Customer Success Metrics—4 Categories to Measure Customer Success Performance
March 20, 2019
Over the next month, I will be writing about the customer success metrics that top organizations use to measure the performance of their customer success strategies and team execution. The metrics I will cover are applicable to customer success departments and also to your entire company. We believe that customer success is not just a department, but a company mindset and culture.
Let’s get started.
In this blog, I will cover the 4 high-level categories of customer success metrics. These categories were developed by 100 of the top customer success leaders during a session at the CS100 Summit—the number one leadership conference for customer success leaders.
In the ‘customer success metrics’ blogs that will follow, I will dive deeper into each category with examples and formulas.
4 High-Level Categories of Customer Success Metrics
1. Financial Metrics
When most executives think about customer success metrics, they typically refer to the core SaaS financial metrics. If current customers are the lifeblood of a SaaS business, then these metrics are the heartbeat metrics for any SaaS company. These financial metrics provide a top-level view of the overall financial health of an organization and can serve as a strong indicator when it comes to the long term growth and scalability.
Here are the top five customer success financial metrics. I will be diving into definitions and formulas of financial metrics in upcoming blog posts.
- Revenue Retention Rate (Gross & Net)
- Revenue Churn Rate (Gross & Net)
- Customer Retention Rate/Customer Churn Rate
- Renewal Rate (Gross & Net)
- Quick Ratio
2. Health Metrics
Customer health metrics help SaaS companies identify customers and users that are getting impact from a solution and that are highly likely to renew or churn. Customer health metrics include more than product usage metrics. In fact, there are many facets that should be considered to understand the holistic health of a customer, including the first-hand perspective of the customer success manager (CSM) who interacts with the customer frequently.
A purely data driven approach may give you false-positive or false-negative signals. By taking a holistic approach at all touch points of the customer experience—not just those directly tied to product or usage—SaaS companies more accurately determine the health of their customer base and take actions that improve customer health and retention.
Here are the top five customer success health metrics. I will be diving into definitions and formulas of financial metrics in upcoming blog posts.
- Product Usage – Daily Active Users (DAU/ Monthly Active Users (MAU)
- Product Adoption – Stickiness Features
- Customer Engagement
- Customer Pulse from Customer Success Manager
- Net Promoter Score (NPS)
3. Usage Metrics
The way in which customers use the product can paint an important picture of customer success that shouldn’t be overlooked. It’s common for SaaS companies to pay attention to obvious metrics like logins, but some products are crucial to the internal process and unique logins don’t give true indicator of customer health. Customer usage metrics can help inform and improve many areas of the business outside of just customer success. Take for example key feature usage: understanding what customers are using most frequently and what they aren’t using can inform the product team. In addition, trend of time spent using specific features can help inform the customer service team and help them proactively answer frequently asked questions or help them build out the knowledge base articles to help customers succeed and drive impact.
As helpful as usage metrics are to assess customer health, they should be used with caution because they could be vanity metrics that are hiding the true health of the customer. For example, a marketer could use her marketing automation solution every day even if she is unhappy with the solution and looking for an alternative, but she has to keep her marketing efforts going. If the marketing automation vendor relies too much on usage to assess health, they may be surprised when the usage cliffs on the day the marketing manager moves to a new solution. Leverage the following usage metrics strategically and carefully and they will be valuable insights into your broader view of customer health.
Here are the top five customer success usage metrics. I will be diving into definitions and formulas of financial metrics in upcoming blog posts.
- Product Usage – Daily Active Users (DAU/ Monthly Active Users (MAU)
- Product Adoption – Stickiness
- License Utilization Rate
- Time Spent in Product
- Impact/Outcomes Achieved (Personal & Organizational ROI)
Let me explain a little deeper about the metric product adoption—stickiness.
Identify the features/feature sets that provide the most tangible impact (“impact features”) for your customers and deliver the outcomes they desire. Then, measure the adoption of those features/feature sets.
4. Team Performance Metrics
A customer success team is only as effective as the sum of its parts. Customer success leaders likely have their pulse on how each customer success manager (CSM) is doing in terms of financial metrics—like whether or not they’re achieving renewal quota and retaining customers—since those are the most visible metrics to the organization. But there are other important metrics to consider, including customer engagement activities, onboarding time, and customer advocacy activities
Team effectiveness reaches far beyond whether or not CSMs are hitting their targets. Customer success leaders know that renewal quotas only paint part of the picture as customers renew and churn for many reasons that aren’t directly related to team performance. Looking at all aspects of how individual CSMs, customer success teams, and leaders are working together to drive results is crucial.
Let’s take a look at the top customer success team performance metrics to consider (by team and by CSM).
- Quarterly Gross Renewal Rate
- Quarterly Expansion Revenue
- Average Time to First Value
- Revenue Retention Rate (Net)
- Averages Days to Onboard
There you have it—a quick intro into the high-level customer success metrics categories that top customer success leaders use to drive big impacts and growth with customers. I will be diving into the financial metrics in the upcoming blog on customer success metrics.
If you don’t want to wait for each blog post—you can get a head start by downloading the “Ultimate Guide to Customer Success Metrics” here.
Learn more about how ClientSuccess can help your company develop a strong Customer Success methodology and strategy with easy-to-use customer success software by requesting a 30-minute demo.
New posts each Tuesday and Thursday.
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