The productivity of the customer success team is often used to assess the health of a company.
How many tickets are the representatives closing? How many product demonstrations have they scheduled? These measures aid management in determining whether a representative is performing effectively or not.
But what if we assessed something entirely different instead of measuring activity?
Customer success metrics focus on your customers’ success, not just your employees’ productivity. Making this distinction is crucial in this day and age, where the customer is king.
This article will summarise ten essential customer success metrics you should measure in your business.
Why Is Measuring Customer Success Vital?
Measuring customer success is vital for three reasons:
1. To increase customer retention: The costs of acquiring a new customer are always higher than retaining an existing one. By focusing on customer success, you can increase customer retention rates and save your company money in the long run.
2. To improve the quality of your product: If customers are unsuccessful with your product, they will churn. By measuring customer success, you can get feedback about areas where your product needs improvement so that you can make the necessary changes.
3. To increase upsells and cross-sells: If customers are successful with your product, they are more likely to want to buy more from you. Therefore, customer success metrics can help you identify opportunities for upselling and cross-selling.
If you master these three objectives, your business will be better positioned to grow and scale.
But what exactly is customer success?
Customer success is the process whereby a company helps its customers achieve their desired outcomes with the product or service.
To achieve this, you need to have a deep understanding of your customer base — their needs, wants, and pain points.
And that’s where metrics come in. By measuring the right things, you can get insights into how well your customers are doing and what you can do to help them even more.
So without further ado, let’s get into the ten essential customer success metrics you should be measuring.
1. Customer Health Score
This may seem self-evident, but we must consider the overall picture, not simply individual tickets and emails. Is your product or service providing real value to your customers?
How frequently does your consumer use your product? How happy are they when they buy your product? What effect does it have on their company? Is their ailment no longer a problem? These are the types of questions you must answer to get a real sense of customer health.
How to Calculate Customer Health Score
The customer health score will revolve around their actions — how long a customer has been paying, any service usage data you have, social media sentiment (optional), and customer surveys (also optional).
Determine how much each of these actions should impact the score, and add them up to see the total value.
2. Customer Churn Rate
A churn rate is an indicator of how many customers are leaving a product or service within a given period of time.
A high churn rate indicates that something is wrong — either with your product, pricing, or customer service. If left unaddressed, it can quickly lead to the death of your business.
There are two types of customer churn:
1. Voluntary churn – When a customer leaves of their own accord because they are unhappy with your product or service.
2. Involuntary churn – When a customer leaves because they have gone bankrupt, their payment method has failed, or for another reason beyond your control.
Ideally, you want to keep voluntary churn as low as possible. But involuntary churn will happen occasionally, and there’s not much you can do about it.
How to Calculate Churn Rate
You can calculate the churn rate by dividing the number of customers who left during a given time by the number of customers you had at the start of that period.
3. Renewal Rate
The renewal rate is the percentage of customers who renew their subscription to your product or service.
A high renewal rate is a good sign that your customers are happy with your offering and see enough value to keep using it.
How to Calculate Renewal Rate
The renewal rate is calculated by dividing the number of customers who renewed their subscription in a given period by the total number of customers up for renewal at the beginning of that period.
You can also look at the revenue renewal rate by dividing the $ revenue renewed in a given period by the total revenue up for renewal.
4. Customer Lifetime Value (CLV)
CLV is a measure of the total value a customer will bring to your business throughout their relationship with you.
It accounts for things like how much they spend on your product or service, how long they stay with you, and whether or not they refer other customers to you.
CLV is essential because it helps you understand how much you can afford to spend to acquire and keep a customer.
How to Calculate CLV
The most common method for calculating CLV is to take the average monthly revenue per customer and multiply it by the number of months they stay with you.
5. Product Usage Rate
The product usage rate tells you how often your customers use your product or service.
Ideally, you want customers to use your product as often as possible because that’s how they will get the most value out of it.
How to Calculate Product Usage Rate
Product usage rate is calculated by taking the number of customers who used your product in a given period and dividing it by the number of customers you had at the start of that period.
6. Average Time in Product/Platform
This indicator helps determine user behaviour, such as how frequently people return to the site. You can use statistics that show the percentage of logins or site visits to track it.
This KPI reflects a product’s popularity by determining how much the audience interacts with it. Unlike volume or session time, the number of sessions per user is an average for a group of users over a period of time.
How to Calculate Average Time in Product/Platform
Number of sessions per user = Total number of sessions / Number of unique users
7. Active users
This KPI is a great leading indicator of success and is one of the first numbers you should track. It answers the question: How many people are actively using my product?
If you’re just starting out, you may only have a handful of consumers. But as your product grows, so too will your number of active users.
How to calculate:
Number of active users = Total number of logins in a given period / Number of unique users.
8. Net Promoter Score
NPS is a scale that measures how likely your customers are to recommend your product or service to others. The standard NPS survey asks, “How likely are you to recommend us on a scale from 0 to 10?”
Promoters are those that answer with a 9 to 10, while detractors respond from a 0 to 6. Your promoters are likely to be loyal and can act as your brand ambassadors, while your detractors are likely to leave and might even discourage other potential buyers.
How To Calculate NPS
NPS is calculated by taking the percentage of respondents who are promoters and subtracting the percentage of detractors.
9. Net Revenue Retention
Net revenue retention (NRR) measures how much your business could continue to grow from your current customer base without acquiring any new ones. It’s important because it shows whether or not your customers are continuing to spend money with you over time.
How to Calculate NRR
NRR is calculated by taking lost revenue (churn and downgrades) from total revenue (starting recurring revenue plus account expansion) and dividing it by your starting revenue.
10. Customer Retention Cost
Similar to the Customer Acquisition Cost (CAC), the Customer Retention Cost (CRC) is the amount of money you spend to keep a customer.
But while CAC is a one-time cost, CRC is an ongoing cost.
How to Calculate CRC
CRC is calculated by dividing the total cost of customer retention by the number of customers you retained in a given period. The lower your CRC, the more efficient your retention efforts are.
Do I Stop There?
Your customers’ success using your product offerings is key to your revenue growth. Therefore, measuring is only the beginning — you should use these data to gain insights and make actionable decisions for your organisation’s success.
While measuring is vital, never forget that your customers are people. So as you look to implement these ten metrics, always keep the customer in mind — they should never feel like a number.
In addition to customer success, you can also use the metrics discussed at the product and leadership levels to better understand customer behaviours, pinpoint challenges, and take action.
To make the most of your business metrics, schedule a free coaching session with us today.