With the rise of big data, businesses don’t have to play a guessing game anymore. Customer success metrics provide up-to-date and detailed insights into the customer experience, both instances of success and areas for improvement.
Customer success describes the ability to achieve high customer satisfaction by meeting and even anticipating the needs of users of products or services. By measuring customer success through key performance indicators, a business can identify what’s working, what isn’t, and how things change over time to continually nurture the customer relationship and achieve positive business outcomes.
For a comprehensive overview of the Customer Success KPIs you could use to attract and retain more satisfied customers and consequently improve business revenue, keep reading.
11 Key Customer Success KPIs
There’s a wide range of different key performance indicators you could measure because there are so many factors involved in the success of a business. You could focus on new customers by measuring the number of customers that purchase from the business over a set period of time. You could focus on existing customers by measuring the total revenue from successful upsells. It all depends on your goals, priorities and concerns. Here’s a list of important customer success metrics you might find useful to track.
Customer Lifetime Value (CLV)
This metric gives a good overview of the profitability of a single customer so it may be of particular interest to a customer success manager. It predicts the revenue gained from an average customer throughout the customer relationship, from their first purchase to their last. This is a really useful metric to know because you can analyze it to find the difference between the segments of your customer base and streamline resources into attracting customers with the highest CLV.
Calculate it by first dividing total revenue by the number of sales to calculate the average order value. Then divide the number of buys by the number of unique customers to calculate the frequency rate. Next, take the number of days between the first and last order and convert it into years by dividing it by 365 to get the average customer lifetime. By multiplying the average order value by the frequency rate by the average customer lifetime, you end up with the customer lifetime value.
Customer Satisfaction Score (CSAT)
How happy a business’ customers are directly impacts how profitable a business is. So it’s worthwhile surveying your active users to find out how satisfied they are with your product or service. Don’t hesitate to send the survey to customers not long after onboarding to get insights into the customer experience early on, before you potentially lose them. If your score is low, consider sending out a more detailed survey to gather customer feedback that reveals what exactly is going wrong.
Respondents rate their satisfaction on a scale. Then divide the number of satisfied responses by the number of respondents to produce the customer satisfaction score.
Net Promoter Score (NPS)
This measures how likely your customers are to recommend your product or service to others. It’s another indicator of how happy they are with your business as people don’t tend to recommend products they don’t like. It’s useful to have an NPS survey as part of your customer success strategy because customers are asked to explain their scores which will reveal what makes your product worth recommending or what is holding them back from endorsing it. Knowing your strengths and weaknesses is critical to attracting and retaining customers.
Respondents are asked to use a scale to measure the likelihood that they would recommend your product. They can then be categorized into detractors (scored 0-6), passives (scored 7-8) or promoters (scored 9-10). Subtract the percentage of promoters from the percentage of detractors to get your NPS.
Customer Churn Rate
Losing customers at a rapid rate post-sale is a sign that something is wrong with the customer journey. You may be attracting the wrong type of customer, it could be a sign of issues with usability and customer support, or you might need to work on customer engagement to ensure they are actively using your product. It’s a particularly useful metric for subscription-based businesses such as Software as a Service or SaaS companies.
Your customer churn rate is calculated by measuring the number of churned customers during a set period and dividing it by the total number of customers during the same period.
Customer Retention Rate
Working hand in hand with the churn rate is the retention rate. This is how long customers stay customers on average. Again, it’s an important metric for subscription-based businesses because they are reliant on customer loyalty.
To work out your customer retention rate, specify the time period you are looking at. Take the number of customers at the end of the period and subtract the number of new customers gained during the same period. Then divide it by the number of customers at the beginning of the period. Multiply by 100 to turn it into a percentage.
Customer Acquisition Cost
To have a profitable business you need to balance the books. That means the cost of winning a new customer shouldn’t be more than the revenue from the sale. If you’re implementing a new marketing campaign or other strategies to boost sales, measuring the acquisition cost is a must to ensure it’s a financially viable initiative.
Find out your customer acquisition cost by calculating the cost of acquisition, usually sales and marketing costs, and dividing it by the number of new customers acquired.
Customer Effort Score
It shouldn’t be difficult for your customers to use your product and get help when they need it. Customer support is vital to sustaining positive customer success metrics. The customer effort score measures how easy it is for customers to interact with your business and get any problems resolved.
This relies on customer feedback as it is calculated by customers being sent a survey after key touchpoints. They rate from 1 to 10 how easy it was to get the help they needed.
Monthly Recurring Revenue (MRR)
While tracking revenue might seem like an obvious metric, it is still an important one. Businesses that heavily rely on loyal subscribers such as SaaS businesses need to know their monthly recurring revenue so they can calculate an average revenue to use for forecasting and goal-setting.
Work out your monthly recurring revenue by calculating the average monthly revenue per user and multiplying it by the number of active users each month.
Free Trial Conversion Rate
Offering a free trial is a popular way to attract new customers for businesses selling a subscription model. But it’s no use if users who sign up for the free trial cancel their subscription before they start paying. The CS team needs to intervene if you aren’t achieving a good conversion rate during the free trial.
To get your free trial conversion rate divide the number of conversions by the total number of trial users. Multiply by 100 to get the percentage of the trial users you are converting.
Customer Health Score
You want your team to reach out to customers before you lose them. For efficiency, you also want them to focus on the customers that are most likely to stay and bring in revenue. A customer health score helps you to identify the customers that justify the most attention. It rates customers on their likelihood to stay and upgrade, stay but at their current level, and churn.
Customer health is calculated by looking at 3 key factors: frequency, breadth and depth. Frequency as in how often the customer uses your product. Breadth as in how many users within a single account actively engage with the product. Depth as in how many of the features you offer they are utilizing.
First Contact Resolution Rate
Wouldn’t it be great if customer inquiries were resolved during their first contact? Repeatedly having to reach out to the customer support team causes frustration, negatively impacting customer success. First contact includes the various channels of customer communication available from phone calls to social media messages.
Find out your first contact resolution rate by totaling the number of inquiries resolved and subtracting the number of inquiries reopened. Then divide it by the total number of inquiries.
FAQs
How do I improve my Net Promoter Score (NPS)?
A low NPS suggests that your customer base doesn’t have the confidence in your product or service to be able to recommend it to others. This could be due to a range of reasons from a lack of customer support in the onboarding process to pricing. The best way to improve your NPS is to analyze the reasons customers gave for their low scores. Follow up with another survey to get to the root cause of the problem so you can resolve the issues your customers have with your business.
How often should I measure customer success KPIs?
It depends on your goal-setting and review process as your KPIs should align with the overall goals of the business. Customer success KPIs should be checked at least annually, ideally quarterly so progress can be checked and any necessary adjustments can be made sooner rather than later. If you have a dedicated customer success team, review your metrics at monthly meetings for more regular insights into the state of progress.
What is a good customer satisfaction score (CSAT)?
It does vary between businesses so it’s worth checking your industry average. A good benchmark to go by is 75% because that means 4 in 5 of customers are at the positive end of the spectrum and you’re aiming for your customer base to be positive, not just neutral, about their level of satisfaction.
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