Retaining your existing customers is extremely valuable. Not least because the cost of acquiring a new customer has been determined to be five times as much as it costs to hang on to an existing customer. Selling to your existing customers has success rates of around 60-70% while selling to new prospects has typical success rates of around 5-20%. And increasing customer retention by as little as 5% will potentially increase profits by 25-95%.
These figures make the value of customer retention very clear and, while overall customer experience is important, it is customer success that drives retention.
Customer Success Definition
There are a number of key points in this succinct definition that can be enumerated:
- Customer success is a business methodology used by vendors and suppliers.
- Customer success strategies need to ensure that customers achieve their desired outcomes when using supplied products or services.
- Customer success is focused on customer relationship management.
- Customer success aligns client and vendor goals.
- Customer success leads to mutually beneficial outcomes for both clients and vendors.
- Effective customer success strategies reduce churn and drive customer retention.
- Focusing on customer success will deliver more upsell opportunities.
Most importantly, customer success is underpinned by a customer-focused ethos that delivers positive customer experience throughout the customer journey leading to repeat business, enhanced customer loyalty and brand advocacy.
Customer Success Goals and KPIs
Developing long-lasting, mutually beneficial customer relationships with deep understanding of the client’s needs and desires is a key aspect of effective customer success management. Part of this understanding should be the determination of their goals and what they expect from the products and services you are providing.
To gain the required insight will often require interaction with people at all levels in the client organisation. The expectations of those working directly with your products are likely to be a lot different from the expectations of those responsible for budget allocations. It’s important to determine what all of these people and departments expect and what their aims and objectives are.
There are a number of valuable customer success KPIs (key performance indicators) that can provide valuable insight. Here are some of the most commonly used metrics.
Customer Satisfaction (CSAT)
Monitoring and quantifying the extent to which customers are satisfied with what you have provided is essential. It is important to examine customer satisfaction for each individual customer as well as looking at the overall experience of all customers.
Net Promoter Score® (NPS)
Net Promoter Score® is an indication of whether or not customers would recommend a business to friends, relatives and colleagues. It’s an indicator of whether or not a customer is inclined toward brand advocacy.
Customer Effort Score (CES)
Typically assessed using a survey, Customer Effort Score aims to determine how much effort the client was required to exert in order to achieve a specific aim. This may relate to the product or service supplied or it may be used to assess other aspects of interaction such as the business website or the user-manual.
Customer Churn Rate
The customer churn rate is an important metric that reflects customer retention. It’s calculated by taking the total number of lost or cancelled customers, over a given time period, and dividing this by the total number of active, retained customers. For example, if a business lost 10 customers while retaining 1000, the churn rate would be 1%.
Upsell and Cross-sell Rate
The upsell or cross-sell rate is a measure of the existing customers who make additional purchases, subsequent to their original purchase. Upsales are products or services which provide more value for the customer and cross-sales refer to products or services which relate to the original purchase.
Monthly Recurring Revenue (MRR)
Monthly recurring revenue is an important metric for SaaS businesses that operate on a subscription model. Monthly recurring revenue defines how much money your customers are spending on your products or services, each month.
Customer Lifetime Value (CLV)
CLV is an important metric that shows the total revenue that can be expected from a single customer throughout the lifetime of that customer relationship. CLV is calculated based on a customer’s average purchase value, their average purchase frequency rate and the overall lifetime of the relationship.
There are many additional measures that can be used to assess and monitor customer success including ‘expansion MRR’ (additional monthly recurring revenue) and ‘time to value’ (time taken for users to get value from products). It’s important to identify the customer success metrics which are entirely appropriate and focus on those that matter the most.
Customer Success and Retention
The introduction of an effective customer onboarding program is a great way to drive customer success and support retention. It can take customers some time before they fully realise the true value of the supplied product. Understanding this part of the customer journey is important as it enables vendors and suppliers to devise onboarding processes that quickly get customers to the point where they are experiencing the full value of what’s been supplied. Customers who have reached this point are experiencing some success and are therefore far less likely to leave.
Monitoring an appropriate collection of relevant KPIs should tell you when a customer’s level of satisfaction is declining and when they are not achieving what they expected. Identifying customers who are at risk of potentially departing is an important aspect of customer success monitoring that helps determine common causes that need to be remedied or customer-specific issues that require focused attention.
There are likely to be some customers who are more valuable than others. Valuable customers may require special attention as they are responsible for the highest customer revenues. Identifying and supporting these valuable customers in the attainment of their goals will help ensure that they remain valuable customers.
Customer complaints can be worrying but they can also be valuable indicators of more significant issues that should be investigated and resolved. It has been found that 96% of unhappy customers don’t complain – so when a complaint is received it needs to be taken very seriously as there are likely to be other customers experiencing the same dissatisfaction, but they haven’t complained. Customer complaints should always be prioritised, investigated thoroughly and resolved as quickly as possible in order to encourage customers to stick around. A high proportion of customers who don’t complain are likely to leave and never return.
Customer Success and the Buyer Journey
Understanding the ‘buyer journey’ is essential for tracking customer success. By clearly defining customer journeys, for a representative group of ‘buyer personas’, from ‘early awareness’ right through to ongoing retention and ‘upsales’, the various touch-points can be determined. This knowledge enables the implementation of optimal customer support and success strategies that include non-intrusive surveys to determine exactly how customers are feeling and how successful they are throughout their journey.
Invest in Customer Success
Businesses that pay little or no attention to customer success are far more likely to fail than businesses that take a proactive approach, engage with their customers and fully understand what success looks like for them. Customer experience has become more important to many customers than product prices and customer success is a key aspect of their experience. Delivering the best possible customer experiences is crucial to their ongoing customer success and happy, successful customers are great for business, so it makes sense to invest in customer success.
Give Customer Thermometer a trial and find out how your customers feel! You will quickly see how easily implemented, simple surveys deliver great response rates that will improve your customer service.