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We have previously talked about how Customer Success Drives Customer Retention. Customer success has been defined as the business methodology of ensuring that customers achieve their desired outcomes when using your products or services and a number of customer success KPIs (key performance indicators) were proposed. In this post we look at how these metrics can be effectively used to track progress and measure customer success.

What Does Success Look Like?

As we know, helping customers and clients achieve their desired goals when using your products or services is not only great for them, it’s enormously beneficial for your business. Successful customers will stick around, they’ll leave positive reviews and they may even become valuable brand advocates. Successful customers are more likely to renew their contracts and they are far more likely to be interested in upsales and other service offerings.

To track and measure customer success over time you need to understand what success looks like both for your clients and importantly, for your business.

For example, if your business has been suffering due to poor customer retention then your customer success assessment should involve monitoring your customer churn rate. Similarly, if your business is based on monthly subscriptions then you will want to track your monthly recurring revenue (MRR) as this tells you how much your customers are spending each month.

Brand reputation is important for most businesses so you may need to be tracking this in order to determine whether your reputation is improving as a result of customer success efforts.

By determining exactly what success looks like you are able to focus on the specific KPIs that will tell you how well you are doing.

Essential Metrics

Customer success metrics are the measurements which reflect customer success status and progress. Every business has its own goals, aims and objectives. Selected success metrics should accurately reflect the business-status in relation to these goals.

We’ve previously listed some common customer success KPIs including these.

  • Customer Satisfaction (CSAT)
  • Net Promoter Score (NPS)
  • Customer Effort Score (CES)
  • Customer Churn Rate
  • Upsell and Cross Sell Rate
  • Monthly Recurring Revenue (MRR)
  • Customer Lifetime Value (CLV)
  • Time to Value (TTV)

This is not an exhaustive list and there are many additional KPIs that may be beneficially tracked and used to measure customer success. Since there are so many metrics it’s beneficial to be selective by identifying the KPIs that provide the required insight. This can be achieved by answering these simple questions for your business.

  1. What are the most important objectives for your business?
  2. Which metrics (KPIs) reflect those objectives?

In addition, it’s useful to consider industry benchmarks to compare your business performance against.

Deal with Customer Churn

Customer churn refers to the cycle of customer-loss and customer-gain. If one of the most important objectives for your organisation is to improve customer retention and reduce churn then you will definitely need to track some churn-related KPIs.

A commonly monitored customer churn metric is MRR churn, or monthly recurring revenue churn. MRR churn is the amount of revenue lost in a month due to lost customers who cancel.

MRR churn is incorporated into the calculation of Net MRR Churn using this formula.

net mrr churn equation
  • MRR Churn = Revenue lost in the month due to cancellations or lost customers.
  • Contraction = Revenue lost from existing paying customers who have downgraded their services or have received discounts.
  • Reactivation = Revenue from customers who have departed but have been regained.
  • Expansion = Revenue derived from customers due to upgrades or upsells.

For example, if your MRR was $100,000 but you lost $2000 to MRR churn and $1000 to contraction while gaining $2000 to reactivation and $2000 to expansion the calculation would be:

calculate net mrr churn

This indicates a negative net MRR churn rate of -1%, which is good. This reflects growth, which is generally what’s desired.

Improve Brand Reputation

If one of the most important customer success objectives for your business is to improve your brand reputation then you will need to monitor KPIs that reflect what your customers think about your organisation. Net Promoter Score (NPS) will tell you how likely it is that your customers will be inclined to make recommendations to friends, family and colleagues.

A typical NPS survey question looks like this:

“On a scale of 0-10, how likely is it that you would recommend [business name] to your family, friends or colleagues?”

Scores of 6 or below are classed as detractors, scores of 7 or 8 are defined as passives while scores of 9 and 10 are considered to be promoters. NPS is calculated by simply subtracting the percentage of detractors from the percentage of promoters.

Routinely and regularly surveying customers to derive NPS metrics should ideally indicate ongoing improving NPS scores as more customers become promoters and fewer remain as detractors. Comparison with industry NPS benchmarks is another useful way to assess your business’s relative reputation status.

cx quote warren buffett customer thermometer

Shorten Time to Value

Time to value (TTV) is a measure of how long it takes for a new customer to start to see value derived from using your products or services. TTV is tightly integrated with onboarding processes that are designed to get customers up-to-speed as quickly as possible.

If a primary objective for your business is to see your customers achieving success, through using your products or services, more quickly then monitoring and tracking TTV is for you.

In order to reduce the TTV it’s important to understand exactly at what point your customer perceives that they are receiving ‘value’ from your products or services. For example, if the product they have purchased is intended to save them money then they will recognise that this has been achieved when they see savings.

By identifying the stage at which your customer sees the value in your products you can examine everything that contributed toward getting to that stage and take steps to optimise the path and decrease the TTV. For example, enhancing the onboarding process, improved training and providing mentoring can all contribute toward shortening the TTV.

Improve Customer Satisfaction

Another common business objective that relates to retention, reputation and increased sales is to improve customer satisfaction (CSAT).

Customer satisfaction, like NPS, is best assessed using simple customer surveys. Typically, customers are asked one easy question immediately after an interaction, such as a service or support call. The single question might ask:

“Were you happy with the support you received?”

The respondent would be offered a binary answer choice (yes or no) but if they select ‘no’ then they would then be prompted to provide a little more detail regarding their dissatisfaction.

Like NPS scores it can often be beneficial to derive some industry benchmarks against which to make comparisons. But often the key aims, when tracking customer satisfaction, are to ensure that satisfaction levels are not deteriorating, to capture details of dissatisfied customers before they churn and confirm that customer satisfaction levels are consistently improving. This can be achieved using ongoing, historic comparisons.

Concluding Recommendations

Accurately monitoring and tracking the impact of your business’s customer success program is not a trivial task. There are so many metrics to consider that the challenge can become bewildering. Clarifying exactly what you are aiming to achieve and determining the metrics that reflect progress helps by establishing focus on what’s important.

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 success.

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