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Customer success should be a high priority for most companies, but it’s especially important for SaaS companies. Your customers’ abilities to use your software successfully is integral to your organization’s health.
If customers find they aren’t getting value from your services, they’ll likely churn. Unfortunately, it doesn’t matter to the customer if the product is actually great — it only matters that they weren’t able to figure out how to use it.
The importance of customer success is obvious. But what isn’t so obvious is how to actually measure customer success. Success is a vague concept that people have struggled to define for centuries.
Any concrete definition of success has to be given in context because there’s no single definition of success. Luckily, within the context of customer success, you can use tried and true customer success metrics to evaluate whether or not customers are succeeding with your software.
When you hear the word “metrics,” your mind probably jumps to quantitative KPIs like retention rate or revenue growth. While metrics like these are one part of measuring customer success, it’s important to consider qualitative metrics as well. Let’s explore some of the most important customer success metrics SaaS companies should consider.
Customer lifetime value (CLV) measures the amount of revenue you’ll generate from one customer over the course of their time with your business. This is one of the most important customer success metrics because your average CLV tells you whether customers are trending towards spending more money with your company or less — which can indicate whether your company is providing enough value or not. If your average CLV is decreasing over time, it indicates that customers are buying less and customer success needs to improve.
You can also learn which customers are your most important customers by calculating individual customer lifetime values. This is helpful for determining the amount of time and money that’s worthwhile to invest in each particular customer.
Average CLV is calculated by multiplying the average annual revenue per customer by the average length of a customer relationship in years and subtracting customer acquisition costs from the result.
Customer Health Score is another very important customer success metric. It’s one of the customer success metrics Gainsight considers absolutely critical to a company’s success. Customer Health Score measures the overall satisfaction of a customer. This also measures how much value they seem to be getting from your service. This is done by using factors like how often the customer uses your service, which features they tend to use the most, and whether or not your service has had a positive effect on the customer’s business.
The exact qualifiers you use to measure your customer health score are up to you. You should focus on factors that are most relevant to the particular kind of software you offer and your goals for customer success. By measuring aspects of customer health like the frequency, breadth and depth of their product usage, you can get a sense of each customer’s potential for growth and spot high churn risks early.
Net Promoter Score measures customer loyalty. More specifically, it measures the percentage of your customers who are likely to recommend (or promote) your business. Determining your business’s Net Promoter Score is as simple as including a question on your next feedback survey that asks customers “how likely are you to recommend our business to other people?” Usually, collecting responses on a scale of 1 to 10 is the preferred method. You can consider customers who respond with the highest scores (typically nines and tens) promoters.
To find your Net Promoter Score, simply subtract the percentage of respondents who are promoters from the number who are detractors (people who ranked their likelihood to recommend your business below a 7). This is an important metric because there are few things more beneficial to a business’s growth than recommendations from other customers — and few things more disastrous than unsatisfied customers who warn others to stay away!
Customer Churn is a metric that measures the percentage of customers your business is losing. One of your top priorities should be keeping customers, because without customers, your business isn’t going to grow. It is much more cost-effective to hold onto existing customers than to constantly sign up new ones for the short term.
Churn is just a basic percentage, which makes it very straightforward to measure. Simply choose a period of time (a year, quarter or month are all good choices) and divide the number of customers you lost during the time period by the number of customers you had at the beginning of the time period, then multiply by 100.
It’s also a good idea to keep a close eye on the number of support tickets your customer support team is receiving. In general, more customer support tickets indicate lower customer success levels because customers frequently encounter problems they need help solving. However, you shouldn’t always take this number at face value. It’s also important to pay attention to the specific kinds of tickets you’re receiving.
For example, if many customers are frequently asking for help with a particular feature, the solution could be to improve the feature, improve customer education around that feature, or both. Consider whether the problem is a lack of customer knowledge or a feature that’s truly difficult to use and address the root cause of the issue.
Also, keep in mind that not every customer who is struggling will reach out for support. If you have very few customer support tickets coming in, don’t celebrate immediately. First, try to verify through other channels that the lack of tickets is truly due to high levels of customer success and not customers who are reluctant to ask for help. If customers are experiencing problems and not reaching out for help, the solution could be to improve your support resources.
Your business’s Customer Satisfaction Score (CSAT) measures how happy your customers are with their experience with your company overall. This is another qualitative metric like Net Promoter Score that requires you to ask for feedback from your customers. Providing opportunities throughout the customer journey for customers to rate their satisfaction with your business (for example, on a scale of 1 to 10) is a good way to show them you care about their experience. Furthermore, it’s a great way to discover how to improve your product or service to increase customer success.
Learning Activity refers to the kinds of actions your customers are taking with your learning software or other educational tools. Customer education is an extremely important part of customer success, and tracking how your customers are engaging (or not engaging) with your learning material is a great way to find gaps in their knowledge.
For example, if a particular course or topic is especially popular, that could indicate it’s a topic customers frequently need help with. You could aid customer success by expanding the resources you offer on that topic. If you see that a customer has not spent much or any time with their onboarding resources, that could indicate you need to reach out to see how that customer is doing and ask if they need additional help.
Product Usage measures how frequently customers are using your software. This is one of the most useful customer success metrics because there are few metrics that so clearly represent whether or not customers are getting value from your product. There are certainly exceptions, but the vast majority of the time, if a customer is using your product frequently it’s because they’re getting value from it; if they aren’t using it frequently, it’s because they aren’t getting value from it.
Measuring product usage accurately is challenging for many kinds of businesses, but luckily, it’s usually very easy for SaaS companies. You most likely already have a way of tracking customer activity on your platform. While the frequency of usage is most important, you may also want to evaluate usage duration and usage of specific features.
Monthly Recurring Revenue (MRR) is another important metric to look at. Tracking the amount of revenue your business is generating each month can help determine the rate at which your business is growing, which is directly related to customer success. Successful customers are inclined to make more purchases and promote your products, leading to higher revenue.
Calculating your organization’s MRR is easy. Simply multiply your business’s total number of customers by your average revenue per user.
These are some of the best customer success metrics for SaaS companies. Looking at customer success metrics examples can help your SaaS company. Using metrics like these to measure customer success is critical if you want to stay informed about your customer base. In order to thrive, your business needs to continually adapt to provide the best possible experience for your customers. However, this would be impossible without any visibility into how successful your customers currently are.
If the metrics show it’s time to take steps to improve customer success, consider investing in better customer education. A learning management system like Northpass can help you provide customers with the resources they need to be more successful
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