What measures your business' success at the end of the day? It’s not your headcount, nor your modus operandi, nor even your revenues. No, it all lies in your customers. What does that even mean? It means your business depends on how your end users interact with your product. Knowing which features are critical in their customer journey and collecting insights on where they extract the most value is vital to your success. Measuring the satisfaction of your end user at each touchpoint will help you determine why and when users tend to join or upgrade. The difficulty stems in determining the right customer success metrics to accurately assess your relationship.
In this article, we’ve tried to bring together what we deem to be the Top 10 Customer Success Metrics any product-based company should have on its radar. They include the following:
Customer Health Score
Net Promoter Score (NPS)
Qualitative Customer Feedback
Customer Churn Rate
Customer Lifetime Value (CLV)
Net Retention Rate (NRR)
First Contact Resolution Rate (FCR)
Customer Satisfaction Score (CSAT)
Customer Effort Score
Customer success teams go through different stages of developments, and each stage correspond to specific metrics. The idea is intuitive: you will be looking at different metrics according to whether you have 1 or 20 people on your customer success team.
💡 The Customer Health Score measures your relationship with your customer. In other words, it is the likelihood of a customer to upgrade or churn.
Your customers are your marketers. If they are happy not only will they remain for the longer future, most importantly they will be your best advocates. A way to gauge their level of satisfaction is to measure your customer’s health score. Insights into your end users’ happiness will tell you whether you need to improve client relationship and in which direction you should grow your business. The driving force behind increasing sales and revenue is customer’s health. A high or average health score can be very impactful and relevant, but a low health score can be very damaging to your business and even bring it to extinction.
There are four main levels on which we recommend you measure your customer health score:
You will then build an index incorporating the four vital points above which will allow you to scale the metric and gain a holistic view of your customers.
The customer health score can be looked at this index as a trend to seek its’ evolution through time. In fact, observing how your health score evolved will reveal your team’s capacity to respond to ups and downs in their client relationship and understand which efforts are put towards end users.
💡 The Net Promoter Score (NPS) is the score your customers give to the quality of your product’s service. It gives a sense of the number of loyal customers, who recommend your product versus customers who dislike your product.
The NPS is an extremely valuable metric, it is said that a good NPS can yield up to 60% of organic growth. There is a strong correlation between your employees’ motivation, reaction and involvement in your product with the NPS. This metric allows companies to constantly build awareness and improve the experience of their customers: it is a good business health indicator.
Usually the NPS is on a scale from -100 to 100. Most frequently, it should be also studied as a trend in order to depict your customer’s satisfaction over time. It is important to keep in mind that being aware of which industry and its’ benchmark your company is part of as the NPS usually varies considerately across industries.
💡 Qualitative Customer Feedback is the act of collecting insightful customer feedbacks on your product.
This metric is important as not only does it enable your customers to have an opinion and voice their concerns but it will also help you understand how well your team is working with clients or even identify some bottlenecks in your processes or product.
Not really deemed to be a metric, collecting qualitative customer feedback is less of a formula than simply a well-thought survey tackling critical questions which determine how your customers feel about your product and customer servicing team. Example of questions may be:
There are different way to collect this feedback the simple being by sending out surveys, but also by having some reps directly meet your customers through demos, or customer days, etc.
Once the surveys have returned, you’ll find yourself with loads and loads of text. Most advanced companies process and analyse those feedbacks by using text analytics and learning processes. A word cloud representation can be used to graph which words resonated the most with your company. If you had asked your customer to score you (i.e. Net Promoter Score), those scores can also accompany the text.
💡Customer Churn, or customer turnover, is the number of customers you’re losing in a predetermined time period.
Churn rate is a dreadful, but super important metric. It allows you to know how many customers are deciding to leave the business and helps you understand how this is impacting revenue. More importantly, it enables you to elaborate strategies to retain your customers.
Example: if your business had 250 customers at the beginning of the month and lost 10 customers by the end, you divide 10 by 250. The answer is 0.04. You then multiply 0.04 by 100, resulting in a 4% monthly churn rate.
Your churn rate should be displayed as a trend. In fact, you need to be able to compare the churn rate across different time periods. This allows noticing when there is a spike in the churn rate so that you can act quickly upon it.
💡The Customer Lifetime Value is a metric indicating the total value a business can reasonably expect from a single customer account throughout the business relationship.
Measuring CLV is critical because it allows you to recoup the investment required to earn a new customer. It allows you to predict future revenue and measure long-term business success. This metric is key for acquiring and retaining highly valuable customers.
Customer Lifetime Value is calculated by adding the costs associated with converting prospects into customers (marketing, advertising, sales personnel, and more) and dividing that amount by the number of customers acquired. This is typically figured for a specific time range, such as a year or a fiscal quarter.
The Customer Lifetime Value is typically displayed as a trend. This is understandable because the trend depicts how the CLV evolves which in turn reveals a lot about your business’ ability to retain customers and exploit existing customer relationships. As mentioned above, it is also interesting to compare the Customer Lifetime Value with other numbers, such as the Customer Acquisition Cost to gauge your profitability.
💡Net Retention Rate calculates the impact on revenue each existing customer has.
Also called the Net Dollar Retention This metric is often one of the most looked at metrics to gauge customer happiness. It directly measures how well you retain and renew your existing customer. It also tells you how effective your team is at generating new revenue from these customers. To put it simply, the NRR tells you how much revenue you and your team have won or lost from your customers.
The Net Retention Rate describes how part your revenue varies through time. Hence, it is practical to look at it as a trend and closely study its evolution on a monthly or quarterly basis.
💡 The First Contact Resolution Rate (FCR) measures the percentage of customer service enquiries resolved on the first call made by the customer.
The First Contact Resolution Rate boils down to measuring the timeliness and effectiveness of your customer service team. We all very well know that time is money, but this saying is even more accurate when it comes to your customers’ time. If you don’t resolve customer issues rapidly and without friction, you may as well hand your customers to your competitors. Thus, having in mind your FCR is critical to improve your customer success, loyalty as well as the skills of your support team.
To measure your company’s FCR, you must have in place some reporting tools which will allow you to track the incoming calls and their status. For example:
With those reporting tools in place, the FCR can be looked into as a number and compared between different periods. You would want to look at it at least on a monthly-basis, if not on a bi-weekly basis.
💡 Customer Satisfaction Score is your customers’ level of content and enthusiasm about your brand.
As we have discussed already, measuring your customers’ happiness is a tricky task which explains in the number of metrics which exist to translate your customers’ state of mind. The most popular one is the CSAT. This metric is used to measure the overall performance of your product based on the customer’s experience every time they interact with a business, service, or product. Fun fact? There is only a 5–20% probability that you will sell your product to a new consumer but a 60–70% chance of selling it to an existing customer. Lesson? Keep a wide-open eye on your CSAT.
Customers basically express their satisfaction on a 5 or 10 point scale, which is then converted to a percentage with 100% meaning that customers are perfectly happy with their experience. To calculate this metric, you do need your customers to answer satisfaction surveys.
You can calculate your CSAT score by dividing the positive responses (satisfied customers) by the total number of responses and multiplying by 100, which is then expressed as a percentage.
As an example, let’s say you have 100 responses total and 90 are positive, your CSAT is of 90%.
The CSAT is more than often displayed as a trend. Its’ evolution allows you to track issues with your customers ahead of time, and in turn react efficiently by adapting your strategy in the following hours.
💡 The Renewal Rate represents the number of new customers signing up and using your product.
Simply put, the renewal rate, especially is you are a SaaS company, is probably one of the most important metrics you’ll want to look at. Customer success is directly correlated to how many new customers are acquired over a time period. It is the best indicator of how happy your customers are.
Your renewal rate can be carefully tracked through time as a trend but also benchmarked to your competitors as a sole number. A high renewal rate means your customers are renewing their commitment to your company for another term. It indicates great customer success. On the other hand, a low rate indicates your customers are not leveraging your product accordingly. There is a space for improvement by understanding your customers’ pain points and improving their experience.
💡 The Customer Effort Score (CES) measures the difficulty and timeliness of an action undertaken by an end user on your product.
Less renowned, the Customer Effort Score is slowly gaining popularity, especially in SaaS businesses. In fact, this metric can directly be compared with the renewal of subscriptions and churns. The CES is implicit: the less efforts your customer has to do to use your product, the happier he will be and the higher are the odds that he will use it again and refer it in the near future.
Usually measured from a survey, the typical formula follows:
Some specific survey questions which pertain the CES are (i.e. rate on a scale 1-10):
Although the CES is very similar to the NPS and the CSAT which we discussed earlier, it brings additional value to your customer success giving direct insight on your product’s seamlessness. The three, CES, NPS and CSAT, should be analysed together so you gain a broad understanding of your customer’s success. We also recommend building one survey which seeks to answer and score each of those customer success metrics. Doing this will help ensure you get objective and reliable answers from your end-users.
While they may not seem vital at first sight, customer success metrics are in fact critical to ensure you have a in depth understanding of your customer, their happiness and their willingness to stay with you at any point in the future. The take home idea of customer success metrics is that customers must align with you not only as a brand today, but as a solution and support in the future.
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