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Case Study | Aug 10
Kiera Abbamonte on October 24, 2019 (last modified on October 21, 2019) • 12 minute read
In many ways, Software as a Service (SaaS) has radically changed the game for a lot of industries.
The subscription-based pricing model of SaaS companies often means more frequent touch-points with customers and requires an ongoing effort to ensure their success with your software.
This makes customer success/support not just more important, but also a competitive advantage for many SaaS companies that get it right.
With the stakes that high, our most recent report found that half of the respondents rely on HubSpot’s customer service software to manage their customer success relationships.
But regardless of which tool you use to facilitate customer success, it’s vital that you have the right metrics in place to gauge how successful your customer support efforts are.
When we asked customer success pros about their most important responsibilities, we heard a myriad of answers—from increasing usage and satisfaction to collecting customer feedback to onboarding new accounts.
That got us thinking: with all of those responsibilities, how can customer success teams properly measure performance?
The answer, it seems, varies from company to company. It’s all about the aspects of customer success that are most important to your business.
Respondents talked about customer lifetime value (CLV), churn, Net Promoter Score (NPS), and more as key metrics to help gauge customer success.
In all, we heard about 15 key customer success metrics that SaaS companies should consider tracking. Without further ado, here are those 15 KPIs for customer success.
“The retention score is the most important metric to me,” said Baptiste Debever of Feedier. “If your customers are coming back, it means that you’ve succeeded in activating them and hooking them into your product. They’ve found value using it and want more.”
Carlo Morandi of Callbell adding that they view the same metric, but look at it over time—retention at 1 month, 2 months, 3 months, and 6 months after an interaction with customer support.
“When a customer contacts our customer support, we measure if the user continues to use our product in the following months. Based on the average retention of the customer who’s contacted support, we can then identify the most significant problems that lead customers to churn.”
“Every customer should measure and track their Net Promoter Score,” Hayley Lloyd of Ocasta told us. “This is a score which can help companies gauge the loyalty of their customer’s relationships or how likely they are to recommend your brand to a friend.”
As Casey Hill of Bonjoro described, “NPS serves as a proxy for the growth potential of your existing base and how likely it is that you’ll get referrals.”
Anna Pogrebniak of AddSearch added that “despite being a simple and easy, customer-oriented metric, NPS can predict future relations with the brand. It’s important to understand that NPS is most beneficial when it’s used as a relationship metric.”
As G2’s Lauren Pope explained, “The purpose of NPS is to track your customer loyalty to your brand and how likely they are to recommend your product to their peers. Your NPS survey doesn’t need to be any more than a single question. The only thing you need to ask is: ‘How likely are you to recommend [insert product] to a peer?’”
Pope added that “measuring your NPS score gives you a clear look into how your customers feel about your product, it allows you to see which of your customers aren’t as happy, and offers your team a chance to improve their experience.”
Amanda Lopes of Oxygen says they use NPS to measure customer success quarterly, explaining, “Using HubSpot, we ensure that an NPS survey is sent out automatically every quarter. This survey provides Oxygen with a formal understanding of our customer success, and any areas we can improve.”
“First contact resolution rate (FCR) is the most crucial metric a contact center can measure,” Eckhard Ortwein of Lean Case said.
“When we speak about first contact resolution, we mean that the customer’s issue is resolved in a single interaction – in a single phone call, in a single response via email or social media or a single live chat session and he doesn’t need to follow up.”
As Jeremy Watkin of 8×8 added, “First contact resolution highly correlates with customer satisfaction. The higher your FCR, the more positive your customer experience and the higher your customers’ lifetime value (LTV).”
“FCR can also serve as a good indicator of whether your customer support agents like their work,” Watkin continued. “This metric directly impacts your support team’s bottom line by improving margins, reducing churn, and increasing customer loyalty so you should take it seriously and take steps to improve it.”
“Because SaaS companies’ business models are predicated on subscriptions, we need to know if customers achieve ongoing value from our products,” said Mark Somol of Zeal Technology.
“There are many ways to measure this concept: revenue renewal rate, revenue or customer churn, LTV, etc. We prioritize customer renewal rate,” Somol explained, “because we are earlier in our company’s lifecycle and we absolutely need to understand how our customers derive value from our offerings.”
Ali Lipman of Brainsell also threw weight behind renewal rate, advising instead to calculate net dollar renewal rate. As Lipman explained, net dollar renewal rate = (dollar value of renewed contracts + growth) / total dollar value of contracts up for renewal.
“We place a lot of importance on first response time,” Stephen Panico of BuzzStream told us. “Not because this is the most important metric overall, but because it is an excellent leading metric and one which customer success can directly control.”
“Quick responses also communicate that customers are valuable, even in cases where a resolution will take a long time or are even not possible within our app,” Panico added.
“The ultimate goal of any organization is customer satisfaction.” – Venus Duggal, VWO
“Imagine you’re running a business and don’t know whether your customers are satisfied with your product or service,” Edward Dennis of Core dna suggested. “By using CSAT surveys, you can not only find out if they were unhappy with you but also come up with strategies on how to turn them into happy customers.”
“You want to see your customers happy,” Lisamarie Monaco of InsuranceForBurial.com said. “You want to see them come back and recommend your brand or product to their friends and family. It is a win-win for you and your clients.”
Andrew McLoughlin of Colibri Digital Marketing emphatically echoed other respondents, saying, “Without question, the most important metric you can track is CSAT. No matter how many sales you make, tickets you fill, or leads you follow, if your CSAT score starts dropping, then your business has a problem you need to resolve.”
Editor’s note: Looking for a better way to bring all of your customer success metrics into one simple dashboard? Download this free Customer Success template to see KPIs like customers helped, revenue churn, happiness score, and more.
“If your churn rate is high you are likely doing something wrong in terms of customer success,” explained Frank Pinder of Oxatis.
Pinder went on to say, “People are more loyal than you think. Understanding customers’ needs and sorting out any issues, notifying customers of new releases, and even using customer feedback for new developments will keep customers happy—and a happy customer won’t shop around and find competitors’ tools. Only an unhappy customer goes hunting.”
“Your leadership team needs to know the daily usage of your product and how that is trending over time,” said Kurt Uhlir of Uhlir Ventures.
“Things like NPS, customer lifetime value, ticket response time, etc. are all important,” Uhlir added, “but knowing how frequently your customers are using your product may be the most overlooked metric in SaaS companies.”
“Having helped build and sell multiple venture-backed SaaS companies, reviewing the daily product usage has allowed us to respond to situations we would not have known about otherwise. You want to watch not just overall average usage but also look for the outliers that are superusers and those have not been active in a long time. Tracking these three segments will allow you to respond when trends change and serve as a basis for your curiosity to better understand your customers’ daily lives.”
“Without a doubt, Customer Lifetime Value is the most important metric, as it’s the only data point that accurately represents both time and profit,” said Michael Catania, adding, “The data it provides determines the amount of spending to acquire a new customer and, because it tracks over time, helps identify sections of the customer lifecycle where additional funds may be needed for retention.”
Karthik Subramanian of Paperflite shared that they also prioritize measuring CLV and gauge it by the dollar amount customers are ready to pay for subscription services.
“CLV is an important metric to track because it is much easier to increase the expected revenue a valued customer will contribute to your company over their lifetime, rather than acquiring new customers,” explained Andrew Ruditser of MAXBURST. “That person is already a loyal customer, so it’s much easier/cheaper to focus on their wants and needs rather than attracting new customers who may or may not remain loyal.”
“You want your CLV to keep increasing by adding upsells and cross-sells to your offers,” Jonathan Aufray of Growth Hackers added. “If your CLV increases, your business will automatically grow.”
“Monthly recurring revenue provides insight into how much growth and expansion is occurring within your existing client base,” said Jennifer Lux of LyntonWeb. “Growth in monthly MRR, without adding new clients, indicates that your clients perceive your services as valuable and therefore they approve the expansion of those services.”
Maksym Podsolonko of EventBiz echoed Lux, advocating for MRR churn measurement. “Net MRR churn is the most vital metric for SaaS.”
“It displays the monthly dynamic of your revenue that also factors in the additional revenue generated from upgrades and sales of extras to your existing customers. The dynamics of this single metric can tell the whole story of the business health and where it goes.”
Editor’s note: Need a better way to measure monthly recurring revenue and churn? Download this free Stripe (MRR & Churn) dashboard to bring all of your MRR, customer churn, and revenue churn data into one, simple and shareable report.
“Engagement is key,” said Oliver Roddy of Catalyst Marketing, “but not just with your product itself, also with the materials surrounding your product”
“In my last job, we boosted retention rates significantly just by starting a customer blog which featured how to’s and product updates. This was a great way of consistently showing customers more and more value to ensure they fell in love with our product and continued to use the system.”
“Tracking how engaged your customers are with your learning materials is therefore key in boosting those all important retention rates,” Roddy added.
“While the typical customer success metrics like churn, renewals, CLTV and retention are important to track, they are all lagging indicators. This means they are a reflection of your work, and your customers’ activity, after it happens,” explained Sam Smith of Linode. “That’s why we track both negative (trouble) and positive (opportunity) escalations to Customer Success.”
“Whether good or bad, an escalation to Customer Success tells us that something out of the ordinary is happening. These are critical points in the customer lifecycle and present opportunities for our team to positively influence our customers’ experiences at Linode. In doing so, we see retention, growth, and other metrics improve across the board.”
“For any SaaS company, of course, it’s all about ARR. Is your customer base growing in revenue?” asked Martine van Deursen of inSided.
Wondering how ARR connects directly with customer success? Van Deursen explained, “We keep a close eye on customer health scores—the ROI a customer is achieving (and therefore their success with the product), the number of service requests they’re sending through (both too many and too few are red flags), and most importantly, their engagement level.”
“We always have a strong, holistic overview of customer health and can take the right actions to make sure ARR increases month over month.”
“I believe every organization which wants to keep its clients happy and, at the same time, aim to increase revenue, should keep their tabs on adoption rate,” said Karolina Matuszewska of Piwik PRO. “It’s the sum of the features used by the customer divided by the total number of features.”
As Matuszewska explained, “We measure the breadth of adoption—how extensively a particular functionality has been applied by our clients. We also track time to adopt, which refers to the time customers need to use a new feature for the first time. Finally, we keep an eye on duration of adoption—how long people continue to use a feature after they find out about it, which tells us whether they are only testing or using a feature regularly.”
While recommending SaaS companies track customer happiness, Ben Johnson of Proof explained, “It gives you a great indication of how your team is doing with every customer interaction—if you’re delighting their socks off, if they’re likely to churn or have a suboptimal view of your brand.”
Eric Melillo of COFORGE told us they track NPS… but that metric doesn’t always catch potential customer success issues in time. “By the time we’ve calculated the NPS, the customer relationship may already be in jeopardy. Loss of trust across the entire customer relationship will impact renewals and cause revenue churn.”
That’s why Melillo recommended monitoring customer happiness on an ongoing basis—in addition to NPS. Melillo says they monitor “things like email, chat or ticket response time, time to inquiry resolution, and if the customer is finding value in the product and achieving their goals.”
“Proactive monitoring,” Melillo continued, “allows you to react quickly when there might be the potential for client dissatisfaction. Then your customer support team can adjust quickly and maintain a healthy customer relationship.”
The pricing and overall business model of SaaS companies is fundamentally different than other types of businesses. That’s why it’s so important you’re measuring everything (including customer success) with the right metrics to gauge what matters for your SaaS business.
And the 15 customer success KPIs our experts recommended above are a perfect place to start.
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