Customer success has exploded in the B2B software world.
No surprise, given that key customer success metrics – customer retention, engagement and satisfaction – are at the core of every SaaS business strategy.
And because the SaaS business model means that if customers don’t use your software or aren’t
happy with it, they’ll simply unsubscribe. But making customer success actually successful
is still a challenge.
Many businesses are unclear what customer success means, how they can build an effective customer success program, who they should staff their customer success departments with – and crucially, how they will measure it.
How do you know, for example, if your efforts are working before you hit the churn?
A few key metrics can go a hell of a long way to backing up your intuition. In this blog, we’ve outlined 11 of them.
Ready to dive in? Let’s do it.
A customer success key metric checklist for SaaS companies
Customer retention, engagement and satisfaction are at the core of every SaaS business strategy. But making customer success actually successful is still a challenge.
Here are 11 ways to quantify it:
For segmentation
Annual Contract Value (ACV)
This is the annual revenue per customer contract (excluding any one-time fees). ACV aids segmentation by allowing you to see the value each customer holds for your business. Which will dictate the level of focus and attention they should receive from you.
For adoption
Adoption Rate
A measure of how many of your customers’ users actually use your SaaS product. There are many ways to measure this. E.g. If 75% or more are logging in, this would indicate a good adoption rate. If it’s lower, it should trigger a call to action so you can address the issue.
For retention
ACV or ARR Gross Churn
Gross churn reflects the subscription value lost in a given period, and can be used to find out why customers are leaving you.
This measures the ACV or Annual Recurring Revenue (ARR) of customers that churned during the period, divided by the total ACV or ARR of the full customer base at the beginning of the period.
In addition to upsell and cross-sell, a low churn rate is a key component of high net revenue retention. This is where your customer success team can make a huge difference.
Customer Renewal Rate
This tells you the percentage of customers that renew their subscriptions. To calculate it, take the number of customers who renew, divide that by the total number of customers who could renew, then multiply by 100.
Delivery Approval
This measures the time it’s taken for the customer to sign off on the delivery of what they were promised. It’s vital that you make delivery approval part of your regular discussions with implementation consultants, onboarding teams, and salespeople. Staying on top, monitoring and course correcting will set you up to make any necessary changes proactively, rather than responding reactively when a spike occurs.
Upsell and Cross-Sell Quota
This measures your sales quota (upsell and cross-sell) per sales representative and per customer success manager. This simple metric is great for keeping your upsell and cross-sell goals on track.
Net Promoter Score
A net promoter score is a customer research metric that measures how likely a customer is to recommend your product to others. On a scale of 0 (“not likely”) to 10 (“extremely likely”), customers are classified into promoters, passives, and detractors. To calculate it, take the percentage of promoters (7-10), and then subtract the percentage of detractors (1-3 – those who actively dislike your product).
For internal performance
Quote To Cash Process
The journey that begins the moment a buyer expresses intent to buy your product through to the moment you receive revenue. Keeping track of this can give you an insight into the health of your sales and implementation processes.
Annual Recurring Revenue
ARR is a good measurement of the health of a subscription business. Because ARR is the amount of revenue that a company expects to repeat, it enables measurement of company progress and prediction of future growth.
Net Revenue Retention
Measures what would happen to your company if all sales to new customers came to a full stop.
To calculate this: Add your Monthly Recurring Revenue (revenue from active subscriptions) and Expansion Revenue (revenue from upsells, cross-sells, and add-ons) together. This gives you the total revenue for the month. Then, subtract the month’s revenue lost (revenue lost from unsubscribers or downgraders). Finally, divide by the original Monthly Recurring Revenue number.
The net revenue retention rate should ideally be above 100%, since it suggests a predictable and scalable business growth.
For the entire department
Customer Health Score
The key metric is (of course) your customer health score.
This is the backbone of your customer success program and will be specific to your organisation. Take time to establish it and remember it’ll also be based on soft skills, gut feeling and customer input.
Being proactive about customer success
Being a successful SaaS company means building relationships and delivering continuous value. It starts from purchasing and goes all the way up to renewal.
In order to do that effectively, you need to measure the impact your efforts are actually having.
Do this right and you won’t just increase your company’s revenue, you’ll ensure that your offering remains relevant as needs change and evolve.
Want to learn more about building a successful customer success program? We’ve got just the thing.
Download The field guide to customer success for SaaS companies eBook. It’s full of practical advice on how to ensure your customers are getting the most from your SaaS product, including the pitfalls to avoid on the way.
