Customer success Metrics that really matter
Wow, 80% of your customers have a health score higher than 8 and 90% of them are using your product daily. That’s awesome isn’t it? But what exactly are these numbers telling you? The answer for most SaaS companies is exactly nothing.
They still don’t know whether their customers are successful. They can’t accurately predict whether a customer will renew the contract next month. Some of their healthiest and most active users churn. Logic would suggest that only customers that fall under a certain score would churn.
These are not metrics that show you what’s really going on and they are not metrics you’ll want to make decisions on.
Why your Metrics Suck
The problem with all these kinds of metrics – scores, activities, engagement etc is simple – none actually measures your customers’ success. They measure customer success from your company’s point of view and not your customers’. And even then they are merely (inaccurate) predictors for the customers’ future behavior.
Let’s go back to the idea of customers success: Your customers buy your product because they want to grow their revenue, reduce costs or improve productivity. That’s how your customers will evaluate the value of your product. And your job in customer success is helping your them to find (enough) value.
In some cases, customers may not be able to quantify their gains. But that’s not a problem because in the end all benefits are emotional anyways. The numbers only quantify the emotional benefit for us. So “never been happier doing …” counts very much.
Think about it, you are using a ton of metric but none of actually accurately measures whether you’ve achieved your goal or not. A customer who appears healthy, satisfied and as a net promoter is not the same as a successful customer. You are just guessing there is a correlation between.
Back to the roots
I have to admit, it’s really tempting to use these generic metrics. After all you don’t have to put in any effort collecting them. But with almost all the things that come easy there is a price and here it’s the low quality of insights.
In customer success, quality is way more important than efficiency. And it’s easy to see why: If your customers are not successful, it does not matter that you’ve failed at low costs.
So you have to put in the effort and invest into building customer relationships. Because they will give you access to the real valuable information customers won’t share over generic E-mails and surveys.
Customer relationships built on trust and transparency are the most valuable asset in your business. If you understand the connection between the who, the what and the why your growth will skyrocket.
Building those kinds of relationships needs only one thing – taking a genuine interest in your customers’ success and earn the rewards by getting access to their qualitative and quantitative KPIs. If you can get the customer to agree on a shared metric system – go for it.
A few examples for real customer success KPIs:
- Increased revenue or opportunities
- Accuracy of meeting deadlines
- Lower production costs (e.g. costs per unit)
- Faster product feature release time (e.g. average time)
If you don’t exactly know how your product affects the customers business then you need to find out. Likewise if there are multiple use cases for your product chasing different goals.
Business Value Metrics
The second big problem with all those vanity metrics is that they don’t translate your customers’ success into business value for your business. How do high satisfaction-, health or net-promoter-scores affect your business?
There are correlations but they are somewhat unreliable. If customers who are net promoters churn then you know these metrics are somewhat unreliable. Because net promoters should not only renew but actually do what the term implies – refer your business to others.
A better way to look at your customer success metrics is to draw the correlations between your success and your customers.
So the “minimum” goal of customer success is to make a customer renew their contract. So the first thing you want to do is to see how customer results and renewals are related. Put simply, how much value is required for retaining the customer – e.g. 5% growth, 10% cost reduction, 20% productivity increase.
The metrics you are looking for are not merely indicators for your customers’ future behavior but actual customer action and the impact on your business.
So the metrics you want to look at here:
- MRR retention
- Expansion revenue (negative churn)
- Revenue from referrals
- % of expansion revenue of total growth
- Portfolio growth
- LTV growth
- ARPU/ARPA growth
Combined with a cohort analysis you’ll get a ton of valuable insights from that kind of analytics. Like who your fastest growing and expanding customers are or the easiest to retain regarding achieved results. Customer success is a growth function.