Understanding and leveraging the right Key Performance Indicators (KPIs) can be the difference between soaring customer success and dismal failure in the fiercely competitive SaaS landscape.
Customer success is not hype; on the contrary, customer success is the new model for sustainable business growth. This article further analyzes the key success factors that can have a positive effect on the customers and in turn, business prosperity.
Understanding Customer Success KPIs
Customer success KPIs are a set of metrics that define how a business meets clients’ demands and expectations and ensure they are satisfied and loyal.
All these metrics help to identify new areas of development for the company and increase the client’s satisfaction to reach long-term success.
Defining Customer Success KPIs
Customer success KPIs are nothing more than measurable parameters that assist your business in determining how effectively it meets specific key objectives related to customers.
These KPIs help to determine the current position of customer relationships and also verify if the current strategies meet customers’ expectations.
Importance of Customer Success KPIs
Customer success KPIs (key performance indicators) are important because they help businesses understand how customers are progressing with their products and services, and how well the business is performing.
These metrics can help businesses:
Identify areas for improvement
KPIs can give a business a clear view of the areas of success and the areas that need to be worked on.
For instance, a measure set that includes the rate of returning customers might assist companies in optimizing areas such as onboarding or customer care that will influence the repurchase decisions of customers.
Create data-driven strategies
KPIs can help businesses adopt a proactive approach and create better strategies. For example, KPIs that track churn rates can help businesses respond faster to risks and promote customer satisfaction.
Understand customer perception
KPIs can shed light on how consumers feel about their interaction with the business.
For instance, customer satisfaction scores (CSAT) can be used to measure customer sentiment after making a purchase or problem resolution.
Tell a story about revenue and cash flow
KPIs are essential in helping businesses gauge their chances of expanding their revenues while at the same time ensuring a positive cash flow.
For instance, monthly recurring revenue (MRR) makes it easy to determine the estimated monthly revenue and identify changes in this aspect which are crucial for strategic planning and business development.
Essential KPIs for Customer Success-Driven Growth
1. Customer Satisfaction Score (CSAT)
Can be used to determine the level of engagement and the level of satisfaction of customers. CSAT can be obtained from customer satisfaction questions such as asking the buyers to rate the company on a scale of 1- 10.
The obtained CSAT can range from a percentage of 0 to 100 based on how many of the customers used the words ‘satisfied’ or ‘very satisfied’.
Insight: According to the American Customer Satisfaction Index, the average CSAT score across all industries in the U.S. is about 74%.
2. Net Promoter Score (NPS)
Calculates a customer’s loyalty and satisfaction based on the likelihood of a customer referring others to use a certain company’s product or engage in a certain company’s service.
NPS has a score of 0 to 100, therefore, anything higher than 0 is considered positive and anything above 50 can be referred to as outstanding.
Insight: According to Bain & Company, ‘Organizations which have the greatest NPS in their industry are set to expand at more than double of the speed of competitors.
3. Customer Lifetime Value (LTV)
Assesses the value of a particular customer to a business by the amount of time a customer spends on a particular business, the amount of money a particular customer spends, and the potential ability of that particular customer to bring in more paying customers.
Customer value can be computed by multiplying the revenue per customer by their longevity and then subtracting customer acquisition and retention costs, to arrive at LTV.
In the long term, patterns in LTV help to evaluate the effectiveness of customer success efforts and identify potential for improvement.
Insight: According to Harvard Business Review, every 5% increase in customer retention increases profits by a range of 25-95%.
4. Churn Rate
Tracks the rate of customers leaving a service, also known as customer turnover. It can be computed by using the formula: (lost customers/total customers at the beginning of the corresponding period) * 100.
Insight: Reducing churn by 5% can increase profitability by 125%, according to Bain & Company.
5. Net Revenue Retention (NRR)
The NRR helps one determine the total number of revenues, including the upsells, in a given period less the revenues that have been churned.
When this key KPI is above hundred percent it implies that the business is healthy and is even expanding even without inviting new customers. The NRR metric has to be computed accurately and as often as it is possible.
6. First Contact Resolution Rate
It indicates the number of customers’ requests that are solved within this contact only, without transferring to other agents. This metric is very important as it directly affects the ability to meet customer needs and organizational performance.
A high FCR rate implies that customers get their problems solved expeditiously and this leads to higher levels of customer satisfaction.
Implementing and Tracking Customer Success KPIs
1. Identify Primary Goals
The first step is to identify your primary goals. What are the ultimate objectives of customer success?
It could be:
- Increasing customer satisfaction
- Reducing churn rate
- Improving product adoption
Any of these are valid goals, though it’s best to focus on one or two at a time as trying to implement a strategy that is too broad can lead to confusion and misdirection.
2. List Necessary Tasks
Once you have identified the goal, it’s time to list out all of the necessary tasks that must be completed to achieve it.
For example, if your goal is to reduce churn rate, some of the tasks could include:
- Analyzing customer data for common issues and trends
- Reaching out to customers who are at risk of leaving
- Improving product features or pricing plans
- Training customer service teams
- Building a customer education plan
3. Set Measurable Targets
The next step is to set measurable targets for each task. These should be based on the primary goal and should be achievable in a reasonable amount of time.
For example, if your goal is to reduce the churn rate by 10%, then you can set a target of reducing it by 5% within the first three months, and then work towards achieving the full 10%.
It is critical to make these goals realistic, as setting unreachable targets can lead to frustration and a lack of motivation on the part of your team.
4. Track Change
A snapshot of your metrics will be informative. The growth of changes must be observed to capture the true means of customer success.
One of the best ways of doing this is by developing a dashboard that can be employed in analyzing LTV among other, factors such as the churn rate at different time intervals. This will help you point out areas of improvement or observe trends that point toward customers changing their behavior.
5. Analyze Successes or Failures
Always appreciate achievements and be ready to share that appreciation but never shy away from embracing mistakes.
When analyzing successes or failures, ask yourself questions such as:
- What worked?
- What didn’t work?
- How could we improve?
These questions are pertinent in establishing which of the strategies should remain in place to ensure the customer base is satisfied fully and which should be eliminated.
Also, it is necessary to pay attention to the customers’ feedback while dealing with successes and failures to get a better understanding of the performance of the team.
Final Thoughts
The modern Customer Success Manager has to strike the balance between customer satisfaction and elevated business revenue.
Unfortunately, every customer is different, and sticking solely to Customer Success KPIs can turn out to be counterproductive. This is why understanding relationships and hierarchies in key accounts is key.
Embrace customer success, and watch your business thrive. Learn more about how our customer success solutions can help you achieve unparalleled growth and satisfaction.
