Customer success—it’s a phrase you probably hear more and more these days. But what exactly is customer success? How do you measure customer success metrics to gauge how well you’re doing?
It’s not a new concept, but it has become a hot topic issue over the last few years and for good reason. Essentially customer success refers to how successful a customer is in using your product or service. Two main factors determine this:
- The quality of your product or service and how easy it is to successfully use it
- How you manage relationships with your customers after the initial sale to ensure they have all the training, support, and resources needed to realize success using your product or service
Customer success and customer satisfaction
High rates of customer success are directly tied to high rates of customer satisfaction. If a customer isn’t successful using your offering, they will be dissatisfied. If customers become dissatisfied, they can easily stop paying for your product or service and leave you for a competitor.
As mentioned above, focusing on two primary areas will help you increase both customer success and customer satisfaction levels.
Product or service quality
If your product or service doesn’t stack up to the competition, people simply won’t purchase it. That’s why it’s so important to involve your customers in the plans and strategy you form that will define the evolution of your offering.
One great way to do that is by creating a customer advisory board (CAB). A CAB provides candid feedback and advice around what your customers want to see in your product based on their unique needs. This helps you develop your product or service to align with your customers’ ever-shifting requirements. Learn more about customer advisory boards.
Customer relationship building
The better the relationships you maintain with your customers, the more likely they are to be successful using your product or service. Best-in-class companies use a customer relationship management (CRM) software solution to manage those relationships, and you should too.
Check in on your customers regularly to see what they need and what challenges they are facing. Deliver world-class customer support and measure customer support metrics (more on that below). Ensure customers receive extensive onboarding and training when they first start using your product. And generally, go out of your way to cater to all your customers’ needs. Learn more about nurturing customer relationships.
Key customer success metrics to track
Once you incorporate a focus on product quality and customer relationship building into your overarching customer success and satisfaction strategy, you must monitor how you perform against your customer success goals. You can do this by tracking some key customer success metrics.
1. Customer churn
Customer churn—also referred to “customer turnover” and “customer attrition”—refers to the percentage of recurring customers you lose in a given time period. Customer churn can be measured monthly, quarterly, yearly, etc.
Among customer success metrics, this is an easy one to measure. For a given time period—let’s use one month as an example—you count the number of customers you have at the start of the month. Then count the number of customers you have at the end of that month. Then subtract the ending number and divide the answer by the starting number.
For example, let’s say you have 100 customers at the start of the month, but only 90 at the end of the month. Subtract 90 from 100 and you have 10. Then divide 10 by 100 (your starting number) and you get 0.1 (or 10%). 10% is your customer churn rate, meaning that you lost 10% of your customers in that month.
Customer churn is one of the more important customer success metrics. Check out our recent article on reducing customer churn to learn more.
2. Net promoter score
Net promoter score (NPS) is one of the most reliable customer success metrics. It actually measures customer satisfaction. But because the two are directly tied to one another, it really measures both.
NPS revolves around a single question you ask your customers:
How likely would you be to recommend our product or brand to a friend or colleague?
They respond on a scale of 0 to 10, with 10 being “very likely” and 0 being “not at all likely.”
Those who respond with a 9 or 10 are considered “promoters”—in other words, they are the most likely to recommend you. Those who respond with a 7 or 8 are considered “passives,” meaning they don’t have a strong sentiment either way. Those who respond with a 6 or below are considered “detractors.”
Calculating NPS involves a few steps that we won’t cover here for the sake of brevity. However, you can learn, in detail, how to calculate NPS by checking out our recent article on measuring customer satisfaction.
3. Customer effort score
Customer effort score (CES) is another customer satisfaction measurement. However, it differs from NPS in that companies use it to measure a customer’s satisfaction with a single interaction they had with a business.
The more effort they must put into a single interaction, the lower their satisfaction level will be. For example, if they have to wait days for a response to a customer support question and call back numerous times to check on the status of their support ticket, they are putting too much effort into the interaction. Your support team should be reaching out to them, not vice versa.
Like NPS, calculating CES involves a few steps that we don’t cover here. But you can learn how to calculate CES by reading that same article on measuring customer satisfaction.
4. Customer satisfaction score
Customer satisfaction score (CSAT) is a third measure of customer satisfaction, which, again, is relevant because satisfaction and success go hand in hand.
Customers rate their satisfaction with a particular aspect of your business—for example, your customer support, the quality of your product, etc.
They rate their satisfaction on a scale of 1 to 5, then you collate and take the average the responses to get your overall CSAT score. CSAT is one of the older customer success metrics but it’s still alive and well. Learn how to calculate CSAT.
5. Renewal rate
Renewal rate refers to the degree at which your business is growing and acquiring new customers. It measures the percentage of customers in a subscription-based business that renew their contracts at the end of their existing ones.
If you have 100 customers at the beginning of a given time period (one year for example), and of those specific 100 customers, 98 renew their contracts, your renewal rate is 98%.
It’s one of the easier customer success metrics to measure but an important one still the same.
6. First contact resolution rate
First contact resolution (FCR) rate is the percentage of submitted customer support tickets that your helpdesk team resolves on the first attempt. Companies with a high FCR rate don’t make customers wait hours or days to receive a resolution to their support query. They typically solve them on the first try.
This is quite easy to do if you use an all-in-one CRM solution with built-in helpdesk group functionality. Helpdesk groups are sub-teams in your support department that specialize in one particular product or service. They are experts in that offering and only field support tickets around that product.
This means that your customers receive expert support every time, which increases satisfaction and ensures that they are more successful using your product. Learn how to boost your first contact resolution rate.
7. Expansion revenue
Measuring expansion revenue is related to measuring customer renewal rate but provides additional, nuanced insight. Expansion revenue is the amount of revenue your company is generating from existing customers. It tells you whether customers are sticking around and continuing to spend more.
According to Forbes, 80% of a company’s future revenue, on average, will come from just 20% of its existing customers. So, ensuring that expansion revenue is growing is critically important to the future of your business.
To calculate expansion revenue, simply divide new revenue from up-sells and cross-sells to existing customers (in a given month) by the revenue you had from those sources at the end of the previous month. That will give you a percentage, which is your revenue expansion rate. A revenue expansion rate above zero should always be your target goal.
8. Knowledge base article rating
Assuming you use helpdesk automation software to streamline your customer support efforts, you will likely have the ability to create a knowledge base (KB). A knowledge base is a repository of self-help articles and other resources that let your customers solve their own problems, which saves everyone time and makes customers more successful.
You can ask customers to rate the effectiveness of each article in your KB and gain an idea of how helpful your KB articles actually are. If you realize your KB resources are not helping customers solve problems on their own and they still have to call customer support, you’re not excelling in this area. Learn more about knowledge base content feedback.
9. Support ticket volume per user
How many support tickets does your average user or customer submit each month, quarter, or year? The more tickets they submit, the less intuitive your product is. A high volume of tickets is an indication that you need to make your product or service more user-friendly and easier to use.
Once you take an initial measurement of that average, your goal should be to continually lower it. If it increases, you should step back and ask yourself why. And again, the best way to minimize the volume of individual tickets is to implement powerful helpdesk software and create a knowledge base.
10. Customer retention cost
I mentioned above that, on average, 80% of a company’s future revenue will come from just 20% of its existing customers. But how much does it cost to retain a customer? How much are you spending on customer retention?
When it comes to measuring customer success metrics, this is an easy one. You can calculate customer retention cost by following these steps:
- Define the time period you want to calculate for—this could be monthly, quarterly, or annually.
- Add up all your customer retention expenditures. These include the tools, time, and materials that you invest in to drive customer retention programs.
- Divide that total by the number of customers that you retained during that time period.
- This will give you the average cost of retaining one customer.
You should always ensure that the cost of retaining a customer is less than the average revenue you generate from an existing customer.
Ensuring that your customers are successfully using your product or service is critically important to the health and future success of your business.
It all boils down to delivering a world-class customer experience and making customer satisfaction a priority.
Keep those objectives in mind, follow the tips above, and you’ll reap the many benefits of maintaining successful customers.