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  3. 8 Key Customer Success Metrics and What They Tell Us

Article 8 Key Customer Success Metrics and What They Tell Us

Lauren Sickel Oct 7, 2021

Customer relationships and loyalty play a key role in an organization’s success story. Awareness about customer success metrics like churn rate, customer retention cost, net promoter score, etc., can provide insight on what areas the business should invest more efforts in to achieve greater customer success.

Customer success teams and marketers use various customer success metrics and key performance indicators (KPIs) to understand how well their products, services, strategies, and campaigns are working. These metrics and customer success KPIs also help businesses analyze their customer acquisition and retention plans’ performance, allowing enterprises to build a strong roadmap that will optimize the lifetime value of customer relationships.

Top 8 Customer Success Metrics

When you track the right customer success metrics and KPIs and have the right insights, you’ll know if customers are happy with your business, find it helpful, see value in it, or if they are likely to switch to a competitor. What you track depends on what customer success means to your business.

Here are eight key metrics to monitor when evaluating customer success.

1. Net Revenue Retention (NRR)

Do you know how good your chances are of growth without winning any new customers? NRR or Net Dollar Retention (NDR) is an important customer success KPI that gives you an idea of business growth driven largely by Customer Success teams.

To find your NRR, start with your monthly recurring revenue (MRR). Add the dollar amount of customer upgrades to your MRR and subtract any downgrades and lost customers. Then, divide that number by your starting MRR and multiply the whole thing by 100. The final number is your NRR.

Your equation should look something like this:

NRR = (Starting MRR + upgrades – downgrades – churn) / Starting MRR x 100%

NRR can help you calculate any change in revenue (gains or loss) from existing customers. It lets you evaluate how deviations in revenue due to subscription plan upgrades or downgrades, customer churn, and any other changes in pricing affect your company’s growth and customers’ purchase decisions.

2. Health Score

Customer health scores weigh the strength of a customer relationship and how likely a customer is to continue doing business with you.

Typically, the health score considers multiple factors, including the usage of key product features, value delivered by the product if it can be measured or inferred, customer evaluations from frontline Customer Success Managers, and negative moments in the customer experience.

Health scores, and the components that make up a health score, can be very powerful leading indicators of churn. Health scores are valuable because they can be measured before churn happens — when it’s often too late to bring a customer back.

3. Customer Churn Rate

Customer churn (or attrition) rate indicates the percentage of your customers who have stopped using your business by unsubscribing, not renewing services, closing their accounts, etc. Dividing the number of customers lost by your total number of customers will give you the customer churn rate.

As per Forrester, winning a new customer can cost five times more than retaining and enriching an existing customer relationship. A high percentage of repeat business with low customer churn is an indicator of business growth.

4. Frontline Feedback

What are customers talking about? What are Customer Success Managers hearing? While not a metric per se, frontline feedback offers critical context for all of the customer success metrics listed here and should be monitored carefully.

Crucial areas for businesses to pay close attention to include the likelihood of retaining a customer and the factors influencing the decision; cancellation drivers; interest in new features, products, or services; and references to competitors or capabilities that competitors are known for.

As you continue tracking frontline feedback, with time, it tends to become more quantifiable. You begin to notice if topics have changed from last month, the last quarter, or last year. Tracking those topics of interest can help indicate the progress Customer Success and the overall business have made, while at the same time revealing opportunities for future focus.

5. Average Revenue Per User (ARPU)

Your company’s ARPU is the average revenue per user or unit over a defined period. You can find your ARPU by dividing your total revenue by your total number of users or subscriptions. A higher ARPU indicates more loyal customers.

Digital and social media companies and software-as-a-service (SaaS) organizations calculate ARPU for better financial planning, to understand how they fare in comparison with competitors, and to comprehend their profit generation potential better.

Upselling additional products or services is one way of achieving better ARPU. The key here is to understand the customer situation and monitor signals that indicate the right timing for an upsell moment.

6. Monthly Recurring Revenue (MRR)

MRR is an indicator of your predictable or regular revenue stream and gives your total monthly revenue from all active business subscriptions. MRR specifically helps SaaS companies in financial planning and measuring business growth.

Multiply the total subscribers under a monthly subscription by the average revenue per user (ARPU) to calculate your MRR. MRR also considers recurring costs from promotions and discounts, coupons, add-ons, etc. MRR does not include one-time charges.

Better customer retention, upselling at the right time, running referral programs, perk-based promotions, etc., can help improve MRR.

7. Customer Retention Cost (CRC)

While acquisitions expand the customer base, retention indicates customer loyalty toward the brand. Every company works toward balancing acquisition, retention, and associated costs. CRC can tell you how much you spend to retain an existing customer.

Calculate all customer success expenses spent on the customer success team and other teams, various customer engagement programs, training, marketing, etc. Divide the sum of these expenses by the total number of customers, and you’ll get your business’ customer retention cost.

CRC can give you insights on how to plan the right investments to retain customers.

8. Net Promoter Score (NPS)

NPS is a proven metric for success, and it can help you gauge customer satisfaction with one simple, straightforward customer survey question: “On a scale of 1 to 10, how likely are you to recommend our offerings to others?”

Subtract the percentage of detractors (those who gave a rating of 0 to 6) from the percentage of promoters (those who gave a score of 9 or 10) to calculate your business’ NPR. Respondents who gave a 7 to 8 score can be considered as passively satisfied customers.

Both finding your NPS and collecting customers’ rationale behind their responses can help you better evaluate customer experiences.

How to Learn from the Metrics and Strengthen Customer Relationships

These certainly aren’t the only customer success metrics — you may also want to think about things like customer lifetime value, conversion rate, and customer satisfaction score. When tracked properly, all of these can help businesses achieve customer success. When to track what metric and what to do with the results is equally important.

Imagine having a system designed for customer success where crucial customer data triggers proactive workflows, from at-risk outreach to customer emails, selling motions, and more. A customer success platform with such features and the capability to assist in decision-making with the right insights would mean you never miss a business opportunity.

Quala combines insights from frontline teams with customer data to do just that. The platform also integrates with some of the top customer relationship management (CRM) systems and customer data platforms (CDPs) with a single click. If you want qualitative and quantitative insights all in one place, Quala is for you. With insightful analytics, business leaders can know exactly what’s working and what’s not.

Quala can help you drive the right actions for the right customers. Reach out to our team or request a demo to find out more.