Customer Success Metrics and Key Performance Indicators

An introduction into key performance indicators (KPIs)/metrics.

Data is essential to providing reliable support that justifies, explains, and offers insight into any business's function or the teams that exist within it.

What is the Most Important Customer Success KPIs?

Although metrics and KPIs are similar and parallel to one another in many ways, there is a discussion amongst industry experts highlighting some functional differences between the two. However, it should be understood that metrics can transform into KPIs and the other way around. As a summary, it has been stated by professionals in the field that all KPIs are metrics, but not all metrics are KPIs. One definition of KPIs says that they are measurable values that illuminate the efficacy of achieving a business objective. Similarly, an explanation of the metric states that the measurement exclusively tracks the status of an identifiable business process. The key differentiator here is the distinction between objectives (or targets) and processes.

The identity or function of a metric and a KPI can flow in and out of one another. For example, a given objective or target can be associated with a metric. If a better outcome is achieved by viewing a metric, it could be considered for adoption as a KPI. In parallel, if exploring a particular target does not result in concrete results, an organization can consider transitioning a KPI into a metric.


A List of Customer Success Metrics and KPIs

Overview:
  • Annual Contract Value
  • Engagement
  • Win Prediction
  • Product Usage Details
  • Value Attainment
  • Customer Lifetime Value
  • Customer Churn Rate
  • Expansion Revenue
  • Support Tickets
  • Customer Health Score
  • Net Promoter Score
  • Customer Satisfaction Score
  • Qualitative Customer Feedback
  • Customer Retention Cost
  • First Contact Resolution Rate
  • Renewal Rate

Annual Contract Value

The dollar amount a standard customer contract is valued to a company in a year equates to the Annual Contract Value (ACV). This metric is most viable when assessed within the context of other metrics, such as revenue retention. A definition of ACV tends to differ from one company to another, depending on the elements most relevant to the organization. For instance, some companies include single initial charges such as setup or training in their ACV calculations. It is not uncommon to confuse ACV with Annual Recurring Revenue (ARR), which does not calculate for single initial charges.

Engagement

The Engagement metric is a modality for identifying how a team is communicating with its opportunities. With recent improvements in data storage and computing power, Engagement models take in a mass of factors to quantify Customer Team and Our Team Engagement, including frequency of communication, quality of communication, and responsiveness of both parties. Engagement can also be measured at the level of individual customers and employees. Each individual involved is designated with their Engagement value, allowing calculations to show who the vital decision-makers are in any opportunity rapidly. Smart data-capture engines can analyze carbon-copy addresses, meeting attachments, and email signatures to provide information that is always up to date and detects drops in customer engagement.

Customer Success KPIs

Win Prediction

Win Prediction mainly concerns whether or not the meaningful result of an opportunity will result from a win, and less about calculating the health of a customer. Every business develops its primary differentiators, requiring machine models that monitor for each of these specificities and bring them to the surface for assessment. This metric permits insight as to what sets a particular solution apart by supporting with real data. Combining natural and artificial intelligence reinforces the data to verify its accuracy.

Product Usage Details

Throughout the complete customer subscription or use of a product, Product Usage Details illumine a normalized set of data regarding what features customers are using. Tools like the Activity Stream allow for a view of the results from product demonstrations and promotional efforts in real-time. With Product Usage Details, an organization can explicate their sales targets with tangible historical and sales data. This metric also provides guidance and knowledge into the processes of retention and onboarding. Beyond increasing revenue, Product Usage Details enable customer success teams to remain proactive and provide customers regular reminders about the value of employing the company’s solutions.

Value Attainment

To expand confidence in the sales department, improve customer retention, and use fewer resources in the pursuit of success, Value Attainment is measured for every account managed by an organization. This metric can be distinct from one business to the next, but it generally concerns four areas: engagement, data consumption, operational metrics, and Product Usage Details. Because Value Attainment offers a historical perspective on trends within an organization, its data permits vision on both present and past activity, allowing for an outlook on upward and downward actions for each customer.

Customer Lifetime Value

Customer Lifetime Value (CLV) is one of the most traditional and foundational customer success metrics. It evaluates the total revenue a business can surmise for an individual customer over the course of their connection with a company. Providing a frame of reference over time allows for the CLV to demonstrate if a customer’s value is increasing. Such an increase indicates the customer is gaining value and success from using a company’s products or services. If a decrease is noticed in the CLV metric, it permits a business with an opportunity to reevaluate its offerings and refine flaws in the customer experience.

Calculating CLV includes a comparison between the customer’s estimated lifespan and the customer’s revenue value. By multiplying average purchase value by average purchase frequency rates, and then multiplying that value by the average customer lifespan, an effective rate is gauged for how much revenue an individual customer will spend with the business.

It can be viable for an organization to understand CLV in relationship to Customer Acquisition Cost. By engaging these two metrics in tandem, a business gains perspective on the efficiency of marketing and sales to provide a more robust lens of its customer’s profile.

Customer Churn Rate

A Customer Churn Rate measures the percentage of customers who terminate the use of a product over a period of time. However, when considering overall churn rates, three classifications of churn can be analyzed. In addition to Customer Churn, an organization can evaluate Gross Dollar Churn and Net Dollar Churn. The percentage of total revenue forfeiture resulting from customer churn and product downgrades constitutes Gross Dollar Churn. When this measurement occurs every month, it is known as Monthly Recurring Revenue, or MRR churn. Similar to gross revenue analysis, Net Dollar Churn concerns the relationship between customer churn and downgrading, but it also factors in the gains that come from expansion revenue, through the actions of upselling and cross-selling to a customer. Again, this measurement can occur every month, resulting in net MRR churn.

Once a period—weekly, monthly, quarterly, annually, et al—has been established for measuring data, the customer churn rate can be calculated by dictating the total number of customers at the beginning of the time period and the number of customers that terminated during the same period. Dividing the number of terminated customers by the total number of existing customers determines the Customer Churn Rate.

In determining the churn rate for a period, it is critical to exclude any new customer acquisition from the current whole. Newly established customer relationships can be included in the measurement of the next period.

Expansion Revenue

It can be useful to understand Expansion Revenue as the contrasting metric to churn. Expansion Revenue calculates how much new money is being derived from current customers. This measurement judges the efficacy of upgrading to the existing customer base. A company can gain insight into its ability to produce value if the customer is willing to spend more money on its product and services. Such insights can also indicate how well a company manages to assist customers in developing with their product or service.

Expansion Revenue is commonly calculated every month, known as expansion MRR. MRR summarizes the monthly revenue generated from customer's expenditures on a company's products or services. A broader perspective on achievements can be discerned by assessing MRR over a lengthier period. The calculation is as simple as dividing the previous month’s total revenue with the revenue generated from upsells and cross-sells in the current month.

Support Tickets

Customers recurrently solicit support when something has gone wrong or encounter challenges in implementing a product. These solicitations are commonly referred to as Support Tickets. Studying these tickets is a useful effort for customer success teams to assemble information on how customers judge a product or service. An analysis of Support Tickets should regard a number of tickets over a period of time, reflecting on how many of the tickets were positively reconciled, and the amount of time these reconciliations required. Assessing which products receive higher numbers of tickets can also provide insight into which products perform better than others, offering perspective for refinement and mitigation of future escalations.

Customer Health Score

For customer success teams to follow their clients, assist with challenges, and proactively strategize for the future, they must actively promote and track customer success. A customer health score provides insight in a few different ways to empower the success team. The health score helps track whether a customer is genuinely reaping value from the company's product or service. This health score metric also displays how often the customer uses the product and how successful the customer is after their purchase. Tracking a customer's health score also enumerates the business's impact, and if a customer pain point has been transformed into a position of strength.

Net Promoter Score

Net Promoter Score (NPS) is a standard metric with high popularity, despite being a point of recent critical dialogue. Its popularity is mainly to do with its simplicity. NPS is executed with the use of a short survey, in which customers are solicited for their likelihood of recommending a product to a friend or colleague. The customer uses a scale from 0-10, and answers are categorized into three brackets: Detractors (scores 0-6), Passives (scores 7 and 8), or Promoters (scores 9 and 10). The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. This score is also based on qualitative data, in which customers are requested to explain their ratings. Although NPS is commonly an adequate prediction of customer loyalty, it tends to lack insight into the causes associated with the score.

There are a few areas that experts draw attention to when considering the factors not provided by NPS. First, NPS does not take into account demographic factors in customers, resulting in a lack of information on the attributes that impact an individual’s experiences. Secondly, NPS is limited to understanding a customer’s intention but without tracking concrete actions. NPS cannot account for whether a customer does or does not act on their stated likelihood of recommending a product. Third, a NPS regards only customers. Despite having a principal role in the customer's experience, NPS does not include insights on employees, stakeholders, or future customers. Lastly, absent from the indicators associated with NPS is how a customer's demands evolve and how this change stands to impact responses on a survey.

Customer Satisfaction Score

Customer Satisfaction Score (CSAT) is similar in nature to NPS, but instead of regarding referrals, CSAT measures a customer’s experience with the organization. By initiating this survey immediately following a customer engagement, CSAT can gauge a customer's feelings about their experience more accurately. By assessing the customer's feelings, CSAT is distinguished from other metrics that measure the actions of a customer. Because customer success managers are trained and experienced in understanding and negotiating a customer's feelings, the CSAT generates a further opportunity for the CS teams to act early and mitigate any negative actions from the customer, such as downgrades or churn.

Calculating CSAT is executed with a survey that solicits customer feedback on how they would rate their overall satisfaction with a specific product or service. Most commonly, by utilizing five categories, ranging from 1-5, where '1' accounts for “very unsatisfied” and '5' entails "very satisfied," the resulting CSAT can be displayed as a percentage concerning how many customers fall into each category.

Qualitative Customer Feedback

The assessment of Qualitative Customer Feedback assists in implementing one of the core functions of Customer Success. It seeks to offer the customer reassurance that they have a voice for their experience and that it is heard and valued by the company. Qualitative Customer Feedback aims to understand what customers are saying about the organization and its products, as well as what the customers like and dislike about their relationship to the company. This data can be derived through surveys, or it can be assessed through customer meetings, whether in forums, emails, phone, or in-person.

Customer Retention Cost

Customer Retention Cost (CRC) works to display the amount of money spent to retain each customer. This metric summarizes the total cost associated with a customer success program and weighs it against the total amount of customers. By contrasting the prospective cost of retention to potential revenue, a business can make more informed decisions about where and how to invest its efforts. An audit of expenses on customer success efforts is necessary to establish CRC, including data on engagement and implementation programs, customer marketing, professional services and training, and payroll for customer success and service teams. Once this total sum of expenses has been established, it can be divided by the total number of customers to arrive at an average cost for retaining a customer.

First Contact Resolution Rate

Because it is a priority for customers to have their problems resolved expeditiously, it is essential to track initial contact with the customer. First Contact Resolution Rate measures the percentage of customer service cases that achieve resolution within the initial engagement. A calculation of this metric is obtained by dividing the number of service tickets closed in the initial engagement by the total number of service cases.

Renewal Rate

The Renewal Rate is especially vital to subscription-based business models, and at the core of SaaS companies. Conclusions drawn from tracking Renewal Rate can be relatively straight forward. High renewal rates demonstrate a customer’s willingness to remain committed to a business, which is associated with the customer successfully redeeming value from their participation. Lower renewal rates can indicate the opposite, presenting opportunities to assess how customer success efforts can be broadened or improved.