Customer success is mandatory for growing any business, especially for SAAS companies. When customers benefit from your service, they remain loyal to you, which help you drive revenue and additional opportunities. Every business aims to provide services that assist customers in achieving their goals.
But how do you know whether a customer is successful? And more importantly, which success metrics matter? This post will share insights about useful metrics you should use to measure customer success.
1) Customers Lifetime Value (CLV)
CLV is one of the core metrics used by businesses. It shows the overall revenue your company can expect to earn throughout the relationship. The metric is used to determine the value of the customer over time.
If the value is high, it means your business is contributing to their success. But if it is low, you will need to re-evaluate the services and look for areas to improve.
How is CLV Calculated?
To determine CLV, you will need three sets of data:
- Annual revenue per customer
- Customer relationship in years
- Customer Acquisition Cost (CAC)
Once you have all the numbers, the first step is to multiply annual revenue per customer by customer relationship in years. Then subtract it with your CAC. The answer will be your CLV.
2) Customer Churn rate
Customer churn is the overall percentage of customers that stopped using your product during a time frame. The metric is excellent for quantifying the impact of your customer success team. If your business maintains a healthy relationship with clients, the churn rate will be less.
However, negligence from your side can cause an increase in churn rate, which is not suitable for your business. A great customer support team can help since customer success is all about establishing good relationships.
How to Calculate Churn rate?
To calculate churn rate, follow the steps below:
- Determine the time you want to calculate the churn rate. For e.g Weeks, Months, or years.
- The next step is to note down how many customers there were at the start and how many remained.
- Now, divide the number of churned customers by total existing customers.
You will now have the churn rate of your business.
3) Net Promoter Score
Another significant aspect of customer success is their feeling towards your brand. When they are happy with your services, they are likely to make a repeat purchase and recommend it to others.
Net Promoter Score (NPS) is a measure of customer loyalty and satisfaction. It is calculated by asking how likely they are to recommend the product to others. The benefit of NPS is that it provides qualitative and quantitative data about customers.
The test asks customers to rate their satisfaction score and write an explanation for their choice. It helps you analyze the results and also improve any shortcomings.
How to Calculate Net Promoter Score?
Measuring NPS is pretty straightforward. All you need is to create a form online for https://www.osmoscloud.com/blog/wp-content/uploads/2022/09/header-cover-1.jpgs to fill out. There are plenty of tools available, but we recommend using Google Forms.
Your form should contain only one question, “On a scale of 1-10, how likely you are to recommend this product or service?” And just below the question, add a space for explanation.
4) Customer Retention Cost
The customer retention cost metric indicates the total expenses of businesses to keep an existing customer. It shows whether your customer success efforts are cost-effective or not. The CRC metic enables your business to plan retention strategies and budget for customer success programs.
How to Calculate Customer Retention Cost?
To proceed to calculations, you need to examine the current expenses of customer success programs. It should consist of all the costs including, customer support, engagement and adoption programs, and customer marketing.
Now sum up all the expenses and divide it by the number of customers to get the average customer retention cost.
(Sum of all expense incurred/ total number of customers = Customer retention cost)
5) Customer Satisfaction Score
The metric is similar to NPS, used to calculate customer satisfaction. The main difference is that instead of rating the likelihood of recommendations, https://www.osmoscloud.com/blog/wp-content/uploads/2022/09/header-cover-1.jpgs directly rate their experience with the company.
It gives you a good idea of customer satisfaction at stages of the sales funnel. For instance, at the moment of purchase, the onboarding process, or after a customer support session. It also helps you know the customer’s thoughts and feelings about the success team.
How to Measure Customer Satisfaction Score?
To measure this metric, you need to have a survey in place. You should ensure that it is triggered right after a customer interaction to get accurate results.
Once you have the results, follow the steps below:
- Consider 6-10 scores as positive scores and multiply them by the total number of responses.
- Then to convert them to a percentage, multiply it by a hundred. It will show you the customers who are happy with your services.
For instance: If you received 1000 responses, among which 700 were positive, your happy customer base is 70%.
6) Renewal Rate
When you are a SAAS business, the renewal rate is one of the essential metrics. It is because most SAAS businesses work on subscription-based models. If your business has a high renewal rate, it is helping customers succeed. However, a low renewal rate suggests unhappy customers.
Using these indicators, you can explore different opportunities for your business. You can invest in customer success programs, upgrade customer support and improve the service to create a delightful customer experience.
How to Calculate Renewal Rate?
Calculating the renewal rate is straightforward. Divide the customers who renewed subscriptions by total https://www.osmoscloud.com/blog/wp-content/uploads/2022/09/header-cover-1.jpgs with expired subscriptions. And then multiply the result by 100 to get your renewal rate in percentage.
Customer success metrics are the integral determinant of how your business is performing. These metrics open gateways to overcome your weaknesses and improve. Moreover, they also help you closely monitor the performance of your business and keep your team aligned.
Keep these success metrics in mind and take your business to reach new heights.