7 Essential Customer Success Metrics ft. Notion Data (@UseNotion)
Excellent Customer Success leaders know that the practice is both art and science. Being exceptional in the role means being good with both numbers and people. In a way, it is the perfect marriage of using data and building relationships. Data helps you build better, stronger, happier, and longer relationships with your customer, because it’s the data that can help you deliver a more responsive, customized and pleasant experience for your customers.
Tracking the right metrics also comes with another benefit: They’re the raw materials you can use to secure more funding for your Customer Success department, argue for changes in processes that impact your team, and back up any feedback you deliver to Product. These are the metrics that prove your worth, help you grow, and enable you to deliver success to your customers too.
Disclaimer: Many of the metrics listed below aren’t solely customer success metrics. In fact, many will be from data sources that aren’t necessarily controlled, managed, or regularly accessed by the customer success department. This can make tracking this data challenging.
We recommend a 5 step process to getting the information you need to deliver a better experience to your customers.
- Make a spreadsheet with each of these KPIs listed. Include additional metrics that matter to your team. Fill in any of the data that you have.
- Determine who owns the information you need to fill in the rest of your spreadsheet. Once you figure that out, send a personal appeal requesting regular updates for that data.
- Set multiple event alerts to remind you to pester them for their numbers each week or month.
- Summarize the pertinent numbers weekly or monthly, so your boss is up-to-date on how you’re team’s doing. Also discuss with your team, so you can track progress to team goals, discuss areas where you can improve and celebrate wins as a team.
- Every quarter, re-evaluate team goals and the associated metrics used to track their progress and adjust your spreadhseet accordingly.
To simplify the experience for you, your colleagues and your team, you can also use a tool like Notion, which automates and improves the processes of data collection, visualization, and collaboration for you.
Your Must-Have Customer Success Metrics
#1. Customer Lifetime Value (LTV) is both a formula, and the foundation for a strategy to increase ROI and sustain growth, but its shortest definition is: The revenue earned from a single customer over time. LTV includes Cost to Acquire a new Customer (CAC) and Churn rate — how quickly customers leave. However, most calculations fail to include cross-sells, up-sells, and the value of referrals for each customer, which increase LTV. To affect LTV, your marketing strategies should take these other factors into account as well.
Source: The Benefits of Customer Lifetime Value
LTV is, perhaps, the most important metric CSMs in subscription-based businesses can track because it’s the best at predicting success…or failure. Using research from Shopify’s Ecommerce Growth Benchmark, RJMetrics found that the top quartile of companies, the ones bringing in more than $600k in monthly revenue, not only acquired 3.5x more new customers than their competition, but also retained those customers right from the start. They were so good at keeping churn down that within the first few months of business, 20% of their revenue came from repeat purchases. By the end of their first three years, these top quartile companies saw the majority of their revenue coming from repeat purchases. That’s the power of customer lifetime value.
The data required to track this metric could live in a number of departments, but at the very least you’ll need access to payment history information to get this number. Once you determine who has access to this information ask them to give you regular updates of these numbers. In Notion, you can assign reporting ownership for any metric using team-sourced data.
#2. Customer Acquisition Cost (CAC) is intimately connected with LTV because if your CAC is higher than or equal to your LTV, your business is FAILING! Your Customer Acquisition Cost comes from tracking metrics like manufacturing costs, research, development, and marketing — everything you need to convince a potential customer to buy.
While the equation is simple enough — just divide the total costs of acquisition by total new customers within a specified time period — adding up every acquisition-related activity is where companies get bogged down.
#3. Net Promoter Score (NPS) works better than churn to score how well you’re doing at delivering those desired outcomes. Sometimes, an unhappy customer won’t get around to churning — the effort is just too low on their to-do list. But if you ask that less-than-delighted customer if they’d recommend you to a friend (the NPS question is “How likely are you to recommend us to a friend or colleague?”), you’ll get an honest answer. Many NPS tools also allow you to segment your surveys for even deeper insights.
#4. Monthly Recurring Revenue (MRR) & Average Revenue Per Account (ARPA) are good numbers to know, but don’t tell enough of the customer story to be as helpful as Lifetime Value and Churn. That said, you might glean some interesting insights from tracking the average revenue per account for new clients versus existing clients to see if and how it changes over time. Are new accounts more likely to be upsold? Or are existing clients hammering at the door to expand their usage (or saying ‘no thanks’)?
#5. Churn is important to track, but more so in the context of understanding what causes churn and how you can proactively prevent churn. Yes, you need to know how many people are leaving. But that number is too little, too late. What you really need to track are the leading indicators of churn.
Groove reduced churn by 71% by using what they called “red flag” metrics, including:
- Length of first session
- Time spent on individual tasks (the longer the time spent, the more trouble the user is probably having, and the more likely they are to churn)
But don’t just copy-paste those metrics onto your Trello To-Do list. Every business is different. You have to learn what the leading indicators for churn are for your specific audience. You also need to understand that these may change over time. Keep evaluating whether the metrics you’re tracking are really moving the needle for your team and the company. Analytics should not be an endstate, but an ongoing evolutionary exercise.
#6. Customer Success Potential and Bad-Fit Customer characteristics also need to be identified and tracked, so you gain a better understanding over time of which customers are likely to succeed, and which customers shouldn’t be your customers at all. At first, tracking this data will seem haphazard — you’ll be recording details about each customer that are relevant to their ability to succeed with your product. From that raw data, you’ll start to see patterns of success and failure. From there, you can create a list of indicators for good fit and bad fit, which you can then use to tag all of your customers in your CRM program as “good fit,” or “bad fit.”
You can then use this information to ‘off-board’ the bad fit customers (yes, you should do this — if they can’t succeed, you’re not doing anyone any favors by keeping them), and take a closer look at the churn rates of your good fit customers. If your good fit customers are churning, you have major problems to address!
#7. Customer segmentation is how Customer Success can scale without losing quality of service, but the question of how to segment customers has many different answers. I prefer Lincoln Murphy’s approach, what he calls “Logical Customer Segmentation,” which segments based on the customers’ needs — rather than their revenue potential.
His argument is that the highest revenue customers might not need (or want) high-touch service — maybe they’ve got your product figured out. Lower revenue customers, however, may have the potential for spending more if CSMs help them achieve their desired outcomes with the product. Essentially, it’s segmentation based on delivering the experience each segment needs. Figuring this out requires creating a hypothesis for an appropriate experience and gathering data to see if your idea holds true.
Did we miss any critical CS Metrics?
Ultimately, the most important metrics to track are those that help you proactively move customers to reach their ideal outcomes. That’s always the object of the game. The metrics above are barometers of your success, or help point you in the right direction. Did we miss any?
This article was originally published on Notion — Get your product team on the same page.
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