Effective customer success management is crucial for any business looking to retain and grow its customer base. Measuring and tracking the performance of customer relationships is essential to identifying opportunities for improvement and making data-driven decisions. In this blog post, we'll be discussing 10 key performance indicators (KPIs) that are commonly used in the customer success field. These KPIs can help companies measure customer engagement, retention, and revenue growth, and can serve as valuable tools for understanding and improving the customer experience. Whether you're just starting out with customer success or looking to refine your existing strategy, this post will provide valuable insights and best practices for measuring and improving customer relationships.
1. Account Retention Rate: Measures the percentage of accounts that a business is able to retain over a given period of time.
Account retention rate is typically calculated by comparing the number of accounts that were active at the beginning of a given period to the number of accounts that remained active at the end of that period.
Account retention rate = (Number of accounts at the end of the period / Number of accounts at the beginning of the period) x 100%
For example, if you had 100 accounts at the beginning of the year and 90 accounts at the end of the year, your account retention rate would be calculated as follows:
Account retention rate = (90 / 100) x 100% = 90%
2. Net Revenue Retention (NRR): measures the percentage of revenue that a business is able to retain from its existing customer base over a given period of time.
NRR is typically calculated by comparing the revenue generated from existing customers in a given period to the revenue generated from those same customers in the previous period.
For example, if a business generated $100,000 in revenue from its existing customer base in the first quarter of the year and $110,000 in revenue from those same customers in the second quarter, its NRR would be 110%.
Important: Net revenue retention (NRR) and account retention rate are related but are not the same thing and serve different purposes.
Combining NRR and account retention rate can provide a more complete picture of a business's performance and can help to identify trends or patterns in customer behavior.
For example, a business with a high NRR and a high account retention rate is likely to be performing well and retaining both its revenue and its customer base over time. On the other hand, a business with a low NRR and a low account retention rate may be facing challenges in retaining its revenue and its customer base and may need to take steps to improve its performance.
3. Product Adoption: Measures the percentage of customers who are actively using a product or service. Adoption can be measured through usage & consumption, feature usage, time spent by the customer in the product, etc.
4. Time To Value (TTV): Measures the amount of time it takes for a customer to realize the value or benefits of a product or service.
Check out the following post for more details about TTV https://www.vineetpuri.com/post/everything-time-to-value-ttv
5. Product stickiness: Measures the degree to which a product or service is used and relied upon by customers. Product stickiness is often used as a measure of customer loyalty, as it reflects the extent to which customers are integrated into the product or service and rely on it for their daily tasks or operations.
6. Customer Health Score: Measures the overall health of a customer's relationship with a business.
It reflects the health of the accounts derived by using various metrics such as customer engagement, product usage, support tickets, product usage frequency, CSAT, NPS, customer effort, etc.
Important: Assess if the Customer Health Scores are working by taking the renewal litmus test. The real value of this is in predicting renewals.
7. Customer lifetime value: This KPI measures the total revenue that a customer is expected to generate over the course of their relationship with the business.
To calculate customer lifetime value (CLV), you will need to gather data on customer acquisition costs, and average customer lifetime. You can then use the following formula to calculate CLV:
CLV = (Average customer lifetime x Average customer value) - Customer acquisition cost
For example, if the average customer lifetime is 5 years, the average customer value is $200, and the customer acquisition cost is $50, your CLV would be calculated as follows:
CLV = (5 x $200) - $50 = $750
This means that the average customer is worth $750 in terms of CLV over the course of their lifetime with the business.
8. Customer satisfaction score: This KPI measures the overall satisfaction of customers with the software or service.
To calculate customer satisfaction (CSAT), you will need to gather data on customer feedback and responses. There are a few different methods that you can use to do this, including:
Surveys: Surveys are a common method for collecting customer feedback and can be conducted online or through other channels, such as email or phone. Surveys can include questions about overall satisfaction with the product or service, as well as specific aspects of the customer experience.
Customer feedback forms: Customer feedback forms are another way to gather customer responses and can be used to collect feedback on a specific interaction or experience.
Social media: Social media platforms, such as Twitter or Facebook, can be used to gather customer feedback and responses in real time.
Once you have collected data on customer feedback and responses, you can calculate CSAT using the following formula:
CSAT = (Number of positive responses / Total number of responses) x 100%
For example, if you received 50 positive responses and 100 total responses, your CSAT would be calculated as follows:
CSAT = (50 / 100) x 100% = 50%
This means that 50% of customers who provided feedback had a positive experience.
9. Net promoter score (NPS): measures the likelihood that a customer will recommend a product or service to others. NPS is calculated by asking customers to rate their likelihood of recommending the product or service on a scale of 0 to 10, with higher scores indicating a higher likelihood of a recommendation. Customers who score 9 or 10 are considered "promoters," while those who score 0 to 6 are considered "detractors." NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.
NPS is often used as a measure of customer satisfaction and loyalty, as it reflects the willingness of customers to recommend the product or service to others. A high NPS is typically seen as a good sign that customers are satisfied with the product or service and are likely to continue using it over time.
10. Referrals: Measuring Referrals is another great KPI to have. This is the most cost-effective way to grow. However, more importantly, it tells that the customers are happy and willing to refer the product or services to others.
Measure referrals as a % of total new logos acquired during the period.
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