Customer Success

100 Customer Success Leaders Weigh in on the Most Important Metrics to Measure

July 10, 2017

For a SaaS organization of any size to be truly successful, there must be an overarching theme of customer-centric focus. This means departments across the organization are aware of how daily processes and procedures impact the overall customer experience. The best way SaaS executives can ensure everyone is on the same page? Keep track of critical customer success metrics that span ALL departments.

Recently, ClientSuccess hosted the CS100 Summit, where 100 of the world’s top minds in customer success strategy and success gathered to discuss, inspire, and learn about customer success best practices. While at the conference, CS100 participants put their heads together to develop best practices around 4 main categories of customer success metrics that all SaaS leaders can measure and put to use at their own organizations. Below are the 4 main types of metrics and why SaaS leaders must pay special attention.

Monitoring the Lifeblood of Your SaaS Company Through Financial Metrics

As a competent SaaS leader, you know that current customers are the lifeblood of your organization. Without clear goals and metrics around financial numbers, SaaS executives and leaders can’t accurately inform investors, board members, and other stakeholders of progress or growth. These financial metrics are also a key leading indicator of overall organization prosperity and, perhaps more importantly, scalability.

The top 5 financial metrics, as chosen by the CS100 participants, are:

  1. Revenue Retention Rate (gross & net) = The total amount of recurring revenue an organization retains over a given period of time. Gross Revenue Retention does not include any lost revenue, while Net Revenue Retention still considers the offsetting revenue from upsells or expansions.
  1. Revenue Churn Rate (gross & net) = The exact opposite of Revenue Retention. Revenue Churn Rate is the percentage of recurring revenue lost over a certain period of time.
  1. Customer Retention/Churn Rate = Customer Retention refers to the percentage of customer gained over a period of time, while Customer Churn refers to the percentage of customer that are lost.
  1. Renewal Rate (gross & net) = The percentage of renewable revenue that was actually renewed in a certain time frame (gross) and the total revenue renewed from the renewable book of business over a certain time period.
  1. Quick Ratio = Measures the growth efficiency of a SaaS company. This independent metric was created by Mamoon Hamid and compares revenue growth against revenue churn.

While other metrics, including numbers such as Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), and Down-Sell Rate, are important to track, these 5 critical financial metrics should be at the top of any SaaS leader’s mind when planning customer success strategy and focus. These are key to the success of a SaaS organization as a whole, and leaders from all departments should be involved and held responsible for the KPIs that directly relate to these numbers.

Keeping Customer Satisfaction Top-Of-Mind with Customer Health Metrics

Accurately measuring customer satisfaction and customer health requires more than just looking at overall product usage numbers. Sometimes, in fact, measuring the elusive amount of ‘value’ a customer sees in a SaaS relationship goes a bit deeper than even metrics can go. On top of the metrics discussed below, customer success leaders should look to the Customer Success Managers (CSMs) or Account Managers that work with customers on a daily basis to accurately determine overall customer satisfaction and sentiment.

  1. Product Usage – DAU/MAU Ratio = The ratio of daily active users to monthly active users. This measures the level of engagement a customer has with your solution.
  1. Product Adoption – Stickiness = Refers to the features or solutions that provide the most value to your customers.
  1. Customer Engagement = The frequency of engagement a customer has with a Customer Success team across various channels and platforms.
  1. Customer Pulse (from the CSM) = Personal feedback from a CSM or other team member that works closely with a customer account.
  1. Net Promoter Score (NPS) = A standard measurement of customer health and loyalty that measures the percentage of internal customer promoter minus the percentage of internal customer detractors.

While some customer satisfaction metrics aren’t quite quantifiable (looking at you, Customer Pulse and Executive Engagement), they are all important in creating a clear, holistic picture of account health. Customer success teams can develop metrics-based scales for these grey-ish metrics, such as measuring customer pulse on a Red/Yellow/Green scale.

Growing Usage & Building Customer Value with Usage Metrics

Usage metrics are an important example of how customer success as a culture can impact all departments of an organization. In many ways, most departments can benefit from important usage metrics. Understanding what key features customers are using most frequently, for example, can influence product team decisions. A customer uptick in usage can alert the marketing team that it may be time for a case study. Customer success leaders and managers should monitor high-level usage metrics as well as smaller numbers to gain an accurate picture of customer value. According to the CS100 participants, the top 5 customer usage metrics are:

  1. Product Usage – DAU/MAU Ratio = The ratio of daily active users to monthly active users. This measures the level of engagement a customer has with your solution.
  1. Product Adoption – Stickiness = Refers to the features or solutions that provide the most value to your customers.
  1. License Utilization Rate = The number of paid licenses that are being actively used vs. the total number of licenses that were purchased.
  1. Time Spent in Product = This measures the total number of minutes spent in product against the total number of users.
  1. Outcomes Achieved = Total number of outcomes achieved across the entire solution. This helps leaders from both sides measure and track predetermined KPIs and goals.

It’s important to remember, however, that as insightful as usage metrics are, they often present an inflated picture of customer health. SaaS leaders should look at usage metrics alongside other leading indicators, such as financial or customer health metrics, to gain an accurate look at a customer’s success.

Building the Most Effective Team Possible Through Performance Metrics

This final category of team performance highlights exactly how important communication, engagement, and responsiveness are to the overall success of customers. Team performance brings the effectiveness of individual CSM/customer relationships to the forefront of executive conversation. Executives themselves are not left out here, either: these metrics also look at how well an organization is as a whole engaging with and serving customer accounts. Team performance metrics include:

  1. Quarterly Gross Renewal Rate = The percentage of the quarterly renewable book of business that actually renewed, not counting expansion revenue.
  1. Quarterly Expansion Revenue= The total amount of expansion revenue closed each quarter.
  1. Average Time to First Value = A measurement of the average number of days between when a customer was onboarded and when they see the first real value from a solution.
  1. Revenue Retention Rate (net) = The total amount of recurring revenue for a given time period plus any expansion, upsell, and cross sell revenue.
  1. Average Days to Onboard = The average number of days it takes to complete the onboarding process for customers.

With retention and expansion numbers attached to team performance metrics, it’s critical that all team members are involved and engaged in achieving these goals. SaaS executives and customer success leaders alike can make these metrics an overall part of company strategy for maximum effectiveness.

Key Takeaways

With these metrics in hand, customer success teams can work alongside executives and c-level leaders to build a culture of customer success throughout a SaaS organization. For growing SaaS companies especially, relying on the core customer success metrics at the beginning can help establish a strong, recurring source of revenue that adds credibility and scalability to any business model.

For more on leveraging customer success metrics and to learn the calculations for each, read ClientSuccess’ newest eBook “The Ultimate Guide to SaaS Customer Success Metrics”.

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Founder & CEO

Dave Blake is founder and CEO of <a href="">ClientSuccess, </a>which is changing the way SaaS companies manage, retain, and grow their existing customer base. Prior to launching ClientSuccess, he was VP Global Account Management at Adobe and VP Strategic Accounts at Omniture.