Metrics for Customer Success
In the last installment in our series about Customer Success ROI, we talk about metrics for Customer Success. Metrics are of course used for many other purposes beside ROI calculations so we will start with the trusty balanced scorecard (discussed here in the context of support):
If you are thinking about ROI, the Financial Performance quadrant is most important and one of the critical task is to clearly define how you measure renewals. You can measure them in a number of ways:
- Raw renewals bookings, i.e., $ renewed / $ for renewal. In this case, renewals will always be less than 100%.
- Net renewals booked, i.e. $ booked/$ for renewal. In this case, renewals can be higher than 100% since upgrades are included in the numerator.
- ARR growth, i.e new ARR/old ARR (or sometimes MRR). This is different from the above in that it reflects ongoing recognized revenue rather than bookings.
Whichever you choose, carefully analyze lost business. In particular, healthy net renewals could hide painful losses for certain products, customers, or customer segments.
On the cost side, the example above shows the customers/CSM ratio but if you have onboarding specialists you will also want to add the customers/onboarding rep ratio — and both are used in creating the staffing model.
Have you implemented a balanced scorecard for customer success? How did that work for you?
(If you’d like to read more about ROI for Customer Success, the first installment discussed the wisdom of not doing ROI analyses. The second showed how to calculate benefits. The third discussed how to create a staffing model. The fourth described how to create and deliver a persuasive ROI presentation.)
FT – I think you have to at least consider “average initial response time” as a customer satisfaction metric. I know it might be considered an “old way of thinking” metric. And it doesn’t mean an automated response like an email saying “we received your ticket and are working on it” counts. It has to be a response that provides value towards the resolution – links to running diagnostics and uploading the results, suggested knowledge base articles, links to upgrades, offers to self serve and chat – these are all potentially very valuable initial and on-going responses. Being responsive and interacting (even if it is just digital) in today’s world of expected instantaneous response and feedback are essential – it may not win you higher satisfaction ratings, but not responding with something valuable in a timely manner can certainly cause dissatisfaction. And if you don’t have the right people, processes, and systems to enable a reasonable response time, your NPS, CSAT, renewals, and employee retention could suffer. I have worked with many software companies where the customers said “they just don’t get back to me” and I have personally interacted with some software companies and websites that don’t respond in a timely manner and I stop using them. I have also worked with many companies where we immediately took steps to improve the initial valued response time, and CSAT and renewals immediately went up.
Hi Chris-
I agree that responding to customers is important, and I also agree that it can be used as a leading indicator for the very lagging CSAT or NPS metrics. For the scorecard I would suggest sticking with outcome metrics, i.e. NPS and its ilk — but track response time and other leading indicators.