Many thanks to Nida Gabriel who suggested this topic.
The question is simple: how can we tell that a Customer Success team is successful? What would signal that our investments are bearing fruit?
- Adoption. Many customer success programs onboard customers to encourage their use of the product or service. If customers are not using the product, they are unlikely to continue paying for it. Adoption is important, but certainly not sufficient to signal success.
- Renewals. Most customer success organizations use the renewal rate as their main success metric, some capturing logo (individual customer) renewal, most capturing the ratio of revenue renewed to the revenue up for renewal.
- Upgrades. Upgrades usher the wonderful realm of “positive churn”, in which revenue from existing customers can exceed the revenue up for renewal. There are infinite variations of how to measure this, since a given customer may fail to renew part of their contract but double down in other areas, yielding an apparently higher revenue, but with some losses hidden behind the rosy outside. Some customer success organizations choose net churn ((renewals + upgrades)/renewal revenue) as their main success metric. Note that this encourages customer success managers to press for additional purchases while discouraging efforts to get smaller customers to renew.
- Referrals. It seems that the ultimate goal for customer success is to get customers to spread the word and actively recommend the vendor’s solution to others. Interestingly, referenceability in general and referrals in particular are rarely used as benchmarks for customer success. Strange, isn’t it? It’s true that buying decisions are rarely made based solely on referrals, and referrals are hard to track, but still.
- NPS, CES, CSAT. Many success organizations are partially measured by some variation of loyalty measurement, and many are indeed responsible for gathering these metrics. While they cannot, in my mind, be linked directly to financial performance, they are valuable to diagnose issues (especially the Customer Effort Score), to track progress over time (all three), and to measure individual performance (CSAT).
Is funding for your customer success team tied to any of these metrics? Others?