The KPI’s of Customer Success
KPIs, or key performance indicators, are simple in theory, but sophisticated in demonstration. Performance is fluid and subjective and needs to be paired with appropriate indicators to be measured reliably. KPIs are not bound by industry, technology or demographic therefore applicable to Customer Success.
The world of Customer Success is heavily focused on performance results, hence the KPIs of a platform or application is an important mechanism in determining successful products. Thought leadership in this area tells us there are 10 overarching KPIs in the CS playbook. Below I have outlined them and exemplified where there importance lies in the potential improvement of software products, along with some industry standards. For a more in depth guide on creating and measuring a successful software product check out our guide.
1. NPS (Net Promoter Score)
This survey asks the user the likelihood they would recommend the platform to a friend or colleague. This recommendation is captured on a 10-point scale with the breakdown of statistics categorising the respondent as either a promoter (scored 9 or 10), passive (scored 7 or 8) or detractor (0 to 6) (HubSpot). Industry standards for these surveys vary largely with department stores sitting around 5.5 all the way to Internet providers sitting at a 2. In research conducted by Colloquy the concentration of responses is skewed negatively due to a 75% likelihood of people who have had negative experiences with products feeling compelled to voice this, opposed to 42% who have a positive experience and would like to receive feedback.
This survey can be sent to a randomised list so the spread of responses should represent most of the user groups. The randomisation assists with its lacking average response rate.
Typically speaking, a 50% response rate for any survey is the ultimate goal, for NPS, 30% or higher is the statistical goal. Between 15% and 30% response rate is the average for SaaS products with 10% a safe count (Perceptive). With this in mind, setting follow ups to increase responses is a great way to ensure a true representation of the data is captured through the survey.
2. C-SAT Score (Customer Satisfaction Score)
The Customer Satisfaction Score is commonly used by SaaS companies who are curious to know the quality of their services. Respondents are asked to rate their happiness on a 3-point emotional scale: Unhappy // Neutral // Happy.
As this scale has a lower variance in scoring than the NPS the skew of results when comparing industry standards are not so horizontal. The results also cluster around the top end of the scale meaning the responses received are generally more positive. This contributes to the C-SAT score being favoured over the NPS. In my opinion though, to build a strong advocate for your product, the data from an NPS is much more useful. Alternatively, the benefits for a C-SAT survey are to survey the user after a certain action, such as a support desk response, whereas the NPS is a strong gauge of the performance of the product altogether.
3. CES (Customer Effort Score)
The Customer Effort Score asks the customer how easy it was to find and receive help from a help desk or member of the service team on a 1-7 Likert scale (7 being the highest).
For example, a user on a platform is confused and not sure of how to navigate around it. They see that the platform has a built-in chat bot which can be opened to submit requests through (this is a great service channel if the request is submitted out of office hours). The user opens the bot and inputs their query. The bot assesses the input and produces articles from a knowledge base. Post the user reading the articles a CES survey would pop up. It is in this that the user responds with a low score (anything between 1 to 4).
Two things that can be concluded here;
1. The articles produced did not match the query, or
2. The articles produced did not house enough information to suit the user’s request.
There is no set standard here with the CES as it is more of a rating on a certain process within an organisation. It does go without saying that the higher the value, the better the service, so it would be ideal to aim for a CES rating of 5 or above.
Each of the above 3 KPIs have the ability to follow up the respondent for more detail. It is crucial to understand, analyse and strategise this feedback to improve the product for the future. It is not recommended to act on every piece of feedback, as that would be quite inefficient, rather, when analysing the feedback, map trends to formulate data-based assumptions about the pain points users might be having.
It also goes without saying, that if the responses are more positive, then capturing the positive feedback is also crucial in assessing a good product-market fit, and celebrating with your team!
4. MRR (Monthly Recurring Revenue)
Monthly Recurring Revenue (MRR) is a growth metric and is so commonly used in the SaaS world. It is calculated by multiplying the number of accounts/licences by the billable amount. This is calculated month on month, but its trend and trajectory is incredibly important for forecasting. This measure is quite large and in terms of using it for forecasting can be considered as too generic. In light of this, MRR can be split into 4 categories; Net New MRR, Expansion MRR, Churned MRR and New MRR. Net New MRR is the portion of MRR that is contributed from new customers. Expansion MRR is the portion of existing customers that have increased their spend (e.g. have upgraded their license). Churned MRR is calculated as a loss (subtracting this value from the overall MRR). Finally, the new MRR is the sum of the Net New MRR, plus, the Expansion MRR, minus the Churn MRR.
As mentioned earlier, this metric is incredibly useful for forecasting for the future. It is also a great tool to retrospectively analyse areas of growth or contraction. For example, if your new MRR is looking on trend, yet when it is broken down the Net New MRR is substantially larger than average, and this is balanced out by the Churn rate also being substantially larger than average. An assumption can be made from this analysis that the SaaS product is doing well to attract new users, but it is not doing well in keeping current users. This is a big flag because at some point that pool of new users will lessen, but the churned customers continues to trend as increasing.
5. CRC (Customer Retention Cost)
It goes without saying, the cost of acquiring a new customer is far greater than the cost of retaining a loyal customer (between 5 and 25 times more). The metric here measures the difference in cost between retention campaigns and MQL campaigns. Maintaining a lower CRC compared to the acquisition cost is the main objective here. It is much easier to stay with a company than transfer data to another and build trust somewhere else. This is why the industry standards for CRC seen in banking, internet services, telecommunications generally sit between 75% to 85%. Even though these are B2C examples, a similar trend for B2B, or professional services is also high (around 85%) (HubSpot). An industry that struggles here is retail, this is mostly due to its strong competitive nature where the substitution cost is high.
6. Support Requests Submitted — Product Adoption
Product understanding support requests (or tickets) generally mean that the user is not privy to the way the product is designed and the desired outcomes are not clear to them. It goes without saying that a user on the product for the first couple of times may need assistance, and there are mechanisms to assist with their adoption (such as tool tips or product tours), but if similar requests are submitted and their quantity is not decreasing in a timely fashion (this will change product to product and user group to user group), then there are 2 areas of improvement here. The first being the design of the platform and the second is improving the onboarding mechanisms. Ultimately, there should be an inverse relationship between the number of tickets submitted and the time the product has been in market.
7. Support Requests Submitted — Functionality Issues
Support requests submitted due to functionality issues is inevitable in software. On average, Zendesk counts about 500 tickets submitted for high user products per month. Similar to product adoption, there should be an inverse relationship with the number of tickets submitted compared to the platform’s functionality. When tickets are submitted, it is important to assess the trends of these tickets. For example, if many requests are submitted regarding a particular page then there might be a larger issue causing the disruption. Most service desks have the ability to track trends in tickets as well as quantities, using this avenue of communication increases the likelihood that the service team can be proactive, and the user experience is improved.
8. Churn Rate
Churn rate is a KPI in Customer Success is calculated by the number of customers who have decided to end their commercial agreement with a product, divided by those who have decided to return (not new customers) as a percentage. The application of this KPI may differ depending on if the products payment structure or product offering. As the rate is denoted as a percentage it is a great indicator of quality and value. Similar to support requests, it is standard practice to see this rate drop over time. As the product moves from MVP to mature, the user base is growing therefore increasing the denominator of the calculation which will reduce the product (or percentage).
Generally, aiming between 3% to 5% churn rate is considered paramount across industries and products. Do keep in mind, a churn rate of 0% is a goal, but it’s a stretch, there will always be something out of our control has users moving away from the product. It’s much more strategic to focus on the 95% loyal customers than to get caught up in the 5% churned customers. That being said — if that churn rate continues to grow, then it’s time to focus your attention on them and understand the root cause of their leaving.
9. Feature Adoption
To ensure market fit, the product team needs to ensure that the features they are designing will be utilised appropriately by the intended users. Measuring this can be conducted in different forms. The simplest way to quantify the uptake is to use analytics platforms such as Smartlook or Fullstory. They pull user journey data and setting up tracking events is simple.
This KPI is more relevant to start tracking once the product has been in market and the development team is ready to release its second version. Creating your own thresholds for this is important because every product is different and each new element of a product will be adopted differently. This is why user testing and market research is important. Create targets that have a specified timeframe and assess how close you came to reaching those targets after each product release.
10. Customer Health
The health of a customer relies on all of the above KPIs, plus much more. It is typically represented in a traffic light form (red = bad, yellow = needs some improvement, green = good). In deciding where a customer sits on this scale depends heavily on the ratings received from the other areas of performance. Where the customer sits on this scale is decided by Customer Success team.
As with each of the KPIs there are certain industry standards that set the thresholds for each. This is no different, except they are created at a company level rather than metric level. Each product company will set metric thresholds for each of the KPIs that align with their business goals and long term vision of success. From this, the placement of customers on this scale will be a documented process for each company for CSMs to follow and update when necessary.
The ultimate KPI though is when a customer advocates for your product. They are someone who will go out of their way to showcase the value the product has made on their business, or lifestyle. An advocacy program takes time, trust and investment, but at the end of the day, a word-of-mouth recommendation is a high conversion lead generation strategy.