Until recently, Customer Success teams primarily supported the transition from Sales to your SaaS product. But the SaaS revolution, along with the Product-Led Growth (PLG) shift, is turning Customer Success Managers (CSMs) into key business stakeholders. What are the goals behind this massive and rapid transformation? Let’s take a closer look at some vital Customer Success KPIs, what to look out for while tracking them, and how the future is shaping up.
Finding new customers is challenging, but making them stick is the real problem SaaS businesses are facing today. In a recent Gartner webinar, Gartner experts pointed out how “Retention is becoming the New Acquisition”. Upselling and cross-selling are now seen as the modern revenue-growing channels, both responsibilities of the modern Customer Success Manager. It’s no surprise that CS KPIs have also evolved.
Top 5 Customer Success KPIs for 2022
Over the last decade, CSMs have been trying to move the needle with Net Promoter Score (NPS) and Customer Lifetime Value (CLV) metrics. While still useful in many cases, traditional KPIs are no longer enough to measure the fluctuations and changes in today’s dynamic SaaS space. Customer Success has evolved and so have the metrics that need to be tracked and monitored on an ongoing basis.
Here are 5 key metrics that need to be a part of your CS strategy today:
1. Net Revenue Rate (NRR)
The NRR metric allows you to calculate the total revenue (including upsells) during a predetermined period of time, minus the revenue churn that has been experienced. When this key KPI is above the 100% mark, it means that the business is healthy and is actually growing even without onboarding new customers. The NRR metric needs to be calculated carefully and as frequently as possible.
2. Customer Churn Rate
Also known as customer turnover, Customer Churn Rate is one of the most important CS KPIs today, as it tracks the rate of customers leaving the service. It’s calculated quite simply – Lost Customers divided by Total Customers (at the start of the relevant time period), multiplied by 100. Besides detecting churn fluctuations, CSMs also need to understand why it’s happening. If it’s the user experience, the product team should be involved as soon as possible.
Customer Churn Rate should not be confused with Revenue Churn Rate (RCR), another important metric you should be tracking.
Calculating NRR and Churn rate, Staircase.ai
3. North Star Metric
The North Star Metric aims to help companies align teams on a key metric that measures the delivered value as an indicator for growth. With Sales, Product, Marketing, Support, IT, and Customer Success teams all focused on their own sub-metrics and sub-goals, the North Star acts as a Single Source of Truth to align the whole company with the common goals and boost cross-department visibility.
A good NSM should be able to:
- Measure Product Value – It should be able to track the moment where your customers find value in your product (a.k.a the “aha” moment)
- Represent Product Strategy – The core of your product strategy
- Be a Leading Indicator of Revenue – It should become a leading business indicator for your company rather than a lagging one (like churn)
North Star calculations vary from one company to another. For example, take Dropbox. When it was a growing company, the North Star Metric was monthly active users. But now that the company has grown, the NSM revolves around paid accounts, rather than Freemium ones.
Courtesy of Grow with Ward
4. Relationship Score
A relatively new arrival on the scene, The Customer Relationship Score have become an essential part of all CS strategies, especially when it comes to big and strategic accounts. The relationship score helps companies identify relationship-based risks and opportunities, taking into account multiple stakeholder relationships engaging with your company.
Once your relationships are mapped, you need to rate how strong your relationship with the customer is. As human estimations can be biased, you ideally want to use a Relationship Intelligence solution to provide unbiased feedback.
Creating strong relationships with key influential stakeholders will not only help you retain more customers, but will also boost your upselling and cross-selling efforts. These relationships also create strong brand advocates.
5. Customer Health Score (CHS)
As the name suggests, the Customer Health Score helps determine the likelihood of retaining customers by measuring their current level of engagement. This churn management KPI can be calculated in many ways with a varying number of parameters. Most CSMs factor in indicators like product usage, relationship strength, unresolved tickets, and other subjective metrics to calculate their CHS.
For example, it’s common to see the CHS being calculated with the time users spend on using the product and the adoption rate or how many features are actually being used, along with the amount of active users in the specific account.
Related: 5 SaaS Customer Success Pro Tips
Numbers Don’t Tell the Whole Story
Establishing and tracking KPIs is great, but they simply cannot tell the whole story due to the dynamic and unpredictable nature of today’s SaaS consumption. You really need to understand and break down the relationships, hierarchies, and dependencies in your key account to get real visibility into the risks and opportunities. Besides that, here are two factors you need to consider while devising your CS strategy.
- Expansion is the New Customer Success KPI – Gone are the days of minimizing churn rates and signing off. No CSM today can be satisfied without creating a serious uptick in upselling and cross-selling metrics.
- KPIs Can Vary From One Use Case to Another – Target audiences are becoming more and more diversified today. With the rise of Product-Led Growth, the boundary between B2B and B2C is also vanishing. This means that you can have users from different sectors with different needs where the same KPIs can paint completely different pictures.
Summing it Up
The modern Customer Success Manager has to strike the balance between customer satisfaction and elevated business revenue. Unfortunately, every customer is different and sticking solely to Customer Success KPIs can turn out to be counterproductive. This is why understanding relationships and hierarchies in key accounts is key.
With Staircase’s AI-driven Customer Relationship Intelligence solution, you can get deep insights on customer relationships on the go, monitor sentiment and engagement trends, and create actionable insights that just dry metrics simply can’t give you anymore.
Go Beyond Your Customer Success KPIs