How can you tell if your customer success strategy is working – if your customers are actually successful?
These questions and more can be answered objectively with the help of customer success metrics and key performance indicators (KPIs).
But how, exactly? And which customer success metrics should you be tracking?
Let’s dive in!
Table of Contents
- What Is Customer Success?
- What Are Customer Success Metrics and KPIs?
- 15 Customer Success Metrics and KPIs to Track
- 1. Customer churn rate.
- 2. Renewal rate.
- 3. Monthly recurring revenue (MRR).
- 4. Average revenue per user (ARPU).
- 5. Net dollar retention (NDR).
- 6. Net promoter score (NPS).
- 7. Customer satisfaction score (CSAT).
- 8. Average response time / Average first response time / Average resolution time (RT)
- 9. Customer effort score (CES).
- 10. Free trial conversion rate.
- 11. SaaS Average session duration.
- 12. Recurring active users.
- 13. Customer acquisition cost (CAC).
- 14. Customer retention cost (CRC).
- 15. Customer lifetime value (LTV).
- Bonus: Qualitative Customer Feedback
- The 9 Best Tools for Measuring Customer Success Metrics
What Is Customer Success?
I’ve written about customer success before, so I’ll be brief here.
Customer success is a measure of how effectively your customers are able to use your products and services to achieve their goals.
If they can learn the product, use it seamlessly, and accomplish their objectives, your customer success rate will be high. If customers find your product difficult to learn, difficult to use, or ill-suited to their objectives, your customer success rate will be low.
Higher customer success is usually correlated with higher customer retention, more recurring revenue, and other positive factors that all lead to a more successful business.
As a result, it pays to keep your finger on the pulse of customer success; by analyzing objective metrics, you can determine pain points, analyze the effectiveness of your strategies, and take better actions to improve customer success.
What Are Customer Success Metrics and KPIs?
They’re objective, mostly quantitative pieces of data that tell you something about your current customer success strategy and your customers’ average experiences.
Ideally, you’ll track these metrics at regular intervals, so you can keep tabs on how your customer success metrics evolve with your changing strategies and product development.
Poor or disappointing customer success metrics should motivate you to troubleshoot the problems and make meaningful improvements. Good and satisfying customer success metrics are evidence that your tactics are working, and they should motivate you to push even further.
15 Customer Success Metrics and KPIs to Track
Now let’s take a look at the most important customer success metrics and KPIs to track.
1. Customer churn rate.
Your customer churn rate measures the number of customers who cancel their subscriptions or stop using your products and services within a given timeframe. As any product manager or sales and marketing expert can tell you, customer churn is a killer. If you’re losing customers too quickly, it’s a clear sign that something is wrong with your customer success strategy; your customers aren’t getting what they need.
How to Calculate Churn Rate
Churn Rate (%) = Total number of churned customers / total number of customers
2. Renewal rate.
Just as importantly, you’ll want to measure renewal rate. In other words, how likely is it for your customers to renew their subscriptions after a given interval? High rates of renewal are a positive sign that customers are finding success with your product.
How to Calculate Renewal Rate
Renewal Rate (%) = (Number of customers who renew ÷ Total number of customers up for renewal) * 100
Renewal rate cannot be higher than 100%.
3. Monthly recurring revenue (MRR).
You can also measure customer success indirectly by measuring your monthly recurring revenue, or some similar measure of how much money you’re generating with your product.
How to Calculate MRR
MRR = Monthly Average Revenue per User (ARPU) * Total Number of Monthly Users
4. Average revenue per user (ARPU).
If you want to dig into the deeper details, calculate the average revenue per user you’re generating. This can help you better contextualize your customer retention rate, give you an indication of the average value per user, and help you realize just how important customer success is.
How to Calculate ARPU
ARPU = Total Revenue / Total No. of Users
5. Net dollar retention (NDR).
Net dollar retention measures the percentage of revenue that you’ve retained from your current customers within a given period. It’s another way to measure how much of your company’s revenue comes from customers who are, ostensibly, successful with your product.
How to Calculate NDR
NDR = (Starting MRR + expansion – downgrades – churn) / Starting MRR * 100
6. Net promoter score (NPS).
Revenue metrics are nice, but they can’t tell you exactly how your customers feel. For that, you’ll need metrics like net promoter score (NPS). This KPI attempts to objectively and numerically capture how likely a customer is to recommend your product to someone else.
High NPS scores mean your customers are very happy and would recommend your product to other people they know. Low NPS scores mean something is wrong with your customer success strategy. Simple, short surveys can help you calculate this easily.
How to Calculate NPS
NPS = The percentage of promoters – (minus) percentage of detractors
7. Customer satisfaction score (CSAT).
Similarly, you should measure customer satisfaction score. Customer satisfaction score is measured in slightly different ways, depending on the organization, but no matter what, your goal is calculating an objective metric that reveals how satisfied customers are when using your product.
How to Calculate CSAT
CSAT is typically calculated by surveying customers, asking them to rate their satisfaction on a scale of 1-5 or 1-10 (ie, “not satisfied at all – extremely satisfied”). CSAT is the average value of the respondents’ scores. As such, CSAT is often expressed as a score between 1-10.
8. Average response time / Average first response time / Average resolution time (RT)
Average response time measures the time it takes your reps to reply to inquiries from customers (this is also a very useful sales KPI).
Average first response time is the same, but measures only the response time of the first contact in a given thread or ticket.
Average resolution time measures the average time it takes to resolve a ticket after it’s created.
How to Calculate RT
If your team uses email to communicate with customers, average response time and average first response time can be measured in EmailAnalytics. As for average resolution time, your customer service CRM will likely have metric available to you.
RT = Total sum of response times / total number of responses
9. Customer effort score (CES).
Customer effort score objectively estimates how much work a customer has to do to achieve a certain outcome. For example, how long do they need to study tutorials before they can use the product competently?
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The lower your customer effort score, the smoother the experiences for your customers, and the more successful they’re going to be.
How to Calculate CES
Conduct a survey and divide the number of positive responses by the total number of responses.
CES = Total sum of positive responses / Total number of responses
10. Free trial conversion rate.
Strong calls to action (CTAs) can help you get lots of customers to sign up for a free trial of your product. But how many people who take advantage of your free trial end up signing up for the full version of your product?
Your free trial conversion rate can tell you a lot about how customers perceive your tool after first using it. If this rate is low, it could be an indication that users are having a poor experience in their trial period.
How to Calculate Free trial Conversion Rate
Free trial conversion rate = Total number of users that converted during the free trial period / total number of users that started the free trial
11. SaaS Average session duration.
Average session duration is a SaaS metric that tells you how long the average customer uses your product. In some ways, a longer session is better; it means the customer is engaged and continuing to get value from it.
But in some contexts, long sessions could mean that customers aren’t able to find what they’re looking for or aren’t able to use the product intuitively. Always consider the context when measuring this customer success KPI.
How to Calculate Average Session Duration
Average session duration = Total seconds of all sessions / Total number of sessions
12. Recurring active users.
Your daily/weekly/monthly active users is an indirect measure of both the size and health of your current customer base – and major swings in one direction or another could be an indication of a major change in your customer success strategy.
How to Calculate Recurring Active Users
Recurring active users = Total users that accessed the site within a given timeframe / total paying users
13. Customer acquisition cost (CAC).
How much does it cost to acquire a new customer? By looking at your lead generation, sales, and marketing strategies, you can figure out exactly how much it costs to bring someone new to your product or service.
While this doesn’t measure customer success directly, it does tell you just how important customer success is; the more expensive it is to acquire new customers, the more valuable it is to retain your existing ones.
How to Calculate CAC
CAC = Total expenses spent on customer acquisition within a given timeframe / number of new customers acquired
14. Customer retention cost (CRC).
It’s also important to evaluate and analyze your customer retention costs. Which customer success strategies are you using and how much money and effort does it take to keep your existing users?
Higher customer success rates generally lead to lower retention costs, since the value of your products and services naturally keep customers around.
How to Calculate CRC
CRC = Total expenses spent on customer retention within a given timeframe / total number of customers
15. Customer lifetime value (LTV).
The ultimate measure of customer success is customer lifetime value; in other words, how much revenue can each customer bring to your organization?
Excessively high levels of customer success and customer satisfaction increase this variable considerably, making every new customer you acquire inherently more valuable for your organization.
How to Calculate LTV
LTV = (Average Purchase Value * Average Customer Purchase Frequency) * Average Customer Lifespan
Bonus: Qualitative Customer Feedback
Most of the metrics on this list are quantitative, attempting to make these data points as calculable and objective as possible. While this is handy for statistical analysis, it doesn’t always tell you the full picture.
That’s why it’s important to track qualitative customer feedback with open-ended surveys. If customer churn is high or if customer satisfaction is low, open customer comments may reveal the main motivations for detraction.
The 9 Best Tools for Measuring Customer Success Metrics
These are some of the best tools for measuring customer success metrics:
EmailAnalytics may be our tool, but I think it’s one of the best for tracking customer success metrics – especially the ones related to your customer service strategy. With EmailAnalytics, you can integrate directly with Gmail and Outlook, and track almost every conceivable metric related to your email exchanges with customers, including average response time, average conversation thread length, and more.
Zendesk tries to be everything at once for your customer support strategy, helping you with onboarding, customer service, and more. With it, you can track most of the KPIs and metrics in this guide – and you can use its intuitive ticketing system to resolve customer issues faster.
Wish your churn rate was zero? Or at least close to it? ChurnZero may be able to help. It’s designed to improve communication and collaboration across your customer service and product development teams, and it’s packed with automation tools to simplify your approach (and help you measure your most vital metrics).
Pendo is mostly geared towards facilitating better customer self-help. Your team can develop, publish, and monitor the effectiveness of in-app guides, walkthroughs, tutorials, and other self-help content. It’s ideal if you want to improve customer success metrics like customer satisfaction (CSAT) and first contact resolution rate (FCR).
From CSAT to NPS and everything in between, Gainsight can help you measure it all. Whether you’re interested in improving product adoption, slowing churn, or just increasing word of mouth advertising, you can witness your growth with this customer health-centric single source of truth (SSOT).
From onboarding to ticket resolution, Intercom can help you do everything related to customer service. The app is well known for its live chat and chatbot support, but it also has plenty of features to help you track and analyze customer success metrics.
7. Zoho Desk
With Zoho Desk, you can manage customer interactions across virtually all mediums, automate portions of your customer service, and generate reports on your most important customer success metrics. You can also create automated workflows through the Zoho Flow integration.
Hotjar enables you to record real screen interaction videos from your users, so you can see exactly how they use your site or software. It’s great for finding and fixing usability and UI issues. They also offer an easy NPS survey tool.
Five9’s slogan is “making CX work for real life,” and it does an impressive job of this. Designed primarily as a cloud contact center and powered by AI, this platform is ideal for managing high-volume customer interactions – and monitoring your customer success metrics.
Are you looking for a tool to help you manage customer interactions?
Look no further than EmailAnalytics. And for more metrics, see our guide to customer service analytics.
What are you waiting for? Sign up for a free trial today!
Jayson is a long-time columnist for Forbes, Entrepreneur, BusinessInsider, Inc.com, and various other major media publications, where he has authored over 1,000 articles since 2012, covering technology, marketing, and entrepreneurship. He keynoted the 2013 MarketingProfs University, and won the “Entrepreneur Blogger of the Year” award in 2015 from the Oxford Center for Entrepreneurs. In 2010, he founded a marketing agency that appeared on the Inc. 5000 before selling it in January of 2019, and he is now the CEO of EmailAnalytics.