What are Top Customer Success KPIs?

If you're running a business, department or managing a book of clients, how do you know if you're doing a good job? That's where customer success Key Performance Indicators (KPIs) come in. By tracking these metrics, you can get a better understanding of how well you're meeting your customers' needs and where you might need to make improvements.

Customer success KPIs can vary depending on your business and industry, but there are a few that are widely recognized as important. For example, Net Promoter Score (NPS) measures how likely your customers are to recommend your product or service to others. Customer churn rate, on the other hand, tracks how many customers are leaving your business over a certain period of time. By monitoring these metrics, you can get a sense of how well you're retaining customers and how likely they are to stick around in the long term.

While there are a host of metrics that you can track in Customer Success, we'll highlight a few that are important across departments including Support and Marketing because Customer Success works as one within a larger ecosystem. In order to be a great Customer Success Manager, you should have an ownership mentality of what's important to your company. Start by understanding how you can leverage these valuable insights to help not only your clients, but the overall success of your company. This is just one of the ways to level up and become a CSM All-Star.

What are top customer success KPIs?

If you're looking to improve your customer success, you need to measure it. Key Performance Indicators (KPIs) are measurable insights that help you track your progress towards achieving your goals. They allow you to determine how effectively you're achieving your objectives and identify areas where you need to improve. These metrics allow you to tell a story about the customer's journey.

KPIs can be financial or non-financial. Financial KPIs are the most commonly used and include metrics such as revenue, profit, and cost. Non-financial KPIs are used to measure other aspects of your business, such as customer satisfaction, employee engagement, and social media engagement. KPIs are essential because they help you focus your efforts on what matters most to your business. They allow you to set specific, measurable goals and track your progress towards achieving them.

By regularly reviewing your KPIs, you can identify areas where you need to improve and take action to address them. When choosing KPIs, it's essential to select metrics that are relevant to your business and aligned with your goals. You should also ensure that your KPIs are easy to measure and track over time. In the next section, we'll take a closer look at some of the most important customer success KPIs you should be tracking. Here are a few KPIs that we'll cover in this comprehensive guide:

• Customer Satisfaction Score (CSAT)

• Retention Rate

• Renewal Rate

• Churn Rate

• Expansion Rate

• Annual Recurring Revenue (ARR)

• Net Promoter Score (NPS)

• Service Level Agreements (SLAs)

• Customer Acquisition Cost (CAC)

• Customer Effort Score (CES)

• Time to Value (TTV)

• Customer Lifetime Value (CLTV)

• Net Retention Rate (NRR)

Customer Satisfaction Score (CSAT)

CSAT, or customer satisfaction score, is a metric that measures your customer's satisfaction. It's measured through customer feedback and expressed as a percentage, where 100% would be fantastic and 0% would be terrible.

To calculate CSAT, you can ask customers to rate their satisfaction with a specific interaction, such as a support ticket or a recent purchase. You can use a scale of 1-5 or 1-10, depending on your preference. A score of 4 or 5 (or 8, 9, or 10) would indicate that the customer is satisfied, while a score of 1-3 (or 1-7) would indicate that the customer is not satisfied.

CSAT is a crucial metric for measuring customer loyalty and retention. A high CSAT score represents customers who are happy with your products and service leading to higher satisfaction. A low CSAT score indicates that customers are dissatisfied and at risk of churn.

To improve your CSAT score, you can take several steps, such as improving your product or service quality, providing better customer support, and listening to customer feedback. You can also use CSAT as a benchmark to measure the effectiveness of your customer success initiatives and track your progress over time.

Retention Rate

One of the most important Customer Success Key Performance Indicators (KPIs) is retention rate. Retention rate measures the percentage of customers who continue to use your product or service over a given period of time. A high retention rate reflects that your customers are satisfied with your product or service and are likely to stick around.

To calculate your retention rate, you need to know the number of customers who started using your product or service during a specific period and the number of customers who continued to use it at the end of that period. You can then divide the number of customers who continued to use your product or service by the number of customers who started using it and multiply the result by 100 to get your retention rate as a percentage. A retention rate of 100% means that all of your customers continued to use your product or service during the period in question. However, a retention rate of less than 100% is more common and can be a good indicator of areas where you need to improve your product or service. Improving your retention rate can have a significant impact on your business. 

A study performed by Bain & Company shows that by increasing customer retention rates by just 5% can increase profits by 25% to 95%. By focusing on improving your retention rate, you can increase customer loyalty, reduce customer churn, and ultimately grow your business. In summary, retention rate is a critical Customer Success KPI that measures the percentage of customers who continue to use your product or service over a given period of time. By improving your retention rate, you can increase customer loyalty, reduce customer churn, and grow your business.

Renewal Rate

Renewal rate is a critical customer success KPI that measures the percentage of customers who renew their subscriptions or contracts with your business. It is a clear indication of customer satisfaction and loyalty, and can help you identify areas for improvement in your product or service.

To calculate renewal rate, divide the number of customers who renew their subscription or contract by the total number of customers up for renewal, then multiply by 100. For example, if you have 100 customers up for renewal and 80 of them renew, your renewal rate is 80%.

A high renewal rate indicates that your customers are satisfied with your product or service and are likely to continue doing business with you. On the other hand, a low renewal rate suggests that your customers are not happy and may be considering switching to a competitor. To improve your renewal rate, you can focus on enhancing customer experience, providing excellent customer support, and consistently delivering value to your customers. It is also crucial to monitor your renewal rate regularly and take action if it starts to decline. Renewal rate is particularly important for subscription-based businesses, such as SaaS companies, where recurring revenue is a significant source of income. By tracking renewal rate, you can identify potential churn and take steps to retain customers before they cancel their subscription.

Churn Rate

Alternatively, you can measure the number of customers who did not renew your product or service over a period of time as the churn rate. Customer retention is important for growth so understanding how many customers are churning and when they're churning during their customer journey is vital.

To calculate churn, you take the number of customers at the end of the period divided by the number of customers at the beginning of the period, and multiply by 100 to get the percentage of customers that are churning. If you are signing on many customers, but are losing them due to high churn, this will stall growth. 

Expansion Rate

Expansion rate is a metric that measures the percentage of customers who have upgraded their subscription or purchased additional products or services from your company. It is a powerful indicator of customer satisfaction and loyalty.

Expanding your customer base is important, but it's equally important to focus on retaining your current customers. Expansion rate is a valuable KPI because it shows how successful you are at upselling and cross-selling to your existing customer base.

To calculate your expansion rate, you need to divide the number of customers who have expanded their subscription or purchased additional products by the total number of customers you had at the beginning of the period you are measuring. Multiply the result by 100 to get the percentage.

A high expansion rate is a good sign that your customers are finding value in your products or services. It also means that you are doing a good job of identifying opportunities to upsell and cross-sell. On the other hand, a low expansion rate could be an indication that your customers are not satisfied with your products or services, or that you are not doing enough to educate them about the additional offerings you have. To improve your expansion rate, you need to focus on providing excellent customer service and support. Make sure your customers are happy with your products or services before you try to upsell or cross-sell. Educate them about the additional offerings you have and how they can benefit from them.

Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR) is a critical financial metric that tracks the revenue the company expects to generate from its customers over the upcoming year. ARR is essential for subscription-based businesses as it helps them forecast their growth and sales projections, budget for sales and marketing, identify trends quickly, and motivate their team.

ARR is calculated by multiplying the average monthly recurring revenue (MRR) by 12. MRR is the amount of revenue a company expects to receive from its customers each month, excluding one-time charges or fees. 

For example, if a company has 100 customers, and each customer pays $100 per month, the MRR would be $10,000. The ARR for this company would be $120,000 ($10,000 x 12).

By tracking ARR, customer success teams can identify customers that are at risk of churning and work to prevent them from doing so. By tracking these metrics, customer success teams can gain a better understanding of their customers' value and identify areas for improvement in their customer success strategy.

Net Promoter Score (NPS)

Net Promoter Score (NPS) measures how likely your customers are to recommend your product or service to others. It is commonly used to measure customer loyalty and track changes in customer sentiment over time.

To calculate your NPS, you ask your customers a single question: "On a scale of 0-10, how likely are you to recommend our product/service to a friend or colleague?" Based on their response, customers are classified into three categories:

• Promoters (score of 9-10): These are your loyal customers who are likely to recommend your product/service to others.

• Passives (score of 7-8): These customers are satisfied with your product/service but not enthusiastic enough to recommend it to others.

• Detractors (score of 0-6): These customers are unhappy with your product/service and are likely to spread negative word-of-mouth.

To calculate your NPS, you subtract the percentage of detractors from the percentage of promoters. The resulting score can range from -100 (if all customers are detractors) to 100 (if all customers are promoters). 

Companies with satisfied customers on average have a score of 40. Anything north of 40 is excellent. On the flip side, companies with really poor user sentiment, can even have a NPS score that's negative. It's a powerful metric that helps you understand your influence and popularity amongst your users.

Service Level Agreements (SLAs)

Service Level Agreements (SLAs) are agreements between a company and its customers that define the level of service that will be provided. They are essential for customer success because they set expectations and provide a framework for measuring performance. Typically, SLAs are used by the Support team to measure response times to ensure they are upholding their commitments to their customers and meeting expectations.

• Average Time to Response: This metric measures the time it takes for a support agent to respond to a customer's initial request for assistance. This metric is important because it sets the tone for the entire support experience. If a customer has to wait too long for a response, they may become frustrated and lose confidence in the company's ability to provide quality service.

• Average Time to Resolution - This measures the amount of time it takes for a support ticket to be resolved. This metric is important because it directly affects customer satisfaction. If a ticket takes too long to resolve, the customer may become frustrated and lose confidence in the company's ability to provide quality service.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is a crucial metric that measures how much it costs your company to acquire a new customer. This metric helps you determine the effectiveness of your marketing and sales strategies and how much you need to spend to acquire new customers. This metric is used by marketing teams to understand and justify their marketing spend. This metric is used in conjunction with Customer Lifetime Value (CLTV) to help understand how long you have to retain a customer before they can positively impact your profit margins. For example, if your CAC is $1000 and your product costs $85/month, it will take about 12 months (85*12=$1020) before you can justify your marketing spend. You can't afford to lose the customer prior to 12 months, otherwise it will negatively affect your profit margins. That's why focusing on retention is paramount.

To calculate your CAC, you need to divide the total cost of sales and marketing by the number of new customers acquired during a specific period. For example, if you spent $100,000 on sales and marketing in a month and acquired 100 new customers, your CAC would be $1,000.

To reduce your CAC, you can focus on improving your lead generation and conversion rates, optimizing your marketing channels, and increasing customer referrals. Overall, CAC is a critical metric for measuring the effectiveness of your customer acquisition strategies and ensuring long-term profitability.

Customer Effort Score (CES)

Customer Effort Score (CES) is a metric used to measure customer satisfaction with the experience of using a product or service. CES surveys typically ask the question, "on a scale of 'very easy' to 'very difficult', how easy was it to interact with [company name]." The idea is that customers are more loyal to a product or service that is easier to use. CES is a great indicator of loyalty, as customer churn is a key business driver. The lower the effort required by customers to use a product or service, the higher the likelihood of customer retention and advocacy.

Time to Value (TTV)

Time to Value (TTV) is a critical KPI that measures the time it takes for your customers to realize the value of your product or service. In other words, TTV measures the time it takes for your customers to achieve their desired outcomes from your product or service. TTV is an important metric for customer success because it helps you understand how quickly you can deliver value to your customers. By measuring TTV, you can identify areas where your onboarding process may be slowing down your customers' time to value.

There are many ways to measure TTV, but one of the most common is to track the time it takes for customers to transition from a free trial to a paid subscription. This is a critical indicator of TTV because it measures the time it takes for customers to see enough value in your product or service to justify paying for it. Another way to measure TTV is to track the time it takes for customers to complete specific actions that lead to value realization. For example, if your product helps customers save time, you might measure the time it takes for customers to complete a task that saves them time. To improve TTV, you need to focus on improving your onboarding process. This means creating a clear and easy-to-follow onboarding process that helps your customers achieve their desired outcomes quickly.

Here are a few tips for improving your onboarding process to reduce TTV:

• Create a step-by-step onboarding process that guides your customers through the most important features of your product or service.

• Provide clear instructions and resources that help your customers get started quickly.

• Offer personalized support and guidance to help your customers overcome any obstacles they may encounter during onboarding.

• Use customer feedback to identify areas where your onboarding process could be improved.

By focusing on improving your onboarding process and reducing Ttv, you can help your customers achieve their desired outcomes more quickly, which will ultimately lead to higher customer satisfaction and retention.

Customer Lifetime Value (CLTV)

Customer Lifetime Value (CLTV) is a critical KPI for any business that wants to make informed decisions related to sales, marketing, product development, and customer support. It is a measure of how much revenue a customer is expected to generate over the course of their relationship with your business. Calculating CLTV can be complex, but it is worth the effort. Knowing this metric can help you identify your most valuable customers, optimize your marketing and sales efforts, and improve customer retention.

To calculate CLTV, you need to know three key pieces of information: the average value of a sale, the number of times a customer makes a purchase, and the length of time they remain a customer.

Here is an example of how to calculate CLTV:
Metric Value Average value of a sale $100 
Number of times a customer makes a purchase 5
Length of time they remain a customer 2 years
CLTV = $100 x 5 x 2 = $1,000

In this example, the CLTV for this customer is $1,000. This means that over the course of their relationship with your business, you can expect them to generate $1,000 in revenue.

It is important to note that CLTV is not a static metric. It can change over time as customer behavior and market conditions change. Regularly monitoring and analyzing CLTV can help you identify trends and make data-driven decisions to improve your business.

Net Retention Rate (NRR)

Net Revenue Retention (NRR) measures the growth of your company through revenue. It is an essential metric for any SaaS business, as it provides a clear picture of how much revenue is being generated from existing customers.

NRR is calculated by taking the total revenue generated from existing customers over a given period and dividing it by the total revenue generated from those same customers in the previous period. The resulting percentage shows how much revenue has been retained from existing customers, taking into account any churn, contraction, expansion, or upsell.

NRR also factors in the revenue earned due to expansion, upsell, or cross-sell. This makes NRR a more accurate reflection of your customer success efforts. To achieve your valuation goals and create momentum for your company, you need to use NRR as your North Star. It is not only the result of cross-departmental efforts but also a reflection of your customer success strategy's impact. World-class NRR should be over 125%, with a good NRR being over 100%.

There are six ways to move the needle with NRR:

1. Focus on retention: Retaining your existing customers is the key to increasing NRR. Make sure you are providing value to your customers and addressing their pain points.

2. Upsell and cross-sell: Encourage your customers to upgrade their subscriptions or purchase additional products or services. This can increase their lifetime value and your NRR.

3. Reduce churn: Churn is the enemy of NRR. Identify the reasons why customers are leaving and take steps to address those issues.

4. Improve customer satisfaction: Happy customers are more likely to renew their subscriptions and recommend your product to others.

5. Optimize pricing: Make sure your pricing strategy is competitive and aligns with the value you are providing to your customers.

6. Expand into new markets: Expanding into new markets can increase your customer base and revenue, which can boost your NRR.

Overall, NRR is a critical metric for any SaaS business. By focusing on retention, upsell, cross-sell, reducing churn, improving customer satisfaction, optimizing pricing, and expanding into new markets, you can improve your NRR and drive the growth of your company.