What metrics matter in customer success?

For SaaS companies, customer success metrics provide vital information about customer behaviors, preferences, trends, and challenges. By tracking and measuring the right customer success analytics data, companies can:

• Build better (and more profitable!) customer relationships

• Get churn under control

• Identify revenue-generating opportunities (like upsells)

• Create strong, repeatable processes for maximizing customer satisfaction and meeting customer success objectives.

In this post, we’re taking a look at the most important customer success metrics for SaaS companies. While there are dozens of customer success metrics examples that matter, we’re going to cover a few examples in two different categories: customer experience and satisfaction metrics, and customer retention/churn metrics.

Customer Experience and Satisfaction Metrics for SaaS Companies

These customer success metrics are recommended for insight into how satisfied customers are when they engage with your company.

Net Promoter Score (NPS)

Whether you know it by name or not, you’ve probably been asked the singular question at the heart of NPS: “How likely are you to recommend [Company] to a friend or colleague?” Customers answer this question by selecting a number from 1 (not likely at all) to 10 (very likely), and are categorized into three buckets: promoters (NPS response of 9 or 10), passives (7 or 8), and detractors (6 and below).

• Promoters are highly valuable to a business, since customer referrals are a great source for leads.

• Passives are satisfied—neither thrilled nor disappointed with their experience.

• Detractors are dissatisfied in some way. Since critical reviews travel fast, it’s important to identify the root causes behind detractors’ unhappiness.

Customer Satisfaction (CSAT) Score

CSAT measures how a customer feels after interacting with your business—mainly, were their expectations met? For example, if they needed a question answered about your product or service, were they taken care of in a timely and professional manner? Measuring CSAT is simple and straightforward, as it simply asks a customer to rank how well their expectations were met, often on a 1-5 scale (with 5 being extremely satisfied, 1 being extremely dissatisfied).

Customer Service KPIs

Understanding the details of customer interactions helps give additional context to metrics like NPS and CSAT. Customer expectations aren’t rocket science:

• They want their questions answered and issues resolved, completely.

• They want to feel known, heard, and understood.

• They want to be treated with respect.

What are KPIs in customer service? A few key performance indicators examples include the following:

• Abandon rate of calls, webchats, or other interactions

• Number of support tickets or complaints—and their average resolution time

• First Contact Resolution (FCR) rate, or the percentage of service interactions that resolve a customer’s issue completely, without the need for additional follow-up

Of course, it’s also important to have processes in place for capturing qualitative customer feedback. When customers share details of their experience, positive or negative, listen. Train customer-facing agents to empathize and ask follow-up questions to really understand the voice of the customer. This way, customer service teams and managers can work to identify trends and respond accordingly.

Next, let’s look at a few metrics that measure the impact of customer success, including retention and churn.

Customer Retention/Churn Metrics for SaaS Companies

These next few metrics quantify customer retention/churn rates and the value of winning and losing customers.

Net Retention Rate (NRR)

This measures how well you’re able to retain your customers and get them to renew their subscription to continue their relationship with the business. Net Retention Rate is the #1 priority for company growth and valuation. To learn more about why - read our blogpost on the future of customer platforms and how to drive NRR here.

To calculate NRR, you’ll need 4 pieces of information:

• (A) Last month’s recurring revenue (MRR) figure

• (B) Contraction revenue (value lost through downgrades or cancellations)

• (C) Revenue churn

• (D) Expansion revenue (upsell or cross-sell value)

The calculation, then, looks like this:

• (A) minus (B + C), plus (D)

• Divide the total by 100

• Divide the resulting total by the original MRR figure (A)

For SaaS companies, anything above 100% is considered excellent.

Customer Acquisition and Retention Costs (CAC, CRC)

Together, CAC and CRC quantify the total cost of successfully acquiring and onboarding a new customer. Depending on what the customer acquisition process looks like for your business, CRC might include items like staffing and technology costs, marketing spend, and more.

Customer Churn Rate

Never a fun metric to talk about, customer churn rate tells you about the rate at which customers discontinue their relationship with your company. The calculation is straightforward: divide the number of customers who canceled with the number of customers who didn’t, and then multiply that by 100 to make it a percentage. Without context, churn rate can be a little misleading, as SaaS companies expect some level of involuntary churn to naturally occur.

Customer Lifetime Value (CLV)

This metric measures the average revenue generated over the lifetime of a customer’s relationship with your company. Comparing CLV with the average amount it costs to acquire a customer (Customer Acquisition Cost, or CAC) provides a more well-rounded picture of customer value.

Monthly/Annual Recurring Revenue (MRR/ARR)

Of exceptional importance to SaaS companies, MRR and ARR calculate the recurring revenue generated (over either the month or year) by new and recurring customer subscriptions. While it encompasses the recurring revenue including any recurring add-ons, it does not account for non-recurring/one-time fees or charges.

How Planhat Empowers CS Teams with Better Reporting and Actionable Insights

Tracking metrics like the ones we’ve discussed in this piece is just one piece of the puzzle for customer success teams. A primary objective of tracking customer success metrics is to arrive at actionable insights to better understand customers and drive consistent, positive outcomes.

Modern platforms like Planhat empower CS teams with:

• A reliable customer data platform that collects all customer data in a single location and provides complete relational database support for both structured data (like .CSV files) and semi-structured data (like JSON).

• Usage analytics to help teams understand, track, and visualize user/buyer journeys in real time.

• Reporting tools to track customer journeys and measure CSM teams’ efficiency—including tools to build a custom customer success metrics dashboard to monitor the team’s performance.

When it comes to customer success metrics and Planhat’s advanced tools for tracking and impacting key performance indicators, we’ve really only scratched the surface in this post. Schedule a demo to learn more about how to unleash unlimited success with our sophisticated and dynamic platform.