The relationship between businesses and customers have evolved and along with that key performance indicator (KPIs) as well.
Things that were considered to be an expense for the company, such as customer service and support are now viewed as departments that enable customer retention and therefore, are deemed to be potential revenue generators.
Not surprisingly, the new customer relationship policies now singularly focus on making customers happy all through the customer journey. Bottom line: The more we focus on customer success, the more customers will keep coming back to you, who, in turn, will evangelize our brand.
So, which customer success KPIs that you should focus upon? Here are five methods you can use:
1. Customer Satisfaction Rating
Customer satisfaction is not just about how customers feel about the support rep; it also includes how they think about the brand and product as a whole.
Customer satisfaction could be measured in various ways; however, one of the most popular ways is to use a Net Promoter Score.
A Net Promoter Score or NPS questions the customer whether they will recommend your service or product to others. The relationship between the rep and the customer plays a crucial role in the rating.
The best part of NPS is that it offers both quantitative and qualitative analysis of customers. Besides asking customers to rate their experience on a numeric scale, it also asks them to reason their score. This way, businesses could use NPS as a barometer for analyzing customer experiences and specifically focus on customer results that are abnormal or out-of-the-ordinary. Plus, you can use live chat software to be constantly in touch with customers and learn and solve their grievances.
2. Customer Churn Rate
Customer churn enables you to measure churn rate on a rep-to-rep basis. A customer support rep who goes the extra mile to maintain a strong rapport with the clients will more or less have a lower churn or cancellation rate.
To calculate the churn rate, first decide on the timeframe you intend to cover: whether it’s weekly, monthly, quarterly, or yearly basis. It can even be more. Next, find out the existing number of customers at the start of the time period as well as the number of customers who left during the same time frame.
Finally, divide the number of churned customers by the total number of existing customers to arrive at the churn ratio.
Let’ say, you have 2k customers at the start of July, but by the end of the month, 100 customers left. In this case, your churn ratio for May will be 0.05% (100/2000 = 0.05 =5%).
However, when measuring churn rate, exclude the new customers acquired during the same period. You can count the new customer in during the next assessment.
Nevertheless, you need to include any new customer who churned during the same time frame as the customer churn happened during the particular assessment period.
3. Monthly Recurring Revenue
Monthly recurring revenue (MRR) is a crucial metric to determine how much your customers have grown or, in other words, their spending has grown since they came in touch with you. The metric or stats highlight the amount of money customers spend on products or services every single month.
You can compare this value over a period of time to determine whether the customers are happy with your product or not. This revenue metric is mostly helpful for SaaS businesses that operate on a subscription model.
Then there’s the Expansion MRR as well. Expansion MRR calculates the additional revenue that you managed to generate from customers, besides your monthly subscriptions. This will give you a fair idea as to whether your upgrades and customer loyalty programs are working or not.
Expansion MRR would include things such as upsells, cross-sells, add-on purchases made by customers on a one-off basis. If your Expansion MRR is good, it merely means that your customers are enjoying your product or service.
4. Customer Effort Score (CES)
CES considers the effort used by a customer to complete a specific task. It’s measured via a survey, where the customers are expected to choose an option that indicates low effort.
If the customer chooses an option that signals more effort, then it only means that there is something wrong with that particular portion of the customer journey. In such cases, it becomes the organization’s job to identify what’s making customers exert more effort than expected and then fix it.
5. Customer Lifetime Value
Customer Lifetime Value is one of the most critical customer success metrics that you can use for your business. It takes into account the total revenue you could generate from a single customer during their association with the company.
CLV is calculated by multiplying average purchase value by average purchase frequency rate. The value derived is further multiplied by average customer lifespan. This will give you a rough idea about the amount a customer plans to spend on your business.
For instance, a customer spends an average of $50 every month at your store. And going by the average lifespan of customers at your store, if it’s expected that this customer will be shopping at your store at least for a year, so the CLV of this customer will be ($50 X12 =$600)
Business can use CLV to know whether their products and services are contributing to customer’s success. If the CLV value increases, it means customers like your product. If it’s decreasing, then your business will have to re-evaluate its offerings and look for issues in the customer experience.
Wrapping up
There you go! 5 customer success KPIs businesses should target. Without taking advantage of them, your business is sure to suffer. Of course, there are more KPIs that companies should consider. Go ahead and list them in the comment section.