8 Proven KPIs for an Effective Customer Success Plan
Are blind spots holding you back from achieving your goals? Eliminate them now with these KPIs.
Here is a question for CS Leaders:
How do you measure team performance AND customer success?
I'm sure that you already measure your team's Churn Rate and Annual Recurring Revenue. But, how can you ensure that you have the full picture?
That's where Customer Success KPIs come in. They allow you to measure the components of the Customer Experience and identify the areas that need improvement.
In this blog post, we’ll list 8 KPIs you must measure to improve the customer experience and boost retention.
As always, this post is here to help you choose the relevant KPIs for your team and company.
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Why do we need Customer Success KPIs?
Each year, the C-Suite executives develop the strategy and vision for the new year.
Once the company's strategic plan is completed, it is shared with the head departments,
who then develop their annual strategic plan with defined goals and action plans.
Their strategy will serve as guidelines for a successful year.
However, what are guidelines without an execution and measurement plan?
It's time to face the truth:
Customer Success Strategy is NOT enough. You also need a Measurement Plan.
Don’t get me wrong. Having a strategy is critical to proving the worth of Customer Success.
But it’s not enough.
You need a Measurement Plan with a list of the KPIs you'll use to measure your progress throughout the year.
** Since this blog post is about CS KPIs, I won’t elaborate on the Measurement Plan. That being said, I will be releasing a step-by-step guide soon so make sure to tune in!
KPIs are the key to implementing your CS Strategy.
For now, let me say this:
Key Performance Indicators (a.k.a. KPIs) are necessary for an effective CS Measurement Plan for one simple reason:
They are quantifiable measures of performance.
There is simply no other way to assess progress, goals, and action plans without the use of KPIs.
That being said, if we want an accurate progress assessment, we must choose KPIs that capture all components, not just one.
Here are the 3 types of KPIs for an accurate assessment.
The overall customer experience is made out of 3 components:
#1. Product Experience:
How satisfied are your customers with your product?
How often do they use your product?
#2. Billing Experience:
How satisfied are your customers with the price of your product?
How satisfied are they with your billing process?
#3. CSM Experience:
How satisfied are your customers with their CSMs?
Does their CSM help them achieve their desired outcomes?
Measuring each component ensures that there are no blind spots keeping us away from our goals.
At the same time, please remember:
Not all three components should get the same focus in your Measurement Plan.
The key is to be smart and efficient.
Focus only on the component(s) that negatively influence the overall customer experience.
Get an accurate assessment with these 8 crucial KPIs
Now that we understand the three components of Customer Experience, we can finally dive into our must-have KPIs.
Product & Company Experience.
#1. Customer Effort Score (CES).
Let’s start with a quick stat about customer experiences.
Did you know that 96% of customers who run into high-effort experiences become disloyal (source)?
We can only guess what happens to disloyal customers - they end up churning.
If we want to offer the best product, we need to understand how difficult it is for our customers.
In other words, we need to the measure Customer Effort Score.
CES is measured via a post-interaction survey sent through an email or an in-app pop-up message.
All you need to ask is:
#2. Customer Health Score.
This KPI is critical to business success.
It allows you to measure where a customer falls on the churn scale; the higher the risk, the more effort the CSM needs to put into preventing churn.
Calculating Customer Health
Here is where it gets tricky.
There’s no set formula for measuring health, as it’s dependent on several variables, such as:
Interactions with CSMs and Support Reps.
If you're just getting started with Customer Health, you need to start by learning more about your customers.
You can do so by scheduling a meeting with your Data Analysts to go through data and insights around usage.
#3. Net Promoter Score (NPS).
Companies are obsessed with NPS for one reason:
Loyal customers are invaluable in the business world.
NPS allows you to measure the loyalty of customers and organize them into three categories:
Promoters: loyal and enthusiastic customers with a score of 9-10.
Passives: satisfied yet not enthusiastic customers with a score of 7-8.
Detractors: dissatisfied and unenthusiastic customers with a score of 0-6.
Based on the results, you can turn words into actions. For example, asking Detractors for their feedback or Promoters for a referral.
After a certain period of time, create an in-app pop-up message or automated email asking your customers the following:
On a scale of 0 - 10, how likely are you to recommend [Organization X] to a friend or colleague?
Then, use the following formula to calculate your NPS:
Financial & Billing Experience.
#1. Annual Recurring Revenue (ARR).
ARR measures the total amount of revenue a company can expect to receive annually from customers.
This KPI is important for two main reasons:
It allows companies to create an effective financial plan and maximize their profits.
It's a growth measurement that can indicate revenue growth/drop over a long period of time.
#2. Churn Rate(s).
If the ultimate goal of any company is to increase profits, then Churn Rates are critical measurements of success.
They reflect the rate at which customers churn (i.e. cancel their subscriptions) within a given time period.
Customer Churn Rate: the number of customers who have canceled their subscriptions.
Revenue Churn Rate: the amount of revenue lost due to churned customers.
From my experience, both rates must be measured if we want to gain an accurate understanding of the company's growth.
Calculating Churn Rates
#3. Customer Lifetime Value (CLV).
In short, CLV determines the value of customers over time.
It shows companies how much revenue can be generated from a single customer over the course of their relationship.
CLV increases = your company is helping customers succeed.
CLV decreases = it's time to collect customer feedback about your product and offers.
CLV = Customer value x Average Customer Lifespan
Customer value = Average purchase value x average frequency rate. a. Average Purchase Value = Total Revenue / Number of orders b. Average frequency rate = Number of purchases / number of customers
Average Customer Lifespan = Average # of years a customer stays active / Total # of customers
#4. Upsells & Cross-Sells.
Upselling and cross-selling are revenue-creation sales techniques directed at existing customers.
Upselling: encouraging customers to buy a higher-end product or service.
Cross-Selling: encouraging customers to buy related or complementary products.
Calculating Upsell & Cross-Sell Rates
All KPIs are an indication of the CSM experience and their ability to help customers succeed.
A successful CSM is one who:
Solves challenges and issues related to the product (= CES above 2.0).
Helps customers make the most out of the product ( = Health/”green” Customers).
Ensures customer satisfaction and increases advocacy (= NPS above 30).
And as a result, their customers renew every year (= low churn rates) and buy more from the same company (= high upsell and cross-sell rates).
I want to be very clear that this definition is only relevant when the entire company is customer-centric.
Without it, CSMs cannot be successful.
#1. Customer Satisfaction Score (CSAT).
Our last KPI is the Customer Satisfaction Score, which relates to customer-CSM interactions.
CSAT is measured by surveying customers after an interaction with their CSM.
This can be done via a pop-up message, follow-up email, or in the conversation by adding the question below to the CSM signature.
“On a scale of 0 - 10, how satisfied were you with your experience today?”
Then, use the following formula to calculate your CSAT:
To sum up...
No matter how well-defined your Customer Success Strategy is, your goals will not be achieved if you don’t measure your progress.
But before you choose KPIs, you must consider your industry, product, and goals.
Understand what it is you want to measure and what are the relevant KPIs for your company.
This information is critical for an accurate Customer Success Measurement Plan.