Key Customer Success Metrics For SaaS Companies

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Key Customer Success Metrics For SaaS Enterprises
At a Glance

Customer success metrics hold great importance for any SaaS enterprise. These metrics and KPIs help the business understand how well the SaaS product has met the customer expectations and what corrective steps are required to achieve the desired targets.

The key is to set realistic customer expectations, and then not to just meet them, but to exceed them, preferably in unexpected and helpful ways.

Sir Richard Branson

There are several important SaaS Customer Success metrics that a SaaS enterprise must monitor to ascertain the satisfaction level that customers are gaining from their products.

In today’s internet-dominated world, SaaS enterprises have become a force to be reckoned with. What sets apart successful SaaS enterprises from unsuccessful ones is the efficiency with much customer success has been achieved. Microsoft, Amazon Web Services, Salesforce are some of the SaaS enterprises that have created a niche for themselves in the market by defining the product-market fit correctly and ensuring customer success.

The only way for new SaaS enterprises to ensure that the customers’ services are solving their problems is by tracking important metrics. This is the only way to know whether the company is in the ascendency or is faltering.

Important Customer Success Metrics

When it comes to ascertaining customer success, there are several metrics that SaaS enterprises regularly monitor. Here are some of the most important customer success metrics for SaaS enterprises: –

Churn Rate

Client churn is the percentage of your customers that leave your service over a given period. It defines or limits the largest size the business can achieve. Client churn can have various scenarios:

·    Cancellation of a subscription

·    Closure of an account

·    Not renewing a service, perhaps by switching to a competing service provider.

Average Revenue Per Account

This metric measures the average amount of revenue generated per customer during a said period. It is essential for determining a company’s revenue generation capabilities. This said period can be months or years. This metric may not always produce an accurate result; hence it is a good practice to analyze it along with other metrics or as a function of other metrics.

Net Promoter Score Or NPS

It is one of the simplest SaaS customer metrics. It asks a simple question to the respondent – How likely is the respondent to recommend the service to someone else. The respondent must answer this on a scale of 0-10. Generally, companies follow this question with an open-ended question asking the user to elaborate on their response. This metric gauges the loyalty of the customer, which is one of the crucial driving forces behind the success of a brand. This metric is simple but a highly effective one.

Active Users Calculation

This includes the calculation of two aspects, i.e., Daily Active Users and Monthly Active Users. This is another simple metric to track customer success: measuring the amount of activity that your customers are performing within your SaaS product. One important thing to remember while calculating this metric is defining what is meant by active users. It can mean any of the following: –

·         The user may just log in.

·         The user may spend a certain amount of time using the service.

·         The user may need to open a certain page.

Time to First Value

Time to First Value (TTFV) is a commonly used customer success metric that helps you understand how successful and efficient your onboarding process is. TTFV measures the amount of time between the close of the sale and when your customer completes signing up on the platform. It typically is the moment that your customer starts to derive actual value from your product and is no longer just learning how it works. For the service to have a good value and customer satisfaction, the TTFV should be as low as possible.

Frequency Of Customer Service Requests

This is an important metric that tracks whether the product is easy to use or creates confusion among the customers. Suppose a new feature is rolled out, and there is a sudden increase in the number of customer service requests, which indicates that the current feature may be confusing and needs to be rolled out in a better manner. This does not indicate whether the feature is good or bad. Just that, the way the feature is rolled out needs some improvement. This is for the sake of the user experience.

Customer Retention Cost

Customer Retention Cost (CRC) is the total expenses that a SaaS enterprise typically commits for offering technical support to its existing customers. This metric helps companies make valuable decisions regarding the rollout of a new service. It gives insight into the potential expense of retaining customers versus the potential revenue you generate from a new feature or service.

Free-to-Paid Conversion

The company’s initial product is free, and there is a paid and premium version. In such a scenario, an important metric to track is the number of customers converted from the free to the paid version of the service. If the conversion rate is high, then it is a good sign. However, if the rate is exceptionally low, that indicates that the service requires some improvement.

Expansion Revenue

Expansion revenue is the percentage of your new revenue that is coming from your existing customers. This is possible if the customers are upgrading to a higher tier plan or paying for higher functionality.

Customer Lifetime Value

Customer Lifetime Value is an estimation of the average gross margin contribution of a customer over the customer’s life. This is an important metric because getting new customers is exceedingly difficult. If this metric is analyzed well, it can account for most of the revenue coming from repeat purchases.

Customer Satisfaction Score

It is the measure of the satisfaction of a customer with the services. It can also be the satisfaction of a customer concerning query resolution. This is an especially important metric to track. Adequate customer service is one of the biggest factors that can result in greater churn and more referrals. Customer satisfaction score can be measured using a survey, wherein customers are asked questions and respond based on their experiences: good or bad.

There are numerous customer success metrics that a SaaS enterprise can monitor for ascertaining its success in meeting the target customers’ requirements. But when a company starts monitoring too many metrics, it will create more questions than answering them. Thus, a SaaS enterprise must determine the most important SaaS customer success metrics according to its product niche and use them for devising plans and strategies.

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