Rethink Commerce Blog

What Does “Customer Success” Mean for Software and SaaS and How Do You Measure It?

Posted on December 20th, 2016 by

In any business, “customer success” is that sweet spot where you’ve converted a lead and turned them into a loyal advocate for your brand . However, that’s easier said than done. No doubt, you know the importance of reducing churn, but if you’re just focusing on one metric, you may be missing the bigger picture: making sure the customers that stay are getting real value from your product, rather than just making it work. What does “customer success” mean and how do you measure it?

Are You Providing Solutions to Your Customer Problems?

And we don’t mean problems they’re having with the functionality of your product—that’s what customer support is for. And customer support is very, very important. But no matter how nimble and thorough your customer support team is, it doesn’t necessarily address the number-one indicator of customer success: are your customers getting the business benefits they need and hoped for from your product?

Your clients purchased your product because they had a specific business problem to be solved. To turn them into customer success stories, you must ensure your product is solving that problem and, ideally going beyond their expectations.

Lincoln Murphy at Sixteen Ventures also notes that customers should “continually and increasingly receive value from your product over the course of their lifetime as a customer”. That means that you not only solve a problem, but that you provide better solutions to that problem as the customer relationship progresses.

Think about what your client could say about your product if they only had one minute to pitch it to their CEO.

Focus on key business outcomes, starting when your customer is still a prospect. Rather than going into a relationship trying to convince them of the value of your product features, shift your mindset to truly hone in on the customer’s priorities. Think about what your client could say about your product if they only had one minute to pitch it to their CEO.

Continue to emphasize those business outcomes throughout the onboarding process and the customer’s lifetime with you but keep also in mind that businesses and the markets they address aren’t usually static, especially in the software world. They’ll change as your understanding of your customers, your company and its ability to deliver a product or a service, etc. mature and evolve.

How to Measure Customer Success

Measuring customer success must be done from two angles, both yours and the customer’s . Reducing your churn rate and increasing expansion revenue easily measure your success.

There are also loads of SaaS specific KPIs such as Monthly or Annual Recurring Revenue, Annual Contract Value, Customer Lifetime Value, Renewal Rate, Churn Rate, as well as other metrics that you can track. Here are more examples of Customer Success Metrics For SaaS Companies, such as Customer Onboarding Costs or Customer Effort Score.

But it’s important to quantify your customer’s success too, since it’s directly related to your success.

Of course, every business will have a different way of measuring customer success, and a lot of those metrics may initially be based on a gut feeling about whom your most successful customers are. But you should approach your customer success strategy systematically, starting by defining what success really looks like for your customers: for each segment of your user base, what do they consider to be the best possible outcome of using your product? Once you’ve defined that, you need to figure out what success indicators to measure that relate to customers reaching those outcomes. There are plenty of possible candidates in what Joel York calls “an ocean of customer success data”:

  • Usage stats, i.e., how often and for how long customers log into your platform
  • User engagement, i.e., the features customers are using and the actions they’re taking
  • Survey responses/ NPS scores
  • Upgrades and extra purchases
  • Referrals
  • External data—for instance, if your service helps businesses with marketing and SEO, you can measure their search rankings for chosen keywords over time
  • Other metrics, specific to your business. For digital commerce for example, KPIs are tracked throughout the digital commerce lifecycle, from acquisition to activation, upgrade and renewal. Some examples are: conversion rate, cart loading time, renewal rates, trial conversion rates, cart abandonment and recovered cart abandonment, revenue uplift from cross-selling, upgrades, reduction in voluntary churn, revenue uplift from additional sales channels and so on.

If there’s a way for you to measure a customer’s actual return on investment, by all means do it, and tell them about it. For example, Sam’s Wholesale Club tells customers in renewal notices and at checkout exactly how much they’ve saved through their memberships. That’s great, but rarely will it be so simple in the SaaS world. Your customer success metric will more likely be an index of several different factors, some of them quantitative, some of them qualitative.

It is a complex pursuit, but a true customer success strategy involves doing the work to eventually somehow quantify the key business benefits of your product. If your product helps to generate more leads, what is considered a good outcome? Would your users view a five percent increase as success, or should it be closer to 50 percent? Identify your customer’s success point and your calculation will naturally follow.

You can also think to quantify revenue uplifts as well as cost savings – two different buckets that can lead to a better ROI.

A Focus on Customer Success Creates Brand Advocates

Customer success isn’t just about reducing churn, though that’s an important metric. It’s about ensuring that your customers’ needs are met, beyond the point where they’re simply “satisfied” with your service. As greater customer success is achieved, your users turn into your advocates, recommending your product to their industry peers, and increasing your new sales. Learn more by downloading the Go Beyond Retention whitepaper on proven ways to keep customers coming back – and spending more.

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Delia Ene

Communications & AR Senior Manager

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