Pandemic, in general, has been a tough time for anyone in the business sector.

According to Smartkarrot, “84% of people say that customer success will go to offense mode from defense mode in the next 2 years.” The SaaS or Software-as-a-service companies have also gone through the same issue.

What if we tell you that you can beat this dry spell for your SaaS company? Today, we are going to tell you about the eight SaaS business metrics that would help you in accurately measuring the customer success of your company.

This post will walk you through:

What Are Customer Success Metrics?

The concept of SaaS services was first established in the 1960s and was referred to as time-sharing systems. In the time-sharing system, various terminals were connected to the main fare with the help of a hub-and-spoke system. 

SaaS or cloud computing is a service that helps users to connect or share data over cloud-based apps. The most common examples of SaaS are Google calendars, email, and Microsoft Office tools.

Customer success is the overall satisfaction of your customer with the product/service that you offer. 

So it becomes self-explanatory that SaaS customer success metrics include scores and metrics that help you measure customer success. 

To better understand customer success, you must be aware of the key success metrics used to measure customer success in the SaaS industry:

8 SaaS Customer Service Metrics to Monitor

According to research done by Esteban Kolsky, “72% of customers will share a positive experience with 6 or more people. On the other hand, if a customer is not happy, 13% of them will share their experience with 15 or even more.” Hence, in order to maximize customer success, you must be aware of certain metrics of success. 

Here are 8 important metrics to monitor that will give you a clearer look into how to measure customer success:

1. Customer Health Score (Churn Rate)

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7-Ways-to-Tackle-Customer-Churn-for-SaaS-in-a-Recession

Customer Health Score or the Churn rate is just the exact opposite of customer retention.

In this metric, you try to measure the number of customers that you lost over a particular period of time. This might occur due to their lack of interest in your service, high service fee, or poor customer service

In simple terms, the churn rate is the number of customers lost or the number of dollars (concerned currency) lost that the particular customer was worth.

How to measure churn rate:

We can measure churn rate by simply dividing “the number of customers who churned over a given period of time” by the “total number of customers at the beginning of the given period of time”. The result will then be multiplied by 100 to give out the actual churn rate.

Check out these tips to tackle customer churn rate for SaaS

2. Net Promoter Score (NPS)

If you haven’t used NPS in your customer success strategies, you might have used it as a customer yourself. This metric is direct feedback that you receive from your customers.

Net promoter score or NPS is a type of user-based survey that asks a user something like “How likely are you to recommend our service?” or “Were we able to tend to your needs?”. This metric gives you a clearer look into the feedback given by the customer. It lets you know if the customer is satisfied with your service or not.

The survey generally takes place on a 10 or 11 point scale.

In the case of an 11-point scale system, customers are categorized based on the following terms:

  • Detractors: Customers who voted between 0-6
  • Passives: Customers who voted 7 or 8
  • Promoters: Customers who voted 9 or 11

How to measure net promoter score:

The Net Promoter score can be calculated by simply subtracting the “promoters percentage” minus the “demoters percentage”.

NPS-Formula

3. Average Revenue Rate (ARR)

Average Revenue Rate or Average Revenue Per User is yet another useful metric to calculate customer success. ARR will help you in calculating the average revenue generated by a particular user over a given period of time. According to the revenue generated, it would help you in distinguishing high profile users from low profile users. Also, it will help you in coming up with personalized strategies for both categories.

Additionally, it helps in analyzing your customer base, your standing in the current market, and what you can do to maximize your overall profit.

How to measure average revenue rate:

Generally, many SaaS services work on a monthly subscription basis. Hence, the Average Revenue Rate is usually calculated on a monthly basis. We can simply calculate the ARR by dividing the “total revenue generated in a month” by “average users who consumed the service”. 

4. Customer Retention Cost (CRC)

Customer Retention Cost or CRC is a metric that is responsible for measuring the average cost incurred for retaining an existing customer. Rather than trying to acquire new customers every month, you must ensure to build a more loyal customer base. Calculating the CRC gives you a sort of clarity as to how much you want to spend on various strategies such as customer acquisition, marketing, and customer retention. 

How to measure customer retention cost:

To calculate CRC, you need to add all the expenses incurred during your customer success strategies. This includes various expenses like customer marketing, payroll of the customer success department, services offered for retention/acquisition, and engagement strategies.   

Have a look at this image to have a better idea:

customer-retention-cost-crc

Check out these customer retention strategies that work like a charm!

5. First Response Time

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As per studies, customer service response time is the most important attribute for 75% of customers.

First Response Time or First Contact Resolution Rate is a metric that tells you the amount of time that has passed since a customer posted a query. The metric is usually more closely related to customer service. However, an efficient means of customer service also plays a huge role in overall customer success.

How to calculate first response time:

The calculation of the First Response Time varies from company to company. The metric is generally used individually to better understand the resolution time taken for each customer’s query. The response time can be found by subtracting the “time when the query was first raised” minus the “time taken for resolution of the query”. 

Hence, the lesser the FRT, the more the chances for customer success.

6. Customer Satisfaction (CSAT)

The customer Satisfaction score is quite similar to that of the Net Promoter Score metric. But CSAT is different from NPS.

Unlike NPS, CSAT allows you to ask multiple questions in the form of a pointer-scale survey. This gives you a good insight into the overall review of the customers.

To better understand the reviews of your customers, come up with direct and useful questions like “How satisfied are you with your product?”, “How likely are you to recommend us to your friends?” and “How likely are you to avail our services again?”. Try keeping a neutral point in your scale, so that the positive and negative reviews aren’t intertwined.

To calculate CSAT, you must divide the “number of positive responses” by the “total number of responses”. Then multiply it by 100 to get your final CSAT score.

Customer-Satisfaction-Score-(CSAT)

7. Customer Lifetime Value (CLV)

Improving Customer Lifetime Value is one of the most important things that businesses strive for. Customer Lifetime Value or CLV can be defined as the overall lifespan of a customer, right from the day they invest in your company till the day they leave.

In other words, CLV is the overall expected revenue or net profit that a customer generates during their time with your service.

CLV can also give you various other insights like:

  • How much a particular customer is worth to your company.
  • How much expense you should incur while retaining customers. 
  • Whether a particular customer will convert into a repeat customer.

How to calculate customer lifetime value:

Customer-lifetime-value

In other words, CLV is the overall expected revenue or net profit that a customer generates during their time with your service.

CLV can also give you various other insights like:

  • How much a particular customer is worth to your company.
  • How much expense you should incur while retaining customers. 
  • Whether a particular customer will convert into a repeat customer.

How to calculate customer lifetime value:

To calculate CLV, you need to keep in mind these three terms: annual revenue per customer, customer relationship in years, and customer acquisition in costs. 

CLV is calculated by multiplying the “annual revenue per customer” and “customer relationship in years”. The product is then subtracted by the “customer acquisition in costs”. The result you get is the CLV of the particular customer.

8. Engagement rate

Engagement rate includes various parameters by which you can measure engagement. The measure of engagement differs from company to company. If a company measures their engagement based on onboarding customers on a yearly basis, they need to subtract the “total number of new users of the present yearminus “total number of new users in the previous year”. 

This would give you an idea of the increase/decrease of engagement within a year. This would also make you come up with more effective marketing strategies for better engagement.

How to measure engagement rate:

Engagement rate is generally determined by the number of users that were onboarded over a given period of time or the number of users that took monthly or yearly subscriptions after the end of their free trials. Engagement can also be measured by the way a customer was approached by the customer service team and whether they were able to tend to their needs.

Customer Success Dashboard

 A good way to keep track of important saas metrics is – A Customer Success Dashboard. 

A SaaS dashboard is a commonly used management tool that helps in consolidating and visualizing various customer success KPIs at the same time

Here’s a good example of a SaaS customer success dashboard:

SaaS-metrics-dashboard-geckoboard

Right from filing an IT report to analyzing your financial statistics, dashboards play a significant role. Similarly, in SaaS, a customer success dashboard can make it easy for you to reach an affirmative decision by spotting relevant data-driven trends.

Moreover, a dashboard often shows all the metrics to measure success in the form of bar graphs and statistics, providing you a clear look at quantitative metrics that help determine your overall customer success rate.

Conclusion

It is not a surprise that companies would want their customers to be satisfied and content with their services. The goal for any company is to have a good customer success rate so that they could both acquire and retain customers for their respective companies. 

The above-mentioned metrics should help you keep track of all the necessary parameters that you need to monitor in order to have a positive and efficient customer success rate.

And if you are still feeling overwhelmed, you can always outsource your SaaS customer support to Helplama’s US-based Tier-I & II Technical Support.