Observing the patterns and trends in those metrics makes it possible to estimate what works, what can be improved and what can be introduced to fulfill customer demands.
Below there are 5 customer success metrics that are worth taking into account when measuring customer satisfaction level and its possible outcomes.
Customer Satisfaction Score (CSAT)
This is a customer success metric used to measure how satisfied the customers are with the service, expressed as a percentage. It is possible to measure it with one YES/NO question which would give a clear indication of satisfaction level:
Were you satisfied with our service today?
The other way is to use a scale, usually a 1-5 scale:
On the scale from 1 to 5, what is the level of your satisfaction with our service today?
1 = very unsatisfied
2 = unsatisfied
3 = neutral
4 = satisfied
5 = very satisfied
CSAT would be the % of the users that choose the options 4 & 5.
This scale could be also reduced to 3 responses:
1 = unsatisfied
2 = neutral
3 = satisfied
Then this customer success metric would be based on the % of users who chose option 3.
A great idea is not only to check the CSAT score in itself but also give the respondents the possibility to express their concerns and issues if their CSAT level is inadequate. Survicate’s sample survey allows customizing the screens to include the text answer from the customer.
Read more about possible solutions that help to track this metric.
Net Promoter Score (NPS)
Image source: Enxoo.com
In his book, The Ultimate Question: driving good profits and true growth, Frederick Reichheld defined the customer success metric that is Net Promoter Score (NPS) as “based on the fundamental perspective that every company’s customers can be divided into three categories.
Promoters are loyal enthusiasts who keep buying from a company and urge their friends to do the same. Passives are satisfied but unenthusiastic customers who can be easily wooed by the competition. And Detractors are unhappy customers trapped in a bad relationship.”
In other words, NPS is the indicator of the customers’ loyalty and whether it is likely or not for them to recommend a product or service to other people.
This metric requires asking the customers specific, scale-based questions.
A good example would be: “How likely are you to recommend (company/product/service) to a friend?”
As presented below NPS is calculated based on the % of customers who would, on the 0-10 scale, choose options 9-10 or, on the scale 1-5, would choose option 5.
What is important, the above question should be followed with another that would allow the customer to express their sentiments, whether in text or using single/multiple choice question.
It enables responding to customers’ needs more efficiently and estimating what should be improved in customer service.
Survicate app allows to create NPS surveys for various platforms and to design them to best suit the user’s needs. What is great is that it enables to add the option for the respondents to give their reasoning for the given score.
Read more on NPS and best practices of using this metric.
Customer Effort Score (CES)
Image source: Heart of the Customer.com
This customer success metric is most useful for measuring the “amount of friction” the customers experience while performing tasks/solving their problems on your app or website.
The question recommended by experts to use for measuring CES is:
To what extent do you agree or disagree with the following statement: the company made it easy for me to handle my issue.
The respondents should be able to pick one from 7 options:
Strongly Disagree – Disagree – Somewhat Disagree – Neither Agree nor Disagree – Somewhat Agree – Agree – Strongly Agree
It is easy to gather that, after aggregating all the results, the average high scores indicate that your company is providing smoother and more comfortable solutions for the customers.
Low numbers mean that customers are required to put too much effort to use your products. In other words, things should be straightened out.
Effective customer service should be able to remove friction and make the experience as user-friendly as possible.
Customer Lifetime Value (CLV or LTV)
The authors of the textbook Marketing Metrics: the definitive guide to measuring marketing performance define Customer Lifetime Value (CLV): “Customer lifetime value is the dollar value of a customer relationship based on the present value of the projected future cash flows from the relationship.”
What does it mean in practice? CLV metric reports the profit/loss that is expected from an individual customer over time.
Why is it useful for the business? CLV determines the value of the customer and allows to segment the customer base. It is crucial for creating the customer persona and optimizing the marketing and customer service to their satisfaction.
The greatest benefit of CLV is that it helps to decide where it is worth it to spend more resources and to improve the relevance of the products and services to the customer’s needs.
How to calculate CLV? There are various ways to calculate this metric. A good example of a basic CLV/LTV formula is the one provided by ChartMogul team:
- ARPA: Average Revenue Per Account (The average MRR across all of your active customers)
- Gross Margin: The difference between revenue and COGS (Cost Of Goods Sold). This is typically extremely high in SaaS (>80%)
- Customer Churn Rate: The rate at which your customers are canceling their subscriptions.
This formula is a great start for more complicated calculations; however, it is only a rough estimate and should be treated as such.
Customer Churn Rate
This is a customer success metric that is important because it shows the customer retention level. It indicates the % of customers who canceled or did not renew their subscriptions within a specified period.
It is worth to track the number of non-active customers as they may also churn in the future. The CS team, taking into account various metrics, has the possibility of predicting, for example, that if the users did not log into the app for two weeks using a monthly plan, it is very probable that they would churn within a month.
Customer churn rate is essential as its high level indicates the failure in achieving customer success. It is a metric that would be best to improve in the first place.
Even more important than tracking the customer churn rate is determining the reasons customers are leaving.
Some may cause involuntary churn (e.g., a customer goes out of business), but the other type is voluntary churn, that is most probably caused by customer dissatisfaction with a product, service, or the company. It is especially important to mitigate the latter, as it is directly connected to the service provider.
Survicate uses a customer questionnaire with a blank space for the user to provide the reason for churning. This information is gold because it helps to improve the app and customer service to improve on the indicated issues.
Measure Your Customer Success Metrics!
There are many metrics that should be taken into account in customer success. What is good to remember is that any steps taken to improving customer satisfaction are beneficial, as the customer focus should be the main goal of subscription-based businesses.
Observation of trends and patterns and quick response to negative feedback are some of the possible actions to take in that direction.
To be able to act, it is necessary to have tools to analyze the information and feedback provided. It is vital to reach to the customers for their opinion, as their satisfaction or dissatisfaction eventually decides on the success of the business.