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Running a business is a complicated affair. You have to juggle so many different responsibilities, from labor and logistics to market research and product development.
However, despite the many ways entrepreneurs must split their attention, the recipe for success boils down to a few simple principles.
One of the most important things for every business owner, regardless of the industry they operate in, is that satisfying customers leads to long-term prosperity. That’s why companies as diverse as consumer goods manufacturers and software as a service (SaaS) providers need to invest in a customer success strategy in a competitive business landscape.
This article will help you understand how focusing on customer success can lead to business success for your company. It will cover the finer points of an effective customer success strategy, such as how to build an efficient customer success framework. More importantly, it will list the most crucial customer success metrics and show you how to measure them and improve your performance in each area.
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What is customer success?
In recent years, customer experience (CX) has become a key differentiator for consumers looking to choose between different companies. According to a global survey conducted in 2022, 94% of customers said that positive CX contributed to making them repeat customers of a company. Clearly, prioritizing CX helps businesses create loyal customers, who can also become promoters who recommend the company’s services or products to others.
Customer success is related to good CX and is also very good for business. It involves understanding and anticipating your customers’ likes and dislikes and creating a framework to serve those preferences. Customer success is a proactive pursuit where companies can accurately predict the challenges customers will face and take steps to provide solutions even before they ask for it.
According to HubSpot, companies displaying growth in terms of revenue are 21% more likely to have invested in customer success than those with stagnant revenue figures. If you want to reduce customer churn rate, increase customer satisfaction levels, and grow your sales, you cannot afford to overlook customer success strategies.
Differences between customer success, customer support, and customer experience
As a business owner, you simply cannot take customer loyalty for granted. Modern consumers are better informed than ever and well aware that they can easily switch to a competitor if your company is not delivering satisfactory service.
Indeed, a large majority of them do precisely that. A recent Global State of Customer Service report by Microsoft showed that 58% of customers are willing to switch brands after just one bad experience. That figure alone should be a wake-up call for business owners who haven’t already invested in customer success.
At this point, you would be forgiven for thinking that customer success is the same as CX. The two concepts seem similar on a superficial level, but there are fine points of distinction that every business owner should be aware of.
Along with customer support, customer success and CX are the three main pillars of customer service. The key element that all three have in common is that they are all customer-oriented. Beyond that, they deal with different aspects of consumer relations, and knowing the difference between the three is essential to meeting expectations and delivering a satisfying experience.
Let’s examine each of the three concepts side-by-side so that their differences come into focus.
Objectives
- Customer success centers on increasing customer satisfaction levels by providing valuable returns on their investment in your brand.
- Customer support focuses on responding to customers’ needs, addressing their pain points, and offering solutions to their problems.
- CX focuses on retaining customers by creating a top-notch end-to-end experience that promotes engagement and increased use of the services offered.
Responsibilities
- Customer success is concerned with educating customers about the resources available to them, assisting with onboarding new customers, delivering value to customers, and cross-selling and up-selling the company’s products and services.
- Customer support involves responding to customer queries, directing customer support tickets to the appropriate channels, and reacting to any customer problems with the brand’s offerings.
- CX is concerned with aligning all the customer-facing departments within your organization, like sales, customer support, and marketing, to create a unified, streamlined experience for every customer.
As we’ve just seen, customer success is a proactive pursuit in which your company’s service and marketing efforts are directed toward moving customers further along in their journey and organically transforming them into wholehearted promoters of the company.
Benefits of investing in customer success
Every time a customer makes a purchase from your company, they are investing in your future success. It’s only fair that you return the favor and invest in customer success as well. To do so, you need to find ways to improve customer retention rates, deliver high-quality personalized experiences, and cross-sell and up-sell your products to add value for the customer.
The best way to approach customer success is to focus on your customer’s specific preferences and what they want to achieve. This is a win-win situation for your company, as the benefits will also help you achieve your own business goals.
Of the many benefits that come with investing in customer success, these are the most noteworthy:
Increases loyalty
An effective customer success strategy endears existing customers to your company. Since they know your organization is committed to helping them achieve their goals and solve their problems, they are more likely to support your brand even when targeted by competitors.
Builds trust
Dedicating resources to customer success shows your customers that there are tangible returns for their investment in your company. Once it's clear that your business isn’t focused on just making a sale but also delivering value to supporters, they are more likely to trust your future offerings.
Improves customer satisfaction
Customer success involves proactively finding ways to improve CX. By delivering a personalized experience for each customer, you can address their needs and find ways to satisfy their demands.
Customer success is vital throughout the customer life cycle and is a key area of concern for any business, no matter its industry. Its importance cannot be overstated, which is why many important metrics can be used to measure your company's level of customer success.
In the next section, we will look at these metrics and how they apply to your business.
Key metrics to measure customer success
Several metrics can be used to measure the effectiveness of your customer success strategy. Each metric focuses on different key performance indicators (KPI) that provide quantitative insight into your company’s customer success performance. These customer success KPIs offer a window into your overall CX and measuring them on a weighted index lets you calculate the overall performance of your customer success strategy.
Depending on the nature of your business, you will need to focus on different key customer success metrics. There are dozens of KPIs to consider, so it is up to your customer success team to identify which ones your company should monitor closely.
Additionally, a customer success metric can be grouped with others according to their area of focus. There are five key groups of KPIs that can be tracked, and they are:
- Customer-centric metrics
- Financial metrics
- User and product metrics
- Support and operational metrics
- Qualitative metrics
Let’s take a look at the various customer service metrics you should consider while formulating your strategy.
Customer-centric metrics
This group of metrics, such as net promoter score, looks at your overall customer satisfaction levels and the value your customer support channels offer. Every business should include a few critical customer-centric KPIs when measuring customer success levels.
Here are six of the most essential customer-centric customer success metrics you can monitor:
1. Net promoter score (NPS)
Net promoter score (NPS) is a simple and widely accepted benchmark that measures how likely it is that an existing customer will recommend your company to others. The net promoter score serves as a valuable indicator of customer loyalty.
Measuring NPS is fairly straightforward. All you need to do is survey your existing customers and ask them how likely they are to recommend your services on a scale of 1 to 10. Low scores, ranging from 1 to 6, count as negative detractors. Scores of 7 or 8 indicate a neutral response. Only high scores of 9 and 10 count as enthusiastic support, and these customers can be classified as brand promoters in the future.
To calculate your net promoter score, simply subtract the percentage of detractors from the percentage of promoters.
2. Customer satisfaction score (CSAT)
Customer satisfaction score (CSAT) is another critical metric for customer success, which demonstrates how satisfied customers are after engaging with your company. It is a reliable indicator of customer emotions and overall attitude toward your company.
It is similar to NPS because it is also measured by conducting a customer survey. However, while NPS surveys can be conducted from a cold start, customer satisfaction score surveys should be carried out after a customer completes an interaction with your support channels.
A customer satisfaction score survey asks existing customers to rate the quality of their customer service interactions from 1 to 10, with low scores from 1 to 5 indicating an unsatisfactory interaction and high scores from 6 to 10 indicating a satisfying one.
You can then measure customer satisfaction score by using this formula:
(Number of positive scores / Number of negative scores) X 100 = CSAT percentage
3. Customer effort score (CES)
Customer effort score (CES) is another metric that calculates the quality of your CX. It is used to measure the amount of effort a customer has to put into achieving a resolution through your company’s support channels. It shows you the efficiency of your resolution process. Like NPS and CSAT, CES is also calculated using a survey.
In a CES survey, customers are asked to rate how easy it was to get the help they needed from the support team. Similar to CSAT, you should conduct this survey only after a customer has successfully resolved their issue.
Usually, the scale for measuring customer effort score looks like this:
- Very difficult (-3)
- Difficult (-2)
- Slightly difficult (-1)
- Neutral (0)
- Slightly easy (+1)
- Easy (+2)
- Very easy (+3)
To calculate CES, you can use the following formula:
The sum total of customer effort ratings / Total number of customer responses
4. First contact resolution rate
For a moment, put yourself in your customers’ shoes. They want the fastest possible resolution when they encounter an issue with your services. Ideally, a company should be able to resolve problems as soon as a support request is made. This is why the first contact resolution rate is so important.
A high first contact resolution rate means that your support team excels in its role. If it is low, your support team is providing unsatisfactory solutions or taking too long to respond to support tickets.
Calculating your first contact resolution rate is possible using the formula given below:
(Number of service tickets resolved after first contact / Total number of service tickets) x 100 = FCR percentage
5. Customer retention rate
Most business owners will agree that it is much more challenging to acquire new customers than to retain existing ones. Devoting resources to customer retention is also more cost-effective than focusing solely on customer acquisition. For these reasons, customer retention rate is a fundamental customer success metric for any company.
The customer retention rate is calculated over a fixed period.
If you want to calculate your customer retention rate over time, use the following formula:
(Number of customers at the end of the period - New customers acquired during the period) / Number of customers at the beginning of the period ] X 100 = CRR percentage
6. Customer health score
One of the most reliable indicators of whether a person will continue using your services is their customer health score. This metric is attached to each customer account and indicates the likelihood they will purchase from you again or be lost to customer churn.
Unlike the other customer-centric KPIs covered so far, a single figure does not represent the customer health score as it varies for each individual.
An important thing to note about customer health score is that it is a composite KPI, which is calculated using a range of other metrics:
- Individual usage patterns
- Number of support requests raised by the customer’s account
- Length of customer relationship
- Level of customer engagement
7. Customer engagement
The number of interactions with customers can indicate how comfortable they are with using your products or services. Of course, the nature of each interaction must also be considered.
Note that customer engagement is a quantitative KPI, not qualitative, and it only indicates the amount of activity on an objective level. Different metrics can be used to calculate this, including login frequency, feature usage, and customer feedback submissions.
Financial metrics
Every business owner is concerned with their bottom line. Investing in customer success is only worthwhile if it positively impacts your finances. The financial customer success metrics covered in this section can be used to measure how your strategy is affecting your monthly recurring revenue, profits, and expenses.
1. Monthly recurring revenue (MRR)
Monthly recurring revenue is a critical financial customer success metric you can track. It measures the revenue generated by your existing customer base on a monthly basis. This figure is extremely important for predicting future earnings and evaluating your company’s current financial stability.
Calculating monthly recurring revenue is quite simple, with a straightforward formula that you can use:
Average revenue per account X Total active accounts for the month = MRR
2. Customer retention cost
We already know that retaining customers costs less than acquiring new ones. However, just because customer retention is cheaper than customer acquisition doesn’t mean it is automatically cost-effective. Calculating customer retention costs is the only way to know that you are getting adequate returns on your investment. This figure represents how much your business is spending to retain a single customer over a given period.
Each business has different expenses related to customer retention. While some might spend on marketing campaigns to encourage repeat purchases, others focus on offering loyalty rewards to customers. Whatever the nature of the expenses, if they go toward retaining customers, they will impact customer retention costs.
The formula to calculate customer retention cost is:
The sum total of customer expenses / Total number of customers
3. Renewal rate
This is one of the customer success metrics that applies mainly to businesses that sell subscriptions to their customers, like SaaS companies. The renewal rate is a very fair indicator of how effectively your customer success strategy is performing.
High renewal rates mean that your services are helping customers achieve their goals, which keeps them coming back at the end of their subscription. Conversely, low renewal rates show that your services aren’t working as advertised, prompting customers to seek alternatives from your competitors.
The formula mentioned below can help your business calculate the renewal rate among its customer base:
(How many customers opted for renewals / Number of customers eligible for renewal) X 100 = Renewal rate
4. Average revenue per account (ARPA)
ARPA (sometimes referred to as average revenue per user, or ARPU) indicates how much revenue an individual customer will generate. It is calculated over a fixed period, which can be monthly or yearly. It’s important to track ARPA if you wish to accurately forecast your company’s revenue and growth.
To calculate ARPA, you can use the formula mentioned below:
Total revenue generated from user accounts in a given period / Number of user accounts
5. Expansion revenue
Expansion revenue is a supplemental financial customer success metric that you can monitor. It can be viewed alongside MRR to paint a more accurate picture of where exactly your customers are spending money on your business. This is useful when measuring the impact of your cross-selling and up-selling initiatives, such as convincing members on a basic subscription to upgrade to a higher and more expensive tier.
To calculate expansion revenue, the formula is as follows:
Total revenue from existing customers - Initial contract value
User and product metrics
Most effective customer success strategies have one thing in common: they prioritize consumer needs. The best way to ensure this is by monitoring KPIs that reflect how active customers and new acquisitions interact with your business.
1. Active users
Those operating on a subscription-based business model, such as SaaS providers, must track how frequently their customers use their products and services. The percentage of active users is an excellent way to measure how much value customers derive from a business’s offerings.
The active user rate is calculated over a specified period, such as daily, weekly, or monthly. Users who meet the criteria—like logging in or using certain features—during that period will qualify as active users when tracking this SaaS customer success metric.
Calculating the active user rate can be done with the following formula:(Number of customers who are active users / Total number of users) X 100 = Active user rate
2. Adoption rate
Similar to the active user rate, the main difference is that it measures the rate at which new customers become active users of a product, service, or new feature. For example, if a streaming service gets 50 new customers to sign up, but only 25 of them go on to become daily users, the adoption rate is only 50%.
Like the active user rate, it is measured over a specific interval.
To measure your product or feature adoption rate, use this formula:
(New active users / Total new users) X 100 = Adoption rate
3. Repeat purchase rate
A customer who makes a one-time purchase will not have a significant impact on your long-term business growth. It is much more effective to encourage users to return and make repeat purchases, even if you aren’t in the business of subscriptions. Essentially, your company’s repeat purchase rate is the percentage of customers returning and continuing their engagement with your company.
You can calculate your repeat purchase rate with this formula:
(Number of customers making repeat purchases / Total number of customers) X 100 = Repeat purchase rate
4. Product usage rate
This is another metric that is quite important for SaaS companies to monitor, as it shows how frequently customers tend to utilize certain features of your product. This metric is flexible, and you can measure it based on the criteria defined by your support team.
Common criteria used to measure product usage rate include average sessions per user, features used per user, or number of hours spent using the product.
5. Average time in app
For software companies, the amount of time users spend on the platform can be a valuable metric that provides insight into customer behavior and product performance. Whether you want users to spend longer amounts of time browsing, like most social media platforms, or you want them to find a quick resolution to their issues, like ecommerce platforms, tracking the average time in app can be revelatory.
The formula to measure this KPI is:
Total time spent by a user on the app in a given period / Number of sessions
Support and operational customer success metrics
If you want your customer success strategy to succeed in the long run, you need to implement processes that allow your customer support teams to function smoothly and at the highest level.
To do so, you must include KPIs that measure the efficiency and effectiveness of your customer service operations.
1. First response time
A vital element of any effective customer success strategy is making customers feel like they are valued. One of the best ways to do this is to be attentive to their needs and quick to respond to any complaints or requests they might have.
First response time measures the average time it takes to respond to a customer inquiry and is calculated with the formula below:
The sum total of all responses times / Number of customer inquiries and support requests
2. Ticket backlog
A fairly straightforward customer success metric, ticket backlog represents the number of open customer support tickets at any given time. A ton of backlog can be attributed to inefficient customer support processes or faulty product design.
Whatever the reason, if you are pursuing customer success, it is in your company’s best interest to keep the ticket backlog at a low figure that is manageable for your customer support team.
3. Ticket volume
This is another simple metric that can impact your customer success strategy. It measures the number of support tickets created within a given period. For example, if you receive 20 customer support tickets in a week, the ticket volume for that week is 20.
4. Time between purchases
When tracking the behavior of repeat customers, it is important to establish how long it takes them to make their next purchase. This is useful when calculating the value of a customer relationship over time.
The way to measure the time between purchases for individual customers is as follows:
Total time between purchases / Number of purchases
Qualitative customer success metrics
A significant component of measuring customer success involves metrics that can be represented by numerical figures. However, you must also incorporate qualitative analysis of all customer interactions to gain deeper insights.
This will allow you to better understand the issues faced by your audience and their expectations from your company’s customer service departments.
Qualitative customer feedback
Customer opinions play a significant role in determining customer success. However, they are harder to track, since there are no easily measured KPIs to calculate. Most qualitative customer feedback comes in the form of text data and can be found in product reviews, responses to feedback forms, social media comments, or written complaints.
Fortunately, advances in customer success platforms have made it possible to extract insights even from text data. Technology such as artificial intelligence (AI) and its offshoots like natural language processing (NLP) help customer service teams process large volumes of text data and identify customers’ pain points, preferred features, and overall sentiments.
How to track and measure customer success metrics
Regardless of the nature of your business, tracking the right customer success metrics will always be necessary. We’ve already covered the difference between qualitative and quantitative metrics and how they both require different approaches to tracking and measurement.
Another way to group and track customer success metrics are as outcome-based or activity-based metrics.
Outcome-based metrics measure the results achieved by customers, like reaching a solution to their inquiry or making a repeat purchase. On the other hand, activity-based metrics measure how customer actions impact your company’s performance in key business areas, such as sales or customer engagement.
Frameworks to organize your customer success metrics
Once you have decided which customer success metrics are essential for your business to track, it is time to put together a model that allows your customer success strategy to function smoothly. This is known as a customer success framework.
This framework's end goal is to help customers achieve their goals by using the company’s products. Customer success frameworks come in many forms, and they all take different approaches to achieving a common objective.
One way to classify customer success frameworks is by the amount of interaction required between the company and its customers. The three types of customer success frameworks according to this classification are:
- High-touch model: This highly personalized approach to customer success requires numerous direct customer interactions.
- Low-touch model: This less labor-intensive approach relies on automation and self-service resources to help customers achieve their goals without involving the customer service team.
- Hybrid model: This combines high-touch and low-touch models to streamline the customer journey. For example, you can go from high-touch in the early stages (onboarding, etc.) to low-touch in later stages (ticket resolution, etc.).
Benefits of implementing customer success frameworks
While the primary objective of any customer success framework is to help customers achieve their goals, they also benefit the companies that implement them.
A successful customer success framework brings several key benefits to organizations:
- Reducing customer churn rate
- Increasing customer lifetime value (CLV)
- Helping customers transition from users to promoters and brand advocates
Popular models for customer success frameworks
When developing your customer success strategy, you should gather a capable customer service team headed by a customer success manager. Their core responsibilities are as follows:
- Helping new customers with the onboarding process.
- Increasing the adoption rate of new products or features among the existing user base.
- Renewing existing subscriptions and expanding audience reach year after year.
- Converting casual or one-time customers into vocal promoters of your company’s products and services.
- Tracking customer success metrics dashboard.
In pursuit of these goals, your customer success team must track various KPIs, outline your overall strategy, and adjust their strategies along the way. When creating an initial outline, the team can use one of the many popular models for customer success frameworks.
Some examples of commonly used customer success frameworks include:
1. Customer success pyramid
This model takes inspiration from the famous hierarchy of needs pyramid devised by the psychologist Abraham Maslow. While Maslow’s pyramid was concerned with an individual’s personal development, the customer success pyramid centers on developing strategies to deliver maximum customer satisfaction.
An easy way to remember the levels of the customer success pyramid is thinking of it as “the six Ps.” Starting from the lowest and proceeding to the highest levels, they are:
- Precision and accuracy
- Prompt responses
- Personal relationships
- Personalized CX
- Preemptive action
- Prescient customer support
As you move through each level, you should be able to elevate various metrics for your company.
2. Customer success flywheel
This model is based on the invention of the flywheel by the engineer James Watt, who used principles like force application and friction removal to create a more efficient mechanical component for steam engines.
In the context of customer success teams, it involves centering your company operations on the core principle of customer satisfaction and then applying force (devoting resources) and removing friction (streamlining processes) to amplify those effects. A customer success flywheel is a circular model where customers themselves serve as drivers of growth as they move through the lifecycle from unaware strangers to vocal advocates.
3. Customer success lifecycle
Another model for a customer success framework is the customer success lifecycle. It tracks a business’s relationship with each customer through several stages, each representing a new achievement for its customer success efforts.
The six main stages of every customer success lifecycle are:
- Awareness
- Consideration
- Preference
- Purchase
- Customer loyalty
- Advocacy
How companies can use customer success strategy to grow their business
Often, companies can build effective customer success strategies but fail to achieve their desired results because they lack the appropriate tools to get the most out of their initiatives.
Leveraging cutting-edge technology to engage with your customers is crucial if you want to effectively deliver your customer success program to your user base and have them respond positively. Modern solutions include tools like LiveChat, which enables customer support teams to easily interact with customers and gather data regarding customer success metrics.
Let’s look at an example of how LiveChat helped a software company track customer success KPIs and improve their performance over time.
Decreasing customer churn rate at GetResponse
The email marketing provider GetResponse serves a global customer base. Seeking a way to reduce customer churn rate, it adopted LiveChat to make the company’s support agents and knowledge resources more easily accessible to audience segments that needed them for any reason.
After partnering with LiveChat, GetResponse’s customer support team was able to handle a much larger volume of customer requests. The tool led to improved performances in several metrics, such as:
- Reduced first response time
- Collecting qualitative feedback
- Providing satisfactory solutions
With a robust customer engagement tool like LiveChat, GetResponse’s customer support agents were equipped to respond to customer inquiries and concerns 24/7. With a reliable way to engage with the company whenever they faced a problem, the customers became more loyal and happy with their experiences, resulting in a reduced customer churn rate over time for GetResponse.
Connect with customers
LiveChat is a complete customer service platform that delights your customers and fuels your sales.
Trusted by 36,000+ companies
Conclusion
Whether you are in the B2B or B2C space, you will need satisfied customers and clients to succeed as a business. A customer success strategy is key to achieving higher customer satisfaction rates and ensuring healthy long-term revenues.
To develop an effective strategy, you need to first identify the customer success metrics that are relevant for your company to pursue and optimize. Once you set specific goals and track the KPIs you’ve chosen, you will better understand your customers' aims and pain points and be able to empower them to achieve success while using your products or services.
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