Using Customer Success Metrics to Grow Your Business

If a business owner were given a genie to grant them three business-related wishes, they might wish for high sales, low costs, and high-profit margins. But maybe he’d be wishing for the wrong thing. What he should actually be wishing for is good customer success metrics. Happy customers mean higher customer-retention, more repeat business, and word-of-mouth marketing – not to mention the satisfaction of high-quality service delivery.

cartoon image of people holding giant thumbs up - signifying customer success metrics

Customer Success vs Customer Support

Customer success has become a bit of a buzzword recently, particularly in the B2B field. As with any buzzword, its definition can be vague and confusing. In essence, customer success metrics are how businesses can ensure that customers are satisfied with their products or services.

Are you helping your client to build a better business? Are the products and services you offer actually fulfilling their intended purpose?

Customer success is different from customer support, which how businesses help to solve issues that may arise whilst customers are using their products or services. Good customer support does help to ensure that high customer success, though the two are not the same.

Customer Success Potential

Lincoln Murphey, who quite literally wrote The Customer Success Book, promotes the concept of Customer Success Potential (CSP). This idea is very simple. In the most basic terms it assesses the ability of your business to provide any particular client with both the required outcome and appropriate experience they need to be successful. By investing time and resources in clients who are more likely to gain success from your products and services, you can streamline not only the ability to create customer success, but the provision of services as a whole. He breaks this idea down to six different types of fit, making a checklist for businesses to assess CSP.

Technical Fit

Perhaps the most basic measure of fit. Is your business technically equipped to provide this customer with the services they need? If you are a content agency that provides content services in English, a customer who needs Italian content is not the best fit.

Functional Fit

This is similar to technical fit. Here we discern if there are functionalities in place to provide the services this customer needs. An example may be a customer who requires around the clock customer support. If your business does not provide 24-hour customer support, you are not a good fit for them.

Resource Fit

This goes beyond the ability of the client to pay the fee for the goods and services, but rather asks, does this customer have the resources to use the services you provide successfully. An example would be if you supply a technological service that requires the client to upgrade features on their existing computer systems. If the customer is unwilling or unable to do this upgrade then they are not a good fit.

Competence Fit

Does the customer have the required competencies to ensure that they can use your product successfully? This is similar to resource fit but refers particularly to human resources.

Cultural Fit

Do the moral and ethical standpoints of your companies align? Does the client want your company to compromise your ethics? If so, they are not a good fit.

Experience Fit

do you have sufficient resources and competence to provide the customer with the required experience?

Measuring Your Metrics

Many entrepreneurs are not number crunchers by nature and may incorrectly use or misunderstand customer success metrics quoted on their own. The power of numbers lies within context rather than within the figure itself.

Ask Your Customer

No metric or number can make up for a good rapport with your client. Talking and connecting with your client is the most important way to measure whether they are happy with your services, are planning on staying with you company and are achieving their desired outcome. More importantly, by talking to your client, you can find out what to do to fix the situation if they are in any way unhappy with your services.

Customer Satisfaction Score (CSAT)

This is a client survey consisting of questions relating to a specific experience which they may rate from 1 to 5. Your goal should be to score at least 80% satisfaction. This is a good metric to use for short-term customer satisfaction, but not a good measure for the long-term.

Net Promoter Score (NPS)

This is a score calculated by a customer survey which asks customers: “How likely you are to promote our services?” Clients likely to promote your business are dubbed ‘promoters’, and those unlikely are called ‘detractors’. The total score is worked out by subtracting the percentage of detractors from the promoters.

Monthly Recurring Revenue (MMR)

This is the revenue that businesses can rely on to be repeated every month. The Expansion MMR is the percentage of your business that comes from upselling and cross-selling to existing clientele.

Customer Churn Rate

This is a measure of how many customers your business it losing over time. Ideally this number should be less than 5%. The MMR churn rate is a related metric, measuring how much income is lost from lost customers over a period. Here you should aim for a more stringent 1%. The MMR churn rate should be lower than the Expansion MMR. Customer Health Score is about stopping your customers before they churn out. However, there is no formula for calculating Customer Health, and so calculating it requires a bit of ingenuity. What parameters are common in your churn out customers? Is there a way of measuring these factors?

Customer Lifetime Value (LTV)

LTV is the amount of revenue that can be expected to be generated from a customer in their time with your company. Ideally this should be at least three times the Customer Acquisition Cost (CAC), the money required to attain clients. If the ratio of LTV:CAC is much more than 3:1, it could indicate that your business is being stunted by insufficient investment in customer acquisition.

In Conclusion

Focusing on your customer success metrics is about moving away from the sausage factory business model to ensure that your business is providing customers with their desired outcome.

Successful clients should increase the return on investment of resources. The idea of customer success is not to squeeze money out of your clients, but rather about helping both you and your client grow to fulfill your maximum potential. In order to create client success, one must be able to measure it.

Some of the customer success metrics discussed may lead to more questions than answers but this in itself is a positive step. Knowing what questions to ask is often the hardest part of addressing a problem at all.