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5 of the Most Revealing SaaS Customer Success Metrics

By Ryan Law on Tue, Nov 8, 2016

Whether you're trying to retain more customers or accelerate new customer acquisition, your customer success strategy needs to start with the right performance metrics.

Today, I'm taking a look at 5 of the most revealing SaaS customer success metrics - from the ever-present customer churn rate, through to your SaaS product's viral coefficient.

1) Customer Churn Rate

I won't fixate on this because I talk about it a lot -  but simply put, the single biggest indicator of customer success is your customer churn rate.

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Happy, successful users will continue to use your product; unhappy, unsuccessful users will look for an alternative solution to their problems. Understanding how many of your customers are churning, or at risk at churning, is the first step towards improving customer success.

$$\text{% Customer Churn Rate}=\frac{\text{Customers that churned in period t}}{\text{Total customers at the start of period t}}$$

2) Onboarding Engagement

Once you've got a handle on your customer churn rate, the next step is to try and identify the problems that cause that churn.

Your onboarding process poses one of the biggest churn risks to your customers; but implemented properly, it can also be your greatest asset.

If your users can't get value from your product in their first few interactions, there's a high chance they'll ditch your solution and go hunting for an alternative. If they can, there's a great chance they'll stick around.

Alex Turnbull - Customer SUccess MetricsFree users who complete the prompts within 24 hours are almost 80% more likely to convert to paid customers than those who don’t.

Alex Turnbull, Groove

 

There are three main ways to improve your customer onboarding process:

  1. Understand the macro- and micro-goals that motivate people to start using your software.
  2. Use your onboarding process to help them tick-off some of these core goals as quickly as possible.
  3. Measure how your users engage with your onboarding process.

Measuring engagement will help you to improve the efficacy of your onboarding process, but it will also help you identify at-risk users: those that are struggling to make full use of your product, and likely to churn as a result.

There are several ways to measure this engagement, and it's a good idea to start tracking:

  • the percentage of customers that start your onboarding process
  • the percentage that complete your onboarding process
  • the average time to complete the onboarding sequence
  • the percentage rate of progress through each step of the process
SaaS_Customer_Success_Metrics.jpeg

Source

3) Active Users

Customer success shouldn't stop at the end of your free trial or onboarding process, and it's essential to monitor your customers' ongoing engagement with your product. After all, if a customer isn't logging into your app, they can't use it to achieve their goals, and they're a very real churn risk.

DAU and MAU stand for Daily and Monthly Active Users, and they're both a simple summation of the number of users that are actively using your product over a given period. By tracking this over time, you gain insight into how effective your product is at providing ongoing value to your customers, weeks and months after initial sign-up.

Crucially though, it's important to work out exactly what you mean by "active" users. Simply logging into your app isn't an indication of success if your user then goes on to delete their data and submit a dozen support tickets, so it's important to count users that are active and actually using your product.

4) Net Promoter Score (NPS)

Another revealing way to gauge customer success is to ask users how likely they would be to recommend your SaaS product to someone else.

The Net Promoter Score takes that idea and uses it to quantify customer satisfaction, asking customers to respond to a simple survey question...

"How likely are you to recommend [your SaaS product] to a friend or a colleague?"

...and score their answer from 0 (not at all likely) through to 10 (extremely likely).

Those that answer from 0-6 are considered detractors; 7-8, neutral; and 9-10, promoters; and their scores are then aggregated to work out whether or not you're receiving an overall (net) promotion:

$$\text{NPS}=\%\text{Promoters}-\%\text{Detractors}$$

5) Viral Coefficient

If the Net Promoter Score helps reveal the intention of customers, the Viral Coefficient helps measure their action: allowing you to calculate how many new customers each existing customer is referring to your business:

$$\frac{(\text{Number of Users} \times \text{Average Number of Referrals} \times \text{Referral Conversion Rate})}{\text{Number of Users}}$$

Customer referrals can be a powerful growth engine, and one fueled almost entirely by customer success. Only happy, successful customers will recommend your product to other people - and only the most evangelical of those customers will succeed in their referral.

If you've ever thought that the benefits of customer success were limited to customer retention, calculating your viral coefficient (and its explosive viral potential) should convince you of its ability to transform your customer acquisition too.

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