Customer Success

The 5 customer success metrics that actually matter for B2B SaaS companies

Aaron Kazah

Founder & CEO

4-MIN READ

Customer success isn't just about how many customers you acquire or how many you retain over a particular time period. It takes a much more comprehensive approach to get a deeper understanding of how successful your customer strategy is and whether your customers are getting the best value from your products/services.

So, without further ado, here are five key customer success metrics for SaaS businesses

The Net Promoter Score

The Net Promoter Score, or NPS, was developed by Bain and Company in 2003 and measures your customers' perception of your company based on one simple question: how likely are you [the customer] to recommend [your company] to a friend or colleague? Unless you’ve never shopped online before, you’ve probably been asked this question many times.

Calculating your NPS is a piece of cake. All you need is a form tool that will enable you to create a rating scale, which should be followed by an open-ended section inviting your customers to explain why they gave that rating.

The NPS equation: (Number of Promoters – Number of Detractors) / (Number of Respondents) x (number of responses)

Why is the Net Promoter Score an important metric for your customer success?

This is an important metric for obtaining qualitative and quantitative data of your customers. It's not just about 'ticking a box and picking a number. The customer can elaborate on why they chose that score, which is particularly important if you're looking for feedback about a poor score.

The Customer Health Score

Just to clarify, this metric has nothing to do with physical or mental health. Instead, the Customer Health Score is used to assess the financial health of your customers to help you determine how their accounts will grow over time. Your customer health score will also take into account other data, such as the growth of your customers' businesses, the number of customers they have, and how many people they are hiring.

Other information might include the following:

  • How much is the customer using your products/services?
  • How much is the customer’s account growing?
  • What proportion of the product features are they using?
  • Are they happy with using your product?

How is it presented?

A Customer Health Score can be expressed as a Colour Code (happy face, neutral face, sad face), on a graded scale from 0-100, or as a percentage.

Why is the Customer Health Score an important metric for your customer success?

Developing a Customer Health Score can help you work proactively to improve your retention rate. For example, it can help you identify 'at-risk accounts' - those that are infrequently and/or inadequately used - and resolve any issues before they escalate. There's a good chance that this type of customer is unhappy with the service and may decide to close their account soon.

In contrast, a healthy customer account would be used frequently and extensively, indicating higher rates of satisfaction and a very low risk of attrition/churn.

Customer Churn Rate

This is a measurement of the rate at which your customers cease business with your company. Also known as the attrition rate, it can be worked out as the percentage of your customers who halt their subscriptions.

So, for example: If you have 1,000 customers on September 1st, but 950 on October 1st, then your Customer Churn Rate is 5%.


Why is the Customer Churn Rate an important metric for your customer success?

This is a key indicator of your overall customer satisfaction. A higher churn rate indicates that more customers are unsatisfied with your products/services and/or are looking elsewhere for their SaaS providers. It is expected that early-stage SaaS companies will have higher churn rates, particularly in their first year. This could be as high as 24%, whereas the churn rate of long-established companies shouldn't exceed 4%.

Customer satisfaction score

Also known as CSAT, the Customer Satisfaction Score helps you track how satisfied your customers are with your products/services over time. You'll probably be familiar with this kind of form. Typically, you'll be asked to rate your 'overall satisfaction with the products/services you received, using a 1 to 5 scale (1 indicating 'very unsatisfied' and 5 indicating 'very satisfied'.

Why is the Customer Satisfaction Score an important metric for your customer success?

You might think this is the same as the NPS, but there is one crucial difference: you ask your customers about their experience of your company, rather than whether they would recommend it to others. This is a quick and easy way to get an overall impression of how satisfied your customers are.

Naturally, not everyone will have the same criteria in mind when picking a score, and some will be easier or more difficult to please than others. That's why it's so invaluable to have written feedback in addition to those raw scores.

Renewal Rate

This is a metric for measuring the percentage of customers that renew their subscriptions after their contracts have expired.

To work out your Renewal Rate:

Divide the number of customers who renew by the number who were up for renewal. Multiply by 100 to convert the figure to a percentage.

Why is the Renewal Rate an important metric for your customer success?

This is a key metric for SaaS businesses because the longer your customers stay with you, the greater the incremental value you get from them.

Therefore, the higher your renewal rate, the greater the likelihood that your company's products/services are delivering the value that your customers require. This means you should be well placed to maintain a healthy revenue stream for the foreseeable future.

Hopefully, by now, you will have a better understanding of the customer success metrics that actually matter for SaaS companies.

Remember to focus on the long-term trends, rather than fixate on the day-to-day peaks and troughs that occur in any business. This will give you the deep insights you need to get a rational impression of where your business stands, where it's headed, and how your customer base will grow and change over time.

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