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I'm excited to continue on with our blog series on customer success metrics. In our last post on this topic, we covered the top four categories of customer success metrics. The topic I will cover in this blog is on the top five customer success health metrics. I will also throw in a few runner-ups. You can also read the top 5 customer success financial metrics by clicking on the link.
Customer Success Health Metrics
Customer health metrics help SaaS companies identify customers and users that are getting value from a solution and that are highly likely to renew or churn. Customer health metrics include more than product usage metrics. In fact, there are many facets that should be considered to understand the holistic health of a customer, including the first-hand perspective of the CSM (customer success manager) who interacts with the customer frequently.
Holistic Health Score Approach
A purely data driven approach may give you false-positive or false-negative signals. By taking a holistic approach at all touch points of the customer experience—not just those directly tied to product or usage, SaaS companies more accurately determine the health of their customer base and take actions that improve customer health and retention.
Top 5 Customer Success Health Metrics
1. Product Usage - DAU/MAU Ratio
Product usage measures the level of engagement the customer has with your solution. A simple signal to watch is the growth (or decline) of Daily Active Users (DAU) as a percentage of Monthly Active Users (MAU).
Every SaaS company will have a slightly different DAU/MAU baseline or target. Some SaaS solutions are such that users should login and use the product every day to be considered “active”. Others consider “active” to be users logging in once per week. Define the usage baseline for your SaaS solution and then work hard to increase that baseline over time Caution: this could also be a vanity metric so don’t rely entirely on this (or any product usage) metric as the only indicator(s) of health. It’s entirely possible that a customer could login every day but still churn Logins do not equal value.
2. Product Adoption - Stickiness
Whereas DAU/MAU ratio measures the frequency of using a SaaS solution, product adoption measures *breadth* and *depth* of using a SaaS solution.
Identify the features/feature sets that provide the most tangible value (“value features”) for your customers and deliver the outcomes they desire. Then, measure the adoption of those features/feature sets.
3. Customer Engagement
Frequency of engagement a customer has with your team across a number of touchpoints (email, phone, meetings, chat).
Customer engagement goals are largely determined by the nature of your product and customer success strategy - particularly whether your model is more low touch or more high touch. Embrace your most vocal customers as they tend to be those who genuinely want you to succeed. Beware of customers who are not engaging because that is an early warning sign of churn.
4. Customer Pulse from Customer Success Manager (CSM)
Frequent feedback from CSMs and other members of your team about customer disposition and health, usually gathered in the form of a simple Red, Yellow, Green scale.
Many leaders believe subjective feedback from the team is unreliable and inaccurate; however, it can be a very reliable and an accurate reflection of customer disposition if the following best practices are implemented: 1) set team guidelines for the frequency of Pulse updates (i.e. updated every 30 days, once per quarter, etc ); 2) create definitions for each subjective status/color (i e “what does “Red” mean for us?”); 3) ensure the team knows they aren’t judged by the status but rather the status is critical for driving insights across the business; and 4) actively leverage the Pulse insights to drive action and customer experience improvements across the business.
5. Net Promoter Score (NPS)*
An industry standard measurement of customer satisfaction, customer experience and customer loyalty. NPS simply asks how likely a customer would recommend your (company/product/solution]) to her/his friends and colleagues, and measures the likelihood on a scale between 0 (not at all likely) and 10 (extremely likely). Responses are categorized in the following three ways: (9-10) Promoters, (7-8 Passives), (0-6 Detractors). The NPS score is determined by subtracting the percentage of detractors from the percentage of promoters, resulting in a number between -100 and +100.
Although NPS has become a standard measurement across a number of industries, there is plenty of debate around the true correlation to customer retention or churn. It’s best to measure at different stages in the lifecycle (i.e. onboarding complete, halfway through the term, 90 days from renewal) and put it into context with other customer health metrics.
* Bain & Company, Inc , Fred Reichheld, and Satmetrix Systems, Inc
Top 5 Runner-Up Customer Success Health Metrics
1. Support Tickets
Support tickets submitted by the customer to ask questions, report bugs, request training and provide feedback.
Be careful not to assume that no support tickets is a positive sign for customer health. In fact, often the opposite is true because it might be a sign that your customer is not deeply engaged with your product. Identify the sweet-spot of healthy support ticket average for your customers and leverage that as your baseline. Too few support tickets is risky, and too many is also risky.
2. License Utilization Rate
The number of paid licenses (seats) actively used vs. the total number of licenses (seats) purchased.
For those SaaS companies whose pricing model is based on seat licenses, this metric can identify both at risk customers as well as potential expansion opportunities.
3. Executive Sponsor Strength
Level of engagement with your executive sponsor.
Your relationship with the executive sponsor for any given customer could make or break your long-term partnership. It’s critical to have a strong relationship with each executive sponsor. When that relationship fractures or if the executive sponsor leaves the company, consider the account high risk. You also should go high and wide with customer accounts.
4. Average Days to Onboard (ADO)
The average number of days to complete onboarding for your customers.
Dedicate a significant amount of attention to optimizing your onboarding experience as the first 90 days of a customer’s experience will likely set the trajectory for the entire relationship. Optimize first around the customer experience and the customer’s needs, and then around your resources and scaling objectives. Onboarding too quickly may not sufficiently enable a customer to succeed with your solution(s), but an onboarding experience rolling on for a year will severely impact the customer in a negative way.
5. Late Invoice Payments
The number of days a customer’s invoice is past due.
There are a number of reasons why customers don’t pay their invoices, but any customer that is more than 30 days past due for paying their invoice should be considered at risk on some level.
There you have it. The top customer success health metrics. These metrics were provided by leaders who attended the CS100 Summit for Customer Success Leaders.
Download our eBook "The Ultimate Guide to Customer Success Metrics" to get the corresponding formulas for each of the above metrics.
We will be covering to top customer success usage metrics in our next customer success metrics blog next week.
ClientSuccess Can Help You Build a Nice Weighted Health Score
Building a health score using spreadsheets or even your pre-sales CRM is difficult. We have built an industry-leading healthscore called SuccessScore. A SuccessScore is a weighted score that brings in many different health metrics like the ones mentioned above. Every SaaS client should have a SuccessScore.
Technology Health Score Example in ClientSuccess
Below you will see the six customer success health scoring metrics and the ClientSuccess SuccessScore—our customer success health scoring framework that allows you to bring in customer data from multiple customer systems to build a weighted health score. Our SuccessScore framework allows you to clearly see the individual metric groups, overall score, and trends that are calculated daily of a customer account.
If you would like to see a demo of the ClientSuccess SuccessScore health scoring framework and how it can save you time, headache, and make you grow more accounts, you can request a 30-minute demo here.
