Everything in life is relative—or so they say. When it comes to success, relativity definitely comes into play, as what is considered successful for one project, may not be applicable at all to another. When it comes to customer success, however, metrics really do remove most notions of relativity, with their data-driven approach and deliverables of measurable results.
The removal of relativity is a good thing when it comes to customer success, especially for agencies. Customer success is extremely important as it’s all about the communication strategies and business processes used that perpetually showcase your agency’s value to your customers. In short, it’s a great opportunity to get your agency ahead of the pack—and keep it there.
We’ve singled out the top customer success metrics behind a great customer experience so you can implement them in your agency and see the world of difference they bring. Each one has its own merit, but when used together they form a powerhouse that will propel your business forward.
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Before we dive deeper into each one, let’s get a definition out of the way.
What is the difference between customer service and customer success?
While both customer service and customer success are important in any business, they are not interchangeable. It is important to differentiate between the two, with the former being reactive, and the latter being proactive.
Customer service offers solutions as they arise, usually in response to customer feedback or criticism. The focus is then to resolve the issues, while providing customers with a pleasant and seamless experience. The end goal is a satisfied customer who despite their initial complaint, has an improved outlook on your business.
Customer success, on the other hand, is less focused on complaint resolution, and more focused on helping customers achieve their business goals. The process involves utilizing and analyzing customer data, and implementing the results to optimize the value your customers experience via your services or products. We know how important this is especially for agencies as a good relationship is everything.
Customer success metrics to track
Now that we have distinguished customer success from customer service, let’s look at the top six customer success metrics (CSM) that are invaluable tools for any agency, and break them down one-by-one:
- Net promoter score
- Customer lifetime value
- Churn rate
- Resolution time
- Customer satisfaction score
- Number of referrals
Net promoter score
The net promoter score (NPS) is a customer success metric that essentially measures a customer’s loyalty to your company in the form of a single survey question:
How likely are you to recommend our company (or specific service or product) to a friend or colleague?
It’s a simple yet mighty question, and since its inception 18 years ago, it’s used by at least two-thirds of the Fortune 1000. Former IBM CMO Michelle Peluso referred to NPS as “more than a metric,” likening it to a religion.
So how exactly does this customer success metric work? The survey is sent out to customers, with respondents having the option to rate their answer from 0-10, with 0 being the lowest, and 10 being the highest. NPS categorizes the ratings in three separate groups, as follows:
- Detractors (0-6): Unsatisfied customers who can negatively impact your brand by ending their relationship with it and potentially spreading negative reviews/impressions to others.
- Passives (7-8): Neutral customers who may not be particularly loyal to your company, and can leave at any opportune moment, such as a competitor offering them something more.
- Promoters (9-10): Your company’s cheerleaders, both loyal and enthusiastic, who will continue working with you and recommend your company to others.
The net promoter score is then calculated by subtracting the percentage of detractors from the percentage of promoters. So if your results show you 60% promoters, 30% passives, and 10% detractors, the NPS would be:
60% – 10% = 50% (NPS)
The recommendation-centric focus in the question is meant to gauge your customer loyalty, and the higher the number, the stronger that loyalty. A score over 50 is considered to be excellent, and above 80 is “world-class”. One of the ways you can really make this metric work for you is to add an automatic follow-up question immediately after the initial one, regardless of what number is selected. This question—keeping it in the same spirit of simplicity, should be:
Why did you choose that score?
This small addition can offer you a lot of insight, and an action plan to immediately work on turning the detractors and passives into promoters, or at the very least, shift the detractors into the passive category. You can also understand what makes a promoter so loyal and enthusiastic about your company, and really focus on doing more of that. When you improve on the potential issues respondents noted, you can also follow up with that progress, letting them know action has been taken based on their feedback.
The main catch of an NPS is you need your customers to actually respond to it for it to be useful. If you find you aren’t getting the traction you’d hoped for, make sure you are personalizing the request, and you can always offer some sort of incentive to those who fill it out.
Customer lifetime value
The next customer success metric to consider is customer lifetime value (CLV), the expected value or income a business can expect to generate from a customer for the entirety of the business relationship.
This is an important metric to take into account for a number of reasons. First, it demonstrates whether your pricing strategy is effective in reducing costs and maximizing profit as you look into your business’ forecast. The numbers all matter in and of themselves, and by calculating the CLV, you also have a convenient breakdown to refer to when making financial decisions.
It also allows you to understand what types of marketing activities and client acquisition costs are worth pursuing, since if your CLV is high, you can certainly spend more to acquire more customers. With agencies offering different tiers, CLV enables your marketing team to make better decisions on which tier (or type of customer) to spend less time and money on. It can also help you retain customers, as once you understand the value a customer brings to your company, you can take a proactive approach in making them feel as valued in turn.
So how exactly do you calculate the CLV? You’ll need a few things to get started:
- Average purchase value: You can calculate this value by dividing your agency’s total revenue in a specific time period by the number of purchases in that same period.
- Average purchase frequency rate: This is the average number of orders of each customer.
- Average customer lifespan: Calculate this number by finding the average number of years a business relationship with a customer lasts.
Next, multiple the average purchase value and average purchase frequency rate to get your customer value:
average purchase value x average purchase frequency rate = customer value
Finally, multiply the customer value and customer lifespan to get the customer lifetime value:
customer value x average customer lifespan = customer lifetime value
And there you have it! This number, as mentioned above, is important for a variety of reasons, and aiming to increase it should definitely be part of your company’s goals.
Did you know? CLV is also roughly the inverse of the churn rate (our next metric). For example, if your churn rate is 2%, then the CLV is 1 ÷ 0.02 = 50 months.
There are a few marketing strategies you can employ to increase your CLV:
- Increase average purchase value: Upsell and cross-sell! When a customer is checking out, or selects an item on your website, make sure to let them know the benefits of the higher tier options, similar offers, or other services and products that complement the one they have chosen. Bundles are a great way to upsell relevant products as well.
- Focus on your top tier customer: Categorizing customers into segments to calculate the CLV is important especially for agencies who have different tiers. Once you know which tier has the highest CLV, you can fine tune your marketing approach to specifically target and attract them.
- Offer incentives for yearly subscriptions: If you’re a business that offers any sort of subscription, create incentives for customers to choose the yearly option, in order to increase the average customer lifespan. You can offer a discounted rate, additional services, or both.
- Improve your onboarding process: Every customer is unique, and your onboarding process should reflect that by being as personalized as possible. Here you can establish a great start to the business relationship, create a lasting good impression, and really get the attention of your customers by introducing them to your products and services thoroughly and interactively.
- Build relationships: Make sure to reach out and build relationships with all customers, getting to know them. This becomes a mutually beneficial relationship, as the better you know your customers, the better you understand their needs and what you can offer them, creating a win-win situation.
- Implement a referral program: A great way to increase your CLV is getting referred customers. Existing customers will recommend your business to a friend or colleague they know would be interested, and that new customer will already come to you with trust and a relatively high level of awareness of your products and services. This makes for a great new client, improving your CLV. Make sure you have a good and beneficial referral program set in place to reward referrals that lead to customer acquisition.
The next metric to consider is your company’s churn rate. This is the percentage of customers that stop being customers over a certain period of time. The importance of this customer success metric certainly seems self-explanatory, as any company’s goal should always be to retain their existing client base.
The lower your customer churn rate is, the higher your customer satisfaction and even loyalty is. On the flipside, when your churn rate is high, it can lead to revenue loss and a domino effect if it is not remedied. It’s always easier to retain existing customers than gain new ones, so it is imperative to do what you can to keep your customers out of the churn rate statistics.
So how do you calculate this important metric? The formula is as follows:
lost customers of a given time period ÷ total customers of same time period x 100
So if in the beginning of the year you had 100 customers and lost 5 by the end of it, your churn rate would be:
5 ÷ 100 = 0.05 x 100 = 5%
While the numbers will differ slightly, a generally accepted churn rate is anything less than 10% yearly, ideally keeping it less than 7%.
One thing to keep in mind when looking at your churn rate—especially if it’s high, is what your client’s goals and needs are. Is it a one-time project or a life-long collaboration with your business? If it’s the former, take that into account when calculating your churn rate, and make the decision on how much money your business should spend on one-time customers accordingly. For the customers who had the potential to be long-term customers but left earlier than anticipated, finding out why can possibly bring them back, and/or help troubleshoot issues for future clients, avoiding the domino effect mentioned earlier.
To keep your churn rate at the sweet spot of less than 10%, consider the following:
- Calculating churn rates monthly: When it comes to losing customers, you want to nip the problem right in the bud—the sooner the better. Aim to conduct churn rate calculations monthly so you can keep track of the numbers and take action immediately. If you wait one year to start calculating churn rates, it may be too late to bring any customers who left back, and the unresolved issues can already have an impact on your existing customers.
- Understand why a customer wants to leave: When a customer wants to end their relationship with your business, the why is very important. The decision may not be final as it seems, and could be based on a misunderstanding or just one not-so-great experience. Setting up a system where a client contacts customer service to cancel a service or subscription is a good way to find out the ‘why’ behind their decision—and potentially reverse it.
- Surveying customers who left: Not every customer who leaves your business may want to fill out an exit survey, however, even if only a few do, it can provide important insight. Have a process ready to send personalized and thoughtful emails to customers that includes a simple questionnaire or survey to gain feedback. The more personalized the better, especially as offering an incentive like a discount to a subscription may not be effective here if the customer is no longer interested in returning.
- Track patterns: Are customers leaving around a certain time? What happened in that timeframe that could impact their business? Was it before a scheduled upgrade, or perhaps simply a matter of too many (or not enough) emails? If the customer had engaged with a customer service representative right before leaving, that could also provide insight into why they left. Doing this monthly (point #1) will lighten the workload of your team, and make it easier to track important dates.
The next customer success metric, resolution time or time to resolution, can directly affect the previous one of churn rate. Resolution time refers to how quickly it takes for your business—specifically your customer care team, to resolve a customer issue. Note that this is different from response time, which is the amount of time it takes for a customer to receive a response.
Once a client lets a team member know that there is an issue, the time between that moment and getting it resolved can be the difference between retaining or losing a customer. Letting your customers know you value their time and prioritize them is an important step in gaining their trust and loyalty, which in turn reduces your churn rate, and increases your net promoter score.
How can you determine your company’s average resolution time? Simply calculate the following:
total time of all resolved conversations ÷ number of resolved requests
While the equation is pretty straightforward, it’s important to take a few factors into account that could negatively affect your average resolution time. For example, if an issue took a long time to get resolved, was it because of a difference in time zones between your customer care team and the client? In this example, it’s important to note that a customer care agent could be waiting for a response, rather than being inactive. Another factor is not separating simpler tasks from the more complex ones, as the average resolution time in a general sense may appear positive, but could be glossing over a slow resolution time for simpler tasks. In this case, it is a good idea to separate resolution averages based on their complexity.
Alternatively, when there are lots of outliers such as the ones listed above, calculating the median resolution time instead can offer a more accurate estimate as the above factors can skew the average.
The resolution time can also provide you insight about the efficiency of your processes and how they can be better improved. Some things to consider if you (and your customers) are not happy with the resolution times:
- Efficiency: Are similar requests coming in frequently? Consider having the top requests and their solutions available in a convenient document for team members to access for faster resolution times.
- Set up proper workflows: If resolution times are lagging due to team members needing to troubleshoot in areas they are not well versed in, make sure they know who to contact for assistance to get the ball rolling faster.
- Communication with clients: Some issues are more complex and need more attention and time. That’s okay. Just keep your customers in the loop with constant communication, letting them know the status of their issue, and what is being done for them to get it resolved. Communication can also be automated here, triggered to be sent out when a ticket has not been resolved in a reasonable amount of time. Your customers will appreciate it!
- Follow up with clients: Once an issue has been resolved, follow up with clients to get feedback, and improve on any criticism to keep the relationship in a good place.
- Trainings for customer service representatives: Introductory trainings for your customer service staff are just the starting point. As your business grows and products and services evolve, so should the knowledge of your representatives. Whenever there is a new change or update, make sure trainings are conducted to keep communication with customers quick, helpful and smooth.
Customer satisfaction score
Customer satisfaction score (CSAT) is another customer success metric that indicates customer loyalty. This metric is used to determine how satisfied a customer is with a specific product, service, or experience.
A customer satisfaction score usually takes the form of a short survey with a rating scale that asks respondents to rate their satisfaction level with a specific product, service, or experience with your business. In the section on resolution time above, following up with clients for feedback would be an example of conducting a customer satisfaction survey specifically about a service—in this case resolution.
For this survey, you would choose the range of a rating scale—1 to 5, for example, with 1 being very unsatisfied and 5 being very satisfied. The CSAT would then be calculated by collecting the amount of positive responses (4 and 5) and using that in the equation below:
number of happy customers ÷ by the total number of responses x 100
The higher the CSAT percentage, the happier your customers. There are a number of different ways to use customer satisfaction surveys, including:
- New product/service launches: Get feedback from customers as soon as they use a new product or try a new service, showing them how valuable their input is.
- Point of interaction: A survey following the point of interaction between a customer and your team can yield a timely and reliable response and offer important insight.
- Track different periods: Another way to utilize customer satisfaction surveys is to conduct them at different periods of time for a customer. You can have one ready at the beginning to gauge the ease of onboarding, and one a few months later to see if there are any dips in satisfaction—and improve on that.
Number of customer referrals
The final customer success metric we will be looking at is the number of customer referrals. This metric is essentially the follow through of promoters from our first customer success metric (net promoter score)—the ones who stated they would recommend your business to others.
Satisfied customers share the love with others via recommendations, which are the organic referrals every business wants. These referrals are extremely beneficial to your business, for a variety of reasons. First, people are more likely to sign up with a business or buy a product when the recommendation is coming from someone they trust. Case in point?
“Did you know that 80% of boomers trust in the companies they get referred to? And that this number drastically increases to 85% when it comes to millennials? Moreover, 28% of millennials say they won’t even use a service or buy a product that their friends haven’t used before!”
Second, the referring customer has a unique position of being very satisfied with your service (promoter level), and knowing the potential new customer (the referral) better than your marketing department does. This intimate level of advertising can lead to more loyal customers, ready to promote your business as well. Another advantage is that when the referring customer is recommending your business to someone they know, they will most likely explain how the product or service works, eliminating the introductory period and getting your new customer on board faster—with fewer hitches. Talk about more gain for less work!
Allow the results from the net promoter score to set the wheels in motion for customer referrals. Those who responded 9 or 10, categorizing themselves as promoters, have quite literally said they would recommend your business to a friend or colleague. Saying something and doing something are two completely different things, but they should still all be considered leads for acquiring referral-based customers. Follow up after receiving the results of your NPS, and make sure to make the offer enticing: include some type of reward for referrals to not only thank the customer for making the recommendation, but also making sure they have another reason to follow through with it.
To measure this customer success metric, you can:
- Use referral codes: You can provide the promoters from your NPS with a unique referral code when recommending your business to others, so you can track which new customers came as a result of a referral, and more specifically, who made the referral.
- Ask the customer: It is commonplace to ask a new customer how they heard about your company. You can include this question as a popup for a new site visit, during the checkout process, or as a follow up email after the first purchase.
We’ve reached the end of our list for the top six customer success metrics that you need to utilize in your business ASAP. While different, each of these metrics are intertwined with each other for the common goals of ensuring a great customer experience, and improving your overall business based on real feedback. Make sure to use every one of these customer success metrics wisely and make the necessary changes based on the information you learn. This data-driven approach will set your business apart from the competition, resulting in an even more loyal customer base—aka promoters for your agency!
- What are customer success tools?
Customer success tools are a source of customer information. Some of the features these tools typically include are customer profiles, product/service usage tracking, customer engagement and experience insights, and more. Companies can offer these tools as part of a platform to keep all customer information in a convenient one-stop accessible location.
- What is the difference between account management and customer success?
An account manager’s main aim is to get renewals, upsells, and cross-sells, with their focus on these factors being beneficial to the business. A customer success manager, on the other hand, usually has success metrics that are intertwined with those of their customers. For the latter, their focus is on helping their clients succeed in their goals using the products and services of the business.
- Is customer success part of sales?
Customer success and sales do go hand in hand, but are not the same as they have key differences. Sales focuses more on converting a potential customer to a customer (from pre-sale to sale), whereas customer success is focused on that customer’s engagement, experience, and continued satisfaction post-sale. Sales will “get” the customer, whereas customer success ensures that the same customer becomes a promoter for the business rather than part of the churn rate.
- How does customer success help sales?
Customer success is an integral part of renewals, upsells, and referrals—all of which directly impact sales. Customer success teams troubleshoot customer experiences, and provide that data to sales, which helps with renewals and upsells. Satisfied customers can also become promoters and recommend the business to friends or colleagues, resulting in more sales.
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