10 customer success metrics that deserve your attention

Customer success metrics measure the success of your efforts aimed at solving customer pain points. They indicate the company's health, growth, and productivity.

By focusing on customer success instead of sales goals, the company can achieve better results, improve satisfaction, drive retention, and turn customers into brand ambassadors.

While many different metrics for customer success exist, there are "must-haves" and "nice-to-haves." Let's take a closer look at the key metrics a business needs to consider. 

To understand customer success metrics, it's important to define customer success. Customer success is a strategy focusing on solving the customer's pain points by using the brand's products or services.

When a person engages with the company, their goal isn't to buy something. The goal is to solve a problem with a product they buy. For example, if a person searches for the "best kitchen mop," their main pain point isn't the absence of a mop. They try to solve a dirty floor problem.

Customer success metrics measure how well your company manages to contribute to the customer's success. They can provide vital information for changing or polishing your customer service, sales, and marketing strategies while improving client relationships.

Businesses use customer success metrics to analyze their performance. If customers succeed with your products and services, they are likely to continue generating revenue for your company.

The key benefit of analyzing customer success metrics is the vast amount of information you receive. You can use this data to adjust product development plans, make educated decisions about your business strategy, design a more customer-centric workforce, and much more.

You don't need to analyze all customer success metrics to draw educated conclusions about your business operations. However, the more data you can gather, the easier it can be to make quick and effective adjustments.

1. Customer churn (attrition) rate

For the sake of customer success metrics, customer churn rate and customer attrition rate are the same things. This rate demonstrates the percentage of customers who stop using your product and leave the brand.

A customer ends their relationship with you when they:

• Unsubscribe from the product

• Don't purchase anything else for a certain period (you set the time frame depending on your product, services, and industry)

• Unsubscribe from your email list or delete your app

Formula: (number of churned customers) / (number of existing customers at the start of the time period) x 100 = customer churn rate

For example, at the beginning of the month, you had 100 customers. By the end of the month, 10 of them had left. Your monthly churn rate is 10/100x100 = 10%.

You can review and improve your customer retention strategies by tracking your customer churn rate.

Since the odds of selling to the current customer are about four times higher than to a new customer, decreasing the attrition rate could significantly impact your company's bottom line.

What is a good customer churn rate?

Each business has its own "good" customer churn rate. Usually, it's between 2% and 8%. However, in some industries (e.g., financial or cable TV), it can reach 25%. While lower is always better, struggling to achieve a 2% attrition rate in an industry where 20% is normal can be counterproductive.

2. Customer lifetime value

Customer lifetime value (LTV) measures how much profit you can expect from a customer while they stay with your brand. This metric can describe the value of the customer and tell you how much retention efforts they are worth.

By estimating LTV, you can make important decisions about the following:

• Marketing budget

• Resources

• Profitability

• Revenue forecasting

This can be an essential metric for businesses that work on subscription-based models, such as SaaS. It's also possible to evaluate LTV over time. If it's going down, you need to reevaluate your approach to customer success and satisfaction.

You can estimate customer LTV in several different ways:

Formula 1 (for subscription models): (average monthly amount expected from customers)/(churn rate) = LTV

Formula 2 (for non-subscription models): (average purchase value) x (average purchase frequency rate) x (average time of customer engagement) = LTV

There are many ways to increase LTV. Some of them are as straightforward as upselling products or services. Others involve more work on personalization.

What is a good customer lifetime value?

A good customer lifetime value should exceed your customer acquisition cost (CAC). For different companies, the relationship between LTV and CAC can be different. A good rule of thumb is to achieve an LTV that's at least three times greater than CAC.

3. Customer acquisition cost

While customer acquisition cost doesn't measure customer success, this metric can help you evaluate your progress. For example, it can help you understand how good your customer's lifetime value is.

CAC measures your spending on bringing a new customer to your doorstep. You can use it to:

• Evaluate your sales and marketing expenses and figure out what can be done to decrease them

• Analyze marketing return on investment

• Improve profit margin

Formula: (sales and marketing expenses over a measured period)/ (number of new customers over a measured period) = CAC

What is a good CAC?

Evaluating the perfect CAC for one particular business can be hard. You can compare your industry's benchmarks or analyze CAC in relation to LTV. A good CAC to LTV ratio is 1:3. 

4. Customer retention rate

The cost of attracting new customers is usually much higher than retaining existing ones. Therefore, the ability of a business to keep its customers over time is crucial. Customer retention rate (CRR) will help you measure customer loyalty and gauge your overall success.

Formula: (customers at the end of the period - new customers)/customers at the beginning of the period = CRR

What is a good customer retention rate?

A good customer retention rate is around 85%. However, this metric varies by industry. For example, in professional services, the CRR is 84%, while in hospitality and travel, it’s only 55%. 

5. Customer retention cost

You can measure customer retention costs to understand if your customer success efforts are sufficient. Customer retention cost (CRC) evaluates how much money you spend on customer retention. It also measures and compares these expenses to the total number of customers.

Measuring CRC can help you:

• Optimize customer retention programs

• Improve retention costs

• Understand the ROI of your retention tactics

• Identify LTV

Formula: (total cost of retention programs)/(active customers during the chosen period) = CRC

Since customer retention is on the agenda of all businesses across all industries, some companies tend to overspend. Measuring CRC can help your company make smart investments in customer retention.

What is a good customer retention cost?

Each company has its own good customer retention cost. To figure out whether yours is satisfactory, you need to evaluate CAC and LTV. If your CRC coupled with CAC is higher than LTV, you may need to adjust your retention campaign.

6. Customer health score

A customer health score measures how successful the customer is with the company. It can help you understand whether they plan to stay and increase their LTV or leave and contribute to your churn rate.

To measure customer health score, you can evaluate the following:

• Customer feedback

• Purchase history

• Customer support tickets

A healthy customer is a customer who doesn't want to leave your company. They have the potential to provide a high LTV. Once you start tracking this metric, you can evaluate your customer success efforts and:

• Reduce churn rates

• Increase the number of sales

• Improve your company's reputation

• Find your biggest promoters and encourage them to become brand ambassadors

You can also identify which customers are at the highest risk of leaving the company. Once the score becomes unhealthy, your support team needs to take proactive steps.

To measure customer health, you need to set up specific indicators. They can be different for each company. For example, you can assign a score to how frequently a customer uses an app to purchase something or subtract a point each time a customer puts in a support ticket.

What is a good customer health score?

Since each company sets up a unique scoring system to evaluate customer health, there isn't a universally accepted "good" customer health score.

7. Customer satisfaction score

Customer satisfaction score (CSAT) is a transactional metric that measures customer experience when they use products and services and interact with the customer support team. You can use CSAT to:

• Improve customer service efforts

• Work on customer retention

• Improve your product offers

• Work on personalization tactics

The easiest way to measure CSAT is to ask customers how satisfied they are with their experience. You can do it by carrying out a survey.

For example, you send out a questionnaire with one open-ended question "How satisfied or not satisfied are you with the product?"

Formula: (number of positive responses)/ (number of collected responses) x 100%

For example, if you received 100 responses and 70 of them were positive, your CSAT score is 70%.

For CSAT scores to be helpful, you must run quick surveys at different stages of the customer's journey with your company. For example, you can implement it after interacting with customer service representatives, before contract renewal, or 24 hours after purchase.

What is a good customer satisfaction score?

The satisfactory customer satisfaction score can vary depending on your industry. A good CSAT is usually between 75% and 85%. Since it's impossible to satisfy 100% of customers (even though it doesn't hurt to try), getting anything above 90% is usually tough.

8. Monthly recurring revenue

Monthly recurring revenue (MRR) can help you determine your customers' success over time. It demonstrates the amount of money they spend on your products and services during a given month. You can compare MRR over time to determine whether customers succeed after using your products.

Formula: (monthly average revenue per customer) x (number of monthly active customers)  = MRR

For example, you have 10 subscribers on a $100/month plan. The MRR is (100x10) = $10,000.

Businesses operating on a subscription model can benefit from this metric the most. You can take advantage of several types of MRR:

• New MRR, which refers to additional revenue you receive from new customers in one month

• Upgrade MRR, which refers to an additional revenue you receive from upgrades in one month

• Expansion MRR, which refers to additional revenue from existing customers in one month compared to the previous month

You can take advantage of MRR to change your customer retention tactics. You can also review upselling and cross-selling strategies.

What is a good MRR?

When evaluating MRR, you need to calculate the MRR growth rate.

Formula: (net MRR for previous period – net MRR for current period)/(net MRR for previous period)x100

A good MRR growth rate is between 10% and 20%.

9. Customer effort score

Customer effort score (CES) measures how easy it is for customers to succeed with your product or service. It shows how much effort a customer has to exert to take advantage of a product or resolve an issue with it.

You can use this score to understand the following:

• What changes to make to your customer service efforts

• How to make products and services more accessible

• If you need to reduce the learning curve of your products

Formula: (number of positive responses)/(total number of responses) = CES

By reducing customer effort scores, you can improve customer satisfaction and loyalty.

To measure CES, you would need to conduct a survey. It would ask customers to react to a statement, such as "It was easy to reach a customer service representative," with a number on a scale from 1 to 10—1 is "strongly disagree," and 10 is "completely agree."

What is a good customer effort score?

A good customer effort score depends on your industry, audience size, and sales goals. The goal is always to improve CES and see how it compares to other metrics, for example, the churn rate.

10. Net promoter score

The customer may be happy with the product but not fully satisfied with its contribution to solving their pain point. Understanding the difference can be hard. A seemingly satisfied customer may not be happy enough to come back or recommend your brand to a friend.

A simple measure of customer satisfaction is by analyzing the net promoter score (NPS). All you need to do is ask the customer how likely they are to recommend your product or company to someone else.

To measure NPS, you must conduct a survey seven to 30 days after the customer uses your products and services. In the survey, you ask the customer how likely they are to recommend your brand to others on a scale from 1 to 10.

• 0–6 are detractors

• 7–8 are passives

• 9–10 are promoters

To calculate NPS, you subtract the percentage of detractors from the percentage of promoters.

Formula: (percentage of promoters) – (percentage of detractors) = NPS

Next, you ask the customer to explain why they replied the way they did. This is the most important part of the survey since it provides highly valuable feedback for the entire team.

What is a good net promoter score?

This depends on many factors, including your industry. Generally, an NPS higher than 0 is satisfactory. A score above 50 is excellent. Achieving anything higher than 70 is impressive and rare.

Customer success metrics allow you to measure the success of your products and services as well as sales and marketing efforts. You can make timely adjustments to your strategy, retain customers, and cut costs by monitoring the above must-have metrics.

Monitoring metrics is just the beginning. The next step is analyzing them in the context of your business operations. With the right approach to analytics, you can leverage customer success metrics to improve your company's bottom line.