Customer Success is a Growth Engine. Investing in Customer Success-driven Growth is an efficient way to drive revenue and company valuation, and we need a metric that is designed to measure that growth. Introducing, Success Vector.
Customer Health Score, historically the Key Performance Indicator (KPI) of Customer Success, is too much of a moment-in-time snapshot; a lagging indicator. We need something more forward-looking.
More of a Key Success Indicator – KSI – than a simple KPI.
So, looking at Customer Success as the growth engine it is, we need a KSI that we can use to ensure we’re on track to meet the growth potential Customer Success will unlock within our existing customer base.
The Key to Real Predictable Revenue
Every company wants predictable revenue, but most turn to new business Sales to get it. They create a goal they want to hit – essentially a made-up number the CEO or Board wants to see – and then they try to figure out how to hit that number.
The “predictable” part of all of this comes down to ensuring your pipeline is loaded with (at least) 5x more leads than your target goal so you can hit it with a 20% close rate. Math!
While that may be “predictable” in a spreadsheet, in reality, hitting that goal requires a lot of work, coordination, effort, hustle, incentives, and luck. Yet, historically, this is where companies look for new revenue by default.
That’s changing as companies realize it doesn’t get more predictable than being able to look at your existing customers, say these 100 customers will reach this Success Milestone in the next month, that milestone has a logical upsell associated with it, the value of that upsell is $1000/ARR, and the percentage of customers that should take the upsell based on their Success Vector is 90%.
That means, for that cohort, we’ll add $90k/ARR next month. Then, by combining the expansion value of all of the milestone cohorts, we can give an accurate prediction of the revenue we’ll generate from our existing customers.
That’s actual, real predictable revenue.
Historically, Customer Health Score was a Key Performance Indicator (KPI) for Customer Success, but it wasn’t giving us what we need in this new world of Customer Success-driven Growth, so I went into my lab (probably a Starbucks or on an airplane) and tore the idea of a Customer Health Score apart with the sole purpose of giving us a real way to see not just what’s happening with our customers today, but where do we think they’re going in the future.
And Success Vector was born.
Until now, only my clients knew about Success Vector as a Customer Success Key Success Indicator (KSI)… it’s time to let everyone in on it.
Let’s dig into Success Vector, shall we?