As you can probably imagine, I’m asked all the time what the best Customer Success KPIs are.
What metrics should you use to know if your Customer Success initiative is working.
Here’s the deal. I’m not an analyst… I’m a consultant.
Companies hire me to help them rapidly acquire good-fit customers, keep those customers longer, get them to buy more over that extended lifetime, and get those customers to advocate for them, too.
That’s called Customer Success-driven Growth.
The reality is, though, that every company is at a different stage as a company, with their Customer Success initiative, etc. so wha the “best” metric for one company at one point may not be the best metric for another company (or even the same company) at a different time.
Let’s dig into this, but first I have to address something serious…
Customer Success is NOT a Metric
Recently I saw an article that referred to “Customer Success” as a metric.
Umm… Customer Success is NOT a metric.
For the person who wrote that,… wow… what a fantastic way to diminish the true value of Customer Success. Not sure what they’re trying to do, but that’s garbage.
I really hope this new positioning doesn’t catch on, but it might; a lot of people seem to want to diminish the value of this incredibly important business function.
But I digress.
I look at Customer Success first as an Operating Philosophy… and when operationalized through Customer Success Management, this philosophy becomes a powerful Growth Engine.
If you want a way to ensure you acquire the best customers, keep them longer, have them buy more over that extended lifetime, and to bring in other customers through advocacy – aka Exponential Growth – you cannot look at Customer Success simply as a metric.
Metrics are very important – as I’ll cover below – but they are just the things you look at to ensure Customer Success – and your other valuable business initiatives – are working.
So let’s talk about…
Reality-based Key Performance Indicators
You need to start by determining the Performance upon which you are looking for Key Indicators.
When looking for KPIs to focus on, I take the company’s goals – sometimes even short-term goals, like cash flow or churn – and operationalize around those.
I covered this in a TON of detail in my post on Customer Success Goals: Cohorts, Metrics, and Prioritization.
The reality on the ground often precludes you from focusing on “best practices” and rather on what’s most important now.
But when pressed for the most important Customer Success KPIs are, here’s what I say.
Customer Success KPI Best Practices
In a perfect world, there must be a financial metric, but to ensure we don’t fall into the Account Management trap, that metric should be sanity checked by a customer-centric metric.
That customer-centric metric should be Health Score, Success Vector, etc.
The financial metric should be Net Revenue Retention or NRR (also called Net Dollar Retention or NDR for those with a Dollar-centric world-view I suppose).
NRR is simple (in theory).
If you start a month off at $1k in revenue from existing customers, end the month at $1.5k from those customers, you had an NRR of 150%.
But it’s “net” of any revenue you lost in that month when customers left or stayed but paid less for the privilege (discounts, down-sells, etc.).
And it’s “net” of any revenue you gained through up- or cross-sells.
> 100% NRR and you could turn off new customer acquisition and not just continue to exist, but grow. In theory.
< 100% NRR and your company is shrinking. In reality.
The former is preferable.
About Lincoln Murphy
