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The Ultimate Cheat Sheet to Customer Success

Churn Metrics

Churn is one of the most vital metrics that need to be evaluated accurately by a business (especially B2B SaaS). This measure can show you the true picture of customer loss and subsequent revenue loss of your business. 

MRR (Monthly Recurring Revenue) churn

It is the percentage of monthly revenue loss that you’ve incurred from your churned customers. This can happen if your clients downgrade to an inexpensive product or a lower subscription pack.

MRR churn =  Lost MRR / MRR over the previous period

Logo ( or customer) churn

It is a vital metric used by SaaS or subscription businesses as input to the holistic health of the business. SaaS investors are more concerned with logo(customer) churn and they rely upon the measure to analyze LTV (customer lifetime value) calculation. 

Logo churn = Number of logos (customers) lost during the period / Number of logos (customers) at the beginning of the period.

Suggested Reads

How to calculate the adoption rate and its impact on customer LTV?
https://customersuccessbox.com/blog/how-to-calculate-the-adoption-rate-and-its-impact-on-customer-ltv/ 

4 customer onboarding metrics for SaaS companies
https://customersuccessbox.com/blog/4-customer-onboarding-metrics-saas-companies-should-measure/ 

The ultimate guide to Customer Retention
https://customersuccessbox.com/customer-retention-guide/

What is customer success and 7 metrics to help you do it right in your business?
https://customersuccessbox.com/blog/customer-success-metrics-to-help-do-it-right/ 

🚩 Red flags for Churn

1.Downloading/Exporting Data – This is the SaaS equivalent of your customer packing their bags and booking a taxi. They fully intend to cancel their subscription very soon. * Note: not to be confused with regular export activities which are likely part of normal usage.

2. Product Adoption Falls – If your customer stops using your product , its a sure sign they want to pack their bags. Intervene immediately to see what is bothering them.

3. No communication – If the customer stops communicating with you, its surely not a healthy sign

4.Credit card expiry – Credit card expiry is one of the most common causes of churn in SaaS. Fortunately you should be able to see this event coming, and take action to reduce churn risk by updating expiring cards before it’s too late.

5.Change of account owner – If the person using your product within your customer’s company leaves, they take with them much of the loyalty and positive impact your product has had – and perhaps their replacement doesn’t see a need for your solution at all. You’ll have to work hard to rebuild a relationship in this scenario.

Customer Experience Metrics

Net Promoter Score (NPS)

Net Promoter Score is an important metric, but do not solely rely on this for your early warning system. What can make this even more interesting will be to see NPS not just at a product level, but also at an Account level. So essentially you’re calculating NPS for each of your customers with multiple users.

NPS =  % of Promoters – % of Detractors

Promoters- (customers who score 9/10)

Detractors – (customers who score 0-6)
Net Promoter Score

Customer retention Metrics

There are plenty of customer retention metrics that are crucial for your business to keep track of.

Retention (Renewal) rate

This measure indicates the rate at which your customers have renewed their contract with you.

Customer Renewal rate = Number of customers who renewed their contract / Total number of contracts up for renewal

Gross Retention Rate (GRR)

GRR measures your ability to retain customers over a while. GRR is a representation of your success in retaining your existing customers.  

GRR = [(Revenue from renewals – Revenue lost due to churn and downgrades) / MRR at the beginning of the month]

Net Retention Rate (NRR)

NRR takes into account the total revenue earned minus any revenue churn (caused due to departing customers or customers who have downgraded) plus any revenue gained through upsells or cross-sells.

NRR = [(Revenue from renewals + Revenue from upgrades– Revenue lost due to churn and downgrades) / MRR at the beginning of the month]

Repeat Customer Rate (RCR)

It measures the percentage of customers eager to make a second purchase from you. This metric is a pretty good indicator of customer loyalty. The higher this metric is, the more inclined the customers are to make the next purchase from you.

RCR = number of returning customers / number of unique customers

Customer Acquisition Cost (CAC)

CAC is an important metric because it calculates how much you’re spending on new customers.

CAC = Total expenses to acquire customers / total number of customers acquired

Customer Lifetime Value (LTV)

LTV measures how much money is generated by a single customer. It is the customer’s lifetime value or, simply put, a measure of how much revenue a customer would spend throughout his/her tenure with the company.

LTV = Average revenue per user (ARPU) / MRR churn (or customer churn)

Customer Onboarding Metrics

Time to Value

The time it takes for your customer to obtain value from your product/service. The shorter the onboarding period, higher is the probability of customers renewing the contract.

Customer Engagement

Measure how your customers are engaging with your product. Don’t wait for the onboarding process to get over to figure out whether the customers are going to use the product or not.

Specific Data Analysis

The beauty of a customer success platform is that you can drill down on the abundance of the data that is already being monitored to gain valuable insights about the customers. Data analysis will help you understand each customer’s specific problems. Analyzing the data can tell you what all the things you need to improve.

Milestones Completed

Milestones are the stepping stones that a customer has to go through before they can achieve their goals. These are not just time-bound tasks for the customer, but also for a CSM as it is the responsibility of the CSM that when a customer completes the milestones, the product adoption should also increase.

Customer Engagement Metrics

Product Access

The ultimate goal is to measure how successful you’ve been at onboarding, getting people to use your application and how well do they actually adopt the product.

Adoption Rate =  Number of Unique Daily Logins / Total Number of Purchased Account Licenses

Features Usage

This metric is similar to the product access model, but feature usage is more about determining actionable next steps. You can measure the number of times a feature is accessed per day/week/month.

Feature Adoption Rate =  Number of Times Feature Accessed / Number of Logins Per Week

Customer Usage

This metric helps understand customer adoption by determining the time a customer spends using your product. It also allows you to determine an overview of how much time the average user spends with the product per login.

Average Time Spent in App Per Login =  Amount of Active Time Spent in App Per Week /Total Number of Logins Per Week

Customer Revenue and Cost Metrics

Average Revenue Per Account (ARPA)

It is the average amount of revenue per customer or revenue generated per account measured in a defined period of time usually in months or years. It is useful for the analysis of a company’s revenue generation and growth at a per-unit level that helps in classifying high and low revenue products.

ARPA (per month) =  Monthly recurring revenue (MRR) / Total Number of Customers

Customer Retention Cost (CRC)

It is the sum of expenses a company undertakes usually in the form of technical support to keep and cultivate its existing customers. Calculating CRC involves the addition of all the costs necessary for customer retention and engagement.

CRC =  Cost of { Customer Success Team + Renewals and/or Account Management Team + Customer Engagement and Adoption Programs + Professional Services and Training + Customer Marketing }

It can also be measured as –

Average Lifetime CRC per customer =  (CRC per customer) x (average customer lifetime)

Expansion MRR

It is used to measure the amount of additional recurring revenue obtained from existing customers through add-ons, upselling and/or cross-selling. Expansion MRR generation is valuable for long-term profits and growth as it costs less than acquiring new customers. It indicates that the customers are receiving more value and the product’s usage is increasing. A good Expansion MRR rate usually indicates that you have a negative revenue churn rate, i.e., the revenue collected from the existing customers is more than the revenue lost to the ones that churned out.

Customer Health Score

Customer health score predicts a customer’s probability of churning out from the company by providing an insight into a customer’s account. It allows the company to be proactive and take the required steps based on the Customer Health Score. It usually consists of many smaller metrics that help determine the current condition of the account.

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