Setting customer success goals is pretty straightforward, but determining which metrics to measure can be more complicated, especially for SaaS companies.
There are a ton of customer success metrics that you can measure, but some are more beneficial to track than others. Let’s talk about the six most valuable metrics that every SaaS company should be monitoring.
The 6 most valuable customer success metrics for SaaS companies (and how to calculate them)
1. Churn rate
The first SaaS customer success metric we’ll look at is the churn rate, which describes how many of your customers stop doing business with you over a certain period. Most companies want to look at their monthly churn rate.
Calculating your monthly churn rate is simple: Divide the number of customers who stopped doing business with your company in a certain month by the number of customers you had at the start of that month.
Churn rate is a crucial customer success metric, especially for SaaS companies that use subscription pricing. If your product is solving problems for your customers, your churn rate will likely be low. However, if you’re not providing the value they need, you’ll see your churn rate begin to rise as customers look elsewhere for solutions.
2. Net promoter score
To calculate your net promoter score, you’ll have to survey your customers and ask them how likely they are to recommend your products or services to other people on a scale from 0 to 10. Your NPS is the result of subtracting the percentage of detractors (everyone who answered 6 or less) from the percentage of promoters (everyone who answered 7 or higher).
To raise your NPS, encourage your customers to promote your brand by offering referral programs that give them an incentive to help bring in new users.
3. Average revenue per customer
Most SaaS companies will have both high- and low-value customers. The higher the average revenue per customer, the better. To calculate this customer success metric, simply divide your total revenue by the number of your active customers.
You can calculate this average annually, quarterly, or monthly. It’s beneficial to calculate it on different time scales to see how your average is changing over certain periods.
Many things factor into your average revenue per customer, but the most significant are your customer retention strategies and the upsells made by your sales team. Increasing your average requires effort from each department of your company, from CSRs to marketing, sales, and account managers.
4. Customer engagement
One of the most valuable customer success metrics that SaaS companies should measure is customer engagement—it shows the percentage of your users that are actually using your product.
There’s a multitude of ways to measure customer engagement: how often your users interact with your CSMs, their average active time, how often they open your app, etc. However, for SaaS companies, the most useful measurement of customer engagement is the ratio of daily users compared to monthly users. To calculate this, divide the number of your monthly active users by the number of your daily active users. A higher ratio means that more of your customers use your services regularly, which shows it’s providing them with real value.
5. Trial-to-paid conversion
Most SaaS companies offer their potential customers a free trial to prove how it can be of value to them. Trial-to-paid conversion shows you how many of those users who took a free trial end up paying for your services.
Calculating trial-to-paid conversion is as simple as dividing the number of free trials you hand out by how many users end up subscribing after their trial period. The most important thing when calculating this is excluding any subscriptions from users who didn’t take a free trial first.
To increase this customer success metric, it’s essential that your customer success and service teams get involved with your users early in their lifecycle. This involves encouraging and assisting users to go from using a free trial to purchasing a subscription.
6. Customer growth
Customer growth is one of the most important customer success metrics for any SaaS company, but it’s more difficult to measure than the other five. Customer growth is an overall measure of your company’s success, but it can be challenging to determine the exact things that are responsible for that growth.
There’s no formula to calculate this metric—it’s more about combining the other customer success metrics you measure to gain a bigger overall view of how your company is doing. The best way to measure customer growth is to keep your CSMs and CSRs in close contact to gain as many details about your customers as possible. Seeing how your customer success interactions affect all of your metrics can help you improve the way you offer your products and services, which, in turn, affects your customer growth.
Focusing on customer success
The goal of customer success is to grow your business and increase revenue, but you can only achieve that by focusing on your customers. Use these six SaaS customer success metrics to help your company reach its financial goals.