Sometimes it feels like there is an overwhelming number of metrics you should be tracking for your SaaS startup. They all have their place, but customer success metrics provide some of the most actionable insights for building successful SaaS products.
Revenue, churn, engagement, and satisfaction metrics help quantify customer behaviors that tell you what to prioritize and improve upon in order to monitor the health of your customer base and build a strong foundation that enables you to scale your SaaS. Depending on your growth stage, some metrics can be more useful than others.
Below, you'll learn about specific customer success metrics that can optimize your growth and success at different growth stages.
Customer Success Metrics for Early-Stage SaaS Startups
As you begin to build out your product, listening to your customers and responding to feedback is critical for finding and validating your product-market fit. There are several customer acquisition, retention, and engagement metrics that can help guide your journey.
Active or Engaged Users
While some companies consider these vanity metrics, DAU (daily active users) and MAU (monthly active users) continue to be popular customer success metrics as they are helpful in terms of looking at your customer engagement levels.
The state of a customer being “active” with a product is subjective and measured differently by different companies. It might be as simple as a customer logging in, or it might be that they used their login details with your company to access a third party app — much like when we use our Facebook details to log in to another site. Facebook counts anybody who logs in like this as an “active” user, even if they don’t go near the actual Facebook platform.
Once you’ve decided what an active user looks like for your business you can calculate your DAU and MAU, and then measure the DAU/MAU ratio. This is a metric that gives you a sense of the “stickiness” of your product for a customer. It’s a simple calculation, but one that can show you at a glance how successful your product is for customers.
Paul Graham, VC and co-founder of Y Combinator, looks at active users as a direct growth indicator, stating:
“The best thing to measure the growth rate of is revenue. The next best, for startups that aren’t charging initially, is active users. That’s a reasonable proxy for revenue growth because whenever the startup does start trying to make money, their revenues will probably be a constant multiple of active users”.
Time to Value
The faster your customers realize the value of your product, the more likely they are to remain a customer and even expand their usage. The longer it takes for customers to see your product's value — if they ever get there — the more likely you are to see them churn out.
Time to value (TTV) measures the time it takes for a new customer to reach their first "aha" moment. It shows the quality of your customer's experience at the beginning of their relationship with your product. When you reduce TTV, you're likely to improve long-term customer retention.
To start tracking TTV, you'll need to dig deep into your product and processes to dissect customer onboarding and define the critical point or specific milestones that indicate a customer has realized your product's value. The time it takes a new customer to reach that point on average is your TTV.
It's not the easiest metric to track, but there are multiple ways you can measure TTV, including:
Time to complete onboarding: An efficient and effective customer onboarding process encourages new user adoption.
Feature adoption: How long it takes on average for new customers to start using a specific feature or features.
Time-to-first-value: How long it takes for new users to start using your platform regularly on average.
Customer feedback: Surveying new customers can help you identify their TTV, though your data will be influenced by their recollection and perception.
Customer Onboarding Success Rate
A smooth onboarding process is crucial for customer satisfaction and long-term success, just like a poor onboarding experience can lead to early churn. Easier to measure than TTV but potentially less informative, your customer onboarding success rate tells you the percentage of new customers that complete onboarding and start using your product.
To get your customer success onboarding rate, you'll track the percentage of new customers who complete onboarding milestones, such as online training completion, account setup or starting to use the product. Tracking onboarding success rate trends over time will help you identify onboarding challenges and make improvements where needed.
Growth Stage Customer Success Metrics
As your business begins to scale and grow more aggressively, it's important to prioritize and maximize retention and revenue from existing customers. The following often become your most important customer success metrics at this stage.
Customer Churn Rate (CCR)
A standard growth metrics for SaaS startups, your customer churn rate tracks the percentage of customers who stopped using your product in a given time period. This could mean they canceled their subscription or failed to renew it.
Customer churn helps you understand how well you’re meeting your customers' needs and identify any misalignment early. High customer churn indicates customers are unhappy with your product for one reason or another. It's also a fairly straightforward and simple calculation:
Customer Churn = Number of existing customers who left during a given period ÷ Total customers at the start of that period
Let’s say you started the month with 1,000 customers, but by the end of the month you had lost 40 customers. This would put your churn rate at 4%. This doesn’t feel like a lot, but your aim is to get your churn as close to 0% as possible. If those 40 lost customers had accounts worth $50 each, your loss during that month is going to be $2,000.
Making your customers (and customer retention) a top priority is critical for reducing your customer churn rate, avoiding lost income, and spending more money trying to acquire new customers to replace the ones that churned out. Even a 5% increase in customer retention can increase your profit by around 25%.
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Expansion Revenue
Jason Lemkin of SaaStr stated, “customer success is where 90% of the revenue is” for SaaS businesses. You not only want to look at how well you're retaining customer, but also how much new revenue your generating from existing accounts.
If your customers find value in working with you and using your product, there’s a good chance they’ll be interested in premium features, special upsell offers and other add-ons. You should be tracking this new, expansion revenue monthly.
Expansion MRR includes new recurring revenue generated from existing customer upsells, cross-sells, add-ons and reactivations. You can calculate your Expansion MRR percentage rate as follows:
Expansion MRR Rate = [(Expansion MRR at the end of the month – Expansion MRR at the beginning of the month) ÷ Expansion MRR at the beginning of the month] x 100
It’s much more cost-effective to upsell your current users than it is to acquire new ones. A healthy expansion MRR rate shows that your customer retention is good and that customers are both engaged and finding more value in your product.
Net Revenue Retention
SaaS startups don't necessarily lose recurring revenue as customers churn out. For example, your business might decide it needs to focus only on enterprise accounts. While your enterprise customers stay and incur a pricing increase, you churn smaller customers that don't renew. As a result, you see higher customer churn and more recurring revenue.
Net revenue retention (NRR) shows if churn is affecting your company's ability to grow. It measures the net revenue left over from your existing customers in a set time period.
Net revenue retention takes into account the total revenue minus any revenue churn (caused by departing customers, or customers who have downgraded) plus any revenue expansion from upgrades, cross-sells or upsells.
NRR is usually looked at on an annual or monthly basis. Your NRR rate can be calculated using this formula:
NRR Rate = [ (MRR at the start of the period + Expansion MRR + Upsell MRR – MRR Churn – Contraction MRR) ÷ MRR at the start of the period] x 100
Customer Success Metrics for Mature SaaS Businesses
Late-stage SaaS startups need to understand customer satisfaction and customer loyalty while continuing to expand. Here are three essential customer success metrics to help your SaaS business maintain a competitive advantage.
Net Promoter Score (NPS)
This customer success metric looks at how happy customers are with your product and service, and how likely they would be to refer your business to others. A strong net promoter score (NPS) shows that your business is performing well and your customers are finding value in doing business with you.
NPS can guide your business direction and reveal the aspects of your service that need improvements. It might be that your product isn’t performing as well as people expected, or that your customer support needs a little work. The feedback from your NPS surveys gives you a valuable glimpse into what needs fixing to increase customer loyalty to your business.
Customer Lifetime Value (LTV)
Customer lifetime value (LTV), the estimated net profit generated over a customer's entire relationship with the company, says a lot about a SaaS business and has the potential to influence many critical business decisions. Why? Because it offers insight into two things no SaaS business can survive without: revenue and customers.
From finding product-market fit to budgeting for growth investments, LTV is an important customer success metric — but it can be difficult to calculate. We show you two common methods for calculating SaaS customer LTV in another blog.
Customer Satisfaction (CSAT)
Regularly surveying customers and measuring their satisfaction with both your product and your customer-facing support systems (this includes engagements with your people and your automated or self-serve systems), will enable you to identify specific aspects of the customer experience you can improve.
There are many ways to collect customer satisfaction data, the simplest being a one-question survey following a customer support interaction. Just asking customers to quickly rate their experience as "good" or "bad" can produce the data you need to gauge overall customer satisfaction — you can get a customer satisfaction score (CSAT) by dividing the number of good responses from the total number of surveys completed.
CSAT surveys and scores that collect more detailed feedback about the customer experience can help you identify:
Opportunities to enhance the customer experience,
Driving forces behind customer churn; and,
At-risk accounts.
Tracking CSAT scores over time and comparing data from cohorts will also deliver more insights, particularly when analyzed along with your NPS data.
SaaS Customer Success Metrics Enable Timely Action
Tracking specific customer success metrics at different growth stages will enable you to turn the right data into an actionable plan that helps customers find greater success with your SaaS product, before it's too late. These measurements will give you a solid data-based framework for identifying problems and opportunities to address that optimize customer success and minimize churn.
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