Popular metrics used by the CS team
Is a Customer Success team needed in a company? But how can we measure the value of this team and its contribution to the company?
There are several ways, and today I’d like to talk a little more about the most popular metrics we use for Customer Success, when and how to use them, and what they can give you.
NPS — Probably the most popular metric used by companies. NPS stands for Net Promoter Score. In the shortest possible terms, it determines whether customers will be promoters of our solution, indifferent towards it, or detractors. To measure NPS, you need to create a survey with questions from 1–10, and the indicator takes a value from -100 to 100. NPS has its supporters as well as opponents. The former claim that high customer loyalty translates into increased profits, so any increase in NPS value is a real gain for the company. Contrariwise, the latter undermines this statement by acknowledging that NPS results are not experimentally proof that an increase in loyalty translates into growth for the company. I have my opinion on this, but I plan to devote one of my following articles to this indicator only to bring it closer. The last point is the application and its use. By default, NPS is used to measure the level of loyalty; for me, using it in product development to test how users perceive the introduced change is more interesting.
CSAT — The second commonly used indicator in the work of the CS team is CSAT or, more precisely, Customer Satisfaction. As the name implies, this metric tracks the satisfaction level of customers who took the survey. There is no single accepted standard for conducting the study, but it is popular to use a 5-degree scale, although I have encountered using 4 or 6-degree scales to avoid central tendency error. Nevertheless, it is straightforward and quick to conduct a survey and check the satisfaction of the effects. Still, I would recommend running it right after the customer acts, e.g. makes a purchase but uses some functionality we want to examine. The later we conduct the survey, the less authoritative results we can get.
CES — Customer Effort Score indicates how much effort the user requires to act. We can use the indicator to measure any interaction at the interface between the product/company <-> customer will need the performance of an action or several actions, however. It is calculated similarly to the previous CSAT indicator using a survey (often 5 or 7 steps, but this is not a rule). I would be cautious about using CES for complicated processes. The indicator will perform much better where we want to examine customer impressions on a specific activity, so instead of, for example, reading the entire subscription purchase process, it is better to ask questions about individual steps or even fragments within a whole process. For me, CES helps identify two types of activities:
Requiring high effort. Here the issue is simple if something is complicated, it can often lead to discouragement and, at worst, an exodus of users. It’s worth considering how to change a process or functionality to make it better for the user.
Requiring low effort. It doesn’t require any work, but I would encourage you to think about what makes a particular interaction highly rated because perhaps you can make changes to other parts of the product based on that. As I mentioned in a previous article, you can’t manage success without understanding the customer and their needs, what suits them and what doesn’t.
These three metrics are the most common in companies, and if you are not measuring anything yet, I would advise you to start with them and gradually move into the others. You may wonder which is the best or which to begin first. Each one measures something a little different. CES will shed light on the complexity of your processes and may or may not tell you how customers experience interacting with your product and your company. I think it’s only by using all three that you can take a holistic look at the entire customer experience and its evaluation.
I’ve selected three more metrics below to briefly discuss them, which can be helpful, especially for products offered as a service.
Churn — Indicates the number of people who have unsubscribed from a subscription/product within a certain period. I’ve noticed that this is the most commonly quoted indicator in many start-ups and scale-ups, and I feel that it is often overused. Please don’t get me wrong, the churn rate is beneficial, but it only represents the number of customers churning our service. We still don’t know the reason and what we can do about it. And, of course, from a business point of view, a low churn is most advisable at a high rate; without additional research can lead to nervous movements that will only worsen things. Churn, especially for subscriptions that we cannot discontinue overnight, shows us the effects of something that could have happened much earlier. I often hear that churn is a metric for the CS team, and I beg to differ. While the customer success team can report it, the entire team should be accountable for it, and often the product manager will be the person who can address the reasons for customer churn.
MAU — Monthly Active Users, a straightforward indicator that shows how many active users we had in a given month. You can track users daily, quarterly or yearly, but I follow these numbers monthly. MAU has more value to me than churn for the CS department because it fits into my philosophy of what customer success management in a company should be. If I see that a customer has been inactive for a month or two or three, or the number of licenses is unused, I can proactively think with the customer and the rest of the team about what we can do to change that. Churn, in its nature, is reactive because it shows a customer who has already given up and whom we need to re-acquire. Retaining a customer is more cost-effective than re-acquiring them.
EGR — The last and probably my favourite indicator is the Earn Growth Ratio. The indicator, also before the creators referred to as Net Promoter 3.0, consists of two parts.
The first is the percentage of revenue from customers who have been with you for at least a year(Net Revenue Retention).
The second is how many new customers you have gained from referrals(Earned New Customers). You can count the Earn Growth rate from the combination of these two values. According to a study by Wharton University (link here), customers acquired this way are more loyal and have an 18% lower churn rate than those acquired through other channels.
About earn growth, I could probably write a separate article(who knows, maybe there will be one in the future :)), but in the meantime, I encourage you to read the report by the creators of this metric on HBR (link here), who tell what was behind the reason for its creation and why it is an excellent metric for modern business.
I could list many more metrics, such as customer lifetime value (CLV), customer retention cost or repeat purchase rate. Still, this article is extensive, and I wanted to focus on the most common metrics in companies.
Let me know in the comments what metrics you guys are tracking in your teams!