What metrics can be used to measure customer retention success for teams?

While retention can best be measured by GRR and NRR, by the time you measure them, you're already too late. You need to track leading indicators as well. Verified outcomes (i.e. your customer confirming in writing/survey that they achieved their required business outcome using your product) are the best indicator of both retention and expansion. You can't wait a year to see if your strategy worked.

In addition to tracking logo retention as described above, it’s important to also track revenue retention-Gross and Net. Net Revenue Retention (NRR) reflects the growth or contraction in revenue from existing customers, considering both expansion (upsell and cross-sell) and contraction (churn). Gross Revenue Retention (GRR) on the other hand, focuses specifically on the revenue retained from existing customers, excluding any expansion revenue. It provides a baseline for understanding how well a business retains its existing revenue, accounting only for the revenue from customers who have not churned.

As mentioned by the peers/experts below, NRR measures the overall revenue growth, including expansion revenue from existing customers and offsetting revenue lost from churn. A positive NRR suggests that your CS efforts are contributing to upsells and expansions. However if we just measure this, it can be too late as this is a lagging indicator. Therefore it is critical to measure the verified customer outcomes which can be tracked to ensure the NRR/GRR are also in the right direction.

The retention team's success can be judged in different ways at different levels as the retention team does different tasks in the retention cycle. NPS/CSAT scores are great precursors and directional data to assess customer satisfaction as churns could also be voluntary, but that doesn't mean work has not been done. Some of the important metrics to look up to are: - GRR - Gross retention revenue - (Starting ARR - Churn ARR - Downgrade ARR / Starting ARR ) NRR - Net Revenue Retention(Starting ARR - Change in ARR / starting ARR) LR - Logo Retention (Total Customers (End of Period) - Total New Customers / Total Customers (Start of Period) LTV - Lifetime value - (Average ARR Per Customer/ Churn Rate)

Stop using the lagging indicators and Start using leading indicators to measure customer retention. Having said that the only viable metric to measure retention is the "Customer Results" also known as "Verified Outcomes". Metrics such as CSAT, CES, NPS, GRR, NRR, et al. are all internal metrics for CS Teams. If your customers are not achieving their desired results and outcomes, they will churn. So start measuring these first.

In my experience, this is the best metric to gauge the potential of a business. From potential investors to management, CLV provides an understanding of sales performance, CX ability to realize booked revenue and renew contracts with lower CAC as well product/service stickiness. The longer the initial contracts, the better the sales team is. The revenue realization speaks to better CX,, Support and product quality. I believe there is no better metric than the CLV that provides better insight to everyone running, working in or potential participants in a business.

CLV = Present value of the future net cash flows associated with a particular customer. CLV is different for different customer segments. The CLV of a SMB is significantly smaller than the CLV of an enterprise customer. Companies should focus their efforts on the "right" customers or ICP and become customer centric around them. For existing customers that are not the right customers (non-ICP), don't leave them. The difference between non-ICP and ICP is for non-ICP, you should not expend any additional energy on them. They are low hanging fruit. We want ICP as long as they don't 1. Cause any trouble 2. Don't waste our time 3. Don't cost us a single cent more than it takes for us to keep them coming back Increase CLV for ICP customers!

Measuring CLV is essential for strategic decision-making, efficient resource allocation, and building a customer-centric approach to business. It allows companies to move beyond short-term metrics and focus on creating sustainable value for both the business and its customers.

Customer Lifetime Value (CLV): Definition: CLV is the total revenue a business can expect from a single customer account throughout their relationship. Personal Experience: We used CLV to segment customers and prioritize retention efforts. Higher CLV customers were given more personalized attention, which significantly improved retention.

In my experience, CLV is a crucial metric reflecting the total revenue a customer generates over their relationship with a business. Utilizing CLV, we prioritize to enhance loyalty, allocate resources wisely, and optimize marketing and retention initiatives, ultimately driving sustainable business growth.

The CSAT metric is what I call a Voice of the Customer metric (VoC). This is one of three VoC metric scores I recommend including when creating a customer health score. This is a lagging metric that helps determine the customers sentiment after they have gone through your process. CSAT surveys provides you the opportunity to course correct and step in where necessary to ensure that your customers are having a great experience throughout the process. I recommend sending a CSAT during their onboarding/CS journey after a moment of truth and at least one more time after their onboarding/CS journey is complete. This give you a temperature check to gauge where the customer is at during the process and after.

I agree with Jackson Hill's comment. More than the NPS survey, I have had a lot of luck with getting great feedback from customers after sending CSAT surveys. CSAT surveys can be structured to be open ended as well as with multiple choice format. I've sent out annual CSAT surveys to guage how the Customer Success department as a whole did in the year - Onboarding, Education, Support and Professional Services. Customers have provided ideas for what additional training we should provide including areas of improvement within Onboarding and Support.

Regularly track CSAT trends over time to identify patterns and assess the impact of strategic changes. Utilize CSAT scores as a key performance indicator (KPI) in your customer experience strategy. Incorporate customer feedback from CSAT surveys into product or service enhancements. By leveraging CSAT effectively, you not only gauge immediate satisfaction but also garner valuable insights to refine and elevate the overall customer experience.

Customer Satisfaction Score (CSAT): Definition: This score is derived from customer responses to a direct question, such as “How satisfied are you with our service?” Personal Experience: Regular CSAT surveys provided immediate feedback on customer satisfaction levels. This was particularly useful for gauging reactions to new features or policy changes.

In my experience, CSAT stands as a direct reflection of customer happiness and loyalty. We gauge satisfaction by asking customers to rate their experience, a valuable metric calculated as the number of satisfied customers divided by the surveyed total. A higher CSAT not only signifies content customers but also serves as a powerful tool to pinpoint areas for improvement in our products, services, and customer support.

NPS scores are really important from the perspective of product improvement. It can be shared internally and externally, fostering transparency. High scores can be used in marketing and promotional materials, while low scores can prompt internal discussions and improvements.

NPS is a critical gauge of customer advocacy and word-of-mouth. By assessing the likelihood of recommendations on a scale of 0 to 10, we calculate NPS as the percentage of promoters minus the percentage of detractors. A higher NPS not only signifies strong customer loyalty but also serves as a key indicator of the success of our customer retention efforts.

The NPS Score is what I call a Voice of the Customer metric (VoC). This is one of three VoC metric scores I recommend including when creating a customer health score. This is a lagging metric that helps determine the customers sentiment after they have gone through your process. Benefits include: ? An indicator of growth and loyalty ? Predictor of churn ? Short and easy ? Easiest way to identify your best reference and product champion Downside: ? NPS doesn’t provide insights into how customers feel.

While NPS is a good overall metric, it often fails to provide the full picture of the customer health or retention likelihood. This is for a couple of reasons: 1. Typical NPS response rates are low ranging between 10-25% of respondents and hence, only capture a snapshot of your customer base. 2. It is too infrequent to capture the sentiment at different points of the customer journey - what they might state at an early stage could not hold any correlation when it comes to renewal and vice versa. Hence, it should be supplemented with other metrics to build a more comprehensive picture of the customer sentiment.

Net Promoter Score (NPS): Definition: NPS measures the likelihood of customers recommending your product or service to others. It's a strong indicator of customer loyalty. Personal Experience: By tracking NPS, we could understand not just the satisfaction level but also the customers' perception of our brand as recommendable, which is crucial for organic growth.

The Customer Effort Score (CES) is what I call a Voice of the Customer metric (VoC). This is one of three VoC metric scores I recommend including when creating a customer health score. This is a lagging metric that helps determine the customers sentiment after they have gone through your process. This is an easy way to understand how easy the process is for a customer to resolve their problems. This is an important metric to track and share across support, CS, and product.

I usually embed this one line survey within the closure support ticket email that gets sent to each customer once the ticket has been closed. I use this metric to only gauge how the customer's experience was with our Support team. Because this is a survey, all responses get tagged with the company's name automatically so that I can follow up with the admin of that company if the score was low.

While I track Customer Effort Score based on data from customer surveys, considering its impact on CSAT and ultimately retention, I consider it a metric for product teams to be accountable for.

Customer Effort Score (CES): Definition: CES measures the ease of experience with your company. It's based on a single question: “How easy was it to deal with our company?” Personal Experience: Implementing CES helped us streamline processes. We discovered that reducing customer effort in getting support significantly improved retention.

The only metric that gives the right measurement of customer retention success for teams is Customer Outcome Achievement Percentage (captured continuously during the customer lifecycle and validated into SMART goals). The customer bought your product to solve a problem/ attain a goal these are the expected outcomes. If that does not happen then the entire project is a FAIL. So even if by some miracle/ push they do renew once - they will churn soon.

Assessing customer retention success means keeping an eye on metrics such as churn rate, repeat purchases, and the value customers bring over their lifetime. By diving into these metrics, teams can evaluate their tactics, pinpoint what works best, and fine-tune their methods to boost overall customer retention.

Customer retention is driven by customers gaining perceived value from the product. Value can be implied or directly quantified such as cost and time saving or supporting revenue lift. Hence, I would suggest building your leading indicators for retention based on customer value metrics and the impact they are gaining from using your product and services. If you get your customer retention and success teams to nail this, indicators such as GRR/NRR will show a positive trend as an output of that.

A customer retention strategy can be very complex. I recommend reading "The Seven Pillars of Customer Success" as well as "The Ten Laws of Customer Success" to get a more in depth framework of building out a customer retention plan.

Sometimes the biggest obstacle to retention success happens internally where a lack of understanding of Customer Success can lead to silo'd and departmental goals elsewhere providing conflict and competing metrics. It can, therefore, be better to avoid focusing on specific metrics while building out these functions and instead ensuring a company-wide understanding of CS and a united effort towards to providing success and value to internal & external customers, until the process is developed and mature enough