Customer Success buzzwords

Welcome to the customer success buzzwords guide.

Customer Success

You probably know that customer success is the goal, but do you know how it's achieved? The customer success team is directly responsible for helping customers achieve success. Customer success drives customer retention, and Customer Success Managers (CSMs) work with customers to drive customer success.?

So let’s get down to brass tacks: What does a CSM do? A CSM is responsible for working with customers to create mutually beneficial outcomes. They help customers find new ways to use your product (or service) in order to make their lives easier so they're more likely stick around and renew their contracts when the time comes.?

Value

Value is one of the most important things to deliver as a customer success professional. The goal is to maximize customer value, which is achieved by providing the best possible experience for your customers.

However, it's not always straightforward how to determine the value for customers. Value can be difficult to quantify and it's often subjective—it's defined by each individual customer.

Importantly, value isn't directly correlated with cost or usage time.?

It is usually correlated with cost savings or could even be subjective - for example if everybody praises the product or service “just because they like it”.

Renewals

The importance of SaaS renewals can’t be overstated. For a business, it’s all about selling as much software as possible for a long time to come. Renewals are the best indicator of customer satisfaction and loyalty, which makes them the most reliable source of revenue for SaaS companies. They offer a more stable and predictable income stream than new sales or upsells. In fact, renewals have been compared to “found money” because they require less effort on behalf of the company than bringing in new customers.

Upsells

What is an upsell?

It's when you take an existing customer and upgrade an existing product they have to something higher cost but with greater benefits.

If a customer is happy with their new car, the salesperson may offer them a great deal on some nice leather seats. If you're a SaaS customer and have basic licensing, someone might offer you the professional version with extra features.

How do I identify upsell candidates?

Sometimes it's very obvious which customers should be targeted for an upsell, but other times it requires some legwork on your part.?

To help determine who would make good targets for an upsell, start by making a list of all your current customers. Go through each customer one by one and write down which ones regularly interact with your business or which ones have a high adoption rate - these are often more likely to spend more money with you because they trust what your company has to offer!

Cross-sell

Cross-selling is the practice of selling other products or services that complement what your customer already purchased from you. So if your customer bought an acoustic guitar, a good cross-sell strategy would be to offer her sheet music or guitar strings.?

When done right, cross-selling increases customer lifetime value through additional sales while helping customers find products they didn't know they needed.

Churn

Churn is the percentage of customers who discontinue their subscription during a given period.?

Churn rate is an important metric for any business with a subscription model, as it is closely tied to revenue. A company that wants to grow its top line can either increase its number of paying subscribers or decrease the number of people leaving (i.e., increase the retention rate).

User Adoption

User adoption is the number of users that use your product regularly and it is a key indicator for product-market fit.?

Net Promoter Score (NPS)

The Net Promoter Score (NPS) is a customer recommendation metric. It's a number between -100 and 100 that is calculated based on responses to a single question: "How likely are you to recommend our product or service to a friend or colleague?"

Answers are bucketed into three groups: detractors, passives, and promoters. Detractors are customers who answer 0-6, passives answer 7-8, and promoters answer 9-10.

To calculate your NPS, take the percentage of respondents who were promoters and subtract the percentage of respondents who were detractors. For example, if you had 100 responses and 20 were detractors (answering 0-6), 25 were passives (answering 7-8), and 55 were promoters (answering 9-10), your NPS would be 55 (the percentage of respondents who answered 9 or 10) minus 20 (the percentage who answered 0 through 6). That would give you an NPS of 35.

It's important not to confuse an NPS with straight customer satisfaction metrics like surveys that ask for feedback on things like "how satisfied are you with our product?"

CAC and LTV

CAC stands for customer acquisition cost and is the amount of money it takes to sell your product to a new customer. This includes things like the cost of marketing and sales, but not the effort required to fulfill the order. CAC is expressed in currency units per customer, where a customer is someone who pays for your product or service (e.g., $/customer).?

LTV stands for lifetime value and is typically used to mean revenue from a single customer over their relationship with you.?

To calculate CAC, divide total costs in acquiring customers by the number of people acquired during that time period.?

To calculate LTV, divide total revenue by the number of customers during that time period.?

The ratio of these two values gives you an idea of how efficiently your business attracts customers and makes money off them over time—and also how much runway you have before needing more funds to expand your business further!?

Improving this ratio will require managing costs on one hand while improving LTV on the other hand; typically that means better ways of targeting potential customers and convincing them to buy from you rather than one of your competitors—but don't forget about retention as well!?

If existing customers are leaving your business because it's difficult or expensive for them to use what they bought from you initially, then those hard-earned dollars will disappear right out the door!

Net Recurring Revenue (NRR)

NRR is one of the most important metrics in SaaS and a great way to gauge your company's growth.?

It's simply MRR minus churn.?

So if you're netting $1,000 in MRR while losing $300 in monthly recurring revenue due to customer churn over the same period, then your NRR is $700.?

While MRR is still used as the standard metric for measuring success, NRR gives a more accurate representation of how much revenue can actually be expected going forward.

NRR shows how much money you can count on expecting each month when looking at your business holistically. It takes into account both positive and negative trends by subtracting churn from growth and gives a more accurate view of what your upcoming monthly revenues will be based on current data. Therefore NRR is not only useful for reporting purposes but also for forecasting future revenue growth as well!

Originally published on https://joseracowski.com/customer-success-buzzwords/

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