Measuring Customer Success

Peter Drucker is famously quoted as saying: “If you can’t measure it, you can’t improve it.” This rule applies equally to the world of customer success management as to any other part of a company’s operations. CSMs need to make sure that the right measurements are being taken and (equally importantly) that the right actions to analyze, report and where necessary take corrective actions occur, based upon the data that is collected. This includes taking per customer measurements that can be reported within a health score or similar software system and which allows CSMs to monitor the health of the relationship between their own company and a specific customer.

It also includes taking measurements of all activity and of activity relating to a particular product or services and comparing these measurements over time to spot patterns and trends either overall or per product/service and again to analyze, report on and take action relating to these patterns as necessary. This article briefly explains and describes some of the most commonly used measurements within the customer success profession and provides some ideas for how customer success teams might decide upon a strategy for measuring customer success.

Selecting KPIs to use in health score systems

The exact KPIs that a particular health score system within a vendor’s customer success management software provides out of the box will vary, and more sophisticated systems will enable the customer success management team to select whatever KPIs they wish and to set up the math to reflect as accurate an overall health score for each customer as possible. 

Naturally the selection of which KPIs to include within a health score system is a very important one, as this will have a strong bearing on the overall health score that is calculated. Care should be taken to select sufficient KPIs to reflect each of the different aspects of the customer-to-company relationship. At the same time, too many KPIs can quickly become unwieldy and ponderous, putting additional and sometimes quite onerous administrative strain onto CSMs to keep the data up to date. There is a balance therefore to be had between accuracy and efficiency that needs to be carefully considered.

My recommendation for selecting health score KPIs is basically the same as for selecting customer success management software systems, which is to use a system that can be adjusted in the future, and then to keep it very simple at first using maybe just two or three KPIs and to add more KPIs as the CSM team’s sophistication and need for more accurate data to analyze grows. Even then however I would still try to stop at around five or maximum six KPIs, since more than this tends merely to increase the admin overhead rather than add much in the way of true value.

The table below lists some of the KPIs that are most commonly used in health score systems and explains where the data might be derived from:

Retention and Churn

In addition to the per customer measurements taken within the health scores system that are shown above, the customer success team will of course also be taking measurements on the overall and per product/service retention and churn rates experienced by their company, and these too should be stored and displayed within the corporate customer success software system. These are defined as follows:

Retention is effectively a mirror image opposite of churn, so for example if you have 100 existing customers and 80 of those customers renew then you will have experienced 80% retention and 20% churn during the period you are measuring.

There are various ways in which the retention and churn measurements can be combined and used to generate useful information. One way is to calculate and display retention over the entire lifetime of customers, and then show churn per contract period (for example per annum if using annual contracts or per month if using monthly contracts). This can help to build up a picture not just of how many customers are retained over the long term, but when within the customer lifecycle they are being lost, and whether this pattern changes over time for more recently acquired customers than for older customers.

Of the two figures, retention is the number I recommend CSMs and customer success teams to focus on, since this is the positive number, and is the number that motivates the team more. One final point on retention is that it is no good blaming the renewals team for lower than desirable retention rates. Actions to increase the retention of customers must occur throughout the lifecycle of the client’s contract term, even though retention itself can only get measured at the end when they either renew or do not renew. Waiting until just before they make that decision to intervene with any positive customer success activity is simply too late!

This article has been adapted from my forthcoming book Practical Customer Success Management: A best practice framework for managers and professionals to be published by Routledge in the summer of 2019

Rick Adams, January 2019

About the Author

Rick Adams is an independent author, trainer and consultant, specializing in helping technology companies deliver measurable business value for their customers. Adams has over 25 years’ experience of working in the IT industry, including owning his own startup software-as-a-service business which he sold in 2012 to focus on writing, training and consulting. Having delivering training and consultancy to many hundreds of businesses and thousands of technology professionals in over 30 countries across four continents, Adams is now based in the rural west coast of Ireland where he lives with his two dogs Zeus and Terri.

Adams’ recent work includes the development and delivery of a global certification program on customer success management for Cisco Systems Inc. He is currently working on a book titled Practical Customer Success Management: A best practice framework for managers and professionals which will be published by Routledge in the summer of 2019. His current interests includes helping individuals and companies develop best practices in customer success management and in business outcomes focused selling.

He can be contacted via LinkedIn at https://www.dhirubhai.net/in/rickadams01/, via Twitter at https://twitter.com/RickAda84728077 or by email at [email protected].