I’m thrilled to keep going with our blog series on customer success metrics. In our previous post, we discussed the top four categories of customer success metrics. This time, I’ll focus on the top five customer success health metrics and include a few honorable mentions. You can also check out the top 5 customer success financial metrics by clicking the link.
Customer Success Health Metrics
Customer health metrics assist SaaS companies in recognizing customers and users who are benefiting from a solution and are likely to renew or cancel. These metrics go beyond just product usage data. There are several aspects to consider to fully grasp a customer’s overall health, including the insights from customer success managers (CSMs) who engage with customers regularly.
Holistic Health Score Approach
A purely data driven approach may give you false-positive or false-negative signals By taking a holistic approach at all touch points of the customer experience—not just those directly tied to product or usage—SaaS companies more accurately determine the health of their customer base and take actions that improve customer health and retention. Client
Top 5 Customer Success Health Metrics
1. Product Usage – DAU/MAU Ratio
Product usage measures the level of engagement the customer has with your solution. A simple signal to watch is the growth (or decline) of Daily Active Users (DAU) as a percentage of Monthly Active Users (MAU).
Every SaaS company will have a slightly different DAU/MAU baseline or target Some SaaS solutions are such that users should login and use the product every day to be considered “active” Others consider “active” to be users logging in once per week. Define the usage baseline for your SaaS solution and then work hard to increase that baseline over time Caution: this could also be a vanity metric so don’t rely entirely on this (or any product usage) metric as the only indicator(s) of health. It’s entirely possible that a customer could login every day but still churn Logins do not equal value.
2. Product Adoption – Stickiness
Whereas DAU/MAU ratio measures the frequency of using a SaaS solution, product adoption measures *breadth* and *depth* of using a SaaS solution.
Identify the features/feature sets that provide the most tangible value (“value features”) for your customers and deliver the outcomes they desire. Then, measure the adoption of those features/feature sets.
3. Customer Engagement
Frequency of engagement a customer has with your team across a number of touchpoints (email, phone, meetings, chat).
Customer engagement goals are largely determined by the nature of your product and customer success strategy – particularly wheth- er your model is more low touch or more high touch Embrace your most vocal customers as they tend to be those who genuinely want you to succeed Beware of customers who are not engaging be- cause that is an early warning sign of churn
4. Customer Pulse from Customer Success Manager (CSM)
Frequent feedback from CSMs and other members of your team about customer disposition and health, usually gathered in the form of a simple Red, Yellow, Green scale.
Many leaders believe subjective feedback from the team is unreliable and inaccurate; however, it can be a very reliable and accurate reflection of customer disposition if the following best practices are implemented: 1) set rm team guidelines for the frequency of Pulse updates (i e updated every 30 days, once per quarter, etc ); 2) create defnitions for each subjective status/color (i e “what does “Red” mean for us?”); 3) ensure the team knows they aren’t judged by the status but rather the status is critical for driving insights across the business; and 4) actively leverage the Pulse insights to drive action and customer experience improvements across the business.
5. Net Promoter Score (NPS)*
An industry standard measurement of customer satisfaction, customer experience and customer loyalty. NPS simply asks how likely a customer would recommend your (company/product/solution]) to her/his friends and colleagues, and measures the likelihood on a scale between 0 (not at all likely) and 10 (extremely likely). Responses are categorized in the following three ways: (9-10) Promoters, (7-8 Passives), (0-6 Detractors). The NPS score is determined by subtracting the percentage of detractors from the percentage of promoters, resulting in a number between -100 and +100.
Although NPS has become a standard measurement across a num- ber of industries, there is plenty of debate around the true correla- tion to customer retention or churn It’s best to measure at di erent stages in the lifecycle (i e onboarding complete, halfway through the term, 90 days from renewal) and put it into context with other customer health metrics.
* Bain & Company, Inc , Fred Reichheld, and Satmetrix Systems, Inc
Top 5 Runner-Up Customer Success Health Metrics
1. Support Tickets
Support tickets submitted by the customer to ask questions, report bugs, request training and provide feedback.
Be careful not to assume that no support tickets is a positive sign for customer health. In fact, often the opposite is true because it might be a sign that your customer is not deeply engaged with your product. Identify the sweet-spot of healthy support ticket average for your customers and leverage that as your baseline Too few support tickets is risky, and too many is also risky.
2. License Utilization Rate
The number of paid licenses (seats) actively used vs. the total number of licenses (seats) purchased.
For those SaaS companies whose pricing model is based on seat licenses, this metric can identify both at risk customers as well as potential expansion opportunities.
3. Executive Sponsor Strength
Level of engagement with your executive sponsor.
Your relationship with the executive sponsor for any given customer could make or break your long-term partnership It’s critical to have a strong relationship with each executive sponsor When that relationship fractures or if the executive sponsor leaves the company, consider the account high risk. You also should go high and wide with customer accounts.
4. Average Days to Onboard (ADO)
The average number of days to complete onboarding for your customers.
Dedicate a signifcant amount of attention to optimizing your on- boarding experience as the first 90 days of a customer’s experience will likely set the trajectory for the entire relationship. Optimize first around the customer experience and the customer’s needs, and then around your resources and scaling objectives Onboarding too quickly may not suffciently enable a customer to succeed with your solution(s), but an onboarding experience rolling on for a year will severely impact the customer in a negative way.
5. Late Invoice Payments
The number of days a customer’s invoice is past due.
There are a number of reasons why customers don’t pay their invoices but any customer that is more than 30 days past due for paying their invoice should be considered at risk on some level.
There you have it. The top customer success healt metrics. These metrics were provided by leaders who attended the CS100 Summit for Customer Success Leaders.
Download our eBook “The Ultimate Guide to Customer Success Metrics” to get the corresponding formulas for each of the above metrics.