Business success metrics have been shifting as B2B eCommerce is becoming more established. The past few years have cemented the power of eCommerce for most businesses as well as customers. However, more than just traffic, conversions and sales volume, there are metrics for success that should be measured to ensure that your B2B business is recognising how to optimise sales and marketing opportunities.
Using customer success metrics to gauge the temperature of your business is a more accurate way to determine the direction your marketing and sales efforts need to take. The following 10 customer success metrics can be taken from your eCommerce data to give you an actionable strategy for digital marketing and sales growth.
- Customer Health Score
- Net Promoter Score
- Qualitative Customer Feedback
- Customer Churn Rate
- Monthly Recurring Revenue
- Customer Lifetime Value
- Customer Retention Cost
- First Contact Resolution Rate
- Customer Satisfaction Score
- Renewal Rate
Customer Health Score
When assessing your customer health score, there are some basic parameters you can assess to learn the direction of your business.
- Are customers reporting value from your product or service?
- Has their pain point been addressed?
- How often is your customer using the product?
- Has your product or service changed the customers’ experience in the way they expected?
- How has your product changed their business?
Customer support is no longer just about answering calls and emails with requests for action or help. Customer service means reaching out to customers to determine how they are feeling about the product or service you provide. Customer success is the driving force behind increasing existing revenue and influencing new sales. By taking a proactive approach to customer service, it becomes easier to guide product development and cater sales and marketing to reach your core audience, and develop customer loyalty.
How to Calculate Customer Health Score
To formulate a customer “health” score, you can start by asking the following questions about your competition.
- How much do their customers spend?
- How many customers do they have?
Get an understanding of the health of your competitors’ business as it pertains to your product, then monitor the metric over time.
Once you have a few points of data you can create an index as the actual score metric to develop consistency and easy tracking.
Measuring the growth of your customers’ business is another great way to measure your success. If your customer is growing because of your product or service, this would indicate a success metric that could be included in your numbers.
Net Promoter Score
When measuring customer satisfaction, you’re determining how content your customers are when they’re interacting with your brand. This means that from consulting in a chat or phone call to conducting transactions using your online cart, they have a consistent experience with your brand and form an impression of that experience. Customers who report a happier experience with your brand are more likely to make repeat purchases.
A popular way to measure customer satisfaction is through Net Promoter Score, a measure that asks whether someone is likely to recommend your company to someone else. Your sales team are the people who need to be conscious of carrying out this type of research because they are usually the person that a customer would have the most contact with.
An NPS provides quantitative and qualitative data about your customers by asking survey participants to rate their experience on a numeric scale and to provide an explanation for their score. This information will not only show your consistencies, but it will also show any anomalies, particularly ones that could become an issue for later expansion goals.
How to Measure Net Promoter Score
To create an NPS, simply use a form tool that can generate a rating scale response. Your eNPS survey form should ask; “On a scale of 1 to 10, how likely are you to recommend this product or service?”
There should then be space for customers to leave an open message about why they gave that score.
Qualitative Customer Feedback
Qualitative feedback is important for customers. It gives them a voice, a way to connect with your brand and a sense of belonging. This is given in surveys or feedback forms. This type of feedback provides a basis for analysis that when combined with quantifiable data, creates a balanced view.
Customer success managers can use qualitative feedback to form a better strategy for their sales team and customer service approach. Some sales teams need to be told when they are being too aggressive or how they could adjust their follow up to create a relationship, rather than sell. Other feedback might simply be a confirmation of what is working and you can go on to further improve those areas that customers are responding to, like automated email confirmations or prompts.
How to Calculate Qualitative Customer Feedback
A survey is one of the easiest ways to gather customer feedback. A few short questions are usually not an imposition for customers in B2B, who are aware that such feedback is highly valuable for your business.
Your survey should ask not only about the customer experience, but also include questions about the product and its quality, and how it has affected the customer. Ask no more than five questions and allow the customer to keep answers brief. Those who want to give you more detail will.
Customer Churn Rate
Customer churn can help you understand underperformance, especially as it pertains to an individual on your sales team. Good customer relations generally result in a lower churn or cancellation rate. Customer support is about relationships, so having a sales team that knows how to focus on building rapport will benefit your bottom line. In B2B sales, the focus is often on providing the best service as compared with competitors, such as fast delivery, no-excuse returns and 24/7 availability of customer contact.
How to Calculate Customer Churn Rate
This formula can be used to calculate the churn rate:
Step 1: Determine the timeframe for measuring your data. This can be a week, month, quarter, year, etc.
Step 2: Determine the number of existing customers at the start of the calculation period as well as the number of customers that churned during the same timeframe.
Step 3: Divide the number of churned customers by the total number of existing customers to find your churn rate.
For example, to measure the monthly churn rate, take figures from the start of June. There were 1,000 customers, but by the end of the month, 64 customers churned. In this case, the churn rate for June would be 6.4% (64/1000=.064=6.4%).
When calculating the churn rate, exclude new customers acquired during the calculation period. These customers count towards your existing customer total during the next assessment period.
You should also include any new customers who churned during the time period with your overall churn total. Since the churn for these customers occurred during the assessment period, you should include them when measuring the churn rate.
Monthly Recurring Revenue
Monthly recurring revenue, or MRR, can be used to determine how much your customer base, or their spending, has grown since working regularly with your business. This metric shows the amount of money that your customers are spending with you each month. Comparing this value over time can how whether your customers are succeeding with your products or not. This metric is most helpful for businesses that operate on a subscription model, such as SaaS.
Expansion MRR is another tool that shows how much additional revenue you’re generating from customers outside of their monthly subscriptions. This metric shows how effective loyalty, rewards and add-on programs are to your business.
How to Calculate Monthly Recurring Revenue
To calculate monthly recurring revenue, multiply your total number of monthly active customers by your average revenue per user. This indicates your monthly revenue.
For example, 1,000 monthly active customers generate an average monthly revenue per customer of $750, meaning that the monthly recurring revenue is $750,000 ($1,000 x $750 = $750,000 MRR).
To calculate expansion MRR, you add all revenue generated from non-recurring purchases, from items such as upsells, loyalty programs, and add-on purchases made by customers on a one-off basis.
By adding these values together, it shows the actual spending on premium offers. This is good for your customer service to understand what products are doing well, what combinations people select for their business needs and why people are motivated to purchase add-ons.
Customer Lifetime Value
Customer lifetime value (CLV) is a fundamental customer success metric. It estimates the total revenue a single customer is expected to generate over the course of their relationship with your company.
CLV is used to determine the value of a customer over time. If their value increases, then you can attribute this to your products and services benefiting your customers’ success. If it’s decreasing, then you might determine that your products or service is not providing customers with the expected results.
How to Calculate Customer Lifetime Value
CLV takes a customer’s revenue value and compares that number with the customer’s predicted lifespan. It can be calculated in two steps.
Step 1: Multiply your average purchase value by your average purchase frequency rate.
Step 2: Multiply the average purchase frequency rate value by your average customer lifespan. This should leave you with an estimated revenue amount that each customer will spend on your business.
For example, if customers spend an average of $50 on each purchase, they visit the eStore about 3 times every month, and have a typical purchase lifespan of 2 years, the CLV is $3,600 ($50 x 3 visits x 24 months=$3,600).
Customer Retention Cost
Customer retention cost or CRC clearly indicates how much money you are spending on each customer to retain them.
This metric shows you clearly what marketing methods are working, which need to be innovated and which need to be dropped. This important metric is also an opportunity to see areas of your business that can be improved with better spending and targeted marketing.
How to Calculate Customer Retention Cost
To calculate CRC, you’ll need to audit your marketing and customer service. This includes payroll for your customer service teams, engagement and adoption programs, professional services and training, and digital marketing.
Add these costs and divide that value by the total number of customers to get your average customer retention cost (sum of all expenses / total number of customers = average customer retention cost).
Customer Effort Score
How difficult it is for your customers to get help can be measured. When it is hard for a customer to get access to the solution they need from your company, 96% of customers report that they would not use the same business or service provider in the future.
You can measure customer effort score (CES) by surveying your customer after they have had an interaction with your customer service team. The metric also helps you predict customer loyalty — Gartner found that CES is 40% more effective at predicting customer loyalty than customer satisfaction.
The metric helps you improve your services, your product and your business. Sometimes the blocks to customer access are unintentional. By asking people what they want and what they need to make their experience better, you improve your overall business process.
First Contact Resolution Rate
The customer wants their issue or problem resolved in as little time as possible. On the first contact is optimal, but in as few contact steps as possible is also important. People value their time, and if your customer service team is able to resolve customer issues in as few steps as possible it proves that you also understand the value of your customers’ time.
How to Measure First Contact Resolution Rate
To calculate the first contact resolution rate, divide the number of closed service tickets resolved after the first interaction by the total number of service cases received. Your CMS will give you these numbers if you set up a ticketing system, or if you outsource your customer service, your provider can configure your system to get the data and give a detailed report.
Customer Satisfaction Score
A customer satisfaction score, or CSAT, is like an NPS, except that it asks participants to rate their experience with the company. This gives you an idea of how customers feel after completing an interaction with your support team.
How to Measure Customer Satisfaction Score
The customer satisfaction score requires a survey to collect data. The survey is sent as a triggered email after a customer interaction to get the most accurate response. The metric should analyze the customer’s immediate reaction to an individual experience, not their overall perception of your brand.
Step 1: Once you have your form set up, you can calculate the score by dividing the number of positive scores (scores six to 10) by the total number of scores given.
Step 2: Multiply your result by 100, you’ll have the percentage of customers who are happy with their brand experience.
For example, if 50 responses were received and 40 of them were positive, then the CSAT would be 80% (40/50 = .80 x 100 = 80%).
Renewal Rate
This is one of the most important metrics for subscription-based businesses. Most SaaS businesses operate on a subscription model, so this metric is very important for such businesses.
If the renewal rate is high, the product or marketing is succeeding in driving customer success. Customers clearly see so much value from the product that they are willing to pay for its use again.
If the renewal rate is low, it is an indicator that customers aren’t getting value from the product or service, or it is not working for them in the way that they expect. This presents an opportunity for improved product development, costs assessment and marketing strategy.
How to Measure Renewal Rate
The renewal rate can be calculated like this:
Step 1: Divide the number of customers who renewed their subscription by the number of users who were due for renewal.
Step 2: Multiply your result by 100 to determine your renewal rate.
Product expiration dates can be used to calculate the rate for other models. Use your CRM to see when a customer bought a product, then set a reminder to review the customer’s account when their product should be replaced. If they purchased from you again, you know they “renewed” their purchase.
These metrics help you focus on securing existing customers rather than always trying to source new customers.
SaaS Customer Success Metrics
SaaS customer success metrics focus on data that is specific to the software industry. While some of the above metrics apply to SaaS, there are a few more that can really enhance your SaaS business metrics more than a generalized approach.
Product Usage Rate
The more customers use your product, the more valuable it is to them. If a customer is using your app daily, they obviously enjoy the product. Your customer service team should be able to track user access numbers and frequency. Your overall product usage rate should increase to your ideal usage frequency over time.
To calculate this metric, select which intervals you want to measure, i.e. daily, weekly, monthly, etc. Then identify what percentage of your customers are achieving each target.
Average Time on Platform/ Average Time in Application
Understanding how much time your customers spend using your software can tell a detailed story about how the product is integrating into their activity. This metric helps you understand customer behaviour and helps to set a benchmark for how long a typical customer should spend using your product. This metric will help you to make software improvements over time.
Active Users
This metric is vital if your company has decided to focus on growth. You can measure active users by adding the number of customers who use the product at a particular frequency — daily, weekly, and monthly.
Free Trial Conversion Rate
Freemium options are a staple in the SaaS industry as they drive user adoption. To measure their success you must now your free trial conversion rate. This metric shows how often people are moving from the trial product to the paid version, and you can also determine what features they are choosing to convert for.
You can measure the rate by dividing the number of customers using the free trial by the number of customers who converted to a paid subscription. You can measure this data point on a monthly, quarterly, or annual basis.
Customer Success is Essential for Business
In B2B, it is essential that you understand how to find key indicators and what those indicators are telling you. Your revenue alone will not inform you of the details of your business’s success. While you can easily speculate about the reasons deals have worked or failed, the reasons customers are purchasing one product over another or why your expansion plans are failing, having measurable reference points and clear performance indicators makes it far easier to plan a strategy and achieve measurable results that will improve your all-important bottom line.
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