Customer Health Metrics That Matte

Every customer success metric you can measure falls into one of these four categories:

In this blog series, we’ll examine each customer success metric category in separate blogs. You can follow the links above for each metric category.

Customer health metrics analyze existing data to provide valuable insights into the customer base. They identify your most loyal and most at-risk customers. When combined with contributions from the Customer Success Manager, these customer success metrics accurately determine customer health, so companies can improve customer relationships, and satisfaction, and promote retention.

Why You Need Customer Success Metrics

You can use customer success metrics to:

Understand and Troubleshoot your Business

Using the popular leaky bucket analogy, the right metrics reveal where the holes are in your organization. When backed with data and trends, metrics help to better clarify your business’s strengths, weaknesses, and untapped opportunities. Customer health metrics notify you of the state of the customer, so you can customize an action plan to save certain accounts if needed.

Drive Action

Especially when shared with other teams, metrics act as a catalyst to drive action and positive change in different segments, offerings, and throughout your organization. Visually presenting a company or accounts in the red to other teams is an efficient way to garner cross-departmental support and drive action.

Monitor Growth

Customer success metrics are the easiest way to demonstrate value. They also track the effectiveness of your customer success team, new playbooks, or other changes implemented in your organization as regards customer satisfaction. The value of customer success is demonstrated when your customer health metrics improve, leading to less churn and, consequently, more revenue for the company.

Customer Health Metrics You Should Monitor

These customer health metrics equip the CUSTOMER SUCCESS MANAGER with a 360-degree view of customer health:

1. Product Usage

Product usage metric measures the usage frequency and the level of engagement your customer has with your product. It compares Daily Active Users (DAU) against Monthly Active Users (MAU) to track customer usage patterns. The definition of an “active” user varies for different SaaS companies and solutions, but the goal of every company is to increase the usage frequency baseline. Customers that don’t meet your requirements for being “active” are more likely to churn.

Product Usage = Total Unique Users Logged in Today / Total Unique Users Logged in Over the Last 30 Days

2. Product Adoption

The product adoption metric measures the stickiness of a software solution by evaluating the breadth and depth of its usage. It does so by comparing the number of features customers actually use against the number of features your solution offers. Some customers may not be informed of all the benefits of your solution, educating them can renew their interest and increase your product’s perceived value.

Product Adoption = Number of “Value Features” Used / Number of Total Features

3. Customer Engagement

Customer engagement is the frequency of engagement a customer has with your customer success team across multiple touchpoints such as email, phone, chat, or meetings. The frequency of customer engagement varies largely due to the nature of the product and the customer success strategies in use. However, improving engagement is essential to increasing advocacy and account expansion. Customers with little or no engagement with your team are usually at risk of churn.

Customer Engagement Can Be Measured Based On:

The Number of Days Since the Last Touch
The Number of Touches
The Average Frequency of Engagement

4. Executive Sponsor Strength

An executive sponsor is a high-level person who is directly interested and focused on the positive outcome of your technology or services offering. There can be two types of executive sponsors; one from your company and another from your customer’s company. This metric is useful in either scenario. The key here is to ensure a high level of engagement with your executive sponsor.

Despite any other metric, you must label the account at risk if the relationship with the executive sponsor is fractured or if he leaves the company. The higher the role of the executive sponsor is in your client’s company, the harder it is to overrule their decision come renewal time, so top executives are preferable.

Executive Sponsor Strength = Number of Executive Sponsor Touches in the Last 90 days

5. Net Promoter Score (NPS)

Net Promoter Score is a widely used metric that quantifies customer satisfaction and loyalty using simple surveys. The surveys ask the customers to indicate – on a scale of zero to ten – how likely they are to recommend your solution to other people. It can be measured at different points in the customer lifecycle and combined with other health metrics to get a better picture of the state of the customer. Personally, I believe this metric is most critical in the identification and nurturing of potential advocates to ensure those continue to be a significant driving force for new revenue generation.

Promoters: 9 – 10 (Happy to recommend your solution)

Passives: 7 – 8 (May recommend your solution)

Detractors: 0 – 6 (Will not recommend your solution)

NPS = Percentage of Promoters – Percentage of Detractors

6. Nature of Support Ticket

Technology companies, regardless of size, usually have an established system to receive and handle customer requests. These requests may be in the form of customer questions, bug reports, training requests, or customer feedback. Customer success is not customer support, but customer success managers can leverage support ticket data to gauge customer health proactively.

There are two ways to do this:

Number of Support Tickets

A customer who has never submitted a support ticket is most likely not engaging your product properly or at all. Such customers are very likely to churn.

On the other hand, too many support requests may be an indication of a larger problem. Your goal is to identify the ‘sweet spot” for a healthy ticket average in a given period, and pay special attention to customers at the extremes.

Support Ticket Rating for A Customer = Number of Tickets Submitted by The Customer / Average Number of Tickets Per Customer

Note, that those who offer on-premise solutions may wish to instead monitor clients who do not renew their annual maintenance contract.

Nature of Support Tickets

Larger Customers usually submit more support tickets, but a high frequency of tickets alone does not indicate healthy engagement with your product. There is more useful data to be collected from the severity and tone of the requests. This data can be collected manually or with sentiment analysis software to proactively identify excessively frustrated customers before they churn.

7. Customer Pulse

Customer Success managers work on the front lines of a company to build relationships, drive adoption, and help customers overcome challenges. Customer ‘Pulse’ collected helps gather frequent and accurate feedback from the Customer Success Managers and other customer-facing teams to determine customer disposition and overall health. It can be used to balance out data-driven metrics to prevent false positives or false negatives. You can use simple colors like red, yellow, and green to denote a strategic customer health status.

Customer Pulse from your Customer Success Manager can be used to analyze:

Number of customers in each health status
ARR in each status
Code Red Reason codes

8. Late Invoice Payments

Even at a startup level, technology, and services companies inform their clients of upcoming renewals and invoices months before the due date. Clients that receive such notifications and are yet to pay their invoices after the due date should be considered at risk on some level.

Businesses must take the number of days a customer’s invoice is past due as an indication that the customer has a low perceived value for the product, and act accordingly. Adding late invoice payment fees may not be an efficient solution from a customer success standpoint, as it may cause at-risk customers to churn at a higher rate.

Number of Days Since Invoice Due Date

Summary

There are various reasons why customers churn, including low engagement, lack of usage, poor product fit, software bugs, and so on. These customer health metrics highlight pain points in the customer journey, allowing the Customer Success Manager to plug the leaky buckets and improve customer health. Follow the links below to see more customer success metric categories: