Do you sometimes feel at a loss when to talk to your Customer Success team? Does the industry terminology confuse you? Don’t worry, we’ve got your back! To better understand Customer Success, it is important to know what the most important metrics are and their meaning. Read below to find out more:
1.Net Promoter Score (NPS)
Net Promoter Score (NPS) It is a metric used to predict customer purchase and referral behaviour. The question used to determine NPS is:
“On a scale of zero to 10, with 10 being highest, what’s the likelihood that you would recommend us (our company) to a friend or colleague?”
This question is almost always included in all surveys send by companies to their customers to gather feedback. The reason for this is that this question is different from others which measure customer satisfaction. In fact, NPS measures customers’ loyalty in general towards your company and brand. This gives valuable information about the potential for sustainable growth through customer retention and word-of-mouth marketing.
To get even more detailed information about Net Promoter Score, check out our previous article on the topic “What is Net Promoter Score and How to Use It?”
2. Churn Rate
Churn rate is another important metric used in the customer success industry. It is the annual percentage rate of customers who “leave” your company, i.e. stop buying your products or services. Nevertheless, it is important to know the reasons behind this number. Make sure to look into other possible red flags, such as the duration of sessions on your website, product return rate, customer satisfaction rates, etc.
3. Customer Acquisition Cost
Customer Acquisition Cost is the sum of various metrics used to acquire new customers, divided by the total number of customers. Those costs vary from company to company, and from industry to industry. However, they typically include research and development costs, manufacturing costs, marketing costs, etc.
Once you have your Customer Acquisition Cost, it is important to compare it to your Customer Lifetime Value (see next point) and to make sure that is is lower. If it is not, this means that you are spending more money to acquire customers than your customers are spending. It is a clear sign that you need to rethink your Customer Success strategy.
4. Customer Lifetime Value
Customer Lifetime Value is the revenue you earn from a customer over a certain period of time. However, here you have to also consider your Customer Acquisition Cost, Churn Rate and the value of up- or cross-sales and referrals. In addition, Customer Lifetime Value is a crucial metric for subscription based companies, where repeat purchases and customer retention are even more important.
Those were the four most important metrics used in the Customer Success Industry. Use them confidently and watch yourself become a Customer Success Pro!