By Jan Young
SaaS has a never-ending list of metrics that can be overwhelming for those new to Customer Success or CS leadership. How does one know which metrics to use and when to use them? You may know that your board and executive team care about NRR and NPS, but why? And how can you impact them? There are a few things to consider when choosing which metrics to use.
Kristen Hayer, CEO of The Success League, wrote in an earlier blog about metrics something that bears repeating:
“Metrics do two things. First, they serve as a measure of success to the broader organization and help to benchmark you against similar companies. This lets you and your leadership team ensure that your business model stays on track for growth. Second, they are a management tool that allows you to measure the performance of your program and team members.”
To that end, let’s explore how you determine which metrics to use and when. But let’s start by asking Why.
Why: What is the goal? What does it help us achieve?
It may seem obvious, but we often don’t stop to ask ourselves why we’re using a metric. What story is it telling you? Is it a red flag, or a reason to celebrate? What do you need to do with the metric? Why track it in the first place?
For example: If your goal is to understand the health of your company, some of the things you’ll want to track are your retention and growth. Retention and growth rates are combined in Net Retention Rate (NRR), so many companies focus on this metric. But what if your fantastic record of upsells cover up your problem with churn? If your company's health is really rooted in retention, then Gross Retention Rate (GRR) is the number you want to focus on.
Metrics tell stories. Understanding your Why will lead you to the metric that you want to track.
Which: Lagging or Leading
Why leads to which. Perhaps at first you were tracking NRR, then realized churn is weighing you down, so you begin to focus on GRR instead. NRR and GRR are examples of lagging indicators. They tell you what happened. But how do you impact a lagging metric like GRR?
If you want to improve retention, you need to understand the elements that are impacting that metric. Those elements are your leading indicators. Identifying and tracking your leading indicator metrics are how you can impact and project the lagging indicator metric.
For example: If you identify that a large percentage of your churn is taking place in the first year, then you would probably want to focus on onboarding and adoption activities to turn that around. Important metrics to track could be Time to First Value or Daily Active Users. But if improving those metrics doesn’t impact your GRR, then dig in a little more. Maybe at your organization it’s a better indicator to track how often a specific report is run, or the number of features used by month 2. If improving those leading indicator metrics impacts your lagging indicator metric, then you know you’re on to something.
Incorporating those leading indicator metrics into your health score will help you understand the health of your overall customer base. Do you have a large number of at-risk customers compared to your successful customers? Now you have real predictive information to share with the board and the executive team. If your customer health score isn’t predictive, then it needs to be adjusted until it is. This is the key reason why Health Scores are not transferable from one company to another.
It’s also important to check if the leading indicator metrics are the same for each customer segment. Just as customer journeys are unique to each customer segment, the metrics that you want to employ can be specific to the customer journey as well.
When: When and for how long should I use a metric?
Metrics are not set-it-and-forget-it. If you’re not actively using a metric to guide your actions and customer success program, then why waste your time tracking it? Once you have churn under control, go back to focusing on retention and growth—make the switch from GRR to NRR. If your board or executive team needs a consistent measure during this period, then continue to report on NRR and add GRR with the explanation that you are focusing efforts there, then when you’ve addressed retention, drop GRR as a reporting metric and continue to focus on NRR.
Or perhaps your customer success program was not consistently delivering Executive Business Reviews (EBRs), you’ve lost touch with the executive sponsors of most accounts, and you want to start providing meaningful information to re-engage the decision makers. The first metric you might measure may simply be the number of EBRs delivered each month. Then, once EBRs are regularly scheduled, you may want to measure the percentage of EBRs with executive attendance, or you could measure the quality of the EBRs by the number and type of outcomes.
If you know your Why—your goal, then you know Which leading and lagging indicator metrics to use. Your goal also helps you identify your When. If you have achieved one goal, what is your next step? That next step is your next goal, your why, and that will again lead you to which and when.
How: Creating clean, accessible data sources.
Ok, but what about How? This is the dealbreaker. If your data is inconsistent or kept in notes fields that make it hard to track, you have to fix that before you can do anything else. If you can’t access your data or you don’t have the tools to track or maintain it, you need to address that within your company now.
If you don’t have the data you need to track, this is not the time to give up. This is the time to come up with a plan not just to fix the bigger problem, but also to come up with an interim action plan. Who generates the information you need to measure? Is it customer activity or CSM or other internal activity? If you don’t currently collect it, can you track the activity in a shared spreadsheet? What information do you need to include to make it easier to marry your data once you get the systems in place?
For example: Do not rely on company name only—misspellings or uncapitalized letters will make it hard on you later—include the company reference code, and make it easier on yourself later. If it’s a critical data field, make it a drop-down choice so you have consistency. Start working with the data you have on hand or start collecting the data you need. You will learn a lot about what information you need and how you need to use it, and that will inform the system you set up. There is no wasted time or effort, unless you continue to do nothing.
If you have clean data available, the ability to measure it, and you can see your data in a digestible, actionable format, you’re ready to go!
Now you get to decide: What story does this metric tell? What cadence do you want to see this data? Which audience within your company or customer base would benefit from getting updates on this metric? Which metrics and levels determine a successful or at-risk customer? Which metrics and at what level do you want to trigger a playbook? The world is your oyster—what do you want to accomplish?
Metrics are powerful and empowering. Once you identify your Why, Which, When and How you can reach your goals.
The Success League is a customer success consulting firm that helps leaders build and develop top performing customer success teams. We offer short-term consulting engagements that can kick-start your planning efforts, as well as coaching for leaders who need some weekly advice. Check out TheSuccessLeague.io for details.
Jan Young - Jan is passionate about lifelong learning, demystifying technology, optimizing teams, processes, and systems, and building effective relationships and communities. Her experience has included working in Enterprise companies and Startups of various stages, and she has advised several founders and startups. She serves on the board of Gain, Grow, Retain as co-lead of the Voice of Diversity, Equity & Inclusion council, and is a Founding Community Lead for CS Insider for which she writes and curates a series called “Inclusive Innovation”. She holds a BA from UC Berkeley, and an MBA from Columbia University. In her free time, she enjoys wine tasting, hikes, and Pickleball.