How Can SaaS Companies Measure & Improve Customer Success?

Software as a Service is one of the fast-paced industries where end-user spending is expected to cross $195 billion in 2023. To survive in this competitive market, businesses need to think outside of the box and optimize various touchpoints of SaaS customer success. It’s a crucial aspect of the growth and success for your SaaS product.

Customer success refers to the SaaS company’s ability to help its customers each step of the way so that they can achieve desired results. In today’s highly competitive SaaS market, it is more important than ever for you to measure and improve customer success to stay ahead of the curve.

Fortunately, there are a range of SaaS KPIs and metrics available that help you measure and improve customer success. In this article, we will explore the key customer success metrics that you should focus on and optimize. So, without further delay, let’s get started:

What is SaaS Customer Success and Why It’s Important?

Customer success refers to the practice of ensuring that your customers achieve the desired results with your SaaS product. The process involves engaging with customers to understand their needs and goals so that you can tailor your product to help them meet their needs effectively.

Achieving customer success in SaaS is important because it’s directly linked to customer retention, satisfaction, and loyalty. Since SaaS business is built on the recurring revenue model, you need to make your existing customers feel happy and satisfied.

If customers don’t feel successful and fail to achieve the desired outcomes, they are likely to abandon your SaaS and cancel their subscription. This will result in revenue loss for your SaaS company. Thus, it’s important to ensure customer success so that your company can increase customer retention and revenue.

In addition to that, positive customer success can lead to increased word-of-mouth referrals and reviews that eventually lead to new customer onboarding. Furthermore, customer service and support play a role in customer success and can be a differentiating factor from the rest of the competitors.

Thus, it’s important that your SaaS business pays attention to developing a comprehensive customer success strategy that includes aspects from onboarding, training with content, support, and continuous engagement. You must also measure and track customer success metrics as listed below:

Important Metrics to Measure Customer Success for Your SaaS Brand

1. Customer Lifetime Value

Customer lifetime value (CLV) is the most crucial customer success metric for SaaS companies to measure and optimize. It’s a representation of the amount of revenue you are expected to generate from your customers for the duration they use your SaaS product.

The CLV metric impacts your customer success operations along with the two important KPIs: Annual Revenue per Customer and the Average Length of Customer Relationship. Here’s how you can measure customer lifetime value,

CLV = (Average Purchase Value x Average Number of Purchases) x Average Customer Lifespan

By optimizing CLV, SaaS companies can ensure that their customer success efforts are focused on driving long-term revenue growth and customer loyalty.

2. Repeat Purchase Rate

Repeat purchase rate (RPR) is another key success metric your SaaS team needs to track to gauge the customer success effort. It’s a measure of the percentage of customers who repeat purchases or renew their subscription to your SaaS.

RPR is the best indicator of how successful and satisfied your customers are since it represents whether customers continue to do business with you or not. By optimizing this metric, you can increase both the number and percentage of customers making repeat purchases.

Here’s how you can calculate the RPR:

RPR = (Number of Customers Who Made a Repeat Purchase/Renewal) / Total Number of Customers

By optimizing it, you can make sure that your customer success efforts are focused on driving repeat purchases/renewals and increasing customer lifetime value.

3. Retention Rate

Customer retention rate (CRR) is somewhat similar to RPR but is useful for SaaS businesses with more customers and improving ongoing relationships with them. The metric represents the percentage of existing customers your SaaS has successfully retained over a given period.

In simple terms, it measures how many of your customers have stuck around with your SaaS in the next month, quarter, or year. To calculate the CRR for your SaaS customer success, you need the number of customers you had at the beginning and end, and the new customers you acquire during a specified period.

Here’s how to calculate the CRR:

CRR = ((Total Number of Customers at the End of the Period – Number of New Customers Acquired During the Period) / Total Number of Customers at the Beginning of the Period)) x 100

Optimizing CRR can help you in focusing on retaining customers and increasing their lifespan with you.

4. Retention Cost

Customer Retention Cost (CRC) represents the expenses your SaaS business incurs to retain each customer. Measuring CRC is important because it helps ensure that you are allocating your resources efficiently to retain customers.

Additionally, it helps measure the impact your customer success team has on growing customer retention than their cost of operations. Further, it helps justify the investment that you made in customer success and retention is worth the customer’s lifetime value.

Here’s how you can calculate the CRC:

CRC = Total Cost Incurred to Retain Customers / Total Number of Retained Customers

By optimizing this success metric, you can reduce the expenses associated with customer retention and increase long-term revenue growth.

5. Churn Rate

The Customer Churn Rate is essentially the opposite of what we did in the Customer Retention Rate. Here, we measure the number of customers you’ve lost over a period of time instead of measuring the customers you’ve retained.

It’s one of the crucial metrics for your SaaS business as higher churn hurts your revenue and profitability. Measuring the churn rate can be simple or complicated depending on your business needs. Primarily, the churn rate represents the number of customers lost or the monetary value they represent.

Here’s how to calculate the churn rate:

Churn Rate: (Number of Customers Lost in a Given Period / Number of Customers at the Beginning of the Period) x 100

As suggested by experts, 5 to 7% is an acceptable annual SaaS churn rate, and exceeding that needs improving your SaaS product to increase customer lifetime.

6. Net Promoter Score

Net Promoter Score (NPS) is another crucial SaaS customer success metric and is fundamentally different from other metrics we talked about. NPS relies on direct customer feedback and how likely they are to recommend your SaaS product to other customers.

It helps you gauge the level of customer satisfaction by simply asking, “On a scale of 0 to 10, where 0 is lowest and 10 is highest, how likely are you to recommend our SaaS to a friend or colleague?”

Based on their ratings, you’d categorize them into promoters, passives, and detractors. For an accurate calculation of NPS, you’d need to subtract the % of detractors from the % of promoters.

NPS = % Promoters – % Detractors

A higher NPS represents that customers feel positive about your brand and are spreading the word about it to their friends and family.

7. Customer Satisfaction Score

Customer Satisfaction Score (CSAT) is somewhat similar to NPS but is more flexible than NPS. It’s measured based on how your existing customers rate their overall experience with your SaaS product and company.

The score is collected through a survey where users respond to the queries on a scale of 1 to 5 or 1 to 10. You can survey customers at different stages of their journey such as onboarding and support. Doing so helps you identify the touch points with higher friction and reduce any bottlenecks to improve customer satisfaction levels.

Here’s how to calculate the CSAT

CSAT = (Total number of positive customer responses/Total Number of Survey Responses) x 100

Tracking this metric can help you optimize your customer success effort and drive satisfaction and increase your CSAT score.

8. Qualitative Customer Feedback

Qualitative customer feedback measures the subjective opinions and experiences of customers with your SaaS product. It’s an important metric for customer success and helps track customer success performance via good old feedback methods.

With this survey, you can document everything from what your customers like and dislike about your product or company. Further, it provides valuable insights into how customers perceive your SaaS company and product and helps to identify areas for improvement.

Qualitative customer feedback is typically collected through open-ended survey questions or customer interviews. It can include feedback on a wide range of topics such as product features, user experience, customer service, pricing, and overall satisfaction.

Conclusion

Measuring customer satisfaction and success is crucial for your SaaS product’s growth and profitability. As a SaaS business owner, you need to focus on a range of SaaS metrics such as customer lifetime value, NPS, churn rate, retention rate, repeat purchase rate, and others.

Further, customer satisfaction scores and qualitative feedback can help you gain insights into customer perceptions and experiences. By optimizing these metrics, your SaaS will be way ahead of your competitors and drive long-term revenue, customer loyalty, and retention.Ultimately, a successful SaaS business depends on delivering value to customers and creating a positive customer experience using SaaS content marketing, surveys, chatbots, and other tools. By prioritizing customer success, SaaS companies can build long-term relationships with their customers and establish themselves as leaders in their respective markets.

Author

Pratik Dholakiya

Pratik Dholakiya is the Founder of Growfusely, a SaaS content marketing agency specializing in content and data-driven SEO.