SaaS businesses operate on a recurring revenue model, and customer success is an essential cog in all modern-day SaaS companies. Customer success teams work hard to build loyalty and establish brand affinity by delivering a world-class experience to users. One way to gauge success for SaaS businesses is by tracking customer success KPIs in 2023.
SaaS users must continue to see value in the service offered, and only then will they renew their subscription in the next cycle. Customer success metrics help the business realise how effectively and quickly customers gain value from the SaaS product. Customer success isn’t just about measuring customer satisfaction. These KPIs also help identify weaknesses in the business. The business can re-evaluate its strategies and not waste time and resources on the wrong ones.
In this blog, we discuss what customer success means in SaaS and why it is important to measure it. We’ll also outline the top 15 SaaS customer success KPIs in 2023 that a SaaS business must track to outshine the competition and provide real value to its users.
What is Customer Success in SaaS?
Customer Success refers to the methods and strategies a business uses to ensure that customers find value in its products and services. In SaaS, customer success teams make proactive decisions and have a relationship-based approach to quickly identify and resolve a customer’s pain points, even before they realise it.
As SaaS is based on the software offered as a service, customer success relies heavily on the users’ digital experience. It is entirely focused on keeping the customers happy, increasing customer satisfaction, and contributing to the product and organisational success.
Why is it important to track SaaS Customer Success KPIs in 2023?
Satisfied customers are imperative for a business to succeed. If the customers’ expectations do not match the value they gain from the product and are not aligned with the amount they are charged, they will likely churn. Tracking customer success metrics allows you to proactively ensure your customers are on the right path to success.
Tracking these metrics allows you to
Gain a 360° view of company growth
A successful company is built based on happy customers, as they can make or break its market standing. By closely tracking customer success metrics, you can keep a close tab on the pulse of the users at any given point in time.
Offer more proactive support
Nowadays, just addressing and resolving customer issues isn’t enough. Customer success teams must track these KPIs to identify and resolve these issues beforehand and offer a richer product experience to users.
Make data-driven decisions
Measuring customer success KPIs help businesses convert intangible data into quantified interferences, which can drive future strategic decisions. They are a yardstick by which they can track the effectiveness of their existing strategies.
Maximise upselling opportunities
Customers are often willing to pay more if the product’s value meets or exceeds their expectations. It is an excellent opportunity for businesses to upsell more services to happy customers, nudge them to buy a higher-end version of your product, and help them achieve greater value.
This also increases the value your business gains from them. Measuring these metrics helps you identify these customers and opportunities.
Top 15 Customer Success KPIs to Track in 2023
1. Churn Rate
In SaaS, the customer churn rate or the customer attrition rate is the total number of customers or subscribers lost over a period of time. The churn could be in the form of cancelled subscriptions, loss of recurring business and value, and closed accounts. You should also keep track of users who downgraded to the freemium model, as your business has a higher chance of getting them back.
By tracking the churn rate, you can identify some of the reasons why customers are churning and look to improve it in the future by modifying the pricing structure, product adoption, etc.
2. Free-trial Conversion Rate
SaaS has three kinds of free-to-paid models:
- Freemium – A limited-feature version of the product is free, but you have to pay for additional functionalities and features.
- Free trial with credit card
- Free trial without credit card
The Free-trial conversion rate focuses on the last two models and calculates how many free-trial visitors converted into paying customers.
Tracking this metric is crucial because if visitors and users don’t convert into paying customers, the business won’t earn any revenue and won’t be profitable. It helps lower the customer acquisition cost by boosting the value of existing visitors and users.
3. Onboarding Speed
It is important for SaaS businesses to measure onboarding speed. The quicker the onboarding speed, the faster users start using the product. The onboarding speed can be calculated by listing pre-determined workflows that a user must complete as a part of their onboarding and measuring the time it takes them to do so. It is the time when a user is able to see the full value of the product.
Also read: 9 Customer Onboarding Metrics to prioritize in 2023
4. Monthly Recurring Revenue
MRR, or the Monthly Recurring Revenue, tracks new sales, cross-sells, upsells, renewals and churn monthly. It is a normalised measurement of a business’s predictable monthly revenue from all active subscriptions. MRR helps SaaS businesses focus on the present and monitor the business’s progress. It also aids companies in prioritising long-term contractually booked sales over short-lived ones.
Often used in financial forecasting, planning, growth, and momentum, MRR provides consistent, accurate, and predictable financial projections. MRR is a critical growth indicator for investor-backed SaaS businesses.
5. Average Revenue per User
Also known as the Average Revenue per Unit, ARPU calculates the average revenue earned per user over a time period. It allows SaaS businesses to gain a deeper insight into financial forecasting, customer needs, competitor comparison, and profit generation capacity.
6. Net Promoter Score
One of the essential customer success KPIs in 2023 is the Net Promoter Score, which measures customer satisfaction. It indicates how users feel about your product and how likely they are to recommend it to others on a scale of 1-10. Giving both qualitative and quantitative feedback, an NPS survey is usually followed by an optional question asking users to elaborate on their score.
This allows customer success teams to identify and address user issues and work to resolve them.
Users are organised into three categories based on how they answer the question, “On a scale of 0 (least) – 10 (most), how likely would you be to recommend our company, product, or service to a friend or colleague?”
- Promoters love your product and score it between 9 and 10. They are loyal advocates of the product.
- Passives are satisfied with the product and score it between 7 and 8 but are not keen on it. You can convert them into promoters by helping them reach the Aha moment.
- Detractors score your product 6 or lower as they are unhappy and don’t derive value from it. These users are most likely to churn. Customer success teams could look into the common issues these users face and look to retain them.
“One of the best ways to measure customer success is to evaluate how many other people the customers have recommended your brand to. Hence, the importance of continuously measuring the Net Promoter Score (NPS).”
Professor Vanja Djuric, Director of Analytics at The University of Akron
7. Time to Value
One of the lesser-known customer success KPIs in 2023, time to value, calculates how much time a user takes on average to derive value from your product. It is essential to reduce time to value so that new users derive maximum value from the product in the shortest time.
8. Renewal Rate
Similar to the retention rate, the renewal rate calculates how many users will remain interested in your product over significant periods of time. It is the rate at which customers renew their product subscriptions.
9. Customer Satisfaction Score
Often mistaken for NPS, the Customer Satisfaction Score or CSAT calculates how satisfied customers are with a particular aspect of the product or service. The primary difference between CSAT and NPS is that CSAT measures how happy a customer is with the product, while NPS quantifies customer loyalty and brand advocacy.
10. Customer Health Score
It is the most widely used customer success KPI critical for SaaS customer success teams. The metric rates customers based on whether they’ll grow, remain consistent or churn. It helps CS teams to realize which users need help and prevents them from overhelping loud accounts.
The metric answers the question “Are your customers healthy, or are they at-risk.” and identifies risks proactively and prevents churn.
11. Conversion Rate
This metric monitors the number of users who complete a pre-determined desired action by the company. For example, signing up for a free trial, subscribing to the email list, submitting a form, etc.
Conversion Rate shows how successful a company is in converting visitors and prospects into paying customers. The definition of ‘conversion’ changes from company to company.
12. Customer Lifetime Value
CLV, CLTV, or LTV, the customer lifetime value, is the most important metric for a SaaS business. It is the expected net profit or total revenue that a single customer will generate while their account is active and indicates how much a user is worth to your business and how much money should be spent on retention. It is one of the most vital yardsticks to measure customer success efforts.
Increasing the CLTV increases the overall profitability of your SaaS business. In SaaS, profits are not earned through single transactions but through repeated subscriptions. The longer a customer stays with the business, the more money your brand earns per subscription. This lowers the acquisition cost per customer and increases the lifetime value.
13. Repeat Purchase Ratio
Abbreviated as RPR, this metric tracks the frequency of customer purchases. This metric supplements the customer retention rate as it measures if customers are content with their first purchase and whether they returned for more. It helps detect onboarding issues that are preventing repurchases.
If a SaaS business has a healthy RPR, it means that it has a lot of repeat customers, and it can start spending more to acquire new ones.
14. First Contact Resolution Rate
This metric highlights how many customers got their queries resolved during their first brand interaction. It measures the efficacy of the business’s support teams. FCR is closely tied to customer satisfaction. Fast resolution of support tickets increases brand trust and boosts loyalty.
15. Customer Retention Cost
CRC is another one of the must-track customer success KPIs to track in 2023. It indicates the total cost of retaining and cultivating existing customers. Customer retention cost differs from customer retention rate as CRC talks about the financial investment required for each retained customer.
Tracking CRC is vital because it helps the business analyse CLTV vs CRC and check whether the customer lifetime value justifies the amount spent on customer success and retention.
Conclusion
Tracking and responding to the customer success KPIs mentioned above is important for achieving customer success and decreasing churn. These KPIs help identify and resolve weak points in your customer success strategy and build on the strong ones.
Every customer success team needs to monitor these 15 customer success KPIs in 2023 to understand the brand’s appeal to customers and measure their loyalty.
Upshot.ai helps SaaS businesses create products that align with individual customer needs so that they continue to derive value from them.
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