Customer education is a critical part of most SaaS business models. Software products have notoriously steep learning curves, and even when they aren’t terribly complex, they’re usually tougher to figure out than low-tech products.
But while setting up a customer education program for your SaaS organization is one thing, it’s quite another to understand whether or not it’s working. Building a customer education strategy is an iterative process — you have to know how to measure customer education outcomes to identify where improvement to your education program is needed.
So, without further ado, let’s take a detailed look at some of the most valuable customer education KPIs.
Customer Education Metrics
1. Customer Acquisition Cost (CAC)
Customer acquisition cost represents the financial cost of gaining one new customer. You can calculate your organization’s CAC by dividing the combined total of all sales and marketing expenses by the number of new customers your business gained during a given period of time. The formula looks like this:
CAC = total sales and marketing costs / # of new customers acquired
When calculating the total cost of sales and marketing, you should factor in all expenses related to sales and marketing — including employee salaries.
Improving your business’s customer education program can help reduce customer acquisition costs. This is because a highly effective customer education academy can actually serve as a very cost-effective marketing tool. Better customer education leads to better customer experiences, and customers who have good experiences are much more likely to spread the word about your brand. This can result in new customers that find your business simply because of your customer education program’s positive impression.
2. Customer Churn
Customer churn measures the rate at which customers leave your business. It’s represented by the percentage of customers your business loses over a given period of time. Customer churn is the opposite side of customer retention, which measures the percentage of customers who stay with your business over a given period of time.
To calculate customer churn, use the following formula:
Customer churn rate = (# of customers at start of time period – # of customers at end of time period) / # of customers at start of time period
Let’s look at an example. Say your business has 85 customers at the beginning of the month. Throughout the month, you lose eight customers and gain five new ones, resulting in a total of 82 customers at the end of the month. Your customer churn calculation would look like this:
- Customer churn rate = (85 customers at start of month – 82 customers at end of month) / 85 customers at start of the month
- Customer churn rate = (3) / 85
- Customer churn rate = 0.035, or a 3.5% churn rate
You’ve probably heard the oft-repeated statistic that it costs as much as 5 times more to acquire a new customer than it costs to retain a current customer. It’s clear that lowering customer churn as much as possible is beneficial to a business’s bottom line. Better customer education can help reduce customer churn because it shortens the time to value. The faster customers start seeing real benefits from the product or service they’ve purchased, the less likely they usually are to change their minds about it.
3. Customer Engagement
Customer engagement is a much less concrete KPI than customer churn or customer acquisition cost, but it’s still a critical metric to watch. Engagement is a measurement of the number and quality of interactions between your customers and your brand. These interactions can take many forms, including direct interactions between customers and support or sales reps, but also encompass customer actions like making new purchases, utilizing new product features, or utilizing customer education materials.
There is no mathematical formula for calculating customer engagement because it’s not a single statistic but rather an approximation of how involved customers are with your brand and products. The best way to measure customer education is to track customer behavior over time to build a picture of how and when they interact with your products, services, and representatives. For example, you can use a learning management system like Gainsight Customer Education to track customer engagement with your training resources.
4. Customer Satisfaction Score (CSAT)
Customer satisfaction score measures how happy your customers are with the experiences your brand provides. Customer satisfaction is generally measured using a simple CSAT survey. CSAT surveys ask customers to rank their satisfaction with a particular experience on a linear scale, often from 1 to 5. Typically, a CSAT survey focuses on whatever experience the customer just completed. For example, you might ask your customers to rate their experience with your customer service representatives immediately after completing a customer service interaction.
You can arrive at the approximate percentage of your customer base that’s satisfied with your brand by classifying customers who score their satisfaction below a certain threshold as “unhappy customers” and then dividing the number of happy customers by the number of unhappy customers. For example, customers that respond with 4s and 5s may be considered happy, and customers who respond with 3s or lower may be considered unhappy.
5. Net Promoter Score (NPS)
Net promoter score is a similar metric to the customer satisfaction score. However, NPS gets a bit more specific than CSAT by asking customers how likely they are to recommend your product or service to someone else. Just like the customer satisfaction score, the net promoter score is typically measured on a linear scale from 1 to 5 or from 1 to 10. One benefit of measuring NPS is that it indicates not only current customer satisfaction levels but also the growth potential for your business.
Better customer education can contribute to both a higher customer satisfaction score and a higher net promoter score. When customers have access to effective training materials, they are more likely to be able to use products and services effectively, leading to higher satisfaction levels.
6. Customer Lifetime Value (CLTV)
Customer lifetime value is the average amount of revenue a single customer will generate for your business. Of course, it’s in your business’s best interests to keep customer lifetime value as high as possible. To calculate CLTV for your organization, use the following formula:
Customer lifetime value = (value of average purchase x average # of purchases per customer) x average customer lifespan
Customer education impacts customer lifetime value in many different ways. For example, improving customer education can lead to greater customer loyalty and higher rates of product adoption, both of which indicate a higher likelihood of customers upgrading their subscriptions or making repeat purchases.
7. Cost Savings
You can use cost savings as a more general customer education metric. One benefit of an effective customer education program is that it can greatly reduce your organization’s support costs. When customers have access to robust training materials and resources to help them solve problems quickly without contacting customer service, fewer company resources need to go toward helping customers on a day-to-day basis.
This is just one example of how a successful customer education program can help an organization reduce expenses. You can look at the impact your customer education strategy has had on your bottom line for an overall impression of how successful the strategy has been so far.
8. Support Tickets
Providing your customers with excellent customer education resources almost always leads to a more capable and self-sufficient customer base. This means your customers are less likely to experience problems with their products and services, and when they do, they’re more likely to be able to efficiently find a solution on their own.
By turning customers into self-sufficient product experts, you can reduce the number of support tickets they submit to your customer service team. Tracking the number of new support tickets you receive over time can be a great way to gauge whether or not your customer education program is working to empower customers.
9. CSM Workload
Similar to “number of support tickets” as a metric, the customer support manager workload can indicate how effectively your customer education program is functioning. Your business’s CSMs are responsible for supporting customers and helping them achieve success with your products and services. If your customer training strategy is not working, your CSMs will likely have to spend more time and effort helping customers. However, when your customer education strategy is working effectively, customers can be more successful on their own.
How To Set Customer Education KPIs
This list includes some of the leading indicators for customer satisfaction with your customer education program. However, the specific KPIs your business should be tracking depend heavily on your goals as an organization. The best customer education programs prioritize outcomes that help the customer get more value from the product or service and move the business toward its objectives at the same time. For example, you might design training courses that show customers how to use a new product feature — not only does this help the customer use the new feature more effectively, but it also helps the business improve product adoption.
Bloom’s taxonomy is a very useful theory for designing training objectives. It revolves around six levels of learning that need to be considered:
- Knowledge – What basic facts or concepts do you want your customers to recognize?
- Comprehension – How do you want your customers to organize and understand the facts and concepts you’re presenting?
- Application – What kinds of situations or problems do you want your customers to be able to apply their new understanding to?
- Analysis – How do you want your customers to combine their knowledge of individual concepts and applications into a cohesive understanding of the solution as a whole?
- Synthesis – What kinds of new discoveries or conclusions do you want customers to be able to reach on their own after they’ve learned about the product or service?
- Evaluation – What kinds of problems do you want your customers to be able to independently evaluate and solve using your products or services?
You can use a learning management system (LMS) like Gainsight Customer Education to manage your customer education objectives and track your progress toward achieving them. Deploying effective software tools is one of the best ways to accurately track and analyze the results of your customer education initiatives.
Learn more about Gainsight Customer Education here!