Measuring Customer Success Image

Measuring Customer Success

By Lincoln Murphy

I get asked all the time how you will know if your Customer Success initiative is, well, successful.

First, you have to focus on your customers and remember that they have a desired outcome. Solve for that and know what it takes to get them there. Measure and monitor to ensure they're successful along the way; the metrics you measure that are specific to them will become obvious once you understand all of that.

Now, to answer the original question - though the point above is ultimately the basis for this answer - start by asking yourself what success looks like for your customer success organization.

One Metric that Matters (plus others that also matter)

It seems like such an obvious question - how do we know if our Customer Success initiative is successful - but the answers aren't always obvious. In fact, the answers aren't always static, either. They'll change as your understanding of your customers, your organization, your views, etc. mature and evolve.<.p>

It might be that you measure success on Net Revenue Retention (NRR) - simply boiling it down to whether in this time period we kept the same, more, or less dollars in revenue than the last time period.

The NRR metric might include renewals, retention, & upsells/expansion, some of those, or none of those. As long as all your stakeholders are on the same page, that's what matters. Download our Executive Guide to Churn if you want more info on when to include the different types of expansion revenue in NRR and why you might not.

More than likely, metrics you focus on at the org level will be a financial metric like NRR plus something else, like customer health.

Customer Health Score

Customer Health is a combination of metrics - both quantitative and qualitative (including both fuels the controversy around Customer Health Scores) - that give you view of whether your customers are likely to stay, expand their use, or if they're going to churn.

While this is great (read: super-important) to know on an individual customer basis so you can take appropriate action, knowing as a roll-up will tell you how successful your customer success management initiatives have been to date (or in the last reporting period) plus how those efforts might impact your future, too.

If this time period you have more customers that are Red or unhealthy, then that might be (probably is) a sign something is wrong even if NRR went up period over period.

Or if you have more Green or "healthy," it might mean things are heading in the right direction, which might offset a down NRR (meaning things were bad but are likely to be better in the future). Though too many Green plus a downward NRR trend might mean something is off… which is good to be know and illustrates the need to look at more than one metric.

While the exact metrics may be different in your situation you'll generally want to have org-level metrics as well as contributor-level metrics that you look at, especially when it comes to building a compensation plan for your Customer Success organization.

Separate Individual Contributor from Org-Level Metrics

Individual Customer Success Managers (CSMs) are generally (or should be) measured on metrics that matter to their daily job.

High-touch, low-volume CSMs would have a different metric than low-touch, high-volume CSMs and attempting to group all CSMs together to be measured similarly simply doesn't make sense.

Whether you're focusing on financial, customer health, or CSM activity (meetings, calls, QBRs, etc.) metrics, finding something that provides meaningful insights into actual performance for all CSMs is probably not going to happen.

Measuring Org-level metrics as well as finding the metric(s) that matter for individual CSMs is the fair way to reward the organization for hitting their numbers (NRR + Customer Health or whatever works for your situation) while calling out specific individual contributors for exceeding (or missing) their numbers.

If you want a deep dive on this topic, we covered this in great detail in - and you can view the archive of - our recent Customer Success Incentives & Compensation webinar. Check it out for sure.

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Lincoln Murphy Chief Customer Evangelist at Gainsight Lincoln Murphy is Chief Customer Evangelist at Gainsight
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