Choosing the right customer success metrics can be difficult. There are dozens of recommendations out there, depending on what you read or whom you ask. But we at Gainsight think these five customer success metrics are good ones to start with.
- Customer Success Magic Number. [ARR/MRR of customers renewed in period + ARR/MRR of up-sells in period] / [Total cost of Customer Success team + Customer Support team] Similar to how the SaaS sales magic number measures the impact of sales + marketing spend on new bookings, what impact is your Customer Success effort having on revenue retention and up-sell? Ideally, this number would be above 5.0.
- Customer Success Batting Average. [# of customers renewed in period] / [# of customers eligible for renewal in period] Are customers voting with their signature on the value of our product or service?
- Customer Success Headwind. [ARR/MRR* of churned customers and ARR/MRR decreases] / [Beginning of period ARR/MRR] How much drag will we have on growth from customers? If this number is significantly more than 20%-30% per year, sustainable growth will be tough.
- Customer Success Tailwind. [ARR/MRR of up-sell and price increases] / [Beginning of period ARR/MRR]How much acceleration will we have to growth from customers? Top companies generate in the range of 10% up-sell per year on a dollars basis.
- Net Revenue Retention. [Beginning of period ARR/MRR + ARR/MRR of up-sell and price increases – ARR/MRR of churn and price decreases] / [Beginning of period ARR/MRR] What is the net dollar impact from Customer Success to growth? Best-in-class companies are greater than 100% here and ideally greater than 110%.
* ARR = Annual Recurring Revenue (total annualized recurring revenue as of a period); MRR = Monthly Recurring Revenue.