15 Key Metrics For SaaS Customer Success Teams (& How To Measure Them)

Article by

Sarah Keliris

Journalist @ customerfacing.io

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April 27, 2023

How do you choose the metrics that matter?

For a business, customer success is ultimately about driving & retaining revenue from existing customers. Your metrics need to align with that, and prove your impact.

If you focus (and report) on the most impactful metrics, you're much more likely to succeed and drive ROI in your organization.

Here are 15 important customer success metrics:

  1. Revenue retention rate
  2. Churn rate
  3. Expansion revenue
  4. Customer lifetime value
  5. Average revenue per customer (ARPC)
  6. Contraction MRR
  7. Customer stickiness
  8. Feature adoption rate
  9. Customer satisfaction score (CSAT)
  10. Customer health score
  11. Customer retention costs
  12. Customer onboarding costs
  13. Monthly active users
  14. First contact resolution rate
  15. Advocacy

Let's cover their definitions, how they’re calculated and tracked, and when they might influence decisions.

First though, a note on how the heck you decide where to focus.

I can’t track them all! Which metrics should I focus on?

Firstly, I’d argue that you can track them all with a simple dashboard. That said, unless you have a large team of CSMs, you certainly can’t work on improving every metric simultaneously.

So, where to focus? Roi Kiouri, a CS team leader, recommends that you do two things:

1. Prioritize revenue metrics (retention, churn, contraction)

2. Align with company-level OKRs.

“When deciding which CS metrics to focus on, I first take into account the company's OKRs. This way, I can get a clear picture of where we want to go and how CS can contribute to the company's growth. Then, I adjust the CS metrics I need to prioritize for that given quarter or year. However, there are certain CS KPIs that should always be on my radar, regardless of specific company objectives.

By order of importance, these are:

  1. Revenue retention
  2. Churn rate
  3. Contraction MRR
  4. Customer health score
  5. Customer satisfaction score (CSAT)
  6. Feature adoption rate
These key metrics help me gain a good grasp of how well my team is performing, while also maintaining laser focus on what matters most; making sure our users get maximum value out of our product and put their trust in us for the long haul.

1. Revenue retention rate

Your revenue retention rate is the total sum of recurring revenue revenue over a defined time period.

How to calculate revenue retention

Here's the formula:

((total revenue - lost revenue) ÷ starting amount) x 100

My total revenue this month (what I started with, plus any account expansion) is $10,000. Over the same month, I’ve lost $1,000 (including revenue churn and any account contraction). I started with $8,000.

((10,000 - 1,000) ÷ 8,000) x 100 = 113% revenue retention rate.

Arguably, this is your most important metric. It tells you if you’re still making money out of your existing customers. People wouldn’t continue spending money with you if they weren’t receiving value.

You can use leading and lagging indicators to give context to your revenue retention. Leading indicators show where you’re seeing change - product adoption, CTAS scores, NPS, etc. Lagging indicators show outcomes - churn rate, expansions, renewals, etc.

By understanding these, you can make predictions, learn from past activity, and work on improving your revenue retention rate.

2. Churn rate

Churn is the rate at which customers cancel their subscriptions to your product over a defined time period. It can be expressed in several ways, with minor differences:

  • Customer churn rate is the percentage of customers leaving each month (dollar value is not considered)
  • Gross churn rate is the percentage of MRR lost (value only not number of customers)
  • Net churn rate is the net revenue movement from existing customers, considering both gross churn, and expansion revenue added

Here, we'll focus on gross churn rate.

How to calculate gross churn rate

Churn is often calculated monthly so that trends are quickly identified.

Here's the formula:

(revenue lost in defined time period ÷ revenue at start of defined time period) x 100

My monthly recurring revenue is $10,000, but I lose $1,000 to customers ending their subscriptions.

(1,000 ÷ 10,000) x 100 = a gross churn rate of 10%.

Your job in CS is to keep this number as close to zero as possible. But remember that not all churn is preventable. Sometimes situations change, budgets get axed -- outside your control.

It’s the CS team’s responsibility to know when churn can be prevented. You can identify trends and predict future churn. It’s your role to figure out the causes and feed those back to the relevant teams (product, engineering, marketing).

3. Expansion revenue

Expansion revenue is any revenue made in addition to your customers’ original purchase.

How to calculate expansion revenue

Here's the formula:

(all customer revenue including upsells and cross-sells) - original purchase

My customer originally purchased our $300/month subscription. This month, they upgraded to a $400 package and bought an add-on worth $100.

(400 + 100) - 300 = $200 expansion revenue this month.

Expansion revenue helps you to predict growth. It shows where customers are buying further into your product or service because of their positive experience so far.

It can also help offset some of the scarier costs that may not be fully in your control, and in some cases even lead to negative churn.

4. Customer lifetime value

Customer lifetime value is the $ amount a customer is predicted to spend with you across an average relationship with your company.

How to calculate customer lifetime value

Here's the formula:

average customer value x average customer lifespan

First, we need to work out our average customer value over a defined period of time - let’s go with a year. Take your average purchase value (total revenue ÷ number of purchases) and multiply it by your average number of purchases (number of purchases ÷ unique customers).

This year, my total revenue was $100,000, made up of 2,000 purchases by 1,000 unique customers.

(100,000 ÷ 2,000) x (2,000 ÷ 1,000) = $1,000 average customer value this year.

My average customer lifespan is 10 years. So, my customer lifetime value (1,000 x 10) is $10,000.

This is a powerful persuasion metric, because you’re looking at big numbers. But be careful not to make too many big decisions based on this number. Things can change and you don’t want to gamble the future of your company entirely on a long-term prediction.

5. Average revenue per customer

Average revenue per customer is the average $ value generated by a single customer in a defined period of time.

How to calculate average revenue per customer

Most companies track their average revenue per customer on a monthly basis.

Here's the formula:

total revenue over a period of time ÷ number of active customers over same period

This month my total revenue was $20,000 and I had 100 active customers in that same time period.

20,000 ÷ 100 = $200 average revenue per customer.

This metric gives you a close look at your customers’ spending. From here, you can make decisions about budgets, pricing plans and staff resources. It helps you dive deeper into what’s driving your customers’ spending and makes decisions value-driven and customer-centric.

6. Contraction MRR

Contraction MRR (monthly recurring revenue) measures the total amount of lost revenue (downgrades and cancellations) in a given time period.

How to calculate average revenue per customer

The clue is in the name with this one - contraction MRR is calculated monthly.

Here's the formula:

downgrade MRR + cancel MRR

Five of my customers dropped from a premium plan ($300) to a standard plan ($200) this month. One canceled their premium subscription entirely.

(5x100) + 100 = $600 contraction MRR.

This is useful for spotting when you might be heading for churn. Value is being lost somewhere - you’ll need to identify this and mitigate that risk.

7. Customer stickiness

Customer stickiness shows how frequently your customers use your product or service.

How to calculate customer stickiness

To calculate stickiness, you need to know some other numbers: your daily active users and your active users over a longer time period (week, month, year). Let’s look at monthly again:

Here's the formula:

(daily active users ÷ monthly active users) x 100

I have 2,000 customers using my product every day, compared to 10,000 who use it every month.

(2,000 ÷ 10,000) x 100 = a customer stickiness rating of 20%.

This tells you how likely your customers are to come back and use your product again. If you have a high customer stickiness rating, this is good news. You’re meeting customer needs and they want more of the service they’re receiving.

8. Feature adoption rate

Feature adoption rate is the rate at which existing customers are engaging with a particular product feature.

How to calculate feature adoption rate

Here's the formula:

(active monthly users of feature ÷ logins in same time period) x 100

I’ve just launched a snazzy new feature. Of the 5,000 customers using my product this month, 4,000 engaged with it.

(4,000 ÷ 5,000) x 100 = a feature adoption rate of 80%.

A high feature adoption rate can be a good indicator of customer-centric decision-making. You’re getting the right features in front of the right people to meet their needs, and giving them the tools to use them.

9. Customer satisfaction score (CSAT)

Your CSAT score tells you how satisfied your customers are with your product or service, based on customer feedback.

How to calculate feature adoption rate

Before you can calculate your CSAT score, you’ll need to collect feedback from your customers. Once you have this, simply sum up your positive responses.

Here's the formula:

(positive responses ÷ total responses) x 100

My survey had 300 responses. Of those, 250 were positive.

(300÷250) x 100 = 83% CSAT score.

This is gold dust when using metrics to tell a CS story, because the narrative is coming directly from your customers.

10. Customer health score

Your customer health score shows whether your customers are happy and healthy, or at risk of churn.

The way this is measured will vary across companies. You need to decide what a ‘healthy’ customer looks like for you - you could look at website activity, product use, participation in surveys, number of upgrades and renewals, etc.

Once you’ve decided which metrics are meaningful to your company, you need to determine a scoring system. This could be as a percentage or total number of actions completed.

For example, my customer has completed 50% of onboarding tasks since they signed up last month. My customer health score target is 70% completion within the first month. This tells me I need to reach out and encourage them to re-engage.

Customer success platforms are a common way of keeping on top of customer health scores - they send automated triggers when a customer is scoring low, and show what actions need taking to prevent churn.

Matt Kelso, a Director of Customer Success, explains the importance of choosing customer health metrics that help you understand the relationship you have with your customer:

While there’s not a one size fits all score, I think the best scores look at both the breadth and depth of the relationship with the account. When looking at breadth, usage metrics of key features or functionality that you believe are value-drivers are obvious targets. The depth component of health scoring is one that I believe is often overlooked, as it can be a little trickier to quantify. In short, your goal is to understand how closely you are connected to the true economic buyer at the account. The economic buyer or decision-maker might not be your power user(s) or even your champion, but understanding what value they are looking to see from your product is critical.

11. Customer retention cost

Customer retention cost is the total $ amount spent over a given time period to ensure a customer continues buying from you. These costs could include staffing, customer marketing, digital adoption software, etc.

How to calculate customer retention cost

To calculate your customer retention cost, you need to find the sum of all costs that go into keeping a customer.

Here's the formula:

total retention spending ÷ number of customers

I have 100 paying customers. And here’s what I spend on retaining them:

  • A staff salary of $3,000 per month,
  • Customer marketing costs of $2,000 per month,
  • Digital adoption software of $1,000 per month,
  • A customer training program costing $500 per month.

$3,000 + $2,000 + $1,000 + $500 = $6,500 total retention spending.

$6,500 ÷ 100 = $65 per month customer retention cost.

You may also want to segment your customer base, to see how different market segments are impacting your retention costs.

Not every month will be the same, which is why it’s important to track this regularly. You need to be able to predict when big costs are coming and spot when anomalies show up.

12. Customer onboarding costs

Customer onboarding is the process your prospective customers follow in order to become proficient in using your product. The costs are the sum of any and all expenses you incur as a result of that process. This can include marketing efforts, training costs, staff time, software trials, etc.

Here's the formula:

total onboarding spending ÷ number of onboarded customers

I have two onboarding specialists with an annual salary of $40,000 each. I spend $20,000 per year on onboarding software and have 100 customers.

((40,000 x 2) + 20,000) ÷ 100 = $1,000 annual onboarding cost per customer.

If this number is a relatively high percentage of your annual revenue per customer, you’ll want to reduce this over the next year. For example, you could try switching to a low-touch customer success model, prioritizing content and software over 1:1 dedicated onboarding.

Tracking customer onboarding costs will tell you if the initiative improves profitability per customer.

13. Monthly active users

The monthly active users metric tells you how many unique customers are using your product every month.

To calculate your active users, you need to define what you mean by ‘active’. Is it customers who login? Perform a function? Engage with a feature? The more precise you can be, the more useful your data.

It’s important that you only track each customer once. This metric isn’t about views or traffic. You’re looking at how many unique customers are actively using your product.

By tracking and comparing this data over time, you’ll start to predict trends, notice churn indicators and be proactive in responding to issues as they arise.

14. First contact resolution rate

First contact resolution (FCR) rate shows the number of customer complaints and requests you’ve resolved during the initial contact.

Here's the formula:

(number of requests resolved on the first contact ÷ all requests received) x 100

This year, we resolved 200 requests on the first contact. Over that same time period, we received a total of 500 requests.

(200 ÷ 500) x 100 = a first contact resolution rate of 40%.

Resolving problems quickly is a sure way to boost that CSAT score. We all know how good it feels to receive fast and effective customer service.

Customer retention and feature adoption rates are also more likely to increase along with this metric, as customers feel more secure and supported to invest in your product.

15. Advocacy

Advocacy is when your customers publicly talk about and recommend your product.

Shane Ketterman, CS Manager, shares some ideas on how you might go about measuring advocacy, and why it’s so important:

84% of B2B buyers start the purchasing process with a referral. The people selling your products and services are your customers. Advocacy can propel brands far beyond any paid or unpaid media, because it unlocks the revenue-building power of partnerships beyond being seen as just a vendor.

Things we can measure:

  • How many referrals you get from advocates (e.g. over a period of a quarter or year),
  • How many re-shares you get via advocates (e.g. on LinkedIn),
  • Number of testimonials, case studies, reviews,
  • Movement from one level of advocacy to another (i.e., Content Customer > Assured > Backer > Promoter). This could be measured in line with the above metrics, as a way to tell your advocate’s of dedication.”

Though it can be tricky to pin down, advocacy is a profound metric. It shows that you’ve established a partnership with your customers and that your product aligns with their goals and values.

Final thoughts

As a CS professional, your team will often be analyzed on metrics you don’t have direct control over. It’s a company-wide issue if a customer churns, for example.

Whichever metrics you focus on, make sure they are ingrained across the company. Always start with the why - why do your metrics matter to your team, company and customer? What story do they allow you to tell?

Important metrics for a CS team are those that show customers growing and adapting. And ultimately how your product or company is meeting their needs - not just how your customers are meeting yours.