What is customer success?
Customer success is a strategic approach businesses use to help customers achieve their goals with their products or services. It’s a proactive effort designed to maximize the value customers get from their investment, both in the product and their overall business.
Today, just delivering a product or service isn’t enough. To excel, businesses need dedicated customer success teams. These teams use a proactive, data-driven approach to enhance customer experiences and build long-term relationships.
Key goals of customer success
- Increasing renewal sales and revenue: By ensuring customers see continuous value, customer success teams help boost renewal rates and overall revenue.
- Inspiring customer loyalty and retention: Effective customer success efforts build strong relationships, fostering loyalty and reducing churn.
- Boosting lifetime customer value: Through strategic engagement, customer success enhances the value derived from each customer over their lifetime.
- Reducing churn: Proactively addressing potential issues helps retain customers who might otherwise leave.
For subscription-based businesses, customer success is crucial for growing Monthly Recurring Revenue (MRR) by increasing customer retention. In non-subscription models, the value of customer success manifests in driving product insights and generating positive word-of-mouth marketing.
Key responsibilities of a customer success team
– Onboarding: Helping new customers get started with the product by offering clear guidance and support, through personalized customer service with kick-off calls or scalable in-app onboarding experiences.
– Assisting in renewals: Supporting the renewal process by working with renewals or account management teams to address customer needs, using established trust to ease renewal negotiations.
– Monitoring customer health and product usage: Keeping track of customer health scores and product usage to detect potential issues early and ensure ongoing value from the product.
– Providing customer insights: Relaying customer feedback to engineering and product teams to inform product development and improvements based on actual customer needs.
– Positioning best practices: Guiding customers on how to use the product effectively to achieve their goals, beyond just answering how-to questions.
– Connecting customers with necessary teams: Ensuring customers can communicate with the right internal teams for specialized support.
– Maintaining communication: Regularly engaging with customers to understand their needs and goals, and making sure they feel valued throughout their journey.
Enabling customer success: Best practices
- Prioritize customer success across the company: Ensure all team members, from senior leaders to front-line employees, focus on customer success.
- Integrate customer success from the beginning: Embed customer success principles into your company culture early to build a solid foundation for lasting customer engagement.
- Understand customer success metrics: Align your approach with what success means to your customers rather than assuming their needs.
- Implement proactive onboarding: Offer clear, comprehensive customer onboarding to set customers up for success, adjusting support based on their needs.
- Monitor key metrics: Track customer lifetime value, retention rates, and churn rates to evaluate and enhance your customer success efforts.
- Create a feedback loop: Regularly collect and act on customer feedback to refine your strategies and address evolving needs.
- Identify and address red flags: Use data to detect early signs of dissatisfaction and address potential issues before they result in churn.
Key customer success metrics & KPIs
1. Churn rate
Churn Rate refers to the rate of customers who are no longer accessing your service in a stated period. Examples include:
– Subscription cancellations
– Account closures
– Non-renewals of contracts or service agreements
– Switching to another provider
To effectively track churn rate, first define how to measure these actions and what constitutes customer attrition for your business. Once defined, you can calculate it using the formula:
How to calculate churn rate
Take the number of customers who are lost in a certain period and use it to divide by the overall customers who were there in the beginning of that period. This straightforward formula helps analyze churn by cohort and identify its causes without getting bogged down in complex methods.
2. Average revenue per account (ARPA)
ARPA indicates the average revenue generated per customer or account over a set period, typically months or years. It helps assess revenue growth and classify products based on revenue contribution.
How to calculate ARPA
Divide the total revenue generated by all customers in a defined period by the number of customers. This simple formula gives insight into revenue per unit.
4. Customer retention cost (CRC)
CRC measures the total expenses involved in retaining and engaging existing customers. This includes costs for customer support, engagement programs, professional services, and marketing.
How to calculate CRC
Sum the total customer retention cost and divide by the total number of customers with the purpose of determining cost and measuring and planning resource allocation.
5. Customer satisfaction score (CSAT)
CSAT measures customer satisfaction with a brand’s products or services after key interactions.
How to calculate CSAT
Survey customers immediately after an interaction. Divide the number of positive scores (6-10) by the total responses and multiply by 100. This “top-2-box” method estimates customer retention.
6. Customer lifetime value (CLV)
CLV estimates the total revenue from a customer over their lifetime, helping identify valuable segments and guide growth strategies.
How to calculate CLV
Multiply the average purchase value by the average purchase frequency and customer lifespan to estimate lifetime revenue.
7. Monthly recurring revenue (MRR)
MRR measures the predictable revenue a business expects to earn each month. It’s particularly useful for subscription-based businesses to track revenue growth and customer success.
How to calculate MRR
Multiply the number of active customers by the average revenue per user. This calculation provides insight into monthly revenue and customer spending.
Final Thoughts
Customer success is essential for ensuring customers achieve their desired outcomes with their investments. This proactive, data-driven strategy enhances value, builds loyalty, and promotes long-term growth.
A dedicated team handles onboarding, renewals, and support while improving experiences and focusing on goals like revenue increase and churn reduction. For effective customer success, companies should integrate these practices into their culture, prioritize metrics like churn rate and customer lifetime value, and use feedback to refine strategies.
A strong customer success strategy enhances customer value, drives growth, and strengthens brand reputation.
