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Sales Metrics
Customer Success Metric: The Leading Indicator for Business Growth
Curious why customer success metrics drive growth? Read this guide to defining, measuring & leveraging customer success metrics.
Curious why customer success metrics drive growth? Read this guide to defining, measuring & leveraging customer success metrics.
Customer success impacts your business's growth and profitability. Happy, successful customers will stick around, become loyal advocates, and ultimately increase your revenue.
You should actively measure success and determine how your offering helps customers succeed to evaluate and improve your business’s health.
This blog will show why the customer success metric should be your north star for growth and how to define and track it effectively.
Customer success means your customers get value from your product or service and achieve their desired outcomes. It directly impacts your business's lifetime value (LTV) from each customer. How?
When customers are successful, they stick around longer, upgrade or buy more from you, and tell others about their positive experiences. It increases the revenue you earn from each customer over time.
Research shows that creating an effective customer success program can result in a 91% ROI after three years.
Customer success is also tightly connected to product-market fit. If your offering doesn't meet a real need for your target customers, they can't succeed. When there's a good product-market fit, your customers can realize value, leading to their success.
Measuring customer success starts with defining a customer value metric (CVM), which quantifies your product's value to customers.
Unlike internal KPIs that track your performance goals, a CVM focuses on the customer's perspective and the benefits they derive from using your offering.
For example, a messaging app's success metric could revolve around active users and message volumes, while its KPI could be the revenue generated.
You should tailor the definition to your specific product and audience. Customer success looks different across industries, so you need a metric that captures the unique value you provide.
There's no one-size-fits-all. The right customer success metric should reflect how your customers achieve their desired outcomes through your solution. With a tailored, well-defined CVM, you can accurately track whether customers are truly successful.
Here are simple steps to follow:
A well-defined customer success metric provides a clear direction for your efforts and allows you to measure how effectively you're helping customers achieve their goals.
Start by asking yourself, “What factor determines if a client is truly successful with our product or service?"
Think beyond basic usage. What activities or outcomes demonstrate that customers are achieving their desired results and getting value from what you offer?
For a project management tool, consistently using core features like task tracking across multiple projects might show successful customer adoption.
Think outcomes, not actions. Logging into your tool is essential, but it's just one step. Focus on the outcomes that signal a customer is achieving their goals.
Once you've defined your customer success metric, the next step is setting a goal. What percentage of customers reaching this success milestone indicates you have a solid product-market fit?
Think of it like this: if only a tiny portion of your customers (say 10%) are achieving success, it might be a sign that your product isn't addressing a core pain point for your target market. There could be a mismatch between your offering and your audience’s needs.
However, if a high percentage (say, 60% or more) consistently hits that success metric, it strongly indicates product-market fit. You're delivering value that resonates with your target audience.
It's not just about hitting a specific number right away. Industry benchmarks can be helpful, but your ideal percentage also depends on your unique growth goals.
Maybe 40% of customers reaching success is a good starting point. However, as you learn and iterate, you can aim to push that number to 70% in the long run.
You should set a baseline and actively work towards increasing your customer success rate. When you focus on continuous improvement, you can ensure your product stays aligned with customer needs and drives long-term business growth.
Overall percentages don’t tell the whole story. You should analyze customer success metrics for specific segments based on company size/industries, use cases, sales channels, customer tenure, and other factors.
Why? Usage patterns and paths to success likely vary across different customer segments. Looking at customer segments shows you valuable details you might miss on a broader scale.
You can identify segments where customer success thrives (e.g., 65% of mid-market customers reaching success in 5 months) and areas needing improvement (e.g., only 40% of enterprise companies reaching success).
Then, you can double down on successful strategies and develop targeted interventions for underperforming segments.
Suppose you discover a discrepancy in success rates between mid-market and enterprise customers. It could indicate a need for improved onboarding or dedicated professional services for the enterprise segment.
Customer success may look different for you depending on your industry and your specific offerings. To help you picture how success looks for different companies, here are examples of tailored success metrics:
Using certain core features within a set timeframe shows that customers have successfully adopted your CRM software. If they actively use the tools for managing contacts, deals, and workflows, they get value from the product.
For example, a success metric could be logging 25 deals within 30 days of signing up using the opportunity tracking feature. This data shows they're utilizing a CRM capability to manage their sales pipeline effectively.
To measure this, you'd simply track which customers hit the benchmark of 25 deal logs in the first 30 days after becoming customers.
With hiring platforms, successfully placing candidates in jobs is the ultimate goal for both companies and job seekers. So, a good success metric is the number of hires facilitated over a certain period, like five placements in the first six months.
Let’s say a recruiting agency helped five clients fill open roles within six months of using your platform. This shows they're successfully leveraging it to make matches and achieve their hiring objectives.
Calculating this metric is straightforward. Count the number of confirmed hires linked to each customer over your set period.
For a messaging app, an active user base that regularly sends messages signals success — that's the whole point! A potential metric could be sending 2,000 messages within the first 60 days.
Let's say a small business onboards and immediately starts using your messaging app to collaborate with employees and communicate with customers. Hitting 2,000 messages in that initial two-month window likely means they've successfully adopted it into their workflows.
Tracking total message volume per user over a defined timeframe can show customers actively engaged and getting value.
With project management software, consistent usage across multiple projects signals successful adoption. A customer spinning up five or more active projects, with teams utilizing the tool daily, probably indicates they've embedded it into their operational processes.
For a creative agency that's a new customer, you could set a success benchmark of having five current projects created and actively updating tasks, comments, files, etc., daily within three months of signing up.
The metrics we measure here are the number of active projects created and daily usage signals like new tasks added, file uploads, comments, etc. Consistent, sustained engagement across several projects points to successful adoption.
Customer success metrics provide a powerful lens into your product's value, market fit, and ability to drive sustainable revenue growth.
Quantifying what success looks like for your customers and rigorously tracking their progress can give you invaluable insights into optimizing your offering, removing adoption barriers, and ultimately better serving your audience.
While the right success metrics will vary for every business, the core principle remains: define quantifiable value milestones that validate your customers are achieving their desired outcomes through your solution.
With a solid customer success measurement framework, you'll make smarter decisions around product roadmaps, sales/marketing strategy, customer onboarding, and more.
Are you looking to dive deeper into effectively measuring and optimizing for customer success? Learn from Lunas’ wealth of expert resources to take your strategy to the next level.
From defining and implementing success metrics to removing adoption barriers and driving product stickiness, our library has you covered.
The path to sustainable growth starts here.
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