Measuring what matters

Hi, Markus here. Welcome to a new episode of the Customer-Value-Led-Growth Newsletter.

I share strategies and guides to help you become a proactive CSM, deliver more value for your customers, and turn it into revenue for your company every week.

Need additional help? Check out these resources 👇️ 

• The Customer Retention Blueprint *NEW*

• Raising the Bar - Enterprise CSM Guide *NEW*

• Plugging the Hole - Churn Guide *RENEWED*

• Peeling the Onion - Customer Problem Discovery Guide *RENEWED*

• The CSM Operating System for Customer-Value Led Growth

There’s no shortage of data in Customer Success Management. But when it comes to gathering actionable insights, it’s a completely different story. What “data-driven” CSM comes down to in most companies is

• tracking the metrics that are easy to measure

• setting alarms when they drop below/above certain levels

• responding to issues and risks with tactical playbooks

This is CSM as generic as it can be. I wouldn’t even call it CSM. It’s extended customer support, and it can be fully covered by AI capabilities.

In this post, I’ll show you how to build a metric system that supports proactive, strategic work and drives results.

Warning: The system includes non-scalable components. If that’s against your beliefs, you should not read any further 😉 

1. Revenue Metrics

Customer Success Management is a revenue growth function. It does not exist for altruistic reasons. Spreading good vibes and happiness is not enough. If you don’t own revenue metrics by now, you need to change that - for your good.

Yes, I’m aware that there’s still a lot of reluctance about managing the commercial aspects among CSMs. But you can’t have it both ways. If you want to get taken seriously and not considered as qualified support, you need to own revenue.

There are 4 different categories of revenue metrics you should track (please note that some terms I’m using are placeholders)

1. Expansion

   • Annual Growth Rate - % of portfolio value growth in the last 12 months

   • Annual Account Growth Rate - % of accounts that grew in the last 12 months

   • Total Account Growth Rate - actual revenue vs revenue at the signup

   • The Negatives - % of accounts with no growth at all

2. Churn and downgrades

   • Customer Churn Rate - % of customers lost in the last 12 months

   • Customer Revenue Churn Rate - % of revenue lost in the last 12 months

   • Downgrade Rate - % of accounts that downgraded their subscription in the last 12 months

   • Downgrade Revenue Loss Rate - % of revenue lost due to downgrades in the last 12 months

3. Customer Referrals

   • Word of Mouth - revenue from referrals that are not attributable to specific customers in the last 12 months

   • Direct referrals - revenue from referrals that is attributable to specific customers in the last 12 months

   • Repeat customers - revenue from former customers who brought your product to new employers in the last 12 months

4. Customer Lifetime Value

   • CLTV Growth Rate - comparison between the CLTV 12 months ago and now to measure the quality/sustainability of growth (I consider it as the CSM performance metric

2. Outcome Metrics

The reliance on proxy metrics like CSAT or NPS is often justified with the argument that you can’t measure customer success directly. Customer Success Management teams can’t measure whether they are doing a successful job?

There’s everything wrong with it. The only “issue” is that it takes actual thought and effort. There are 2 things that you need to make it work:

• A clearly defined, measurable, and realistic customer goal - if there’s no mutual agreement on what needs to be accomplished, the customer discovery is not complete

• A mechanism to track your customers’ results - if you can’t do it within your product (in most cases), ask your customers to share their reports/spreadsheets

If you have the data available, you can measure

• Degree of target achievement on account level - achieved (=100%), underachieved (<100%), or overachieved (>100%)

• Average target achievement across the portfolio - achieved (=100%), underachieved (<100%,) or overachieved (>100%)

• Customer Success Rate - % of customers who achieved their goals within the last 12 months

Measuring success like your customers do is not only important to make accurate predictions about their future behavior. It’s also how you demonstrate your impact to your leadership.

You need to clearly show that renewals, expansions, or referrals are the result of what customers have accomplished. Results that only happened due to your ongoing efforts.

Input Metrics

Now comes the trickiest part. To accomplish their goals, your customers have to complete a sequence of tasks and solve specific problems. Therefore, they require the proper skills and knowledge.

If they don’t possess it by default, it’s your job to enable them through educational content and services. And you need to measure the effectiveness of your inputs.

All inputs? Of course not. It does not make sense to dissect every email you’ve ever sent. You need to focus on the major parts of your customer education and training program.

What you need to know are things like: Does the 6-week session training program you provide help customers solve the problem it’s designed for? If it does not, how are customers supposed to accomplish their end goal?

To accomplish a high customer success rate and the desired revenue impact, your enablement program needs to perform on an equally high level. More precisely, every single item does.

That requires building all your content and services with purpose, a clear goal in mind. And get feedback from your customers on whether they have been able to implement their learnings to the intended outcome.

If they are not, you go deeper to find out why and how to improve the quality of the respective input. Following up on these is also a way to proactively mitigate churn risks by providing additional help in real-time.

Want to become a high-performing CSM and accelerate your career? Join the CVLG Community to improve your skills and knowledge 👇️