Want to know a cheat code to SaaS success?
Pay attention to your customers.
Fortunately, keeping tabs on them is easy with SaaS customer success metrics!
But what are they?
Further Reading
- Check out our detailed guide to Bounce Rate and how you can quickly improve it!
- Explore 7 surefire ways to boost your website’s Average Sessions Duration.
- Find out 6 easy tips to drive your Click-Through Rate through the roof.
This Article Contains:
- What Are Customer Success Metrics?
- 11 SaaS Customer Success Metrics You Should Track
- Benefits of Tracking Customer Success Metrics
- How to Choose the Right Metrics to Track
Let’s get trackin’!
What Are Customer Success Metrics?
Customer success (CS) metrics are quantitative measures of how successful a company’s marketing and customer success efforts are. Tracking them helps you visualize how well your customers are doing with your products and services.
But here’s the thing:
There isn’t a fixed standard for these metrics.
Moreover, different SaaS businesses track different customer success metrics.
Some prefer to track customer success based on the revenue generated, while others might quantify their customer success based on how their users feel about the product.
Note: A customer success team serves a different purpose than a customer support team. Customer success helps users discover value right from the customer onboarding stage, while customer support addresses user issues after they use the product.
However, the two teams can work together to ensure greater customer success.
Curious to find out how many CS metrics exist?
Continue reading to find out!
11 SaaS Customer Success Metrics You Should Track
Below are essential customer success metrics to stay on top of.
- Customer Churn Rate
- Monthly Recurring Revenue
- Expansion Revenue
- Average Revenue Per User
- Customer Renewal Rate
- Customer Acquisition Cost
- Customer Lifetime Value
- Customer Retention Rate
- Customer Retention Cost
- Net Promoter Score
- Customer Satisfaction Score
Let’s get started!
1. Customer Churn Rate
Here’s what you need to know about customer churn rate:
What Is Customer Churn Rate?
Customer churn rate (also known as the customer attrition rate) measures the percentage of customers lost in a period.
Who Should Track This Metric?
All SaaS businesses. It’ll help them see how well their customer success efforts are doing based on the number of customers who stayed with their product.
Why Is it Important to Track Customer Churn Rate?
Using your churn rate, you can identify ways to optimize your overall customer experience to retain more customers in the future.
How to Measure Customer Churn Rate?
Here’s how to calculate customer churn:
| Customer Churn Rate = Users Canceling Subscription for the Month / Number of Users at the Start of the Month * 100 |
How Often Should You Track Customer Churn Rate?
Tracking customer churn can be done monthly, quarterly, or annually. However, tracking it for shorter periods is preferable since it gives you more detailed insights about when your customers unsubscribe. This, in turn, helps you discern what potentially caused the customer loss.
Acceptable Ranges
According to HubSpot, an acceptable churn rate is between 2% to 8% a month for B2C businesses.
For a B2B SaaS business with average contract values greater than $1,000 per month, the churn rate should ideally be below 2%.
Example
Let’s say you want to track the churn rate for your B2C product in February 2023.
At the start of the period, you have 300 customers subscribing to your SaaS product, and by the end, you have 280 subscribers.
Your product’s churn rate would be = (300 – 280 / 300) * 100
= 20300100
= 6.67%
Since a good customer churn rate should be between 2% to 8%, your product’s churn in February isn’t alarming.
However, it’s helpful to follow up with your customer success team and create a plan to reduce that figure by increasing customer engagement efforts or offering discounts.
2. Monthly Recurring Revenue
The following are the basics you’ll need to understand MRR:
What Is Monthly Recurring Revenue?
Monthly recurring revenue (MRR) tracks your business’s expected monthly revenue from all active subscribers in that particular month.
Who Should Track This Metric?
Tracking MRR is essential for all SaaS companies, especially if they want to assess their current and potential revenue growth.
That said, startups benefit from tracking MRR only after they’ve gained traction, not in the very early stages.
Why Is it Important to Track Monthly Recurring Revenue?
MRR is crucial for subscription-based businesses as it offers a comprehensive view of revenue generation, business growth, and customer engagement.
How to Measure Monthly Recurring Revenue?
Here’s how you can calculate MRR:
| MRR = Sum of Paying Customers’ Monthly Fees |
How Often Should You Track Monthly Recurring Revenue?
As the name suggests — every month! 👀
Tracking it month-over-month lets you assess if your monthly revenue is growing (growth rate) and by how much.
Acceptable Ranges
There isn’t an exact range that you can compare your MRR to, but there is a range for MRR growth rate.
MRR growth rate requires you to compare your current MRR with the one from the month before. Typically, a good MRR growth rate value starts at about 15%-20%.
Example MRR
For example, your product has three different subscription tiers, and their prices are as follows, $7.99, $11.99, and $25/user per month.
Each subscription has 150, 100, and 80 users in March 2023.
So you’re MRR for March 2023 is = (150 * $7.99) + (100 * $11.99) + (80 * $25)
= $1198.50 + $1199 + $2000
= $4397.5
Now, let’s say your MRR for February 2023 was $3500.5.
Then, your MRR growth rate for March would be:
MRR growth rate = MRR (this month) – MRR (last month) / MRR (last month) * 100
= $4397.5 – $3500.5 / $3500.5 * 100
= 25.62%
This means that your MRR growth rate is healthy.
However, if tracking recurring revenue monthly is a hassle, or you mostly have annual contracts, you can track annual recurring revenue (ARR) instead.
Annual recurring revenue is a variation of monthly recurring revenue. To get ARR, all you have to do is multiply your MRR by 12.
Psst… we’ll be using this figure as an example throughout this article!
3. Expansion Revenue
Here’s what expansion revenue is:
What Is Expansion Revenue?
Expansion revenue tracks the additional revenue generated from upsells, add-ons, etc. The expansion revenue can help you observe your revenue growth.
Who Should Track This Metric?
All SaaS businesses should track expansion revenue when they start generating revenue from their existing customers (like their second billing cycle).
Why Is it Important to Track Expansion Revenue?
Expansion revenue allows your business to understand future growth potential by measuring trends in upsells and the effectiveness of your expansion strategies.
How to Measure Expansion Revenue?
Here’s how to calculate expansion revenue:
| Expansion Revenue = MRR (or ARR) – Total Revenue from New Customers and Regular Subscriptions |
How Often Should You Track Expansion Revenue?
There are a few options for how often one should track expansion revenue, depending on how often you track your recurring revenue.
If your business tracks for MRR, you can track your expansion revenue monthly. The same goes if you track your revenue annually or quarterly.
Acceptable Ranges
Typically, an acceptable expansion revenue range starts from 10%.
Scores lower than 10% mean that your company might need to rework your upselling and cross-selling strategies. 10%-15% is considered an average score, while scores above 20% are top-tier for SaaS businesses.
Example
Let’s stick with our example form earlier.
Let’s say you receive $3390.50 from regular monthly subscriptions out of a total MRR of $4397.50 in March 2023.
Then, your expansion MRR is = $4397.50 – $3390.50
= $1007
From here, we can say that your MRR has increased by $1007 (29.7%) in March 2023. This indicates your expansion MRR is excellent. At this point, it would help to identify what’s driving the growth and optimize it while looking for new expansion opportunities.
4. Average Revenue Per User
Another revenue-related customer success metric is ARPU. Here’s what it is:
What Is Average Revenue Per User?
Average revenue per user (ARPU) is another variation of MRR and ARR. This metric tracks how much a user spends on subscriptions, add-ons, cross-sells, renewal rates, downgrades, etc., in a period (it can be monthly, annually, or quarterly).
Who Should Track This Metric?
All SaaS companies should track their ARPU, even at the early stages.
Why?
Tracking ARPU can help you review whether your current pricing model works for your customer base or is generating enough revenue to help you reach your goals.
It highlights which areas need price adjustments (not selling well) or if the product needs major changes.
Why Is it Important to Track Average Revenue Per User?
Tracking ARPU primarily helps visualize how much a user will spend on your product.
It also gives valuable insights into financial performance, pricing strategy effectiveness, and growth potential. With these insights, you can identify growth opportunities.
How to Measure Average Revenue Per User?
Here’s how to calculate ARPU if you’re tracking it monthly:
| ARPU = MRR / Total Number of Users |
How Often Should You Track Average Revenue Per User?
ARPU is often tracked monthly, but you can also track it annually or quarterly — based on your average contract length.
Acceptable Ranges
There’s no fixed standard for APRU since its value is often based on your average contract value. However, a higher ARPU is better for your business.
Example
For instance, you’d like to know the ARPU for March 2023, and your product has 200 users.
If your MRR is $4397.50, then your ARPU is = $4397.50 / 200
= $21.987 = $21.99
This shows that your average user spends $21.99/month on your SaaS product. This means most of your customers are probably subscribing to low and mid-tier products (based on the example above — $7.99 and $11.99/user per month subscriptions)
5. Customer Renewal Rate
Now, let’s dive into some customer-based metrics. Starting with the customer renewal rate.
What Is Customer Renewal Rate?
As the name suggests, the customer renewal rate metric tracks the number of users renewing their subscriptions.
Who Should Track This Metric?
SaaS businesses with a subscription model should monitor their customer renewal rate as it affects their revenue.
Why Is it Important to Track Customer Renewal Rates?
Businesses, including startups and enterprises, should start tracking their renewal rate when they receive customers. It helps them understand their business’s customer relationships by seeing how long customers stay with you.
How to Measure Customer Renewal Rate?
To calculate the renewal rate, you must compare the number of users who have renewed their subscription to the total number of users who were due for renewal.
Here’s the formula:
| Renewal Rate = Number of Renewals / Number of Users Eligible for Renewal * 100 |
How Often Should You Track Customer Renewal Rate?
How often you should track your renewal rates depend on your subscription plans.
You should track it monthly if you offer monthly subscription plans. But if you offer an annual pricing model, then you should track it annually.
Acceptable Ranges
According to www.csmpractice.com, a reasonable customer renewal rate is above 80%. However, there isn’t a golden standard for it since it can vary based on different SaaS business models.
A higher renewal rate means that your existing customers are enjoying the product, so much so that they’re willing to commit to it for another month. It also means that the effort your customer success team made has paid off in retaining customers.
Example
Let’s say that you have a total of 300 users that have their subscriptions due in April 2023. Out of the 300, only 250 users renewed their subscriptions at the end of the month.
Then your renewal rate for April 2023 is = 250 / 300 * 100
= 83.3%
This means that 83.3% of your customers are willing to return — a healthy indicator of customer satisfaction.
6. Customer Acquisition Cost
The following is what you need to know about customer acquisition cost:
What Is Customer Acquisition Cost?
Customer acquisition cost, or CAC, is a customer success KPI that measures how much your company spends on acquiring new customers.
Who Should Track This Metric?
SaaS and e-commerce businesses should track their CAC from the moment they launch their product or start marketing to keep tabs on how much cash they’re burning.
Why Is it Important to Track Customer Acquisition Costs?
By tracking CAC, you get to understand how much your team spends on advertising, marketing, and sales.
How to Measure Customer Acquisition Cost?
Here’s how you can calculate CAC:
| CAC = Sales and Marketing Costs / Number of New Customers |
How Often Should You Track Customer Acquisition Cost?
You should track your CAC regularly — monthly, quarterly, or annually.
The more you track it, the more you’ll have data on how different factors affect acquisition. Plus, you’ll have a good reference for setting future marketing budgets.
Acceptable Ranges
There isn’t an exact value for a good CAC, but you can compare it to your CLV instead. This helps you to justify whether the expenses made on gaining a new customer were worth the costs.
A good CAC:CLV comparison is at least 1:3 as per the golden ratio for customer acquisition costs and customer lifetime value.
But before we dive deeper, let’s see what CLV means after this quick example.
Example
Let’s say that your team spent $50,000 on marketing and sales efforts in 2022 (on advertising, sales team salaries, etc.), and you managed to rope in 250 new customers.
Using the formula above, your CAC for the year 2022 would be = $50,000 / 250
= $200/customer
How do you know if $200/customer is a good amount?
Easy, by comparing it with your customer lifetime value!
7. Customer Lifetime Value
Here’s what you should know about customer lifetime value:
What Is Customer Lifetime Value?
Customer lifetime value (CLV) is a metric that records the expected total income your business generates from a user throughout the business relationship.
Who Should Track This Metric?
SaaS businesses who wish to know how much revenue they can expect from a user for the duration of their business.
Why Is it Important to Track Customer Lifetime Value?
CLV can help you understand how much value your customers bring and how much revenue you can get from them.
How to Measure Customer Lifetime Value?
You can use this formula:
| CLV = Customer value * Average customer lifetime |
Where:
- Customer value is the average purchase value a customer makes multiplied by their purchase frequency over a period of time.
- Average customer lifetime is the sum of customer lifespan divided by the number of customers.
How Often Should You Track Customer Lifetime Value?
Ideally, you should track your CLV right from your first customer.
But how often you should track this customer success KPI depends on you and your business. You can track it after changes in pricing plans, major discount campaigns, or significant product milestones.
Acceptable Ranges
As mentioned earlier, one should compare customer acquisition costs (CAC) to their customer lifetime value data.
By comparing your CAC with CLV, you’ll understand how much you’re spending to get each customer, how much you’ll gain from them, and whether your business is profitable.
A safe CLV value should be at least thrice your CAC, meaning customers should generate more income than what you spend on getting a new customer.
If not, your business won’t be profitable.
Example
Customer value is the average purchase value a customer makes multiplied by their purchase frequency over a period of time.
Average customer lifetime is the sum of customer lifespan divided by the number of customers.
Suppose your company’s customer value is $500, and the average customer lifetime is 2 years.
Then, your CLV for 2022 is = $5002
=$1,000
If you were to compare this CLV with the CAC value above ($200/customer), then the CAC:CLV ratio would be = $200 : $1000
=1:5
This means you’re gaining more from customers than you’re spending on acquiring them. Plus, you could also look at boosting marketing spend since the ratio is higher than the recommended benchmark.
8. Customer Retention Rate
Here’s what customer retention rate entails:
What Is Customer Retention Rate?
Customer retention rate (CRR) measures the number of customers staying with your product for a certain period.
Who Should Track This Metric?
Businesses that wish to know how good their product and customer success strategies are at retaining customers.
It’s also important for businesses with a subscription model since their revenue depends on subscribers. Tracking it helps your SaaS company predict its future revenue and growth.
Why Is it Important to Track Customer Retention Rate?
Your retention rate gives you an idea of how many customers return and receive value from your product.
How to Measure Customer Retention Rate?
Here’s how you can calculate it:
| Retention Rate = Number of Customers at End of Period – Number of New Customers During that Period / Number of Customers at Start of Period * 100 |
How Often Should You Track Customer Retention Rate?
It’s best to track your CRR monthly as it provides a detailed overview of your customer satisfaction levels.
Plus, you can conclude which strategies work when you have the data to prove their effectiveness.
Acceptable Ranges
According to Mixpanel, a good CRR is between 35%-84%.
Example
Suppose you’re tracking your retention rate for the first quarter of 2023. You started with 210 users at the start of the period and have 90 new customers by the end of March. But you lose 10 existing customers during the month.
Then your retention rate would be = (290 – 90 / 210) * 100
= 95.23% = 95%
This means 95% of your customer base is pleased with your product, and your customer retention strategies are working well.
9. Customer Retention Cost
Here’s what you need to know about customer retention costs:
What Is Customer Retention Cost?
Customer retention cost is a metric that tracks how much the customer support, sales, and customer success teams spend on ensuring your current customer base stays loyal to your product.
Why should you spend on retaining customers?
Retaining customers is more cost-effective than acquiring new ones. According to HubSpot, getting a new customer can be 6 to 7 times costlier than retaining an existing customer.
Who Should Track This Metric?
Established SaaS companies that wish to see how much it costs to keep their customers with them. It’s also helpful for SaaS businesses that want to optimize their customer success strategy.
Why Is it Important to Track Customer Retention Costs?
Tracking how much you spend on customer retention can provide insights into how much your company invests in a customer.
You can also use the data obtained and compare it with your CAC and CLV.
How to Measure Customer Retention Cost?
To calculate this metric, you’ll need to audit the total cost of your customer success and retention initiative for a selected period. You’d also need to keep track of the number of active users at that time.
Here’s what the formula looks like:
| Retention Cost = Total Cost of Customer Success and Retention Initiatives / Number of Active Customers |
How Often Should You Track Customer Retention Cost?
It’s best to track this metric monthly to stay on top of your customer success and retention efficiency.
Acceptable Ranges
There’s no fixed standard for customer retention costs. However, businesses should optimize their spending to adopt the most cost-effective strategies.
And the best way to do that is to regularly track these costs and details about which strategies were adopted.
Example
If your team spent $5000 on customer success and retention campaigns for January 2023, and you have 250 active customers.
Then, your retention cost would be = $5000 / 250
= $20/user
Now, let’s say a good retention rate is anywhere between 35-80% a month. If your company only spends $20/user and manages to retain 75% of your users, then you have succeeded.
Moreover, if your CAC is $200 and CLV is $1,000, you’re spending 10 times less than the acquisition cost and gaining 50 times in value — a major boost for your bottom line.
But if you end up with a 20% retention rate, you might want to spend more on customer retention efforts.
10. Net Promoter Score
One of the best ways to measure customer loyalty, satisfaction, and success is by tracking your Net Promoter Score (NPS).
What Is Net Promoter Score?
NPS uses customer feedback to measure how likely users are to recommend your product to their friends, colleagues, etc.
It works by asking users: “On a scale of 1-10, how likely are you to recommend (Z software) to others?”
Depending on their responses, you’ll need to separate them into these categories:
- Detractors (Scores of 0-6)
- Passives (Scores of 7-8)
- Promoters (Scores of 9-10)
Who Should Track This Metric?
All SaaS businesses that want to improve their customer experience should track this metric.
Why Is it Important to Track Net Promoter Score?
Tracking NPS helps a customer success manager quantify customer loyalty. It also tracks customer experience and potential growth due to word of mouth.
How to Measure Net Promoter Score?
To calculate this metric, you’ll only need to consider the detractors (unhappy customers) and promoters (satisfied customers)
Here’s how you do it:
| NPS = Percentage of Promoters – Percentage of Detractors |
How Often Should You Track NPS?
How often depends on what you want to know.
If you want to know how much your customers love the product, you can track it before your annual or quarterly business review. If you want to know how your customers feel after every version update, you can launch a Net Promoter Score survey a month after said updates.
Acceptable Ranges
Positive NPS scores are good, but it’s best to nudge it up to more than 20%.
Why?
20% is a healthy figure since NPS values can range from -100% to 100%.
Plus, a negative value would mean that your customers are unhappy with the product. And a 100% score would mean your software is out of this world!
Example
Let’s say your company decided to run an NPS survey, and you receive 190 responses — 140 promoters, 15 passives, and 35 demoters.
So your NPS score is =(140 / 190 * 100) – (35 / 190 * 100)
= 73.68% – 18.42%
= 55.25% = 55%
From here, this means there’s a 55% chance that your customers would refer your product to their peers.
11. Customer Satisfaction Score
The customer satisfaction score (CSAT) is the most straightforward metric that tracks customer satisfaction — and no, it has nothing to do with the SAT exams.
Here’s what you need to know about CSAT:
What Is Customer Satisfaction Score?
As the name suggests, CSAT metric measures how satisfied your users are with your product and services through customer feedback.
It’s pretty much a more in-depth version of the NPS.
Who Should Track This Metric?
Businesses who wish to understand (in detail) how their customer base feels about their product or services.
Why Is it Important to Track Customer Satisfaction Scores?
Although both metrics track customer satisfaction based on a rank scale, you shouldn’t confuse CSAT with NPS. That’s because NPS only gives an overview of product feedback, while CSAT allows you to track based on specific areas (features, new updates, fixes, customer service, etc.)
How to Measure Customer Satisfaction Score?
CSAT scores are obtained by asking customers questions and rating them (1-5, 1-10, etc.). Here are some examples:
- How happy are you with X software?
- How satisfied are you with the help you received from our customer support team?
- Did you find everything you were looking for?
CSAT score only uses positive responses in its calculation. So, how you perceive “a good ranking” is up to you and that can affect the score.
You can use this formula to calculate CSAT:
| CSAT = Number of Positive Responses / Total Number of Responses * 100 |
How Often Should You Track Your Customer Satisfaction Score?
If possible, it’s best to track this metric based on your average subscription or contract period.
However, some companies prefer to track it after their customer reaches a specific milestone (like 100 hours of use, a user anniversary, or a month after they upgraded, etc.).
Acceptable Ranges
Although getting a full score is the goal here, it’s almost impossible. Like the usual things in life, someone’s bound to feel unsatisfied with your product.
Moreover, there’s no fixed standard for customer satisfaction for SaaS. However, any score above 50% is good since it means that more than half of your customers are happy with the service. Still, it’s best to aim for higher scores.
Example
Suppose you’d like to measure the CSAT score for your product’s latest update and receive 50 responses. In your survey, scores of 5 and above are considered good, and you received 35 positive answers.
Then, your CSAT is = 35 / 50 * 100
= 70%
This indicates that a healthy number of customers are satisfied with your product and its features.
Now you know the types of SaaS CS metrics available.
But how exactly can these metrics help your SaaS company?
Read on to find out! 🔍
Benefits of Tracking Customer Success Metrics
Measuring customer success metrics enables several benefits, including:
- Keeping your business on track: Monitoring the right customer success metrics can ensure that your churn doesn’t outpace your growth and help you gain insights into your company’s prospects.
- Enabling customer-centric planning decisions: Tracking user feedback and behavior can help you understand which areas/features of your product need improvements. You can also use customer feedback to make better UI and UX decisions.
- Gaining insights into pricing strategy effectiveness: Keeping tabs on your customer churn, customer retention, and revenue growth after a pricing update can help you identify which customer niche it negatively affects. This visibility helps your finance and CS team create better pricing strategies.
- Developing proper training and onboarding modules: Understanding customer satisfaction can help you identify which features in your software need more onboarding modules or demos. You can also determine whether your customer service team needs more training on certain issues.
Next, let’s see how you can choose relevant customer success metrics for your SaaS business.
How to Choose the Right Metrics to Track
When selecting metrics to track, you must choose ones that align with your business goals and objectives. You should also focus on areas necessary to help your brand succeed.
Here are some aspects to consider:
- Does the metric align with your long and short-term goals?
Your chosen metric should help you understand what you need to do to reach your goals. Tracking a metric barely related to your business success goals would cost you a lot of time and effort, and you’d take longer to achieve your objectives.
- Is the metric suitable for your business niche?
SaaS KPIs and metrics aren’t a one size fits all kind of thing. The size of your business, where it’s based, current development stage, and niche could determine which metric you’ll need to measure. For example, customer retention shouldn’t be your primary concern if you have just started your business. Instead, you should focus on growth metrics like CLV and CAC.
- Is the metric easy to track?
You must ensure everyone on your team or company can easily understand these metrics. The data collected should also be accessible to everyone in your company.
Grow Your SaaS Business With Customer Success Metrics!
Understanding your SaaS business’ customer health is as important as tracking your finances. Customer success metrics help track the effectiveness of your company’s marketing and customer success efforts.
Plus, they help your customer success manager make data-driven decisions for growth.
So, if you want a thriving business with happy customers, you better start tracking your CS metrics!
