Introduction

Picture sitting in a board meeting, the CS leader is presenting the status on the customer growth and retention. Although the churn rate is not horrible, the growth rate is extremely low. The board asks a simple question: “Why aren’t customers expanding their use of the solution?” The CS leader pauses and responds honestly. “We don’t really know.”

Even when CS teams are not sure what is blocking customers from expanding their use of the new technology, the truth is: “They should know.” It doesn’t matter the company size, high growth SaaS companies have CS leaders that have developed a 360 dashboard since the earliest days to discover, learn and share with the leadership team where the sweet spot is for their solution and target markets. 

It is difficult to steer a company’s growth strategy in the right direction without understanding what makes customers successful with a solution. 

The Elements of a Baseline Customer 360 Dashboard

The elements of a Customer 360 dashboard to discover and learn what is working and not working for customers consists of the following baseline KPIs:

• Each KPI has a range that can be used to indicate the specific areas the customer may be showing signs of risk.

• It is best for each SaaS company to track and monitor these KPIs over time. Once the company has accumulated a few years of data, the customer data can be used in a statistical model to determine the highest correlation factors to use in the customer health score algorithm to predict customer retention and expansion.

• With a few years of trend data, the ranges can be modified to more accurately reflect the levels that correlate to each risk level.

Product Usage and Engagement KPIs

These KPIs are tracked weekly and on a trend line to show how the customer base is growing in their overall usage and number of users in the system. It is helpful to work with the Product team to create an integration into a Data Analytics, Business Intelligence or Customer Success solution to enable the reporting of customer usage data frequently and to be able to dissect the customer data into cohorts (By Target Market, Industry, etc.)

These KPIs can be different based on the solution. For example, if the solution usage is based on other units besides seats, (i.e. CPUs, events, projects, processes, etc.) then usage KPIs for these other unit metrics can be tracked and reported as well to provide better insights that help CS understand when customers have maximized their purchase contract agreement and are ready for expansion or if they are not engaged nor using the product as expected.

Usage KPIs have a significant impact on the customer health score as it is usually weighted heavily in the areas that provide the highest value and are processes utilized that are highly associated with critical operations. Most statistical models will show these metrics as being highly correlated to customer retention and growth rates.

Support KPIs

Why are support KPIs important in customer retention and expansion? Over the last 20 years, these KPIs have shown to have good correlation to customer retention and expansion rates as well. The reason is that the number of Tickets, level of tickets and frequency of tickets are good indicators of the number of problems and the percentage of time customers are spending to solve problems with the solution. The higher these KPIs are the higher the probability the customers will not renew.

Company Perception

The company perception KPIs help SaaS companies to review how the customer base is perceiving the company’s products and services and if they would recommend the company and their products to their friends and colleagues.

Perception KPIs help the product team to understand the areas that are not providing the value that was expected and can tap into specific groups of customers to obtain detailed feedback to guide their future product roadmap plans.

Effective Product teams review these metrics each month and conduct a deep dive into the “Why” behind the scores including asking the frequency questions to understand which operations, (functionality, processes, reports, etc.) create the highest values and utilize daily, weekly or monthly in their critical operations.

Customer Value

Customer Value KPIs help SaaS companies to understand how quickly they can guide customers to operationalize the solution and confirm value and ROI in a timely manner.

The highest retention rates are highly correlated to customers who can operationalize and prove value within the first six months. For more complex target markets (Enterprise, Supply Chain Management, etc.), customers who at least get to value and ROI within the first year can be highly correlated to high retention rates as well due to taking more time to get to higher value outcomes.

One of the most valuable KPIs in this category is the ROI %. This KPI is critical to track and add to the customer health score algorithm to help the company understand what ROI % is the right predictor to customer retention and expansion. It also helps to make better pricing model changes to ensure the SaaS company doesn’t make it impossible to achieve an ROI due to the high cost of the solution. 

For Marketing purposes, this KPI is one of the best customer stories to tell the market. Customers love to be the heroes of their own story within their company as well as to be highlighted at User Conferences as a top reference and success story.

Tracking customer references and ensuring the references are across the target markets for sales to utilize is critical to sales growth, sales cycle times and win rates. The higher the percentage of customer references the more the burden can be shared across the customer base and the higher the probability of having a customer reference that is most like the prospect.

The Impact of Implementation Success in Year 1

One of the KPIs that continues to have a high correlation to customer retention is the ability for the customer to achieve a fully operationalized state of the solution within the first year. Customers must prove value each year during their budgeting cycles. Solutions that can be proven to have a business impact within the first year have over 95% probability of renewing and expanding.

SaaS companies that invest in their Customer Professional services offerings and Customer Success Management with a coordinated plan that guides customers on how to operationalize the solution in a short period of time have the highest retention and expansion rates.

Customer Roadmap Plan % Complete

The Customer Roadmap Plan is the treasure map for customers to follow to get to the gold. The gold is the value, business impact and ROI that can be achieved and is the reason the customer purchased the solution. It can show how committed the customer is to execute on the plan recommended by the SaaS company to operationalize the solution. 

Tracking the customer’s percent completion rate to the overall Customer Roadmap Plan (CRP) is extremely helpful in knowing when a customer may be in trouble. If the CRP is designed to operationalize the solution in one business unit within the first six months and the remaining three business units by year end, then tracking this KPI monthly will ensure the CS and Product teams can drive the plan to fruition to achieve the business impact and value expected within the first year. If the customer is at only 20% complete in month six, the CS teams can dive into what is causing the delay or roadblocks and clear them quickly to get the plan back on track.

The other impact to SaaS companies is the ability to drive additional customer expansions in the first year. Many customers may only purchase licenses for one business unit to see if they can get to operationalizing the solution in a timely manner. Based on the success of the first phase implementation, the customer will be motivated to keep the momentum and expand to other business units within the first year.

Summary

A Customer Health score algorithm can be developed from these KPIs.  The algorithm can be based on the specific elements of the software that generate the highest indispensable (Stickiness) factors, usage and engagement factors in key customer operations.  The usage metrics can be weighted appropriately to improve predictive accuracy for retention and expansion.

These metrics should be shared with the leadership team on weekly or biweekly basis with updates on what the top causes are for any of these KPIs trending in the wrong direction. An action plan should be developed to address each area of concern. Once each cause is identified, the CS team should coordinate across the other departments that are partners in delivering the ultimate customer experience to develop the action plan and agree on resources committed to help course correct in each area.

Keep in mind that the software space is always growing, and new solutions are coming into the market weekly and monthly. As more solutions come into the markets and usually at a lower price than the leaders in the market, many customers are willing to rip and replace solutions, especially if they haven’t fully operationalized the current solution. The less sticky and integrated into their daily operations, the easier it is for customers to make the decision to cut solutions loose and try other competitors.

As always your feedback and opinions are welcome. If you would like help in building your Customer 360 Dashboard, please book an appointment by selecting the link above or contact us directly at [email protected].