How do you measure your business’s success? Your sales and revenue are the most obvious metrics. However, focusing on those could leave you chasing the wrong targets.
After all, large sales numbers don’t necessarily translate to higher profit. You may be spending a lot to get those sales. And if you focus on lead generation instead of customer loyalty, you’ll eventually dry up your pipeline.
Thus, you must assess your business’s ability to deliver customer success and satisfaction and nurture leads more sustainably. You just might find that your marketing and sales strategies could benefit from a new approach. Plus, once you know how your business performs with customers, it’s easier to set attainable goals for lasting success.
Here are 7 customer success metrics you should be tracking — and how to help your marketing and sales teams leverage them.
Customer Spending Metrics to Watch
Customer Lifetime Value (CLV)
How much revenue has your business generated to date? That’s probably an easy metric to find. But how much revenue do you earn from each customer on average?
Your Customer Lifetime Value (CLV) is the revenue generated by each customer over the course of their engagement with you. If most of your customers regularly purchase from you for 1 year, the CLV is how much they spend in that year on average.
This metric helps you see the long-term potential of each conversion. Instead of relying entirely on new leads, you treat every new customer as an investment.
It’s less expensive to recapture a previous customer than to convert a new one. Aim to keep every customer coming back, and you can often reduce your top-of-funnel advertising costs. CLV is a good indicator of how well you continually recapture and re-nurture previous leads.
Customer loyalty not only increases your CLV but also creates “ambassadors” who will refer your business to their friends and family. In the inbound marketing flywheel, your loyal customers regularly return to the purchase cycle, thereby giving your business momentum.
Of course, this can be a little tricky to measure, especially if you don’t have a way to track all your customers (such as in retail). In some industries, customers come and go due to the nature of the product.
A comprehensive marketing and CRM platform can help solve this problem. By gathering multiple touchpoints and lead behavioral data, you gain a complete picture of each customer’s profile, so you can improve your CLV’s accuracy — and nurture customer loyalty!
Putting CLV Into Action
To best leverage CLV to improve your customer success strategy, put it into context with these key marketing metrics.
Customer Acquisition Cost (CAC)
Your Customer Acquisition Cost (CAC) is just what it sounds like. It’s often calculated as the sales/marketing cost per customer for a given time period. The formula is typically:
[cost of total marketing and sales efforts]/[number of customers gained]
However, your precise CAC formula depends on your team structure, overhead costs, paid advertising strategy, and many other factors. It’s up to you. Just be sure to calculate it consistently for each audience segment.
After you calculate your CAC, compare it to your CLV to assess how well your marketing and sales budget is building a strong customer base.
CLV-to-CAC Ratio
Measure CAC and CLV in tandem to better assess your business’s profitability. Ideally, your CLV-to-CAC ratio is at least 3:1. At 2:1, you’re only slightly profiting, and at 1:1 or less, you’re breaking even or losing money.
In other words, your CAC should be one-fifth to one-third of your LTV.
However, be sure to give these metrics a time frame. If you’re making a big push to grow your customer base, your CAC will naturally be higher. Measure at both the beginning and end of your growth campaign for clearer insights. Consider the costs of holiday marketing or other seasonal factors as well.
A common culprit for a high CAC is paid advertising and cold email marketing. When you rely heavily on “spray and pray” strategies, you burn through your lead lists without making meaningful connections. Worse, you end up paying for a lot of unqualified leads. You could be investing in customer loyalty instead!
That’s not to say you shouldn’t use PPC or email campaigns. Rather, leverage marketing automation to make each touchpoint relevant and meaningful. Score your leads and remove unqualified ones from your pipeline as soon as possible.
Profit Per Customer
In addition to comparing your CLV to your CAC, determine your profit per customer. You can calculate this with a simple formula:
[Customer Lifetime Value / Customer Acquisition Cost = Profit Per Customer]
This metric gives you a good idea of how many loyal customers you’re gaining with your marketing efforts. Ideally, you’re not spending money on leads who make one minimal purchase. Your Customer Lifetime Value may sound decent until you consider how much you’re spending to get those conversions. Your Profit Per Customer reflects the true value of your customer base.
These metrics help you understand how your marketing and sales efforts generate revenue, so you can set appropriate goals and benchmarks. Next, you’ll analyze the other piece of the puzzle: how happy your customers are and how likely they are to become loyal.
Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue is just what it sounds like. If your company sells products or services on a subscription or retainer basis, you can measure how much revenue you know you’ll get every month. Your MRR doesn’t have to be a precise tally of each customer’s actual monthly spending. It’s generally calculated as such:
[# of monthly active customers] x [average revenue per customer]
Putting MRR Into Action
Monthly Recurring Revenue is technically a measure of your business’s income, but it doubles as a customer success metric. A solid subscriber/client base is a clear sign of a trustworthy brand. The better your overall customer experience, the stronger your base. Pay attention to fluctuations in your MRR as they could indicate a shift in your target audience’s needs or satisfaction.
Expansion MRR
You can modify the MRR formula to see how your customers’ satisfaction is encouraging further spending. This metric is called expansion MRR, and it’s a good indicator of your business’s growth. Here’s how to calculate it:
[# of monthly active customers] x [average revenue per customer] + [monthly average revenue from non-recurring purchases]
Non-recurring purchases include upsells and cross-sells, add-on purchases, and so on. Expansion MRR indicates a highly engaged customer base who are willing to spend even more with your company.
MRR also helps you assess your customers’ overall satisfaction because higher spending signals their trust in your company. Let’s review some other key measures of satisfaction.
Customer Satisfaction Metrics to Watch
Net Promoter Score (NPS)
The Net Promoter Score is a simple assessment of your brand reputation. As you know, word-of-mouth is the best kind of advertising. The NPS® asks how likely your customer is to recommend your business to someone else. The higher your score, the stronger your network of loyal customers.
The inbound marketing model encourages referrals as part of its emphasis on attracting and recapturing leads. A solid base of happy customers creates momentum that reduces your dependence on lead generation. Plus, referred leads are more likely to convert — and their CLV is 16% higher on average (PDF).
NPS is an excellent predictor of this momentum. It’s usually measured with a simple question, “How likely are you to recommend our company/product/service to others?” Customers respond on a scale of 1 to 10. Those who give a 9 or 10 are your “promoters.” Those who rank you 6 and below are “detractors.” Your Net Promoter Score is the percentage of promoters minus the percentage of detractors. If your NPS is negative, you have more detractors than promoters.
Customer Satisfaction Score (CSS)
Like the Net Promoter Score, you can measure your Customer Satisfaction Score (CSS) with a single question. The customer rates your company on a scale of 1 to 10, usually after a purchase, support request, or other interaction. Ideally, they have the option to leave a comment explaining their rating. (Tip: Use automation features, such as chatbots, to immediately engage customers after an interaction.)
Once you’ve collected feedback for a given time period, calculate your Customer Satisfaction Score with this formula:
[# of positive scores (6 and above) / [# of total scores] x 100
You can collect ratings for any aspect of your business, from ordering to onboarding. Track your Customer Satisfaction Scores separately: don’t compare apples to oranges. Discrepancies may point to a gap in your customer experience. For example, if your CSS is high for your product but low post-checkout, see if your checkout process could be more user-friendly.
Customer Effort Score (CES)
One of marketing’s golden rules is to send leads down the path of least resistance. People don’t want to jump through hoops. So, the harder it is to purchase something, the less likely they are to do so.
Your Customer Effort Score (CES) indicates how hard or easy it is for people to complete an action or solve a problem with your company. Of course, you want everything to be as easy as possible, especially for your checkout process!
Like CSS and NPS, CES is usually measured with a one-question survey after a customer interaction. It asks people to rate their agreement with a statement, e.g. “It was easy to place an order/resolve my issue.” The lower the average rating, the lower your CES.
CES is a helpful proxy for overall satisfaction. In fact, it’s a better predictor of loyalty than satisfaction itself. Your CES points to ways you can optimize your customer experience and avoid creating resistance that could hurt your conversions.
Churn Rate
Customers come and go — that’s the inevitable reality of any business. But of course, you want to keep around as many customers as possible. It’s less expensive to re-engage previous customers, and they’re more likely to become promoters.
Your churn rate measures how many customers you lose within a specific timeframe. It’s most often used by service-based or SaaS companies that collect revenue from customers’ subscriptions or retainers. However, you can identify recurring customers with a well-configured CRM, then assess how many of them stop purchasing from your company. The same tool can help you re-engage (and hopefully re-convert) these lost customers.
The churn rate formula is quite simple. For any given timeframe (month, quarter, year), calculate:
[# of lost customers by end of timeframe] / [# of current customers at start of timeframe] x 100
Note: Don’t include newly acquired customers as part of your current count. For example, if you have 100 customers at the start of Q2, lose 5, and gain 10, your churn rate would be 5/100, or 5%, not 5/110.
A bit of churn is normal. Some customers will stop purchasing from your company due to their business or financial situations or simply because their needs change. But if your churn rate is higher than you’d like, it could be a sign of a less-than-ideal customer experience or a lack of re-engagement. Learn how marketing automation with SharpSpring can help you reduce churn.
Wrapping Up
These metrics give you critical insights into the strength of your brand’s reputation, how well your marketing and sales strategy align with your target audience, and the overall quality of your customer experience.
None of these measures should be made in a vacuum; they all interact to give you a complete picture. Then, you can set benchmarks and advise your marketing and sales teams accordingly.
The easiest way to consistently measure and implement your customer success metrics is with marketing automation. A dual analytical and CRM platform such as SharpSpring lets you survey customers, optimize their experience, and implement their feedback. At the end of the day, it comes down to personalization: how well you can meet your customers’ needs with a great experience — every time.
