The Critical Customer Metrics for Each Stage of Your SaaS Company’s Journey
By: Matt Brown, Kathy Isaac, Lauren Thibodeau, and You Mon Tsang
December 2022
It’s never been more important for SaaS companies to concentrate on the health of their current customers to expand revenue and minimize churn. Depending on your company’s context, it can cost anywhere from 5 to 25 times less to sell to an existing customer than to acquire a new one according to the Harvard Business Review (1). Fully monetizing your current customers delivers more value for them through expanded usage and ROI, while at the same time increasing your company’s top line revenue and bottom line profitability.
How then should we think about the critical customer metrics to measure at each stage of the journey?
This is exactly the question the four of us discussed at the 2022 SaaS North Conference, held in Ottawa, Canada. And as a fitting metaphor to the unexpected challenges that come with building a great SaaS company, our panel overcame a government issued cell phone alert, a conference centre power outage, and multiple security announcements during our session. The audience took it all in stride and it was a lot of fun.
We looked at the topic of critical customer metrics through two lenses: what to measure during a company’s journey from product-market fit to scaling to cruising altitude; and what to measure during the customer’s journey from onboarding and adoption to value realization and expansion. We’re sharing our Q and A here with the goal of supporting your company on its journey. And if there are metrics we refer to that are newer to you, check out MetricHQ, a free online dictionary of metric definitions crowdsourced from experts.
For context, here’s who we are from L to R and the hats we wear right now:
Lauren Thibodeau – Founder, SaaSCan. Core mandate is to empower Canadian SaaS co’s to be metrics-savvy and customer-centric through research and services.
Matt Brown – VP, Customer Success and Service at Solink, providing cloud video surveillance for business security. Core CS Mandate is Expansion. North Star CS metric is Net Revenue Retention.
Kathy Isaac – VP, Customer Success at Carbide, a leading information security and data privacy management platform. Core CS Mandate is Renewals. North Star CS Metric is Gross Revenue Retention.
You Mon Tsang – Founder and CEO, ChurnZero, a leading Customer Success platform. Core mandate is to help customer success teams at subscription businesses improve efficiency, increase revenue, and deliver the best possible customer experiences.
Key Customer Metrics During the Company Journey
Lauren: You Mon, as a four-time founder and current CEO whose company serves subscription businesses, you have a unique perspective. As SaaS companies mature in their company journey, how should their customer-centric metrics change?
You Mon: First of all, the thing about metrics is you need to add different ones at each stage, but you need to keep the ones from the prior stage too.
In the pre-product market fit stage, it’s all about usage. You want to measure daily, weekly or monthly usage to see how sticky your product is. And you want to look at how people are using and adopting the features as well as whether they’d recommend you to others through their Net Promoter or NPS score.
As you hit product market fit you want to start looking at Net Revenue Retention to monitor how you’re expanding the revenue footprint from your customers.
In the scaling stage, you want to be sure you’re retaining revenue from those early customers by adding Gross Revenue Retention to the mix.
And then at cruising altitude, add in Customer Led New Bookings that result from customer referrals. This demonstrates that your revenue flywheel is starting to hum.
Company Lifecycle Metrics
Source: You Mon Tsang, ChurnZero
Question: Kathy, what stage is Carbide at in your company journey, and what advice do you have when it comes to measuring and improving survey-based metrics like Net Promoter Score, Customer Satisfaction, and Customer Effort Score? What about gathering qualitative customer feedback at this stage?
Kathy: Carbide has hit product market fit and is transitioning to scaling. At this stage, customer feedback is important to us. We’re looking at what features successful customers use consistently so we can drive other customers to those features. While surveys provide a quantitative measure of customer sentiment, be sure to ask the question “What is the main reason for your answer”. These open text responses are usually packed with incredibly valuable feedback around what is working well and what areas require improvement. Use that feedback as part of your roadmap for improvement and your survey metrics should improve.
You Mon: As an FYI, here’s the percentage of surveys sent by ChurnZero customers to their customers via the platform over the past 12 months. This reflects tens of millions of surveys sent. NPS is more established while Customer Effort Score is an emerging metric.
Source: ChurnZero
Lauren: Matt, what stage is Solink at in your company journey, and what advice do you have when it comes to measuring and improving metrics like product usage and adoption, and net and gross retention?
Matt: Solink has found product market fit and is currently in the scaling stage. Metrics such as product usage or adoption, net and gross retention tell you very different stories at different stages of your business. We focus a lot of time on the first critical stages of our customer’s lifecycle, driving product adoption and engaging customers at a high level to ensure they understand the product value. If the product makes a key impact on their business and is sticky enough, this will improve your retention numbers. It’s also important to understand the various areas of product whitespace and work your customers toward consistent use of the product, if that’s what’s required for them to be successful with your offering. When you work towards these proactive measures in the early stages of their lifecycle, you can focus on relationship management over time which builds a balance between product value and company loyalty. All of these in turn help retain customers over a longer period of time and we see our customers continue to grow with Solink.
Key Customer Metrics During the Customer Journey
Lauren: You Mon, now let’s look through the lens of the Customer Journey. As our customers go from onboarding to adoption to renewal and expansion, how should the customer-centric metrics we focus on change?
You Mon: As a customer moves in their journey, so do the metrics (see the chart below). Beginning with onboarding, those metrics feel more like a project with progress as your main goal. After that, it moves to metrics around product or service usage, surveys and relationship. As a customer evolves to tenured, then you will want to see referral and referenceability as your goals.
Customer Journey Metrics
Source: You Mon Tsang, ChurnZero
Lauren: Matt, your CS mandate is revenue expansion and your north star metric is NRR. How does that inform what you do on a day to day basis in CS at Solink?
Matt: Through a focus of our customer success managers allocating their time to helping our customers obtain positive business outcomes, it provides the space for the remainder of the company to smooth out the customer experience in other areas of the business, such as customer service. We’ve witnessed the positive impact these customer facing teams can have on our customers overall. An upfront investment in building leading indicators of your customer’s health will allow your customer success team to spend time in areas that could lead to revenue expansion, but also when needed, to be more defensive for account retention, if required.
Lauren: Kathy, your CS mandate is renewals and your north star metric is GRR. When it comes to measuring customer health throughout the customer journey, what can you share so our audience doesn’t need to learn it the hard way?
Kathy: Using a multifactor health score is key. A good health score should contain usage factors, factors that measure engagement outside of the platform, like email or survey responses, and for high touch customers, consider a CSM sentiment factor. Your CSMs are frontline. CSM sentiment is a powerful indicator of customer success and probability of renewal. Make sure to capture that factor in your health score as well.
To wrap up the session, we each shared a resource to learn more about customer metrics. Hope these will be helpful for you too.
Kathy – SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters
Matt – ChurnZero Online Resources (and no, Matt was not strong armed to say this!)
You Mon – The 2021 Keybanc SaaS Metric Benchmark report
Lauren – Dave Kellog’s SaaStr presentation Churn is dead. Long Live Net Dollar Retention Rate.
Reach out to any of us if you have questions or would like to chat more.
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(1) HBR Article Link
