There is a never-ending list of tasks, strategies, and customers to manage in the SaaS industry. This highlights the need for effective client communication for every SaaS business owner. Customer success in SaaS requires upfront investigation into user needs, common questions, and how your product may facilitate the customer’s desired outcomes. After reading this article, you’ll be able to guide your customers to measurable results when they sign up for your service and understand why customer success is essential for software-as-a-service businesses.
What is SaaS customer success?
In business, “customer success” refers to the processes and procedures used to ensure that a product or service provides lasting value to the buyer rather than just immediate gratification. There has yet to be a well-defined framework for customer success. Still, in the meantime, teams take a proactive, relationship-based approach to addressing issues before consumers even know they have them.
“SaaS customer success is the process of proactively resolving problems and easing pain points for your customers.”
In other words, the key is to address it before a client’s situation.
You may feel that customer success and customer service are interchangeable. But that isn’t so. Though they aim to aid a client, both strategies could be more similar in execution. With a fantastic frame of mind, customer success in SaaS is all about leading the way in helping with product creation, onboarding, adoption, and satisfaction.
- These are important to the idea of a software-as-a-service company
- Making it easy for people to sign up for an account and set it up
- Emphasizing the product’s worth in advance and promoting it as such
- Getting feedback in real-time, processing it, and using it to make your bottom line better
- Transforming free-trial participants into long-term, paying consumers
- Ensuring that these customers are satisfied with your product or service
- Having customers fall in love with your product/service/brand, therefore becoming brand advocates themselves.
- Boosting income while decreasing customer defections.
One of the essential components of SaaS customer success is anticipating customer needs to guarantee the possible return on investment. They will have great results with your product or service, continue to use it, and your company will profit in all likelihood after they acquire it.
Why does a SaaS company need customer success?
Making clients succeed with your start-up or established SaaS company is more than just a nice-to-have in a space where competition is heating up rapidly. To put it another way, a SaaS company can only survive with regular customer payments. Customer retention is crucial to the success of your SaaS business. There are three key reasons why customer success is crucial for SaaS companies.
There are several benefits to focusing on customer success for SaaS company:
- Convey the meaning of the present benefit: Improve your client onboarding process to assist consumers in achieving their goals and learn what makes your product unique.
- Stay ahead of changing needs: Now that consumers can take care of their own needs, they may ask for more features in the future. Be careful to keep users interested and responsive to their needs as they change.
- Get turnover rates for revenue down below zero: SaaS businesses, typically based on a subscription model, always need to measure monthly recurring revenue (Monthly Recurring Revenue). To achieve a negative monthly revenue churn, it is necessary to focus on the “expansion revenue” (which allows you to increase LTV).
- Encourage customers to refer others: Nothing will magically appear in the form of recommendations. Developing a reliable referral programmer that provides an attractive incentive in exchange for submissions should be high on your list of priorities.
- Skyrocket viral growth: Customers who are successful and satisfied might be considered a growth fuel. If you aim high for the benefit of your customers, they will reward you by helping your SaaS company expand even more quickly.
- It helps to cut down on customer turnover. An increased client defection rate makes it more challenging for a SaaS company to expand by attracting new paying customers.
- Customer lifetime value is optimized. Customers are likely only to defect if they see value in using your offering. If there are good upsell and cross-sell chances, a one-year contract can turn into two or three years, or even longer, and expand with the consumer.
- It makes it possible to generate second-order revenue. Referrals from satisfied customers and sales made when former clients introduce your product to their new employers count as second-order income. If you can help your current clients achieve their goals, they will be more inclined to spread the word about your product and keep using it even after moving on to other positions.
The critical jobs on a customer success team
It can only be easy to assemble a strong customer success team by clearly understanding who should be hired for what positions. While the significance of particular situations on a team may vary with its size and resources, it is always helpful to have a broad perspective.
Here’s a rundown of some senior and entry-level customer success positions you can fill as you build your team.
1. CEO of customer service (CCO)
This is a top-level executive position in charge of the company’s customers and their satisfaction. Their job is to develop, promote, and implement the company’s overarching strategy for the customer experience.
2. Senior Director of Customer Success
Unlike a chief customer officer, a vice president of customer success is responsible for something other than the company’s customer success strategy. They devise the overarching plan for customer success and then employ others to implement it. High-level metrics for the team’s performance are also determined and reported.
3. Lead Customer Success Manager/Team
This individual is in charge of managing the day-to-day activities of the customer success group. As people managers, they oversee the customer success team’s contributors, encouraging them to achieve their full potential while contributing to the team’s larger goals.
4. The Customer Success Team
Managers of customer success are independent contractors that interact directly with clients. They play an essential role in processes like customer onboarding and are often the first point of contact for the clients they manage.
5. Head of Implementation
The primary responsibility of an implementation manager is to ensure a smooth onboarding process. Businesses with highly technical products or services requiring extensive setup typically employ implementation managers.
Things that ensure the success of SaaS customers
Metrics that are closely connected to the objectives that your firm has set for itself are referred to as key performance indicators. These goals should be attainable if you follow the general strategy you have developed for your company. Because key performance indicators can assess progress toward achieving strategic goals, utilizing them is vital to achieving long-term success.
In addition, key performance indicators are essential components of improvement. Keep a regular tracking system for your progress toward your strategic goals. Correcting any areas in which you are deficient will be much simpler while ensuring that your strengths are effectively preserved. Quantifiable and empirical data are requirements for key performance indicators.
Important customer success KPIs for SaaS businesses
Customer success teams are used by SaaS businesses to assist customers in realizing the benefits of using the service. Providing clients value is essential if a company hopes to keep their loyalty. However, “value” is a rather vague concept. To ensure those benefits are reaching your customers, you need to track the metrics for customer success.
Key performance indicators are typically based on the money the client makes or saves by utilizing the product. From the very outset of your interactions with clients, you must have targets that you can measure. Then, the value they’ve created is defined by each step they take along their plan.
Role of customer success manager
As a Customer Success Manager (CSM), you must ensure that they always follow the strategy you’ve developed for them. You should tell them how far they have come and where they still need help. This will ensure that they continue to be committed to the outcomes they desire from using your product.
Many customer success metrics can be measured as you progress with clients utilizing your product. These metrics indicate how well you perform your customer success obligations, but they can also be considered vanity metrics because not all measures can be used as KPIs. While others reflect the precise value realized by customers, some are more crucial in indicating the effectiveness of your customer success initiatives.
SaaS customer success key performance indicators (KPIs)
Here you look at some of the most important key performance indicators (KPIs) related to customer success that can be used to track your progress in this business area.
1. Churn rate
The churn rate is the percentage of active users who discontinue service over a specified time frame. There are two methods to determine the churn rate. One way to look at it is through the speed of customer turnover, which indicates the total number of customers that have left. Second, people have revenue churn, which measures how much money was lost due to consumers going.
Reasons for customer churn include not being satisfied with your service and needing more value from your product. As a customer success manager, one of your main goals is to boost CLV (LTV). In a subscription-based business-like SaaS, income generation is directly proportional to the subscriber’s length of service.
As a result, you must take measures to minimize employee turnover. The churn rate can be easily calculated using the following formula:
The Customer Churn Rate is calculated as follows: CCR = (Total Customers Lost) / (Total Customers Gained) x 100
You can figure this out on a monthly, quarterly, or yearly basis.
Like the customer churn rate, the revenue churn rate is the proportion of total revenue lost due to customer turnover, downgrades, or down selling. It is also frequently expressed as a percentage of monthly or annual recurring income (MRR or ARR) (ARR).
2. Earnings from growth
Revenue earned from current customers is one of the most used customer success measures. If you’re good at account-based marketing, in which you cross-sell or up-sell similar products to your existing customers, this score will reflect that.
The goal of establishing a customer success group within your company is to increase revenue utilizing your current clientele. Therefore, this is a key performance indicator (KPI) for satisfying customers.
Using your MRR, you can quickly figure out your growth rate in terms of revenue.
Growth MRR rate = (Monthly Net Revenue from Cross-Sells and Upsells) / (Total Monthly Revenue) x 100
The Value of a Customer Over Time (LTV)
The lifetime value of a customer (LTV) is a key performance indicator (KPI). To put it simply, lifetime value is the amount of money earned from a customer throughout your business’s engagement with them. From purchase onward, they begin to generate income for their owners. Then, it develops due to your organization’s upselling and cross-selling chances with them. The marketing and promotion costs associated with gaining a new customer can be substantial for businesses. Therefore, a customer’s total revenue must be subtracted from the acquisition cost to reach a net revenue amount.
To determine LTV, use the following formulas.
Lifetime Value (LTV) = Annual Customer Revenue x Total Number of Years (a Customer Has Been an Existing Customer) – (Total cost of acquiring a new customer)
LTV heavily influences your company’s valuation. When gauging the health of a company, investors place a premium on this indicator. To an investor, this is a sure sign of the company’s success in the years to come.
3. Net promoter score (NPS)
A high Net Promoter Score (NPS) is a crucial metric for a customer success manager. Your hard work in cultivating a rapport with the client has paid off. The first round of approval is achieved when users are delighted with your product and derive value from it. The next step is providing outstanding support for clients with problems with the product. If your efforts to improve the customer experience pay off, it will show up in your Net Promoter Score, affecting your ability to keep existing customers and attract new ones.
A single question is asked to the customer in this survey. Here, you poll respondents on how likely they are to promote your wares to others. They will be able to assign a probability to their response between 1 and 10, with 10 indicating the highest likelihood and one the lowest. Those who give you a perfect score (a 10) are loyal customers who will spread the word about your company. They are neutral if they give you a rating between 6 and 8. However, individuals who gave you a rating of 1–5 are the detractors who would do everything to damage your company’s reputation if given a chance.
4. The customer health index
When automation is in place, this measure becomes essential. This metric should take centre stage on your CS platform’s dashboard as the most crucial indicator of client success. It shows you how your client account is doing across several key metrics. These settings can be configured by the user or established beforehand. Just a few of them are:
This provides you with information regarding the total length of time that the user spends utilizing your product. It is among the essential measures for measuring engagement.
This provides a clear indication of the frequency users revisits your app.
Indicator of Loyalty:
Customers that have a much higher longevity towards utilizing your product or who have used the product for more than a specified amount of time, say a month or so, are deemed to have a good loyalty index. If this is the case, the loyalty index is considered good.
5. Rate of first-contact resolution (FCR)
This statistic is most often applied to customer service, but it can also be valuable in customer success. Your CSM will be the one that interacts with consumers regularly. For the best results, it’s ideal if the problem can be solved on the first try. It shortens the time it takes to handle the issue and makes it, so the consumer doesn’t have to keep checking in: the higher your FCR percentage, the better.
6. Consistency of renewal
This KPI should be the primary focus of all your customer-centric efforts. It measures how well your customer success activities are working to keep existing customers around. You may quickly determine the renewal rate by dividing the number of successful renewals by the total number of clients whose contracts were up for renewal. Here’s the formula:
The renewal percentage is calculated as (Total actual renewals) / (Total number of customers due for renewals) times 100.
7. Transition period
Time to onboard refers to how long it takes for a consumer to use your service. The term “onboarding” may have varying meanings depending on the type of consumer you’re dealing with. Although the time to first value is a variable, the fundamental idea is unchanging. The time it takes for a newly acquired customer to realize value from your product is a key performance indicator (KPI) in customer onboarding. The user must put the product to work to accomplish the purpose it was purchased before the configuration, customer training, product orientation, etc., will have been worthwhile. They have successfully finished your onboarding process once they reach this point. An essential key performance indicator (KPI) for customer success is the time it takes to get to this point after the transaction.
8. The profit margin on sales increases
How well you upsell approach is can be measured by this indicator. The more time you put into serving a smaller group of consumers, the more significant that group will eventually become. As a result, occasional offers to purchase upscaled products are required.
To get your upsell rate, take the number of upsells made within a given time frame and divide it by the number of customers who met the criteria for an upsell offer during that time frame.
Upsell rate = (Total upsell deals) / (Total customers qualifying for upsells) x 100
To maintain growth over time, you should continually strive for the highest possible upsell rates.
9. Remarks from satisfied customers
While this has been going on, discussions concerning measurable quantitative KPIs have continued. However, qualitative comments from customers are much more crucial than the quantitative metrics mentioned above. A customer’s own words are the most precise measure of their satisfaction. Therefore, periodically soliciting qualitative feedback is necessary for determining customer contentment with the brand. You can compile this info during regular conversations and quarterly business meetings.
10. Count of service requests
One of the keys to customer success is being there for your clients before they need you. If successful, the number of tickets requiring assistance would drop precipitously. As a result, this customer success management KPI should also be used to evaluate the efficacy of your customer success efforts. To cut down on this, you need to analyse the specifics of support tickets and spot the underlying patterns leading to the same issues repeatedly. Resolving that issue permanently and proactively would cut down on tickets significantly. Other areas can also be improved with a complete analysis of the keys.
A plethora of additional metrics can provide you with a more nuanced understanding of your customer success initiatives. However, the customer above success KPIs serves as the basis for further evaluating the performance of your CS operation. In today’s SaaS businesses, “customer success” is a relatively new role. However, these businesses have yet to appreciate this feature’s potential properly. Therefore, you must provide adequate justification for the resources they are expending to support this operation.
These CSM KPIs are direct indicators of the quality of service you deliver to your clients. The Lifetime Value (LTV) and Expansion Revenue (ER) indicators tell you how much money your customers are worth. At the same time, the other two show you just how effective your relationship management is. Although there are monetary metrics that can be used to gauge customer success, more is needed to capture the role entirely. For a business to successfully cultivate a long-term relationship with its clientele, the service provided to those clients is crucial.