7 Key Customer Success Metrics For SaaS Enterprise Software
To provide truly exceptional service, SaaS vendors need to be constantly and quantitatively measuring the approval and engagement levels of their customers. Here are 7 metrics we use at Duco.
By Joe Peters, Head of Customer Success
Enterprise software has been undergoing a fundamental shift over the past 20 years. Installed systems, once ubiquitous, are giving way to Software-as-a-Service (SaaS) or cloud-based offerings, which bring a whole host of advantages to firms including immediate installation, regular seamless upgrades, and far greater scalability.
Another benefit to SaaS is that vendors need to up their game in terms of customer engagement. Installed systems are likely to be sold on the basis of 5-10 year licence fees where you only start to see a return on investment by the third or fourth year.
This is particularly the case in financial services when dealing with mission critical data, such as trade capture systems, collateral management, affirmation and confirmation, settlement, clearing and reconciliation.
The installed system becomes an integral part of the firm’s architecture for up to a decade, so vendors have little incentive to provide good customer service until towards the end of the contract. Instead they are able to rely on expensive professional services consultants to sort out any issues, and only really need to start engaging with the customer a year before the renewal date.
SaaS is different
With SaaS offerings the customer has far more control. Because these systems can be turned on or off quickly, the experience vendors provide needs to be exceptional. This is true in the consumer world too – you can cancel your Spotify subscription whenever you want. The reason you don’t, is because it’s a great service.
Pricing for SaaS tends to be on a usage basis. The better a solution is, the more a customer is likely to use it. And the more a customer uses the solution, the more they need to pay for it. The result is that the success of the customer is directly linked to the success of the vendor. Hence at Duco, and in many other SaaS companies, we have a Customer Success function rather than calling it Client Services or similar.
So far so good, but how do you actually measure customer success? It’s vital for SaaS firms to constantly and consistently track the engagement levels of their customers to ensure they are making good use of the product.
At Duco we have spent a lot of time and effort looking into this, and we currently track the following seven metrics:
1) Customer effort score
Onboarding is an important component of any software deployment. The quicker you can get a customer live and using the product, the quicker they are likely to achieve value and ROI, and it’s more likely they are going to have a good experience using the service.
At Duco we put quantitative values on the speed, effectiveness and user experience of the onboarding process, and combine these into a metric we call the Customer Effort Score. It’s a one-off metric but often correlates closely to the levels of engagement we see in a customer’s first year of using Duco. Speaking of which…
2) Engagement levels
Measuring the frequency and quality of engagement is absolutely key to ensuring good customer health. This needs to be carried out across all touchpoints: emails, support calls, onsite visits, online demos, attendance at customer events, etc.
High engagement levels are an indicator of a good active customer relationship. If engagement starts to drop, red flags should be raised. As an organisation you then need to dig into the reasons behind this and bring those levels back up.
3) Customer satisfaction (CSAT) score
Linked to the above, it’s vital to know how a customer perceives the level of support they are receiving. A good way to do this is ask for a Customer Satisfaction (CSAT) score after each support interaction.
Low CSATs can be investigated to learn how to improve in the future. The frequency of interaction with support can highlight some interesting trends. If the customer never asks for support, either they are extremely happy or they aren’t actually using the platform. If the customer is continually calling support, that might indicate an opportunity to discuss additional training, a customised onsite session, or even some strategic consultancy.
Ideally you want customers somewhere in the middle – the sweet spot – where they are engaged with the product and contacting support as and when needed.
4) Actual usage
How usage is tracked will vary dramatically depending on the type of software or service provided and how it’s priced. But whether you are charging based on usage, or on a number of users/licence basis, it’s clearly an important metric to track constantly. At Duco we look at two measures: actual usage and breadth of usage.
Actual usage is a straightforward calculation for us. We charge by volume, typically with an upper data limit, so if a customer has a ceiling of one million lines of data per day, and they are generally putting 600,000 lines through Duco per day, then the usage rate is 60%. Low or dropping usage indicates a cause for concern, while if a customer regularly reaches (or breaches) their limit, it provides an opportunity for us to sit down and discuss their subscription.
5) Breadth of usage
For breadth of usage, we look at how many of our product features are being used on a daily basis. Duco has core functionality for ingesting, normalising and reconciling data that all clients use, but we also have other features such as workflow for automatically allocating issues to individuals/teams or an API for downstream reporting. The more features a customer uses, the stickier their relationship is likely to be and the more confident we can be in the strength of the customer engagement.
6) Number of active users
Although we don’t charge by the seat, we still track the number of active users (just as firms who charge by users should also measure actual usage). A growing user base usually means the customer is finding more uses for the product within the organisation. Great news! Conversely, if user numbers are declining, it’s imperative to find out why.
7) Net promoter score (NPS)
Net promoter score or NPS is an industry standard engagement metric that gives you a benchmark of your customer loyalty. In a nutshell, you ask the question: “On a scale of 0-10, how likely are you to recommend this product/service to a friend or colleague?” Anyone who answers 9 or 10 is a promoter; 7 or 8 are passives; 0-6 are detractors. Your NPS score is calculated by taking the percentage of promoters and subtracting the percentage of detractors. This will give you a score in the range -100 to 100. For more information, Hotjar has a good NPS summary.
NPS is great because you can benchmark your organisation against the industry very easily. For example, a 2019 Retently survey put the NPS average for SaaS companies at 26. Duco’s most recent NPS survey across all our customers put us at 65, so we’re doing well against the average. However, it’s vital to measure this metric regularly to spot trends.
We run NPS surveys of our customers every three months. We look at both Duco users and the business sponsors who made the decision to invest in Duco in the first place. Often these are very different groups, but both are vital to the health of the customer engagement.
If we see the NPS fall below a certain threshold for a particular customer – for either group – it triggers an action to find out why. We will speak with the customer and try to get to the root cause of any dissatisfaction. This can happen when, for example, a business sponsor at a customer is replaced by someone not familiar with Duco, or who has more experience with on-premise solutions. NPS acts as a heads up that we might need to arrange a meeting with the new sponsor and re-emphasise the benefits of Duco.
At the other end of the scale NPS helps us to see who our real advocates are. These are customers who might be receptive to joining us to speak at a conference, or potentially acting as a reference client.
Service not software
One of our core values at Duco is ‘service not software’. This is especially relevant to us as a SaaS provider, because it’s so easy to switch. As cloud-based offerings start to take over in the enterprise software market, the power is starting to shift to the customer. If you don’t provide exceptional service – and constantly measure how you’re providing exceptional service – then your customers will surprise you and move on.
The world of enterprise software is changing. And as the Head of Customer Success for a best-of-breed SaaS provider, I’m all for it.