[Last Updated: Aug 15, 2024]
In SaaS, understanding and leveraging the right customer success metrics is key for driving growth, retention, and overall business success.
Acronyms like NRR, ARR, and NPS might seem overwhelming at first.
But mastering these key performance indicators (KPIs) can make the difference between thriving and merely surviving in the competitive SaaS landscape.
According to a recent study by Gartner, companies that effectively leverage customer success metrics are 2.5 times more likely to maintain high customer retention rates. (Source: Retorio)
Here are the top 5 customer success metrics every SaaS professional should know, including a full glossary of essential terms to help you navigate customer success.
Why Customer Success Metrics Matter
Before diving into specific metrics, it's important to understand why tracking these KPIs is so fundamental:
Identify at-risk accounts before they churn
Forecast revenue more accurately
Improve customer satisfaction and loyalty
Drive product adoption and feature usage
Increase upsells and expansions
Allocate resources more effectively
Nick Mehta, CEO of Gainsight, emphasizes:
"In the subscription economy, customer success is the new sales. Tracking the right metrics is not just about numbers; it's about understanding and improving the customer's journey and outcomes."
Melissa Garcia, Director of Renewal Operations at Chief, adds:
"Our north star metric in CS is net revenue retention (NRR). If we are consistently striving to increase this number and measure all of our projects and initiatives against their impact on that goal, we focus our efforts on the right activities more often than not." (Read my full interview with Melissa Garcia for more insights)
Now, let's explore the most important metrics you need to track.
Top 5 Customer Success Metrics for SaaS
1. Net Revenue Retention (NRR)
NRR measures the percentage of recurring revenue retained from existing customers, including expansions, downgrades, and churn.
Key points:
Aim for NRR > 100% to indicate growth
Industry leaders like Snowflake achieve 160%+ NRR
Calculated as: (Starting MRR + Expansions - Downgrades - Churn) / Starting MRR
A recent OpenView Partners report found that companies with NRR above 120% are valued 2x higher than those with NRR below 100%. (Source: SuccessCoaching)
For a deeper dive into this key metric, check out my Net Dollar Retention (NDR) SaaS Success Guide.
2. Monthly Recurring Revenue (MRR)
MRR represents the predictable revenue generated from subscriptions each month.
Why it matters:
Helps identify trends and forecast future revenue
Affected by upgrades, downgrades, and churn
Declining MRR is a warning sign
According to ProfitWell, companies that track MRR meticulously grow 30% faster than those that don't. (Source: Velaris)
Learn more about MRR and other key metrics in my Top SaaS Metrics & KPIs Guide.
3. Customer Lifetime Value (CLV)
CLV estimates the total revenue expected from a customer throughout their relationship with your company.
Benefits of tracking CLV:
Identify the most valuable customer segments
Justify customer acquisition costs
Guide retention and upsell strategies
Harvard Business Review reports that increasing customer retention rates by 5% increases profits by 25% to 95%. (Source: SemRush)
To calculate this important metric for your business, use my Customer Lifetime Value Calculator for SaaS.
4. Customer Engagement Score (CES)
CES is a single metric measuring overall customer health, success, and engagement with your product.
How to use CES:
Identify trial users ready to convert
Spot at-risk customers before they churn
Find upsell and cross-sell opportunities
A study by Totango found that companies using engagement scoring have 24% higher retention rates than those who don't. (Source: CIA Insights)
For more on customer engagement strategies, read my guide on Customer Engagement Tactics.
5. Net Promoter Score (NPS)
NPS measures customer loyalty and likelihood to recommend your product on a scale of 0-10.
NPS best practices:
Aim to increase Promoters (9-10 scores) and decrease Detractors (0-6 scores)
Use alongside other metrics for a holistic view
Follow up with detractors to address concerns
Bain & Company research shows that companies with top NPS scores in their industry grow revenues 2.5 times faster than competitors. (Source: Vitally)
For tools to help measure NPS, check out my list of Best NPS Survey Tools.
Want to learn more about key SaaS metrics?
💡Check out my guide "7 Top SaaS Metrics Everyone Should Know". I break down the most important metrics and KPIs for SaaS professionals.
Implementing Customer Success Metrics
To effectively use these metrics:
Set clear goals and benchmarks for each KPI
Implement tools to track and analyze data (e.g. Gainsight, ChurnZero, Totango)
Create dashboards for easy visualization and reporting
Regularly review metrics with your team and stakeholders
Use insights to drive strategic decisions and improve customer experience
Jason Lemkin, founder of SaaStr, advises:
"Don't just track metrics for the sake of it. Use them to drive action and improve your customer's experience. That's where the real magic happens." (Source: Akita App)
Kirsten DiChiappari, VP of Customer Success at vCom Solutions, emphasizes the importance of personalization:
"If you can curate relevant insights and recommendations for your customers, packaged in an easily consumable, non-threatening way, you've won."
Read my full interview with Kirsten DiChiappari for more expert insights.
For more on implementing these strategies, read my Scaling Customer Success Ultimate Guide.
Case Studies: Metrics in Action
Snowflake's Record-Breaking NRR
Snowflake, the cloud data platform, achieved an incredible 162% Net Revenue Retention rate.
This means that not only are they retaining customers, but those customers are also significantly expanding their usage over time.
Snowflake attributes this success to the following:
Strong product-market fit
Focus on customer education and enablement
Proactive customer success team identifying expansion opportunities
HubSpot's MRR Growth Strategy
HubSpot, the inbound marketing and sales platform, has consistently grown its MRR by focusing on:
Tiered pricing model to capture different market segments
Regular product updates and new feature releases
Strong emphasis on customer education and community building
For more insights on successful customer success strategies, check out my Game-Changing Customer Success Strategies article.
Comprehensive SaaS Metrics Glossary
To help you navigate Customer Success, I've compiled an extensive glossary of essential terms and metrics:
A
ARR: Annual Recurring Revenue
B
B2B: Business to Business
B2C: Business to Consumer
C
CAB: Customer Advocacy Board
CAC: Customer Acquisition Cost
CAGR: Compound Annual Growth Rate
CCO: Chief Customer Officer
CEM: Customer Education Manager
CES: Customer Engagement/or Effort Score
CHS: Customer Health Score
CLM: Contract Lifecycle Management
CLV: Customer Lifetime Value
CO: Customer Outcomes
CRM: Customer Relationship Management
CS Ops: Customer Success Operations
CSAT: Customer Satisfaction Score
CSE: Customer Success Executive
CSM: Customer Success Manager
CSS: Customer Success Strategy
D
DAU: Daily Active User
E
EBITDA: earnings before interest, taxes, depreciation, and amortization
EBR: Executive Business Review
ELO: Enabling Learning Objectives
G
GM: Gross Margin
GTM: Go to Market strategy
I
IPO: Initial Public Offering
K
KB: Knowledge base
KPI: Key Performance Indicator
L
LTV: Life Time Value
M
MAU: Monthly Active User
MRR: Monthly Recurring Revenue
MVM: Minimum Viable Model
MVP: Minimum Viable Product
N
NPS: Net Promoter Score
NRR: Net Revenue Retention
O
OKR: Objectives and Key Results
P
PSM: Partner Success Manager
Q
QBR: Quarterly Business Review
R
ROI: Return On Investment
S
SAM: Serviceable Addressable Market
SEM: Search Engine Marketing
SEO: Search Engine Optimization
SLA: Service Level Agreements
SOM: Serviceable Obtainable Market
T
TAM: Total Addressable Market
TT: Tech Touch
TTV: Time To Value
V
VoC: Voice of Customer
Y
YOY: Year Over Year
YTD: Year To Date
And That’s It
Mastering these top 5 Customer Success metrics—NRR, MRR, CLV, CES, and NPS—will give you a solid foundation for measuring and improving your SaaS business.
And tracking these KPIs and understanding the broader landscape of SaaS metrics will help you drive growth, reduce churn, and maximize customer lifetime value.
💡If you want to learn more about Customer Success strategies and skills, check out my book "How to Become a Customer Success Manager". I cover everything from fundamental concepts to advanced strategies, making it perfect for both newcomers and experienced professionals looking to improve their skills.
The key to success is not just tracking these metrics, but using the insights gained to continuously improve your product, processes, and overall customer experience.
As Lincoln Murphy, customer success expert, puts it:
"Customer success is where 90% of the revenue is."Want to dive deeper into Customer Success strategies?
Kirsten DiChiappari adds a final note on adaptability:
"The one non-negotiable thing that I've told anyone who works for me is that they need to be comfortable being uncomfortable and that if they want a predictable, fully defined role, it won't be here."
For more resources on customer success, check out my Ultimate Guide for Customer Success Managers and my Customer Success Career Guide.
Sources:
Gartner, "Customer Experience in Marketing Survey", 2023
Nick Mehta, LinkedIn post, 2024
OpenView Partners, "2024 SaaS Benchmarks Report"
ProfitWell, "The State of Subscription Commerce", 2023
Harvard Business Review, "The Value of Keeping the Right Customers", 2020
Totango, "Customer Success Benchmark Report", 2023
Bain & Company, "Prescription for Cutting Costs", 2023
Jason Lemkin, SaaStr Annual Conference keynote, 2023
Lincoln Murphy, CustomerSuccessAssociation.com interview, 2024