June 01, 2021 | Data

Happy customers are essential to the continued financial success and overall growth of any business. Satisfied customers will remain loyal to your company – and loyal customers are critical to boosting the bottom line in more ways than one.

Research suggests that a loyal customer will spend up to 67% more on a business’s products and services than a brand new customer. It makes sense: They have already tried and tested what you have to offer and found it satisfactory. A returning customer knows that the money they are spending is a sure bet, not a gamble. In contrast, a new customer may be more hesitant to pay more.

Loyal returning customers can also help you expand your business. They may spread the word about your products and services, offering free marketing with no effort required on your part. By helping you possibly acquire new customers, they further help drive profits.

Customer satisfaction is critical to building a happy, loyal following for your company. If your customers are unhappy, you must make a change. But how can you tell whether your clients are satisfied? Tracking and measuring key customer success metrics will give you the information you need.

4 Customer Success Metrics You Should Be Measuring

If you are not yet tracking these four customer success metrics, now is the time to start.

1. Customer Churn Rate

Churn rate refers to the ratio of customers that quit your business in a set timeframe. Exactly how you define what qualifies as a “lost” customer is up to you. It could include a customer who:

  • Cancels an account,
  • Fails to renew a service agreement or contract, or
  • Switches to a competing company, vendor, or supplier.

To calculate the churn rate, you must further define a given timeframe you want to analyze. For instance, you might calculate a monthly, quarterly, or annual churn rate.

Once you have decided on what qualifies as a loss and defined your timeframe, you can figure out the churn rate using a simple formula. Divide the number of churned customers you had throughout your defined period by the number of customers you had at the beginning of the period:

Churn = # customers lost within the timeframe / # customers at the start of the timeframe.

Tracking churn rate trends over time allows you to identify trends and pinpoint what is impacting customer satisfaction. For example, if you adjust prices at the end of each year in line with inflation, you may find that the churn rate goes up slightly in Q1 of the following year as customers seek alternatives.

Visual representation of customer churn rate equation featuring two circles and stick figures.

2. Average Revenue Per Account

Average Revenue Per Account, ARPA, refers to exactly how much revenue your business brings in from each customer account. As with the churn rate, ARPA needs to be calculated in accordance with a set timeframe to allow for accurate business analytics. You can use ARPA to analyze your business’s overall revenue and growth.

You can even break your information down into more granular data, such as a per-unit level. This allows you to track what products are a hit with your customers – and which ones are a miss. You can then tailor your catalog accordingly. Further, a per-unit analysis will allow you to determine which products are high-revenue versus low-revenue.

How do you calculate ARPA? Again, the formula is relatively simple. Say you want to figure your monthly ARPA. You would divide your monthly recurring revenue, MRR, by the total number of customers in that month:

ARPA = MRR / Total Customers

Unclear what MRR is? This refers to how much your business predictably makes in revenue every month. So, if you have ten customers and each one earns you $10,000 per month, you would have an MRR of $100,000.

3. Customer Retention Cost

Customer Retention Cost, CRC, refers to how much your business invests in customer success. This could include everything from product seminars to email newsletters. Engagement programs, professional services, training initiatives, and customer marketing all fall under this umbrella. You must also factor in your customer success team (e.g., account managers) on the payroll.

Again, it is always essential to consider your CRC customer success metric within a timeframe, e.g., monthly or annually. Add up all of your customer retention expenses and then divide the number you get by the number of customers:

CRC = (Total Expenses Incurred to Maintain Customers) / Active Customers

Line chart of frowning and smiling faces demonstrating values of a net promoter score.

4. Net Promoter Score

Your business’ Net Promoter Score, NPS, is a clear indicator of customer satisfaction. It indicates whether or not an individual is likely to recommend your business to another person. Many factors go into this beyond the selection and quality of products you offer, including customer support, ease of payment, and overall purchasing experience.

An NPS brings together qualitative and quantitative data. It is determined with a survey, which asks participants to provide a numerical satisfaction rating and comment-based feedback. Survey participants are categorized as promoters (they would recommend your business) or detractors (they would not recommend your business).

The detractor versus promoter label is based on a 1 to 10 scale:

  • Detractors: Customers with a 0 to 6 score.
  • Passive: Customers with a 7 or 8 score.
  • Promoters: Customers with a 9 or 10 score.

The total NPS is then calculated based on the ratio of promoters to detractors:

NPS = % of customer promoters – % customer detractors

The NPS customer success metric can go from -100 to +100. Ideally, you will have an NPS of at least 90.

Enhance Customer Success Metrics with Televerde

Televerde is committed to helping you grow your business with dedicated sales, marketing, and customer support services. We understand that happy customers are critical to your business success – and we will help you keep them satisfied. We serve a diversity of industries, from telecommunications to manufacturing and more. Learn more about how we can help you support your customers.

Want to work with us? Get in touch today.

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