This article is taken from a presentation Daniel Goldfeld gave at the SaaS Metrics Summit 2022. Get the full talk on demand, right here!
My name is Daniel Goldfeld, and I'm a Vice President of Customer Success. I have about 13 years’ experience in customer-facing, technical, and customer success roles in startups and corporations.
I’ve managed several teams in my life, most of them focused on technical customer-facing roles in pre-sell, post-sell, and support.
Here's a breakdown of our key talking points:
KPIs vs Metrics
Let's move on to the topic of this article: KPIs and metrics in SaaS. I understand that every company in every domain views and uses KPIs and metrics in a slightly different way. While I'm going to talk to you about how I leverage them in my work, don’t feel this is the only way you can do it.
Let's look at the differentiation between KPIs and metrics. Key performance indicators (KPIs), are quantifiable objectives. They’re things that we want to achieve in a certain amount of time. In our case, they measure the growth and trends of our company.
Metrics represent the heartbeat of our current state. Where are we now? How are we doing at this point? Our metrics don't necessarily have to correlate with our KPIs, but they’ll usually represent the current state of the things that we need to measure to achieve our KPIs.
Defining a vision
Once we've defined what metrics and KPIs mean to us, there's another thing that I think is super important in regards to what we measure: your vision.
If you want to measure something, you first need to understand what you want to achieve. You can quantify and measure a lot of things. However, you need to have a vision of what you want to achieve to be able to break that down into KPIs and metrics.
For us, in the customer success team at Perimeter 81, our vision is the one you see below: getting our customers’ technical stakeholders and decision-makers to a state in which they realize they gain value by achieving their company's business goals and securing personal wins while undergoing great customer experiences.
In other words, we're focusing on technical stakeholders within the accounts because our product is very technical – we're providing remote access. We need to talk to our technical stakeholders and work hand in hand with them.
Then, we need to make sure that those stakeholders gain value from the product. We want to make sure that after they decide to buy Perimeter 81, there’s a return on their investment.
We need to ensure that we've addressed their pain point, and done what they were expecting us to do, and that they can answer the question, “Why did we buy this product?” with a positive answer.
And last but not least, is the great customer experience. This is super important. If you think about your cell phone provider, for example, that provider could be the best in the country.
But when you have a problem and you just want to speak to customer care, you have to wait in line, and they don't provide you with the answers you want.
You're gonna get frustrated. There's a good chance you're gonna churn, even if they're the best technology vendor in the domain.
They might be providing you with 5G, but if you find an alternative that only provides a 4G connection but provides you with a better customer experience, you're probably gonna switch. That’s why we need to measure those customer experiences and make sure they're great.
Our KPIs and Metrics
Let's talk about the KPIs and metrics that are coming out of this vision.
Our KPIs are pretty similar to those in a lot of other SaaS companies’ CS functions. We’re focused on retention: the number of renewals minus churn.
We need to have expansion from existing customers, in other words, ARR growth. Last but not least is collection – making sure that all the invoices are being paid correctly.
Those are the KPIs. Now let's talk a little bit about our metrics; you can see they don’t correlate exactly with the KPIs. However, each one of the metrics will ultimately help us meet our KPIs and realize our company vision. Let me tell you how.
The first thing we're measuring is life cycles. We want to see how many customers are onboarding:
- How many are training?
- How many are adapting?
- How many are extending?
- How many are in the renewal process?
- Why do we need this?
All of these questions allow us to better understand our current state and our workload.
Understanding how many new customers we have and their onboarding time helps us focus on them and make sure that the onboarding is successful so we can build a healthy relationship.
It also helps us better understand their needs and why they're using the platform.
Expansion is another important part of the life cycle to monitor. We want to see if there's an expansion opportunity for those customers who’ve adopted our platform and used it successfully.
Last but not least, in the life cycle part, is the renewals. We want to know how many customers are up for renewal within three months. We do this to make sure that we can dedicate enough manpower to focus on them and keep them on board with us for another cycle.
The second metric is adoption. We're a company that believes that value comes from adoption. If your product’s not being used, there's no value.
You can give it at the best price there is, but if users are not logging in, or if you've sold 100 licenses but you only have 10 users using the platform, something's gone wrong and you’re going to see churn. So adoption is super important for us.
We're focusing on adoption not only per account for our entire product across different segments. We have to make sure that the adoption makes sense and that people are using the product.
We know that certain features are very sticky within the platform, and we want to make sure that our customers are using those features because if they're not, they're going to get less value from the product and it's going to be easier for them to churn.
By mapping those different features and measuring their usage per company andsegment, we can make sure we've got a positive trend in the usage of those different features and their stickiness within different life cycles.
We measure Net Promoter Score through a survey that we send out to active users, where they can rate the platform. It represents our end users’ satisfaction. This is something that we're closely tracking.
It's important for us to know where we stand as a company in regards to what our end users feel – not the decision-makers, not the technical stakeholders, but the actual users of the platform. It also gives us an idea of the health score of each of our accounts.
CSAT is for support. We want to know that every interaction our end users have with support is great.
Not only that the problem was solved, but the response our end-user got was good, and they're happy with the service they received. This, in our perspective, is the customer experience, and if the experience is bad, it might affect the health score of the account and impact the expansion opportunity.
The service-level agreement metric is about making sure that the system is up and running and we don't have any outages affecting the users. We also want to make sure that our support team is providing support within the defined SLA in terms of the time it takes for them to respond to and close each ticket.
This is also a very important metric for us to understand the load on support. Also, if we see a sudden spike in support requests, that might indicate an issue within the platform, which is vital for us to know.
It helps us gauge the health score of each account too; if we're in an SLA breach for a company that is now in the renewal phase, we want to know about it.
Last but not least, we have the relationship metric. Are we talking to the customer? Are we talking to the sponsors? Are we talking to the technical stakeholders? Are we talking decision-makers? How strong is our relationship with the company?
This is measured in the number of engagements that we have with customers. These can be emails, meetings, phone calls, or any type of contact with those different stakeholders. We also look at the sentiment of the account. Is it negative? Is it positive? Is it neutral?
We know and understand that this relationship is super important for our ability to expand and renew. If the relationship doesn’t exist, there's more risk to the account.
By measuring our relationship metrics across the company, we gain the ability to be proactive in identifying accounts that might have been missed. We can then engage with them before they reach out to us or before we get to a sensitive period, like the renewal.
Where can we use these metrics?
Now let’s take a closer look at how we put all these metrics to use in our company. We’ve touched on it briefly, but it’s time to dive deeper.
The more data points you have, the more accurate your health score is. The health score can be for each account that you manage; it can be for different segments, different life cycles, and the entire portfolio of the company.
The health bar gives you the ability to identify risks and potential within every account, even without talking directly to them.
It gives you the ability to proactively reach out when you recognize a risk, even if the sponsors and decision-makers didn't talk to you or escalate any issues.
It also helps you plan your day effectively. By having a good representation of everything that you do with your different accounts, you can decide which ones you're going to focus on instead of constantly putting out fires.
You can look at the accounts that you see have a poor health score and focus on them in the upcoming weekto improve that score, touch base, and get a better understanding of why the metrics are not that great.
You can also look at the accounts that have amazing health scores and decide that you want to focus on them because there’s an expansion opportunity coming up.
The second thing is trends. The health score represents a certain point in time, but you also want to identify the longer-term trends of the company, the segments, and your portfolio.
There are all kinds of trends that it’s useful to track:
- Cross-company and product trends;
- Trends in the adoption of specific features
- Trends related to life cycles and onboarding
By tracking your metrics over time, you'll also be able to understand not only the current situation but the direction you’re heading in.
It can also be valuable to look at trends concerning different employees. Some CSMs and CSEs might be struggling because the number of companies they’re looking after has increased because they're new, or because they're missing something.
By looking at these trends, you can identify weak links and spot who you need to coach.
CS load and impact
This brings me to the next point, which is the customer success load and impact. Your metrics can give you a great overview of your team’s workload, so you can understand if, say, a specific customer success engineer has too much on their plate and it might be a good idea to get another CSE to help them out.
By identifying these trends, you can also figure out how many people you need to hire tomorrow, in a month, or the next three months.
With the right data, you can proactively plan this and get ahead of the game. You don’t want to get to a point where there's a fire that you need to put out and you have to hire someone quickly.
And the last point that metrics help us with at Perimeter 81 is our benchmarks. Our benchmarks give us the ability to balance the art of customer success with science.
In other words, you can’t win with every customer; even if you have the best metrics and all the data points in the world, you’ll still meet with the 80:20 rule. You'll probably be right 80% of the time, but there are going to be exceptions.
Benchmarks give you the ability to show how different segments are doing. The numbers aren’t set in stone – they’re medians that measure similar companies in similar life cycles. They show the metrics we have for those segments in comparison to the account we're looking at.
Maybe you're looking at a specific mid-market company that’s being onboarded, and you see that their adoption isn’t great.
By having a benchmark comparing all the other mid-market companies in the onboarding phase, you can see that maybe 30% adoption is typical and you’re doing okay. Now you know that you don’t need to freak out or focus on this account too much just yet.
Let's sum it up
I want to leave you with five key lessons that I hope you take from this article and adopt into your working practices.
You need a vision and a goal
Without a vision and a goal – it might be a company goal, it might be a group goal, or a goal for your role – there's not a lot to measure. If you don't know where you want to go, it doesn't matter which road you pick.
Metrics help us understand our current state
Metrics can’t replace our common sense or our ability to understand what we need to do, but they are a handy tool that helps us understand where we stand with our customers.
Correctly identifying data points increases accuracy
The more data points you have, the better you'll be able to identify the ones that are meaningful for your customers. The better numbers you have, the better you can translate them into meaningful actions.
Granularity is key for precision
The more granular your data is, the more precise you are. If you build a lot of different life cycles, for example, you can get more granular.
If you just segment your accounts into SMB, mid-market, and corporate, you’re off to a good start, but you'll probably miss some information and some of your metrics won’t be accurate. You need to break these segments down further and look at where these accounts are in their life cycle.
By having a more granular breakdown of the data, based on the needs of your customers and your company, you'll be able to build better metrics and get a clearer representation of how you're doing about your KPIs.
Don’t forget about the art
The last point is always the most important one. Don't forget about the art. We're working with human beings, and we're working with a lot of different use cases. We need to use our professionalism and our natural ability to identify which data is correct or incorrect.
It might be that we have an account in stellar mode. They have the best metrics out there, they have the best health score, and they're giving us the best NPS scores, but we know that something's wrong. When we talk to them, we can feel that they're dodgy.
This is the art, right? This is what we need to do as professionals to quickly identify where we stand with each account.
The metrics are there to help us understand objectively how our all accounts are doing, and they’re fantastic for a one-to-many approach; however, they don’t replace the need for us to communicate with customers and make sure we're doing great.