This week, Emilia D’Anzica from Growth Molecules™ joined us in the discussion of Metrics. The leading question was “How do you lead and motivate your team with metrics?”
What are some of the metrics that not only should be used, but should be fully understood and embraced by your team?
- Recurring Revenue
- Monthly Recurring Revenue (MRR) especially for newer companies and newer customers
- Annual Recurring Revenue (ARR) for more mature companies that are tracking long-term goals
- Logo Retention Rate (LRR) – how is your retention rate overall?
- Compare customers you have at the end of a time period versus those you had at the start
- Look at your customers that have either renewed or are up for renewal versus total number of customer up for renewal
- Be sure you are not including customer who just signed on during this time period as it will skew your results
- Customer Lifetime Value (CLV) – how much a customer will spend on products during their lifetime. This allows measurement of entire business and is based on every department delivering on the Customer Success metrics.
- Spend per visit, frequency of purchases, and customer journey – CS platforms calculate this complicated metric for your team
- Gross Revenue Retention (GRR) – Net revenue during a time period versus total recurring revenue in that same time period
- Customer Acquisition Cost (CAC) – how much does it cost to bring on a new customer. Often a metric potential investors will look at
- Marketing and sales expenditures in a time period versus number of new acquisitions
- Combining this and the lifetime value helps give an understanding of the profitability of a particular customer
- Customer Health Score (CHS) – the more inclusive your scoring metrics are, the better your understanding of where a customer is in relationship to churn or retention
- Are they using your product extensively?
- Are they a returning customer?
- How are upsells being received?
- What about new product sales?
- A good score gives a better prediction of likelihood of renewal
- How happy is your company with your product? Are they fully engaging with it?
- A good formula here allows all internal stakeholders to work to strengthen this score within areas they are responsible for
- A high NRR is directly proportional to the company growth rate\
- Net Retention Revenue (NRR) – focuses on retained revenue for existing customers
- Customer Churn Rate (CRR) - Long-term customers are the key element to a profitable business, so calculating the number of customers who leave or stop using your product is a very important metric to understand
- Number of lost customers versus total existing customers
- Low numbers here are the goal
- Losing customers increases the CAC costs, creating higher costs and negatively impacting brand value
Key Performance Indicators
- Should be based on metrics
- Are you comparing yourself to other companies in your industry to get a benchmark understanding of your health?
- They show an objective evidence base of progress being made
- They measure what you mean to measure which allows for better decision making
- Good metrics measure efficiency, effectiveness, quality, governance, etc. for a solid understanding of company health
- Need to include a good balance between leading and lagging indicators
Effective Communication of Data
- Be sure to tell a story for each focal point you are highlighting
- Data and story telling should be your main point of communicating. Use fewer words!
- Align all goals with your company priorities
- What are the common obstacles that your industry faces? What assumptions are valid to make here?
- Learn from your data…what just happened? What can we learn from it?
Ensuring Your Team Understands and Utilizes Data
It is important to not only utilize metrics, but to make sure your team understands them. How?
- Educate your team – make sure the metrics are understood. What are they, how do they calculate them? What is the best way to use and apply these metrics? This can be done through lunch and learns, AMA’s, team training, and content.
- Lead by example – show and tell your team. Use data at every opportunity. Demonstrate in meetings and conversations how data should inform their decisions.
- Promote and award your team – use data milestones and celebrate when they are met. Create initiatives for the team that drive impact on the company, your customers, and the culture of the team.
Initiatives with Impact
- Provide the big picture to your team and to leadership – what are the main goals and drivers your organization cares about and how is your data showing growth or gaps?
- Be transparent – why do the numbers matter?•Motivate individuals and teams
- Set smaller goals that break the big picture into achievable and understandable segments
- Recurring recognition – make sure your team (and leadership) see the wins
- Gamify and incentivize – make it fun and help keep the momentum up
Attendees moved into small groups to discuss the following questions. The summary of their findings follows.
- I don’t have a customer success platform, how should I track these metrics?
- My team manages a large book of business, do you think they should own the renewals too?
Thoughts for those without a platform
- Use a Crawl/Walk/Run method based on your company or team maturity
- Google sheets, Excel or some other internal tools are valuable here
- Determine your North Star metrics (tracking aha moments) before you can create models
- Internal OKRs – EBRS/QBRs completed
Additional Conversations Sparked by the Introduction
- NPS – is it valuable and how should we action on it?
- Yes – but tough to go to the board and have them understand what an increase actually means
- Be sure to:
- Focus on detractors to see how you can help them based on the data
- What are the comments saying that help you create an action plan
- Call them and discuss the low score
- Many companies have a ‘close the loop’ process that requires a follow up call to all detractors for a more in depth and personal understanding of issues
- CHS – should it be fully automated or fully manual?
- Probably a mixture – some data makes sense to invest in but the CSM needs to provide direct input
- Need to communicate and train on CHS to develop consistently across the team
- How to set it
- How to score it
- Without training, it is likely that some on the team will begin adjusting to meet their own needs creating measurements that differ in scope and meaning
- Take a multi-prong approach
- CS sentiment
- Product usage
- Adoption readiness – can be calculated manually by the CSM and cover a variety of components
- Product champion at the customer company
- Change management plan in place
- An early warning system that shows trends of product usage (for some this is a more manual process)
- Low score is bad
- High score shows strong adoption
Growth Molecules™ has put together an ebook to help with metric development. Download it here.
Emilia is the Founder & Managing Director of Growth Molecules™, a management consulting firm focused on customer success and an adjunct professor at Saint Mary's College of California Business School. She is the co-author of Pressing ON as Tech Mom & a global speaker on everything customer success.