How can one judge whether they've been effective at leading a customer to success? Churn rate alone won't cut it anymore! Data always tells a story, but rendering insights for something as qualitative as customer success proves a far tricker task than liquidity ratios. The modern commercial power dynamic is dominated by the customer, and accordingly, the measurement of success itself - yielding how we may either reinforce or update our methods - demands a cultural shift. Today, we will be exploring the metrics that really matter, and why the human-first business model is the lifeblood of customer success management!

Not Your Grandpa's Metrics

In the early days of SaaS and the burgeoning field of customer success, businesses often operated with a set of metrics that ultimately presented a limited and reactive perspective on customer relationships. This era was marked by a heavy emphasis on churn rate as the primary, and often sole, indicator of success. While a high churn rate is undoubtedly a cause for concern - relying on it as the single metric of truth inevitably manifests a reactive mindset, focusing on damage control only after customers have already been lost. This reactive approach, much like treating the symptom rather than the disease, fails to address the fundamental reasons why customers choose to either discontinue ongoing services or end their subscriptions. This reactivity was also further complicated by the old-school method of measuring Customer Acquisition Cost (CAC) - which would then be measured in isolation from long term value. This essentially categorized the bought customer as a period expense of marketing, failing to actualize that any priorly or potentially bought customer relationship is in truth an investment. It limits the scope of alternative solutions, missing key opportunities to proactively engage and remedy issues.

Companies were optimized to acquire customers rather than to delight them. And herein lies the heart of the problem, highlighting a critical imbalance in resource allocation and strategic focus. Companies focused on optimizing for acquisition, rather than ensuring long-term satisfaction, and thereby neglected the equally critical importance of cultivating and retaining those acquired customers for the long run. This led to a myopic view that prioritized immediate gains over the potential of long term relationships, missing out on the value that could be earned through sustained customer success. In every aspect of commerce, even beyond the customer success context - short term profit is no cardinal sin, of course - but maximizing it at the cost of growth potential robs both the company and the society supporting it by the end of the ball game. Holistically, the prevailing business culture was characterized by a significant degree of revenue-centricity - If it doesn't immediately move ink on the balance sheet, we don't have time for that. Metrics like Monthly and Annual Recurring Revenue (MRR & ARR) dominated boardroom conversations, serving as ultimate evidence of whether the customer was properly satisfied. That's certainly... useful(?) Likewise, it takes a professional meteorologist to intercept a hurricane weeks out and warn the public - but by the time your SUV goes airborne and the surge wipes out grandpa, you don't exactly need clueing-in anymore.

These metrics, while essential for financial reporting, failed to capture the intricate nuances of customer health and well-being. Companies may have been meeting revenue targets but overlooking the fact that their customer base was not truly realizing value, or that loyalty was at risk. The obsession with financial metrics created an "inside-out" focus where the company's goals often overshadowed the customer's needs and experiences, causing a fundamental misallocation of effort. This meant that revenue could be good, even while customer satisfaction was low - plateauing the firm's growth, to an inevitable cliff if left unaided. Companies commonly looked at metrics like support tickets and average resolution time. While helpful, they equally failed to capture the proactive elements at play, necessary to truly meet customer needs. All-around, companies often hyperfixated on chasing numbers, and then hardly focused on making customers happier. This same principle applies to customer support a focus solely on case resolution, instead of focusing on overall happiness, shows a company optimizing for a metric, but not for the true goal: customer satisfaction. The focus was on quantity of support interactions and not the quality of the overall experience. These staunch oversimplifications have proven insufficient in the long term, and have led companies to pursue more actionable metrics.

The Consumer-Centric Shift

The shortcomings of these legacy metrics, with their reactive and short-sighted focuses, paved the way for a profound shift in how businesses approached customer success. This was christened by the ascendance of customer-centric metrics, designed to provide a more holistic, proactive, and ultimately more value-driven understanding of customer relationships. Rather than simply reacting to problems after they occurred, these new metrics empowered businesses to anticipate customer needs and address potential issues before they escalated. The first, and arguably most important, of these new metrics was Customer Lifetime Value (CLTV). CLTV shifts the focus from the immediate to the long-term, emphasizing the total revenue a customer is expected to generate over the course of their relationship with a company. This represented a monumental change from focusing primarily on acquisition and short-term revenue gains. As a famous study by Bain & Company has established, a 5% increase in customer retention can lead to a 25% to 95% increase in profits - highlighting the crucial importance of a CLTV-driven mindset. This new metric highlighted that a focus on long-term relationships was paramount.

Net Promoter Score (NPS) likewise emerged as a powerful tool for measuring customer loyalty and advocacy. Unlike revenue-focused metrics, NPS directly captures the voice of the customer, measuring their likelihood to recommend a product or service to others. The Harvard Business Review article “Net Promoter 3.0” underscores the importance of creating these promoters, highlighting the power of genuine advocacy to drive business growth. While the HBR article also goes on to discuss that chasing the number (like any metric) can detract from its true value, the importance of the metric itself cannot be understated. By understanding the drivers of customer loyalty, businesses could now proactively identify areas for improvement and invest in strategies to delight their customers. The move towards metrics such as Customer Satisfaction (CSAT) also reflected the growing importance of incorporating direct customer feedback into the decision-making process. CSAT provided a way of measuring customer happiness immediately after specific interactions or experiences with a product or service, offering an actionable way of identifying issues and improving the customer experience in real-time. By listening to the customer, businesses could now make changes that were actually going to create real, actionable change.

Beyond the more abstracted sentimental measures, Customer Health Scores provide a more granular and predictive view of customer well-being. Unlike reactive support metrics like ticket counts, health scores combined multiple factors - such as product usage, engagement levels, and support interactions, to create a composite score that indicated a customer’s likelihood to renew, expand, or churn. Companies utilizing customer health scores experience significantly lower churn rates and increased customer retention, highlighting the effectiveness of this proactive approach. By combining a multitude of differing-natured factors into one score, this is far superior in effectiveness to just looking at support metrics alone. Furthermore, the increasing accessibility of Product Usage Metrics provides another layer of insight into customer behavior. This data not only helps identify areas for product improvement, but also enabled customer success teams to offer tailored support and guidance, optimizing each customer's unique journey. The focus holistically moved away from simply maximizing revenue towards a more people-centric approach (at least in messaging) - which prioritized customer happiness, loyalty, and overall value.

The Culture of Success

The evolution of customer success metrics is not merely a story of new calculations and data points. It is, more fundamentally, a reflection of a profound cultural transformation in how businesses perceive and engage with their customers. This transformation is rooted in a growing understanding that lasting success is not solely determined by maximizing revenue but by building genuine, value-driven relationships. The shift from a top-down, revenue-centric approach to a customer-centric model demanded a complete reevaluation of priorities and a fundamental change in the way companies operate, communicate, and make decisions. Central to this cultural shift is the elevation of the customer's voice. They cannot be seen as transactions on a spreadsheet - instead, they are recognized as invaluable sources of feedback, insights, and ideas that can shape the trajectory of the entire business. This is reflected in the increased use of metrics like NPS and CSAT, which actively solicit customer feedback and incorporate it into strategic decision-making. The era of guessing at what customers want is rapidly drawing to a close - those who truly listen to their customers have a profound competitive advantage.

The influence of the SaaS and subscription business model cannot be overstated in shaping this cultural shift. With recurring revenue becoming the lifeblood of these businesses, maintaining customer relationships over the long term has become paramount. This fundamental change in business structure necessitates a shift in strategic focus. Customer retention is now as critical if not more so than customer acquisition, requiring a concerted effort to build lasting relationships and demonstrate ongoing value. This emphasis on long-term customer engagement underscores the idea that the business model and metrics you are using have to work in tandem to achieve true customer success. This move toward recurring revenue and the subscription model is a powerful force that has forever changed the landscape. Aligning internal teams with customer goals requires a new approach, encouraging employees to act as advocates for the customer. Furthermore, successful businesses today are leveraging data to make informed decisions and constantly refine their approach.

Ultimately, the evolution of customer success metrics is a compelling narrative of how businesses have learned to move from a transactional, inward-looking approach to a more relational, customer-centric one. The metrics that we track are a reflection of the values we hold, and the way in which we track and utilize them can have a significant impact on the success of a business. Today, the most successful businesses are the ones that acknowledge the importance of a human-first business model, while using data-driven insights to understand their customers on a granular level. As the playing field only becomes increasingly competitive, we had to start caring about our customers at some point! In the end, the journey of customer success is a never-ending process of refinement and growth, and we must always look to adapt our approach in a way that maximizes value for our customers. This approach is how we create truly successful, lasting, and mutually beneficial relationships.