Genius Ways to Use Customer Success Formulas

by Chris Arringdale Customer Success, Proactive Solutions, Team Empowerment

For any business to be successful they have to have clients, right? And to get these customers you need a good product or service that convinces people to use it over your competition. Once your team has accomplished that, it’s time to turn it over to the Customer Success Team. Their job is to proactively keep customers happy, or at least figure out why they’re upset and how to fix the problem.

Most of the time, the Customer Success team already has an idea of what the problems are or could be. Now, it’s time to learn what metrics to look for and how to extract the knowledge of the data gathered from these customer success formulas.

Learn how to build the ultimate #CustomerSuccess report with these formulas: Click To Tweet

Churn

A simple way to calculate churn is by dividing the number of clients in a certain time period by the number of churn clients at the beginning of that time period. This could be monthly, quarterly, or however you choose.

Churn Clients

Customers1

Another way to determine the churn rate produces more precise data and takes into account the variation of clients throughout the selected time period.

Churn Clients

(Customers1 + Customersn) / 2

Other ways to calculate the churn rate exist but these two methods are the most commonly used. Ideally, your rate should be zero or negative. However, for small and medium businesses something around 3-5% monthly is acceptable. Annually, it should be lower than 10%. The churn rate should be less than 1% for enterprises with high ticket offers.

A low churn rate means a higher client retention rate!

Monthly Recurring Revenue and Expansion (MRR)

Monthly Recurring Revenue Expansion or MRR is the monthly revenue that comes from clients paying for a subscription service, cross-sell and upsell. An MRR Expansion rate is the MRR from your current month divided by the MRR from the previous month. This provides information on how much your business is actually earning from clients, excluding new customers.

customer success formula mrr

Customer Lifetime Value

Customer Lifetime Value or CLV is the projected revenue you expect to receive from a customer. Knowing this percentage will help you identify how much you should spend to get a new customer, while simultaneously identifying who your best customers are and your average profit. To calculate the lifetime value (LTV), multiple average revenue per account (ARPA) by the gross margin profit. Then divide your answer from the first step by the MRR churn rate percentage.

customer success formula ltv

Rates to know

customer lifetime value formulaMany useful rates can be pulled from a customer success platform. Be sure to check which ones your current solution supplies. Customer success formulas don’t necessarily exist for these takeaways, but they’re still important to know.

New Leads

Gathering information on the number of new leads you attracted, where they came from and what brought them to you provides valuable data for the Customer Success team. They now know what is working for them and where they have room to improve.

Conversion Rate

This metric might not typically fall under the customer success category but it can help the team understand how many new clients you are getting, and what their behavior is after onboarding. It’s a kickoff point for Customer Success tracking.

Need help with your #CustomerSuccess? Check out @Kilterly’s blog on the formulas you should be using: Click To Tweet

Campaign Success

Was your goal to upsell current clients or retain a certain percentage of your existing clients? Track if these clients behaviors are consistent with those of a churn client or if they’re still strong. Inactiveness is an indicator of churn.

MQL to SQL

How many leads moved from Marketing Qualified Leads (MQL) to Sales Qualified Leads (SQL)? This is simple data that doesn’t require a formula and can be pulled from your software, but nevertheless is still important to know.

After gathering all these data points, a Customer Success team can cross-check the data and understand their clients better. You can analyze your strong and weak points and determine how problems should be fixed. This allows you to make plans and improve your Customer Success strategies, your onboarding, overall client experience and result in a better client retention rate.

Need a Customer Success Platform to better suit your needs? Schedule a live demo today!

worker taking notes on different customer metrics

Subscribe to the Blog

Get the latest tips to improve your customer success!