Published August 30, 2022
Judging the health of your relationships with clients is vital for Client Service professionals. The answers provide a measure of performance and a way of targeting improvements. So what are the key metrics that client service professionals should track?
The churn rate shows how often clients stop doing business with you. For ongoing services, it’s the percentage of clients who cancel their subscription within a period of time.
To calculate client churn, divide the number of clients you lost during the month by the total number of clients you had at the start, then multiply by 100. This will give you a percentage churn figure. The lower the figure, the better: churn is a failure of client retention and can harm your growth.
A high churn rate indicates that clients are not satisfied. There’s a problem either with your products or with the client experience. For a client service team, it indicates that they’re not keeping clients engaged.
Though that broad picture is important, you also need to explore the nuance of who’s leaving, something that isn’t reflected in the flat churn rate. Some churn is inevitable, as clients stop needing the services you provide. Knowing whether clients are going to another company or quitting these services entirely can tell you whether the problem is with you.
The type of clients who leave also matters. New clients are transient. They may have been drawn in by a special offer or their own whims, and they’re more likely to be part of churn, especially after a big marketing push. Older clients are more critical to a company’s success. If long term clients, who have been satisfied for years have a problem with you, there is an issue which requires further attention, so if churn rises, look at which clients are leaving.
To understand whether your churn rate is dangerously high, look for average data for your industry or for competitors to compare yourself with. Churn varies hugely by industry, and you won’t gain anything by living up to the wrong standard.
The age of the company also matters. New companies tend to have higher churn, while older companies are more stable. Consider where your company is at in it’s life cycle.
If you discover that your churn is high, especially among established clients, then it’s clear you have a problem. Look at communications from departing clients to work out why they’re going and what you can do to fix it.
The net promoter score (NPS) was developed by Frederick F. Reichheld in the early 2000s as a way to better understand client satisfaction. It has gone on to become one of the leading metrics of client success, replacing a wide range of surveys and feedback forms with a single metric of client satisfaction and loyalty.
To gather data for NPS, ask your clients a single question: how likely would they be to recommend your product or service, on a scale from 0 to 10. It’s a simple question that most clients will be happy to answer.
The cleverness of NPS lies in what’s done with that data. Reichheld recognised that what mattered wasn’t the average view of the company, but the views of those on the extremes, those who were likely to leave and those encouraging others to join. He also recognised that, in answering a question like this, a seemingly average score like 5 or 6 isn’t neutral. Clients satisfied with your products will give high ratings, meaning that mid numbers are as dangerous as low ones.
Instead of averaging out the results, NPS is calculated by categorising responses:
Total up how many clients are in each category, deduct the percentage of detractors from the percentage of promoters, and you have your NPS.
A high NPS score indicates that clients are happy with the product and are likely to promote it to others. A low NPS indicates that they’re discontented and you have serious work to do.
Like client churn rate, NPS is a broad brush, and you need to consider it in the context of your industry and competitors’ ratings, if you can find that information. Ideally, you should aim to improve NPS over the long term, accepting that there will be short-term fluctuations, sometimes for reasons you couldn’t foresee.
As with churn rate, you need to dig deeper to make that improvement. Look at what promoters and detractors say about you, what you could do more of to delight your clients, or less of to stop them leaving.
Client lifetime value (CLV), also known as lifetime value (LTV), measures the amount of revenue that a client generates over the course of their relationship with your company. When used on an individual level, it can tell you what sorts of clients give you the most value, and so should be targeted for marketing. On a cumulative level, it’s a useful measure of how your company is performing.
Calculations of CLV are varied and sometimes complex. At its most basic, it can be total revenues divided by the number of clients, but this won’t tell you much. Complex models and advanced revenue intelligence are often applied to give companies an insight into how much different types of clients spend, how that spending is distributed, and what they are likely to spend in the future.
A high CLV indicates that clients are stickier and more valuable to the company. They’re more like the promoters in CLV or long-term clients in churn rate, people who will give you high value for the effort of finding them. A low CLV indicates that clients aren’t sticking around, or aren’t buying into high-value products.
Financial success depends upon your ratio of CLV to client acquisition costs (CAC). A low average CLV is fine if it didn’t cost you much to bring the client in. But if the costs of marketing and sales staff create a high CAC, then you need a proportionally higher CLV, or clients will cost you more than you make out of them.
For companies providing subscription-based products, including software as a service, stickiness suggests that the client success team is doing a good job. A high CLV reflects both the quality of your products and the efforts of staff in keeping clients onboard.
Client engagement score (CES) is one of the harder metrics to discuss because its details vary so much. It’s also an important metric to talk about, because it goes to the heart of what makes a business successful.
Client engagement lies at the very heart of client management work. Clients who engage regularly with your company and its services are far more likely to keep doing business with you. Their engagement is both a reflection of their attachment to your products and an opportunity to encourage this attachment, as you can use interactions to demonstrate new features or upsell extra products. It’s your chance to enhance the client journey, and in the process, to increase CLV.
A client engagement score provides a measure of engagement, based on the amount of interaction that clients have with your product or service. How you calculate it will depend upon your business and what data you have available. You might use data on how frequently people use a product, how long for, and in what depth. Depending on the service, counts of clicks or time logged in can help in understanding what’s going on.
The data then has to be combined. This involves weighting the figure through multipliers, both to bring wildly different sorts of data together and to reflect their importance in engagement. If click rate is the best indicator of engagement with your product, then it should also make up the largest part of your client engagement score.
It’s important to be careful about the data you use. Certain types of interactions might not be a sign of healthy engagement, but of a frustrated client struggling to fix a problem. That sort of behaviour could badly skew your results.
A high level of engagement indicates that clients are using the product frequently and are getting value from it. But this is a measure that’s only useful for in-house comparisons. The unique nature of each company’s service and its CES means that scores are never comparable.
If it can’t be used to compare your company’s performance with others, then what is CES useful for? The answer is to look at variations in your scores. This can be a performance measure, showing how engagement increases or decreases, whether you’re heading in a good or a bad direction. If you measure the CES for individuals or groups then it can help you to understand where you’re performing well and where to target your efforts. Are users in their twenties more likely to engage heavily with your product? Then maybe you should target them with your marketing. Are your new clients less engaged? Then maybe your client success team should reach out to them, increasing their engagement, improving client retention, and raising revenue down the line.
It might not be the most straightforward measure, but your client engagement score can really help focus your work.
The client satisfaction score (CSAT) is grounded in classic client satisfaction questions. It provides a simple way to test the waters with the people you’re working for, measuring how happy clients are with the product or service.
The data for a CSAT is gathered using a simple feedback question to clients, along the lines of “How would you rate your satisfaction with the service you received?” The client is provided with a range of responses, usually labelled from “very unsatisfied” to “very satisfied”. These can be number 1-5, 1-7, 1-10, or whatever variation you prefer. Some companies use facial expressions instead of or as well as numbers and words. The scale isn’t important, but it is important that you understand which results happy clients will pick. For example, 4 and 5 are generally regarded as positive answers on a 1-5 scale.
Once you’re got all of your answers, total up how many are positive, divide by the number of respondents, and multiply by 100 to give you the percentage of satisfied clients. Organisations such as the American Customer Satisfaction Index provide benchmarks for specific industries to judge your score against.
A high satisfaction score indicates that clients are happy with the product or service and are likely to keep using it. A low score means that you need to look for chances to improve.
As with many other measures, CSAT can help you to target your efforts. If you find patterns in which clients are satisfied and which aren’t, then you can identify groups for your client service team to work with.
CSAT is one of the crudest metrics. It crams everything about the client journey into a single score, whose meaning to the client is uncertain. But it’s also one of the easiest metrics to implement. That gives it value in getting a grasp on your performance, and in diagnosing the quality of the service you provide.
Not all metrics are equal. Their usefulness depends on your business, what you want to understand, and what data you can collect. These metrics give you a way of getting started on measuring and improving client service.