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7 Fundamental Customer Service Metrics to Measure Success

author
Nikoletta Bika
Content Specialist
9 min read
7 Fundamental Customer Service Metrics to Measure Success

There’s a wealth of customer service metrics to track and each of them can give you useful insights in what you do well and what needs improvement. But you probably don’t have the time to track every metric in the book. So, what metrics matter most to your company and team?

Let’s break down the types of metrics for measuring customer service based on:

  • Strategic opportunity. Strategic opportunity is more relevant to customer success, since these customer service metrics can give you insight on what to improve in your product, your CS processes, and more.

  • Efficiency. The efficiency metrics could be team or individual.

So here’s a list of 7 important customer service metrics for customer support and customer success:

Strategic opportunity

1. Net retention rate

As a company, generating new revenue is vital. But, you also need to retain revenue sources you’ve already acquired – otherwise, business won’t take off, and it may even slow down. That’s why churn and retention are such important factors to consider.

Enter, a critical retention metric: Net Retention Rate (NRR). NRR is fundamental to Customer Success. This metric measures the revenue you achieved at the end of a specific period from existing customers (including upgrades), after all churn or downgrades have been accounted for. Specifically:

NRR is the revenue from the beginning of a specific period, plus upsells and cross-sells within that period, minus revenue loss from churn, all divided by revenue from the beginning of the same period.

Here's the formula:

customer service metrics nrr formula

You can track this metric both monthly and annually. According to ChurnZero, a common way to look at NRR measurements when you do multi-year contracts is to measure NRR for a specific month compared to the same month in the previous year. For example, you can use the monthly recurring revenue (MRR) in February 2020 from those who were your customers in February 2019. February 2019 revenue will count as the initial revenue and MRR in February 2020 will only include renewals.

Generally, if NRR is higher than 100%, it means your business more than makes up for churn by acquiring new revenue from existing customers. According to Crunchbase, the median net retention of publicly traded software companies was 104.0% in 2018. 

If it’s less than 100%, then you’re losing business. This isn’t necessarily the end of the world, although the closer to 0% your NRR is, the more urgent it is for your company to take action to increase revenue retention. The Customer Success team will be the protagonist of efforts to win over customers and increase loyalty to the company.

2. Gross retention 

As NRR’s sibling, the Gross Retention Rate (GRR) also helps you understand customer churn. GRR shows you what percentage of revenue you’ve managed to keep from existing customers, without counting any additional revenue from upsells and cross-sells. 

GRR is the revenue you have at the beginning of a specific period minus the lost revenue from churn in that period, divided by the initial revenue.

Here's the formula:

grr formula

For example, if you have a $300,000 contract value at the beginning of one month, and you lose $50,000 during this month because of customer churn, your GRR will be 300,000-50,000 / 300,000 = 83%. This means that if you did nothing to achieve expansion over the course of the month, you’d still have 83% in renewals by the end of the month. 

The same calculations apply to the annual GRR or comparing GRR between the same month year over year, as described for NRR. According to Gainsight, a strong GRR is above 80% when you sell to SMBs, and above 90% if you sell to enterprise. 

Gross retention optimization ranges
Image by Gainsight

100% is the highest your GRR can go, meaning you retain all customers and there are no downgrades in a given period. Track this metric alongside NRR as it’s important that they’re both at the upper end to indicate business health. A concentrated, strategic effort to increase customer satisfaction and meet customer needs is likely to improve both customer service metrics.

3. Usage metrics

As Melissa McMillan, Acquire’s Director of Customer Success, says: 

“In order to identify which behaviors are tied to high retention customers vs. customers who churn, it’s necessary to track usage metrics. Tracking usage metrics allows us to see which features or functions within our product lead to desired outcomes—as well as when a lack of use of certain features indicates higher likelihood of churn.”

To track usage metrics, you can use software like ChurnZero, Natero, or Vitally.

Of course, despite data being very useful, you can also benefit from anecdotal evidence. Make sure to talk to your customers. For example, your Customer Success team (including Account Managers) could ask customers why they are not using certain features. This may be because they need retraining or more information about how a feature can improve their workflow. 

Other example questions to ask are:

  • What do you like most about our product?
  • What would you like the product to do?
  • Which feature do you use most regularly?
  • Which capabilities do you find the least useful?

Communicating the feedback you get also means you’ll be in direct contact with your product department. This can make it easier for your team to know about the latest updates and be able to better explain them to customers.

Customer satisfaction

4. Customer retention

We focused on customer revenue in the previous section, but that doesn’t give the whole picture. For example, imagine you have a small group of customers that spend a lot on your product or services and a large group of customers with smaller accounts. Now imagine that you retain your big money customers, because they’ve probably paid for advanced service, but you don’t manage to retain your smaller accounts. Your NRR and GRR might not immediately suffer, but the loss of customers is never a good sign for business.

That’s why it’s important to know when to take action and implement reactive and proactive customer retention programs. A part of that is to include the customer retention rate (CRR) in your customer service metrics scorecards.

The CRR of a specific period is the percentage of customers you retained from the beginning of the period to the end. To calculate this, you need to exclude all customers you acquired within that period.

Here's the formula:

crr formula

The closer this metric is to 100%, the better. Customer retention costs 7x less than customer acquisition and existing customers are more likely to buy more from your company than prospects. Also, research suggests that increasing customer retention by 5 percent could help you increase profits from 25 to 95 percent. So, it’s important to know your CRR over time so you can evaluate the results of your customer retention efforts.

5. Net promoter score

This is the first metric that comes to mind whenever CS teams are looking for customer service metrics to measure client satisfaction:

Net Promoter Score (NPS) reflects how likely customers are to recommend your company to others.

Customers are asked “How likely is it for you to recommend us to someone else?” and can usually reply on a scale from 0 to 10. Based on their answer, customers are classified as promoters (9-10), detractors (0-6), or passives (7-8). You can also ask them to say why they chose that score, plus other follow up questions, so you can better understand their perspectives.

The final NPS Score is the percentage of promoters minus the percentage of detractors, which can be a number between -100 and +100.

Net promoter score
Image from netpromoter.com

You can set up an automated NPS survey with various tools, such as Hotjar, HubSpot, Qualtrics, etc. Track your scores internally over time and, if possible, compare your scores to averages in your industry or direct competitors. For example, use benchmarks like the one from NICE; a breakdown of NPS scores in different sectors:

Compare your NPS score against different industries
Image by NICE Satmetrix

Usually, if your company has more promoters than detractors, it’s good news. But, a really encouraging NPS score over time would be above 50, according to HubSpot. 

Of course, NPS is only part of the picture. Melissa McMillan says:

“NPS scores are important to collect for a big-picture view. The board definitely wants to see NPS scores get higher over time, and it can indicate success with the new processes and procedures you implement. However, it's far from the most important metric for Customer Success teams to track. NPS is expected and essential, but on CS, we're more concerned with retention and churn to showcase our results.”

Don’t just get hung up on the numbers (“we have an average NPS of 70%”) – use qualitative customer feedback as part of your customer service metrics to increase engagement and retention, too. 

Efficiency

6. Time to resolution

Also called “Mean Time To Resolve (MTTR)”, this is one of the most important customer service performance metrics in terms of efficiency and effectiveness.

Time to resolution measures the time elapsed from the moment a request/query comes in to the time it gets resolved and closed.

The average of all times to resolution will produce the mean (also called ‘average’) time to resolution. Here’s the formula:

mttr formula

With customer support software, you can track time to resolution per agent, among other customer service metrics. This will help you see whether there are some agents that take longer than others. Then you can dig deeper to see whether these agents need more training or if they happen to take over the more complex customer issues.

It’s also useful to track this KPI on the team level over time to see whether it increases or decreases. If there’s an upward trend, investigate further. Long waiting times, for example, usually result in bad customer experience and they might be the result of lack of organization. If issues seem to get stuck at a particular stage in your support process, then you may need to invest some time in efficiency changes.

7. First call resolution

First call resolution (FCR) refers to the number of times that an agent was able to resolve an issue on the very first call. Or, if you have an omnichannel contact center, the very first interaction or “contact.” 

The First Call Resolution Rate, or First Contact Resolution Rate, can be calculated as the number of customers who had their issue resolved in one interaction divided by the number of customers who called in, multiplied by 100%. 

Your team can internally decide on the nuances of calculating this rate, like whether abandoned or escalated calls should count. Or, what is the period of time that should pass before you count a call in your FCR, i.e. should you wait a couple of days after the first call to make sure the customer won’t call back? Once you decide on the exact definition, make sure it stays consistent over time.

The higher your FCR, the better. According to a Microsoft study, 33% of consumers (the biggest group) indicate that resolving their issue in one interaction is the most important part of good customer experience. Improving FCR can have many benefits, as shown by SQM Group’s research:

Reasons to improve FCR
Image by SQM Group

One way to get data on first call resolution is customer surveys either by phone or email, so they can tell you directly whether their issue was resolved and after how many interactions. Alternatively, use tracking capabilities in your technology solutions (e.g. customer support analytics or repeat call trackers). Using both methods is a good idea, since aggregated data are easier to analyze, while customer feedback allows for clarifications, like whether they were satisfied with the interaction or whether they waited for a long time on hold.

Set yourself up for (customer) success

It’s useful to know the formulas and definitions of customer service metrics. But, you and your team are probably too busy to do everything manually in spreadsheets (and you want to minimize the possibility of errors). So, see if your customer support software can help you with calculating some metrics. Find other technology solutions for more complex tracking. 

And of course, remember to evaluate each metric both by itself, and in relation to other relevant metrics. CRR and NRR should be tracked side-by-side. First contact resolution and time to resolution go hand-in-hand. Pay equal attention to all the important customer service metrics, and you’ll be able to extract useful insight for your strategic CX decisions.

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