#50: Customer Success KPIs That Work

How do you know your team is doing the right stuff, without micromanaging?

That's a question a lot of CS leaders I work with ask themselves. 

In theory, the answer is simple:

• Engineer your CS process with the activities that drive value for customers
• Monitor the leading metrics of value regularly
• Coach your team to ensure they are delivering high-quality activities

But in practice, it can be very difficult to make this happen. 

In this newsletter, I want to help you define the leading metrics that will help you manage and coach your team to be successful in 2024.

The Problem With Leading Metrics

When I wrote the 4 Laws of Customer Success, I talked about the signals that create success, and two of them are important leading indicators: Engagement and Adoption. 

The reason most activity metrics get a bad reputation is that a lot of companies use outdated playbooks, and implement processes that are not driving value for customers.

Leading metrics that are not data-driven is a recipe for disaster. 

They cost the business a lot of money and they make you lose credibility with your team.

Asking a CSM to do a call a month with each customer, without a clear goal for that call seems pointless. Some people will do 20 check-in calls and ask about the weather, while another CSM will do 20 strategic calls helping customers realise value.

Needless to say, the results will be wildly different.

That's why so many people get stuck on the debate of value vs. volume. However, having led CS teams for 10+ years, I learned that you need both volume and value to succeed.

Another challenge with setting good leading metrics is with the logic we use when analysing data.

For example: You run an analysis and learn that customers with a higher number of calls also have a higher renewal rate.

It's easy to jump to the conclusion that more calls will drive more retention. And setting a call target for your CS team might seem logical here.

But let's pause for a moment... Would you apply the same logic to support tickets?

Assume that you find that customers with more support tickets also have a higher renewal rate.

CS leaders would be less likely to jump to the conclusion that tickets are driving retention. And they would rush to set a target of "number support tickets" for CSMs to drive with customers.

That's because you understand that in this case, CORRELATION doesn't imply CAUSATION.

So it's important to avoid that logic trap when the activity seems more likely to drive the result.

Defining Leading Metrics That Work

To look at causation, we need more than just data.

We need to get our hands dirty and experiment with the activities that we think drive value.

What does that look like?

1. Have a clear definition of customer value. What is that we deliver and how do we measure that we are delivering it? Unless you have this piece of the puzzle, it's hard to anchor your experiments. If you are trying to define customer outcomes, I wrote this guide.
2. Find the signals of what usage drives towards customer value. Map the top features that connect with your customer's Jobs To Be Done. If a customer wants to increase revenue, what features are responsible for it? Learn how you can do this at scale here.
3. Create a hypothesis. What are the CS engagements and other resources that are driving these signals up? For example: "EBRs help customers get closer to their goals". This Customer Journey might help you define the areas you should be looking at creating hypotheses around.
4. Test the hypothesis. Use a control group to validate your assumption, and measure the impact of the activity for the group that received the intervention vs. the group that didn't receive one. For example: Did the adoption of the features that drive value increase after the EBR?  
5. Discard the assumptions that fail to have a positive impact. It's hard to let go of things, but it's important!
6. Roll out causational Leading Metrics. Double down on the activities that proved to move the needle on customer value. Win the buy-in of the CSMs by showing the research and process you've gone through. 

Doing this work takes time and energy.

But you know what takes more time and more energy?

Doing the wrong thing.

 Oh, and make sure to partner with your CS Operations team. This is a place where they can add insane value.

See you next Friday!