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42. Essential Metrics Introduction

https://www.udemy.com/course/essential-customer-success/learn/lecture/20998228#overview

Focusing on the leading indicators

• will help me plan and execute the right activities.
• Will see positive results in the metric (lagging) that we’re measured on.
• If the customer is successful, and the value is visible to them, they will renew.

43. Revenue Metrics

https://www.udemy.com/course/essential-customer-success/learn/lecture/20766822#overview

SaaS business do not sell products, they sell subscriptions.

• Old school
  • Client makes a payment
  • Business hands over a CD
  • Done
• Subscription Based
  • Revenue is recurring
  • MRR – Monthly recurring revenue
  • ARR – Annually recurring revenue
  • ACV – Annnual contract value
    • MRR + One off fees
      • Consulting
      • Professional Services
      • On boarding
  • TCV – Total contract value
    • MRR x 12 x Years
    • ARL x Years
• If customers can pay Month to Month, my key revenue metric should be MRR.
• One Off fees would not be included in MRR
  • Consulting
  • On boarding
  • Professional Services
  • These would be included in ACV

Examples:

• Carrefour
  • Contract Length: 1 yr
  • MRR: $10k
  • ARR: $120k
  • One Off: None
  • ACV: $120k
  • TCV: $120k
• Walmart
  • Contract Length: 1yr
  • MRR: $10k
  • ARR: $120k
  • One Off: $25k
  • ACV: $145k
  • TCV: $145k
• Waitrose
  • Contract Length: 3yr
  • MRR: $10k
  • ARR: $120k
  • One Off: $25k (But negotiated in for 3 yr term
  • ACV: $120k
  • TCV: $360k

44. Retention Metrics

https://www.udemy.com/course/essential-customer-success/learn/lecture/20766828#overview

If everything has been done correctly across the 5 Metrics, this will be maximized

• OR(A)EO
  • Outcome
  • Relationship
  • Adoption
  • Expansion
  • Organization
• This doesn’t mean it will be perfect
  • Customers may need to reduce costs

Forms of Retention

Gross  Retention Rate (GRR)

• $$ of contracts at End of Period / $$ of contracts at Start of Period
• This measures success at retaining customers
  • It will NEVER be over 100%
• Example

GRR Example

• Google developed their own service
• Start = $400k
• End = $300k
• GRR = 75%

Net Retention Rates (NRR)

• ($$ Contracts at End of Period + $$ Expansions – $$ Downgrades) / $$ Contracts at End
• Measures success in Expansions
• Can be over 100%

NRR Example

• Apple and Alibaba each bought our Analytics functionality
  • Purchased seats for 1000 users at $25,000
• GRR stays the same.  Gross Retention
• NRR increased to 112.5%

Churn

• The opposite of Retention
• Churn = 100% – Retention
• Businesses will often focus on the Positive, rather than the negative.
• By reviewing Retention, Churn is implied (anything less than 100%)

45. Retention Benchmarks

https://www.udemy.com/course/essential-customer-success/learn/lecture/20998436#overview

Retention

• The amount of Revenue retained from the beginning of a period to the end of the period.
• This is one of the most important lagging indicators I’ll be measured on as a CSM
  • Important to the line manager
  • Important to the business
• Benchmark Retention rates may vary depending on the size of the customer.
  • SMBs, average contract value ~10k
    • GRR 70% – 80%
    • NRR 80% – 100%
  • Midmarket (Avg. contract $10k – 50k)
    • GRR 80% – 90%
    • NRR 90% – 120%)
  • Enterprise (Avg. contract 50k+)
    • GRR 90%+
    • NRR 100%+

Quiz 5: Metrics Quiz

https://www.udemy.com/course/essential-customer-success/learn/quiz/4957346#overview

1. The cost of onboarding would be included in which metric?

• Annually Recurring Revenue (ARR)
• Monthly Recurring Revenue (MRR)
• Annual Contract Value (ACV)
  • The annual contract value includes any one-off fees including onboarding.

2. Which of the following, relating to the cost of customer acquisition (CAC), is the SaaS secret that no one wants to talk about?

• The median cost of acquiring one dollar of revenue is less than one dollar
• The median cost of acquiring one dollar of revenue is exactly one dollar
• The median cost of acquiring one dollar of revenue is more than one dollar
  • The median cost of acquiring $1 is $1.14 (according to Key Bank Capital Markets)

3. When should you measure and manage MRR rather than (or as well as) ARR?

• For small value contracts, most common in B2C SaaS
• For large value conracts, most common in B2B SaaS
• If my customer can make month-to-month decisions about their contracts for our service
  • Whilst MRR is measured most often in B2C SaaS businesses it can happen in larger B2B businesses too. The principle is that if the customer can make month-to-month changes you should, as a Customer Success Manager, measure and manage MRR.

4. Net retention is a measurement of what?

• The successful retention of customers
• The rate aw which customers are churning
• The successful expansion of customers
  • Net revenue retention includes any expansions and downgrades so is the most suitable metric for measuring the successful expansion of customers

5. You start the period with 5 customers In your portfolio, each with an ARR of $100,000. At the end of the same period one of your customers does not renew. What is your GRR?

• 20%
• 75%
• 80%
  • (4 x 100k) / (5 x 100k)
  • Gross Revenue Retention is the retained revenue over the subscribed revenue at the start of the period
• 25%

46. Metrics Wrap-Up

https://www.udemy.com/course/essential-customer-success/learn/lecture/20998462#questions

What has been discussed

• Key Metrics needed to understand as a CSM
  • As part of of the Organization perspective
  • Along with Customer Health
• Mange
  • Ensure the Outcome is
    • Clearly articulated and understood
    • Being achieved
  • Sustain healthy relationships
  • Routinely consider Adoption Expansion
• Understand Revenue
  • ARR and MRR
  • Annual Contract Value ACV
  • Total Contract Value TCV
• Under Retention and Churn (by implication)