Here are few (but not limited to) of the most common terminologies which are helpful while working in Customer Success functions.
Annual Recurring Revenue
Annual Recurring Revenue is the dollar value of the recurring revenue of a subscription for a single calendar year. This is the way recurring revenue businesses are measured. It’s the annual contract value for any given customer.
Churn basically means a customer has decided they no longer want to be your customer. It is the complete opposite of retention, and it is your primary responsibility as a CSM, to prevent it.
Cost of Retension
Cost of Retention shows the amount spent on retention per customer on an annual basis. It’s important to keep in mind that when entering the number of active customers, you should not include customers added in the current year. This metric will be most accurate when calculated with the total number of customers that have been retained during the year. Your results may vary, but in general, you want this number to decrease over time. If you don't have any costs for a category, you can leave the field at zero.
Technically, a cross-sell is when additional products, services, or licenses are sold to a new individual, team, program, department or division within a large existing customer.
Lifecycle Stages are what Software as Service, or SaaS companies, use to help describe the customer’s journey with your company, and the related steps along the way. Each stage tells you where the customer is in their evolution with you, and where they are on the SaaS maturity curve. It can also tell you which part of your organization is involved with the customer the most. Just as with other industry terms, the stages may be different in names, and time duration.
- Rentention / Renewal
As you know, CSAT is short for customer satisfaction, and it’s another critical KPI for CSMs to track. Why? Well, because as the name suggests, this KPI measures how satisfied a customer is with a product/ service. Tracking this KPI is actually pretty simple, as it includes a variation of “how satisfied are you with the goods/services/products” at the end of a customer feedback survey.
A Downsell happens when an existing customer wants to renew their contract, but at a lower contract value than the previous term. A Downsell can also happen during a subscription-period, depending on the terms of the agreement.
Any kind of interaction between you, your company, and the customer, can be considered engagement. An engagement, especially a successful one, is a huge responsibility for many members in your organization. An engagement can be any employee communicating with a customer. Marketing sending them an email.
Engagement Touch Model
Engagement touch model is the process through which your company approached the customer management during their post-sales journey. Here are the 4 commonly used Engagement Touch Models:
- High Touch Onboarding
- Low Touch Onboarding
- High Touch Post Onboarding
- Low Touch Post Onboarding
How much are you expanding your existing customer base through upsell and cross-sell year-over-year or month-over-month? As a function of the Cost of Acquisition (CAC), expansion revenue is much cheaper than new revenue, and may be an untapped source of growth for your company.
Gross Renewal Rate
This is the total value of contracts renewed minus contracts churned. The key difference between this number and Net Renewal Rate is that it does not include an expansion element. This metric purely measures your success in retaining existing customers from month-to-month or year-to-year—the closer to 100, the better.
Customer health scores offer a simple yet powerful way to measure the success of your product and your relationship with your customers and a proactive way to address issues that may arise as you scale your business.
Key Performance Indicators
Key performance indicators (KPIs) refer to a set of quantifiable measurements used to gauge a company’s overall long-term performance.
Logo Retention is the ratio of renewed contracts to the amount of contracts with the potential to be renewed. This metric shows retention in terms of customers lost, instead of revenue lost, making it a key indicator of weaknesses that may otherwise be overlooked.nhjbuj
Net Promotor Score
Net Promoter Score (NPS) is a widely-used metric that measures and evaluates customer loyalty. Customers rank their likelihood of recommending your product or service on a scale from one to ten and are sorted into three groups based on their answer: Promoters, Neutral, and Detractors. NPS is a reliable leading indicator of future customer behavior, including renewal, expansion, and advocacy.
Score is recorded on a scale of Zero to Ten.
- Detractors: Answers from zero to six are considered pretty unhappy customers.
- Passive: Scores from seven to eight means customers are satisfied, but not completely committed to your product.
- Promotors: The top scores of nine and ten means these customers are loyal and enthusiastic about your product, and will most likely renew, or buy more. They are also going to refer you to other people.
Net Renewal Rate
Net Renewal Rate is the total dollar value of contracts renewed out of the existing customer contracts. Renewal comes in the form upselling and cross-selling while contract churn is considerd as a down-sell and even the contracts lost too.
Net Revenue Retention
Net Revenue Retention measures the health of a company’s customer base to track how much your existing customers want to spend with you next year as compared to this year.
It refers to the practice of your customer using your product. To guarantee the continuous use or adoption of the product, you, as the CSM, will be responsible for making sure the product becomes highly valuable to the customer.
This can be managed by onboarding, training, and getting the customer to use the product within a short amount of time; usually 90 days or less.
Quarterly Business Review
A Quarterly Business Review, or QBR, refers to the quarterly meeting that may occur with your customers. During this meeting, you will review the customer’s use of the product and its value to them over the prior 90 days, as well as advice you will provide to them for their next 90 days.
Red, Yellow, Green Meetings
The Red, Yellow, Green Meeting is one of the most common ways in Customer Success to measure and prioritize engagement and improve customer health. Definitions of these colors vary based on each company.
- Red: Situation is at its worst and this will impact the engagement and renewal could be unlikely.
- Yellow: Somewhat between Red and Green. Situation is good but not sure if customer is really utilizing the products at its best and renewal is not gauranteed.
- Green: Situation is excellent, customer is utilizing the products/services at fullest and renewal is difinitely on cards.
The renewal is a sales transaction and is the opposite result of churn. It can happen one of two ways. The first is explicit, as with a signed contract. That typically means you need a signature to continue the customer’s business agreement with your company.
The rate at which you keep your customers and/or the revenue associated with your customer contracts.
An Upsell is another type of recurring revenue for SaaS companies. When your customer is using your product, and they love it, then they are confidant in its use. They believe it brings them value. After a period of time, they can be approached about adding new features, extending the number of licenses, or even new or additional products. Revenue gained from an existing customer in this way, is called an Upsell.
Please note, all these definitions are referred or as is picked from these resources. Copyrights, trademarks or any kind of IP rights are held with their own entities.