Measuring CLG
One of my criticisms of the vast majority of customer success organisations is they don’t measure the customer’s success, only their company’s success. Metrics like GRR, NRR, logo churn and expansion penetration are vital and may be related to the benefits customers achieve but none actually measure the results the customer achieves from using their products and services. In this blog, I want to suggest a scorecard for customer-led growth companies that combines and shows the relationship between customer and company success. To support this, I will expand on the concepts that underpin the scorecard I propose.
For me, customer-led growth is “everything an organisation does to deliver measurable results for key customer roles to profitably win, enable, retain and grow its chosen customers better than the competition”. How well you communicate, sell and deliver results to customers is a significant determinant of how well you do. The scorecard I am suggesting therefore starts with the customer.
Customer results
There can only be one starting point for a customer-led growth scorecard, the customer. This matters; really matters. My friend Greg Daines tracks churn data and reports a six-fold increase in retention when customer results are tracked, irrespective of the actual result!
Many suppliers talk of ROI or customer value but these are either too vague and/or narrow in scope to be effective. If the people using buying, using or exploiting the product are to sanction the initial and subsequent purchases (renewal and expansion) and be positive advocates, there has to be something in it for them. And remember, the majority of users don’t give a toss about the ROI of your product. All they care about is does it help them do their job better and easier. That’s not to say the overall impact of your product is not important, just that it is not enough.
For this reason, I differentiate between two types of customer results:
Value metrics are role and activity specific measures that your product improves. For example, a digital marketer may assess a product that identifies web visitors based on the percentage of ICP fit customers it identifies. An SDR however may assess exactly the same product based on the number of contacts it provides. These metrics should form part of the Role Profiles of your Ideal Customer Profile.
Business impact measures are higher level metrics that your product improves. In the case of that visitor identification product, the Marketing VP may be primarily concerned with the revenue generated from web-site visitors as the first point of attribution. Business impact metrics are candidates for your company’s customer North Star metric.
The customer element of the dashboard below shows examples of the data that should be reported.
I believe the core of enabling success for customers is managing the process around these metrics. This involves:
Agreeing the metrics to be measured with each role. In many cases, they won’t know, so your job is to tell them what to measure, why and how. Preferably in-app!
Setting a goal. Again, many will not how much improvement they should be aiming for, if so, your job is to tell them. Maturity models are very helpful here. Preferably in-app!
Enabling improvement. This is the help and guidance provided to help them achieve their goals. I call these value elements, of which product features are a special category. Preferably in-app!
Tracking and reporting on progress, preferably in-app!
NOTE: I say ‘preferably in-app’ because, as a B2B SaaS business, your product should be the prime candidate for each of these activities. This eases in-app goal setting and tracking, a subject I will cover in a future blog. One of the principles underpinning CLG is “Code scales better than people.” In-app is not the universal answer: some of the roles you will work with may not be users. In many cases, these roles may hold key decision making responsibilities, so staying in touch and helping them with their goals is important.
I have developed the Customer Results Canvas to help companies think through this process and establish measurable results for the key roles they serve.
Customer Results Canvas
For each key role (there are typically around three to five) the canvas answers the key questions:
How mature (sophisticated) is this role across the customer. This sets expectations about the degree of improvement that is reasonable, thereby guiding goal setting. Note: AI will improve the development and implementation of maturity models and their use in customer goal setting massively.
What are the key metrics that determine the performance of this role as it relates to the product you provide and where do you access the data?
What is the current level of performance?
What is their (next) goal for this metric? [This is a short term goal, which when achieved is reset. This delivers the recurring results needed to generate recurring revenue. It also recognises that multiple small steps are often easier to achieve.]
What changes will they need to make in their work and behaviours to achieve this goal?
What actions will you and the role make to effect the changes?
What resources can you provide to help them with those actions?
Irrespective of the type of metric, there are four ways to collect the data:
Scale-assessed: each role reports (using an anchored Likert scale) the result at the beginning and end of a period.
Self-reported: the role reports the actual value of the metric.
Integration: the value is pulled from a system your product is integrated with.
App-generated: your product collects the metrics as part of its functionality.
These data can also be produced for a specific company to track and report on the measurable results delivered. Given the impact of measurement on retention, building this capability in-app should be a high priority for most companies.
Company results
Measuring the success of our customers provides the basis for the customer section of a company’s CLG scorecard. These are aggregations of the activity and results achieved by customers and should include:
Mock-up of CLG Customer Dashboard
CUSTOMER RESULTS ACHIEVEMENT KPIs
Average gain per metric by role
% customers with measures in place by role
%age of roles achieving measurable gains
%age of roles achieving goal
Exec teams and investors would be wise to keep a careful eye on these results as they are likely to be leading indicators of retention and expansion revenue. Good results here also bode well for advocacy and the associated secondary revenue stream and also make powerful sales and marketing messaging content.
Whilst my focus in this blog is on the content of a supplier’s dashboard, the data above are also the core what you report to customers. And, to repeat myself, preferably in-app. The main difference is that reports to customers will be role specific.
The second part of the company results are more traditional: much is already on the top-level company dashboard. For me, these include:
COMPANY PERFORMANCE KPIs
Net new ARR
Net and Gross Revenue Retention
Logo churn
CLTV:CAC ratio
Gross margin
Net margin/EBITDA
Revenue/FTE
Cash
Net burn & runway
These are the key performance indicators. There are many other metrics and data points that underpin the reporting and management of them.
The power of tracking both customer and company results will come from the ability to see the correlations between the two. I knew of one UK -based provider of software for financial advisors in the UK who are so data rich in this arena, they can measure the maturity of new customers, tell them what results they can achieve and thereby what profit improvement is possible from using their product. They also know the relationship between customer results and their revenue!
If the purpose of a SaaS company is to win, keep and grow its chosen customers, then measuring the results key customer roles achieve is at that core. Why? Because companies buy software to improve their performance. It’s what drives the initial and all subsequent revenue. Not doing it is commercial suicide.
Need help to make it happen? Give me a call.