Top 14 Customer Engagement Success Metrics
Companies with high customer engagement have 63% less churn. With so many SaaS companies on the market, keeping your customers engaged is a top priority so that you don’t lose them to competitors. And just like any other SaaS marketing and sales strategy, increasing the efficiency of your customer engagement programs requires careful tracking and optimization. After all, you can’t fix something if you don’t know it’s broken.
The right metrics will tell you if something’s wrong in terms of customer engagement: read more to learn about them, why they’re essential, and how you can use them.
14 Customer Engagement Success Metrics You Should Know
1. Customer Health Score
What is the Customer Health Score, and why is it important?
More than measuring the health of your customers, the Customer Health Score measures the health of the relationship your brand has with that customer. And just like real-life relationships, the relationship between your brand and your customer depends on the amount of effort that both parties put in. For your company, this looks like giving special treatment to your customers, and doing this not only when you’re trying to sell but also while you’re trying to maintain their loyalty.
A healthy relationship is about constant engagement with your products and features for customers. If you’ve done your part as a company and accommodated your users’ needs, then a healthy customer would be expected to keep their subscriptions, advocate for your services, use your products frequently and for long periods, and even upgrade to more expensive plans.
The Customer Health Score measures the amount of effort put in by the customer, so how involved they are with your brand, but it also indicates the effort your company put in (or failed to put in). Knowing this can help you:
- Optimize and improve your customer service,
- Predict the customers that’ll have high LTVs and upgrade,
- Predict those that’ll churn and prevent losing customers via win-back campaigns.
How do you track your Customer Health Score?
There’s no formula for the perfect Customer Health Score calculation. This metric is highly subjective and changes from company to company: it involves calculating various metrics, which I’ll mention below, and using their results by weighing their importance for your brand. The steps you can follow to create your scoring system are:
- Pick the metrics you’ll use.
If session durations and usage frequency can measure your product’s success, you can use the Average Session Duration, First-week engagement, and similar metrics. If your product isn’t used every day, you may prefer to use metrics like the Adoption Rate to understand customer satisfaction and engagement.
2. Determine the weight of each metric.
The results of one metric may be more detrimental than the other. Instead of blindly adding all scores, you’ll want to decide on their effects on customer churn and retention.
3. Segment customers based on their scores.
This way, you can target the suitable campaigns to the right customers. Those that are close to churning will require more attention than your promoters.
2. Net Promoter Score (NPS)
What is the Net Promoter Score, and why is it important?
The importance of “word-of-mouth marketing” cannot be underestimated. When a friend or colleague, so someone you know and trust, recommends a product to you, your view of that product changes substantially. NPS is a great metric to understand whether your company uses the power of recommendations. By asking customers, “On a scale of 1 to 10, how likely are you to recommend our products to a friend or colleague?” the NPS survey segments your customer base into Promoters, Passives, and Detractors.
Knowing the distribution of your customers, similar to the Customer Health Score, makes it easier for you to create targeted win-back campaigns. Your NPS shows you how satisfied your customers are with your products in terms of customer engagement. Naturally, those that find your product vital are more likely to be promoters.
How do you track your Net Promoter Score?
There is a specific calculation to use while measuring NPS:
% Promoters – % Detractors = NPS
Where Promoters score between 9 and 10, Detractors score between 0 and 6, and Passives score between 7 and 8. As can be seen, Passives aren’t a part of the calculation, but knowing their percentage is still helpful because you can easily convert them into Promoters.
3. Customer Churn Rate
What is the Customer Churn Rate, and why is it important?
An unengaged customer will, inevitably, stop doing business with you. It’s impossible to prevent customers from leaving, but you should put in the maximum effort to get them to stay. Your customer churn rate tells you about the proportion of customers that have stopped doing business with you over a certain period. An acceptable annual churn rate for SaaS is around 5 to 7%: if your is higher, you should take a closer look at the segments that are churning.
Knowing about your churn rate is essential because not only does this rate tell you about the satisfaction of your customers, but it also tells you about the rate at which you’re losing revenue. You may be acquiring new customers as you lose old ones, but replacing the lost recurring revenue with new prospects is still more expensive.
How do you track your Customer Churn Rate?
The churn rate calculation is straightforward. The important thing is to use the right analytics tool to tell you about your churn rate and the demographics of those who churn.
Monthly Churn = # of Customer Lost During the Month / # of Customers at the Beginning of the Month
4. Monthly/Annual Recurring Revenue (MRR/ARR)
What are MRR and ARR, and why are they important?
An engaged customer will keep paying for your services, and each time they spend, they’ll be contributing to your recurring revenue. Since SaaS companies mainly operate on a monthly subscription basis, they prefer to use Monthly Recurring Revenue as an indicator of the consistency of their cash flow. Using Annual Recurring Revenue is also helpful while comparing yearly improvements or fallbacks. Knowing the changes in your recurring revenue lets you:
- Make predictions about your cash flow and make investments/budget plans accordingly,
- Measure your business’s success in attracting new customers (as new customers increase MRR)
- Track customer engagement, as decreasing MRR indicates to lost customers who stopped working with your tools.
How do you track your MRR and ARR?
With this simple calculation:
# of Monthly Subscribers x ARPU = MRR
Where ARPU is the average revenue per user (explained below). This is the most basic MRR calculation. You could also calculate the variations of MRR such as Upgrade MRR, Downgrade MRR, Expansion MRR, Reactivation MRR, and more. You can also look at the MRR generated by your different marketing channels by using HockeyStack’s customizable dashboards.
5. Customer Lifetime Value (CLV)
What is Customer Lifetime Value, and why is it important?
This cannot be overstated: acquiring new customers is five times more expensive than retaining existing ones. So, a good growth strategy isn’t about constantly acquiring new leads; it’s more about getting your existing customers engaged. By doing so, you’re increasing their likeliness to switch to better plans and generate more revenue. A customer who’s highly engaged, likely to upgrade and generate more revenue is considered a high-value customer.
The Customer Lifetime Value metric measures the value of your customers. Using this metric, you can see the distribution of customers of high value to your business and work on retaining them. You can also analyze those of low value and know why this is the case. It may be because you haven’t put enough effort into satisfying them or because they’re not in your ideal customer profile.
How do you track your Customer Lifetime Value?
The most basic formula is:
(Customer revenue per year * Duration of Business with Customer) – Cost of Acquisition and Service = CLV
You can also get a more detailed and accurate picture of CLV by performing the steps described below.
6. Customer Effort Score (CES)
What is the Customer Effort Score, and why is it important?
If customers have to put a lot of effort into getting something done, they will switch to a brand that’s easier to work with. The Customer Effort Score measures this effort: the effort a customer has to put in to solve a problem or get a request fulfilled. The data is collected in surveys that ask, “How much effort did you put in to handle your request?” The answers may be on a scale of 1 to 5 or 10, where one translates to ‘very high effort.’
Naturally, when customers struggle to buy one of your products or ask something about its features, they get less likely to engage with your brand. So, one of your main goals should be to increase your CES by providing quick responses and service. You should also be sending the CES survey after significant interactions, after a subscription or purchase or after a prospect’s interaction with your customer service team.
How do you track your Customer Effort Score?
Calculating your CES only requires sending out a survey and collecting data (you can also support your quantitative surveys by asking for more qualitative feedback: ask for more information regarding their experience.)
Your average CES can be calculated with the formula below.
Total of Customer Effort Scores / Number of Survey Respondents = (Average) Customer Effort Score
7. Customer Retention Cost (CRC)
What is Customer Retention Cost, and why is it important?
Even though retaining customers is cheaper, it’s still not free. As its name suggests, your Customer Retention Cost measures the amount you have to spend to keep a customer for as long as possible. This cost includes:
- Costs associated with customer success teams, including wages, training costs, management, etc.
- Costs of the tools and software used for customer success,
- Onboarding costs,
- Marketing costs associated with existing customers,
and more. Your CRC should be balanced with your Customer Acquisition Cost (CAC.) Spending too much on either acquisition or retention will hamper your business’s growth, but putting more effort into retaining customers is generally wiser.
How do you track your Customer Retention Cost?
To calculate and track your Customer Retention Cost, you need to first find the cost of each element that’s involved in customer retention. These include the costs I’ve mentioned above related to customer marketing, not those required to keep customers’ products running, such as customer service. Once you have the total of these costs,
Total Customer Retention Cost / # of Active Customers = Average CRC per customer
8. Average Revenue Per User (ARPU)
What is Average Revenue Per User, and why is it important?
Similar to CLV, your ARPU tells you about the strength of your existing customer base. It’s a good tool, especially when comparing yourself with your competitors. It’s crucial to profit from individual customers as much as possible, or you’re not using customer marketing to its full potential. A high ARPU indicates engaged customers likely to be continuous buyers and upgraders.
How do you track your Average Revenue Per User?
Since this formula results in an average, you may argue that it’s not an indicator. Individual users belong to different segments with different budgets and needs, so a segmented calculation of ARPU may be more beneficial for your company.
Total Revenue / # of Users = ARPU
9. Conversion Rate
What is the Conversion Rate, and why is it important?
Measuring customer engagement is very subjective as an engaged customer looks different for each company. Thus, using metrics like the conversion rate, where you make your definition of “conversion,” makes measuring customer engagement easier. Your conversion rate tells you about the rate of customers that have completed a milestone that you’ve specified. This may be an indicator of product adoption, such as using a feature a certain number of times. You can use this rate to both measure marketing success and customer engagement.
How do you track your Conversion Rate?
Once you’ve defined “conversion,” calculating your conversion rate is easy:
# of Conversions / # of Interactions = Conversion Rate
10. Average Session Duration
What is the Average Session Duration, and why is it important?
Average Session Duration is known to be one of the vanity metrics, though this doesn’t have to be the case. If used in sync with other metrics such as the Bounce Rate and Adoption Rate, session durations can tell you about customer engagement. A good benchmark for session duration is about 2 to 3 minutes, though this number depends on the product.
If your users stay for a shorter period, ask yourself whether there are problems with your onboarding and/or UI/UX. Maybe you’re not serving customers’ needs the way you need to. The average session duration is essential because it can lead to important questions like these.
Average Session Duration doesn’t have a calculation; the only thing you need is analytics software to tell you the numbers.
11. First-week Engagement
What is First-week Engagement, and why is it important?
The first weeks are crucial; they may determine whether your newly acquired customer will become a long-standing part of your customer base or a lost opportunity. The First-week Engagement metric looks at the rate at which users interact with or stop interacting with your products within the first week of purchase. If they drop off after a couple of short sessions, this indicates a complex UI or a lousy onboarding process. It’s the same if they drop off before even reaching their aha moment.
First-week engagement combines different metrics, qualitative feedback, and contextual reasoning, so there’s no single calculation that you should use.
12. Qualitative Feedback
What is Qualitative Feedback, and why is it important?
Numbers don’t always give you the complete picture. While they may indicate problems within your products or service, they rarely ever tell you what the problem is. To get to the bottom of issues, you need to ask people for qualitative feedback. These people can be (and are usually) your customers, or they can be people working in your marketing team who have gotten accustomed to the repeating feedback.
13. Bounce rate
What is the Bounce Rate, and why is it important?
Uninterested users tend to leave before performing other actions on your product or site. These single interactions are called “bounce”s, and your bounce rate tracks the ratio of single-page visits to the number of sessions. An increased bounce rate signals a decrease in customer engagement, and it’s your job to find out why.
Here, it may be helpful to use qualitative data together with quantitative. Ask users about their experience on your site or product, and you may learn why people left without trying other features or clicking other links. Maybe your UI isn’t as intuitive as you thought, so people are going before completing the desired actions.
How do you measure your Bounce Rate?
You can track the number of bounces using an analytics tool like HockeyStack. You’ll get your bounce rate when you divide that number by the total number of sessions. As a benchmark, a reasonable bounce rate for SaaS is between 26 to 40 percent.
14. Adoption Rate
What is the Adoption Rate, and why is it important?
One of the most significant indicators of customer engagement is active usage. If customers use your products and their features, they’re less likely to leave. Your Adoption Rate tells you about the rate of customers that have become regular users: the Product Adoption Rate looks at your products’ number of regular users, while the Feature Adoption Rate looks at the same number for specific features.
You can use these rates to measure the customer engagement of current customers, but that’s not all: you should also be using this rate to see if the updates you make to your products and features are understandable and useful.
How do you measure your Adoption Rate?
To track your Adoption Rate, you need to define an activated user profile. These users may log on to use your products with a specific frequency, or they may be people who complete specific milestones. Once you know your definition, track the newly active users and divide by the number of signups.
Knowing about all of these metrics’ use cases and importance is necessary, but you don’t have to track every one of them. Every company’s metrics will look different because their needs and goals are different. What’s important is that the metrics you choose to track give you a complete picture and a better understanding of your customers’ experiences.
You should measure success by defining your engagement goals (which may be reaching a certain number of active users, increasing MRR, etc.) and picking the metrics that show your progress in relation to those goals.
Some good metrics include MRR, Activation Rate, and Conversion Rate.