April 14, 2020

Why SaaS Companies Should Measure Customer Success on Bookings

3 min read

Written by: Taylor Forest  |  Share:

 Why SaaS Companies Should Measure Customer Success on Bookings

Goals are essential for the success of any organization. They motivate specific behaviors and outcomes, provide accountability and encourage growth. Plus, objectives are more likely to be completed — and done well — when they’re being tracked. 

The challenge is creating goals that are simple and measurable. No goal is perfect, and focusing too much on a single metric or task can have adverse effects holistically.

To accommodate for that, the best goals aggregate multiple factors to promote the desired behaviors and outcomes. Those factors should be determined by what data you can collect and what the role being measured needs to accomplish.

What Are the Functions of Customer Success?

Customer success teams are responsible for progressing customer relationships in order to improve retention rates and increase customer lifetime value. However, the specific ways they do that can vary depending on your company’s offering and the size of your team. 

In general, customer success teams work to positively influence NPS scores, product usage, engagement outcomes and dollars under management. They do this by proactively supporting customers so that potential escalations are identified and resolved before they become issues. Additionally, customer success teams work to increase the value customers gain from your product through strategic upsells and cross-sells. 

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Why B2B SaaS Companies Should Measure Customer Success on Bookings

Many of the other metrics you’d measure customer success teams on are leading indicators of revenue bookings. NPS scores, customer health, retention and lifetime value are all metrics that should ultimately result in revenue for your company. Setting a bookings goal for your team cuts out the middle metrics and measures your team on the outcome you actually want them to achieve.

A client with good sentiment who’s seeing great results with no immediate challenges is more likely to renew their contract, buy additional offerings and refer new business. Those three goals can all be tracked through the lens of revenue.

Renewals, account expansions and referral business can all be translated into dollars, providing a single unit of measurement for analyzing the results of their efforts.

Looking at their book of business in terms of potential revenue can enable customer success managers to take a holistic view of account health and gaps in service. This approach can also improve the proactivity of their customer communications. If the end goal is expanding the revenue obtained from that account, the customer success manager is more incentivized to ensure every customer is having such a great experience that they want to expand their engagement with the company.

The downside of viewing accounts this way is that there can be clients who simply don’t have the budget to expand or even continue their engagement, regardless of how much success they’ve seen because of it. To account for that, the goal assigned to your customer success team should account for some churn due to factors outside of their control.

Checks and balances

With a bookings goal, there is a risk that customer success managers will sacrifice the long-term best interests of a customer in favor of hitting their goal in the short-term. However, if a customer success manager chooses to prioritize their goal over the customer’s needs, they’ll be responsible for handling the negative sentiment that results from that decision.

For example, selling a poor-fit product or feature may result in delivery issues, expectation challenges, lack of ROI, underutilization of the product or additional challenges in the form of client escalations. That would also make it much less likely the customer will renew down the line. 

Alternatively, if you provide customers with solutions that address their pain points and challenges, they’ll gain the value they expected from your product. This will lead to them continuing to renew with your company and ideally expand the scope of their engagement over time, increasing their lifetime value.

The Takeaway

Measuring your customer success team on the revenue they bring in helps you understand how your existing customers are contributing to your overall company growth. On top of that, it helps your customer success team see how your product is helping your customers grow. 

If your customers are receiving so much value from your software that they want to extend and expand their use of it, that’s a sign that your product is contributing to their success and your company has created loyal, long-term customers.

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Topics: Reporting & ROI, Revenue Operations

About The Author

Taylor is COO and Director of Customer Success at New Breed. He is dedicated to providing excellent service to our customers.

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