Customer Usage Metrics That Matter

February 24 2020 1Comment

Your customers cannot be successful if they don’t use your solution offerings. Unfortunately, renewing their subscription contract with you, does not mean they are successful either. It is the job of the customer success team to maximize engagement with your technology or services in order to drive value for the customers.

This can be done by tracking actionable customer usage metrics and using adoption analytics to shape the customer experience at different points in their life-cycle journey. In general, monitoring customer trends leads to a win-win situation for both sides, because the customer success team can be alerted to potential churn risks early and proactively mitigate it.

Most customer success metric fall into one of these four categories:

  1. Customer Usage Metrics
  2. Customer Financial Metrics
  3. Customer Heath Metrics
  4. Customer Success Team Performance Metrics

While in this blog, I focus on usage metrics, I encourage you to examine other customer success metric categories covered in this blog series. You can follow the links above to read the entire blog series.

Customer Usage Metrics You Should Monitor

Tracking usage for software solutions goes beyond monitoring unique logins, and companies need to examine other usage patterns to get a clearer picture of how customers use the solution. In many cases, metrics are more reflective of actual customer experience when calculated for different customer segments individually.

Customer usage metrics for new customers, low-touch segments, and high-touch segments can be calculated differently to get a more accurate representation of customer engagement and experience.

1.    Time Spent in Product

Time Spent in Product is a straightforward product engagement metric with significant effects. As the name implies, it measures the amount of time a user spends on your platform. Companies want customers to use their products frequently; however, more time spent in the product is not always a positive indicator of engagement.

This is true in cases where the software solution is specifically designed for speed and usability. In any case, you can use this metric to measure customer engagement with the product or to determine what needs to be improved to deliver on your promises.

Amount of Time Spent in Software

2.    Active Users

Defining who an “active user” is a prerequisite for measuring solution engagement. Due to the wide variation in SaaS solutions nowadays, each business has to determine which user actions counts as valid “activities.” These actions can be logins or actions around key features. A user can be considered active if they have engaged in at least one valid activity in a specified period. Active user trends make planning resources, recognizing product fatigue periods, and tracking usage growth at a basic level easier.

Number of Users Who Have Been Active in A Given Timeframe

3.    Product Usage

As discussed in the blog on customer health metrics, product usage metric defines an “active” user with specific value-based actions and clearly segments your customer base into different usage categories. Even though it doesn’t take the level of engagement into account, it is infinitely better than tracking logins.

When used in conjunction with other metrics, product usage can give a reasonable estimate of your acquisition, retention and churn levels on a weekly, monthly, or yearly basis.

Product Usage = Total Unique Users Logged in Today / Total Unique Users Logged in Over the Last 30 Days

4.    License Utilization Rate

License utilization measures the rate of license (seat) used against the number of licenses purchased for a customer or a segment of customers. This is an essential metric for technology companies that have a license-based pricing model or are able to set an expected license level for different customers.

Companies that track license utilization rates can recognize, prioritize, and execute license optimization opportunities faster. License utilization can be monitored on a daily, weekly, monthly, or yearly timeframe depending on the business model.

License Utilization Rate = Number of Active Licenses Used / Total Number of Licenses Purchased

5.    Feature Usage

Feature usage examines how many of your solution’s features are being used. Improving usage rates can lead to higher retention, expansion into additional features, lower churn, and easier upsells and cross-sells. When customers fully buy into your solution and its features, you gain more advocates, and your revenue is stabilized and predictable.

High feature usage marks indicate a healthy and well-informed customer experience across the board. Low feature usage marks signal a dire need for customer education campaigns or poor product fit. Understanding the percentage of product features in use helps technology businesses to shape their product roadmap.

Feature Usage = Number of “Value Features” Used / Number of Total Features

You can also use this metric to measure adoption rates for new features to monitor how aligned your new features are to your customer’s business outcomes. A steady rise in new feature adoption rates is an indication that your product is headed in the right direction.

New Feature Adoption = Number of Users Who Use A New Value Feature / Number of Active Users

Another way to leverage feature usage information is to identify the top features used by your customers. You can then investigate why customers prefer those features and use your findings to drive further adoption among customers who don’t use them. A simple survey can clarify why customers ignore certain features and reveal opportunities for improvements.

You can develop your own feature usage metrics to measure different aspects of feature adoption, including:

  • Features most used/ignored by a particular segment
  • Features most ignored by a specific segment
  • Time for adoption
  • Duration of adoption

6.    Activation Rate

Without proper onboarding, the line between a prospect and a fully activated customer can be blurry. To clarify, a prospect is only a customer when they have acquired value from the solution. Activation rate measures the percentage of the “activation” criteria a customer has met during onboarding. This metric is even more critical for startup businesses and trial / proof of concept accounts.

Activation rates are directly linked to the efficiency of your onboarding process. If your activation rates are low, prospects may be stuck in a problematic or extended onboarding process. Tracking activation rate enables the Customer Success manager to prioritize and organize their work and recognize bottlenecks to conversion and product adoption.

Activation Rate = Number of Steps Taken in Onboarding / Total Number of Onboarding Steps

7.    Outcomes Achieved

At the core of its model, technology and services businesses offer specific benefits and business impact for the user. Examples of business outcome may include, an increase in the number of leads generated, deals closed, or invoices sent. The Outcomes Achieved metric measures the total number of key business outcomes achieved through your business. Defining and measuring the business outcomes your solution delivers enables the Customer Success manager (CSM) to optimize onboarding, training, and time to value.

Outcomes Achieved = Number of Outcomes Achieved / Period

Summary

Customer usage metrics are essential for customer success teams, so they introduce efficiencies, educate the customer, and drive business outcomes. As a whole, technology and services businesses can use customer usage metrics to determine important initiatives, build better strategies, and avoid ‘analysis paralysis’. Follow the links below to learn about additional customer success metric categories:

  1. Customer Usage Metrics
  2. Customer Financial Metrics
  3. Customer Heath Metrics
  4. Customer Success Team Performance Metrics

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About Irit Eizips

Irit Eizips is a Customer Success thought leader whose mission is helping startups to Fortune 100 enterprises, establish a proactive and scalable customer success practice. Irit is frequently featured in podcastsbooks, and industry events as a subject matter expert on customer success operations and strategy. In 2014, Irit founded CSM Practice, an international consulting firm providing strategy and technology services. Irit is known for her unique experience and expertise in launching customer success programs at scale based on best practices, automated playbooks, and client data analytics. Connect with Irit Eizips on TwitterLinkedInYouTube or sign up for her weekly Customer Success Newsletter.

About CSM Practice

CSM Practice specializes in the design and implementation of best of breed scalable customer success programs using an optimal combination of research, strategy, playbooks, and technology. CSM Practice is the first to develop accelerated methodologies for customer success programs and is continuously producing thought leadership content for the Customer Success community. The company was founded in 2014 and is headquartered in Sunnyvale, California. Additional information can be found at www.csmpractice.com or connect with CSM Practice on TwitterLinkedIn, and Facebook.

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Written By:

Irit Eizips

Irit Eizips brings deep expertise in the area of Customer Success. As an early member of Gainsight's executive team, Irit has been pivotal in shaping Customer Success methodologies and best practices. For the past 3 years, Irit has been voted as a top Customer Success influencer and is frequently featured as a speaker at conferences and Customer Success public events. Irit serves as CEO for CSM Practice, a global Customer Success consultancy firm. The firm specializes in working with customer success leaders to accelerate the creation and implementation of Customer Success strategies, derive extensive value from Customer Success technology solutions as well as certify and train customer facing teams in becoming more proactive and efficient.

1 comment

  1. Great content! Super high-quality! Keep it up! 🙂

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