Beyond Service Metrics – Focus on What Really Matters
Your service organization is an incredible source of metrics and measurements that describe ongoing interactions with your customers. Of all the metrics your service team tracks there are 5 important areas that you should key a close eye on.
Your service organization can tell you how many customers they interact with on a daily, week or monthly basis through a variety of communications channels. They can tell you about the top concerns of your customers, the challenges they face using your products and the features they want to see in the future. If you dig a bit deeper Services can provide statistics on the level of service provided, and the costs and revenues associated with delivering these services.
Customers contact your Services team for a variety of reasons, and if typical, more than half of all customer service requests are related to “how-to” type questions. These are “good” interactions – your customers are engaged with your product and this provides insights into how they are using it.
Few customers (hopefully) are contacting you because your product does not work as expected. Defect related interactions are not always pleasant but are inevitable. Tracking defect rates is critical since they are often costlier to respond to and result in higher levels of customer dissatisfaction. What you need to know about defects:
- What percent of all customer reported issues are directly attributed to product defects?
- What is the total cost to handle defect related issues (total and as a percent of total service costs)?
- How do defect related issues affect customer satisfaction?
Dis-proportionally high defect rates can indicate a failure in process or lack of appropriate resources in Development and Quality organizations. By understanding the cost and customer impact you can act to mitigate negative impacts from defects.
2. Customer Health
You may receive periodic reports indicating customer satisfaction or Net Promoter Scores (NPS). These are good indicators, but with so many touch-points with your customers expect to know how healthy your customer relationships are.
Don’t make assumptions that NPS or satisfaction ratings indicate the health of a customer relationship. Expect to understand if customers are generally content, or if they are anxious about the future, restless and thinking about moving to another vendor, or just plain angry with you. What you need to know about customer health:
- What percent of your customer base is at risk of defecting to another vendor?
- What percent of customers are at risk and likely to reduce spending or discontinue buying future products and services?
- How much revenue is at risk?
Nurture healthy relationships but pay special attention to at risk customers and attempt to understand and repair relationships.
3. Service Sales Performance
Selling a perpetual or SaaS license is the just the beginning of long-term profitable relationship when additional services can be attached to the initial license sale. Look at the financials of larger public software companies and you can see how important support and maintenance contracts are. If you don’t already sell add-on services, consider it. If you do, make sure that service sales performance is optimized. If your products are offered as a service, then look to add-on services to grow. What you need to know about service sales performance:
- How many customers are under an extended service contract or success plan?
- At what rate are new contracts attached to product sales?
- How does this differ by geography and channel?
- At what rate do existing customers renew?
- For SaaS companies – what rate do customers buy a higher level of service than what is provided with the subscription?
Service sales performance begins with the initial “attachment” of a service contract, but the sales process continues indefinitely with an opportunity to renew the relationship year after year. Great service sales practices require focus and investment to sell, renew and expand the service relationship.
Your services team specializes in engaging with customers – in fact this is their job. The frequency and quality of engagements is important. If you never hear from your customers is that a good thing? It certainly costs less but you have less visibility into how they are using your products or their level of satisfaction. Too much engagement may suggest that your products are difficult to use. What you need to know about customer engagement:
- What percent of your customer base do you actively engage with?
- How often do you engage with them?
- What percent of customer engagements are positive? Negative?
- How does the health of customer relationships correlate to engagement frequency and quality?
The correct engagement model can make the difference in the health and profitability of a customer relationship. Engagement focused on early and effective onboarding and success coaching can help customers get up to speed and productive with new products. High-touch engagement models may be necessary for large critical customers. In all cases the type and level of engagement is hopefully proportional to the value of the relationship.
When we consider the role of Service, we need to think about it as an instrument to engage and retain customers. The basic assumption is that more interaction may be good, especially if it is positive interaction, but if it costs too much it is difficult and costly to scale. We cannot simply throw unlimited resources at customers to keep them delighted. What you need to know about customer service profitability:
- How much does it cost to deliver services?
- How much direct revenue does Services generate?
- How much indirect revenue does Services contribute to?
- Will incremental investments in Services generate more direct or indirect revenue?
- What impact will investments in Services have on retaining recurring revenue streams?
Service profitability, and the impact of services on overall profit can be elusive, often because the tangible return from the investment in services can be hard to connect to the costs. For service organization that operate as a profit and loss center the relationship between the cost of services and the benefits is more apparent. Accounting for the cost and financial benefits of service is critical.
These service insights are different from traditional service metrics such as cost per incident or time to resolution and are intended to provide a more strategic customer view through the eyes of your Services team. Tap into the insights and perspectives services has to offer. Services is on the front line with customers and they can offer unique insights about your customers, your relationships and the very health and success of your business moving forward.
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If you inventory all the metrics used by your customer-facing organizations – Sales, Marketing and Service – you will find an impressive collection of data elements that describe how you interact with your customers. Marketing metrics describe the ability to reach and influence customers; Sales metrics provide insights into the time and efficiency to book revenue; and Service metrics describe the volume, timeliness, and effectiveness of interacting with them. Add to this, insights provided from customer satisfaction assessment efforts. As an industry we have a lot of customer data, but does it tell us everything we need to know about how to engage and sustain long term profitable relationships?
The amount of recurring revenue a company receives may increase, stay the same, or decline for a given period. Recurring Revenue Rate indicates the percent change in the amount of recurring revenue at the end of a specified period compared to the recurring revenue at the beginning of the same period. Measuring recurring revenue rate is essential to help identify the factors that lead to revenue retention and attrition and provides an indicator of the overall state of customer relationship health.
We have become too dependent on electronic surveys and NPS/CSat scores to tell us that our customers are okay. These are fine indicators but do not always tell us why we lose customers.
Service renewal metrics indicate the level of performance for sustaining service relationships and retaining recurring revenue. Tracking both service contract renewal and recurring revenue retention is essential to help identify the factors that lead to customer and revenue retention and attrition and provide important indicators about the overall state of customer relationship health.
The ability to accurately track the effectiveness of Service Revenue Generation activities is essential to maximizing revenue from new and existing customers. There are three primary opportunities to capture service revenue including the sale of new contracts at the time of the initial product sale (Attach); renewal of existing service contracts (Renew); and as reinstatements (Win Back) of contracts that have been previously cancelled by customers. This article presents a consistent set of metrics and definitions to help companies measure the overall of service sales and renewal policies, programs and personnel.
Use ServiceXRG’s Contract Renewal Assessment tool to get an immediate evaluation of your current renewal practices and performance. The assessment takes just a few minutes and will provide you with a customized performance scorecard with recommendations for improving contract renewals.