7 Powerful Metrics to Optimize Your Customer Service Software

Are you looking to optimize your customer service software and improve your subscription KPI metrics? Look no further! As a serial entrepreneur with years of experience, I have curated a list of the top seven customer service software with the most crucial KPIs.

• Customer retention rate: The key to business growth is retaining loyal customers. Track your customer retention rate to measure how many customers are continuing to use your service.
• Monthly recurring revenue: This metric measures the predictable revenue coming in each month. This is crucial for subscription-based businesses.
• Net promoter score: The ultimate goal is to have happy customers. This score measures the likelihood of customers recommending your service to others.

By tracking and improving these KPIs along with others such as customer satisfaction score, ticket resolution time, average response time, and churn rate, you can elevate your customer service and increase business growth. Keep reading to learn more about how to track and calculate these metrics.

Customer Retention Rate

As a pro serial entrepreneur, I know that retaining customers is essential to the success of any business, and customer retention rate is a KPI that can help you measure how well you are retaining customers. In this chapter, we will explore what customer retention rate is, its use case, how to calculate it, its advantages and disadvantages, and common industry benchmarks.

Definition

Customer retention rate measures the percentage of customers who continue to do business with a company over a period of time, typically a year. It is calculated by taking the number of customers at the end of a period, subtracting the number of new customers acquired during that period, and then dividing that number by the number of customers at the beginning of the period. This provides a percentage that represents the company's ability to retain its customers.

Use Case

Customer retention rate is an important KPI for businesses because it helps them understand how well they are serving their customers. By tracking this metric, businesses can identify areas where they need to improve their products, services, or customer support. Additionally, a high customer retention rate may indicate that the company has a loyal customer base, which can lead to increased revenue and profitability.

How To Calculate KPI

To calculate the customer retention rate, use the following formula:

Calculation Example

Let's say that a company had 1,000 customers at the beginning of the year and acquired 200 new customers throughout the year. At the end of the year, the company had 900 customers. The customer retention rate for that year would be:

KPI Advantages

The advantages of tracking customer retention rate include:

• Identifying areas for improvement in products, services, or customer support
• Increasing customer loyalty and engagement
• Improving revenue and profitability by retaining customers and reducing customer churn

KPI Disadvantages

The disadvantages of tracking customer retention rate include:

• It may not be appropriate for all businesses, especially those that are just starting out or have low customer volumes
• It may be difficult to obtain accurate data, especially if the company does not have a robust customer relationship management system in place
• It does not provide insights into why customers are leaving the company

KPI Industry Benchmarks

Industry benchmarks for customer retention rate can vary depending on the type of business. However, some typical benchmarks include:

• SaaS companies: 80-90%
• Retail companies: 20-40%
• Financial services companies: 75-95%

Customer satisfaction score

As a business owner, tracking and improving your customer service experience should be one of your top priorities. One way to measure this is through the customer satisfaction score (CSS) KPI.

Definition

The CSS is a KPI that measures how satisfied your customers are with your products or services. It takes into account their overall experience, including the quality of your customer service. This KPI is crucial as it gives you insight into what you need to improve or maintain to keep your customers happy.

Use Case

By setting up a system to track your CSS, you can identify areas in your business that need improvement. A higher CSS score means that your customers are more satisfied, which leads to better reviews, increased customer loyalty, and more sales.

How To Calculate KPI

Calculating your CSS is easy. First, you need to gather data from customer surveys or other feedback channels. Then, use the following formula to calculate your score:

Calculation Example

Let's say you received 500 survey responses, and 375 of those customers reported being satisfied with their experience. To calculate your CSS:

KPI Advantages

• Provides insight into your customers' satisfaction level
• Helps you identify areas for improvement in your business
• Boosts customer loyalty and increases sales

KPI Disadvantages

• May not account for the silent majority (those who don't respond to surveys)
• Can be influenced by factors outside of your control (i.e., the customer's mood)

KPI Industry Benchmarks

It's important to compare your CSS to industry benchmarks to see where your business stands. Here are some industry CSS averages:

• Software industry: 70%
• Retail industry: 75%
• Healthcare industry: 80%

Monthly Recurring Revenue

As a subscription-based business, monthly recurring revenue is a metric that you must keep your eye on. It is the amount of revenue that your business generates every month from your customers who are subscribed to your product/service.

Definition

Monthly recurring revenue, or MRR, is the predictable and recurring monthly revenue generated from your customers who are subscribed to your product/service, irrespective of any one-time charges or variable usage fees.

Use Case

MRR helps you identify the revenue trends of your subscription business. It gives you a clear snapshot of how much predictable revenue you can expect for the upcoming months. Furthermore, it is a vital metric to calculate the valuation of your business.

How To Calculate KPI

To calculate MRR, you can use the formula:

For instance, imagine you have 100 subscribers, and each pays $20/month. Your monthly recurring revenue would be $2,000.

Calculation Example

Suppose your subscription business had 500 active customers in a month:

• Half of them had a $25 monthly subscription plan.
• Quarter of them had a $50 monthly subscription plan.
• The remaining quarter had a $75 monthly subscription plan.

Your MRR calculation would then be:

KPI Advantages

MRR is valuable because it is a metric that reflects your business's stability and predicts future revenue more accurately, making it easier to plan future investments. In addition, comparing your MRR over time provides a meaningful context to make more informed business decisions on pricing and customer acquisition costs.

KPI Disadvantages

The downside of relying on MRR is that it doesn't indicate how well you are retaining customers or how much they are engaged with your product/service. Low churn rates combined with strong MRR can be a misleading indicator of business health.

KPI Industry Benchmarks

Industry benchmarks vary depending on the business type and target market. However, as a rule of thumb, MRR for software-as-a-service companies should be above $10,000 per month.

Ticket resolution time

Whenever a customer reaches out to a business, they expect quick solutions to their problems. The ticket resolution time metric measures how fast a business can respond to and resolve customer tickets.

Definition

The ticket resolution time is the duration between ticket creation and resolution. It measures how fast a business can resolve customer queries, problems and issues.

Use Case

The ticket resolution time metric is crucial for customer service teams to identify areas where improvement is necessary. A fast response time can improve customer satisfaction, increase retention rates, and enhance brand reputation.

How To Calculate KPI

To calculate the ticket resolution time, subtract the time when the ticket was created from the time when it was resolved. The time can be measured in hours, minutes, or seconds. The formula for this KPI is:

Calculation Example

Let's take an example. A customer raises a ticket at 9:00 AM, and a customer service representative resolves the ticket at 10:00 AM. The ticket resolution time will be:

KPI Advantages

• Improves customer satisfaction by resolving queries and problems quickly
• Enhances customer loyalty and retention by providing a better customer experience
• Increases brand reputation by showing commitment to customer service

KPI Disadvantages

• The ticket resolution time may vary depending on the complexity of the ticket and the skill level of the customer service representative
• It may not be suitable for all business types, especially those where the customer service team does not handle tickets
• It may not factor in variables such as ticket volume and customer expectations

KPI Industry Benchmarks

The ticket resolution time benchmark depends on the industry and the type of business. However, on average, a ticket resolution time of less than 24 hours is considered good. Higher-ticket volume businesses may have an average response time of 12-20 hours, while lower-ticket volume businesses may have a response time of less than 6 hours.

Average response time

As a business owner, you know that it's crucial to provide timely responses to your customers. That's where the KPI, average response time comes in.

Definition

Average response time is the period it takes for your customer service team to respond to a customer's inquiry. In simple terms, it's the time between when a query reaches your customer service team and the time they respond to it.

Use Case

By tracking the average response time, you can get a good idea of your customer service team's efficiency. You can identify areas that require improvement and optimize your team's performance.

How To Calculate KPI

To calculate the average response time, use the following formula:

Calculation Example

Let's say you received 100 inquiries and your total response time was 500 minutes. Using the above formula, your average response time would be:

KPI Advantages

• Helps you identify areas that need improvement
• Enables you to optimize your customer service team's performance
• Keeps you informed of your team's workload and capacity to handle inquiries

KPI Disadvantages

• Doesn't consider the complexity of inquiries, which can affect response time
• Doesn't account for different channels of communication (i.e., phone, email, social media)
• May not reflect customer satisfaction or quality of responses

KPI Industry Benchmarks

Industry benchmarks vary according to the sector and size of the business. However, the average response time for a business should range between 24 to 48 hours.

Net promoter score

As a serial entrepreneur who has started and run many businesses, I understand the importance of tracking and calculating KPI metrics for customer service software on subscription. One such essential KPI metric is the Net promoter score.

Definition

The Net promoter score (NPS) is a customer loyalty metric that measures how likely customers are to recommend a company to others. It is computed by subtracting the percentage of detractors (customers who rate the company between 0 and 6 on a 0-10 scale) from the percentage of promoters (customers who rate the company between 9 and 10). The score ranges from -100 (if everyone is a detractor) to 100 (if everyone is a promoter).

Use Case

The Net promoter score is a valuable metric for companies to gauge their customer's loyalty and satisfaction levels. It is often used as a benchmark to track the company's performance over time and to compare it with the industry benchmark. The higher the NPS score, the more likely customers are to recommend the company to their friends and family, leading to increased referral business and customer retention.

How To Calculate KPI

Calculation Example

Suppose a company has surveyed 100 customers.
60 rated the company between 9 and 10 (promoters)
20 rated the company between 7 and 8 (passive)
20 rated the company between 0 and 6 (detractors)
The Net promoter score is calculated as follows:
NPS = %Promoters - %Detractors = (60/100)*100 - (20/100)*100 = 40

KPI Advantages

• Easy to calculate
• Reflects customer's emotional attachment to the company
• Allows companies to identify areas of improvement and take corrective action

KPI Disadvantages

• Does not provide insightful feedback about specific areas of improvement
• Can be affected by cultural differences and variability in survey administration

KPI Industry Benchmarks

The Net promoter score benchmark for different industries varies widely. For example, the telecommunications and software industries have an average NPS of around 30, while the hospitality and retail industries have an average NPS of around 60. Companies can assess their NPS score by comparing it with industry benchmarks and setting achievable goals for improvement.

Churn Rate

As a business owner, you must be familiar with the term 'Churn rate.' Churn rate is a well-known KPI that measures the number of customers who disconnected or stopped using your product or service during a given period. It reflects how good you are at retaining your customers and how loyal they are to your brand.

Definition

Churn rate represents the percentage of customers who stopped using a company's product or service over a particular period of time, typically measured monthly or annually.

Use Case

Churn rate is an essential KPI for businesses to track their customer satisfaction levels, identify churn reasons, and implement corrective actions to reduce churn. A high churn rate can lead to lost revenue, decreased market share, and a damaged reputation. It can also create difficulties in attracting new customers.

How To Calculate KPI

The formula for calculating churn rate is quite simple:

Calculation Example

Let's assume you had 500 customers at the beginning of the month, and during the period, 50 of them decided to stop using your product or service. Using the formula above, we can calculate the churn rate as follows:

KPI Advantages

• Helps businesses track their customer satisfaction levels.
• Identifies the reasons behind customer churn, which enables businesses to take corrective measures.
• Helps businesses retain customers, reduce churn, and create a more loyal customer base.

KPI Disadvantages

• Churn rate does not account for new customers acquired during the measurement period.
• Churn rate may not be accurate for businesses with a large number of one-time customers.

KPI Industry Benchmarks for the KPI: ' Churn rate'

The average churn rate varies by industry, but in general, a high churn rate is anything above 10%. Some industries with a high growth rate, such as SaaS companies, can have churn rates between 5% to 7%. On the other hand, some industries, such as telecommunications and internet service providers, have a significantly higher churn rate of around 20%.

In conclusion, optimizing your customer service software and tracking the right KPI metrics are essential for the growth and success of your business. Customer retention rate, monthly recurring revenue, and net promoter score are three critical KPIs that every subscription-based business should measure and improve.

Furthermore, to provide exceptional customer service, other vital KPIs to track include customer satisfaction score, ticket resolution time, average response time, and churn rate. These metrics will help you identify areas of improvement and make data-driven decisions to enhance your customer experience.

By prioritizing these KPIs and focusing on customer satisfaction, you can establish a long-lasting relationship with your customers, encourage referrals, and increase business growth. So, start tracking your KPIs today and take your customer service to the next level!