There was a recent discussion over on the Customer Success LinkedIn group about defining leading and lagging indicators for customer success.
Here’s my take on which is which, through the prism of churn risk.
Indicators or outcome measures?
Before we get to indicators, let’s start with defining the outcome measures. These are the standard business metrics that are used to measure success. They sometimes get confused with leading indicators.
- Logo and revenue renewal rates
- Churn rate
- Period-over-period revenue growth per customer
- Lifetime value
Therefore, indicators aren’t financial metrics so much as they are operational measures. And the best indicators are the ones you can link to the outcomes you care about.
For example, take your churn events: can you unpack your churn outcomes to spot the leading and lagging indicators in retrospect?
If we’re looking for churn indicators, think of lagging indicators as the evidence of customer risk that could turn into a bad outcome in the near term.
- Account escalation
- Low license utilization
- Negative feedback / surveys near a renewal date
- Refund requests / discount requests
- Account downsell
Think of leading indicators as the earliest signs of a customer struggling to achieve value and success.
It’s easiest to conceive of early indicators when the customer relationship itself is early:
- Slow time to first value
- Slow initial adoption
- Negative feedback and/or low survey scores
- High volumes of support tickets (depending on what’s in them)
Others indicators can be signs of churn risk even when the relationship is otherwise stable:
- Declining adoption
- Negative feedback and surveys
- Lack of engagement
There are plenty of indicators you can pay attention to; too many, in fact. So the goal is to focus on a subset.
Start with just one outcome that matters most. For example, “flat or reduced renewals”.
Unpack that outcome to spot the indicators. Get good at monitoring them, and responding to them reliably.
Once you’ve established some focus, you face a choice. Stay the course or introduce additional outcome measures with their indicators? Regardless, start simple.