The North Star Metric for CS

"The 'North Star' Metric for Customer Success: How to Choose Between Net Retention Rate (NRR), Monthly Recurring Revenue (MRR), and Churn Rate"As a customer success manager, you know that it's crucial to measure the health and success of your customers in order to drive growth and improve retention. But with so many metrics to choose from, it can be difficult to determine which one is the best "North Star" metric to focus on. In this blog post, we'll compare three popular metrics - Net Retention Rate (NRR), Monthly Recurring Revenue (MRR), and Churn Rate - to help you choose the right one for your customer success strategy.First, let's define each metric:

• Net Retention Rate (NRR): This is a measure of how much revenue is retained from existing customers over a given period of time. It's calculated by subtracting the revenue lost from churned customers from the revenue gained from upsells and expansions, and then dividing by the total revenue from the beginning of the period. One key advantage of NRR is that it takes into account both churn and upsells/expansions, giving you a more complete picture of customer success. It allows you to see not only which customers are leaving, but also which ones are growing and generating more revenue for your business. This can be particularly useful for identifying opportunities for cross-selling and upselling, as well as for detecting potential issues with customer retention.
• Monthly Recurring Revenue (MRR): This is a measure of the predictable, recurring revenue generated by your customers each month. It's calculated by multiplying the number of customers by the average revenue per customer. This metric can be useful for tracking the growth of the customer base and for forecasting future revenue.
• Churn Rate: This is a measure of how many customers stop using your product or service over a given period of time. It's calculated by dividing the number of churned customers by the total number of customers at the beginning of the period. This metric can be useful for identifying potential issues with the product or customer experience, and for taking action to prevent further churn.

So which one to choose? It seems that NRR is gaining in importance as a metric for customer success teams, as it provides a more comprehensive view of the health of the customer base. But also the churn rate and MRR are important metrics for measuring the success of a customer success team. The metric that a company considers most important will depend on the specific goals and objectives of the customer success team. For example, a company that is focused on growing its customer base may prioritize net retention rate as a key metric, while a company that is focused on generating predictable revenue streams may prioritize MRR. Ultimately, the most important metric will be the one that is most closely aligned with the company's goals and objectives, and that provides the most useful and actionable insights.

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