When implementing revenue growth strategies, businesses often focus on marketing and sales initiatives to promote their products and services. Commonly overlooked, customer training can also be an effective method to acquiring new customers and retaining existing ones. Unlike sales and marketing strategy, however, customer education cannot be easily measured to prove its overall impact on revenue. As a result, customer training is often undervalued by decision-makers.
To combat this, customer training teams and managers must understand how to prove the impact customer education has on revenue.
In this article we will:
- Define customer training
- Identify the 5 key metrics to measure your training’s success
- Explain how to measure the impact of customer training on business KPIs
- Demonstrate how to measure ROI for a customer training program
- Explain how to correlate your training KPIs with revenue to prove the impact
What is Customer Training?
Customer training is the process of educating consumers to successfully utilize a product or service. Also referred to as training-led growth, customer training helps companies attract users and grow brand experts through intentionally designed learning opportunities. Growing in popularity within the SaaS and technology industries, training-led growth has been a key differentiating factor among similar products.
Often taking the form of courses, FAQs, demos, and guided efforts, learning academies differ in appearance and execution by company and product.
5 Key Metrics to Measure Your Customer Training's Impact
In order to create an impactful solution, companies should evaluate the effectiveness of their customer training program with key performance indicators. When looking to prove the impact of training-led growth on revenue, there are five key metrics to take into consideration.
The 5 KPIs to measure your customer training’s impact on revenue are:
Engagement is the measurement of how a consumer interacts with a product or service. In terms of customer training, engagement as a metric can be evaluated through monitoring participation in training or post-training product use. Often this is shown in measurements like total usage, course completion, and more.
Ultimately, an actively engaged customer is more likely to buy a brand’s product more frequently and with greater longevity. Even more valuable, effective customer training engagement creates brand experts who can attract new users, rekindle lost relationships, and build upon existing ones.
Net Promoter Score
The Net Promoter Score evaluates customer satisfaction and loyalty. Generally speaking, this metric is found through surveys that ask customers to rate their likelihood of promoting a product or service; scores are typically on a 1-10 scale, with 10 being most satisfied. Participants are typically asked to explain their reasoning for their scores, providing first-hand customer feedback for management teams.
Along with a customer satisfaction score, the NPS is one of the most direct ways to evaluate the user’s enjoyment of the product. Additionally, because users submit answers, the survey information can be used to identify pain points and areas of improvement.
Customer Lifetime Value
The Customer Lifetime Value (CLV) measures the expected total revenue or net profit for a single customer’s entire relationship; essentially, CLV measures the lifelong value of a customer in relation to a brand or product. With this metric, companies can evaluate how much should be invested in customer retention and identify consumers likely to become repeat users.
In order to find CLV, managers must know the average cost of a purchase, the average number of purchases made per year, and the average length (in years) of a customer’s relationship.
Often used in a cost/benefit analysis, Customer Lifetime Value can be used to identify ways to provide more value within an existing product, such as repositioning.
Overall Cost of Training
The overall cost of training can be viewed through two lenses: customer finances and internal finances.
From a customer perspective, the cost of training must be lower than the perceived gain of knowledge. Companies can better position and price their product by understanding how their market perceives and values their brand.
Internally, financial planning is required to successfully run a training program; evaluating the cost of training relative to revenue will allow companies to assess their programs' overall value.
Course Completion Rate
While engagement rate measures how users interact with a training solution, it does not directly show the number of users that complete a course. As a result, managers should measure the number of users who complete courses and earn certifications versus those who do not. If managers feel so inclined, they can also further segment the non-certified users into groups based upon how much a course was complete.
This KPI gives managers a tangible metric for the number of users who are successfully using a customer training program. To improve this measurement, managers should look to the reasons users are not completing courses and adapt accordingly.
The Benefits of Training on Business KPIs
Whether to meet compliance requirements, better understand the market, or develop greater skill sets, the purpose of training is to give clients usable strategies and tools. Difficult to measure directly, the best way to study a training’s effectiveness is through evaluating wider key performance indicators, such as sales revenue, ROI, or client retention.
When evaluating training processes, companies should note quantifiable changes to key metrics following the conclusion of related programs.
How to Measure ROI
Of all business KPIs, return on investment (ROI) helps calculate In the simplest sense, measuring a customer academy’s return on investment comes down to a standard equation:
ROI = (Net Profit/Cost of Customer Training) x 100
When calculating ROI retrospectively, net profit and the cost of customer training are typically already available. When calculating the potential future return on investment, however, managers and decision-makers will have to rely on forecasted estimates.
To get an accurate estimate of future net profits, managers should make realistic approximations for revenue and costs. Forecasted revenue should take into account historic and current revenue, as well as how revenue would increase, decrease, or stay the same without customer training; revenue can be impacted by a reduction in customer churn, ongoing lead generation, and more.
When forecasting costs, decision-makers should first consider the variable cost of the training program and its fixed costs. Variable costs are expenses that change as the number of customers is scaled up; typical examples are licensing fees, content creation for new products, and bandwidth/delivery expenses. Fixed costs are expenses that are not directly impacted by scaling; fixed costs; typically, fixed costs are those associated with the implementation, integration, training, and modification of customer training programs.
Additionally, managers must find the projected decrease in costs brought on by implementing training-led growth programs. Typically, after creating a custom training solution, customers see reduced expenses as a result of decreased help desk costs, fewer training administrative errors, automated labor, and more.
Projected ROI = (Projected Net Profit / Projected Costs) x 100
Projected Net Profit = Projected Revenue - Projected Costs
Projected Costs = Variable Costs + Fixed Costs - Projected Decrease in Costs
By finding the projected ROI of a customer training program, managers can give a tangible metric to show the value of customer education.
How to Correlate Your KPIs with Revenue Growth
Even with a proven or projected ROI, customer training departments still should expect to have to further prove the value of training-led growth. As expected, this means showing the impact customer education has on revenue. In order to do so, managers should show the correlation between the customer training KPIs and increases in revenue.
At a minimum, managers should prove a correlation between the engagement of users and total revenue. In its simplest form, this would be done by showing an increase in revenue as engagement also rises.
More effective, however, is focusing on revenue produced by up-sells, cross-sells, and order sizes on returning customers. In theory, engaged users are more likely to purchase additional extensions, add-ons, and products from a brand. If decision-makers can show how taking certain courses led to buying a product, using engagement and purchases as evidence, they can conclude customer training’s impact on revenue.
Additionally, managers can also analyze the relationship between prospective customer engagement and products sold. If there is an established trend between a lead’s use of customer training and their eventual conversion, managers can reasonably conclude that customer education positively impacted revenue.
Net Promoter Score
To prove a correlation between Net Promoter Score and revenue, managers can analyze the buying habits of customers in relation to their feedback score given.
Specifically, decision-makers should look to see if there is a noticeable increase in purchases for users who give satisfactory scores. If highly satisfied customers are purchasing at a higher rate than the average consumer, managers can prove that their customer training program has an impact on profitability.
Additionally, managers can show the relationship between NPS and revenue by analyzing how these metrics change over a specific time period; ideally, NPS would be measured before and after modifications are made to a course or module. By showing growth in overall NPS during a period of growth in revenue, managers can establish a correlation between the two. As a result, can again prove customer training’s impact on revenue.
Customer Lifetime Value
Customer Lifetime Value calculates the projected value of a customer for their lifecycle. Managers can prove a correlation between the two by showing growth in revenue consistent with the growth in Customer Lifetime Value.
A growth in CLV can be attributed to a change in the average cost of a purchase, the average number of purchases made per year, and the average length of a customer relationship. Because the statistic is used as a key performance indicator for customer training, any positive increase reflects an increased value of customer training.
To prove customer training grows revenue, managers must show that CLV and revenue increase proportionally; simply put: as revenue increases, so too should CLV. By showing a correlation between the two, decision-makers can make a reasonable conclusion that customer training grows revenue.
Overall Cost of Training
When looking to establish a relationship between the cost of training and revenue, managers should focus internally on the costs to execute and maintain their customer education program.
With this KPI, managers must show that the cost of training does not negatively impact grossed earnings. The best way to do so is to show growth of revenue growing at a greater rate than the ongoing cost of training; managers can do so by showing the Customer Lifetime Value of trained customers vs untrained customers. Costs can be further alleviated by charging users to use a learning academy.
While not necessarily proving a direct impact on revenue growth, this relationship confirms customer training is not a net loss for the bottom line.
Course Completion Rate
For this KPI, managers can take two main approaches to prove a relationship between it and gross revenue.
First, managers can look to draw a relationship between revenue growth and the number of certified users in a given period. In this approach, managers should look to show that revenue increases in periods during and directly after users get certified. Managers can strengthen their case by showing revenue growing at a lower rate when there are fewer newly certified users.
Second, managers can dive a layer deeper by analyzing the direct buying habits of certified and non-certified users. In both cases, managers should be measuring the number of products purchased by a certified user after course completion, versus those who are uncertified. If they can identify a noticeable trend in which certified users purchase more products after course completion or receiving a certification, managers can conclude that customer training has a positive impact on revenue.
Customer training educates users to properly use a product and grow into brand experts. Difficult to prove its value, customer education is often undervalued by higher-level management.
To show the quantifiable impact of training, managers should first track key metrics, such as engagement and customer lifetime value. By establishing and analyzing KPIs for customer training, managers can establish credibility for their program.
In order to show how customer training grows revenue, managers should look to draw correlations between growth in revenue and strong customer education KPIs. In doing so, customer training teams can prove their program’s profitability.
To learn more about training-led growth and its benefits, visit Raven360.com.