8 min read

How to Measure the ROI of an LMS for Customer Training

How to Measure the ROI of an LMS for Customer Training

Return on investment (ROI) is an idea that has fueled the human race for millennia.

The agricultural revolution was based entirely on the idea of putting more work in upfront to reap a greater harvest each year than could be gotten through hunter-gather methods. Traveling the long, hot, dusty, and plague-ridden Silk Road was only worth it for the riches in the end.

This concept lies at the root of all business: providing a product or service takes effort and resources, but the resulting profit makes it all worth it. Whether a company sells goods or services, this is the driving paradigm.

Software as a service (SaaS) is no exception, and we see this throughout the commercial world, from B2B to B2C, across international borders, and from top to bottom of the stages of production.

Nowhere is ROI more salient, though, than when it comes to the investments you make in your customers’ well-being, empowerment, and peace of mind.

Customer Retention and Your Training Program

Throughout the long and winding course of history, we’ve learned to place bets on upfront ventures in the hopes of receiving a greater return in the long term.

Of course, to do this wisely, you need to be able to measure the results of that return. Yes, we can eyeball the success of any investment, but it is not a good way to run your life or business.

Naturally, that means you want to know how any undertaking performs over time, which includes your learning management system, a.k.a. your LMS.

From Inward to Outward

We are increasingly seeing a shift in the way companies do business. Where before, they focused purely on internal elearning and employee training, today’s organizations have started looking outward toward boosting the skills of their customers.

This makes good sense. If customers can’t use your product, they won’t keep it around for long.

Poor retention metrics almost always reflect, at their root, inadequate user training. To keep customers around, you must stop envisioning them as buyers and treat them as learners.

Companies that have made this mental shift are thriving. Now that they understand the direct correlation between training and brand loyalty – not to mention increased customer spending – they have seen attendant booms in profit.

But how do you know if this training is working? How do you measure it?

These are critical questions that we’re here to talk about today. We’ll examine why revenue is the most important metric you should focus on, which other training ROI metrics to watch, and how to get started with customer training ROI in your business.


Revenue: The Leading Metric in Learning Management System ROI

The main reason to take any action in business is usually to generate additional income.

Businesses really are in it for the moolah, and the downstream gains are why they’re willing to put the effort in upfront. The same goes for customer training – the effort put in now will bear fruit in the future.

Unfortunately, too many businesses treat learning and development initiatives like a sales gimmick rather than a core principle. But only the latter mindset will reap long-term benefits, allowing you to justify higher pricing, increase your fan base, and pad out the bottom line.

Turns out it also works.

ROI LMS: The Metric That Matters

Our friends at Braze, who run a fantastic customer engagement platform, track the efficacy of their client initiatives via their academy-based product certifications, and they’ve made some staggering findings.

They compared the people and companies who had completed their training with those who hadn’t, and guess what they discovered?

Their analysis showed that customers who made it through their online training program increased their spending by 67% afterward. Figures show that for every $1 spent on training, a user spends an average of $12 on products related to that training.

That is a considerable training ROI. Most companies would do almost anything for that kind of leap in revenue, and it doesn’t take much to see why that makes it such an important metric. Not only does it mean the most to investors and shareholders, but it’s also a pretty easy way to measure the effectiveness of any externally facing LMS platform.

The reason revenue and training are so highly correlated is similarly straightforward. Customers who train with you are already engaging more with your platform. That increases the know-like-trust factor.

Plus, it has the added benefit of reducing churn, making recurring subscription revenue more stable. And the crowning glory of training? It’s the perfect opportunity to upsell your products.

Bottom line: If you can get someone training, you can get someone spending.

SaaS is the go-to model; we don’t see that changing anytime soon. Because of this, customer training is something that any software provider should take notice of, and that means explicitly tying your training efforts to your revenue.

Revenue isn’t, however, the only metric to watch.

Other Customer Training ROI Metrics to Watch

Finding the suitable LMS for your training initiatives, and instituting the right set of KPI metrics to ensure its success, isn’t a one-and-done proposition. Stakeholder approval and learner success will only result from carefully tracking additional data from your learning management systems and training programs in real time and over the long run.

Let’s look at some of the most critical metrics now so that you can get a handle on your data regarding return on investments.

Customer Retention Through Personal Development

Think CRM systems, and you think Salesforce, right? Our CEO, Joe, was a user for 15 years before starting Raven360 – but he openly admits that he only used around 5 percent of the power of Salesforce. He became accustomed to using only the tools he felt he needed and was already comfortable with.

As he was never internally pushed or given training by an external party on how to use the system more effectively, it stayed that way.

Fast forward a few years, when HubSpot appeared and took the CRM world by storm with a much cheaper solution that was more accessible to new users. Joe switched by seeing the lower price tag and the same features. As a user, it was a no-brainer.

If Joe had been well-trained in Salesforce, he would already have been invested in it personally. He would have had far less reason to switch if he could have accessed more of the system he was already using.

This is a familiar story across many software packages: switching for ease and price. Therefore, it stands to reason that if you can provide accessibility and value, these switches can be prevented.

That’s where training comes in. By meeting customer training needs through LMSs that offer headache-free onboarding, you will keep more of those customers around.

Even if a user moves to a new role or starts their enterprise, they’ll likely want to stick with what they already know: your system. This is especially true if they feel confident that your training courses can easily lead their teams through learning your system.

Et voilà: they can now feel a greater sense of employee engagement and stakeholder approval, further increasing their faith in the training process. Think of this as a monthly “conversion” each time your user doesn’t cancel, making your learning platform an invaluable part of your ROI calculation.

If they’ve had a good experience through training, they’re also far more likely to endorse it to colleagues and peers – which will also help your product spread through the market. And if they can envision more significant personal development through greater leveraging of features, they are more open to upselling.

In other words, providing customer training gives your product the best chance to be retained in the future. While “personal development” might be hard to quantify, sales growth through recommendations and further adoption is far more tangible. You can measure both of those with readily available raw data.

In short, by training a user well, you increase their lifetime value to you. Let’s take a look at that metric now.

Customer Training ROI

The CAC and LTV of Your LMS

At the risk of sounding a bit like alphabet soup, it is critical to understand the essential acronyms that make up both long-term and real-time metric analysis. You can’t talk about SaaS without mentioning the twins – CAC (customer acquisition cost) and LTV (lifetime value).

We’ve already touched on LTV, but it's crucial to think of them in tandem, as together, they become a far more insightful metric for LMS investment and customer satisfaction.

Customer Lifetime Value

Lifetime value is the total revenue from a customer or client while they are with you. If your LMS solution can keep customers around, then it will dramatically increase that value, but that often doesn’t happen.

The problem with the current customer acquisition and retention approach is that it needs to be more balanced. All the focus is on turning leads into prospects and prospects into customers. Once they’ve signed on the bottom line, boom: most companies stop investing heavily in them.

Companies with a traditional sales funnel often push for more web traffic, hoping to capture visitors through contact forms and low investment sign-ups. Once they have these points of contact, salespeople can swoop in at the right time to nurture them into paying customers.

However, we’ve seen that companies that offer learnings as a critical part of their website can convert visitors at a far higher rate than those that don’t.

How do we know? Because advertising bonuses such as “free courses” or “free academy entries” get the attention of website visitors immediately. After they go through the funnel, making good on the pledge of an excellent learning experience will keep them loyal. Often for years or even decades.

Therefore, the ROI of your LMS depends heavily on whether you can get users to course completion. (Think of this as the value of an internal LMS for corporate training that increases employee retention rates.)

Many companies worry about training costs, but the real question is: how much does it cost to onboard new customers who don’t give you a significant ROI … or any at all?

Which is where CAC comes in.

Customer Acquisition Cost (CAC)

Most companies are good at quantifying how much it costs to convert a prospect into a customer. The total marketing effort, salesperson time, free materials, and so on add to the total CAC, or cost per acquisition.

Unfortunately, all those resources are wasted if the customer doesn’t stay with you. Therefore, what looked like cost savings (not offering much customer support, so you don’t have to pay for it) became a waste of marketing money.

On the other hand, if you can promise customer success and new skills through valuable training content, you’ll see profits and popularity soar.

HubSpot is one of the best companies at using this strategy, and their wealth of content speaks to such a broad audience that they have fantastic potential to pick up almost any user. 

By positioning your website and associating with your brand as a place of learning where users can access quality content, you will reduce the cost of turning them into paying customers.

We already know that users who spend on training increase their spend overall, so combine this with reducing the cost to onboard them, and you’ve just boosted your margin. Some websites are so effective at turning visitors into users that they can even forgo the step where a salesperson contacts a prospective client.

This admittedly takes some time and a great deal of analysis of your existing base, but it has a real upside beyond just the increased revenue you’re likely to see with customer training.

Hence, accounting for LMS ROI in your CAC and LVT calculations is paramount.

Customer Training Means Education, Education, Education

Now that we have spoken about some key metrics and how much you stand to gain from training your customers, we would like to quickly go over the two main models you can choose between.

The Free E-Learning Content Model

Firstly, you can produce and distribute your training content for free. Again, remember, this is an investment.

Even if you must spend considerable amounts on a new LMS to provide an excellent cloud-based experience in each training session.

Promoting a “free online training academy” will likely generate significant traffic to the content. By having all the free content accessible with only a name and email address, you can quickly build up a network of prospective clients.

Throughout their training, you can track their progress and aggregate all the user information to understand which courses are most and least popular and how users generally engage with the content.

While many of your users won’t go on to purchase, the proliferation strategy of leveraging free content for leads is an effective method.

The Paid Customer Education Model

Your second option is to create a paid training setup. By charging for individual courses or a slightly discounted rate for the entire package of content, you add value to the training and show users that it is worth a purchase. 

This is a common pricing strategy. While there’s a slightly higher amount of inertia for the customer to overcome, those who spend the initial amount are committed to the process. So the chances of upselling to them are very high.

Also, by investing in it themselves, they will be more committed to your training, product, and brand. Over the lifetime of that customer, this training offer can pay serious dividends.

Leveraging Customer Training ROI for Fun and Profit!

Here at Raven360, customer certification is one of the most exciting parts of the training space. For many years, internal staff training has been refined and improved upon. Customer training, by comparison, is relatively new … but that’s all changing.

Today, many companies understand the bottom-line implications of good LMS platforms for users. If you can create content you think your clients would find helpful, give it to them.

Sure, there is some initial investment in the process, but the potential payoffs are enormous. Plus, you can build the cost to yourself into the price you charge the customer if you provide great value.

The formula is simple: give your customers a chance to invest in your products, and they will become better spenders for longer and at a lower cost. What’s not to love?

At Raven360, we’re committed to internal and external training, so whatever your needs are, contact us today!

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