Leading and lagging indicators are some of the best ways to prevent churn for business to business (B2B) organizations. But what are they? How do you use them? And what’s the difference? While you may have explored leading and lagging indicators in business school, it’s time to brush off those books and finally put them to practical use.
Leading Indicators are key metrics and stats that look toward future events and outcomes. These are the stats you look at to determine future growth or decline. Usage rates are a good example of a leading indicator. If usage rates are up or high, you can project that those customers will likely re-up come renewal time. Be careful, tho. While leading indicators are helpful in giving a broad understanding of future outcomes, they're not a guarantee. Maybe your customers are using your product, but are unhappy with execution and setting their eyes toward your competitor.
Our favorite Leading Indicators include:
- Customer Satisfaction Rate (CSAT)
- Net Promoter Score (NPS)
- Activation rates
- Usage rates
- New leads/pipelines
Lagging Indicators are metrics and stats that look toward past events and outcomes in predicting future outcomes. Churn is a lagging indicator. If you lost, on average, 10% of new customers each quarter of the past year, that’s a good indicator that you probably will lose 10% next quarter. Sometimes, lagging indicators come in too late. For instance, if you see churn stats increase, it may be too late to save your customers. Further, lagging indicators are great at telling us what happened, but aren’t so great at telling the “why.”
Our favorite Lagging Indicators include:
- Net Promoter Score (NPS) *Yes, this one can be both leading and lagging.
There’s upsides and downsides to both indicators. So we believe the best way to use leading and lagging indicators to prevent churn is by using them together! Lagging indicators can provide the metrics on the success of leading indicators. Simply, lagging provides the “what” while leading can provide the “why.”
Plot your churn data (a lagging indicator) next to customer satisfaction data, activation stats and usage (all leading indicators). What are the relationships? Are they related? Where are the trends?
These key indicators can tell you exactly where you need to focus attention to prevent churn. Maybe your customers are happy, but usage is low and the data points toward a high level of churn next quarter. Find out why before your customers head to your competitor! Maybe they’re not engaged with the product and are struggling to incorporate it into existing workflows? Maybe they are additional internal goals leading them to explore competitors?
When working together, your leading and lagging indicators can provide you a recipe for customer engagement. And in our experience, engaged customers are happy customers.
The more you know about your customer, the easier it is to prevent churn. ProteusEngage facilitates the perfect environment to develop a true, collaborative relationship with customers, so you can anticipate problems before they arise. Our proven Keep and Grow sales flow has been saving businesses up to 15% reduction in churn when fully deployed. Learn more and schedule a demo today.
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