Published on: 23 Oct , 2024
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A well-planned and set-up customer education engine is integral to giving you a strategic advantage. On one hand, it helps your customers get more value from your product. On the other hand, it can significantly increase your revenue potential. It is reported that the ROI from customer education can be as much as 372% over three years and a seven-month payback period.
But how do you calculate this ROI? Customer education does not have a direct metric that directly connects with revenue generation since its main purpose is providing quality education to help customers master your product and align their objectives with your product. Fulfilling these customer-centric purposes is the key to increasing your revenue and realizing the value of your customer education efforts.
In this blog, we’ll look at what customer education brings to the table, and how to calculate the ROI of your customer education program effectively.
But before that, let’s see why we must calculate customer education ROI first.
Customer education is not a one-and-done activity, but something that needs continuous care, like watering a plant until it grows into a tree that yields the fruits you want. Measuring your customer education ROI is an important process that lets you give that care to your customer education program.
Without analyzing the right metrics, you cannot assess the performance of your customer education program to determine if you’re meeting the customer education goals you set. You also cannot assess if you’re at least on the path toward getting your money’s worth out of the initiatives.
This is especially impactful for scaling businesses that need to provide an exceptional customer experience under a fixed budget and reach their company goals as expected.
Let’s compare scenarios of two companies that started their customer education program recently. Company A has an increase of feature-related support tickets from customers in the marketing role, and since they do not check the metrics, it slowly increases the churn rate of that customer segment, leading to a loss of revenue.
Meanwhile, Company B which had the same issue, noticed the issue and immediately created a personalized webinar explaining the feature for that customer segment. They went on to see an increased customer satisfaction rate and product adoption, leading to an increase in customer retention and profit.
So, this is how tracking and not tracking your customer education program’s performance can benefit or affect your business in the long run.
From the scenario above, we saw one of the benefits that Company B had a hand in from their customer education program. Let’s look at other benefits that a customer education engine can bring to a company. For simplicity, we’ve divided the benefits into Direct and Indirect benefits.
One of the first benefits you'll encounter is a reduction in customers' time to complete their tasks and realize your product’s value. By reducing the time-to-value, you’re essentially breaking most of the barriers a customer faces during onboarding and initial product use. This also helps in getting rid of buyer’s remorse faster.
Good user onboarding does three things—it educates users on the problem, it showcases the features of your solution, and it signals that the ‘better life’ the user signed up for is right around the corner.
- Samuel Hulick, The Elements Of User Onboarding
Pro Tip: Use customer segmentation to provide personalized onboarding to display content based on industry, role, or use case to quickly align your product with customers' objectives.
How to Measure: Define the “aha moment” where customers recognize the core value of your product, like sending out the first campaign, rendering media, etc. Track this event in your product analytics app and compare it with the time they first onboarded and there you have it.
This can be considered the next stage of “time-to-value” where the focus is on reducing the learning curve of your product to help customers get the maximum value out of your product and incorporate it into their daily workflow.
Pro Tip: Use engagement-based segmentation to draw customer pathways and understand common customer struggles at different pathway points to create educational content for them.
How to Measure: Similar to measuring time-to-value, define the event that tells you when a customer adopts your product, such as sending campaigns every 3 days, rendering 100 media in 1 month, etc. Track the events in the product analytics tool and compare it with their initial onboarding date to get their time-to-adoption.
A good customer education engine makes your customers experts on your product. This reduces the amount of repetitive and basic support queries raised, lowering the burden on customer support and allowing CSMs to focus on more important tasks such as reducing churn rates.
Pro Tip: In one of our podcast episodes, Monica Sindwani suggested these steps to help you get started on a solution:
Step 1: Collect your current or previous support tickets from a time period.
Step 2: Categorize the tickets into different query buckets. For example, login issues, feature issues, UI bugs, etc.
Step 3: Create help articles, product documentation, and videos for these buckets addressing the pressing issues.
Step 4: Share these contents for support requests, email replies, and to your knowledge base.
How to Measure: Compare your knowledge base visits with the no. of support tickets in a time frame and correlate the impact.
Different customers like to consume educational materials through different content formats like - help articles, product documentation, training videos, webinars, etc. A good customer education program helps you satisfy this expectation as well as make these resources available 24/7 in self-service portals.
Pro Tip: Conduct a content preference survey with your customers to understand their learning preferences and prioritize your content creation efforts based on it.
How to Measure: Check for an increase in the engagement rates of these resource materials, for eg: an increase in knowledge base article views, webinar views, etc. You can also monitor your knowledge base feedback survey responses and automate feedback emails after every webinar session and review those responses as well.
There is one main reason customers would genuinely want to spread the word about your product - They love your product and are completely satisfied with it.
Customer education (of course with good customer success and support), helps customers reach this state through your consistent efforts in personalization and enabling them to realize the full potential of your product.
Positive word-of-mouth helps you get organic growth and increases sign-ups from referrals.
Pro Tip: If your analytics tell you that your customer education is top-notch, and you have a good NPS, then set up a referral program to encourage and incentivize customers to recommend your product to their friends.
How to Measure: Track your reviews in various sites like G2, and Capterra, and track your referral program metrics. Monitor your onboarding survey to see if the number of referral sign-ups increased.
Customers have a problem and your product provides the solution. Customer education helps you connect your product to your customers’ problems better, increasing product adoption.
Paired with positive word-of-mouth, it helps you achieve product-market fit faster and establish yourself as the top choice among people.
Pro Tip: If you’re reaching a global audience, then it’s wise to have localized educational content available in multiple languages and accents. This makes your content more relatable and accessible.
How to Measure: In measuring customer education’s impact in achieving product-market fit faster, you need to consider a lot of factors, but for simplicity, let's correlate these three metrics:
Looking at the benefits, it’s pretty clear that customer education as a process contributes directly to your revenue generation, and at the same time cultivates a customer base of loyal advocates.
By educating customers, you positively influence their adoption rate, leading to increased customer lifetime value and reduced churn rates. You also help reduce the cost of customer support and success teams and scale them using your on-demand educational resources.
The customer-centric approach builds positive word-of-mouth, bringing in new customers through organic trust and referrals. As you continue to provide and upgrade your customer-centricity, you position yourself as a thought leader in the market.
Measuring the ROI of your customer education program requires you to analyze and list the costs involved in setting it up. These costs include technological and personnel costs.
Technological Costs include your recurring subscription costs for the software you use to execute your customer education program, including:
Personnel Costs include the costs associated with hiring and maintaining your customer education team/division such as employee salary and training costs.
When it comes to ROI, it boils down to the revenue, but with customer education, you cannot point out exactly what activity is bringing in revenue - it’s all working together like the gears of a machine.
The Key Performance Indicators (KPIs) of your customer education program will be reflected across different metrics in different places. So, let’s divide the KPIs into three different aspects:
Once we take a look at these metrics, let’s correlate them to understand how customer education brings in revenue.
Here are a few metrics to track from common customer-facing platforms using the in-built analytics or any analytics tool integrated with these tools like Google Analytics.
Knowledge Base Software | Learning Management System (LMS) | Customer Support Platform | Customer Success Platform |
---|---|---|---|
Knowledge base visits | Learner enrollment rate | Support ticket rate | Customer health score |
Specific article page visits | Course enrollment rate | First contact resolution rate | Time-to-value |
Search bar effectiveness | Course completion rate | Average resolution time | Engagement rate |
Time spent on articles | No. of active users | Ticket deflection rate | Onboarding journey experience |
A common metric to track across all platforms is customers’ feedback on their experience with each platform. The customer support/success platform also lets you conduct customer surveys to analyze your Customer Satisfaction Score (CSAT).
It is the percentage of your total customers who have started to use your product in their everyday workflow.
A customer usually goes through six product adoption stages -
An effective customer education program helps them move through these six stages seamlessly. A high product adoption rate indicates that.
Pro Tip: Since product adoption is dependent on habitual, and regular usage patterns, use gamified elements to encourage customers to come back every day.
Calculating Product Adoption Rate:
( New Active Users / Total Signups ) X 100
This tracks how easily users can navigate your product and complete intended actions without facing obstacles or confusion.
Smoother user flows indicate that customers are well-educated on how your product’s features work, making it easy for them to achieve the desired output efficiently.
Pro Tip: Look for steps in the flow where users tend to get stuck for unusually long periods and optimize your customer education activities there.
Measuring User Flow Smoothness:
1. Identify key user flows in your product
2. Track the completion rate of these flows:
( No. of users who completed the flow / No. of users who started the flow ) X 100
3. Measure the average time taken to complete each step in the flow:
( Sum of the time taken by all users / total no. of users in the step ) X 100
4. Track the drop-off rates of each step:
( No. of users who drop off at step X / total no. of users in step X ) X 100
Feature utilization rate measures how frequently users engage with specific features within your product, helping you understand which features are most valuable to your users.
This helps you look at feature usage patterns and identify potentially valuable features that aren’t being used often. If that’s the case, then the current education about its benefits and impact might need to be looked at for improvements.
Pro Tip: If you feel a lot of users are not following an optimized feature path, you can create a webinar topic centered around helping people realize the optimal path.
Calculating Feature Utilization Rate:
Before looking at the formula, decide on which period you want to calculate the feature utilization for - Monthly, weekly, or daily. Apply the data from this period to the formula
( No. of users who used the feature / No. of active users ) X 100
User stickiness measures how often users return to use your product and how essential it becomes in their daily workflow.
It lets you know how well your product is delivering value and makes users return to make use of that feature regularly.
Pro Tip: Track the stickiness across different customer lifecycle stages and look for stages where feature stickiness tends to decrease and focus your customer education efforts there.
Measuring User Stickiness:
( Daily Active Users / Monthly Active Users ) X 100
The above formula gives you the daily stickiness rate, but if you feel your product might not be a daily use tool, you can swap Daily Active Users with Weekly Active Users, to get the weekly stickiness rate.
NPS measures customer experience and predicts business growth by asking customers how likely they are to recommend your product to others.
A higher customer satisfaction tends to increase your NPS and bring in quality referrals.
Pro Tip: Follow up your NPS survey with an open-ended question on why they chose their rating to get a better understanding of customer sentiments.
Measuring NPS:
"1" being less likely to recommend and "10" being very likely to recommend
2. Categorize responses into three:
3. Calculate NPS using this formula:
NPS = Percentage of promoters - Percentage of detractors
The metrics that we’re going to discuss here directly affect your revenue from customers in the form of:
Customer retention rate measures the percentage of customers who continue to use your product over a given period. It’s a metric that tells you how many of your customers continue to find value in your product.
Pro Tip: Compare the retention rate across your different pricing plans or pricing groups if you only offer customized pricing. If there is a constant dip in retention in a particular pricing segment, either optimize your pricing plan or improve your customer retention strategies for this customer segment.
Calculating Customer Retention Rate (CRR):
To calculate the CRR for a specific time frame, we need three metrics:
The number of Customers At the Start of the given period (CAS)
The number of Customers At the End of the given period (CAE)
The number of Customers you Gained in this period (CG)
Now, apply these metrics in the CRR formula:
CRR = ( (CAE-CG) / CAS ) X 100
Churn rate is the flip side of retention rate, measuring the percentage of customers who stop using your product over a given period. Analyzing areas where most customers churn indicates that customer education might be ineffective at those touch points.
Pro Tip: Conduct exit interviews to understand the reasons why those customers churned. Try to find any patterns and focus your churn-reducing efforts there.
Calculating Churn Rate for a Given Period:
(No. of customers lost / Total customers at the start of the period) X 100
Customer Lifetime Value represents the total revenue a business can expect from a single customer account throughout the business relationship. It's a forward-looking metric that helps in understanding the long-term value of customer acquisition and retention efforts.
Pro Tip: Compare your CLTV with your Customer Acquisition Cost (CAC) to ensure you’re getting your money’s worth by investing in customer education.
Calculating CLTV:
CLTV = Average revenue per customer/churn rate
Upsell and Cross-sell Rate measures the success of the efforts taken to increase the value of existing customer accounts, either by upgrading them to higher-tier plans (upselling) or by selling additional products (cross-selling).
According to Invespcro, you’re 60-70% more likely to sell to an existing customer than a new customer. This is one of the best ways to grow your revenue without incurring high acquisition costs.
Pro Tip: Identify the best timing opportunities based on the consumption of educational resources by a customer across various channels. For example, have they completed your advanced LMS course, visited your knowledge base >50 times, and viewed your latest webinar?
Calculating Upsell Rate:
(No. of up-sells / No. of up-sell attempts) X 100
Calculating Cross-sell Rate:
(No. of customers who made additional purchases / No. of cross-sell attempts) X 100
Alright, what do we do with these metrics? I mean, we know we need to positively impact them, but even if we achieve that, how do we know that our customer education program was a major factor in the success? This is where your educated customer segment comes into play.
To correlate success with customer education, we need to check how the positive impacts of the KPIs from product analytics tools and ones that directly impact revenue come from educated customers vs non-educated customers.
So, before moving on, determine who is an educated customer. This should be based on your KPIs from Customer-facing Platforms, for example:
Ideally, your definition should include multiple KPIs to ensure a high-quality standard of an educated customer.
Correlate the success of product analytics and revenue-impacting KPIs: Out of the positive impacts of all the KPIs, compare how many were contributed by educated customers vs non-educated customers.
Correlate the increase in revenue growth with customer education: Out of your current MRR, ARR, Net Retention Revenue, Expansion Revenue, and Customer Acquisition Cost (CAC) Payback Period - how much do the educated customers contribute in this?
If the ratio is notably higher with educated customers, you’re getting your money’s worth.
Measuring The ROI: A Recap
1. Analyze your costs related to customer education (Technological and personnel costs).
2. Since we cannot directly connect one metric to prove the revenue impact, we need to correlate different metrics, so let’s consider KPIs from three different aspects (from customer-facing platforms, product analytics software, and ones that directly impact revenue).
3. Determine who is your educated customer based on the KPIs from customer-facing platforms.
4. Analyze the positive impacts of product analytics and revenue-impacting KPIs and find out the contribution by your educated customers in this success.
5. If educated customers contribute significantly to your business success, then you’re customer education efforts are paying well.
A common challenge most customer educators face is the process of collecting and compiling data from different sources. The best way to overcome this is to automate this process using automation tools like Zapier which can fetch data from multiple apps and feed it to a Google Sheet - giving you a single source of truth. Eric Mistry shared this insight with us on Trainn’s Customer Educated Podcast.
By implementing a robust system for measuring and analyzing your customer education ROI, you're not just proving its value – you're setting the stage for data-driven improvements that can significantly boost your growth as an industry thought leader. It’s time to elevate your customer education program to become the strategic driver of business success.