Elevating your MSP B.R.A.N.D with Metrics and Measurement: A Checklist

2024 is poised to be a breakout year for MSPs (Managed Service Providers) worldwide, especially if they can solve enterprises’ cybersecurity concerns and strengthen their Brand. That’s why I am discussing a metrics-driven approach to supporting your organisational capabilities in this series of blogs.

Research shows that 62% of managed service providers (M.S.P.s) expect to grow primarily from new business, and even during the stern quarters of the pandemic, revenues remained stable for a whopping 95% of providers.

In 2024, it is vital to continue the momentum and leverage it as a launchpad for future growth. To that end, M.S.P.s need to focus on internal B.R.A.N.D metrics and customer-facing B.R.A.N.D metrics, as I detail in Part 1 and Part 2 of this series.

There are many ways to connect and organise metrics and dashboards. One way is to use a metrics pyramid. A metrics pyramid is a well-balanced hierarchy of metrics that helps define the reasons and foresee the problems. It is built according to science, making metrics sensitive, logically related to product hypotheses, and actionable. The scientific method helps create an actionable data-driven metrics hierarchy. Another way is to use a barrel structure. The barrel structure is a simple and effective way to organise metrics. It is a structure that is easy to understand and can be used to manage metrics in a way that makes sense. However, it is less potent than the metrics pyramid.

Creating a metrics pyramid involves several steps:

- Identify the need for a hierarchy of metrics: This usually happens when you realise that your data analytics is unorganised and you want to align the metrics. The earlier you start building the hierarchy of metrics, the better.

- Determine if you have enough data for meaningful analytics: You can create a metrics hierarchy or pyramid for your product as soon as you have enough data. The hierarchy of metrics can show the exact reasons why metrics change and how these changes can cause problems for business goals.

- Understand the purpose of the hierarchy of metrics: The hierarchy of metrics allows you to localise the causes of changes in the graphs of critical metrics. It helps you focus on essential indicators and identify growth points.

- Build the hierarchy of metrics according to science: You must make metrics sensitive, logically related to product hypotheses, and actionable. People often see a hierarchy simply as a tree structure that helps organise the metrics. However, a hierarchy built this way is just a mental exercise. For a small project, it is a good starting point. But if you hope to become as big as Amazon, you must build the metrics hierarchy according to science.

The metrics pyramid is a tool to help you understand and manage your metrics more effectively. It’s not a one-size-fits-all solution but a framework that you should adapt to your needs and circumstances.

Building a pyramid of metrics involves organising your metrics according to the pyramid layers. Here are some steps to guide you:

· Identify Your Metrics: Identify all the relevant metrics to your business or product.

· Group Your Metrics: Group all metrics according to the pyramid layers. The grouping should be based on business vision or business outcomes.

· Hierarchy of Metrics: Understand that top-level business goal metrics should never drop, even if the lower-level ones are growing.

· Align Metrics with Product Hypotheses: Make sure your metrics are sensitive, logically related to product hypotheses, and actionable.

· Build the Pyramid: Building a pyramid takes 20% of the effort compared to building a metrics hierarchy, bringing 80% of the result.

For most businesses, a pyramid of metrics is more than okay. But if you plan to be bigger, go for a data-driven, well-balanced metrics hierarchy first and then create a mighty pyramid from it.

Choosing the right metrics for your pyramid is crucial. Some of the steps that you can perform to build the hierarchy of metrics are here:

- Relevance to Business Goals: The metrics should be relevant to your business or brand goals. They should help you measure the success of your strategies and initiatives.

- Quantitative and Qualitative: Metrics can be both quantitative and qualitative. Quantitative metrics are numerical indicators that reflect a particular characteristic and the level of success of a product. Qualitative metrics, on the other hand, can provide insights into user behaviour, preferences, and attitudes.

- Product, Marketing, and Business Metrics: There are different types of metrics, such as product, marketing, and business metrics. Choose the ones that align with your goals and objectives.

- User Engagement and Product Usage Metrics: These metrics help you understand how and from where users come to the product, how many of them there are, which of them are active, and how they use the product. It also helps you to drive adoption plans for your users. They also provide insights into likely churn threats and opportunities for cross-selling or upselling.

- Monetisation Metrics: These indicators determine how much you earn on the product or from the business.

- Actionable and Traceable: The metrics should be actionable, suggesting workflow improvements, policies, incentives, tools, etc., and traceable to root causes. Broadly, these metrics help reduce noise and leverage user signals to improve the service or product.

But with these guidelines, you should be able to navigate and choose the right metrics for your pyramid.

For example, a hierarchy of metrics for driving growth:

- Level First: Primary Metric (e.g. Organisational Growth measured as Revenue growth or Benefits delivered to customers)

- Level Second: Key Performance Indicators (KPIs) (e.g. Conversions rate or Online reputation)

- Level Third: Main Metrics affecting the KPIs (e.g. Customer Acquisition Cost or Adoption rate for your product or service)

- Level Fourth: Sub-Metrics affecting the Main Metrics (e.g. Retention Rate or Referral Rate

- Level Fifth: Actionable or traceability metrics (e.g. Defects density or Current account receivables)

This hierarchy helps to understand the performance of a business and identify areas for improvement. Each level provides more specific details about the primary metric.

Here are the metrics collated for customer & market value management and internal stakeholder objective management. I have deliberately listed a few to help the readers understand the structure.

Customer and market-facing BRAND metrics to measure value establishment: adopting BRAND as a comprehensive model allows an organisation to evaluate its performance from multiple aspects, including customer loyalty, brand preference, brand equity, market differentiation, reputational risk, agility and adoption, network acceptance, and defect diagnosis. Understanding these dimensions can empower organisations to make data-driven decisions that boost their brand positioning, enhance customer satisfaction, and drive business growth. The parameters to measure here are Benefits and Value, Reputation effect, Adoption and agility progress, Network effect and finally, Defect and diagnosis resolutions.

A. Examples of Benefits and value metrics:

· Net Promoter Score (NPS): This metric shows your clients’ loyalty, which ones are your fans/promoters, and which drive people away from your Brand. Net promoter score (N.P.S.) = % promoters (those who score their likelihood of recommending your M.S.P. to others between 9 and 10) — % detractors (those who score their likelihood of recommending your M.S.P. to others between 0 and 6)

· Customer Lifetime Value (CLV): The company’s total net profit from any given customer. It can also help you target your marketing efforts more effectively and customise them for each client group. Customer lifetime value (CLV) = (Median or Average value of a sale x the average number of transactions) x the average customer lifespan.

· Customer Effort Score (CES): This measures how much effort a customer exerts to resolve an issue, a request fulfilled, a product purchased/returned, or a question answered. Customer effort score (C.E.S.) = Number of customers who said their interaction with the M.S.P. was “easy” ÷ Total number of customers who responded.

Another is Churn Rate: This is the percentage of your customers or subscribers who cancel or don’t renew their subscriptions during a period. You could also use the Customer Satisfaction Score (CSAT) for every incident they reach our customer support: This is a primary measure of customer satisfaction or experience.

B. Reputational metrics are measures used to quantify and track a company’s reputation.

· Google PageRank: This link analysis algorithm of Google assigns a numerical weighting for measuring the “relative importance” of your web page or website. Google PageRank = A score is given by Google using the algorithm P.R. (A) = (1-d) + d (P.R. (T1)/C(T1) + … + P.R. (Tn)/C(Tn)) — you can find an explanation of this here. Still, M.S.P.s can access this reputational metric from their Google Analytics dashboard.

· Local search rank = A score Google assigns based on your business’ relevance, distance, and prominence.

· Rate of returning visitors = Number of returning visitors in the specific period ÷ Total unique visitors

In addition, you can also measure Brand mentions over Time: This measures how often your Brand gets a mention on various platforms over a certain period. Another effect measure is Sentiment analysis, which involves analysing customer feedback to determine their sentiment towards your Brand. Finally, how you fare vis-a-vis competition, measure Share of voice: This measures the percentage of total mentions of your Brand compared to competitors.

C. Examples of Adoption and agility metrics: which clients are utilising the product or services provided and how quickly and effectively your organisation can adapt to changing demands.

· Percentage of Monthly Recurring Revenue (MRR): Your MRR is your business’s Revenue from recurring payments. For an MSP, that’s through contracts and managed service agreements. Percent of monthly recurring Revenue (M.R.R.) = (M.R.R. ÷ Total monthly Revenue) x 100.

· New Service Adoption Rate: This metric tracks how quickly clients adopt new services. A high adoption rate indicates that the MSP offers valuable and relevant services. New service adoption rate = (Number of customers who adopted a new service ÷ Total number of customers) x 100

Another metric is the Client Utilisation Rate, which measures the percentage of a client’s utilisation of contracted services. A high utilisation rate indicates that the client is getting good value from the services, which can lead to higher client satisfaction and retention. Another metric to measure agility is Service Modification Time: it measures how quickly an MSP can modify or adapt its services to changes in a client’s needs or the IT environment. Finally, Agility Score: This is a composite metric that considers several factors, such as the MSP’s ability to adapt to new technologies, respond to changes in the IT environment, and modify services in response to client feedback.

D. Network effect metrics that help you validate how your community is helping you in your growth objectives. Here are a few examples:

· Referral Metrics: These metrics measure how often your users recommend your product to others. A high referral rate can indicate a strong network effect. Referral rate = (Number of customers who referred new prospects ÷ Total number of clients/customers) x 100

· Client Onboarding Satisfaction: This measures clients’ satisfaction with onboarding. Client onboarding satisfaction rate = (Number of customers satisfied with onboarding giving a score of 8–10 ÷ Total number of responses) x 100

· Acquisition Metrics: Effective user acquisition channels can lead to rapid growth, while ineffective ones can result in slow or stagnant growth. By monitoring metrics such as customer acquisition costs (CAC) and conversion rates, you can assess the efficacy of your product in attracting new users and gain insights into the types of acquisition strategies that work best for your business. Customer acquisition costs = Cost of marketing & sales initiatives in a specific period ÷ Number of new prospects gained in the period

Besides the above, Engagement Metrics measures how users interact with your product. High engagement levels indicate that your product is valuable to its users. Finally, Retention Metrics measure how many users use your product over Time. High retention rates mean that your product meets its users’ needs.

E. Defects and diagnosis metrics are crucial as they help identify, analyse, and resolve issues in the services provided. Here are some examples:

· Defect Density: This indicates how effective your developers are and how mature your software development process is. Defect density is the number of defects divided by the software size. Defect density = Total number of defects during SDLC + Total lines of code or size of the software

· A defect Pareto Chart is a chart which reflects the frequency of occurrence of various problem categories. The defects with a higher frequency of occurrence observation lead to priority assignment. Rather than measuring defects and categories of defects, calculate the Time taken to resolve such tickets. Thus, Average response time (A.R.T.) = Total amount of Time (in minutes) spent responding to tickets in a week ÷ Total Number of tickets.

· Service/System Availability: This metric is the percentage of time that a service or system is available. Service/system availability = Uptime ÷ (Uptime + Downtime)

Regular review and effort are required to drive Root Cause Analysis (RCA), which is the method of finding the reason contributing to the defect. It is an essential part of eliminating causes that lead to deficiencies. Thus, defect prevention should come down over Time. It can be a measure to ascertain that defects detected so far must not reappear. Another view would be to measure Failed Requests/Total Requests: This ratio can help you understand the reliability of your application.

Internal stakeholder (employee, partner, and investor-facing) metrics to measure value-building. Internal Brand metrics are helpful for investments, stakeholders, and employees for the following reasons:

1. Investors: Investors base their financial backing on belief in your Brand, mission, and financial numbers. A strong brand can command a price premium, contributing to business growth. Therefore, measuring brand performance can give investors a clearer picture of the company’s value and potential return on investment.

2. Stakeholders: Stakeholders, including customers, are interested in the company’s Brand. Customers make purchases based on perceived value. Therefore, brand measurement can provide insights into brand performance if the organisation is a growing concern and identify sustenance power if threats emerge.

3. Employees: A company that offers a good work environment and fair pay will attract and retain high-quality employees. These employees can contribute to higher-quality products, increased demand, and a more substantial brand reputation. Therefore, measuring a brand can help a company understand how its internal practices impact its reputation, reduce hiring costs, increase retention, and increase employee referral, productivity, collaboration, team and organisational success.

A. Business Metrics that MSP needs to review and drive organisational behaviour, systems and processes. Here are examples :

· EBITDA Margin: EBITDA is the net income (or earnings) with interest, taxes, depreciation, and amortisation added back. It is a vital metric because Revenue alone doesn’t measure the value of an MSP; profitability is what matters… EBITDA margin = ((Earnings before interest and tax + depreciation + amortization) ÷ Total revenue) x 100

· Revenue Growth Rate: A metric that shows the increase in how much growth your company makes, i.e., it could be due to price improvement, service expansion, customer expansion, etc..… Revenue growth rate = ((Revenue at the end of the measurement period — Revenue at the beginning of the measurement period) ÷ Revenue at the beginning of the measurement period) x 100

· Monthly Recurring Revenue (MRR): The most critical metric for MSPs reflects the business’s health. It is the expected Revenue that stems from recurring services each month. Monthly recurring Revenue (MRR) = Total number of paying customers x average Revenue per user per month (ARPU)

A few other critical metrics can be the customer retention rate, which is how successful businesses can acquire and keep new customers. Another one will be Active Usage: Successful digital transformation requires sustainable technology or product adoption. Lastly, User Engagement: Measuring technology’s impact on end users in their jobs and efforts to warrant regular engagement is critical.

B. Reliability and Resilience Metrics: The metrics that provide insights into your products and MSP service v. Examples are

· Reliability (Mean Time Between Failure and Mean Time To Repair): In the world of electronic components, the expression of reliability of repairable parts is a combination of two parameters, which are MTBF (Mean Time Between Failures) and MTTR (Mean Time To Repair). Mean Time between failure MTBF = Total uptime ÷ Number of breakdowns and Mean Time to acknowledge = Total Time taken to recognise all incidents in a week ÷ Total Number of incidents a week

· Data Packet Loss: This measures the number of data packets lost during transmission. Packet loss rate = (No. packets lost ÷ No. packet sent) x 100

A few other metrics can be Service/System Availability- This metric is the percentage of time that a service or system is available. Another one is Failed Requests/Total Requests: This ratio can help you understand the reliability of your application.

C. Automation metrics are numerical measurements used to assess and analyse the efficacy and efficiency of test automation activities. These metrics give teams important information about the effectiveness and state of the test process, enabling them to make data-driven decisions and continuously enhance their automation tactics. Examples of metrics are:

· Deployment Duration: This measures how long it takes to complete a deployment. Automation deployment duration = The amount of time it takes to deploy the automation in days

· Defect Escape Ratio: This ratio indicates the number of defects that have escaped into production. Defect escape ratio = Defects filed by customer for a specific service : (Defects filed by Q.A. and developers pre-deployment + defects filed by customer post-deployment)

Some other metrics include Time to value = The amount of time in days it takes for you or the customer to see the value of an automation service. Another metric to focus on will be the deployment failure rate, which measures the rate at which deployments fail.

D. North Star metric is the critical measure of success for the product management team in a company. It defines the relationship value created between the customer problems the product team is trying to solve and the Revenue the business aims to generate — examples of the North Star metric.

· Daily average user (DAU) = Number of active users in said timeframe making unique interactions + Total Number of active users in the stated timeframe

· Customer engagement score (CES) = Total event value #1 + Total event value #2 + Total event value #3 +… Total event value #n

· Weekly querying users = Number of visitors or users who queried ÷ Total Number of visitors or users for the week

A North Star metric should consist of two parts: a statement of your product vision goal and a metric that serves as a critical measure of your current product strategy. In most companies, product teams are measured by how much they ship, not by their impact on the business. Without an impact-driven culture in the product, you can’t influence the destiny of your business. Without a North Star, you can’t have a product-led company. For example, your North Star metrics might be the average loan value (AOV) for a Loan origination system MSP. Thus, another critical metric could be the number of customer case-filling conversion rates.

In the “real world,” translating an ambitious mission into daily activities can feel so intimidating that it often goes beyond significant words written on the wall or a website.

E. Dashboard metrics are tools and measurements used to create digital displays of data you’ve gathered. These displays may include charts, graphs, tables, and percentages to help you better understand a specific area of a company. A dashboard is a tool used to track and display critical performance indicators to analyse delivery and business efforts over time and across multiple channels. Examples of Dashboard metrics :

o Current accounts receivables = Total amount of money owed to a business by its debtors

o Sales target attainment = (sales for the current period ÷ Sales target) x 100.

o Sales pipeline velocity = (The number of pipeline deals x The overall win rate percentage x average deal size) ÷ sales cycle length in days.

A few management metrics included are CAC, customer lifetime value, customer satisfaction score, sales target % (actual/forecast), sales by product or service, revenue per FTE, and Revenue per customer. The Financial metrics that require attention are Operating margin, Gross margin, ROE (return on equity), ROA (return on assets), Current ratio (assets/liabilities), Debt to equity ratio, working capital, and HR metrics should include employee satisfaction rating, average employee age, attrition rate band wise and Average tenure of the employee.

These are just examples of the metrics to measure, and a comprehensive list could be virtually infinite, especially when you tailor it to your M.S.P. organisation. Business leaders need to adopt a targeted approach, choosing either a pyramid or cylindrical model for measurement.

In Summary:

In the former, you start by measuring five metrics for the B bucket, four for R, three for A, and so on. The organisation can focus all its energies on the 15 most important metrics. In the cylindrical model, you measure three metrics each for the five buckets. It allows you to assign equal weightage to each of the buckets and distribute your energies equally instead of proportionately.

Metrics and quantifiable BI are crucial for any organisation, but more so for MSPs, as they specialise in traditionally intangible service offerings. In addition, MSP’s role is interweaving with the customer’s business success. Measuring the right metrics — which includes first-level resolution rates, net operating income, onboarding metrics, SLA compliance, technician utilisation, and effective rate of offering — helps manage sustainable and frictionless business operations.

Metrics and measurement are now critical to the success of M.S.P. companies, as I discussed in my previous article. The indices you choose can make a difference to your future growth path in 2024 and beyond.

Please share your thoughts and queries below or email me at Arvind @ am-pmassociates.com to know more.