How to Drive Top-Line Growth with Customer Success Management Metrics

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This presentation is all about growing your top-line revenue by leveraging Customer Success Management metrics.

The most successful Enterprise SaaS companies know that growing revenue only through new customer acquisition is the less efficient way to scale. Rather, they understand that growing revenue within your existing customer base - through up-sells, cross-sells, and expanded use - is the most profitable way to scale.

In fact, Enterprise SaaS companies that grow revenue - and company valuation - by expanding revenue within their existing customer base also know the key to making this work is to focus on - and operationalize - Customer Success.

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  • Easier for customers to try your stuff (acquire) but also easier to leave (churn)Metrics come faster – measured monthly, weekly, daily. Monthly compounding amplifies small churn rates into big problems
  • Current metrics and measurement processes still work but your flight isn’t going very fast…
  • You can track more detailed types of data like usage, engagement, external data sources (news, fundraising events)Faster – in autopilotMake it an automation system. You don’t even have to steer, you can spend your time shooting at the targets that will drive growth rather than doing things manually.
  • Customer number churn rate
  • This masks big underlying issues.
  • Revenue churn rate
  • Efficiency in getting renewals and up-sellSo, it’s really important to have a very efficient CS team that uses appropriate tools to get their job done
  • We have a bunch of operating metrics, but how do we leverage these metrics to make money?How do we improve reduce churn?What contributes to upsell/cross-sell/growth?
  • Understand past churn trends and reasonsForecast risk and plan corporate numbers accordingly
  • Drill into past data to understand why things happenedInteractively visualize causes of churn and impact on revenue / users / etc across 4-dimensions
  • Alert on risk based on global and account-level business rulesManage alert pipeline – keeping data current and following best practice playbooks
  • I’m going to show you how our own Customer Success team uses Gainsight to make money.This is also how our best-in-class customers use it. These graphs refresh as your metrics are updated. It’s a living, breathing representation of the success of your customers.Manage upcoming renewals Inform your sales and finance groups with your single view into all past transactions [LRM]Build dashboards that refresh with your data
  • 1) Prioritize based on any attribute (Size, Health, Date)
  • Use each customers’ 360 profile for all the details about that account e.g. outstanding tickets or invoicesSee what they’ve bought vs. are using
  • Load balance among employeesTrack team metrics like time to close, interactions, resultsRefine playbooks based on most effective actions
  • Create macro “score” from all integrated dataMonitor trends / changes over time
  • Identify who may churn or buy more 3 months in advanceTweak your health scores from historical precedence
  • Would have been 60 accounts per AMGrew it to 100 accounts per AM – so 30 AM’s for 3000 accounts
  • Just a quick reminder that we’re hosting an even bigger event this year filled with best practices, awesome keynotes including Malcolm Gladwell, and a lot of fun. Check out pulse.gainsight.com for all the details.With that, let’s answer your questions.Seed Questions1) Lauren – how are large companies changing processes based on benchmarks?2) Allison – What financial systems does Gainsight work with (Data agnostic – open APIs link to everything and built-in connectors via SFDC and Informatica Cloud – examples customers use include Zuora, Netsuite, Aria)3) Lauren – Who is responsible for benchmarking and who uses the results?
  • Thanks for spending time with us today!
  • How to Drive Top-Line Growth with Customer Success Management Metrics

    1. 1. 2014 Gainsight, Inc. All rights reserved. Drive Growth Customer Success Metrics May 2014
    2. 2. 2014 Gainsight, Inc. All rights reserved. Housekeeping • Q&A panel on your right • Recording for colleagues who can’t make it • All attendees will receive slides • Twitter hashtag #customersuccess
    3. 3. 2014 Gainsight, Inc. All rights reserved. Today’s Panelists Lauren Kelley CEO & Founder @opexengine Allison Pickens Director of Business Operations & Finance @pickensallison
    4. 4. 2014 Gainsight, Inc. All rights reserved. What We’ll Cover 1. OPEXEngine Benchmarking 2014 2. Customer Success Metrics 3. Tying CSM Metrics to Financial Growth 4. Q&A
    5. 5. Management by Metrics The Smarter Way to Manage Your Software Company Lauren Kelley www.opexengine.com
    6. 6. About Trusted Financial Benchmarks for the Tech Industries  8th year helping small and medium-sized software, SaaS, Internet and other tech companies manage and plan for growth  Partnered with Netsuite, Intacct, Adaptive Planning, Oracle and the Software and Information Industry Association (SIIA)  Proprietary survey data from hundreds of private and public software companies since 2006  Partnered with EDGR/RR Donnelly to deliver on-demand Financial Insights Reports, on-demand comparison reports based on real-time database of over 16,000 companies 6 www.opexengine.com “We found OPEXEngine’s reports to be square on with what we needed and a critical source of data for our management team. High quality data – like OPEXEngine – is rare and worth paying for.” Jim Lejeal, CFO, Rally Software
    7. 7. Confidential and Comprehensive Benchmarking www.opexengine.com “We’ve participated in OPEXEngine’s confidential software benchmarking for the past four years and find the data highly useful. As a fast growth, mid-sized, public software company, we are data-driven in our management and planning processes and OPEXEngine’s software benchmarking is a critical information source for detailed financial and operating metrics.” Ralph Bryant, VP Finance, RightNow/Oracle “The OPEXEngine benchmarking report is a key element of our planning process, it helps us set the right targets for our cost structure 2 to 3 years out.” Stephane Panier, CFO, GoodData Private CompaniesAll Participating Companies 7
    8. 8. Key Factors  Early stage, private or later stage public  Are you Salesforce.com or a $10M venture backed company?  Goals: Growth vs. Profitability?  Sales and marketing model: do you sell larger contracts to enterprise type customers, or small subscriptions to SMEs? Peer Analysis Who do you compare yourself with? “The great thing about the OPEXEngine data is that there are several peer groups to look at. You can look at metrics for private vs. public companies, metrics for companies in your revenue band, or with similar headcount. So many other metric reports are too focused on public companies. Public company data just isn’t that relevant to us.” Mike Morgan, CFO, Bomgar Corporation “At T2 Systems, we migrated our customers to the SAAS business model in 2005. Since then, we struggled to find key benchmark data that we could use to determine the quality of the Company’s financial metrics. OPEX Engine easily filled that void for our team by providing us with key data points ranging from customer acquisition costs to revenue per employee. OPEX is one of our strategic planning tools.” Jim Zaloudek, CFO, T2 Systems, Inc. 8 www.opexengine.com
    9. 9. Best Practices Benchmarks drive performance and accountability  Save time making data-driven decisions  Bring your performance targets in line with market leaders and grow faster  Reduce expense in line with peer group norms  Have better conversations with line management with neutral, 3rd party benchmarks  Track model changes by peer companies and competitors “As CFO at two different successful companies, we participated regularly in the OPEXEngine Software and SaaS benchmarking and got terrific value in the process. OPEXEngine benchmarks all the key business metrics we needed and is unique because you can’t find this kind of information for private companies anywhere else. Participating in the benchmarking process was straightforward and a useful exercise for my team. The benchmarking allowed me to support and collaborate with the CEO and other exec team members, plus the board, in a way that I couldn’t have done without the benchmarks. With the OPEXEngine benchmarks, I had better and more productive conversations with line management. OPEXEngine does something that you can’t find anywhere else, since the data comes from the participants directly, and OPEXEngine works with each company to ensure the data is clean and comparable.” Dan Kossmann, former CFO Initiate Systems (bought by IBM) and Outstart (bought by Kenexa) 9 www.opexengine.com
    10. 10. SaaS versus Traditional License Model Differences • Less visibility • More predictive • Sales predicts revenue; sales-driven P&L • Finance predicts revenue; model-driven P&L • Fewer moving parts, fast moving levers • More moving parts, slow building business • Value of customer relationship drops off after 1st sale • Maintaining customer relationship is key: renewals and upselling • Customer choses and pays for all IT to run the software • Vendor runs and maintains all software and hardware to deliver SaaS offering • Contracts structured for revenue recognition • Contract drives the process, cost, and customer interactions Software-as-a-ServiceTraditional Software
    11. 11. SaaS – A Metrics Driven Model Revenue Metrics: • CMRR • Net new CMRR Customer Metrics: • Total # and net new subscribers • Contract value per customer • Customer lifetime value (CLV) • Customer acquisition cost (CAC or COCA) • Monthly gross margin per customer • # months to break even • Omniture’s Magic Number for putting on gas in sales and marketing Churn/Renewal Rates: • Customer Renewal Rate • Dollar Renewal Rate Cost of Revenue • Cost of Goods • Cost of Services Hosting Expense • Third party • In-house Virtually none of these indicators were tracked 10 years ago www.opexengine.com
    12. 12. Definitions: The Devil’s in the Details  MRR  CMRR  Cost of Customer Acquisition  Renewal versus Retention  Customer Churn  (Net?) Dollar Churn Most key metrics are not GaaP metrics – there’s no accountability for how you define them. Adapt them to your business, but be cautious when understanding other company’s data.
    13. 13. SaaS Renewal Rates Keep customers satisfied, avoid churn and begin up-selling 13 2013 OPEXENGINE OPERATING BENCHMARKS FOR SOFTWARE AND SAAS VENDORS PRIVATE SAAS HYBRID PUBLIC COMPANIES PUBLIC SAAS Average Recognized Revenue $21,246,957 $264,813,000 $219,433,211 Churn Rates Customer Renewal Rate During Year (as a % of Customers Up for Renewal) 86.0% 97.2% 95.0% Dollar Renewal Rate During Year (as a % of Total $ Value Up for Renewal) 93.5% 97.7% 98.0% Source: OPEXEngine Benchmarking, 2013 All Rights Reserved www.opexengine.com
    14. 14. Early-to-Later Stage Private SaaS Reaching profitability earlier, then kicking into high gear growth mode www.opexengine.com 14 2013 OPEXEngine Software and SaaS Confidential Benchmarking All Private Companies Saas: Less Than $10 Million Saas: $10 Million - $20 Million Saas: More Than $20 Million PRIVATE COMPANIES Average Recognized Revenue $24,738,701 $6,263,747 $15,003,561 $40,808,762 2012 over 2011 YTY Revenue Growth Rate 30.50% 30.50% 14.80% 58.00% Total Expenses 122.90% 141.10% 115.40% 123.00% Dollar amount of investment capital taken over company's life $27,500,000 $4,800,000 $10,450,423 $58,500,000 Source: OPEXEngine Benchmarking, 2013 All Rights Reserved
    15. 15. Revenue Growth Rates at IPO www.opexengine.com 15 Source: OPEXEngine On-Demand Financial Insights Reports, All Rights Reserved
    16. 16. Market Valuation and Revenue Growth Alignment www.opexengine.com 16 -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 Revenue to Market Cap Multiplier Annual Revenue Growth Source: OPEXEngine On-Demand Financial Insights Reports, full year 2013
    17. 17. 2013 Public SaaS Sales & Marketing Expense to Revenue Growth Source: OPEXEngine On-Demand Financial Insights Reports, 2013 17www.opexengine.com 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Annual Revenue Growth S&M Expense as a % of Recognized Revenue
    18. 18. Operational Trends for 2014  Advanced Customer Success Management  Security  Performance and redundancy  Expansion into international markets  Return of the channel www.opexengine.com 18
    19. 19. Software and SaaS Benchmarking 2014 Extended deadline for registered Gainsight webinar participants – thru May 15 ONLY 19 www.opexengine.com
    20. 20. Find out more about growth benchmarking: www.opexengine.com Business, like sports, is about constantly benchmarking your performance and using that data to improve. 20 www.opexengine.com
    21. 21. lauren@opexengine.com 617-674-4218 www.opexengine.com www.opexengine.com 21
    22. 22. 2014 Gainsight, Inc. All rights reserved. DRIVING FINANCIAL SUCCESS WITH CUSTOMER SUCCESS METRICS
    23. 23. 2014 Gainsight, Inc. All rights reserved. What Friction?
    24. 24. 2014 Gainsight, Inc. All rights reserved. How Do We Steer?
    25. 25. 2014 Gainsight, Inc. All rights reserved. Time for an Upgrade
    26. 26. 2014 Gainsight, Inc. All rights reserved. 1. Batting Average # Customers Renewed In Period ÷ # Customers Renewable In Period Are customers voting with their signature on the value of your product or service? Best-in-class: > 90%
    27. 27. 2014 Gainsight, Inc. All rights reserved. 2. Net Revenue Retention Beginning of period ARR/MRR + ARR/MRR from tailwind – ARR/MRR from headwind ÷ Beginning of period ARR/MRR What’s the net dollar impact from Customer Success? Best-in-class: > 120%
    28. 28. 2014 Gainsight, Inc. All rights reserved. 3. Headwind ARR/MRR of churn dollars including price decreases and downgrades ÷ Beginning of period ARR/MRR How much drag do you have on your growth? Best-in-class: < 10%
    29. 29. 2014 Gainsight, Inc. All rights reserved. 4. Tailwind ARR/MRR of up-sell dollars including price increases and upgrades ÷ Beginning of period ARR/MRR How much acceleration do you have to new bookings? Best-in-class: > 20%
    30. 30. 2014 Gainsight, Inc. All rights reserved. 5. Magic Number ARR/MRR of renewals in period + ARR/MRR of up- sells in period ÷ Fully-loaded cost of Customer Success team + extended team What’s the cost- effectiveness of Customer Success? Best-in-class: 3-5X or higher
    31. 31. 2014 Gainsight, Inc. All rights reserved. We’ve Got CSM Metrics Now what?
    32. 32. 2014 Gainsight, Inc. All rights reserved. MAKE IT ACTIONABLE WITH CUSTOMER SUCCESS WORKFLOW
    33. 33. 2014 Gainsight, Inc. All rights reserved. How we use Gainsight • Reduce churn • Drive growth • Manage your team • Get proactive
    34. 34. 2014 Gainsight, Inc. All rights reserved. Stay on Top of Churn
    35. 35. 2014 Gainsight, Inc. All rights reserved. Explore Data to Identify Root Causes
    36. 36. 2014 Gainsight, Inc. All rights reserved. Intervene Just in Time Alert/Manage Risk
    37. 37. 2014 Gainsight, Inc. All rights reserved. How we use Gainsight • Reduce churn • Drive growth • Manage your team • Get proactive
    38. 38. 2014 Gainsight, Inc. All rights reserved. Forecast and Plan Growth
    39. 39. 2014 Gainsight, Inc. All rights reserved. Drill Through to Take Action
    40. 40. 2014 Gainsight, Inc. All rights reserved. Get a Complete Customer Picture
    41. 41. 2014 Gainsight, Inc. All rights reserved. How we use Gainsight • Reduce churn • Drive growth • Manage your team • Get proactive
    42. 42. 2014 Gainsight, Inc. All rights reserved. Manage Your Team
    43. 43. 2014 Gainsight, Inc. All rights reserved. How we use Gainsight • Reduce churn • Drive growth • Manage your team • Get proactive
    44. 44. 2014 Gainsight, Inc. All rights reserved. Keep Customers in the Green
    45. 45. 2014 Gainsight, Inc. All rights reserved. Start Being Proactive Predict risk and opportunity with data science
    46. 46. 2014 Gainsight, Inc. All rights reserved. File-sharing Co. • AMs used to handle 50 accts max • Load-balanced 3000 accounts based on anticipated alerts • Kept the team small and lean: 100 accts/AM for $3M savings/year
    47. 47. 2014 Gainsight, Inc. All rights reserved. QUESTIONS?PULSE.GAINSIGHT.COM
    48. 48. 2014 Gainsight, Inc. All rights reserved. Thanks For Joining!

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