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How to account for customer success

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Customer Success as a movement is so young even compared to other emerging tech sectors. But it's changing so fast it can be hard to justify it to your financial department. Scott Golden, Gainsight's Director of Customer Success Strategy, will deep dive into a data-driven webinar all about how you can account for Customer Success in such a rapidly-evolving industry.

Published in: Technology

How to account for customer success

  1. 1. How to Account for Customer Success
  2. 2. Should you Charge for Customer Success? Omid Razavi Scott Golden Director, Customer Success Strategy Gainsight
  3. 3. Should you Charge for Customer Success? Omid Razavi Today’s Agenda 1. Customer Success Costs • Segmentation Strategy • CSM Coverage Ratios • Emerging CS Roles • Aggregate CS Team Costs 2. Accounting for CS Costs • Industry Strategies • ROI of Customer Success • Impact Levers 3. ROI of Customer Success • Impact Levers
  4. 4. Should you Charge for Customer Success? Omid Razavi Segmentation Strategy
  5. 5. Your Customers Dictate Your Coverage Model STRATEGYSEGMENT High Touch Mid Touch Tech Touch ENTERPRISE MID- MARKET SMB PROACTIVE JUST-IN-TIME AUTOMATED
  6. 6. Customer Base Segmentation Strategy Primary Segmentation Levers Customer Segment # 20% 54% 17% 6% 4% <3 3 4 5 >5 Annual Recurring Revenue is still the best proxy for CSM workload 13% 15% 72% Customer Count Other ARR $
  7. 7. Should you Charge for Customer Success? Omid Razavi CSM Coverage Ratio Benchmarks
  8. 8. High-Dollar / Enterprise Segment Ratios Annual Recurring Revenue 7% 4% 22% 35% 20% 9% 2% > $20M $20M - $10M $10M - $5M $5M - $2M $2M -$1M $1M - $500K < $500K 0% 0% 4% 43% 52% 0% 2% > 500 500 - 250 250 - 100 100 - 50 50 - 10 10 - 5 < 5 Customers 69% 95%
  9. 9. Med-Dollar / Mid-Market Segment Ratios 5% 7% 7% 38% 24% 16% 2% > $20M $20M - $10M $10M - $5M $5M - $2M $2M -$1M $1M - $500K < $500K 0% 46% 15% 37% 0% 0% 2% > 500 500 - 250 250 - 100 100 - 50 50 - 10 10 - 5 < 5 Annual Recurring Revenue Customers 78% 98%
  10. 10. Small-Dollar / SMB Segment Ratios 7% 7% 13% 19% 24% 13% 17% > $20M $20M - $10M $10M - $5M $5M - $2M $2M -$1M $1M - $500K < $500K 20% 17% 24% 15% 17% 0% 7% > 500 500 - 250 250 - 100 100 - 50 50 - 10 10 - 5 < 5 Annual Recurring Revenue Customers 69% (Impact of Customer Marketing Role) 61%
  11. 11. Should you Charge for Customer Success? Omid RazaviEmerging Customer Success Roles
  12. 12. Emerging Roles Within Customer Success Yes 60% No 40% Renewal Resources Yes 61% No 39% Solution Architects No 54% Yes 46% Customer Marketing No 53% Yes 47% Success Operations This person is typically hired after acquiring more than 150 customers It is a must-have role if the Customer Success Team owns or forecasts the retention and expansion number These types of resources are typically “floaters” that will help drive a project if the needs are beyond a CSM’s technical capabilities This role will continue to grow in prominence; our data shows Customer Success Teams have doubled in prominence over the last 12 months The Operations role is key once you have invested in a Customer Success platform and your processes mature from reactive or gut-feel to data-driven
  13. 13. Should you Charge for Customer Success? Omid Razavi Aggregate CSM Team Costs
  14. 14. >$100M ARR Organizations Customer Success Costs as a % of Annual Recurring Revenue 11% 0% 6% 0% 22% 22% 39% >30% 30% - 25% 25% - 20% 20% - 15% 15% - 10% 10% - 5% <5% Solve for <10%
  15. 15. <$100M to >$10M ARR Organizations 0% 0% 0% 6% 29% 29% 35% >30% 30% - 25% 25% - 20% 20% - 15% 15% - 10% 10% - 5% <5% Customer Success Costs as a % of Annual Recurring Revenue Solve for <15%
  16. 16. <$10M ARR Organizations Customer Success Costs as a % of Annual Recurring Revenue 13% 13% 13% 13% 25% 13% 13% >30% 30% - 25% 25% - 20% 20% - 15% 15% - 10% 10% - 5% <5% Over-investing in Customer Success to protect their most precious asset: customers
  17. 17. Should you Charge for Customer Success? Omid RazaviAccounting For Customer Success Costs
  18. 18. CSM Cost Accounting Matrix Responsibility Department COGSSales&Mktg.
  19. 19. CSM Cost Accounting Matrix: By Department Responsibility DepartmentCOGSSales&Mktg. 4 of the 7 companies are aligning their costs by department with an even split between COGS and Sales & Marketing
  20. 20. CSM Cost Accounting Matrix: By Department, Large Cos, S&M Responsibility DepartmentCOGSSales&Mktg. Large SW Cos. Transitioned from Renewals Sits within Sales org Still owns renewal
  21. 21. CSM Cost Accounting Matrix: By Department, COGS Responsibility DepartmentCOGSSales&Mktg. Transitioned from Support Sits within the support org No commercial responsibility
  22. 22. Responsibility Department COGSSales&Mktg. CSM Cost Accounting Matrix, Responsibility 3 of the 7 companies are aligning their costs by the responsibility of the resources that sit within the Customer Success Team
  23. 23. Responsibility Department COGSSales&Mktg. CSM Cost Accounting Matrix, Responsibility, Easy Split Responsibilities span CSM spectrum Responsibilities shift per segment 50 / 50 S&M v COG split
  24. 24. Responsibility Department COGSSales&Mktg. CSM Cost Accounting Matrix, Responsibility, Easy Split Mapped all responsibilities of CSM as % of time Allocates that % between S&M v COGS Commercial responsibility is key delineation point
  25. 25. Commercial Responsibility Is Driving S&M v. COG Accounting Split Commercial Responsibility Product Training Technical Support Strategic Advice Contract Renewal License Up-Sell Product X-Sell Support & Training SalesDepartment Expense TypeCOGS Sales & Marketing 0% 100%
  26. 26. Should you Charge for Customer Success? Omid RazaviCustomer Success ROI Levers
  27. 27. The Financial Impact of Customer Success Impact Churn Revenue Expansion Net New Business 1 2 3
  28. 28. The Financial Impact of Customer Success: Churn Impact Impact Churn # of customer saves within a given time period Lever Measurement Save = Red to Green shift in health score Time Period = 6 months before renewal Input
  29. 29. The Financial Impact of Customer Success: Revenue Expansion Revenue Expansion Up-sells & X-sells closed Lever Measurement # of closed deals Expansion revenue closed Input # of expansion leads identified # of leads Average expansion deals size
  30. 30. The Financial Impact of Customer Success: Net New Business Net New Business Lever Increase the # of advocates Increase # of SQLs Increase the # of references Increase close rate
  31. 31. Scott Golden Director, Customer Success Strategy Gainsight Questions? @sctgldn sgolden@gainsight.com

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