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How to Account for
Customer Success
Should you Charge for Customer Success?
Omid Razavi
Scott Golden
Director, Customer Success Strategy
Gainsight
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
Should you Charge for Customer Success?
Omid Razavi
Segmentation Strategy
Your Customers Dictate Your Coverage Model
STRATEGYSEGMENT
High
Touch
Mid Touch
Tech Touch
ENTERPRISE
MID-
MARKET
SMB
PROACTIVE
JUST-IN-TIME
AUTOMATED
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 $
Should you Charge for Customer Success?
Omid Razavi
CSM Coverage Ratio
Benchmarks
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%
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%
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%
Should you Charge for Customer Success?
Omid RazaviEmerging Customer
Success Roles
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
Should you Charge for Customer Success?
Omid Razavi
Aggregate CSM Team Costs
>$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%
<$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%
<$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
Should you Charge for Customer Success?
Omid RazaviAccounting For Customer
Success Costs
CSM Cost Accounting Matrix
Responsibility Department
COGSSales&Mktg.
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
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
CSM Cost Accounting Matrix: By Department, COGS
Responsibility DepartmentCOGSSales&Mktg.
Transitioned from
Support
Sits within the support
org
No commercial
responsibility
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
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
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
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%
Should you Charge for Customer Success?
Omid RazaviCustomer Success
ROI Levers
The Financial Impact of Customer Success
Impact
Churn
Revenue
Expansion
Net New
Business
1 2 3
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
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
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
Scott Golden
Director, Customer Success Strategy
Gainsight
Questions?
@sctgldn
sgolden@gainsight.com
How to account for customer success

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How to account for customer success

  • 1. How to Account for Customer Success
  • 2. Should you Charge for Customer Success? Omid Razavi Scott Golden Director, Customer Success Strategy Gainsight
  • 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. Should you Charge for Customer Success? Omid Razavi Segmentation Strategy
  • 5. Your Customers Dictate Your Coverage Model STRATEGYSEGMENT High Touch Mid Touch Tech Touch ENTERPRISE MID- MARKET SMB PROACTIVE JUST-IN-TIME AUTOMATED
  • 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. Should you Charge for Customer Success? Omid Razavi CSM Coverage Ratio Benchmarks
  • 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. 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. 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. Should you Charge for Customer Success? Omid RazaviEmerging Customer Success Roles
  • 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. Should you Charge for Customer Success? Omid Razavi Aggregate CSM Team Costs
  • 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. <$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. <$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. Should you Charge for Customer Success? Omid RazaviAccounting For Customer Success Costs
  • 18. CSM Cost Accounting Matrix Responsibility Department COGSSales&Mktg.
  • 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. 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. CSM Cost Accounting Matrix: By Department, COGS Responsibility DepartmentCOGSSales&Mktg. Transitioned from Support Sits within the support org No commercial responsibility
  • 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. 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. 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. 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. Should you Charge for Customer Success? Omid RazaviCustomer Success ROI Levers
  • 27. The Financial Impact of Customer Success Impact Churn Revenue Expansion Net New Business 1 2 3
  • 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. 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. 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. Scott Golden Director, Customer Success Strategy Gainsight Questions? @sctgldn sgolden@gainsight.com