![Goal of Phase
#1 Product-Market Fit #2 Go-to-Market Fit #3 Growth and Moat
Experiment Scale
Customer Success Unit Economics Growth & Moat
Annual Revenue Retention > 100%
Annual Customer Retention > 90%
Annual Revenue Retention = [ARR (start of year) – Churn + Upgrades] / ARR (start of year)
Annual Customer Retention = [#Customers (start of year) – Customer Churn] / # Customers (start of year)
Customer Retention = Healthy, Sustainable Revenue Growth](https://image.slidesharecdn.com/thebestcompaniesandpefirmsarefocusedonengagement-areyou-190605184057/75/LOCALOGY-ENGAGE-19-The-Best-Companies-and-PE-Firms-are-Focused-on-Engagement-Are-You-7-2048.jpg)
![% of customers that achieve customer value by month of tenure
1. Define customer success measurement
2. Define acceptable percentage of customers reaching value [product-market fit]
3. Measure by customer cohort
The Real Product-Market Fit
Consistent Customer Value Creation](https://image.slidesharecdn.com/thebestcompaniesandpefirmsarefocusedonengagement-areyou-190605184057/75/LOCALOGY-ENGAGE-19-The-Best-Companies-and-PE-Firms-are-Focused-on-Engagement-Are-You-10-2048.jpg)
![Aligning Sales Playbook with Customer Retention
Qualifying Matrix for Buying AND Retention
Sales Qualifying Matrix
Customer Likelihood to Buy
Sales Qualifying Matrix
Customer Likelihood to Succeed
[B]udget
[A]uthority
[N]eed
[T]iming
[M]etrics
[E]conomic Buyer
[D]ecision Maker
[D]ecision Process
[I]denitfy Pain
[C]hampion
[C]ontent
[C]ommitment
[C]oncept of a Lead
[U]ser Bought In
[R]ealistic ROI
[I]T Bought In
[T]ech Feasible
Examples Examples](https://image.slidesharecdn.com/thebestcompaniesandpefirmsarefocusedonengagement-areyou-190605184057/75/LOCALOGY-ENGAGE-19-The-Best-Companies-and-PE-Firms-are-Focused-on-Engagement-Are-You-17-2048.jpg)
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LOCALOGY ENGAGE 19: The Best Companies and PE Firms are Focused on Engagement - Are You?
This document discusses how companies can focus on customer engagement and retention to drive optimal growth. It argues that improving retention is easier than maintaining rapid growth while fixing retention issues. The document provides examples from Hubspot of how focusing on customer success through strategies like sales compensation aligned with lifetime customer value can improve retention metrics like annual revenue retention above 100% and customer retention above 90%. It emphasizes defining and measuring key customer success indicators.
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LOCALOGY ENGAGE 19: The Best Companies and PE Firms are Focused on Engagement - Are You?
- 1. The Best Companiesand PE Firms are Focused on Engagement. Are You? Mark Roberge (@markroberge) • Senior Lecturer @HarvardHBS • Managing Director @Stage2.Capital • Former CRO @HubSpot
- 2. What is theoptimal growth path? REVENUE GROWTH REVENUERETENTION Mediocre (i.e. 30%) Awesome (i.e. 100%) Mediocre (i.e.70%) Awesome (i.e.100%) OPTION B Awesome Revenue Growth Improve Retention OPTION A Awesome Retention Improve Revenue Growth
- 3. Easier to accelerategrowth with world class retention than fix retention while maintaining rapid growth REVENUE GROWTH REVENUERETENTION Mediocre (i.e. 30%) Awesome (i.e. 100%) Mediocre (i.e.70%) Awesome (i.e.100%)
- 4. Goal of Phase CustomerRetention = Healthy, Sustainable Revenue Growth #1 Product-Market Fit #2 Go-to-Market Fit #3 Growth and Moat Experiment Scale Customer Success Unit Economics Growth & Moat
- 5. Pothole Alert! Sales isfirst and foremost about creating customer value. Revenue and profits are an outcome of customer value creation.
- 6. Prioritizing Customer Success:“Why Now”?
- 7. Goal of Phase #1Product-Market Fit #2 Go-to-Market Fit #3 Growth and Moat Experiment Scale Customer Success Unit Economics Growth & Moat Annual Revenue Retention > 100% Annual Customer Retention > 90% Annual Revenue Retention = [ARR (start of year) – Churn + Upgrades] / ARR (start of year) Annual Customer Retention = [#Customers (start of year) – Customer Churn] / # Customers (start of year) Customer Retention = Healthy, Sustainable Revenue Growth
- 8. Pothole Alert! Churn isa silent killer. Identifying a leading indicator to churn (and customer success) is critical.
- 9. Define the customersuccess leading indicator Defining your customer success leading indicator Observable in weeks or months, not quarters or years Measurement can be automated Ideally correlated to the product CVP Repeat purchase, referral, setup, usage, ROI are all common. Revenue is usually a mistake. OK to use multiple metrics 2,000 Team messages sent 1 file added to 1 folder on 1 device Using 5 of 20 features within 60 days
- 10. % of customersthat achieve customer value by month of tenure 1. Define customer success measurement 2. Define acceptable percentage of customers reaching value [product-market fit] 3. Measure by customer cohort The Real Product-Market Fit Consistent Customer Value Creation
- 11. Goal of Phase TargetMarket GTM Process Compensation Demand Gen. Pricing Sales Hiring Early Adopter Personal Network + Referrals #1 Product-Market Fit #2 Go-to-Market Fit #3 Growth and Moat Experiment Scale Customer Success Unit Economics Growth & Moat Customer Success Focused Solve for Customer Commitment Process Builder Based on Customer Success Customer Retention = Healthy, Sustainable Revenue Growth
- 12. Sales Compensation –Selling to SMBs Lessons from HubSpot Experience 2007 •$500 per customer •2x commission on revenue above quota •4 month claw-back
- 13. 0.0% 2.0% 4.0% 6.0% CumulativeCustomer Churn% * Data hasbeen altered from actual HubSpot data for the purposes of this presentation Sales Compensation – Selling to SMBs Lessons from HubSpot Experience
- 14. *DatahasbeenalteredfromactualHubSpotdataforthepurposesofthispresentation MonthlyCustomerLTVperSalesperson Individual Salespeople Sales Compensation– Selling to SMBs Lessons from HubSpot Experience
- 15. 2007 •$500 per customer •2xcommission on revenue above quota •4 month clawback 2009 •1st LTV tier = $1000 per customer •2nd LTV tier = $750 per customer •3rd LTV tier = $500 per customer •4th LTV tier = $250 per customer 2014 •20% more commission for expansion revenue from existing customers than new revenue from new customers •50% paid on contract. 50% paid on achievement of leading indicator of success Align Sales Compensation with LTV versus TCV Lessons from HubSpot Experience
- 16. Align Pricing withCustomer Retention Increase Price through Expansion Rather than Starting Price $0 $15,000 $30,000 $45,000 $60,000 1 2 3 4 5 Customer Lifespan Legacy Pricing Price Value $0 $15,000 $30,000 $45,000 $60,000 1 2 3 4 5 Customer Lifespan Modern Pricing Buy then Adopt Longer sales cycles Lower close rates Higher disruption risk Adopt then Buy Shorter sales cycles Higher close rates Lower disruption risk
- 17. Aligning Sales Playbookwith Customer Retention Qualifying Matrix for Buying AND Retention Sales Qualifying Matrix Customer Likelihood to Buy Sales Qualifying Matrix Customer Likelihood to Succeed [B]udget [A]uthority [N]eed [T]iming [M]etrics [E]conomic Buyer [D]ecision Maker [D]ecision Process [I]denitfy Pain [C]hampion [C]ontent [C]ommitment [C]oncept of a Lead [U]ser Bought In [R]ealistic ROI [I]T Bought In [T]ech Feasible Examples Examples
- 18. Goal of Phase TargetMarket GTM Process Compensation Demand Gen. Pricing Sales Hiring Early Adopter Personal Network + Referrals Early Majority MQL = High LTV Segments #1 Product-Market Fit #2 Go-to-Market Fit #3 Growth and Moat Experiment Scale Customer Success Unit Economics Growth & Moat Customer Success Focused Buy AND Retain Based on Customer Success LTV, Not TCV Solve for Customer Commitment Adopt then Buy Process Builder Process Executor Customer Retention = Healthy, Sustainable Revenue Growth
- 19. Pothole Alert! Over optimismabout the breadth of product-market and go-to-market fit across customer segments and demand generation mediums
- 20. 20 @markroberge Analyze CustomerBase by Market/Channel Segments $3M ARR 18 Mo. Payback 15% Logo Churn $4M ARR 8 Mo. Payback 6% Logo Churn $1M ARR 19 Mo. Payback 19% Logo Churn $2M ARR 23 Mo. Payback 3% Logo Churn SMB Vertical SourceofCustomer Consumer Services Tech Financial Services Inbound Outbound Partners
- 21. 21 @markroberge Identify “Scale”vs. “Experiment” vs. “Ignore” Segments Market Channel Inbound Outbound Partners Consumer Services Tech Financial Services
- 22. 22 @markroberge Scale teamswhere there is Product-Market and GTM Fit Setup small cross-functional teams for experiment segments Consumer Services Inbound (Experiment) MKT AE AE CSM Tech Outbound (Experiment) AE AE CSM SDR SDR Financial Services Inbound (Experiment) AE CSM Tech Inbound (Scale) AE AE AE AE AE AE AE AE AE AE CSM CSM CSMMKT MKT MKT Existing Employee New Hire
- 23. Sales and MarketingAlignment
- 24. 24 @markroberge $0 $5 $10 $15 $20 $25 2018 2019 AnnualBookings(millions) 2019PLAN Create Bottoms Up Sales Plan 2019 GOAL Grow Sales 100%! Predictable Scalable Revenue Growth in SMB MONITOR PROGRESS Quarterly Sales Sales Leading Indicators
- 25. 25 @markroberge Predictable ScalableRevenue Growth in SMB Analyze Historic Sales Model
- 26. 26 @markroberge Predictable ScalableRevenue Growth in SMB Evaluate Sales Plan Options Invest in sales training to increase sales effectiveness and, in turn, “Bookings per Salesperson”
- 27. 27 @markroberge Predictable ScalableRevenue Growth in SMB Evaluate Sales Plan Options Invest in demand generation to increase “Bookings per Salesperson”
- 28. 28 @markroberge Predictable ScalableRevenue Growth in SMB Evaluate Sales Plan Options Invest in sales recruiting and demand generation equally
- 29. 29 @markroberge Predictable ScalableRevenue Growth in SMB Build Bottoms Up Sales Plan
- 30. 30 @markroberge Predictable ScalableRevenue Growth in SMB Monitor Leading Indicators to Sales Online and Email Marketing Outbound Appointments Plan Actual 0 10 20 30 40 Appointments per SDR 0% 3% 6% 9% Appointments to Customer % $0 $10,000 $20,000 $30,000 Average Bookings per Customer 3,000 4,000 5,000 Leads 0.00% 3.00% 6.00% 9.00% Appointments to Customer % $0 $10,000 $20,000 $30,000 Average Bookings per Customer
- 31. 31 @markroberge € 0.0 €1.0 € 2.0 € 3.0 2019 2020 AnnualBookings(millions) 2020 PLAN Create Bottoms Up Sales Plan 2020 GOAL Grow Sales 33%! Predictable Scalable Revenue Growth in SMB MONITOR PROGRESS Quarterly Sales Sales Leading Indicators
- 32. Sales and MarketingAlignment
- 33. New Consulting Adoption Upgrade Renewal Retention Renewal Opportunities ScalingCustomer Success in SMB Trigger Experimentation
- 34. Trigger Experiment IDConnect Opp Upgrade ID->Upgrade % 3+ active lead nurturing campaigns 154 111 36 17 11% Lead lift > 300% in 3 months 40 32 25 21 53% Downloaded product literature on Smart Content 298 71 19 1 1% Other Experiments TOTAL 921 465 155 81 9% Example Upgrade Triggers Results and Optimizations over Quarter Find More Loosen Trigger Tighten Trigger * Data has been altered from actual HubSpot data for the purposes of this presentation Scaling Customer Success in SMB
- 35. Goal of Phase TargetMarket GTM Process Compensation Demand Gen. Pricing Sales Hiring Early Adopter Personal Network + Referrals Early Majority Expand via Experimentation Service Level Agreement Role Specialist #1 Product-Market Fit #2 Go-to-Market Fit #3 Growth and Moat Experiment Scale Customer Success Unit Economics Growth & Moat Customer Success Focused Data-Driven Add Promotion Path Solve for Customer Commitment Increase via Expansion Process Builder Based on Customer Success MQL = High LTV Segments Buy AND Retain LTV, Not TCV Adopt then Buy Process Executor Customer Retention = Healthy, Sustainable Revenue Growth
- 36. • Jay Simons– President, VP S&M @ Atlassian • Lesley Young – Global Sales @ Facebook Workplace, Box • Jed Nachman – COO, CRO @ Yelp • Emmanuelle Skala – SVP Customer Success @ Toast, Digital Ocean • Oliver Jay – Head of Sales @ Asana, DropBox • Syndey Sloan – CMO @ Salesloft, Jive, Adobe • Brian Halligan – CEO @ HubSpot • Hilary Headlee – Head of Sales Ops @ Zoom, MindBody • Josh Allen – CRO @ Drift, CarGurus • Carol Meyers – CMO @ Rapid7 • John Boucher – SVP @ Oracle, ServiceSource • Kara Gilbert – Chief People Officer @ Turbonomic • Andrew Rains – CRO @ Automotive Mastermind, VTS • David Meerman Scott – Speaker & Best Selling Author • Jeetu Mahtani – SVP International Sales @ HubSpot • Lou Shipley – CEO @ Blackduck Software • Tom Chavez – CEO @ Superset, Krux • Bill Vellante – GM @Infor, Workday, Oracle • Jim Norton – CRO@ Dosh, Conde Nast, AOL, Google • Larry D’Angelo – Chief Sales Officer @ LogMeIn • Mike Volpe – CEO @ Lola, CMO @ HubSpot • Michael Manne – CRO @ Reonomy, Namely • Mike McGuinness – Chief Customer Officer @ Veracode • Mike Arntz – SVP Sales @ SmartSheet, NetSuite VC Backed and Run by 100 Sales, Marketing, and Customer Success Executives
- 37.
- 38. 38 @markroberge All proceedsgo to Ayele Shakur Build.org CEO
- 39. Thanks! Mark Roberge (@markroberge) •Senior Lecturer @HarvardHBS • Managing Director @Stage2.Capital • Former CRO @HubSpot