Customer Success

Next-Level Annual Customer Success Planning

In Part I of our series, we discussed Pre-Sales and Sales and what levers to pull to increase efficiency beyond hiring more people. In the second part, we’ve explored marketing planning and typical pitfalls to avoid. Now we’re going to take a look at Customer Success annual planning.

It wasn’t long ago that companies almost solely focused on new sales and did not pay much attention to customer retention, upselling, and turning customers into referrals or references.  When Salesforce broke the SaaS ceiling of $1B for the first time in SaaS history, it was not accomplished with new sales. It was achieved through upsells and finding customers where mutual extraction of value enhanced the relationship. This means being ready to lose customers that you probably shouldn’t have signed and be even more ready to delight the customers that get tremendous value from your product or service.  


Maximizing Net Revenue Retention (NRR)

The metric to focus on is Net Revenue Retention (NRR) and it’s calculated by taking all of the revenue from a cohorted year and comparing it to next year’s revenue from those same customers. Successful SaaS businesses achieve between 115% to 120% of NRR, because the customers they churn are offset by the upsell and cross-selling opportunities presented during the year.  Here’s a free calculator you can use to find your ceiling. To break the SaaS ceiling there are several best practices you can implement:


Labeling Accounts by Difficulty and Revenue

Labeling accounts by difficulty and revenue is essential during the prospecting and onboarding process. This allows the onboarding team to properly prepare the resources needed to make sure a new customer is onboarded quickly and efficiently, reducing time to value. While the implementation may be difficult, once it’s set up the client needs little to no support.  Do it during the buying process, not the onboarding process. You may find that the difficulty and revenue categories typically align and splitting this up doesn’t make a lot of sense.  

Every account doesn’t need this level of evaluation, but when a deal is larger or the prospect organization is deeply complex, then assigning a label early on in the process can potentially keep a bad customer fit from becoming a customer at all. Signing long-term customers that spend more each year is the path to a healthy NRR metric.


Balance Client Needs With Profitability 

Revenue complexity is based on the amount of work the account manager or customer success manager will need to do to keep the client happy. This is usually measured in how much time it takes to service and upsell a client. If you find this takes 2 or 3 account managers, then the account coverage needed would be 2x or 3x depending on the specific needs.  

Making sure this resourcing is profitable can be tricky because most clients will need a lot of help to get onboarded and ramp up adoption across their team. Once that initial period is over, the needs for the account will be highly specialized and depend on how many issues pop up in the software or service during their subscription. 

Even so, the best way to tackle this is to calculate the Average Cost of Service metric. This allocates all of Customer Success headcount and a portion of G&A, R&D, Hosting, Software cost to maintain customers (and a couple other costs depending on your business).  This essentially provides the cost to keep a customer versus acquire a customer. Using this, you can calculate payback period. You can also calculate your long-term value (LTV) to customer acquisition cost (CAC) ratio, which forecasts the amount of profit your company makes from each customer given acquisition and maintenance cost by using a Gross Margin estimate. 


Cross-sells and Upsells are Baked into the Account Management Process

Ensuring that cross-sells and upsells are part of your renewal process is easier said than done. To understand best practices, let’s look at Salesforce again. Their derivative pricing model allows them to start with a base price of access to the CRM system or Service cloud. But when you want a full sandbox, you pay per user and if you want full analytics, you pay a small amount per user. This allows Salesforce to constantly grow with their customers, extracting as much value as they are injecting into organizations.  

If you haven’t set a pricing model that is derivative based, consider other ways to diversify and increase your average selling price. There are not many ways to do this. The most straightforward way is to introduce new products and new functionality, which is the easiest option from a change management standpoint. You could also implement a different pricing model, but that could cause major business disruptions if not executed with great care. Nevertheless, if your company is selling one product or service with no add-ons from functions or support, then this lever will prove hard to utilize. You always want to plan to expand with great customers and be ready to cut your losses with customers that weren’t a fit. Design your business and offerings around this and you’ll achieve a desirable NRR.

Be sure to classify your cross-sells or upsells! Many organizations focus on customer acquisition cost alone and the GTM portion of the business ignores metrics like payback period. This leads to a huge focus on Expansion and Cross-Sells being classed as “new sales.” While that drives down CAC, it usually requires more customer success people to implement and maintain, so it drives up the average cost of service. And that drives up the payback period.  If you aren’t watching the payback period closely, this could look attractive, but that’s why it is important to make sure the cost to acquire and maintain a customer is profitable in the long run. 


Net Promoter Score (NPS) Monitoring 

NPS has become a central function of CS orgs. It’s how that team communicates to internal and external stakeholders that customers are happy. To ensure your NPS strategy is effective, avoid the following pitfalls.


Measure Different Personas Differently 

Economic buyers, project managers and end users are all different personas. These  different personas should stay segregated as they each measure the health of different areas of the business. The economic buyer will be able to provide feedback on the buying process and all of their interactions. The project manager can provide feedback on the implementation timeline and onboarding. Finally, the end user can provide feedback on the product or service itself.  Each of these are 3 feedback mechanisms that should provide data-based insights on pivoting to an improved prospect or customer experience in 3 unique areas of the business.  All of which will help improve Net Revenue Retention.

Commonly, NPS is sent out to the person(s) who signed the contract to ask how the implementation went and if they would recommend the company to a colleague. This is a good measure of implementation, but commonly the economic buyer knows if the implementation was successful (or not), but has no knowledge of the details. It’s better to send the NPS survey to the internal project manager and not the economic buyer.  This will give you a much more accurate assessment of the implementation. Survey the economic buyer on the sales and marketing process alone. Measure end users on the functionality and ease of use of the software.


Find the Right Way to Measure at the Right Time

Methods of surveying, such as via email or in-app can produce wildly different results.  Economic buyers don’t always log into the software so email is probably the best way to send a NPS survey.  Admin users are typically better off being surveyed through email as well and not in-app because they’re usually performing admin tasks and interrupting them could yield negative NPS results. 

Lastly, when surveying end users in a product, develop a consistent cadence and get the user’s consent.  Don’t ask for NPS when they hover over the logout button, as that’s plain annoying. And don’t ask an end user for NPS if they haven’t been using the software sufficiently to provide feedback (this goes for implementation as well; time this for at least several weeks after the implementation because the first couple of weeks could go smoothly and then turn out terribly. An early NPS would not show this).  

Consider showing a banner that asks if they’d like to participate in NPS after they have some decent usage. The banner could flash on their dashboard and you could give them the option to ignore it or exit without responding. This is a much better way to get authentic responses about your software and avoid bad NPS scores due to intrusive approaches.  


Useful Health Scoring of Each Account

Health scores on accounts are a nebulous topic. Some people have asked: “Why don’t health metric software companies offer health scoring out of the box?” The answer to this is quite easy.  It’s your organization’s responsibility to measure and find buying and churning signals. It can be as simple as making it easy to cancel as long as a reason is provided. That reason can be used to change current people, processes or systems to avoid churning more customers due to this in the future.  

How can you predict when current customers will churn before they actually go through the process? This requires setting up tracking in your software to see what users are doing when they churn. Software like Segment or HEAP can help narrow this down, but it’s a lot of work to set up all of the events you’d like to monitor and track.  With this technology, it’s possible to track all events that led to a customer churn.  

For example, perhaps a customer goes to a help article and then back into their account to make the changes suggested by the help article. That event is logged and a customer success person reaches out in 24 hours to make sure the customer’s issue was resolved. They do this because the tracking software found that customers who  visit a help page usually churn within 48 hours because they couldn’t find the solution.   

Health metric software is not going to know this or be able to analyze it to figure it out.  To be predictive, your company has to find the path to a customer buying and churning via software like Segment. These paths will contribute to the health score you implement using whichever health scoring software you choose.  If your company is only looking at customer behaviors such as last login, time logged in, or pages visited, you are far behind and probably having a hard time fixing churn issues before they happen. Without predictive churning capabilities, it will be difficult to save your most valuable accounts. Those accounts are the path to a healthy NRR and payback period.  

Don’t forget! Discover the top GTM strategies from B2B experts at RevCon: our must-attend annual conference on October 18-19, 2023!