Improve your business with customer success pipeline stages in UAE

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so the panel is how to how to drive growth with customer success metrics uh and the moderator the moderator is Alison malar so let me just introduce Allison she's the director at Price waterhous Coopers and the lead director responsible for their SAS practice uh with 15 years of experience leading and managing large scale business transformation so I will get out of the way and bring Allison up and let you guys enjoy this panel everybody get how right hello and welcome everyone thanks for joining us today we've got a great panel ahead of us today the topic is managing customer success metrics and um I'm Ali Miller with PWC I'm very excited to be here today um in my role with PWC I help large software organizations really affect new business model changes and that often means offering their products as services and one thing I know for sure is that that the only way to successfully affect that change is really a laser focus on customer success so I am thrilled to be joined today by a phenomenal panel and we'll introduce them shortly but panel if you can come up and up to the stage and join me please [Music] it's like a perfect are we all getting comfortable very good so before we go into intros um what I would just like to just a couple of words about the format today we've structured this panel um really in the style of many TED talks and so each of our panelists will will introduce themselves they'll share some insights um with you based on their experiences and then at the end I'll I'll throw I'll pose a couple of questions to them really get them warmed up and then what we would like to do is hand over to audience Q&A and really get your questions from the floor so with that thank you gentlemen thank you for joining me really appreciate you spending the time with us today and um why don't we start with Aaron Aaron take it away for us all right thank you Alison so my name's Aaron Ross let's see here I think I have control I've Got The Power there we go I wrote a book called predictable Revenue which has been a number one bestseller and I people tell me it's become something of the sales the new sales Bible for Silicon Valley uh a lot of it's based on the time I spent at salesforce.com I created an outbound sales team there that helped out a 100 million in extra revenue and actually by now it's probably been like an extra billion uh left Salesforce in 2006 and I've worked with you know Consulting off and on for different companies and um you know sort of really really trying to focus on what are the few things that drive growth and I've had I think by now four companies that have either broken 100 million or gotten on track to do that and actually working on a new sequel to predictable Revenue with Mr lpin here called the predictable Revenue guide to tripling your sales which is was a I think a SE drop they had with a handout so it's little bit the background just a fun fact about myself I think people always are like whoa when I tell them I'm going to have eight kids pretty soon there's actually four in the house today my wife is due June 24th with a new baby daughter and we're trying to adopt in process with three other kids so uh love kids okay thank you thank you I do it for I say I do it for selfish reasons I don't do it to be Noble I just We love kids and it's fun it's chaotic but fun and um it's it's been fun as I do more speaking not today but conferences I including pictures of kids and family stories to help make the sales points so in fact last fall when I keynoted a conference I brought my oldest daughter up and brought her on stage and you know it's just fun doing that with her and she had a great time having said that I think from my perspective I'm not here to tell you how to do customer success I'm probably going to be more helpful to you to help sell it to your executive team to do it the way you want to do it just to give you some context and I think because this is probably preaching to the choir the fact that customer success okay what what what it's not is it's not free help it's not glorified support and it's not an afterthought oh yeah we'll do that later once we're big enough right it's wrong thinking I think part of the problem is a lot of companies and executives are used to saying oh if I hire a salesperson I should get X dollars back and what I want to help do is help teams Executives and Boards understand that customer success is an investment you start now early and you will make money with it it's early to understand how much money you'll make but you a lot of the metrics and benchmarks are still coming together but the way I describe it is okay if you have a business the traditional way to grow a a software or a company with salespeople a B2B company is you hire more salespeople but that's wrong Lessons Learned From salesforce.com and some of these other hundred million dollar companies is salespeople don't drive growth lead generation drives growth sales people help fulfill it and I think it's important to understand these three kinds of leads these three types because a lead is not a lead is not a lead and oftentimes in board meetings and you do need to learn something about how your board and Executives think if you need to sell them on what you want is they'll think okay we did $10 million last year and we had 10,000 leads so to double our Revenue to 20 million we'll need twice as many leads and that doesn't work begin because a lead is not a lead is not a lead and I say look just to break it down to simple terms there's just three types I call them seeds Nets and Spears seeds are really many to many you know Word of Mouth word of mouth right Nets are one to many marketing and Spears is are outbound prospecting one to one and the the way so the book I first book I wrote is called predictable Revenue and what Executives care about is predictable results or systematic results so the way to now the popular ways to systematize these would be seeds would be customer success really you know generating growth through Word of Mouth uh Nets now Inbal marketing is popular and Spears outbound prospecting but the point is to help people Executives understand that customer success is a growth driver so it's not glorified support it's what will help Drive Revenue help make them make that connection and when they start to see it they'll be willing to invest in it and give Financial ownership to it excuse me but I believe personally that a team you know uh the executive team of the future would have a head of sales a head of marketing and a head of customer success and they'd be on par of equal importance because they're all important the mix on for your company may be different but they're all vital and I think the last part of this is is that for those Executives or for you they need to see how where does the money come you know show me the money uh it's always be a little bit different depending on the company because there's so many variations at least today but one example and this is example in this ebook is from a company called Guild I'm not sure if there's probably some Guild people here I know at least at the conference but the way they what they own and what's more common now is that customer success often owns at least renewals perhaps caps upsells as Guild and they also have two things that matter to the company it's not Financial metrics but they call 90day adoption which is time to value and uh they're in charge of product road map feedback but essentially they can show in a board meeting it's here's how we're making the company money so espcially those top two points and the executives need to know or board say okay because honestly at the end of the day they care about money it's just the way it is yeah hugs are great they're important but they're going to put money in where money's they see they're going to make money so you need to show them that so great thank you that's super thanks Aaron okay if you move it forward we'll find up duh wow that's great Mr Lin all right uh I'm G to stand because I'm not that good at enunciating while seating um just 60 seconds on me uh uh I'm now uh a VC new to the VC world at a at a firm called storm Ventures that just invests in Enterprise Mobile and SAS um uh I have a community called saster maybe a few of you have read some of the content but it's sort of the largest community now on the web for SAS Founders and aison AOS and the stuff we'll hopefully by the end of this year we'll have a million views per month on our content um and I co-founded and was CEO of a company called echoine and uh which is right out there and has done extremely well under Adobe and sort of my shtick is I I really knew nothing about SX before Echo I literally knew nothing I'd sold to the Enterprise and I'd done the internet thing but I had never done the combination of the two and I pretty much got everything wrong you could possibly get wrong and Learned From The Trenches and so what I've had fun doing the last 18 months is is sharing all that learnings and still having built a pretty big success out of it um and what I learned ultimately it took me a while is that of all the things out there customer success was the most important right and I didn't figure it out our first year because you're just struggling to get any customers right and it didn't even figure it out the second year because the renewals seem to automatically happen because any customer you happen to get in the first year is going to renew the second year right I mean they have an extreme desire to buy your product if no one's heard of you so really for first- timers like I used to be it's not till the third year that you even figured this customer success thing out right and that's kind of a shame because the one thing that I learned is there's only one thing you know will work right Aaron talked about will more sales reps work probably not maybe right but you can't just just throw reps at something and grow faster um will more marketing spend work well you could have like a really neat user conference that'll probably work um but I don't know like maybe maybe it won't work right there's only one thing you can do when you're really scaling when you're growing faster than 20 30 50 80 100% there's only one thing that's guaranteed to work is customer success right because if you make your customers happy you'll get more customers and the learning that I thought I knew before I did it but if you talk to any any software company any company that's at scale right any of the big ones the Adobe into it Google Facebook whatever Salesforce you're going to hear one metric that's common to all of them which is they get 80% of their customers from their old customers they get 80% of their customers from word of mouth right and beyond all the metrics that we're going to talk about right your customer success is are your Advocates um and your soldiers for creating That Word of Mouth Loop that leads to all that subsequent Revenue right the the challenge is of course it doesn't work in a day right um this word of mouth Looper even if you have a somewhat viral product like I did it it takes time right so the single most important concept that I figured out um which which can maybe help you socialize in your companies what I call second order Revenue right um so sales does this amazing job and they bring in the customer for the first year value right um and that's kind of usually what the whole organization's focused on right what were the bookings for this week this month this quarter this year that's all the company talks about but as we know and I'm color blind but I think it's blue is it blue down here at the bottom left I think it's medium blue that's just the tip of the iceberg right and there's two pieces that happen first of all if we're in the Enterprise or larger customers they're going to renew for the second year and the third year and the fourth year in the fifth year and we don't really talk about that other than sort of calculating customer lifetime value which is important right um but then of course the second thing happens right which is upgrades right and on average they're going to buy 120% 110% whatever the number is for you more of than their initial contract value and then even more important is this true second order ref you know it's a total bummer when you've worked so hard in this customer and then your Champion quits and goes to another company I mean God it just breaks your heart but most of the time they'll bring you into that company right they come with you right um it's a little bit of risk but it's actually going to increase your multiple right um and then word of mouth will build right and it echosign what I realized probably as early because we did track lead sources religiously that's the one thing we were good at even as early as four to 5 million in Revenue it was clear that 80% of our growth all came from the base it came from Word of Mouth upgrades viral whatever you want to call it that's where those leads came from that's secret sauce right and so when you want to understand the value of customer success to the Enterprise you have to calculate it all in not just customer lifetime value right which is those three five years not just adding in upgrades right the 110 120% number but you actually have to calc add in the second not Revenue right and when you add in that which can be another 100% right when you realize you'll do the math and you'll realize your customers are with with 68 10x the first year ACV right what you'll realize especially as a CEO or others you're grossly underestimate underestimate underinvested in customer success right you can't get any higher Roi and the key is to help everyone understand this C this holistic calculation right and then all of a sudden you'll realize you should triple down and what you'll see with a lot of folks that are now doing their second or third or fourth SAS company even even folks like Nick at gainsight um they're they're they're they're dramatic Ally over investing in customer success in the early days right um and and one metric um I think it was on the slide before that a lot of folks use as a metric is 2 million per CSM right and larger organizations you'll see something around that right and you can kind of back into that what is I get this much revenue how much do I want to spend to keep the revenue how does it work 2 million per CSM I think the Uber learning is as you're accelerating that should probably be as low as 1 million per Revenue per CSM right so that so that those customers can accelerate all this second order Revenue um and uh and and this key math a different way to put it and then I'm trying to help further quantify this is not only is a customer worth eight to 10 times its first year ACV if you help the organization understand this you'll realize customer success is five times more important than sales right obviously if we have no sales we have no customers right and and and my VP of sales and I to this day we Facebook two or three times a day all right we're as close as you can possibly get but the truth is all this huge amount of recurring Revenue that we have have today it's all it's all from customer success so as soon as you understand whatever your magic number is in customer success and maybe we need to create a magic number for customer success what is that all in number right with all pieces how much more Revenue do you get after that not just customer lifetime value but everything second order Revenue customer success is worth at least five times more right and the one thing I'll tell you I know it's not a metric but the one takeaway from all this is once you figured this out in the company make sure that everyone's getting on a plane right because the one mistake a lot of CEOs make as they're GR in the company is this you got the big deal the big deal comes down and what's going to happen Coo's going to get on a plane right and then you close that huge deal you close that epic deal with whoever it is with Etna or Google or or whoever your great customer is and how often how how much of the Coo's time how much of the non-customer success time is spent visiting those customers right it's usually a tragically low percent right and actually that time should correlate to the revenue your CEO should spend far more time visiting your existing customers than doing that cool deal right and I remember it took me a while to figure this out but at echoine one of our larger customers was Groupon I was a Groupon probably in 2009 um and and this was before the IPO Groupon was probably the hottest company on the plan face of the Earth and I look in the conference room there the big one and Mark Ben off's there right he's flown in from his mansion in Hawaii I don't know how you get direct on a private jet from Hawaii to Chicago but I I guess you I guess you can make it in one hop and I'm like what what is he doing here right and it turns out not only is Mark benof going they'd already closed Groupon for 10 or 20 million a year or whatever is not only is he going there but they've got a phone at Groupon right where they can call Mark benf and I don't know if he literally picks up right but seeing him there was this epical Mo epic sort of this moment where I where I where I Vally saw that you've got to get the CO on a plane right and spend more trips on a plane visiting your existing customers building those relationships than going out um to new ones and sort of my final Point what do I have about one minute good one minute now that now that I I'm no longer running echosign and far more talented and experienced people than me are running at Adobe and a lot of times's Gone by you do see how all this churn sort of affects itself over time right and you'd love to say you lose no customers but you do lose some for a variety of reasons there's one thing I've learned when I've tacked this back over time we never when I was there we never lost a company that I as the co visited never okay and and churn is such this weird concept you'll have seemingly very happy customers and you'll lose them right they the renewal comp holy cow they went your competitor they never complained they they had incredible utilization and then you'll have other customers that never deploy right or they're or they complain and they're miserable and you retain them at a very high level right and a key at especially for the second group is just go there right if you go there and build the relationship the thing about this recurring revenue is it's not it's it's like AJ said on the panel before it's not like buying a piece of enterprise software you put on the Shelf they know the customers know it's a 5 to sevene commitment and if the co builds that relationship with the customer they'll they'll just never leave you um so for a for a different metric that's not quantitatively I came up with this metric which is 5 plus two so every CSM should do five on-site visits a month okay go face to face especially if you're in the Bay Area and you have customers in the Bay Area it's just not that hard five visits why did I make up five because it's more than one a week okay so everyone should check in and everyone needs to be scored did you go to Five on-site visits a month okay you won't lose those customers and then two what you eventually should get in your first year as a CSM if you do five per month right which is 60 a year you'll get two badges your customers will be so tired of checking you in at the front desk that they will give you two badges they literally would and if you make your CSM team do five plus two including the CEO the co may not get the badges but it's got to do the visits this will have the profound effect of accelerating that Revenue in the out years right the fact that I never lost a customer that I went and visited no matter how much crap I heard no matter how many complaint I heard even in some cases where for example we were integrated into Salesforce and they never deployed Salesforce and they never deployed us if we went out and visited um they'd always renew and so maybe my last point and this one is is maybe more obvious than we've chatted about but but um you know why is this so important this second order Revenue as we know customer success is increasing net negative turn building revenue from the base and we're here for gainsight so first we need tools right we have to have tools to measure this right and then I know I'm preaching to the choir here but the one thing I've learned is you can't have any best efforts in customer success I know at a lar lot of bigger companies it's soft it's squishy customer success is viewed as sort of um customer support on steroids it's viewed as a cost center the whole point of this is customer success is the best Revenue Center you can possibly have in a recurring Revenue company it's better than sales it's better than everything else so you've got to measure it and then you have to drive it up quarter over quarter that's the key right if you can't measure it you can't improve it so so my learnings thanks for the time [Applause] thanks Jason hi everybody my name is Tom tungus I'm a partner at Red Point um red point is a venture firm we invest anywhere from about 250,000 to about 40 million in companies of all sizes around the world uh mostly in it uh we work with a lot of different AA service companies including striped willo zendesk looker uh TI Mark expensify and fer and Zora um I'm a former pm at Google and um I'm a statistics nut and I write a lot at ts.com with with a bunch of different metrics and today what I'm going to show you is a way of thinking about a startup from the point of view of a customer success manager and the financial impact that a successful customer success uh campaign can have on a business so CS is critical and you know uh we've seen it firsthand or I've seen it firsthand at Red point and and so as a result of those experiences I've become a student of customer success and and trying to use metrics and data to understand the real impact but at at the highest level the reason why customer success is so critical is Happy customers uh well your customers become happier because you're listening to them and as a result of that you end up building a better product the second reason is that because of customer success the company is able to grow much faster but not only is it able to grow faster it's actually able to grow at a much more Capital efficient rate so in order to prove these points to you I'm going to walk you through a hypothetical SAS company I'm calling gain Vision which operates in the uh customer success space it's a series a company we're just about to raise our series A we're operating at about 50k in Mr we've got 50 customers charging um paying us about $1,000 in Revenue a year the cost to acquire customer is about $1,250 which means we pay back that cost in 15 months and we're growing 15% month over month everything is roses there's one problem though our turn rate is about 4% a month so if I look at the if I as a CEO look at the impact of what that means for the business I get a chart that looks like this on the y axis I've got Mr in dollars going from0 to about $3 million a year in the x-axis I have time so from today to 24 months out the bottom line the blue line is the current trajectory of the business Mr is turning at about 4% a month so in about two years time the Mr for the business will be about $500,000 if I implement the customer success team and I'm able to draw my Mr to Z so draw my CH rate to about 0% I will increase the revenue run sorry the Mr of the business by 12 25% in the same time period if I'm able to actually get customer success to be really successful and grow my business to achieve net negative turn and other words grow all the accounts uh fast at a faster clip than they're leaving then I'll actually be able to 4X the size of my business in the same time period it's a pretty powerful statement but the the other amazing fact is that in addition to Growing the business much much faster it actually takes me less cash to get there so I have to raise less money as an entrepreneur in order to achieve exactly the same same result this is a chart um of a very simple model looking at the total sales and marketing expenditure of this hypothetical SAS business over the course of those two years in order to achieve those Revenue run rates at the 4% Churn number which is the current course and speed of the business it takes me about eight and a half million dollar to replace all the customers that I've lost and then acquire enough customers to double the revenue in the case of a 0% Churn it takes me about half of that capital and in the case of NE 4% turn it takes me about one10 the capital and that's just because my customer base is now working for me right so the question now it's pretty clear that customer success is definitely the right thing for the business but the real question is what's the ROI how much should I be willing to invest uh in order to make this kind of thing happen well so let's look at a let's look at the business on a per customer basis here we've got another chart on the y- axis again it's Mr on the x-axis customer lifetime value this is a to and out customer so with the 4% monthly churn rate the typical customer is going to last about 24 months with the business and what's going to end up happening is the first 15 months of revenue from that company are going to be used to pay off the cost of customer acquisition and the cost to serve and and all those things and then the the nine months after that from months 15 to months 24 is going to be contributions be profit on a per customer basis but again these customers turn at 4% a month so what I'm going to do instead is I'm going to make an investment in customer success and again uh this is a success case for a renewed customer with a customer success investment so the first 15 months are again going to be used to pay off the cost of serve uh the cost of customer acquisition and the cost of serve instead of having 9 months of contribution from months 15 to 24 I'm going to reduce that to six months of contribution from months 15 to 21 I'm going to take three months of the revenue from the customer and invest it in customer customer success and then what that's going to drive is another 12 months of contribution of the 12 months of profit so with three months investment from customer success three months of revenue from the customer so which is roughly around $300 I'm actually doubling the amount of profit or contribution I'm driving from a custom customer so with a very very little bit of Leverage I can actually get a huge amount of impact on the business but this is only going to happen in a certain subset of cases right the customer success team is only going to be able to save revenue or save customers at risk in some fraction of those cases in another case I'm going to actually incure a loss so this is this is the downside case so what I've done is uh I've I've got additionally the customer success investment for about three months my contribution Falls from about 9 months to 6 months and in order to determine precisely the amount of money I'm to spend on customer success I've got to take a weighted average I've got to figure out on the whole if I can save what fraction of customers can I save and what is the impact of that uh for my long-term profitability and so here's a really simple equation it's a really rough metric it's it's kind of a rough rule of Thum but thinking about how much you should spend on customer success based upon this model for this company at that stage with the metrics that I indicated so uh for the why everybody laughing um uh it's it's roughly basic to save rate times the value the extension so in this case it's about if I assume that my customer success team can save about a third of the people who are going to churn uh and they renew them for about 12 months at $83 a month it's about $300 or about 30% of the a annual contract value of a particular customer and for that investment if I can achieve a two percentage Point decrease in turn I actually get a ton of benefit I increase my Revenue by about 50% and I decrease my sales in marketing cost by about 30% and that's the reason why I'm so excited as an investor about about promoting and championing customer success within startups because the amount of Leverage that you can get for a tiny investment into this team is absolutely stratospheric for the business thank you very much uh Hey guys my name is Brian Stafford I'm a partner at McKenzie um I started and lead a practice we have serving pre-ipo tech companies companies between about 30 to 300 million in revenue and before joining McKenzie as a former uh entrepreneur started and ran a company grew to about 100 million in Revenue um uh I know I know that the uh the talk here is about customer success let me frame it in the context of Company Success just to start with so at McKenzie we did a bunch of analysis to say hey what are the biggest predictors of companies at $100 million level actually growing to be billion doll plus companies using all kind of publicly available information we looked at 600 companies over a 15year period of time and you can argue well 15 years ago did things really matter let me just go to the data for a second first and then we can debate um the really interesting thing is the super fast growing companies companies that grew at more than 60% per year at the hundred million level roughly half of those companies turned into billion dollar companies but if you get below that companies that weren't growing as fast you get to less than 10 to 20% of companies the growth rate less than that actually became a billion doll business a couple takeaways one sustaining growth is really hard we found of the companies that actually dipped down in the revenue growth rate kind of below that $60 threshold only 25% of those companies were able to to go from a dip to pick it back up and grow again um and the recipe that kind of underlied kind of growth there was to get from the 100 million to a billion people had to build a new muscle they had to get get good at something they weren't good at previously build out a new channel build out a new capability in order to actually scale in to get there and what we find in now this in this SAS world is there are five kind of value drivers for SAS companies everybody gets subscriber growth and I feel like that's what everybody talks about and focuses on but the customer success metrics get far less visibility and should get more and the two customer success metrics that I'll hit on here are ARR growth per customer and churn and how they then translate into kind into value uh at McKenzie we launch and run a um a a proprietary benchmarking database with about 100 SAS companies in it ranging from 10 million in Revenue to 350 million Revenue most private a few public a couple divisions of companies we collect about 40 metrics across those companies and help to analyze and identify the points where there's got to be other levers Beyond just hey Revenue growth that can help make companies smarter and how they can actually grow grow faster uh and I'm going to walk you through some of that data it's by the way it's it's it's free for for companies to join and we do it as a as a service to the to the ecosystem um uh AR growth is one of the most underleveraged areas of growth for companies we just don't see it get nearly the amount of of attention that it that it could roughly 80% of the companies in our database are growing ARR per customer at less than 10% per year especially true of the larger companies as well where you actually have great relationships but they're still not not scaling them large enough that great relationship that you have from your customer from a customer p uh customer success perspective how that translates back into new product how that translates into upsell is really a massive value driver that hasn't been hit and even when you look at the companies that have where they're growing their AR per customer at more than 10% so more than 10% per year when you look in data they're only touching about half those customers half those customers are still languish they're not being covered nobody's actually growing and scaling them and across those levers we find smaller companies smaller in um Revenue Siz customers doing it better as they try to scale up their relationships but in the bigger companies not touching it at all and pricing is a huge lever that we see no one touching people are so so worried that your customer is going to churn if you actually don't go visit to them you're actually don't go visit them you're actually never going to realize that you actually probably have some pent up opportunity increase pricing you know beyond what the discount that you gave them in order to close them uh next lever is churn churn I think every churn gets lip service I feel but it doesn't actually get kind of the focus that it really deserves if I look at churn and the churn numbers in our database this year and I compare them to next year and aggregate they're the same there's no material difference some companies have gotten better but in aget they're they're they're exactly the same uh when you look at the churn rates as well you're talking a churn rates for most of these companies in the 20 to 40% per year churn is kind of the average churn when we look at it on a cohort basis I think that's an important thing to call out most of these compan most companies are growing and many of your guys companies are growing so quickly that the denominator on number of customers is growing even faster than the total number of customers we losing are if you're doubling in size or increasing in size by 50% and you're actually have a churn of 20 to 30% the reported churn is going to end up looking something more like 15% and then people look around a boardroom and they say 15% well it's higher than I'd like but you know I you know guess it's not that bad but in the reality it actually tells a different story on the health of a business for fast growing businesses and actually not looking at at the real health and actually the churn of those customers when no one's paying attention to them and there's real dollars at L uh at stake here when I look at uh I serve a large Wireless company my some of my other partners and colleagues serve other other cable companies and when you look at real mature at scale subscription businesses and the way that they manage every little Leverage and dial and tie it back to how successful customers are and where are their points that they can upsell them or whatever else it is there's big dollars at stay kind of in this hypothetical example of a Wireless company kind have an average across the the four major wireless companies out there there's about 400 to 500 million in value it's in Revenue at stake 150 million in margin from managing to turn Okay versus managing turn very well it actually really matters and as growth slows you would hope that people actually can can focus on that but you actually don't have to wait for growth to slow which is actually then this next chart and it'll be my last one um when you look at we did a fun comparison just for um uh just to sake of looking at the top quartile companies in our database on growth so the companies that are growing the top Cortel is growing about 64% in Revenue growth per year then we took a look at and there is some overlap that's why I said it's a little bit of a fun comparison but when you look at the low turn companies the companies who actually are turning at kind of less than um uh two and a half perent per quarter or 10% per year they're still growing at 32% but when you actually look at the customer lifetime value of the highest Growers that 40% per year turn that 10% per quarter 40% per year just craters the customer lifetime value and no one's actually focusing on it and the lower turn companies are unbelievably more Capital efficient and actually focus on and either have focused explicitly on maximizing uh CLTV or they've just done it by focusing on best practices and whatnot now the interesting thing here and if I then if I then spin this back to the first chart I showed you which said hey I got to grow at at 60% per year because otherwise I'm not going to grow and scale and become big the interesting thing though is the takeaways from the best practice people for managing churn either through use of tools and technology or how they put the focus on it all those learnings can be applied to any other company it's just not a focus it's not part of management it's not part of DNA so for for example those companies actually Focus 10 to 20% of their people of their FTE on Farming versus hunting which is some sort of a post close relationship management success related role and they spend 30 to 50% more FTE on churn prevention which is when you go in and talk to people and you say Hey you know not surprising it doesn't take a consultant to tell you this but if you put more people on preventing churn you will have lower churn and say they go I get that I get that and said well why don't you do that I'm like well you know we're hiring 20 people and I need those 20 people at sales and well why don't you take two of them and put them into redu oh my board wants me to hit these 20 people on on sales and well okay the data is the data you'll figure this out at some time but um uh so I think there's a lot that can be learned actually from more mature companies because it's just good business practices and holding on to your customers that everyone will realize it sometime the sooner you realize it for your companies the better so thank you gentlemen lots of great insights that you've shared today um let me start the Q&A part of our agenda today um and maybe I'll throw just a general question out to um to you all you know one thing that we can all agree on is the importance of customer success but what I'm curious about is um what are some of the biggest challenges that you see customer success groups grapple with when they try and sell um to the CFO and the C the CEO their their customer success metrics and some insights in terms of how they can overcome those obstacles well uh actually I'll I was talking with some guys last night um including Tony I'm sorry if I get your name wrong Tony but nin who leads customer success in maretto and I worked at Salesforce a long time and if you don't have some kind of financial responsibility for the team it gets moved around tossed around and treated like a second um you know like oh where we going to put this year oh put over there put over there and it doesn't really get the investment it deserves but how do you actually get financial responsibility for the team is a could be tricky because the head of sales may not want to give whoever owns renewals if they own up sales renewals do they want to give it up I don't know so I think it's just recognize the importance and how do you convince the team to get on board with treating it like I said on par as a sales team yeah when it's culturally not ever done I think it's it's uh data and analytics and Roi I think it's what it really comes down to and that doesn't if I look at our you know our largest clients and if I also look at um uh some faster growing companies it's if you're a really really big company your data exists in 10 different systems different data warehouses multiple teams touching on anything like how do you actually give someone if you make a business case and provide line of sight and what impact it has you're actually going to get the funding the support Etc and I think for actually for um uh for most companies in the room I think it's just it's Focus because the systems aren't as complicated you're not dealing with multiple data warehouses and different systems it's all sitting right there you can utilize you know selfish plug you can utilize tools like Gite and others to actually better monetize and actually look at the data and make that case I think if people get the data that I think we've all shown in different versions of our slides you can make the case I think it's easier to do yeah yeah the last part I'd say is having a voice when it comes to talking to the sales team about which customers the sales team is pursuing because if the customer success team owns renewals it has to make sure that the kinds of customers that are coming through the top of the funnel are the right kinds of customers good point I think another also add to that I think it's um I think if you don't have visibility at the sea level office it's going to be a two to threeyear project uh a friend of mine uh his company got acquired uh and they wanted to move his whole customer success team reporting to customer support right which was actually borderline outsourced okay now we can laugh in the room but what that says is that company has not yet learned that customer success is a revenue Center okay that it's the most key one and you're not going to change that in a day right first you've got to measure it like we talked about then you have to socialize those metrics then you have to prove those metrics and then and then for that fiscal year then people will start to nod and then next year you're going to get the budget so I wish there was a perfect answer answer right but I think it's if you don't have this this this if this doesn't exist in your company if there isn't recognition and the DNA doesn't change because the DNA change can change this overnight it's going to be a two to threee process right and you've got to quantify it right because if you don't quantify it it's just like support it's just a CO it's just cogs yeah right but customer success isn't cogs customer success is down there in sales and marketing expense right there's a reason it's not it's not a cost of goods it's a cost of of Revenue absolutely great so G given that we're running a little short on time let me throw it open to audience Q&A at this point and I think we've got some microphones in the audience questions for a panel hello so I think most people would agree that the cost of acquiring a new customer is pricier than the cost of retaining expanding existing customer but one of the things that I grapple with is how do we make it very clear and and and with metrics show that customer success is contributing to expansion and growth within an account because some of the the the things that I hear is well you could attribute the growth to the fact that sales had these open opportunities when they were going into that customer acquisition or you could attribute it to product features and functionality that were released there's just so many different things that you could attribute growth within an account to and I'm trying to figure out how can I clearly put metrics around what csms do to growth within an account gentlemen who would like to take then uh I'll take it I think it's a really difficult problem and it's not yet a solved problem I think the the companies that I've seen handle it the best what they do is they run correlations and they tend to run correlations between the number the type of different customer success events and the growth of an account and then they Benchmark that against um people who uh customers who haven't had exposure to that so you're really kind of running an AB test in order to create a Baseline and to make a measurement but um you know attri attribution in marketing or in custom success like marketing is a really really difficult uh it's a really difficult problem it's not solved I I think just to two versions it is hard um I mean two thoughts first of all it's hard in sales too right occasionally you have leads that come in and they say I want to buy today and you're like man I had to give that guy a commission especially in the early days there's nothing more frustrating than I could have closed that deal in five minutes and now now I've got to write Elena a $40,000 check right so it is murky even in s we think sales isn't murky but it is there's all different quality of leads right y um I'll throw out a thought that will help I I I don't know what percent of csms have a bonus plan that is tied to upselling their accounts I I think you've got to socialize this and get it done I think you have to if you don't in first of all you have to measure it right then you have to improve it and then you have to incentivize it incentives work for different people for different reasons right um and I think one key piece is making sure there's a bonus component that is contingent on upsell in those accounts or on reducing churn depending on the what type smaller smaller business may be reducing churn larger customers it's about increase in the size and make sure there is a material VAR component that's at least 20% of the base and then I think magic will happen from there yeah quick question uh the investment in CSM that does yield you know better customer lifetime value what what kind of percent of Revenue or or customer value is kind of a good Benchmark you know 2% of Revenue 10 20 what kind of metrics have you guys seen as as companies start to get out of the uh pure retention and get into some of the growth phase of of the CSM function got the metric is a percentage of Revenue is really hard because a lot of the companies that we work with uh have really very fast growth rates and so the revenue changes but typically the way that I think about you know it kind of depends on the size of the account but for an account kind of in the 5 to 20K we typically a ratio of 120 customers to 150 customers per CSM rep that's going to obviously depend on the complexity the product and and and the value of each account but that's that's roughly what I've seen in companies that I work with I think also the question might be what percent of Revenue do you spend on retaining that account I think you're going to see 5 to 20% right and I think 5% is kind of an old school number right so you know if you if you if you have 2 million per account and you only spend 5% of that you can only accomplish so much right 10% is probably the kind of all-in number that we're thinking about right a CSM for less than 2 million fully burden cost plus all the cost of supporting that customer maintain it that's going to be 10% and folks that are investing in accelerating business are probably spending close to 20% of that Revenue right but that's still less than the magic number of you know more than 100% that they may be spending all in to acquire that customer and it's the best use that that scarce Venture Capital too but five at the very low end and I think 20 are folks that are that have done this again they're push they're pushing that number High other questions from the audience um I have a question for Jason um you quote a number that you think a csre should have about two million uh in accounts under management um is that for a model of Cs where um a CS rep is handling things like support things like you know planning and running renewals or is that for something where a team would be split out and things like support would be handled by a different function I think the answer is yes what I mean is if you look at mature SAS companies and talk to them a lot of them are modeled around 2 million and what that 2 million does is very different right if you're managing a 2 million plus customer you could have just one person managing that account right if it's really a high velocity SB business with a $2,000 ACV right you may have to figure out how to deal with a th000 customers which is a quantitative proactive but glorified customer support job right and I think there's a Continuum from 2,000 to one customers that defines the job um and so I think you know you put if you put one per two million it sort of normalizes out against that number so so unfortunately I think the answer is just yes that's what the organization tends to expect and and the more customers you have the more the more you do all those different pieces maybe time for one last question um this is for Jason again um I was wondering if you could dig in a little more to that same point why why is the number two million is that just a trend you've seen or is that a best practice I don't know um what I do know anecdotally is people figured out a certain set of norms like this magical magic number that you should try and go profitable on your customer in month 13 or month 7.6 or 15.8 right if you're a box 18.1 but still grow 100% a year like some of these things people figured themselves out because this isn't 20 years of experience in recurring Revenue models so so 2 million has become it I think though you can back into it from a cost of Revenue perspective right so if a fully Bur person that's experienced with benefits and and and office and parking space is going to cost you hundred hundred and something thousand that eats up a fair amount of Revenue right um for most organizations if they're viewing it as a cost center unfortunately when it gets much more than that it's going to seem it's going to seem expensive um but I do think you know that's that's that's a best practice number that folks been doing for a while but I think that's being driven way down right people have figured this out especially second and third timers that this is where this is the best investment right so you're seeing that number driven down to as little as 1 million and if you don't have that in your company and you're growing you've got to grow for the math to work right if you're grow if you're mature and growing 5% like I mean I I don't know that the math works but if you're growing in that sort of 50% or above number there's not a better investment you can make and driving it down to one is the winner I think I think it's what we've all said in different ways same thing it's especially in customer success don't go back $2 million is not the rule it's like a starting point because everybody's so different you know use your damn brain you know people always want well just tell me what to do well okay start there but adapt it to what your situation is because you know if you has 300 people in here you have 300 different situations still the way it would support this and comp that and you know just don't be afraid to AB test or figure it out take it as a starting point and make it your own yeah it was interesting I hadn't done the math before earlier the earlier talk but when the head of customer Salesforce was here they're 5 billion in Revenue now with a th000 folks in customer success that's actually not that heavy right especially considering how profitable Salesforce is right that's 5 million right so don't socialize that number with your boss don't let them know the Salesforce number tell them it was 10,000 uh I think Salesforce only has like 20,000 employees what like 7% of their total employees yeah so it's a lot is it but even that that's 5 million right that that's that's actually Salesforce is pretty efficient there that's super panelists thank you for your time today really appreciate your insights m