Has anyone cracked the code on CS ROI?

Miranda Balcar

Hi! 

Has anyone cracked the code on identifying ROI for their CS teams?

I've read (and now experienced!) that it's notoriously difficult to quantify, but my exec team is asking me to give it a shot. Ideally, I'd show our ROI before and after using a CS platform. 

Any resources, ideas, or templates are welcome! 

Amanda Watson

Hi Miranda! 
What a great question! I am looking at how to show ROI as well... hoping to get more $$ allocated to CS. I am interested to hear more.

Jordan Silverman

There are people here more qualified than me to answer but happy to chat about how I have done this in the past.

Our main metric is NRR as a company. Every input metric rolls up to NRR and customer churn.

- Trainers = Activation Rate = Activated customers churn less
- Health score = Healthy customers churn less and expand more
- CSAT
- Etc.

We are able to tie each input metric to churn and NRR.

Then we secure budget in two ways:
1) End of each year we use next years forecast to project MRR and number of customers. We then see where we will run into capacity issues and plan to hire 2-3 months in advance.
2) Show how added head count or tools can impact NRR and churn

For example when we signed up for Totango my thesis was it would help scale the portfolio sizes of CSMs through automation and better processes. With Totango we were able to have CSMs go from managing 150 accounts to 350 accounts. This dropped our costs to service a customer dramatically and completely offset the cost of the system.

When we wanted to add a new trainer that was outside of budget we showed how the increased activation rate would decrease churn. When you looked at the decreased churn + LTV it was a positive ROI on the hire.

Grant Jones

@Miranda Balcar @Amanda Watson this article has some info regarding customer success ROI.  https://www.tsia.com/blog/quick-guide-to-customer-success-roi

CS platforms, at a high level, are really designed to support NRR growth...so anything tied to retention or upsell increases.  If leadership care about growing the business, you simply cannot do it without solidifying your customer base.  You can also look for increased efficiencies such as customer time to value or if CSM/AM's are able to manage more customers per rep.  Increased NPS/CSAT scores lead to great reviews on G2 which leads to inbound leads/referrals/building brand awareness...(maybe run an internal campaign asking your happy customers for reviews/referrals). 

You could also look at it from a different perspective, if leadership is making investments in sales/marketing (which they usually are) you could make the argument an investment in CS is more valuable. Talk about how much more it costs to attract new customers vs holding on to the ones you have.  

Shamar72

Jordan Silverman said:

There are people here more qualified than me to answer but happy to chat about how I have done this in the past.

Our main metric is NRR as a company. Every input metric rolls up to NRR and customer churn.

- Trainers = Activation Rate = Activated customers churn less
- Health score = Healthy customers churn less and expand more
- CSAT
- Etc.

We are able to tie each input metric to churn and NRR.

Then we secure budget in two ways:
1) End of each year we use next years forecast to project MRR and number of customers. We then see where we will run into capacity issues and plan to hire 2-3 months in advance.
2) Show how added head count or tools can impact NRR and churn

For example when we signed up for Totango my thesis was it would help scale the portfolio sizes of CSMs through automation and better processes. With Totango we were able to have CSMs go from managing 150 accounts to 350 accounts. This dropped our costs to service a customer dramatically and completely offset the cost of the system.

When we wanted to add a new trainer that was outside of budget we showed how the increased activation rate would decrease churn. When you looked at the decreased churn + LTV it was a positive ROI on the hire.

Jordan, whilst a detailed answer with nice alignment to future planning, you also highlight the challenges with such a question, ie Health score is somewhat of a red herring without much more context - 

• must have alignment to customer value (ie what were their buying criteria/use cases) and how has the product delivered against that.. CSM and Sales alignment is critical to ensure no mixed messages

• what was TTV (first and ongoing)? whilst a very subjective measure, again the customer needs to feel onboarding and deployment was quick and effective leading to value being achieved 

• Note activated is different to adoption (potential v actual users) 

• Product Feature adoption should be another CSM lead initiative - making sure the customer is aware of and using (or planning to use) the majority of features that align to value creation 
• CSAT is customer subjective - majority of customers only voluntarily reply if unhappy and those that give 10s generally have been pushed by CSM to respond. the feedback comments often are more insightful than NPS scores 

any/all of the above can lead to a decent health score during the year but then the customer doesn't renew as missing perceived value or the QBRs don't myopically focus on the delivered value 

who ever says the life of CS is easy !! 

Amanda Watson

WOW! Thanks to everyone for the valuable insight. 

Ed Powers

Hi @Miranda Balcar. I've done extensive work with my clients to help them demonstrate the ROI of Customer Success to their financial community. Ultimately, everything boils down to revenue and costs, contrasting results with/without Customer Success. Attached is a spreadsheet that helps tell the story at a high level as well as analyze the tradeoffs of tiering operations to increase scale--I'm happy to talk through it.

To prove the impact beyond any doubt, however, you must look closely at how Customer Success influences actual account behaviors. This requires a different set of metrics than are normally used, specifically survival charts, control charts, and Pareto charts. By using statistical analysis and A/B contrasts, you can demonstrate precisely how much impact you make, including confidence intervals.