How do you calculate CTR (Cost to Retain) & margin on low touch segments?
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Hi Jeff,
Great question..... I'm curious if the lack of responses is some form of an indicator at how few are doing this at all. Cost To Retain(CTR) is something I have wanted to track at a previous company and was decided by others that A. too complicated and B. not wanted/cared about by enough leaders.
To my limited knowledge and experience, it seems there's a split between measuring CTR for all customers on an ongoing basis, versus measuring CTR for just those customers which are/have been at risk. The former being a much more overarching measure which can help gauge profitability. The latter being a more transactional measure for specific accounts and retention efforts, and an aide in deciding if a single retention effort is worth it or not. Which are you most curious about?
In once trying to tackle the latter, we considered the following process (very vague overview).- CSM an CS Leadership create Save Plan that is believed to be enough to mitigate risk
- Quantify Costs of that specific Save Plan
- Costs of Product Enhancements
- Costs of Negotiation with Sales, Legal, Etc. if negotiations/contract amendment required
- Increase in CSM costs as more CSM capacity given to a single client with increased efforts to retain and project manage the Save Plan
- Costs of implementation of solution (whether new product, reconfiguration, etc.)
- Costs associated with increased Support consumption as changes to the product experience surface more support tickets
- Note: this did not include normal/standard ongoing costs of delivery a healthy/not-at-risk account would have., only the increase due to the effort to save the account from churning.
- Then we would of course compare the CTR to the ARR and renewal value of the customer at risk.
- Then we would compare the CTR of the specific account at risk to the ARR and renewal value of all customers at risk for the same issue(if there were others).
Curious to see some conversations happen regarding this topic. I think all too often the CS org sees itself as responsible for revenue, when really the responsibility is to maintain profitable relationships with customers.Will Buckingham
Customer Strategy & Operations Manager
Customer Success Consultant
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I thought Kaiser Mulla-Feroze at Totango did a pretty good job of defining it some years back at their annual conference. Here's the link to the slides:
https://blog.totango.com/wp-content/uploads/2019/03/customer-retention-cost-report.pdf
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This is a fascinating read. Thanks for sharing Ed - very much appreciated. @Ed Powers have you implemented any of the practices in this? If so, would be curious to learn what you implemented and how it went. Thanks.
Will Buckingham
Customer Strategy & Operations Manager
Customer Success Consultant
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In practice, I have not broken down Customer Success costs to distinguish CTR from CTS, @William Buckingham . Most times the debate I had was whether CS costs belonged in CTS (e.g. Cost of Sales) or part of overhead. I think CTS boils down to a question of roles and responsibilities. If a separate team (e.g. Sales) owns up-sell/cross-sell/expansion vs. renewals, then breaking out retention GL's probably makes sense when rolling up separate installed base sales resources to the SG&A line.
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