How do you calculate CTR (Cost to Retain) & margin on low touch segments?

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Jeff Breunsbach
Jeff Breunsbach Member Posts: 266 Gain Grow Retain Staff
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edited August 2023 in CS Org Conversations
From our CS Leadership Office Hours today...

How do you calculate CTR (Cost to Retain) & margin on low touch segments?

@Andrew Marks
@Paddy Carr
@Andreas Knoefel
@Ed Powers
@David Jackson
@David Ellin
@Bertil Weil



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  • Ed Powers
    Ed Powers Member Posts: 180 Expert
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    edited October 2020
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    Hey @Jeff Breunsbach. Per your request I uploaded that spreadsheet file for top-down planning I mentioned today to the Library section here in the GGR Community. Hope it helps.

    The CTS (Cost to Serve) calculation in the spreadsheet adds the fully loaded costs of the Customer Success function, but as @Andrew Marks pointed out, the CFO should be your best friend. Every company calculates things a bit differently, so you should follow what your finance community does. For example, sometimes Customer Success costs are part of Cost of Sales and sometimes they're buried in overhead.

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    Ed Powers
    Consultant
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    -------------------------------------------
    Original Message:
    Sent: 10-22-2020 13:56
    From: Jeff Breunsbach
    Subject: How do you calculate CTR (Cost to Retain) & margin on low touch segments?

    From our CS Leadership Office Hours today...

    How do you calculate CTR (Cost to Retain) & margin on low touch segments?

    @Andrew Marks
    @Paddy Carr
    @Andreas Knoefel
    @Ed Powers
    @David Jackson
    @David Ellin
    @Bertil Weil





    ------------------------------
    Jeff Breunsbach
    Founder, Gain Grow Retain
    Director of CX at Higher Logic
    Top 25 Influencer 2020
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  • David Ellin
    David Ellin Member Posts: 170 Expert
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    edited October 2020
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    Thanks, @Jeff Breunsbach. I've never calculated a Cost to Retain and it sounded like some others hadn't either. As I thought about it, I think it's important to incorporate the non-monetary considerations as well as the true cost considerations. @Ed Powers' calculation sheet does a fantastic job with the true cost considerations.

    On the non-monetary side, we need to keep in mind the strategic value we derive from customers either as an early adopter in a new market segment, a well-respected logo that can be leveraged for new clients, or a customer who serves as a great reference for new business. I'm looking forward to hearing what others contribute.
  • Dan Balcauski
    Dan Balcauski Member Posts: 7 Seeker
    edited October 2020
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    Hey Ed,

    Maybe I'm reading this wrong, but why is CTS = ARR*GM%/# of accounts? Shouldn't CTS be ARR*(1-GM%)/# of accounts? 

    The spreadsheet is otherwise really helpful!

    -Dan
  • Ed Powers
    Ed Powers Member Posts: 180 Expert
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    edited October 2020
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    Oops! Yes, you're correct. Good catch, @Dan Balcauski ! I will update