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

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Comments

Ed Powers

Oops! Yes, you're correct. Good catch, @Dan Balcauski ! I will update

Dan Balcauski

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

David Ellin

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.

Ed Powers

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

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Jeff Breunsbach
Founder, Gain Grow Retain
Director of CX at Higher Logic
Top 25 Influencer 2020
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