Building the business case for CS
Brian Strock
Member Posts: 4 Seeker
Hi all-
Is anyone able to share their experience, useful resources, and/or lessons learned for drafting a business case to stand up a brand new CS function in a large, well-established organization? I'm currently working on selling CS up the chain in an org where it doesn't exist today. I'd say I have executive interest at this point, but not necessarily buy-in yet. I'm particularly interested in any thoughts on the following:
Thanks!
Is anyone able to share their experience, useful resources, and/or lessons learned for drafting a business case to stand up a brand new CS function in a large, well-established organization? I'm currently working on selling CS up the chain in an org where it doesn't exist today. I'd say I have executive interest at this point, but not necessarily buy-in yet. I'm particularly interested in any thoughts on the following:
- What was most valuable to highlight from an ROI perspective and how did you determine projected improvements by instituting a new CS function (e.g., will reduce churn by X%, will improve NPS X points, will reduce support costs by $X, etc.)? Where did you find the data to prove your hypotheses?
- Any tips on the best way to pitch a new prospective org structure with CS? For context, we currently have an AEs who handle the spectrum of new business cross/up-sells, and renewals, PMs responsible for implementation, dedicated Education team for training, and a specialized analyst group with industry experience for specific use-case assistance in the product suite and other data projects. Is there a path of least resistance you've found to at least get something stood up and evolve from there?
Thanks!
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Comments
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Hi @Brian Strock--
A couple of thoughts:- Recall the history for why SaaS companies started Customer Success teams in the first place: to reduce churn. Shifting from a perpetual license model where nearly all revenue and profit was taken up front, to a subscription model where revenue and profit was collected over time, meant software companies suddenly had to care about whether their customers actually used and derived value from their products. The economic case is first made here, by limiting churn and then by expanding revenue with more users, upgrades or additional products and services. In my experience, you can expect at least a 30% improvement in revenue retention simply by adding a CS team and executing a good process. The case for expansion depends on the 'white space'--how much opportunity exists for revenue growth and how much of that can you get (i.e. TAM, SAM, SOM) from your installed base? I recommend you download my Tiering Analysis worksheet in the Library which contains more ideas and benchmarks you can use to build your business case.
- Customer Success doesn't have to be a separate function--you can make it a 'Center of Excellence' that supports the functions you already have. In fact, some of my clients are just like you and doing exactly that. You and your team should focus on driving change within your organization by adopting the unique philosophy and practices that support the subscription model, most importantly Success Plans, widespread adoption, value realization, and risk mitigation.
Ed0 -
Thanks for the response and great points, Ed. One issue is the perception that we don't actually have a retention problem right now, or at least the current numbers don't generate a sense of urgency around it. But certain indicators and market forces are there to suggest we need to take a more proactive stance. The 30% figure is certainly an eye-catching stat with the right data to support it. I've looked at your Tiering Analysis worksheet and also actually attended one of your workshops a while back, so I'm digging out those resources as well, which are all very useful.
I really like the COE model and am curious to hear more about your experience there. There's certainly a huge change management component I'm being careful to not overlook here, and am a proponent of ADKAR, although not an expert by any means. I'll follow up via email and really appreciate the insight!0 -
Hi @Brian Strock
At a high level, without getting into the weeds, your first thought on ROI is correct, reduce churn. Find your company's current annual account retention. Is it 60%, 70%, 80% etc? What is the average annual revenue loss per churned account. Better yet, calculate your company's Lifetime Value per account (LTV). What is the average length of an account and average revenue per account? Legacy companies can have very long LTV. Many, if not most CS teams, target 10% improvement in churn. What does that mean in retained revenue? How much LTV revenue does 10% improvement in retention give the company? The added benefit for a CFO to hear is that retained revenue falls right to the bottom line (earnings) because your Cost of Acquisition (CAC) has already been paid for these accounts. CFO's should like that unconsidered need.
Regarding the build out, you seem to have some of the pieces in place. The education and specialized analyst group could be part of your CS efforts. Thus reducing the investment. As you know from your past experience you still need to build out a process and probably buy some technology to automate the calculation of health scores, utilization, NPS scores, and other account changes. Your next decision is which account segment to beta test? Identify where the churn is coming from. The Tier A accounts may be getting enough attention from Account Managers and have less churn. If not, then build a team for Tier A accounts. If the churn is coming from Tier B accounts then build a CS team to reduce their churn by 10%. If your company is enterprise then 10% retention improvement in Tier B accounts can equate to tens of millions of dollars in retained earnings. At least that is what we see from our CS programs that are assigned to Tier B for enterprise.
Hope this helps guide you.
Ben Simms0 -
Hi @Brian Strock,
Great advice from @Ed Powers and @Ben Simms. I would just add that getting the perspective from the Customer may be helpful. Stories and quotes often resonate when combined with data. What are your competitors doing? Of the customers that have left, could CS have made a difference? For the cross/ up sells that are taking place, is it organic to your customers' needs/ making them more successful? Or is it approached by AEs primarily to achieve quotas?
Another question to answer: It sounds like your company is doing a lot to understand the market place already. What gap or problem would a CS group address that isn't working now?
Best,
Jan0 -
Thanks for the insights, Ben. I definitely made it an early priority and found my finance ally that can help me tell a story with numbers. The 'where to start' question has been on my mind for sure, and finding those low investment, quick wins will help get some momentum behind the effort.0
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All great questions to consider, Jan! To your last point, I'm definitely trying to be careful to not fix what isn't broken. With aggressive company growth targets, I'm trying to position any effort as an accelerant to growth than a remedy to a particular problem, also being careful not to water down the urgency.0
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