Which is More Important - Fighting Customer Churn or Growing Customers?
Should customer success fight churn or grow customers? Research across 5,000 SaaS firms shows CS impacts expansion revenue more than it reduces gross churn.
TL;DR
- ProfitWell's Patrick Campbell analyzed nearly 5,000 SaaS companies and found customer success teams impact expansion revenue more than they reduce gross churn.
- Companies with a dedicated CS team see at least a 10% boost in retention, up to 27% less gross churn, and a 50-125% increase in expansion revenue versus those without.
- The best results come from driving expansion revenue by preventing churn — and from defining a targeted ideal customer profile across marketing, sales, and CS.
As customer success professionals, we often ask ourselves “Is this what I should be spending my time on?” With so many competing priorities and KPIs, every single decision must be strategic and focused to keep your team and your customers on the right track. Patrick Campbell, CEO and Founder of ProfitWell, a SaaS analytics platform, takes this uncertainty a step further.
**Combating Customer Churn vs Growing Customers **
In a recent article, Patrick questions the overall definition of customer success, echoing a common sentiment in the industry: is customer success about combating churn or is it focused on upsells and renewals? Inspired by a question from Emery Wells, CEO at Frame.io, Patrick tackled the topic in an episode of The ProfitWell Report. In the hunt for the answer, Patrick looked at nearly 5,000 SaaS companies to see what actually has a bigger impact on a business: churn or revenue.
With the data from these organizations at hand, Patrick was able to pull out some pretty eye-opening statistics, which the customer success team used as a jumping off point for even more insight and discussion. Just look at what Patrick was able to deduce from his research:
- Organizations with a dedicated customer success team have at least a 10% boost in retention than those without.
- On top of that 10%, organizations with a dedicated ‘Account Manager’ role see another 5% bump in retention.
- Companies with customer success also see up to 27% less gross churn than those without.
- And those same organizations see a 50 - 125% increase in expansion revenue with customer success than those without.
Which Strategy Impacts Your Business More?
Based on those numbers, it’s easy to see how churn and revenue together are huge drivers of the customer success industry. But which one actually impacts a business more?
According to Patrick’s analysis, customer success teams in general impact expansion revenue more than they impact gross churn. Whether through upsells, renewals, or expansions, helping customers grow and expand their relationship with your organization can make a stronger impact on your organization as a whole.
Additionally, as Patrick briefly highlights at the end of his video, churn in general is more reliant on a customer being a good fit from both a product and business perspective. To truly drop churn numbers, organizations must have a targeted customer profile that expands from marketing to sales to customer success. This way, teams aren’t wasting time on accounts that are likely to fall through regardless of effort.
Understanding How Churn and Revenue Work Hand-in-Hand
For best results across the board, customer success teams should look at how to drive expansion revenue by preventing gross churn. This means ensuring customers are satisfied with their service and the products so they can spend more with your organization.
Here are some ways customer success teams can successfully bridge the gap between focusing on churn and upsells:
- Start with an end expansion goal (in dollars, percentages, etc.) and identify how much each account is worth towards this goal.
- Set up strategic checkpoints with your customers to discuss satisfaction, NPS results, and possible expansion opportunities.
- Work directly with your marketing, sales, and product teams to develop a focused, detailed ideal customer profile.
- Ensure customer success leadership has a strong relationship with the rest of the executive team in case red flags come up.
With these strategies in place, your customer success team can have peace-of-mind that you’re focusing your time and effort in the right places.
eBooks:
Ultimate Guide to SaaS Customer Success Metrics
Customer Success as a Culture: Customer Success Leaders Edition
Blog Posts:
Customer Success in the C-Suite—Aligning the Board and Exec Team
The Four Fold Mission of Customer Success
Learn more about how ClientSuccess can help your company develop a strong Customer Success methodology and strategy with easy-to-use customer success software by requesting a 30-minute demo.
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