2016 Expansion Report: Benchmarks for Customer Success
Editor’s Note: The following is an excerpt from OpenView’s 2016 Expansion Report: Benchmarks for Customer Success. You can access the full report here. Additional reports will be made available in the coming weeks on sales, talent and marketing.
Many software companies have already realized the vast benefits a customer success function can bring to their organizations. That said, with the all-important role that customer success plays comes the need to audit the market and reevaluate goals consistently. CS professionals should use industry benchmarks to ensure they are contributing to their companies’ bottom-line and long-term success.
In this report, we present customer success benchmarks so you can track your progress against your peers. We also provide core recommendations around how to grow and structure your team, set and track goals and compensate team members to ensure incentives align with said goals.
Throughout our analysis, we uncovered an underlying trend that underscores our core recommendations. Companies need to invest in customer success early on in their life cycles to build momentum and accelerate growth so they can capitalize on this early investment in their later stages. Companies that fail to build out a CS function early on will find it hard to grow through expansion – upsell and / or cross-sell – opportunities. Organizations that set shorter-term goals around customer retention and product adoption will forfeit the benefits investment in CS provides. This conclusion is supported by the following key takeaways:
Investment in Customer Success Adjusts as Organizations Scale
Organizations are not scaling customer success teams in a manner linear to overall company growth. However, this does not represent a failure to invest in CS after the $50M annual recurring revenue (ARR) mark. It does however point to a redistribution of resources when companies get to this later stage. It is our belief that these later-stage organizations are investing in customer success through means other than expanding headcount. These activities actually support the CSMs they’ve already hired. So, while total spend on “customer success” is probably still increasing, it is spread through other resources (onboarding specialists, customer success operations, customer analysts, tools and technology and so forth). Despite this continued investment, data throughout this report points to a failure by these later-stage companies to fully leverage expansion opportunities through upsell and / or cross-sell.
Ability to Increase Revenue by Relying on Expansion
Expansion as a percent of revenue tops out at a median of 21% for even the largest companies surveyed. Companies can increase the efficiency of their revenue generation engine by relying more heavily on expansion. New customer dollars are far more expensive to obtain than expansion dollars through upsell and / or cross-sell opportunities. Many Customer Success organizations don’t maximize the potential for driving expansion across their customer base either because they are afraid of losing their “trusted advisor” status or because they are completely absorbed by other activities within their account (ie. lengthy onboarding, pure retention activities, etc.). This is not only a huge missed opportunity, but also obstructs the path to a sustainable Customer Success organization.
Many venture-backed companies are justifiably infatuated with top line growth, but fail to consider associated longer-term costs. Wise management teams quickly recognize the accelerating impact of focusing on customer retention and growth. Looking to your current customer base for additional revenue can be a key lever to growing an efficient revenue generation model, oversetting burn and working towards profitability.
To continue reading Benchmarks for Customer Success, access the full report here.
With only lagging metrics in their toolset, customer success leaders can’t really drive strategy at the executive level. Here’s Chris Hicken, former president at UserTesting, on how to change that.