3 Important Trends From the 2022 CS Index and Why It’s Important to Your Business Image

3 Important Trends From the 2022 CS Index and Why It’s Important to Your Business

Gainsight and RevOps Squared had an incredible response to our Customer Sucess Index 2022.

It makes perfect sense too. Investment in customer success (CS) is causing a significant impact on companies’ revenue and growth. According to the Index, companies spend anywhere from 3% to 20% of revenue on customer success. Why this level of investment? Because they find value in it. We are not the only ones seeing this type of investment in CS. 

From the Index, three primary trends that companies are pointing their customer success teams and organizations towards emerged, and they deserve further highlighting:

  • Integrating customer success into expansion and renewals
  • Improving user NPS with success plans
  • Simple strategies for newly formed Customer Success teams

Integrating customer success into expansion and renewals

Companies have realized that the greatest source of recurring revenue is their customer install base. The median cost of attaining $1 of new logo revenue is $1.67 versus $0.63 on upsells and cross-sells from existing customers. Although those costs tend to plummet in the long run, the return on investment (ROI) usually comes about a year and a half after the deal is closed. So, what’s a business to do about avoiding increasing customer acquisition cost (CAC)? They are turning to existing customers for their stream of revenue. That is one of the key reasons the Index showed that 95% of B2B companies of all sizes prioritize customer success.

When the Customer Success team or organization has cultivated a relationship of trust and developed a mature customer who finds value in your product, the customer will be open to gaining more from their partnership with you. More businesses have recognized that there is a natural and logical progression for them to want to buy more products, new features, and additional licenses, and thus create more recurring revenue. To accomplish this, your CSMs become the eyes and ears of your Sales arm, whether they close the deal or not. 

With the apparent advantages of CS contributing to renewals and expansions, we were surprised that the Index revealed that 45% of companies make Customer Success responsible for renewals. Additionally, only 17% of companies look to Customer Success to close expansion opportunities. 

But 72% of companies leverage CS to help identify expansion and renewal opportunities. Additionally, some of the responsibility for renewals and expansions is divided between Account Management (31%) and Sales (24%). What was eye-opening is that 45% of companies have now made their CS team responsible for customer renewals. 

These revelations indicate that businesses may not be exploring nor taking full advantage of the expansion and renewal white space. Every opportunity missed is money lost. Our suggestion is to integrate your CS org or team into the expansion and renewal process more fully.

Improving user NPS with success plans

Improving Net Promoter Score (NPS) is not an easy feat. NPS is a core measurement or method that most companies use to measure overall customer satisfaction. It shows not only customer health, but also loyalty. Like most health data, NPS is also a lead indicator or prediction of present and future product adoption and growth. 

The Index revealed that 80% of companies track customer satisfaction via NPS surveys. While this is an incredible percentage, what was insightful, if not disappointing, was that only 19% of companies reported measuring NPS once a year, and 20% of companies did not measure NPS at all. 

That indicates that 39% of companies do not gather regular feedback regarding their customers’ level of satisfaction. Another enlightening piece of information is that of those filling out NPS surveys, only 37% are executive buyers or platform administrators. These are your decision-makers and they aren’t weighing in on your product. The good news is you have a great opportunity for growth here.

 We believe that there is a critical need to become more prescriptive surrounding your NPS surveys and more proactive about your scoring. The data turns into dollars. If you are not willing to act on improving customer satisfaction and health, that is revenue lost. So, look to success plans that will help leverage better NPS scores that prevent churn, improve retention, and increase net revenue retention (NRR). 

 Simple strategies for newly formed Customer Success teams

At Gainsight, we realize that CS is constantly evolving and reaching across organizations, various fields, and being integrated into diverse industries. We also recognize that every company has a beginning. It can often be unclear when to start with customer success methodologies, strategies, teams, and CS operations. This subject revealed itself as part of our study participants’ focus in our 2022 Index. 

 The Index indicates that 31% of companies have newly formed Customer Success organizations. That suggests that company leadership awoke to the advantages of CS, or they are putting the right foot forward by beginning their startup with customer success. What was startling was that the Index showed that companies with $1–10 million in annual recurring revenue (ARR) have the lowest percentage of well-defined CS organizations, but 70% are either planning or have newly formed organizations. 

Gainsight has always encouraged startups and small- to medium-sized businesses (SMBs) to begin the CS journey with pointed efforts that create quick wins and provide early, demonstrable value. Part of that is incorporating CS as a team and as an ideology throughout your organization in a way that will provide long-term success. For orgs just getting started with CS, another Gainsight offering is the new Gainsight Essentials.

While your company may be too small for the role of a Chief Customer Officer, consider a CS leader and, in the near future, a CS operations professional. But CS must, of course, include those motions that bring value and growth. 

Customer success is a growth engine for companies of every size. According to Gainsight’s CCO, Kellie Capote, “A majority of companies indicated that their Customer Success teams reported to either the CCO (if applicable), CRO, or CEO. With CS seen as a new growth engine, we predict an increase in CCOs over the next year.” Having a place in the C-suite is an indication in tech that CS has legitimately arrived. 

Another consideration is the investment in technology. At Gainsight, we advocate that there are three main reasons to invest in CS technology early. 

  1. You will see a return on investment.
  2. There are verified outcomes.
  3. You will find fast time to value.

Automation is always a good first consideration. Embracing automation will create efficiencies significantly when leveraging automation with best practice playbooks. Another part of the technology should include the ability to track product usage. This inclusion gives you the ability to understand customer adoption and, eventually, health. 

Kellie Capote touched on the use of product analytics when she stated, “Although 80% of companies track Net Promoter Score (NPS), 88% prefer to use product utilization metrics to forecast churn.” Investing in product analytics that provide actionable insights beyond monthly and daily active usage helps retain and grow your current customers. Most of all, you are trying to create strategies to encourage retention. 

Want to have deeper insights into this article’s subject matter? Check out Gainsight’s CS Index 2022, including an interactive benchmark tool that shows you where you rank amongst your cohorts.