Expansion is not sold. It’s earned. Image

Expansion is not sold. It’s earned.

Data tell a story in customer success. 

When interpreted and presented correctly, they reveal what you are doing right or wrong and where you need to improve. They can even tell you when a customer is optimally ready for expansions, upsells, and cross-sells. Data provides the trigger for your Customer Success organization to execute on those opportunity.

Recently, Gainsight’s Chief Customer Officer Kellie Capote was a guest on the Metrics That Measure Up” podcast, hosted by Ray Rike, founder and CEO of RevOps Squared. They discussed critical insights from Gainsight’s 2022 Customer Success Benchmarking Index and how customer success is becoming an evolving priority in business, especially SaaS.

What the research reveals 

The 2022 Customer Success Index was created through a partnership with RevOps Squared. The data and insights discovered brought to light that a total of 61% of companies had a version of a CS Ops organization. Additionally, 41% of companies indicated that they had newly formed CS Ops organizations. 

For Capote, this indicated a critical point that was synonymous with sales and sales operations or revenue operations. “It shows the level of operational rigor and operational excellence from an investment standpoint that organizations are taking to really double down and kind of sophisticate those principles and workflows within their systems,” Capote shared. 

It also showed that CS is no longer seen with a limited view that merely fights churn. It is now being appreciated as a growth engine for organizations. It has moved from a reactive process to a proactive one, or as Capote explained, CS has moved from the “defense to the offense.”

While this data is engrossing, what is more, enlightening is that 45% of US organizations actually have true renewal responsibility. “I think that that’ll be a number that we continue to see shift up into the right direction over the next several years,” Capote explained. This data is a good sign of customer success and where it’s going. 

An additional statistic revealed that 63% of customer success organizations are tracking Net Revenue Retention (NRR), which is key to enterprise value. Yet, only about 20% of CS organizations had primary responsibility for the upsell and cross-sell motion. Since NRR is based upon renewal rates, expansion revenue, upsells, and cross-sells, CS effectively needs to operate in a manner to drive better NRR. However, CSMs, on average, are not usually responsible for the expansion, upsell, or cross-sell process. How, then, do CSMs drive that motion?

Earning expansion through CS

Capote warned not to get “hung up” on the 20% statistic because, according to Index, 49% of the time, CS is still identifying leads and handing them off to Sales. That is an excellent metric to concentrate on. Capote indicated that “the nature and the dynamic of a CSMs role, effectively they should be functioning as a trusted advisor, consultative type of partner to the customer.” 

“In that working environment, it becomes more of an organic conversation,” Capote stated, “especially if they are having the right attitude of conversation around desired business outcomes, understanding truly what the customer is trying to do, and working that backward in order to achieve the next set of maturity outcomes. 

It very often demands some type of additional functionality—your users. You’re bringing in more teams and departments. So, if you’re able to craft that long-term roadmap or partnership view with your customer expansion, that sort of should happen organically over time. I say expansion is earned. It’s not sold, in my opinion.”

She explained that a minimal level of value and adoption needs to be accomplished to ensure continuous motion in the right direction from a growth perspective. Capote found it great news that 50% of organizations are at least identifying this opportunity, a metric referred to as customer success qualified leads (CSQLs). 

According to Capote, organizations need to measure the number of CSQLs. However, they must also include the pipeline dollars at play and how many leads were closed. Another metric to consider is the difference in conversion rates between customer success-driven leads versus marketing-driven leads. There are also efficiencies to be considered regarding acquisition costs and other associated items. Also, the product’s complexity and the industry’s maturity play a role. 

The intrinsic role of the CSM

Ultimately, the nature of the CSM role is intrinsic to CSQLs. Capote believes they must be able to handle expansion opportunities organically. It is contrary to the standard cross-sell expansion, which returns to your traditional sales teams. 

“At a minimum,” Capote explained, “I think the CSM can still have the attribution of expansion because of the identification and the handoff. To Capote, it makes it more of a sure thing to close those types of deals. Also, the deal cycles are usually much shorter, as well. Capote further stated that “it’s a collaboration in my mind. It doesn’t always have to be an ‘or.’ It’s kind of an ‘and’ type of dynamic between the two teams.” 

The concept of the CSQL is similar to a product-qualified lead. However, Gainsight discovered in some additional research that a product-qualified lead typically closes 2.5 times faster than a marketing-qualified lead. In Capote’s operating experience, customer success teams that identified upsells and cross-sales had a 60% shorter lead time and two times higher close rate. With results like that, companies cannot deny the benefit.

To hear the entire conversation between Gainsight’s CCO, Kellie Capote, and RevOps Squared founder and CEO, Ray Rike, tune into the podcast Metrics That Measure Up” on Apple Podcasts.