Why Forrester’s Business Case for Customer Success Management is even more relevant in the current market Image

Why Forrester’s Business Case for Customer Success Management is even more relevant in the current market

By Gainsight Team

Forrester’s 2020 report, The Business Case for Customer Success Management,  rings true in today’s market as companies realize the need for efficient growth through their existing customer base. As the tech market, in particular, enters a downturn, SaaS organizations can’t afford to neglect their retention and expansion strategies. In other words, it’s time to empower Customer Success (CS) teams with the digital tools and sustainable, scalable strategies they need to not only avert churn, but also build a durable growth engine for the business.

Gainsight CEO Nick Mehta reminds us that “tech juggernauts like Venmo, Instagram, Uber, andWhatsApp all launched during the Great Recession. So now’s the time to put on your rosiest glasses and look for ways to build durable growth and spin the situation to your advantage.” To help today’s SaaS companies endure the downturn and emerge as giants, Gainsight recently released the Durable Growth Playbook for Savvy SaaS Organizations

Here are three ways that you can leverage learnings from Forrester and Gainsight to make the business case for durable growth through customer success.  

1. Embrace retention as the foundation of efficient growth 

According to the 2020 Forrester report, CS plays a critical role in retaining customers. By implementing CS ideology and methodology into your organization, you can:

  • Track customers’ progression toward their goals.
  • Intervene to remove barriers between customers and their goals.
  • Link customers’ value realization to business success. 

Gainsight highly agrees. In fact, in our 2022 CS Index, we found that “CS responsibilities tie directly to business goals and revenue.” Churn reduction and product adoption were top priorities, indicated by 83% and 81% of respondents, respectively, and 45% of companies actually let their CS org drive renewals and other expansion efforts. 

This is a perfect example of our Durable Growth Play, No Surprises. With a top-notch CS organization, the risk of customer churn will never be a surprise because Customer Success Managers (CSMs) are actively guiding customers to value and renewal, well before the deadline. Moreover, CSMs will also closely monitor customer health which means they can address issues before they blow up to cause churn.

When CS teams lay the foundation for retention in this way, they quickly prove their value as an efficient growth engine. In fact, in Gainsight’s recent study, the 2022 SaaS Market Report, one of our toughest questions to our participants was: Where do you think SaaS companies should increase spending, and where should they cut? Both CEOs and investors agreed that Customer Success should be the least likely to receive departmental cuts.

The same report also showed that CS spend is increasingly aimed at digital-led strategies that allow CS teams to scale efficiently.

2. Invest in Digital Customer Success to scale sustainably

Investing in CS, especially in SaaS, is necessary to help customers reach their desired outcomes while guaranteeing the renewal of their agreements and retention. In fact, the cost to retain customers is much lower than the cost of new customers’ logos. According to a KeyBank Capital Market (KCBM) 2021 Survey, the spend to acquire $1 of new Annual Recurring Revenue (ARR) from a new customer was $1.67 in 2020. Existing Customer Acquisition Cost (CAC) Ratio Fully-loaded S&M spend to acquire $1 of ARR from upsells and expansions was $0.63.  

If a company needs to show that its investments in people, processes, and technology are worthwhile, then according to Forrester, CS leaders need to have a well-prepared framework and integrate four elements into their business case for customer success. 

  • The costs of developing and implementing a Customer Success program.
  • The business benefits of a full-scale Customer Success program. 
  • The likelihood Customer Success will improve business performance.
  • The future value of a Customer Success program.

To ensure the efficacy of CS means investing in it—specifically, it means investing in the Durable Growth Play, Scale Through Digital. To ensure success, SaaS organizations should invest early in CS Operations and digital-led CS strategies that empower CSMs to do more with less. 

Gainsight learned that companies spend anywhere from 3% to 20% of revenue on customer success. In fact, the CS Index found that “Companies that reported the highest Net Revenue Retention Rates (NRR) also reported investing 10% of revenue in their CS and CS Ops teams (75th percentile). Simply put, investing in CS increases revenue and the value of businesses.” This is increasingly vital as NRR is the key metric guiding SaaS valuations today. 

3. Establish the right KPIs to ground your business case 

The Forrester report proves that there are great incentives for beginning a CS program.  However, there is a caveat to this revelation—you must ground your business case in business performance expectations. Forrester suggests that “Emerging CSM teams must help the business identify how the program will boost business performance, as well as how the business will track this improvement.”

Customer Success leaders described to Forrester that their programs had to be built around the ways they improved their company’s business. There were four distinct, measurable, and quantitative factors to this process:

  • Develop baseline key performance indicators (KPIs).
  • Align specific aspects of the investment to improved outcomes. 
  • Collect data over an initial phase or pilot program.
  • Use real data to build out the business case.

Gainsight echoes the necessity for this type of justification in the CS Index. Moving forward, though, as you build out the use cases and need to prove ROI, there are some effective tools to justify the use of CS. Many organizations (63%) shared that success plans are their top tool to manage customers. Quarterly business reviews (QBRs) came in a close second, with 62% of companies identifying QBRs as the tool most used to manage customers. 

What was incredibly interesting was that 40% of respondents found that customer education and training programs were an essential means of engaging and managing customers. This illustrates our Durable Growth Play, Keep the Customer in Customer Success. To drive durable growth, it is essential that your CSMs have what they need to understand what each account needs to reach their goals. In turn, CS will help your business reach new heights.

Looking beyond the downturn 

We at Gainsight are looking towards the next phase of the CS field and the SaaS market. With research firms such as Forrester making the business case for CS, we know SaaS companies can use CS digital tools and strategies to build long-term, durable growth.

To learn more, download the Forrester report, The Business Case for Customer Success Management.

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