Customer Success Reduces Churn & Increases Expansion Revenue
This episode might reference ProfitWell and ProfitWell Recur, which following the acquisition by Paddle is now Paddle Studios. Some information may be out of date.
Originally published: October 3, 2018
Customer success has been one of those parts of the organization that we all know we need, but it's been tough to define exactly what customer success entails. Is it a part of the product organization combating churn and NPS through scalable initiatives or is it part of the revenue organization focusing on upsells, renewals, and expansion?
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Customer success has an aggregate impact on net retention with those companies with some sort of customer success function seeing at least a 10% boost in net dollar retention compared to their non-customer success peers. Note though that dedicated customer success, meaning a full customer success organization that’s staffed in an account management fashion sees an additional 5% bump.
Digging deeper this analysis only shows a blunt interpretation of customer successes impact, because the data suggests that customer success actually doesn’t impact gross churn as much as it impacts expansion revenue.
Take a look here at our same groups broken down by aggregate gross churn. There’s definitely a drop in churn for those organizations with customer success showing a 15 to 27% drop in gross churn.
Yet, when we look at the same organizations from an expansion revenue perspective, we find that we’re seeing roughly a 50 to 125% increase in expansion revenue compared to those organizations without customer success.
So what does this mean then?
Well, customer success is absolutely valuable, but the implication is that their value is in an expansion revenue capacity, encouraging customers to find more and more value in our products and therefore spend more with us over time.
A deeper implication here is that gross churn can absolutely be influenced by customer success - I’ll take a 15 to 30% drop any day - yet, gross churn is likely more greatly influenced by your targeting of the right customer and product, the elusive persona/product fit.
Want to learn more? Check out our recent episode: Venture Funded Companies Have Higher Churn, Less Growth and subscribe to the show to get new episodes.
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You've got the questions,
and we have the data.
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This is the ProfitWell Report.
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Hey, Patrick. Emery
from Frame. Io here.
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And my question for the week
is how does customer success
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impact retention and churn?
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Customer success has been
one of those parts of the
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organization that we all know
that we intrinsically need,
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but it's been
tough to define you
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you're focused on
upsells and expansion?
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The truth is probably
somewhere in between,
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but the more interesting
question is, is it working?
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So to answer Emery's
question here,
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we looked at just under five thousand
companies and the data therein.
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Here's what we found.
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As to not bury the lead,
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customer success has an aggregate
impact on net retention,
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with those companies with
some sort of customer success
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function seeing at least a ten
percent boost in net dollar
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retention compared to those
without customer success.
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Note though that dedicated
customer success teams,
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meaning those who have account
managers per customer in some
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ratio like banner, are seeing
an additional five percent bump.
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Digging deeper, this analysis only
shows a blunt interpretation of
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customer success's impact
because the data suggests that
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customer success actually
doesn't impact gross churn as
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much as it impacts
expansion revenue.
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There's definitely a drop in
churn for those organizations
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with customer success showing a
fifteen to twenty seven percent
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drop in gross churn.
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Yet when we look at the same
organizations from an expansion
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revenue perspective,
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we find that we're seeing
roughly a fifty to a hundred
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and twenty five percent
increase in expansion revenue
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compared to those organizations
without customer success.
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So what does this
all mean? Mean?
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Well, customer success
is absolutely valuable,
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but the implication here is
that the value is more in an
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expansion revenue capacity,
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encouraging customers to find
more and more value in your
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product and therefore spend
more with you over time.
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A deeper implication here is that gross
churn can absolutely be influenced
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Well, that's all for now.
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If you have any questions,
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shoot me an email or video over
to p c at profit well dot com.
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And let's also thank Emery from
Frame dot io for sparking the
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research by clicking the link below
to share and give them a shout out.
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We'll see you next week.
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This week's episode is
brought to you by ProfitWell.
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