“The faster you can help customers understand and extract value from your product that is in line with their business goals the stickier and more successful they’ll be.”
With businesses keeping a closer eye on finances as they brace for a downturn, they’re inevitably going to be evaluating what is and isn’t necessary to cut costs. Rather than shifting your focus on acquiring new customers, investing in retaining your current ones is going to be your best friend. Why? Because it is much cheaper.
Acquiring New Customers vs Investing in Customer Success
CSMs vs CAC – How much cheaper is it?
According to LinkedIn research, Customer Success roles are one of the highest-growing jobs in the UK market because they have become, arguably, nearly as important as salespeople in terms of generating and sustaining revenue. Generally, 70%-95% of revenue comes from existing renewals/upselling – even established enterprises like Salesforce have 73% of new bookings coming from existing customers.
Whilst hiring an entry-level CSM could set you back $50,000, acquiring new customers is going to cost more in the long term. The CAC (Customer Acquisition Cost) for the average B2B SaaS company is roughly $1,450. If there are ambitious customer acquisition goals within your start-up, work those numbers into your budget – which is more viable?
You Are Underinvesting in Customer Success.
Gainsight data revealed that the majority of companies with >$100M ARR are typically spending 10% (sometimes less!) of revenue on their Customer Success function. Whilst it may look good from a financial standpoint that the percentages are low. Still, it is likely that it is this low because they are underinvesting in their CS functions, meaning they are more prone to suffering from lower upselling and retention rates, alongside a stressed-out sales team.
What sort of CSM function should you build?
We see the term “Customer Success” being used to describe 3 very different types of roles:
First is the “Relationship” CSM.
This is the “classic” Customer Success – the focus is on the business relationship. Day to day this includes onboarding and product adoption, understanding business challenges and how this solution can add the most value, building relationships with stakeholders throughout the business, and being a trusted advisor for the customer to ensure they are getting ROI. They are typically measured on KPIs like renewal rates (a natural outcome of doing their role well) and NPS.
One key thing to look for when hiring these reps: tenure is extra important for these reps in order for you to see evidence of building long-term, successful relationships!
Second, the “Commercially Savvy” CSM
Here, the main focus is on account growth, spotting opportunities for upsell/cross-sell and either facilitating the sale for an AE or managing that cycle themselves. This sort of CS approach can be risky, as from your customer’s perspective it could be perceived as you putting your own interests above theirs. Success is usually measured through the revenue of their portfolio as a whole e.g. they lose a customer but another grows which evens out the overall revenue.
One key thing to look for when hiring these reps is examples of accounts they have grown, and a clear process on how this was achieved.
And finally... the “Technical” CSM
Whilst it is always necessary for your CS team to have an in-depth knowledge of your solution, don’t get them confused with support! Sometimes working alongside another type of CSM, these reps will focus more on product adoption and advocating best practices.
One key thing to look for when hiring these reps: a presales background can work well here as you need someone who can navigate technical conversations with both technical and business stakeholders!
FYI Tip – If you envision your function to having predominantly relationship focussed CSMs, you should steer away from mixing commercial reps with them as it could undermine the function as a whole. Focus on one type of rep that aligns with the sort of function you want to scale.
How Do You Hire?
Once an ideal function is established:
- Work with recruitment partners who are aligned on your hiring goals and the type of CSM's you're looking for. This way, you'll always have access to talented CSMs who match your ICP/ideal function.
- Put your interview process to paper. Establish the number of stages you think is needed to learn about the candidate, and what each step will involve. Have candidates present an example of a QBR they have run to see what they focus on, how they structure/run those meetings, and whom they angage with.
- Decide who will be involved at each stage. Will it be the founder(s)? Anyone from C-suite? Will candidates meet the rest of the team? It’s normal if your process involves more stages than you’re used to. One of our recent blogs explains this change.
If you are considering scaling your CS function as a result, it is likely that your competitors are likely thinking the same, which means you could be losing out on top talent if target candidates are signing contracts with your rivals.
Roles in Customer Success are booming, and they are arguably becoming just as important as Sales in terms of generating revenue. By defining the type of function you're after, working with the right people, and putting an efficient hiring process in place, your CS team will help you retain your customers, increase your revenue, and reduce churn during challenging times.
Want to work with those right people? We have scaled the Customer Success and other GtM functions for BRYTER, BitSight, and Looker! If customer retention is your priority, let's chat! Book a call, or send us an email so we can discuss your hiring goals!