On this episode of the ProfitWell Report, Emery Wells, CEO at Frame.io, asks us how customer success impacts retention and churn. To answer Emery’s question we looked at the data from just under 2 thousand companies within the subscription space specifically. Here’s what we found.
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.
Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Emery for sparking this research by clicking the link below to share and give him a shoutout. We’ll see you next week.