The ROI of Customer Success: Why It's Worth the Investment in Times of Economic Uncertainty

Introduction:

One critical question in every boardroom is whether an investment in a department will be worth it. In today's competitive landscape, with budget cuts and layoffs, every decision needs to make financial sense.

So, is an investment in customer success worth it?

Even though there are layoffs in the customer success manager space, CSMs have the opportunity to play a pivotal role in driving retention and revenue generation from existing clients.

Especially in times where it is more difficult to acquire clients, and more focus is on current clients.

In this blog, we discuss the evolving significance of customer success, the shift towards a numbers-focused approach, the importance of measuring customer health and impact moments, and how to calculate ROI for customer success investments.

1. The Evolving Significance of Customer Success Amid Economic Downturn

The economic downturn has led to a stronger focus on customer retention and revenue generation from existing clients.

According to a recent survey, 60% of SaaS executives said that retention was their number one priority, and 40% said that expansion revenue was their second priority.

As a result, customer success has the opportunity to play an even more vital role in business strategy. While layoffs are happening across various sectors, including SaaS and customer success, this does not diminish the importance of customer success teams. On the contrary, it emphasizes the need for CSMs to adapt and become more numbers-focused to ensure their continued relevance and impact.

2. The Shift Towards a Numbers-Focused Approach for Customer Success Managers

As the economic situation forces companies to make more data-driven decisions, the role of customer success managers (CSMs) is evolving. CSMs are now taking on a more significant role in revenue ownership, becoming responsible for creating pipelines and delivering on specific targets. The focus on revenue generation highlights the need for CSMs to be customer-obsessed and relentlessly focused on delivering customer outcomes while adopting a more numbers-focused approach.

For example, HubSpot, one of the biggest CRM providers there is, implemented a customer success program that increased revenue by 46% and decreased customer churn by 24% (2). By measuring customer satisfaction and identifying areas of improvement, HubSpot was able to tailor their customer success strategy to the needs of their customers and increase revenue as a result.

3. The Importance of Measuring Customer Health and Impact Moments

To maximize ROI, companies must accurately measure customer health and have technology that provides proactive insights. Visibility into customer journey stalls and knowing mission-critical impact moments for customers are crucial factors in delivering value in the shortest possible time. You can shift the balance in your favor by introducing more efficient customer success strategies. By understanding how your customers use the product, and achieve their business goals, you can deliver engagements that drive value.

For example, a company called Gainsight developed a customer success platform that helped a SaaS company reduce churn by 40% and increase upsells by 35% (3). By tracking customer health and identifying impact moments, Gainsight was able to provide their customers with personalized, targeted solutions that improved their overall experience and increased revenue as a result.

4. Calculating the ROI of Customer Success

Tracking customer success revenue is a process of weighing potential customer lifetime value against the cost of serving customer segments that promote renewal. Calculating ROI for customer success can be a tricky subject, as there are multiple ways of determining its value and various metrics to consider, such as Net Revenue Retention (NRR), Gross Revenue Retention (GRR), Customer Lifetime Value (CLV), Churn Rate, and more.However, a simple formula to help you calculate ROI, which takes into account some of these factors, is as follows:Total CS cost = Employment cost of CS team + CS automation tools + Customer loyalty program, etc.

Total CS revenue = Customer retention revenue + Account expansion revenue + Customer referral revenue. By measuring the ROI, businesses can make informed decisions about investing in customer success teams and tools.

5. Calculating the ROI of Using a Customer Success Tool

As mentioned earlier, the cost of a customer success tool is an essential factor in calculating the ROI. To make it even easier to understand the potential ROI of investing in customer success, Churned has developed an ROI calculator. By inputting a few key metrics, businesses can determine the financial benefits of using a customer success tool like Churned, and how it contributes to the overall ROI of their customer success investment.

6. Conclusion

As the economic downturn continues and data-driven decisions become the norm, customer success teams and managers must adapt and embrace a numbers-focused approach. By understanding the ROI of customer success and investing in the right tools and strategies, businesses can not only weather the storm but thrive in uncertain times. Don't hesitate to try our ROI calculator and see how Churned can help you maximize your customer success investment.

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