Calculating the Benefits of Customer Success

Last month, I shared the first idea of my presentation at Customer SuccessCon: that sometimes ROI is not the best way to measure the success of Customer Success organizations. Today, I tackle the second idea: how to calculate the benefits (and from now on we are assuming that it does make sense to proceed with a ROI analysis).

Benefits may come in two ways:

• revenue (more of this)
• costs (less of that)

On the revenue side, you may want to look at retention, adoption, and referrals:

• For retention,whether customers stay with you as a vendor, look at renewals or its evil twin, churn. You can look at bookings or recognized revenue.
  For bookings, compare $$ actually renewed vs. $$ up for renewal. It can get complicated as a customer may, say, drop one product but purchase another, or more of another, so make sure that you are crystal-clear in how you will compute bookings.
  For recognized revenue, look at either annual or monthly recurring revenue (ARR/MRR). Bookings may jump quite a bit from month to month, but recognized revenue is quite stable.
• For adoption, whether customers grow over time, look at seats per account or MRR for continuing accounts
• For referrals, whether customers recommend your solution to others, look at revenue generated through client referrals. It can be difficult to pinpoint the one reason why customers buy from you, however.

On the cost side, look for benefits both within the customer success organization, and outside. The first two are inside the organization, the last two outside:

• Lower onboarding cost, as exemplified by the number of customers onboard per rep,
• Lower CSM cost, as shown in the number of customers/CSM
• Lower support cost, as shown by a lower incident rate, either overall or for new customers (who typically use support a lot if they are not properly onboard)
• Lower sales cost, as captured in higher productivity for sales reps and sales engineers

Most ROI analyses end up the bulk of the benefits in just one category — usually one that’s clearly identifiable right from the start. For instance, starting an onboarding program will boost adoption. Carving out a couple of headcount from a support team to work on customer success will pay back in terms of lower support load. Focus on the main category and don’t bother with others. Showing a slew of tiny benefits next to a large benefit may weaken your overall argument — and you likely don’t need it to make your decision, or your case.