The Link Between Customer Success, Retention, and Upsells – TrackMaven

The Link Between Customer Success, Retention, and Upsells

customer success

It’s no secret that customer retention is extremely important to a business. Customer retention is much more than a rate to strive towards, it’s a reflection of your success to meet the needs and desires of the most important people in your world — your customers!

The benefits that brands reap from developing and keeping loyal customers are significant. From having brand advocates and continual renewal, to purchasing additional products and services, satisfied customers make for a healthy and growing company — not to mention, a healthy and growing bottom line!

Statistics around existing customer profitability and significance speak loud and clear. A study by Bain & Co. reports that increasing customer retention rates by 5% increases profits to anywhere between 25% to 95%. Gartner Group discovered that, on average, 80% of a company’s future profits come from 20% of their existing customers. And according to Lee Resources Inc., attracting a new customer costs your company five times more than keeping an existing customer.

In addition to these findings, happy, repeat customers lead to word-of-mouth marketing and referrals, as well as positive reviews and case studies for your business. That is why repeat customers are your best friends (in addition to this little guy, of course!)

The Most Important Metric — Churn

Customer satisfaction within a SaaS business is extremely important in order to maximize customer lifetime value and minimize churn. Churn is reportedly the most important metric for long-term SaaS success, defined as the percent of paying customers that cancel their subscription (measured monthly, quarterly, etc.).

To calculate churn in the month you look at the monthly recurring revenue (MRR) at the beginning of the month, then divide by the MRR you lost that month, minus any upsells or any additional revenue from existing customers. You have to subtract the additional revenue because you want to see how much total revenue you lost and any new revenue from existing customers you gained.

As an example, let’s say you had 700,000 in MRR at the start of May and then only 650,000 at the end. But you also had 75,000 in upsells. The churn rate would be…

((700,000-650,000)-75,000)/700,000
(50,000-75,000)/700,000
-25,000/700,000= -3.5%*

*Negative churn is good as it means you gained revenue for the month!

To prevent churn, customer success is a necessary focus. It’s the priority of a customer success team to ensure each customer is receiving the promised benefits of the product and realizing value and ROI. The ultimate goal is to get to a place of negative churn, when expanding revenue from existing customers is greater than lost revenue from churn.

Source: Forentrepreneurs.com, January 2013

Source: Forentrepreneurs.com, January 2013

Identifying Upsells

Expanding revenue from existing customers leads us to the topic of upsells. Good news: according to Marketing Metrics, it is about 50% easier to sell to existing customers than to new prospects. By the time of an upsell, it should come as a natural next step in the customer lifecycle that adds value to the customer account and/or solves an additional problem for the customer that they’ve come across. Upsells should be recommended to current customers when (and only when!) it will help them hit a new level of achievement.

QuickSprout reiterates the simple truth that in most cases people buy something because it solves a problem. As customer success and retention goals align, the deeper your relationship and understanding of your customer’s problems and needs grows, allowing you to better recommend an upsell solution for their problem.

This quote by sales legend Jeffery Gitomer summarizes this point perfectly, speaking from a customer point of view: “When it comes to up-selling, tell me how I win. When I win, you win.”

What It Means To Be In Customer Success

As a Customer Success Maven, it may come as no surprise that I’m passionate about developing strong customer relationships and doing everything possible to ensure customers receive maximum ROI from their purchase. Success to me means customers who can’t imagine life without our product and brand.

While the statistics above surely drive the importance for customer success and retention from a business perspective, it’s the delight in seeing a problem solved, a metric improved, or a customer satisfied that motivates day in and day out. When it comes to passion for the optimal customer experience, I agree with Jeff Bezos’ perspective completely: “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.”

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