Which is More Important – Fighting Customer Churn or Growing Customers?

November 1, 2018

Burke Alder

Customer Success Strategist

As customer success professionals, we often ask ourselves “Is this what I should be spending my time on?” With so many competing priorities and KPIs, every single decision must be strategic and focused to keep your team and your customers on the right track. Patrick Campbell, CEO and Founder of ProfitWell, a SaaS analytics platform, takes this uncertainty a step further.

Combating Customer Churn vs Growing Customers

In a recent article, Patrick questions the overall definition of customer success, echoing a common sentiment in the industry: is customer success about combating churn or is it focused on upsells and renewals? Inspired by a question from Emery Wells, CEO at Frame.io, Patrick tackled the topic in an episode of The ProfitWell Report. In the hunt for the answer, Patrick looked at nearly 5,000 SaaS companies to see what actually has a bigger impact on a business: churn or revenue.

With the data from these organizations at hand, Patrick was able to pull out some pretty eye-opening statistics, which the customer success team used as a jumping off point for even more insight and discussion. Just look at what Patrick was able to deduce from his research:

  • Organizations with a dedicated customer success team have at least a 10% boost in retention than those without.
  • On top of that 10%, organizations with a dedicated ‘Account Manager’ role see another 5% bump in retention.
  • Companies with customer success also see up to 27% less gross churn than those without.
  • And those same organizations see a 50 – 125% increase in expansion revenue with customer success than those without.

Which Strategy Impacts Your Business More?

Based on those numbers, it’s easy to see how churn and revenue together are huge drivers of the customer success industry. But which one actually impacts a business more?

According to Patrick’s analysis, customer success teams in general impact expansion revenue more than they impact gross churn. Whether through upsells, renewals, or expansions, helping customers grow and expand their relationship with your organization can make a stronger impact on your organization as a whole.

Additionally, as Patrick briefly highlights at the end of his video, churn in general is more reliant on a customer being a good fit from both a product and business perspective. To truly drop churn numbers, organizations must have a targeted customer profile that expands from marketing to sales to customer success. This way, teams aren’t wasting time on accounts that are likely to fall through regardless of effort.

Understanding How Churn and Revenue Work Hand-in-Hand

For best results across the board, customer success teams should look at how to drive expansion revenue by preventing gross churn. This means ensuring customers are satisfied with their service and the products so they can spend more with your organization.

Here are some ways customer success teams can successfully bridge the gap between focusing on churn and upsells:

  • Start with an end expansion goal (in dollars, percentages, etc.) and identify how much each account is worth towards this goal.
  • Set up strategic checkpoints with your customers to discuss satisfaction, NPS results, and possible expansion opportunities.
  • Work directly with your marketing, sales, and product teams to develop a focused, detailed ideal customer profile.
  • Ensure customer success leadership has a strong relationship with the rest of the executive team in case red flags come up.

With these strategies in place, your customer success team can have peace-of-mind that you’re focusing your time and effort in the right places.

eBooks:

Ultimate Guide to SaaS Customer Success Metrics

Customer Success as a Culture: Customer Success Leaders Edition

Blog Posts:

Customer Success in the C-Suite—Aligning the Board and Exec Team

The Four Fold Mission of Customer Success

Learn more about how ClientSuccess can help your company develop a strong Customer Success methodology and strategy with easy-to-use customer success software by requesting a 30-minute demo.

New posts each Tuesday and Thursday.

Customer success best practices delivered to your inbox.

Also worth reading

LinkedIn Emerging Jobs Report | The Rise of Customer Success in 2020

  Every year, reports are published claiming that ‘this is the year of x’ or ‘get ready to see more of y this year’. Without real numbers to back them up, these reports are typically just hopeful looks at different industries or professions that people think might be big in the upcoming year.  This wishful [...]

Dave Blake

Founder & CEO

Best Customer Onboarding Experiences

When it comes to dealing with customers, there are some situations that can be a little overwhelming for both a customer success manager and the customer in question. For many, onboarding is one of those situations. From the customer side, onboarding typically involves hours or even days of training, meeting new team members, and trying [...]

Teresa Becker

Customer Success Strategist

3 Considerations to Improve Your Digital Customer Experience (CX)

If you’ve ever read any published content from the ClientSuccess team before, you know that we take the concept of customer success as an entire company goal very seriously. After all, your customers aren’t the responsibility of one department – they’re the reason your entire company is in business. This being said, customer sentiment and [...]

Teresa Becker

Customer Success Strategist