Why SaaS companies are closing the gap between sales and Customer Success
We need to keep talking about Customer Success, says Main’s Wessel Ploegmakers: as long as CSM is overshadowed by sales, SaaS companies lose important growth potential.
In line with the development of the SaaS industry, the integration of Customer Success Management has become an increasingly hot topic of conversation. The CRM company Vantive pioneered the field in 1997 when they introduced a CS department to define and secure the customer’s so-called success. This department was solely focused on retaining existing customers, not winning new ones.
More than 25 years later, we find ourselves in a subscription economy, which we’ve seen flourish even more during the ongoing pandemic. Switching software services today is neither costly nor time-consuming, creating problems for sales departments who have a hard time estimating and utilizing customer life the same way as before. During the Main Insight Event around Customer Success Management, which took place in Stockholm last week, several expert speakers voiced it clearly: the days when sales drive SaaS companies are long gone.
Customer Success has gained a broader function. It is no longer solely about reducing customer loss, but about increasing customer value from the start, with the ultimate goal of getting the customer to become an advocate for the service and the company. In order to achieve this, it’s necessary to start bridging the gap between sales and Customer Success.
The complex relationship
Software sales departments have had an undeniable claim in the rise of SaaS; without sales communications, enterprise software would not have spread as widely as it has over the years, especially due to the fact software companies often avoid marketing campaigns and software services can be quite specific. As a result, acquiring new customers is aligned with a company’s success.
At the same time, finding the right kind of customer can be more important than getting that one extra sale. For example, a bad fit customer poses a risk of churn, and also requires time and resources that could be spent on innovation and growth. Not to mention the risk of them leaving negative reviews, which is the ultimate nightmare. An important question to ask is therefore, “do the expectations of the new customer fit the offered services and timings?”
The complex relationship between the two departments is obvious. Sales departments run with different objectives, often focusing on new customer value from an account perspective. This focus can overshadow the question of whether these customers can be made successful or not. In turn, this slows down the growth wheel.
Bridging the gap
The solution lies in integrating Customer Success and sales, but since CSM is still a concept in development, the strategies for getting there vary. A survey conducted by Main Capital Partners shows, for example, that Customer Success is often included in different departments. 43% stated that their Customer Success team is part of the sales department, 31% that they are part of the customer service department and 8% in the marketing department.
Integrating CSM into the sales department feels natural. This way, customer expectations and SaaS deliverables can meet in an early stage. Successful companies in our portfolio, like Assessio, have integrated the Customer Success department into the commercial organization and thereby managed to reduce their churn.
The downside of this set-up can be that the focus remains on new business sales and too little attention being given to setting up and integrating a Customer Success organisation properly. CSM needs to be provided with the opportunity to create its own agenda and influence sales, development and operations. In the end, it doesn’t matter where the team sits as long as there is good communication between departments and as long as the KPI’s from Customer Success are shared. Which brings us to another important point in the aligning of sales and Customer Success within a company.
Whether it is Customer Success or any other business objective, it is important to measure progress. Main Capital Partners has been working closely with software companies for almost 20 years now, helping them professionalize their business operations. For us it’s clear math: the companies that are measuring their customer happiness through quantifiable metrics have lower churn rates and higher margins. In this time and age, we still see companies that don’t measure churn, which is -quite frankly, worrisome.
The most common key performance indicators for CSM are Net Promoter Score (NPS), Net Retention Rate and Churn. We always advise to measure these on a monthly basis to have a clear view on developments and seasonality, and above all to share them within the management team to ensure that the importance of these KPIs, in addition to the usual sales KPIs, is supported by the entire leadership
Joined perspectives on sales and Customer Success is key for growth. We see that SaaS companies have come a long way when it comes to professionalizing their systems and business models. But the next step in professionalizing, from an operational perspective, should be taken by actively starting to integrate a Customer Success strategy into daily practice. Only the software companies that do so, will really be able to rise above the masses.
About the author
Wessel Ploegmakers is operationally heading the Stockholm office and overseeing the Nordics activities. Wessel holds a MSc in Finance & Investments from the Erasmus University Rotterdam. On behalf of Main Capital Partners, Wessel is Chairman of the Supervisory Board at Pointsharp and Björn Lundén and Supervisory Board member at Alfa eCare.
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