Simply Explained: What is the ROI of Customer Success Teams?
I need you to know that you are valuable to your business. Please never doubt that.
I’m telling you this because I know that Customer Success is sometimes seen as a glorified Customer Support role.
And in many companies, this results in Customer Success teams not getting the resources, attention, and recognition they deserve.
More often than not, this is because the Return on Investment (ROI) of the Customer Success role isn’t clear. It’s fuzzy.
And the literature doesn’t help. The materials that I find online on the ROI of Customer Success (and how to communicate it) are complicated. Almost academic. And not too practical.
So I wanted to share with you how I approach the ROI of Customer Success and how to share it with the organization. I’ve tried to make it as simple as possible and I hope it’s helpful for you.
Measuring Other Commercial Functions
Measuring the impact of Sales is simple. Revenue! New business revenue! It doesn’t get much simpler than that. Any Sales leader that doesn’t deliver revenue results will need to look for a new job sooner or later.
The ROI of Marketing is, admittedly, more unclear. But lately, there is a trend in B2B SaaS. The metric is… you guessed it, revenue! The best Marketing teams today are being evaluated based on the revenue they drive and the qualified pipeline they create.
Which brings me to Customer Success. Many Customer Success teams are measured on NPS or churn rate. But I believe that CS needs to be an equal partner on the commercial table. And there is only one metric that can deliver that: revenue.
How to Show the ROI of a Customer Success Team
The reason most Customer Success teams don’t get measured based purely on revenue is because the concept gets overcomplicated. Revenue attribution for Sales is super simple. Revenue attribution for Marketing is doable. But for Customer Success, it’s impossible… right?
It doesn’t have to be. There are 3 core components of defining the CS driven revenue:
- Retention revenue: how does our churn develop based on the target we define?
- Expansion revenue: how much extra revenue does CS generate through up- and cross-selling?
- Referral revenue: how much revenue is created through customer referrals (much better than measuring NPS)
Based on these three numbers it’s easy to define a revenue goal for Customer Success. And guess what a revenue goal leads to? A clearly measurable ROI!
Do you agree?