As more companies embrace recurring revenue models—trading large upfront sales for annual or monthly recurring payments—they often neglect to invest in the relatively new and developing field of Customer Success. Many firms rely on their existing customer support team, with the hope that answering calls and emails quickly and accurately will combat customer churn and make for happy customers. A far better approach: invest in a customer success team that can proactively identify and help struggling customers before they churn.
Salesforce.com was one of the first companies to talk about the function and importance of Customer Success. Now Customer Success rivals sales, marketing, product management and engineering for the CEO’s attention. While the Customer Support team still exists, and focuses on metrics like “average response time” and “average resolution time,” the Customer Success team is the proactive arm, focusing on reducing churn.
Why is churn so important? A small change in churn has a huge compounding impact on a business’s value. A company growing 30% with 5% annual churn will have 52% more revenue in 5 years than a company growing at the same rate but with 15% annual churn. Driving down churn can be difficult. According to a 2015 Pacific Crest Private SaaS Company Survey of over 300 SaaS companies, the average dollar churn rate in 2015 was 7%. Companies with a lower ASP (<$25K a year) had higher churn rates (8-13%) while companies with a higher ASP (>$25K a year) tended to have lower rates (4-5%).
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