Can Customer Churn Be Good for a B2B SaaS Business? Sometimes...
Customer churn tends to be viewed negatively by SaaS companies, and for good reason. However, in specific scenarios, it can actually be, dare we say, a positive.
One important benchmark to follow is the ratio of paying customers to Customer Success Managers. If the number is too high, you could break this crucial member of your team. If it’s too low, you risk losing customers.
A savvy SaaS company recognizes the value of Customer Success. CS prioritizes the quality of the customer experience over simply acquiring masses of new buyers and herding them into conversion funnels. It’s not by accident that businesses that invest in customer-centric strategies consistently show impressive net retention rates and 60% higher ROI than their competitors.
In short, making Customer Success a primary pillar of your business operations is a brilliant move.
As a company ventures into establishing an optimal CS strategy, it’s essential to note what other best-in-class businesses are doing. One important benchmark to follow is the ratio of paying customers to Customer Success Managers. If the number is too high, you could break this crucial member of your team. If it’s too low, you risk losing customers.
Finding the “golden mean” between customers assigned to individual CS managers will allow a business to attain optimal results that increase customer satisfaction while also capturing more profits. This article explores how to determine the sweet spot for customers assigned to Customer Success Managers and how to apply this ratio to your SaaS company’s existing Customer Success model.
To start, let’s look at some industry benchmarks. We recently surveyed B2B SaaS companies to gain insight into their current CSM to customer ratios. You will defer to multiple factors that are unique to your business when determining your own golden ratio; the benchmark data from our survey should be viewed as informative rather than a pure indicator of what your ratio should be.
33% replied that 1 CMS to 10-25 paying customers was their current ratio. This also happened to be the most popular response. Other responses:
From the data, it’s clearly more common to have fewer customers per Customer Success Manager. This makes a reasonable starting point.
Before we move to another data point that you can use to inform your ratio, it’s worth pausing to note something that you should avoid.
A seasoned Customer Success Manager is already schooled in why you should avoid treating customers purely as numbers on an account balance sheet. However, if less customer-centric leaders from your company will have any input into crafting your golden ratio, please steer them away from using revenue as a primary factor.
While appropriate for a variety of other strategy-forming activities, using revenue as the main factor can be a mistake because it doesn’t take into consideration any qualitative data like customer satisfaction, customer’s business goals, or other “soft” points that relate to their unique experiences.
A better method is to segment your customers by type and experience and determine what logical level of Customer Success coverage (high touch or low touch) each segment needs.
The best Strategy for Customer Success is to develop protocols from the customer’s viewpoint, not just your company’s. Using this approach, you will see which segments require a higher level of service and a dedicated Customer Success Manager.
Once you’ve determined your ideal ratio, you’ll want to optimize your Customer success model to match. Below we will cover two CS strategies and provide tips for helping your Customer Success Manager succeed with them.
In a 1-to-many Customer Success model, one CSM is responsible for many customers. CS activities in this strategy should be designed to optimize a manager’s effectiveness at scale. Best practices include:
In a 1-1 CS model, managers are assigned to a small handful of customers. 1-to-1 interactions are more involved, and therefore, this strategy is used selectively. Customers in this model commonly pay for expensive or complex products or services that require a lengthier customer journey. The following tips will help a CSM get the best outcome from this arrangement.
Customer Success Managers are the keystone of your SaaS company’s CS strategy. For them to be most effective, you should establish a golden ratio of how many customers they are assigned to. Once determined, make sure to provide them with the support they need to shine in their work.
Vitally works with Customer Success professionals in a range of industries. Request a free demo and see how we can work with you to enable your Customer Success team to deliver world-class customer experiences at scale.
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