Roger Lee at Battery Ventures held a dinner for Customer Success leaders tonight in Oakland with about 35 people from their portfolio companies. The timing was not an accident; the dinner was deliberately held on the eve of Pulse 2016, the largest gathering to date of Customer Success leaders across many industries. Allison Pickens, VP Customer Success at Gainsight, opened the event with a koan-like statement: "As Customer Success leaders, we are accountable for things we don't influence, and we influence many things we are not accountable for."
Zen poetry? Perhaps. But Roger Lee at Battery appears to believe it's more than that. In fact he said (or maybe Allison said ... I can't quite remember) that sales teams may eventually report to the customer success team. Sales, which is responsible for the initial sale, has held the most power in product companies for decades. But, as we all transition to a subscription economy, long-term revenue, and thus long-term enterprise value, will depend more on customer retention than it does on new customer acquisition. We won't stop seeking new customers, but the long tail of revenue will depend on the success of customers we already have.
Tonight Allison pointed to the three priorities of every CSM team:
- Gross retention
- Net retention
- New sales
Did you catch #3? That's right, new sales. Pickens says that Gainsight is tracking metrics related to advocacy that leads to new sales. She mentioned specifically number of sales references, number of times customers speak at events, number of case studies that CSMs drive, and even dollars of closed sales that CSMs have influenced by creating advocates among their customer success.
If that wasn't enough, Roger Lee suggests that there is a positive correlation between NPS (likelihood that a customer would be an advocate) and the efficiency of the sales team. In less technical terms, this means that it costs less to sell a product if that product has more advocates. Enterprise sales teams are notoriously expensive, but what we are learning is that if your customers become vocal advocates, they will help with your sales efforts. And the converse is true: if you have low advocacy rates, sales will be much, much more epxensive.
Roger says that the average enterprise software has an NPS of 29. How horrible is that? Really good NPS means over 50, and great is over 70. But the average is 29. Roger says that his best companies have scores in the 60s and 70s (good and great), and those companies have the most efficient sales organizations. Roger believes this is because referrals drive a sort of virtuous cycle within the sales / buying cycle.
Will the Sales department eventually report to the Customer Success function? It's a provocative idea, but worth thinking about. Like a great zen koan, it may not have an immediate answer, but thinking about the question is fuel for profound insights.
PS: If you are attending Pulse, please drop by our booth and say hello. I'll also be speaking on Thursday on the role of customer interviews in understanding churn, retention, and upsell.