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Big on impact; short on investment: Key trends from the 2022 Customer Success Leadership Study
Customer Success is gaining ground, influence, and budget within organizations. Nearly two-thirds of CS teams added new members this year. However, CS departments remain underfunded, especially when it comes to their tech stack.
These are just some of the findings in this year’s Customer Success Leadership Study, ChurnZero’s third annual report on the top trends and opportunities in Customer Success, presented in partnership with ESG and sponsored by Higher Logic Vanilla and involve.ai.
Based on a detailed survey of more than 1,000 Customer Success leaders, this is the most comprehensive study of the evolving CS landscape to date. Here’s a high-level look at three of the top trends revealed by this year’s study.
1: Customer Success teams are driving revenue and earning more influence.
- 78.5% of Customer Success teams now report into the C-suite. 36.0% report to the CEO, 17.1% to the chief operations officer, and 16.6% to the chief revenue officer—all indicating that Customer Success teams are revenue drivers. In companies with $500M or more in revenue, one-third (30.3%) of CS leaders have a place in the C-suite.
- The top metrics in CS are all revenue metrics. NRR, which tracks the percentage of recurring revenue retained from existing customers, is now the top metric for CS teams in almost every revenue band. Overall, the industry’s top five measurements of success are NRR, gross revenue retention (GRR), churn rate, logo retention rate and expansion revenue—while “softer” metrics like NPS appear only further down the list.
Related: Which Customer Success best practices should you keep or let go in 2023? Our expert panel offers their take on the trends, challenges and opportunities revealed in the 2022 Customer Success Leadership Study.
- 34.1% of CS departments have veto power for bad fit customers. Another indication of the rising influence of Customer Success is its ability to influence sales. The higher a company’s ACV—and with it, the cost of signing a bad-fit customer—the more likely it is that Customer Success has veto power.
2: Customer Success teams are growing, but not enough.
- 63.3% of respondents said their Customer Success teams are growing in 2022. That’s another indicator of the demand for, and impact of CS. However, 76.5% of Customer Success teams have fewer than 50 team members, and most teams surveyed fall well below industry benchmarks on CS team headcount.
- In an encouraging sign, 59.5% of teams now have a dedicated Customer Success operations role. That number gets higher in larger companies, companies with larger Customer Success teams, and companies who have invested in a Customer Success platform. This dedicated role shows investment in Customer Success and a greater level of maturity in the function.
- 79.6% of CS leaders say their budget is increasing or staying the same this year, despite economic volatility delaying purchasing decisions at 57.9% of companies. However, CS remains an underfunded department. 64.1% of respondents reported having non-headcount budgets of $200,000 or less: a severe under-investment in this critical business function.
Related: How do you convince your CEO to invest more in Customer Success with a downturn approaching? Learn to make the case for greater investment in CS with MarketSource’s Jeff Heckler and ChurnZero.
3: Customer Success teams lack the right technology—and it’s holding them back.
- Although six out of ten teams have a CS operations role, less than half (46.3%) have a purpose-built Customer Success platform. This means that most CS teams still don’t have the appropriate infrastructure to deliver insights, increase efficiencies, drive revenue, and enhance the customer experience.
- This year’s data shows slight increases in technology typically used to run or support Customer Success operations. However, it appears that too many CS teams are managing their customers and operations through sales tools like CRMs, and manually—an attribute of an early maturity phase. It also suggests that Customer Success teams are inheriting their tech stack from other departments.
- Having a Customer Success platform appears to correlate to higher NRR. 57.0% of teams with a purpose-built Customer Success platform reported NRR greater than 100%, while just 46.1% of teams without a CS platform reported this result.
- CS leaders understand the urgency of upgrading their tech stack. Top priorities in 2023-24 include implementing tools (27%) and processes (28%) to enable a more efficient and data-driven approach. However, Customer Success non-headcount budgets are currently too low to allow for purpose-built systems and tools that increase efficiency and scale.
Even amid the economic downturn and tech layoffs, Customer Success continues to grow in size, budget, influence, ownership, and impact. To find out where your team stands relative to your industry peers, download the 2022 Customer Success Leadership Study in full here.