Sep 15, 2016

Read Time 11 min

Bridging the efficiency gap between Sales and CS, key retention metrics, why CS should be an early SaaS startup hire


Fighting Churn Newsletter

The boundary between Customer Success and Sales can seem foggy. When the boundary gets too foggy, these questions should be answered:

  • Who is really responsible for upsells/cross-sells at your company?
  • Do renewals belong to the CSM, an account manager or a special sales team?
  • Does each CSM feel confident they’re performing in the role they signed up for?

Defining the boundary between Customer Success and Sales often falls on managers who are too busy putting out fires to focus on longer-term strategy. This can place CSMs in the tough situation of defining their own roles, day after day.

Working in a cloudy organization is painful and frustrating. The first inclination is to blame something – sales promising too much, product failing to deliver, support taking too long to resolve tickets, etc. However, blame rarely leads anywhere productive. Once you set aside your frustration, the reality of the situation will emerge: Every minute a CSM spends wondering “what to do next” with a client is a minute they could have spent preventing the next fire.

What if the reasons your CSMs spend most of their time firefighting aren’t product deficiency, support latency, poor account management, insufficient documentation or any of the other things you love blaming inefficiency on? Instead of looking outward for a solution, look at what is right in front of you – your team. It might become apparent your people are stuck in “what do I do next with the customer” mode. If that’s the case, here are a few concepts to help you bridge the gap between Sales and Customer Success so everybody can be on the same page about what to do next:

  • “Built to Serve” versus “Built to Sell”: There’s a world of difference between people who are Built to Serve and those who are Built to Sell. If you are Built to Serve, you are naturally inclined to place a customer’s needs above your own. If you are Built to Sell, you are very comfortable putting your needs – or your company’s needs – ahead of a customer’s. Team members who are Built to Serve make great CSMs. The best managers keep an eye on the strengths of their team members and know how to make this stark delineation. If you mix and match Built to Serve and Built to Sell, you get a weird Frankenstein team that’s neither Success nor Sales. Unsurprisingly, you don’t sell very well and your customers don’t feel all that successful. The resulting disparity in personality/role fit can be catastrophic for the morale of your team (which translates to turnover).
  • You need internal clarity on roles: At one company, Sales takes care of upsells – across the street, that is the Success team’s department. In addition, the fuzzy line becomes a moving target because the two roles are in flux as the company scales. At early stage companies, Sales winds up taking on a bigger role in the customer lifecycle, but as companies grow and develop more resources, Success tends to take over some aspects of the job. Even though the delineation fluctuates between industries – and even within the same company over time – it needs to be drawn stupidly clear, so that there is never any internal confusion regarding how these departments work together. If you see confusion over who handles a client or at what point Sales passes the baton to Success, you need to step in with some advice. Success and Sales need to work together. If they don’t, you could accidentally waste resources and/or lose the customers in the shuffle. That’s usually when the micromanagement, random meetings and half-baked strategies start to emerge. There’s no shortage of things to measure at this point, which usually leads to metric overload and analysis fatigue.
  • Customers need to know who to go do: Having internal clarity is great, but it does nothing if the customer doesn’t know where the division between Sales and Success lies. You need to manage the customers’ expectations of who owns what in order to tap into the natural talents of each team member.
    • Key Take-Away: All it takes is a little good cop/bad cop. The leader of Customer Success and the leader of Sales need a agreement – Sales will toe the line for the company and play “bad cop” while Customer Success takes point on enabling customers’ long-term goals and plays “good cop.” This relationship allows the customer to feel like even when the company isn’t on their side, someone still has their back. What’s more, they will always know exactly who to go to for their specific needs. Customers know to go to Sales for contractual changes, but Customer Success when they really need someone to pull strings for them.

Interested in more Customer Success leadership tips and tricks? We recommend this read, this read and checking out this guide to building and scaling a world-class CS team.

Retention metrics your business can’t afford to ignore

Without customers you don’t have a business – and that means not only acquiring customers, but keeping them. That means understanding what you’re doing right – and wrong – where customer retention is concerned. According to RJmetrics, the most successful businesses get more than 50% of their revenue from returning customers. For building a sustainable and scalable business, you’ll want to know your customer retention rate and keep your churn rate (the rate people abandon your product or service) to a minimum.

There are 5 key metrics for determining the performance of your customer retention activities, let’s explore them:

  • Customer Retention Rate: This is the key metric to determine whether you customer success team is keeping your customers happy and to predict how fast you can grow your business. Your customer retention rate indicates what percentage of your customers have stayed with you over a given period of time and can be calculated on an annual, monthly or weekly basis. So what is a good retention rate? Like many things, it depends on your industry and your goals. But the objective is to keep retention rates as high as possible. While there’s no standard formula for calculating your customer retention rate, here’s one accurate way of measuring it:

  • Customer Lifetime Value: The customer lifetime value is a projection of revenue you can expect from a customer relationship. This metric is based on previous purchasing behavior, only, which means its value does not immediately translate into actual money in your bank account. Knowing the lifetime value of a customer will help you determine how much you can spend on customer acquisition and also help you calculate your return on investment (ROI). As venture capitalist David Skoks explains in his article, the biggest reason startups fail is due to their customers’ acquisition costs being higher than their lifetime value. For determining whether your retention strategies are working, you’ll want LTV to increase over time. This means that people are be spending more and buying more frequently as their relationship with your business progresses. You can include many variables when calculating your customer lifetime value, but here is a simple formula you can start with:

  • Repeat Purchase Rate: Your repeat purchasing rate is the percentage of your customers who have bought from you more than once. It shows how many have come back to buy from you after their first purchase, which gives a good indication of how your customer retention efforts are performing. For a more detailed analysis into your repeat purchasing rate, you may want to use cohorts to track it daily, weekly and monthly. If you’re running a special promotion, cohorts can help you determine whether that specific activity led to an increase or decrease of people coming back for more. But to start you can easily track this metric easily by dividing the number of customers who have shopped more than once by the total number of customers:

  • Redemption Rate: Sending out coupons with special offers can be an effective way of bringing people back to your business – but what percentage of your coupons are being redeemed? Your redemption rate will tell you whether your customers are taking action – usually by purchasing – when you issue a coupon. If your redemption rate is low (around 20%) then you’ll want to dig deeper to find out what the causes are. Perhaps your special offer isn’t enticing enough to draw people back to your store – or they’re just not interested enough in what you’re offering.


  • Net Promoter Score: From scale of zero to ten, how likely are you to recommend this product to a friend or colleague? That’s your Net Promoter Score: Your customers are asked this simple question and they answer with value between 0 and 10, with zero being ‘not likely at all’ and ten being ‘extremely likely’. This is a powerful metric to track, because it questions your customers’ willingness to promote your product to their network, which they would only do for companies they’re very satisfied with. NPS divides customers into three categories:
    • Detractors (0-6) are people who are unhappy with your product or service, who will never buy from you again, and who may damage your brand by complaining on social media and forums.
    • Passives (7-8) are satisfied customers, but they won’t go above and beyond to promote your brand and may be tempted by competitive offers from competitors.
    • Promoters (9-10) are the ones who bend over backwards to get everyone they know using your product. They’re loyal to your brand alone and can fuel your growth organically through word-of-mouth, by attracting new customers at a relatively low cost.


It’s easy to get overwhelmed with metrics and analyzing may seem like a daunting task. However, by tracking these customer retention metrics you get a better overview of how you’re performing and discover what areas need improving.

Why a CSM should be an early SaaS startup hire

In the early days of a startup, there are many competing priorities for which positions should be added and why. There’s the product: you need to build a great product that you can sell and renew. There’s sales: in order to make money and scale growth. There’s marketing: in order to get your brand out and fill the funnel with leads for sales, you need compelling content and a go-to-market strategy. Of course, there’s also HR, finance, administration, and a plethora of other roles that are considered. You need someone to help make hires, pay employees, pay taxes and file paperwork, and the list goes on.

Does this sound all too familiar to your company?

But what about your first customer success hire? Perhaps your startup is going through the process of planning out your hires now and it’s never easy to determine which roles are most important to the business at any given time. But there is a strong case for why a Customer Success Manager should be one of your first early hires:

  • A CSM will help validate the product: CSMs build incredibly strong relationships with customers – especially in the early days when things aren’t always smooth. CSMs build a rapport and trust that surpasses surface level conversation and extends into the nitty gritty of how the customer really feels about the product, what he or she would change and how it has helped (or not) their business. The CSM is the first call when there’s a big win and they’re also the first call (sometimes in the middle of the night or on the weekend) when things go wrong. Because of this level of transparency and trust, the CSM is able to ask probing questions that could make the customer uncomfortable if it were to come from another individual in the company. For example, if a developer were to ask the client what he or she thinks about a specific feature, the customer may be hesitant to respond with complete honesty.
  • A CSM will ensure customers are success – and renew: What’s the good of winning all sorts of new customers only to lose them months later because they weren’t successful or weren’t given proper attention? The role of the sales team is to win new accounts. While sometimes sales reps are asked to look after existing customer accounts, it’s never their primary focus (and arguably, it shouldn’t be!) A CSM’s role within a startup is to not only work with the customer to achieve their goals and help to win the renewal, but the CSM is expected to do a lot of blocking and tackling in the early days. The CSM is truly the customer’s advocate and will go to great lengths to ensure the customer’s success in the short term, and in the long term, too. Without the role of the CSM with early customers, who will make sure they’re successful and also answer questions and get their hands dirty helping the customer solve any problems they may encounter?
  • A CSM will ask questions to help define future roadmap: How do you know how your product or service should evolve in the future? What is driving the decisions for your product team, user interface and more? Running surveys or focus groups should only be part of the equation. Your customers are a wealth of knowledge and most of them want to talk about their experience with your product or service, as well as how they would like to see your offerings evolve in the future. What integrations could they use? How do they use reporting functionality? What processes in your product or service could be eliminated? Your customers are in your product (hopefully) every day or are using your service on a regular basis. Your CSM, who has a trusted and transparent relationship with customers, can guide the conversation and ask for feedback on product strategy and roadmap. Of course, it’s helpful to have a member of the product team present in the conversation, the CSM knows the customer in a way that he or she can ask questions differently based on each unique customer experience.
  • A CSM will work cross-functionally across all teams: Perhaps more than any other role across the company, the CSM has to be able to work with every single department, from marketing to sales to product to services to finance and the list goes on. All departments ultimately impact the customer and the CSM is essentially in the middle. Because of the CSM’s unique position in the company, they are poised to work across all functions in order to make the customer successful, whereas other departments may not have the same cross-functional experience. This ability to work across all departments to get things done and to move the customer forward allows other departments to focus on their own roles, knowing that the CSM will come to them whenever there’s a customer need.

If you’re interested in more guidance on building a top-notch CS team, we recommend this read on considerations for cultivating a high-performance team.

Word to the Wise

This week’s wisdom is from Eliot Peper, author of the Uncommon Stock novel series, expert on storytelling and adviser to several startup businesses. In a recent episode of the Above and Beyond Podcast, Peper talks about the importance of getting your story right. This means finding your authenticity and expressing it through action – which we believe should be a driving motto for all Customer Success teams. He explains that the “why” is just as important as the “how” and the “what” of what you’re doing and how you can convey this. He also talks about why you don’t have to be perfect to gain the respect of your customers:

“As humans, particularly as humans doing business, we have this thing in our heads that says we need to appear perfect and strong. Whenever anyone looks at us, we think we need to look like a superman […] because that’s how it seems like companies “should be.” But ironically, that’s not what people are really engaged with. […] If you’re a startup or a small business owner and you’re worried you may be judged by potential customers because of your size [or other perceived weaknesses], sometimes its most useful to turn that around and be really vulnerable. Because that vulnerability, sharing the things that we all struggle with on a day-to-day level, encourages people sign up, to be on your team. [By being vulnerable], you are inviting them to join you, it is the opposite of alienation; […] you’re inviting people in and building their trust.” 

We recommend listing to the full episode; there are lots of great thoughts on authenticity in business. And if you’re interested in more insight into how to authentically communicate with your prospects and customers, we also highly recommend Simon Sinek’s TED Talk called “Start with Why.”



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