article | January 30, 2020
How Salesforce Invested in Customer Success to Soar to $1B in the Last Recession
Remember when a cloud was only a fluffy thing in the sky? It was only 20 years ago that Salesforce introduced the revolutionary idea to help companies use cloud-based applications for customer relations management. The applications would be run over the web on their own servers. It was a novel idea in 1999, but surviving the 2009 recession would require more than a 10-year-old innovation.
The Great Recession led to a loss of more than $2 trillion in global economic growth, or a drop of nearly 4 percent, between the pre-recession peak in the second quarter of 2008 and the low hit in the first quarter of 2009. That didn’t stop Salesforce from growing its revenue from $497 million in fiscal 2007 to nearly $1.1 billion in fiscal 2009.
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What has made all the difference for Salesforce is its ability to continually grow its customer base and enable new uses for its system. But it wasn’t always sunshine and roses.
By 2005, Salesforce had emerged as the clear leader in the online CRM space. The impressive growth numbers were hiding a major flaw – Salesforce was bleeding customers. Churn was at 8% per month.
Silicon Valley’s darling was headed towards a death spiral. Retaining customers had to become as important as winning new ones. That is when customer success became the center of everything Salesforce did.
Salesforce became so dedicated to its customers’ success that product enhancements are added to a “Customer Success Platform,” for example. Why? Because the additions all have a single purpose: to help the customer succeed.
The customer obsession paid off. The 8% monthly attrition rate was in the low double digits annually going into the Great Recession.
Focusing on customer success not only lead to a reduction in attrition but also maintained momentum in acquiring new customers. Potential customers began seeing established customers succeed, and they wanted to enjoy the same outcomes.
Being able to retain current customers while gaining new ones is what helped the company continue to thrive in the worst economic downturns of our lifetime. It sounds like a simple concept, but can you imagine the effort it takes to address a churn problem that is so bad that you’d lose nearly all of your customers in the first year?
“Customer success is one of our core values, and by focusing on our customers, it’s helped our business in the same way.” – Marc Benioff
One of Salesforce’s four core values is Customer Success. It proclaims that “our customers’ success is our success.” They began living this by holding “CRM Success Days” around the globe. The company has Customer Success Managers (CSMs), a role that what many of us refer to as support or service reps. The CSMs are dedicated solely to the success of their customers, from the initial setup process through the entire duration of the relationship. Everything is executed around a single purpose – to help customers succeed.
Heading into the early days of the recession, Salesforce had established a culture of success. For Benioff, it went hand-in-hand with SaaS and innovation. The “leasing model” enabled companies to save time and money by removing the technology barriers that complex software solutions presented.
It was paying off – Salesforce’s stock price had nearly tripled in the three years since going public. During the recession, the company managed to continuously post impressive revenue numbers, clearing a billion dollars in 2009.
You may be saying to yourself, “That’s all well and good, but the biggest reason they succeeded was the technology and its value prop.” You’re not wrong, but consider this: they executed it in a way that was hyper-focused on helping customers succeed.
In the 2007 Annual Report, Benioff’s letter began: “From the beginning, our number one priority at salesforce.com has been clear: customer success.”
That year, the company added more than 250,000 subscribers. For context, it took five years to get to the first 250,000 subscribers. Salesforce’s customer community grew to include 29,800 customers throughout the globe. It added ~ 9,300 new customers in the year, which encompassed two 15,000-subscriber deployments and their largest customer yet with 25,000 subscribers.
They were just getting started. By mid-2009, Salesforce had more than doubled its customer base for a total of 63,200. By the end of 2018, it would be over 150,000 strong. Here’s a growth chart that any CEO would love to see:
They’d fixed the churn problem and gone on to begin a market share takeover. The two most prominent players were losing ground, while Salesforce’s average annual growth rose to 29% by 2010.
There were many significant innovations in the years leading up to the recession. AppExchange, Salesforce Mobile, Force.com, and even a new programming language came to fruition between 2006 and 2009. Still, Benioff was quoted as saying, “We believe that superior customer support is critical to retaining and expanding our customer base.”
Today’s version of Salesforce is proof positive that a focus on customer success creates customers whose loyalty is earned. Don’t make the mistake on being so laser-focused on product development or new sales that you overlook the experience you’re proving customers. To survive and thrive – especially during a recession – your customers must be doing the same.
People are typically willing to feel some pain in exchange for an exceptional customer experience. For companies that rely on subscription models, customer success teams are an integral part of reducing churn and earning customers for life. The added bonus is that your prospects will notice your customers’ successes.
As Benioff would say, “Play a part in the success of your customers, and they’ll never leave.”
Start to assess your company’s recession readiness with SBI’s Revenue Growth Maturity Model Diagnostic to determine if you are positioned to thrive in the next recession.
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