Going into 2020, Market Leaders were already counting on the majority of their revenue coming from their existing customer base. Most companies build their 2020 Revenue plans on an assumption of GDP growth, and this assumption has shifted. As my colleague Mike Hoffman points out in this article, companies that retain a higher percentage of their customers will be the long-term winners coming out of the COVID-19 induced recession that has just begun.
Even in a growing economy, it costs 7 times more to sell a new logo than renew an account. The cost of an up-sell transaction is twice the cost of a renewal. With the onset of the COVID-19 crisis, these differentials will accelerate, and will ultimately be the tipping point of the Customer Success function in driving long-term Enterprise Value.
For guidance on how you can maximize revenue during this crisis, start by leveraging SBI’s Revenue Growth Approach Tool for COVID-19.
What are Market-Leading CEOs doing to navigate the CoVid-19 crisis?
Focus on Retention
The Customer Success teams we have worked with (several of which have joined our LinkedIn Group, Inspire Others), we often emphasize the need to measure renewals on a Dollar basis, which shifts the focus to retaining the largest accounts. This helps companies align Customer Lifetime Value with Cost to Serve. In a recessionary environment, there will be pressure on budgets, seat counts will decline, and Customer Success teams must also focus on account level renewals. Preserving access to the buying decision team is equally crucial to maintaining revenue.
Market-leading companies are taking a proactive approach early in the crisis. This includes direct outreach to influencer and buyer personas. The most effective teams took the opportunity to listen and are already working on ways to help their customers. This may include:
- Proactive Value Creation- Buyers and influencers feel vulnerable for the investments they made in a growing economy. Now is the time to help ensure they have taken the actions to drive the ROI in the business case. This may be the right time to deploy value-based pricing, which aligns both parties’ interests.
- Proactive Value Communication- Customer Success professionals are uniquely equipped to help the influencers and buyers tell this story internally. In some cases, they may ask for help, which will ultimately deepen or broaden relationships at the account.
- Creating and demonstrating value overcomes a lot of flaws, but in cases where that proves difficult, companies might have to think creatively about renewals. Some techniques that we have discussed with members of our community include:
- Short-term price decreases and/or longer payment terms. Some firms have already provided more price discretion to front-line Customer Success professionals.
- Creating incentives for longer renewals. Market-leading companies have accelerated their 3Q and 4Q renewals and have adjusted incentive plans to reward CSMs and/or Account Managers for capturing longer renewals.
- Offering free trials in additional buying centers. If seat counts are going to be under pressure, this defensive play may help reduce churn within the account.
Make It Easy to Do Business
Market leaders have already been focused on improving their Customer Experience, and it may be easy to look at those long-term investments as an easy place to cut. But in an environment where buyers must defend their budgets and have a propensity to consolidate vendors, Customer Experience leaders must make it easy for them. It’s essential to understand and immediately reduce the things that drive friction across functions.
As my colleague Laura Hall points out in her article, Customer Success and Marketing must collaborate in 4 key areas to retain business during this crisis. By maintaining access, Customer Success teams can share insights on how the Buyer’s Journey and Personas are evolving in the 100% virtual world. This ongoing access will also allow Marketing to run expansion campaigns vs. costlier new logo or “win-back” campaigns as we begin to emerge from this recession.
The Customer Success team cannot execute all of the above on their own. They will need support from other functions in order to be successful. During this crisis, the CEO will need to consistently drive interlock with his or her executive team. It is also vital to actively monitor these changing customer behaviors. For example, customers may shift their preference to being served virtually, even when things return to “normal.” This will have strategic Go-To-Market implications.
It Is Not Too Late to Activate Your Customer Success Team
The best time to have deployed a Customer Success team was before the CoVid-19 crisis. The second best time is right now. Market leaders had the foresight to implement a team already. Still, they will need to dynamically evolve the Customer Success function to focus on the activities necessary to succeed in this challenging environment. Download this tool to see how Market Leaders are leveraging Customer Success to increase customer and dollar retention. If you would like to discuss this further, please submit a request to our Revenue Growth Help Desk, and an expert will get back to you within 24 hours.