A greater portion of the 2020 number will come from the existing customer base. Most companies are increasing their investments in Customer Success, which plays a vital role in serving the right customer, with the right resource(s), and the right message at the right time.

We recently wrote about the emergence of the Chief Customer Officer and took that opportunity to survey CCO’s about how they will make their 2020 number.   We found that companies had initially been planning on nearly 31% of their 2020 revenue coming from new logos, prior to the COVID-19 lockdown.   Since the lockdown and a resulting reduction in demand, we observed the following:

 

Survey Findings

 

  • Overall, a 5% reduction in the overall 2020 revenue target and renewals have increased from 46.8% to 49.4% of the 2020 Revenue Target.
  • A 17% decrease in new logo revenue represents a reduction in new logo’s contribution to the 2020 number from 30.7% to 25.6%.
  • Expansion revenue increased from 22.5% to 25.9%, making up some (but not all) of the new logo shortfall.

     

 

Protect Renewals

  • Many Customer Success leaders are feeling the additional pressure, notably on renewals, as they now have no margin for error. Depending on their customer’s industry dynamics, demand may be reduced, but maintaining share of wallet is vital.  Market leaders don’t want to allow any points of entry for their competitors when demand drivers increase.
  • As my colleague Ellen Wade wrote, market leaders view Customer Success as a profit center, and this creates an opportunity to demonstrate revenue contribution.
  • Corporate Visions, in their new book, the Expansion Sale, outline how new messaging techniques that focus on “why stay” instead of the traditional “why change” messaging can make CSMs more effective. We will discuss this in more depth in our upcoming webinar.

     

 

By an overwhelming majority (15:1), companies with CCOs are growing their investment in Customer Success. This is a defensive move, in some cases, but can also be an offensive move to drive expansion.

 

How Customer Success Can Drive Expansion

 

By definition, expansion requires an ongoing relationship.   The access to the buying decision team is as important, if not more important, than the in-year revenue. This access must be preserved, even if there is a short-term drop in revenue for pricing/packaging or volume decreases. Revenue leaders are deploying tiger teams to drive new logo bookings, which can also be assigned to grow share of wallet in existing accounts.   The dynamic nature of these teams ensures that their efforts are continuously prioritized towards the most impactful opportunities.  Market-leading companies will also assign Marketing budget from new logos to drive expansion opportunities.   These campaigns require different approaches and messaging, but can drive higher ROI because of the higher win rate in cross-sell and up-sell opportunities. Utilizing ‘why evolve’ messaging can help Customer Success teams convert these expansion opportunities at a higher rate.

 

Rethink New Logo

 

Early in the COVID crisis, many companies took actions to proactively secure their customer base.  These included pricing considerations for early renewals (and payment), extending deals at favorable terms for cash strapped clients, and/or investing additional resources to help customers achieve their outcomes.   These have effectively created additional barriers to entry for companies that are seeking to displace incumbents. The actions of market leaders create an uphill battle for new logo sellers.   The most effective response will focus on “wedge” opportunities that drive some 2020 revenue and create 2021 expansion opportunities. To increase the chances of success, these initial “wedge” opportunities should be products that drive immediate value that can be documented.   By bringing success stories to the buying decision team, the conditions will be in place for 2021expansion bookings. Capacity plans for 2021 must account for this opportunity within Customer Success.   The function will have to demonstrate value to “earn the right” to have expansion conversations.   More advanced teams will also create the capacity to manage the expansion opportunities within the customer success teams.   Less experienced teams will generate referrals for the sales team.

 

Conclusion

 

The dynamic economic environment has raised the profile of the Customer Success function.   The most effective Customer Success leaders will drive revenue for their employers and write an important chapter of their careers.    To learn more about how your team can deploy this, please attend our upcoming webinar with Corporate Visions.

 

Corporate Visions will host an upcoming webinar with SBI focusing on Retention is the new Growth: how market leaders are going “back to the base” to make their 2020 number

 

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ABOUT THE AUTHOR

Fred Penteado

Guides private equity portfolio companies in a variety of industries on how to make their number.

Prior to joining SBI, Fred held a variety of leadership positions with multinational Fortune 50 companies. He has worked in product/program/channel management, sales operations, and served as a Chief of Staff.

 

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