Today, the value of customer success has been learned by many people, and it seems that SaaS enterprises need customer success has become common sense. The author of this article takes UiPath as an example to analyze where the value of customer success is reflected? How can we effectively help enterprises grow? Let’s take a look together.
1. UiPath's growth
In April 2021, UiPath, one of the most influential companies in the SaaS industry, was listed on NYSE. In its submitted S-1, we can see a series of amazing information:
1. The old customers repurchased
UiPath Those customers in 2016 had a ARR of 57 times in five years. Among them, the top50 customers have increased their ARR by 81 times in five years. In other words, even if the company cut off its entire sales and marketing department after 2016 and no longer accepts new customers, its business will still increase by 2-3 times every year in the next five years.
source: UiPath IPO S-1
2. Old customer stickiness
NPS 30+ is considered a high score, while UiPath's NPS for nearly 12 months was 71. The average NDR/NRR in the SaaS industry is about 114%, while UiPath has an ARR of about $600 million in 2021, and it still reaches 145%.
This means that UiPath customers will not only buy more and more every year, but will also desperately introduce other companies to become customers.
source: UiPath IPO S-1
3. Explosive growth
In 2014, UiPath's annual turnover was only 500,000 US dollars. It is a small business that has been in business for 10 years but has only a few employees. In 2016, the business suddenly started, with an annual business of US$350,000, and rapidly developing to US$600 million in 2021. In 2021, 75% of booking comes from old customers.
source: UiPath IPO S-1
Seeing the above information, I believe that SaaS practitioners will instantly think of the classic land expand exploit growth model of the B2B software industry, and in addition to the compatibility between the product and the market itself, customer success is indispensable. So where is the specific value of customer success reflected in that ultimately can effectively help the company grow rapidly?
2. The value source of customer success
The author was internship in an San Francisco SaaS enterprise in the fall of 2011. The first task was to clarify the company's customer success process and improve system support in CRM. At that time, customer success was still popular, and there were controversy and different understandings in different companies. When I talked with my classmates and colleagues about customer success, many people did not recognize its value.
By 2022, the importance of customer success has long been fully recognized. even in the capital market, SaaS companies' customer success indicators, such as NRR/NDR, logo retention, etc., are also important parts of each financial report, and their minor fluctuations can greatly affect the company's market value/stock price. From the perspective of enterprise employment, the consensus in recent years of SiS Valley is that the successor of SaaS enterprise CEO should first choose the customer success person.
In China, it is common sense for SaaS companies to require customer success, but it seems that many companies are not fully clear about customer success, such as treating customer success managers as implementation, account managers, renewal sales, etc., and confirming customer success budgets with business income such as renewals. But is this short-sighted and can it really allow companies to gain the value brought by customer function?
Customer success is not cheap. During the growth period, the company's investment can reach 15%-25% (source: https://sixteenventures.com/account-coverage-ratio). So, as a value center rather than a cost center, where is its potential value? This article talks about the sources of great value for customer success from three perspectives: indirect commercial value, direct commercial value, and strategic value.
. Indirect commercial value: Land Expand Explode and second-order income First of all, the business of SaaS manufacturers needs to be consistent with the customer's own new technology adoption and deployment process.
Modern enterprises implement IT technology rarely spreads completely from top to bottom from the beginning, but instead requires partial implementation and horizontal expansion. Examples of extreme points include the early Salesforce and Slack in previous years, starting with a team or department, proving its value, and achieving virus-like growth within the enterprise, selling from bottom to top.Even if customers centrally purchase SaaS products from top to bottom, from the perspective of risk and implementation plans, they need to be rolled out locally and through medium and long-term iteration.
This creates the most classic business model of SaaS, land expand exploit, first cut in, then expand, and finally explosive growth.
The following figure shows UiPath's land expand exploit. Example:
source: UiPath IPO S-1
. In addition to continuous expansion and renewal, satisfactory customers will also bring second-order income to SaaS manufacturers. For example:
- With the flow of personnel (job-hop or internal transfer to department), it brings SaaS products to new customers or new teams of existing customers.
- helps word-of-mouth marketing
- . Registration, whether internal or external
, the growth brought by second-order income can far exceed the initial ARR and regular renewal. This is an important element of exploit in land expand exploit.
Finally, customers and SaaS manufacturers were most in line when they first started to cooperate, but the natural development afterwards was gradually no longer aligned. This is because the customer scenario is dynamic, and with changes such as strategic direction, personnel flow, business improvement, etc., the previously purchased and implemented systems will gradually become inappropriate. , and customer success requires continuous monitoring of the occurrence of this deviation and taking measures.
2. Direct business value: customer life cycle value LTV
direct business value is best understood and is easiest to be accepted quickly. SaaS Because the charges are continuous, and the initial investment is relatively high, profits are heavily dependent on renewal. Assuming that the average CAC of customer acquisition costs is 60w yuan, and the average annual fee is 30w yuan, it will take two years to recover the cost. However, if the customer purchase renewal is lost after 10 years, the same 600,000 customer acquisition cost will bring about 300,000 yuan.
I believe that SaaS practitioners are very familiar with the following picture. Subtle changes in % loss can significantly affect long-term returns.
Source: https://www.forentrepreneurs.com/why-churn-is-critical-in-saas/
In addition to reducing churn, SaaS enterprises also need to choose and cooperate with the right customers. There is also a rare phenomenon among traditional companies here, that is, the successful customers will participate in the preliminary business feedback, and even reject the cooperation between the sales department and inappropriate customers. After all, two orders of 25w a year, one may have a potential ARR of 200w+ in the future or have strategic significance, and the other may be difficult to retain for 2-3 years, and limited energy and resources have to be spent on the edge.
In addition, as the company grows, the number of old customers accumulated by will gradually exceed the number of new customers acquired every year, so the main source of business operations and even growth of the company will become old customers rather than new customers. The core reason for acquiring new customers also becomes potential future value rather than first order sales. In a mature SaaS company, the performance of the customer success manager far exceeds that of the sales manager.
3. Strategic value
In the complex environment of corporate customers, especially large corporate customers, customer success managers are often not only experts in their own products and fields, but also have an in-depth understanding of customer business and company operations. The powerful synergy effect brought by this combination ensures that manufacturers have the ability to successfully implement products in the customer environment and bring returns.
This is a high threshold and high return capability, and it has naturally become part of the core competitiveness of the enterprise , commonly known as the moat. This is a long-term and extremely difficult business attribute, and with the successful development of enterprise products and customers, it has become the long-term strategic cornerstone of SaaS enterprises.
4. Conclusion
The situation of each SaaS manufacturer is different, and customer success is not a silver bullet methodology. But only by truly aware of the potential value range of customer success can we choose the right strategic route to best assist the company's development.
Author: Max, official account: SaaS Meditation Record, WeChat: invicti
This article was originally published by @Max. Everyone is a product manager. Reproduction is prohibited without permission.
question picture comes from Unsplash and is based on the CC0 protocol.
The views in this article only represent the author himself, Renren are both product managers and only provide information storage space services.
