Insights From The RevOps Manual

We see many organizations prioritizing acquiring new customers over nurturing and expanding existing ones. This focus, driven by what I think is the appeal of quick wins and the influx of (VC) funding into sales development, marketing budgets, and lead generation programs, has resulted in skyrocketing Customer Acquisition Costs (CAC) and often unsustainable growth strategies. Meanwhile, we see that Customer Success (CS) remains neglected, receiving minimal investment and attention from leadership. This oversight is not just a missed opportunity; it’s a potential threat to long-term sustainability.

Customer Success is one of, if not the most, important component of your revenue engine. Existing customers, who are already familiar with your product and brand, are the easiest prospects for upselling and cross-selling. They trust your offerings and are more likely to engage with new products or services you introduce. This makes expanding revenue from existing customers significantly more cost-effective compared to acquiring new ones, leading to better margins and overall profitability. Also when you are in a subscription business, growth is sourced from not one but 3 areas: acquisition, retention and expansion. But, unlike acquisition, retention and acquisition follow an exponential growth curve that exceeds that of acquisition in a healthy business.

This is the reason you need a strong focus on CS which can improve the Customer Lifetime Value (CLTV) as well. Satisfied customers tend to stay longer, buy more, and are more likely to recommend your services to others. When done right, it can create a cycle of growth and advocacy that is both organic and powerful. Building an expansion pipeline from your existing customer base is also more predictable and stable, which helps more accurate financial forecasting and planning.

Despite these benefits, many companies continue to overlook the potential of their existing customers. The focus on building new pipelines to hit targets often comes at the expense of retention and expansion. We see this imbalance is in several areas:

• High CAC and Low Retention: The emphasis on new business acquisition leads to unsustainable CAC levels, leaving little budget for retaining and expanding existing customers.
• Lack of Strategic Investment: Companies often allocate minimal resources to develop a robust expansion strategy, and sales reps are rarely incentivized to pursue upsell or cross-sell opportunities.
• Neglect of Win/Loss Analysis: Leadership often fails to conduct win/loss analysis, missing out on critical insights into why customers stay or leave, which could inform retention strategies.

I think we’re at the moment where a reset is needed. Companies have to allocate the same level of investment, resources, strategy, process, data, and tools to Customer Success as they do to new customer acquisition. This begins with building robust CS teams equipped with the right tools and training to identify and nurture growth opportunities within the existing customer base. Sales and success teams should be incentivized not just to acquire new clients but also to retain and grow existing ones.

Leveraging customer usage data is another critical component. This data acts as intent data, providing insights into how customers are interacting with your product and where there may be opportunities for upselling and cross-selling. Regular health checks of customer accounts can help proactively address issues before they lead to churn, ensuring a higher retention rate and long-term customer satisfaction.

Creating a culture of Customer Success within an organization involves more than just strategic changes. It requires a shift in mindset where customer outcomes are at the forefront of the company’s goals. Leadership must make customer success a core part of the revenue strategy, embedding it into every aspect of the business and ensuring it receives top priority.

And we can see the success of companies that develop world-class expansion strategies and prioritize customer success. They will find themselves in a stronger position to achieve sustainable growth. By aligning your revenue teams around customer outcomes and making the necessary investments in customer success, you can unlock the full potential of your customer relationships and drive long-term success.

This approach isn’t just about improving metrics; it’s about creating a business model that is sustainable, repeatable, and focused on the long-term health of both your company and your customers. This is in my opinion the only way you position your organization to survive when CAC keeps going up.

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