Remember when SaaS was all about new logos? Buyers enjoyed unrestricted budgets and VC funding seemed limitless. You know, the good old days.
It’s time to admit that growth at all costs is no longer a viable strategy. Instead, the smart money is on something more sustainable: customer-led growth. In short, SaaS businesses that want to thrive in today’s tough markets will focus on generating revenue from existing customers.
- Giving your CSMs revenue goals, not productivity goals
- Supporting them with the tools and data they need to meet those goals
- Creating moments of impact to prove your product’s recurring value to your customers
- Using technology to create consistent, customizable playbooks with insights that help you evolve
- Harnessing data to optimize those playbooks and drive customer growth
We’ve been banging the customer-led growth drum for a while here at Catalyst. (It’s kind of our thing!). But we wanted to learn more about the post-sales industry and the people who are leading the charge.
In particular, we were curious about how other customer success leaders and individual contributors see things. What keeps them up at night? What changes were they seeing? How are they planning to hit their revenue targets in 2024?
To get this insight, we surveyed hundreds of customer success leaders and team members from organizations of all sizes, with the majority having 50-100, 101-250, or 251-750 employees. We also partnered with ChartMogul and Tropic to capture even more data on the selling and buying side,
Insights from the State of Customer Growth Report
Here are a few key insights we gleaned from our research (if you want all the data, follow us on LinkedIn so you’re notified when it goes live).
1. We’ll keep the conveyor belt moving on customer education
The CS industry moves fast, and that means keeping up with skills, trends, and tactics. One huge education gap we’ve discovered in the report is that too many CS teams confuse activity with impact. They’re working hard, absolutely — but they’re not always working on the right things. Plus, they’re spending hours combing through account data manually, which doesn’t leave them with much time to prove their product’s recurring value to their customers.
And yet, driving product uptake and demonstrating value is the single important factor for driving customer growth, according to over three-quarters of our respondents (77% of individual contributors, and 80% of managers).
In other words, your customer success team needs to focus relentlessly on increasing the value your customers are getting from your product.
Here at Catalyst, we’ll be doubling down on improving customer value from our product in 2024 by:
- Continuing to invest heavily in our customer community
- Creating educational resources that enable our customers to get the most out of our platform
- Building our customer journey around moments of impact
It’s worth acknowledging that our CS team is able to prioritize these revenue-generating activities because they aren’t wasting hours a week going through customer data manually. Catalyst automatically surfaces insights and makes sure that educational resources get sent over to customers as soon as they need them.
Plus, our Playbooks insights keep us looped into which activities are working well, and which tasks turn out to be a waste of our team’s limited time.
2. Expansion isn’t going away
One CS principle that won’t go out of style anytime soon is expansion; nurturing customers is the key to sustainable growth. If you had any doubts about that, 97% of our respondents confirmed it’s true. And the data we got from ChartMogul shows why.
They found that even if you can rush GRR, you can’t rest on your laurels. No matter how strong your CS team is, organic retention begins to decay noticeably in year two. Even all-star CS teams in the 90th percentile will see retention drop from 135% to 115% by the second year.
In other words, while a strong GRR buys you time, it doesn’t get you the valuation and growth you need to succeed. And if you’re still not convinced, consider this: data from Tropic showed that renewal requests are flat, even as new business purchases are going down. That points to a single option for growth—-you must know how to secure account expansions.
In 2024, we’ll be putting a focused effort into building a strategy for expansion that provides value to both our customers and Catalyst. Luckily for us, we launched Signals earlier in 2023 — the market’s first and only solution dedicated to targeting customer expansions.
Signals use data in Catalyst to automatically flag up customers who could be ready for expansion, and then action those opportunities with standardized playbooks. Handy, that!
3. We’re looking for reactivation opportunities
Reactivations turn out to be a surprisingly effective growth lever. ChartMogul’s data shows that account reactivations can bring back as much as 30% of churned ARR.
It runs out that churn isn’t always the end of the story. In fact, there’s a real opportunity to win back lost revenue and even grow reactivated accounts.
We’ll be looking to build a stronger reactivation play in 2024, to complement our other revenue-generating activities.
4. Transparency is the bridge between leadership and their teams
One of Catalyst’s core values is “Be Transparent”. We believe firmly in open communication, honesty, and directness. And we believe in providing CS teams with access to transparent, easy-to-understand data so they know exactly where they are with each account.
One of the findings that emerged from our report is that many of our respondents still need help with this level of transparency in their teams. For example, when we asked our respondents about the QoQ change in their company’s GRR in the most recent fiscal quarter, a worrying 30.38% of CS leaders admitted that they simply didn’t know.
It seems like many CS leaders aren’t being given the revenue insights they need to make the right decisions for the business. While you may know, for instance, that NRR goes up when CSMs manage customer accounts, you might not know the activities that those CSMs are doing that actually move the needle.
And it’s not just a shortage of readily accessible CS data. We also noticed a lack of alignment between individual contributors and managers; when we asked respondents about their expansion process, there were significant discrepancies in the answers we got from ICs and management.
For instance, 45.9% of management believes the process is informal but consistent; only 39.6% of ICs believe this. And, on the flip side, 8.1% of ICs say there is no process in place at all, compared with only 3.2% of management.
What we’re taking away from this is that we may be overestimating our own culture of transparency. While we believe that we’re all on the same page internally, we will continue to invest in ways to drive alignment between management and ICs to remove silos and operate in a unified rhythm.
Download the full report to learn 6 things you can do right now to supercharge customer retention and expansion!
That’s just a quick snapshot of some of the findings that have informed our thinking about next year. We’re pretty excited to share the full report with you because there are so many more insights packed in. We’ll be covering:
- The state of new business growth, retention, and customer expansion
- The key drivers of account expansion
- The factors that negatively affect customer retention and expansion
- The expansion strategies that are working best for our respondents
- The challenges that CS leaders need to be aware of, that could impede success
If you want to make sure you’re one of the first to get access to our State of Customer Growth Report, follow us on LinkedIn so you don’t miss out!