Your Growth Engine: Customer-Led Growth Principle One
Embracing customer retention, expansion, and advocacy as your #1 growth engine. Here’s how to do it.
Customers are your most valuable asset to revenue growth. Embracing customer retention, expansion, and advocacy will be your #1 growth engine.
The SaaS landscape is changing. There’s no longer cheap capital to fuel growth at all costs and, even if that capital comes back, it’s an unsustainable business model.
Plus, the probability of selling to an existing customer is 60-70 percent, while the probability of selling to a new prospect is only 5 to 20 percent. And just a five percent increase in customer retention can produce more than a 25 percent increase in profit.
The data is clear: customer-led growth is the way forward.
But… that’s easier said than done. Starting this journey requires a true mindset shift around how you attract, retain, and grow customers. This blog explains how to do that.
To officially shift your mindset towards CLG, you have to first and foremost reframe what “customer success” means. “Success” is not retaining your customers. “Success” is driving revenue growth from your customers. If you reframe that to be your north star mindset you get to reverse engineer people, processes, performance measures, and compensation to align towards driving to this winning outcome.
- Sydney Strader, VP of Customer Success, Catalyst
The four pillars of customer-led growth
As you embark on this journey, always remember the end goal in mind: GEAR.
There are not one, not two, but four revenue-generating outcomes that create your CLG flywheel and can be thought of as the GEARs to your sustainable growth: Growth efficiency, Expansion, Advocacy and Retention (GEAR).
1. Growth efficiency: Prioritize growing existing customer revenue at higher margins while driving efficiency in your ability to acquire the right new customers.
2. Expansion: Invest in customer programs and expansion processes as part of your growth strategy. Don’t let this revenue go untapped.
3. Advocacy: Listen to customers and reflect their voice in your strategy to build partnerships that renew, grow, and refer more business.
4. Retention: Build a proactive journey management strategy to mitigate risk at every milestone and maximize revenue upon renewal.
Setting up pre-sales efforts for CLG success
With GEAR outcomes in mind, both pre- and post-sales efforts need to adjust. Here’s what that looks like and how to take action.
Pre-sales teams–Marketing and Sales–need to shift their mindset around how they create and close revenue.
It’s no longer “close every deal you can, no matter what.” Instead, these teams need to create new revenue strategies that mirror your best customers.
How to take action
Overall, pre-sales teams need to embrace collaborating with Success and Product to understand your best-fit customers, clearly articulate your value, and optimize the expansion process.
Be intentional with listening to customer insights shared by Success and Product. Actively use post-sale learnings and product enablement to improve your sales skills. And, remember that Customer Success is your revenue partner. An effective Sales-to-CS handoff will increase the likelihood of them returning to buy more, instead of bringing you back into an escalation call.
Note for Sales: Always keep the ultimate goal in mind: more revenue. That is not changing. What’s changing is how you earn that revenue—focusing on both customer expansion and responsible new business targeting.
Marketing must shift its mindset around what drives the marketing funnel (hint: expansion revenue is a key part of it). From product adoption events and campaigns to customer advisory programs; Marketing has a big role to play in creating retention, expansion, and ultimately, lifelong brand advocates.
Note for Marketing: Always document new customer insights and pipeline generated. What did you learn in a Customer Advisory meeting? Did a product launch event increase cross-sell opportunities? Be sure to contribute to helping teams understand your ICP, use those learnings to target new business, and drive more pipeline from within the customer base.
A reduction in wasted time on bad-fit customers, a maximized win rate, and more predictable revenue growth with new customers.
Customer Success should be leading the charge in optimizing your revenue strategy. It not only grows revenue from existing customers, but it also compounds year-over-year through customer lifetime value! At the same time, it drives down customer acquisition costs through advocacy and second-order revenue. It's a massive revenue engine that requires only one thing—a focus on achieving the customer's goals and maximizing ROI that unlocks unlimited revenue potential.
- Rachel Provan, Founder & CEO, Provan Success, LLC.
Building a post-sales function that champions CLG
Post-sales efforts should focus on amplifying the voice of the customer to influence value delivery and revenue optimization.
Following successful pre-sales targeting and pass-offs, this step is about deeply understanding customer challenges and championing them across the organization. At Catalyst, we call this ‘bringing Customer Success to the center’ and it is in fact our mission to help other companies achieve this to power growth. Let’s dive in.
How to take action
Simply put, Success needs to be part of revenue and product conversations, both with a focus on value delivery and driving expansion leads from your customer base.
In Customer Success
Customer Success leaders need to champion the CLG mindset across leadership. This is customer-led growth, the answers lie within your customer base! Their challenges are your product opportunities, their business goals should map to your sales pitch, etc. To kick-off your journey, Catalyst has developed multiple resources on customer-led growth to help you gain peer leadership support and build a C-Suite business case.
Connect with the Customer Success team to talk through customer sentiments and industry trends that can influence the product roadmap. In addition, actively join customer calls and have a clear escalation process to directly support at-risk customers due to product.
The voice of the customer becomes a constant in the business resulting in a more natural flow of revenue retention and expansion. Reduce friction and increase your clarity to drive durable business growth.
The spark that lights a fire
The primary takeaway of this principle is a mindset shift: customers hold the keys to your growth, not unfamiliar prospects in the market. Center your revenue strategy around the customer—first.
Ideally, all teams are on board. However, we recognize that a full mindset shift across leaders can take a lot of time. If you're able to champion this with even one other GTM partner, that's a win in itself. And, don’t forget that Catalyst is on this journey with you. Stay tuned for more content from us next week on Customer-Led Growth Principle Two.
Check out the Definitive Guide to CLG to find out how customer-led growth can fuel your revenue engine.
Stories, best practices and thought leadership from the customer success community.