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FOUNDER’S GUIDE TO B2B SALES MEASURING THE CUSTOMER SUCCESS FUNCTION Technical support • Cases/agent and post-case CSAT – ideally increasing cases/agent while maintaining 4.5+ out of 5.0 CSAT rating. • Cases/customer - ideally declining as result of strong deflection and product/ documentation improvements. Professional services • Services gross margins – ideally above 0%. • Post-implementation CSAT of 4+ or 4.5+ depending on difficultly. Customer success management • Churn, gross (before expansion) on either ARR or customer count basis • Churn, net (after expansion) on an ARR basis • Net retention rate (NRR) – expansion or shrinkage of year-ago cohort on an ARR basis To avoid penalising CSMs who take on the most at-risk accounts, measure performance relative to a realistic start-of-year forecast for their accounts. LTV VS. NET RETENTION RATE There are two different ways of trying to value the installed customer base. Lifetime value (LTV) = 1/churn * annual contract value • Average ARR of $50K with 10% churn = $500K LTV • Often compared to customer acquisition cost (CAC) to contextualise it • $500K LTV with $100K CAC = 5.0x LTV/CAC ratio • LTV/CAC benchmarking: good 3.0x, better 5.0x, best 10.0x+ LTV and LTV/CAC analysis have several flaws and increasingly companies are turning to NRR – or as it’s also known, net dollar retention (NDR) – as a superior, cohort-based analysis metric. NRR, also known as net dollar retention (NDR), is a cohort-based analysis. • NRR = value of year-ago cohort today / value of year-ago cohort one year ago • If the year-ago cohort was worth $100K a year ago and is worth $116K today, then NRR is 116% • NRR benchmarking: good 104%, better 110%, best 120%, epic 150%+ (Epic NRRs are typically achieved only by companies using consumption-based pricing such as Twilio or Snowflake.) SPRING 2023 .35

BALDERTON The Founders Guide to B2B Sales - Page 35 BALDERTON The Founders Guide to B2B Sales Page 34 Page 36

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