MarketStar Blog

As business solutions grow increasingly complex, some buyers require additional assistance to introduce and implement new products or services into their company’s environment  successfully. It’s no longer enough for business-to-business (B2B) sales organizations to sell a product or service and leave the customer to their own devices. Today, they need support and knowledge over the long haul. 

Key Takeaways

• If there is one SaaS metric you should monitor carefully, then it is your churn rate. The lower the percentage, the better

• However, the churn rate does not give you the full picture and health of your business

• To understand the impact of churn on your revenue, Net Retention Rate (NRR) and Gross Retention Rate (GRR) are more effective markers

• Choosing between the two metrics can be tricky as the metric you employ can help determine the health of your business

Almost every profitable enterprise relies on its customer base to succeed.

Customer success is, even more, a critical consideration for businesses that provide solutions through a SaaS model.

Customer success is an important component of every department: marketing, sales, onboarding, support, hiring, or operations. The goal is to deliver value to the customers.

Therefore, the question that arises is: How do you measure it?

Few critical metrics for customer success provide valuable insights into the many factors that determine your customer’s success. These metrics help businesses understand and explain how and why a customer uses their solution, how many customers they are retaining, and the value of both retained customers and those lost to attrition.

For many organizations, the answer to these questions lies in using several methods or metrics. At the same time, these metrics are not static and can keep changing through the customer life cycle.

Why are Customer Success Metrics So Critical? 

The metrics for customer success come into the picture because of customer churn. And less than ideal customer service is one of the most dominant reasons why customer churn occurs. 

According to one study, 65% of customers have switched to a different brand because of poor customer experience. So even if you have the most competitive product in the industry, a mediocre experience will lead you to lose customers.

A crucial reason for reducing your churn rate is the reality of just focusing on new customer acquisitions. 

While the success rate of selling to a new customer stands at a mere 5-20%, your success rate of selling to an existing customer is 60-70%! This is because your current customers are already happy using your product or service. They trust your business, which is so important if businesses want to remain relevant in the current competitive landscape.

New customers, on the other hand, need to be convinced why they should spend money on your product.

Existing customers will be the key to your business success.

Consequently, you can significantly reduce churn if you know what your current customer base is experiencing and what you can do to alleviate some of their pain points.

The 2 Key Metrics to Measure the Efficacy of Your Customer Success Program: NRR & GRR

Broadly speaking, there are two metrics that can help you measure the amount of revenue you have retained or revenue that you did not lose to churn.

These customer success metrics are – Net Retention Rate (NRR) and Gross Retention Rate (GRR).

What is the Net Retention Rate in SaaS?

Net Retention Rate is a SaaS-based metric that helps businesses calculate the percentage of revenue they have retained from existing customers over a period.

This can be monthly or yearly and can include upgrades, downgrades, cross-sells, and cancellations.

In simple terms, your NRR helps you understand how many of your existing customers are staying loyal and extending their subscriptions.

NRR, also known as Net Dollar Retention, helps you understand whether the service you are providing has the quality of engaging new customers and meeting their needs. It’s a key metric that can help uphold a company’s financial performance and comes in handy when evaluating the quality of customer success.

Calculating Net Retention Rate

You first add your Churn MRR and Expansion MRR and subtract them from Contraction MRR. 

Further, subtract the result from starting MRR. Now, divide the result by starting MRR and then go on to multiply it by 100 to get your Net Retention Rate.

NRR = (Starting MRR – Contraction MRR – Churn MRR + Expansion MRR)/ Starting MRR x 100

Here’s what this means:

• MRR: Monthly Recurring Revenue or the amount of recurring revenue a company predicts to earn each month

• New MRR: Monthly Recurring Revenue from new customers

• Contraction MRR: These are your downgrades or lost MRR from existing customers

• Churned MRR – These are your lost MRR from canceled customers

• Expansion MRR- These are your upgrades or MRR from existing customers

Improving Net Retention Rate

To begin with, you can encourage your users to upgrade their trial accounts to paid accounts using modals.

A modal is a rectangular UI element that is commonly used in SaaS businesses to notify users of something important.

Modals are effective as they grab the customer’s attention as they normally take up most of the user interface. Contextual in-app messaging is another great way to help increase your NRR.

What is the Gross Retention Rate in SaaS?

Your Gross Retention Rate is the ability of your business to retain its existing customers.

When you retain your customers, you retain revenue. So, GRR is the percentage of customers a business can retain at the existing price point.

Unlike NRR, your GRR does not take into account revenue earned from expansion, upsells, and cross-sells. But it does include any downgrades or cancellations of subscriptions. Your Gross Retention Rate simply tells you how happy your existing customers are. It is a stability indicator of any SaaS-based business model.

Calculating Gross Retention Rate

GRR is the rate of existing customers retained during a given period.

To calculate GRR, subtract your MRR at the beginning of the period from your downgraded MRR during the period. 

Further, subtract your downgraded MRR with your contraction MRR. Now, divide the result by the MRR at the beginning of the period. GRR = (MRR start – Churn – Contraction) / MRR

Improving Gross Retention Rate

An excellent method to boost your GRR is by giving your customers the opportunity to speak out about their concerns.

This can be done through surveys which will enable you to determine customer experience. The onboarding process plays a critical role here, ensure you have a solid onboarding process in place to retain more customers, and consequently revenue.

What Should You Focus On – NRR or GRR?

The debate over whether to pick NRR or GRR is tricky. 

Net Retention Rate might look like a better alternative as it considers two revenue streams: upsells and renewals. 

However, the Gross Retention Rate has a small advantage over NRR in that it measures the long-term health of any SaaS business. Keep in mind the below tips when deciding:

• NRR is a good metric for customer success when you are considering growth. It’s what you need to focus on finding the perfect product-market fit to attain a high GRR. A high GRR is only possible when your customers find your product useful and continue their business with you.

• Remember that when it comes to funding opportunities, your prospective investors will closely scrutinize your GRR. Between two businesses with high NRR, investors are more likely to place their bets on the business that has a higher GRR.

• NRR and MRR go hand-in-hand. So as you continue to chase growth and scale new heights, ensure that you are seeking a better market fit for your product.

• Regardless of whether NRR or GRR is the priority, track both metrics carefully. Make use of a holistic subscription billing solution to capture insights from the payment process for strategic decision-making. Such solutions can help you gather relevant data about your business’s expansion, contraction, and churned revenue.

• A good way of determining whether you are on the right path with your customer success metric is to determine the quality of NRR and GRR. While the standard benchmark varies across sectors, the closer your GRR is to 100%, the better the health of your company. Similarly, if your NRR is anywhere above 100%, your business is growing rapidly. 

Wrapping Up

Retaining existing customers should be at the top of the to-do list of any SaaS company.

GRR and NRR are not just calculations to measure dollar value. These metrics of customer success are crucial as they show you your customer’s journey and their success with your product/service.

Optimizing your NRR and GRR makes a world of difference when you are going for funding. To give your company the best chance of securing success, such customer success metrics should be explored and improved upon.

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Key Insights

• The buzz around RevOps continues to build, with companies adding new roles at a record pace

• One of the reasons why RevOps is gaining such unprecedented traction is its potential of bringing together different teams

• Businesses looking at unleashing the potential of RevOps must utilize the emerging trends for overall business transformation

In many of the fastest-growing B2B organizations, Revenue Operations or RevOps can be seen as the newest functional team.

A report by LeanData highlights that almost 58% of B2B organizations have put a dedicated RevOps team in place or are in the process of building one. 

RevOps can be defined as an organizational function dedicated to streamlining operational processes in order to provide alignment across the revenue journey, including sales, marketing, customer success, and support. 

Since the ultimate goal of any business is to increase revenue, it makes sense to have revenue operations as the main component of a company’s structure, influencing decisions made by all departments. 

So, with the continued rise of RevOps, what can we expect in 2022? Let’s take a look. 

The Top 5 RevOps Trends for Business Success in 2022 

1. The Rise in RevOps Job Titles

The RevOps role is fairly new and interesting. 

With the boom we see in tech startups, it is natural for companies to look for new roles to solve new business challenges. 

Job titles with the word “revenue” such as Director of Revenue Operations, VP of Revenue Operations, and Chief Revenue Officer have become a big trend on job posting platforms like LinkedIn

With new roles opening up in revenue operations, we see new technology for RevOps as well. Such technological innovation defines the very core of RevOps by ensuring that your teams, data, and processes are all in perfect sync. 

2. Decreased Focus on Historical Trends

Typically, those in RevOps had the option of looking at past data to evaluate and assess what to expect the following year. 

2020, however, was not your typical year. 

What it did teach us is that we cannot flip a switch and go back to “normal”. Instead, we adapted, incorporating external factors into our forecast, and developed a plan that optimizes growth. 

Organizations relying on historical data must take into account the rapidly-changing conditions and behave proactively to scale the success ladder with RevOps. 

3. Streamlining Processes with Automation

Your RevOps team cannot work without robust integration and automation backing up your technological stack. 

A unified tech stack will allow RevOps teams to be more efficient by providing transparency across all processes. It can help in better allocation of resources and increase the collaborative flow of work. 

Additionally, businesses can improve efficiency, fix revenue pipeline, and make more data-driven decisions with process automation. 

When different departments are looking at different numbers, it is even more difficult to align toward a common vision. Combating this problem requires automation that takes care of quality control processes.

4. Increased Focus on CAS

Customer Acquisition Security or CAS has become the new core area and focuses on eliminating the fast-growing problem of fake users and bots from customers’ funnels, campaigns, analytics, and CRMs. 

Even Sales and Business Development Representatives (BDR) teams can benefit from CAS by using it to clean up their CRM, helping them to reduce the time wasted on prospecting fake users. 

A White Ops survey shows how 22% of companies believe that at least 25% of their first-party database is populated by fake and fraudulent contacts. 

CAS can eliminate these problems, helping BDR teams to go after real leads who are most likely to convert. 

5. A Central Component of CX

While a necessary function of modern business, teams in marketing, sales, or customer success often tend to operate in silos. 

Furthermore, they don’t define success the same way. If salespeople are focusing on sales alone, those in marketing or customer success are relying on KPIs to measure their goals. 

RevOps recognizes the need for collaboration between these teams, in not just generating and maximizing revenue but also in enhancing the overall customer experience. 

As a unified team, RevOps is best positioned to deliver a stellar customer journey. 

The Road Ahead

As stated by Matthew Volm, CEO and Co-founder of Funnel IQ, RevOps is the glue that holds the entire go-to-market function together. 

Utilizing revenue operations within your organization will enable you to better align your teams, make way for unified data and a more sophisticated tech stack in order to streamline your processes for maximum agility. 

And as the unknown continues, there has never been a better time to make a change for the better. 

Key Takeaways

The market for sales-as-a-service continues to grow across the globe with major multinational and fortune 500 companies like Apple, Amazon, and Microsoft augmenting their in-house sales teams along with outsourcing sales operations to drive revenue and efficiency in operations. 

Social selling is one of the most overlooked strategies in B2B selling. Many sales reps consider social media to be a waste of time when it comes to reaching prospects, but platforms such as LinkedIn, Twitter, or Instagram are actively used by the buyers you want to target. Social media can be an excellent source of insight and can help you learn more about your target buyers. Using social selling channels such as LinkedIn can provide a means to directly connect with prospects. It also provides a forum where you can influence potential buyers and build a rapport over time.

Our journey starts in the midst of a company wondering why they can't keep customers using their products. The leaders of the company meet in their boardroom, and everyone has the whole day's schedule dedicated to answering the question... "why aren't our customers renewing with us?"  

Key Insights

• With digitization opening more avenues than ever for customers to make a choice, it’s crucial for businesses to stay on the pulse of customer experience

• Creating a culture and practice of prioritizing customer engagement is easier to brainstorm than execute

• While many business ventures might still be averse to outsourcing this customer-facing function, there are clear benefits to doing so

• These range from a deeper understanding of the customer success space to industry-leading methodologies to execute customer success goals

Customer success may be a relatively new term, but growing customer expectations have solidified its significance to revenue growth and long-term success.

A report by Forrester highlights that customer success is on top of mind for many businesses, with 72% reporting it to be a priority.

In particular, the COVID-19 pandemic drove home its importance in protecting relationships with existing customers.

As the economic fallouts of the pandemic unfolded through constrained budgets, shifting business priorities, and disrupted operations, companies realized that a continuous race for the next sale was not sustainable. More important was nurturing the existing customer base beyond the point of sale.

A visible aspect of this shift is the value of trustworthiness in ensuring customer loyalty.

So, should you outsource customer success? To answer this question, one must look at what customer success does for an organization.

What are the Benefits of Customer Success?

Focusing on customer success involves tracking different kinds of value provided to the customer. A Deloitte research identifies three types of value that constitute customer success: performance value, business value, and experience value.

In the B2B world that we are in, getting the signature on the dotted line is only the beginning of the journey with customers.

• Customer Retention: Renewal decisions are based on perceived value. When you focus on customer success, you help your customers realize more value in your products and services. This leads to increased renewal rates and longer customer tenures, both of which increase a customer’s lifetime value and help you drive growth and profitability.

• Increased upsells and cross-sells: As per a report, vendors are 60-70% more likely to sell to existing customers rather than selling to new customers. Existing customers are also more likely to have undertaken integrations that maximize the value to be drawn from greater engagement with related products and services. It is precisely this advantage that customer success secures by increasing the likelihood of customer satisfaction.

• Operational Improvement: Focusing on customer success increases customer predictability. It provides you detailed insight into developing issues. It will also help you uncover drivers of that outcome, which will help you with recurring revenue predictability and capacity planning.

• Increased Revenue: Customer success is not just about keeping revenue in the business. It also helps generate more revenue at a lower cost. Customer success provides a mechanism for not only creating these chances but also capitalizing on them.

Why Should You Outsource Customer Success?

It might make more sense for you to outsource more transactional engagements such as customer service or customer support rather than outsourcing a long-term, relational role like customer success.

What is important is to acknowledge that outsourcing customer success does come with its fair share of challenges. Despite these challenges, however, outsourcing key customer success activities can contribute in several ways to revenue and growth.

1. Cost Savings

An obvious advantage of outsourcing is cost savings. But this advantage is often misperceived as resulting from hiring low-paid offshore customer success representatives.

Such misperceptions only consider the salaries as part of the costs of building a customer success team. But there are numerous other hard and soft costs such as facility, equipment and technology, travel, recruitment and training, and management costs.

By outsourcing all or part of the customer success function, companies can save on operational costs related to onboarding and training, renting and maintaining office space, management costs, and investing in the latest tools and technology stacks.

2. Skilled Representatives

When you have an in-house team, it can take months or even years to build the kind of high-quality team you have in mind for long-term success. While it might look rewarding, you are putting years of resources and thousands of dollars into building such expertise.

With outsourced customer success, you receive a top-notch crew whose sole responsibility is to provide excellent customer support. Such a team is better equipped to ensure that there is no lag in customer experience.

3. Access to leading technologies

A 2021 report by Talkdesk highlights that while customers want to talk more and for longer, they are not willing to wait on hold for longer than a minute.

Reputable outsourced customer support vendors understand this shift.

An outsourced customer success team will ensure that processes are in place to reduce average wait time (AWT). They have dedicated QA auditors to coach agents on how to minimize “dead time” between calls.

4. Effective Management

An in-house team can cater to high-value customers. However, real growth requires customer success at scale, catering to all segments of customers.

Most companies are likely to have a large segment of long-tail customers who cannot be converted into high-growth customers because of a lack of bandwidth among in-house customer success teams.

Outsourcing the long-tail customers can help organizations move beyond an 80-20 trap in their revenue generation and grow a much larger base of valuable customers.

5. Focus on Core Competencies

Customers are the key to success for any organization. Nevertheless, customer support may not be one of the core competencies of your venture.

Outsourcing customer success can help you focus on what your company does best, without sacrificing customer satisfaction in the process. And this can happen without a huge upfront investment of resources.

Finding the Right Outsourced Customer Success Partner

Pearsons’ Marketing Metrics: The Definitive Guide to Measuring Marketing Performance shows that the probability of selling to an existing customer is up to 14 times higher than the probability of selling it to a new one. 

By bringing an outsourced customer success team, you are better equipped for future growth. The sooner you establish a reliable partnership in this important business segment, the easier it will be for you to master future challenges.