The Importance of Retention in Customer Success

09/13/23 • 22 min

Impact Academy 2-Week Retention program for CSMs and Heads of CS starts on September 25, 2023. Learn more and sign-up here.
ON TODAY'S EPISODE:

Net Revenue Retention (NRR) is unarguably a highly important metric but is it the main KPI for a Customer Success Manager? And if so, how do you track progress and make sure your actions influence NRR? In this episode of Impact Weekly, Johan and Lincoln will unwrap Net Revenue Retention and give practical advice on rollup metrics, prioritization and how to make sure you maximize NRR for your customers.THIS WEEKS QUESTION:
“Is NRR the main KPI for a CSM?”TOPICS BEING ADDRESSED:
* The definition of NRR and the rollup metrics
* The rule of 15 for prioritization
* What most people miss with NRR - that make all the difference
QUOTES:
Lincoln Murphy (03:52): “Well, really, the primary reason why companies look at NRR is that its an indicator of whether your business is shrinking or growing”

Lincoln Murphy (05:29):” In fact, you know, why is your company investing in customer success? They're investing in customer success because it's the most efficient way to drive NRR and NRR drives company valuation. So it's pretty important stuff.”

Lincoln Murphy (11:30): “If you're giving a discount to a customer to stay and they're not actually gonna be successful, you may just be prolonging the inevitable. So whatever you do, you want to follow up with a success plan to get them back on track.”

Lincoln Murphy (11:46): “[The rule of fifteens] is something that you can kind of take a quick look at what's going on and as a head of customer success on an org level, we can look at our entire customer base.”

Lincoln Murphy (14:15): “[Contraction/Downgrades usually happen because of things that occur earlier in the life cycle. Oftentimes we can track contraction back to onboarding.”

Lincoln Murphy (15:42): “[...] it's not about trying to do anything at the last minute to save them and. It's about making them successful all along the way.”

Lincoln Murphy (17:08): “Everything seemed to be going well by all accounts. And then you realize that their goals had changed. You didn't sync up with them on those goals.”

Johan Nilsson (17:59): “That's why it's good to focus on contraction cases.[..] Because you cannot just only reduce the actual contraction, but you can even turn it around to an expansion opportunity.”

Lincoln Murphy (20:36): “If you focus on making your customer successful, and that's helping them achieve their desired outcome, and giving them their appropriate experience along the way, your customer will tend to stay longer, increase their spend and maybe even advocate for you.”

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Impact Academy 2-Week Retention program for CSMs and Heads of CS starts on September 25, 2023. Learn more and sign-up here.
ON TODAY'S EPISODE:

Lincoln Murphy (14:15): “[Contraction/Downgrades usually happen because of things that occur earlier in the life cycle. Oftentimes we can track contraction back to onboarding.”

Lincoln Murphy (15:42): “[...] it's not about trying to do anything at the last minute to save them and. It's about making them successful all along the way.”

Lincoln Murphy (17:08): “Everything seemed to be going well by all accounts. And then you realize that their goals had changed. You didn't sync up with them on those goals.”

Previous Episode

Don't Be Fooled: Why High Usage Doesn't Guarantee Customer Success

ON TODAY'S EPISODE:
Johan and Lincoln tackle a pressing concern for Heads of Customer Success and Customer Success Managers: Why high usage doesn't equate to customer success. They explore the "Usage Trap" and introduce the concept of Success Gaps as a way to understand and act on customer goals effectively.

THIS WEEK'S QUESTION:
“My customers are frequent users of our platform, but my numbers are not what I want when it comes to churn, contraction, as well as expansion. What can I do here?”

TOPICS BEING ADDRESSED:

The critical difference between high usage and actual customer success
Understanding the concept of "Success Gaps" and why they matter
How to identify and act upon customer goals for meaningful progress

QUOTES:
Lincoln Murphy (05:22): “High usage without context is like driving with a blindfold.”
Johan Nilsson (10:48): “Ignoring Success Gaps is like filling a leaky bucket; it'll run dry eventually."
Lincoln Murphy (15:05): “Understanding customer goals isn't a luxury; it's a necessity for scalable success.”
Johan Nilsson (21:37): “If you're not aligning with customer goals, you're just hoping things work out."
Lincoln Murphy (28:55): “Usage metrics can be smoke and mirrors; look for signs of real value.”

Next Episode

Shifting Gears: Transitioning to Proactive Customer Success

Impact Academy 2-Week Retention program for CSMs and Heads of CS starts on September 25, 2023. Learn more and sign-up here.
ON TODAY'S EPISODE:
In this episode, we delve into the transformative world of customer success, exploring strategies that shift the focus from firefighting reactive measures to proactive, sustainable solutions. Johan and Lincoln share invaluable insights on breaking the cycle of customer churn, empowering teams, and achieving long-term growth by prioritizing the success of your customers.
THIS WEEKS QUESTION:
"I'm swamped over here. We're running around, putting out fires, barely holding on to customers. But we also know we should be planning for the long term. How do I even balance that?"

TOPICS BEING ADDRESSED:
* Challenge of Balancing Short-Term and Long-Term Goals
* Reactive and Proactive Customer Success
* Deprioritization and Resource Allocation
QUOTES:
Lincoln Murphy (03:14): "Reality is messy."
Johan Nilsson (05:24): "It's a vicious cycle. Customers that you're dropping the ball on, they will have one foot out of the door."
Lincoln Murphy (09:20): "Chasing customers and spending all of our resources to save just a few will lower NRR most likely."
Lincoln Murphy (21:05): we're not looking at how to prioritize everything, but what we are looking at is right now, what can we deprioritize?
Lincoln Murphy (29:15): "Celebrate moving customers through progress milestones; it's a crucial part of proactive customer success."
Johan Nilsson (29:47): "Visibility is key; you need a system that provides real visibility to drive positive change."