SaaStr - How to Build a World-Class Customer Success Org: Lessons from Notion's and GitHub's VP of CS
The discussion emphasizes the importance of allocating 10% of a company's revenue to post-sales activities, including customer success, professional services, and support. This allocation is crucial for businesses aiming to raise funds, adhere to the Rule of 40, or go public. Spending beyond this percentage requires justification through faster growth or higher quality leads. The conversation also highlights the evolution of customer success teams, which may include roles like customer success managers, professional services, and technical support, depending on the company's growth stage and needs. Additionally, measuring customer success through both lagging and leading indicators is vital, with a focus on early customer journey metrics to predict long-term success. Practical examples include GitHub's and Notion's approaches to structuring and evolving their customer success teams to meet business and customer needs.
Key Points:
- Allocate 10% of revenue to post-sales activities for sustainable growth.
- Justify spending above 10% with faster growth or better lead quality.
- Customer success teams evolve with company growth, including roles like CSMs and technical support.
- Measure success with both lagging and leading indicators, focusing on early customer journey metrics.
- Professional services and support can be monetized to maximize investment.
Details:
1. 💡 Revenue Allocation Strategy: The 10% Rule
- Companies are advised to allocate 10% of their revenue to post-sales activities, which include customer support, retention initiatives, and follow-up services.
- This 10% rule provides a concrete budgeting framework that can help companies strategically enhance customer loyalty and satisfaction, ultimately driving long-term revenue growth.
- The strategy is particularly beneficial in industries with high customer acquisition costs, as it emphasizes nurturing existing customer relationships.
- Examples of successful implementation include companies in software as a service (SaaS) sectors that have seen improved customer retention rates by dedicating resources to post-sales support.
- Challenges include ensuring that the allocated budget is effectively used and adapting the rule to fit the specific needs of different business models.
2. 👥 Unforgettable First Day at GitHub
- For businesses aiming to raise money effectively and possibly go public, it's crucial not to exceed 10% spending without a strong justification, as you must grow faster than peers and generate quality leads to drive sales.
- An interesting anecdote: Erica hired the speaker at GitHub, but they hadn't met in person until the event, making their first meeting on stage unique.
- The speaker joined GitHub in January last year, excited to be part of the team, which was shortly after an announcement that excited them.
- On the speaker's first day, during their first meeting with Erica, they were informed by Erica that she was leaving GitHub, marking a memorable start.
3. 🤝 Evolving Customer Success Teams
3.1. Introduction and Experience
3.2. Components of Customer Success Teams
3.3. Evolution of Customer Success Teams
3.4. Strategic Alignment and Growth
4. 📊 Tracking Success: Metrics and KPIs
- Regular user feedback sessions are critical for guiding role-specific decisions and strategies, ensuring alignment with customer needs.
- Investment in Customer Success (CS) should be approximately 10% of revenue, covering all post-sales activities, and aligning with the Rule of 40 for companies planning to raise money or go public.
- Exceeding the 10% allocation necessitates justification, such as faster growth rates or exceptionally high-quality leads from CS.
- Monetizing professional services can help protect and possibly expand the 10% CS budget, facilitating investment in new functions or projects.
- Leaders should know the CS revenue allocation percentage, as it is crucial for financial planning and aligning with strategic goals.
- Considerations for exceeding the 10% benchmark include the potential for accelerated growth and improved customer engagement metrics.
5. 💸 Strategic Investment in Customer Success
- The support organization at Notion sets a current target at 3.9% of ARR, focusing on measuring customer success through adoption metrics and revenue expansion, particularly in the early stages of the customer journey.
- A critical metric for Notion is the number of integrations a customer enables, which serves as an indicator of successful onboarding and long-term success. By analyzing onboarding within the first 90 days, advanced user behaviors such as database usage and editing are identified.
- Monthly active users and net revenue retention (NRR) are pivotal for predicting next quarter renewals. Notion emphasizes leading indicators like activity, onboarding velocity, and usage depth to ensure ongoing customer success.
- GitHub's strategy involves a thorough review of both leading and lagging indicators, encapsulated in a comprehensive document of key performance indicators (KPIs). Weekly discussions focus on addressing areas of concern, prioritizing yellow and red indicators over green ones.
6. ✨ Achieving Customer Success Magic
- Achieving customer success involves aligning all business aspects from acquisition to retention and pushing these elements to drive innovation and effort.
- Balancing cost-efficient offers with customer retention optimization (CRO) is crucial, especially when considering the lack of support for new customers on their first day.
- Internal 'magic' occurs when everyone understands their role in the customer journey, ensuring alignment and avoiding overlap in efforts.
- Sharing successes and identifying improvement opportunities across teams enhances customer experiences.
- A CEO's unsolicited LinkedIn post praising product engagement exemplifies external success and positive customer validation.
- Internal success is marked by clarity in roles, accountability, mutual respect, and trust, critical for cohesive customer success efforts.
- Customer obsession must be balanced to prevent overwhelming customers, emphasizing the need for a common language across the organization to discuss the customer lifecycle.
7. 🔄 Organizational Leadership and Structures
7.1. 🔄 Leadership Interchangeability
7.2. 🔄 Customer Engagement and Monetization
8. 🎤 Final Reflections and Insights
- Organizations must choose between a pod structure and a functional structure based on their growth stage and objectives. For example, GitHub utilizes a functional structure, whereas Notion employs a pod and GM structure, illustrating the necessity of aligning organizational design with business needs.
- Building strong interpersonal relationships is key to scaling businesses successfully. This involves frequent communication and collaboration, such as regular calls and texts, which can enhance professional relationships and help overcome shared challenges.
- The ability to adapt and be flexible in organizational structures is crucial to meet different business objectives, highlighting that no one-size-fits-all approach exists.