Sales isn’t a funnel, Gainsight chief customer officer Dan Steinman says, it’s an hourglass. And the bottom half is way bigger than the top. 90% of most SaaS companies' revenue comes from after the first deal is closed. Don’t just align sales and customer success, he argues; get them to collaborate. In this panel with Gadi Shamia, Steinman talks about the key metrics for customer service managers, handoffs between sales and CS, and multi-year deals.
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Special thanks to Jason Lemkin of SaaStr for putting on this conference and giving us the chance to publish these summaries.
In a nutshell:
- Don’t necessarily try to maximize initial deal size.
- Measure your CS team on net retention, but keep an eye on churn.
- Multi-year deals are risky, since they don’t create the same sense of urgency for customer success.
Q: How should CS influence new acquisitions?
A: Existing customers should be advocates. You should have referenceable customers.
Q: How should you handle sales transactions after the initial deal?
A: If your CS person isn’t also sales-savvy, he or she probably isn’t a good fit for the job.
Q: How do you train CSMs to recognize upsell opportunities?
A: They should know the product inside and out, and be able to ask customers questions that will lead them down the path to a deal.
Q: Should you try to maximize the initial deal size?
A: Not necessarily, as that might turn into a downsell when people lose seats. It’s not good for anyone except the initial sales rep.
Q: What are the key CS KPIs?
A: You should treat them similarly to how you'd treat salespeople. As a result, the key metric is net retention: renewal + upsell – churn. But be careful: net retention can mask other problems. For example, tons of upsell can mask a 40% churn problem. The three KPIs:
- Gross renewal rate
- Net retention
- The gap between the two
Q: What’s your opinion on multi-year deals?
A: They’re dangerous, because they don’t force you to focus on the customer in the same way. If your product takes more than 90 days to implement, though, consider two-year contracts.