Customer Success | 4 MIN READ

How Much Should SaaS Providers Spend on Customer Success

Businesses know that customer success pays off, but determining how much they should invest in customer success management can be tricky.

Rakhin V
Feb 14, 2020

customer success invest

Increasingly, businesses are using customer success initiatives to ensure customer satisfaction, goal attainment, and growth. The benefits of customer success for SaaS companies, in particular, are clear: when companies increase the focus on delivering value to customers, it’s easier to retain subscribers. A well-managed customer success program can reduce churn and add new customers based on the demonstrable results of a SaaS solution.

customer success invest

Businesses know that customer success pays off, but determining how much they should invest in customer success management can be tricky. Customer success undoubtedly delivers results for SaaS companies, but it can also be challenging to implement at scale, which can make the cost of customer success prohibitive.

The value that customer success brings to a SaaS company

The first step in determining how much should be spent on customer success, it’s helpful to understand the value that customer success can deliver. A customer success manager (CSM) orchestrates post-sale customer satisfaction with a focus on enabling optimal use of a SaaS product, resulting in measurable and repeatable wins for the customer. Customer success management is a complex process that requires obtaining detailed insights into customer needs, monitoring use after subscription, and circling back often to ensure that a SaaS solution continues to deliver value as a customer’s needs evolve.

Customer success management cost

When properly executed, a customer success program is an indispensable tool for operations. But, like any business activity, customer success can be expensive to manage. If you search the internet for appropriate customer success management budgets, you will find many different answers. Some experts say customer success is so crucial it warrants a cost of up to 20% of annual revenue. This may be true, or your business may require less or more of an investment. No one answer applies to all SaaS providers.

To operate a customer success program, businesses need to employ one or more individuals to maintain relationships and track and monitor usage and value derived from a SaaS product. A customer success team is unique in that its cost can be considered a cost of goods sold or a component of sales and marketing because customer success activities straddle operations, sales, and other departments. The goal of customer success is to maintain subscribers, which is an extension of the sales process, but successful customers become brand advocates and built-in marketers. SaaS company growth can threaten customer success if systems are not put into place that enables continued customer success after growth.

CSM personnel expenses

Customer success is a specialized field, requiring a high level of skill and experience in managing customer needs, optimizing product usage, and analyzing customer behavior. According to Payscale and Glassdoor, the average annual base salary for a CSM is around $65,000. Since customer success is often closely tied to revenues from renewals and other performance-based metrics, the personnel expense for customer success can be an additional $10,000 to $20,000 or more. This also doesn’t account for the cost of employee benefits and overhead associated with additional employees.

As a result, a strategy of adding CSMs to handle growth can be an expensive one. Because of this expense, many companies fail to grow their customer success processes and end up stunting their growth.

Executing customer success at scale

Of course, efficiency is an ever-present goal, so businesses should seek to reap the benefits of customer success at the least cost. In today’s business environment, achieving an efficient customer success management program means making customer success scalable.

Instead of simply hiring more CSMs, SaaS providers should leverage technology to achieve scale efficiently. A platform for operationalizing customer success can help automate customer success activities. Scalability is a key benefit of using a customer success platform, as everything from adoption to goal attainment can be measured and optimized without the need for large personnel expenditures.

The SmartKarrot platform helps CSMs scale operations and bring efficiency to customer success initiatives. SmartKarrot provides end-to-end features to fuel efficient and scalable customer success, such as:

  • 360-degree insights across systems and accounts
  • Customer Health scoring
  • Touchpoint management
  • Personalized onboarding
  • Adoption guidance
  • Pulse feedback
  • And more…

SmartKarrot helps SaaS providers see customer activity, so low-touch customer management is not only possible, it can be more valuable than in-person account management. Best of all, SmartKarrot enables the kind of automation that is central to customer success, such as tasks, alerts, personalization, and multi-channel campaigns. With these tools and more, SmartKarrot makes scalable customer success a reality, with greater accuracy and less expense.

To learn more about how SmartKarrot can help your company break through the barriers to sustainable SaaS growth, contact us to schedule a free demo, and start achieving your customer retention goals, today.

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Originally Published February 14th, 2020, Updated February 14th, 2020

Rakhin V

Rakhin has over 10 years of experience driving business development and client services. In his prior roles, he stayed close to customers to understand their requirements and help them achieve their business goals. He is passionate about customer success.

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2 years ago

Clint Thorburn

Customer success is indeed very important but 20% of annual revenue dedicated to it seems a bit steep. I don’t have the exact figure but I think our company spends around 8% which is still a good amount. I suppose it depends on the type of business, some of them require a lot more actions post-sale to ensure the customer is getting the service they need.

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