Customers are in the market with certain expectations of their transactions and interactions with brands. Customer success is simply when customers are able to meet their expectations of desired outcomes through their engagement with the company. This satisfaction comes to customers not from the product alone but the quality of customer experience. Customer success is metamorphic. It impacts how the company is valued in good and bad times. There are 7 ways in which it also drives company valuation.
Greater Revenue: Customer success ensures they stay on with the brand for a long period of time even without attractive offers and discounts. Customers are also willing to buy add-ons, move to higher price-plans or premium products. They recommend/ introduce your product to others. All these drives up revenues and company valuation.
Improving Customer Acquisition Cost (CAC) Ratio: Bringing in new customers and sustaining them involves costs and CAC tells us this. CAC by itself may be a misleading figure; CAC ratio is what companies are interested in as it measures CAC against the Lifetime Value (LTV) of a customer. So, when more customers are staying with your brand for longer periods and advocating your brand to others, it improves the CAC ratio, thereby, driving the valuation of the company by investors.
Improving Customer Lifetime Value (LTV): When customers’ lifetime with the company/ brand is longer, there is greater up-selling, cross-selling and greater scope for future revenue generation from that customer. This adds up to their lifetime value, even if they stay with their original lower price plan or do not upgrade to higher price plans. So, customer success in terms of their LTV accelerates company valuation.
Reduction in Burn Rate: Initially, companies will have to spend out of venture capital funds until they start making sufficient revenues to cover overheads and have a positive cash flow. This is referred to as gross burn. Net burn is the difference between gross burn and revenues. Lower net burn rate resulting from higher revenues is an indicator that the money spent initially was for productive purposes. Customer success indicates the positive relationship with the customer and helps reduce burn rate, even during the economic downturn.
Account Expansion: Account expansion is improving customer engagement with existing customers, increasing renewals, upsells, cross-sells and generating greater revenues from this customer base. Through these companies can stop new customer acquisition. This improves the company’s value among investors.
Total Addressable Market (TAM): If your churn rate is high, your TAM reduces. Customers leave with negative feelings and are unlikely to become customers again. Focusing on customer success will help you to retain customers and improve your TAM.
Talent Acquisition ability: Your company’s ability to acquire talented personnel as employees add value to your company. Customer success impacts your talent acquisition ability. If your company image is negative and you have high burn and churn, you are not going to attract good employees.
A good marketing analytics course will give you further insight into these concepts relating to customers valuation.
