For the 7th year, David Skok has published the findings from his annual survey of privately held SaaS companies. And just like the previous 4 years, I’m here to highlight the impact these trends could have on Customer Success teams in the year ahead.
Professional Services remain relevant
The role of Professional Services in SaaS companies has been on my mind as of late. While the impact Professional Services has on 1st year account revenue is declining, this year’s report continues to demonstrate that companies leveraging Professional Services see a lower annual gross dollar churn rate than those without.
Receiving even just 1–10% of 1st year ACV from Professional Services yields a 2% reduction in churn rate compared to companies that don’t support this offering. This is a reversal of the trend seen in the 2018 report that showed this 1–10% cohort had higher churn than companies without Professional Services.
Investing in upsells and expansions continues to pay huge dividends
Upsells and expansions remain a critical component of growth for SaaS companies, with the median respondent receiving 37% of new ARR bookings from upsells and expansions. Larger companies rely even more on upsells and expansions to grow, with the average $100M+ ARR company seeing 50% of new ARR from existing accounts.
Because the CAC of upsell and expansion revenue remains a fraction of the cost of new customer acquisition, companies are comfortable spending more money to realize this type of revenue than they did in 2018.
Renewals are less likely to be owned by Sales
Renewals and expansion have become expected and are no longer owned by Sales, as demonstrated by lower commission rates.
Commissions on simple renewals are going down every year– this year, almost 50% of the time not paid at all (vs. 35% last year). Meanwhile, commissions on upsells are also trending down (53% pay full commission in this year’s results, vs. 68% last year).
I’d love to see additional data on how non-Sales teams are being paid out on renewals and upsells and if CSMs are picking up some of this responsibility in the form of a quota.
Rises in experimental pricing
Pricing by seats remains the most common strategy, but we’re also seeing an increase in non-traditional pricing metrics. The number of companies reporting their primary pricing metric as “other” has grown from 7% in 2018’s survey to 18% in 2019.
After reviewing the full report, what are some of the trends you think will impact Customer Success in the coming year?
Read my 2018 recap if you want to review the key trends from last year’s survey.