McKinsey & Company |
Courting and Cross-selling:
The secrets of low-churn SaaS companies
August
2014
#customersuccess
2014 Gainsight, Inc. All rights reserved.
• Q&A panel on your right • Recording for colleagues who couldn’t make it• All attendees will receive slides• Twitter hashtag #customersuccess
Housekeeping
2014 Gainsight, Inc. All rights reserved.
Today’s Panelists
Nick MehtaCEO
@nrmehta
Brian StaffordPartner
Shawn LanktonAssociate Partner
Courting and cross-selling: the secrets of low-churn SaaS companies
August 13, 2014
Gainsight Webinar
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
McKinsey & Company | 5
Lower churn leads to faster growth
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
Annual ARR growth
Low churn (<10%)
High churn (>20%)
90%
53%
McKinsey & Company | 6
Who we studied
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics
Later-stage startups: Revenue from $25M to 75M
With enterprise customers: ACV from $65k to 350k
Smaller companies and companies with smaller ACVs may be the topic of a future Webinar
McKinsey & Company | 7
Top tactics of low churners
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
▪ Killer products
▪ Lots of cross-sell
▪ Careful courting
▪ Investing in users
1
2
3
4
McKinsey & Company | 8
A great product is a good start
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
R&D spend / sales
Low churn (<10%)
High churn (>20%)
30%
10%
1
It’s a no brainer, and the numbers don’t lie…
McKinsey & Company | 9
Cross selling keeps customers
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
Customers buying >1 product
Low churn (<10%)
High churn (>20%)
33%
0%
2
Broader product suites and more customer touchpoints
McKinsey & Company | 10
Loyal customers cost more to get. . .
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
M&S spend / Rev.
Low churn(<10%)
High churn(>20%)
53%
30%
3
Sales cycle length
5 months
3 months
McKinsey & Company | 11
. . . and not everyone can sell
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
Portion of FTEs on quota
Low churn (<10%)
High churn (>20%)
41%
71%
3
More lead qualification and sales engineering FTEs
McKinsey & Company | 12
Keep taking care of customers post-sale
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
Churn prevention FTEs / $1M ARR
0.3
0.1
Low churn (<10%)
High churn (>20%)
4
Proactively ensure customer success
McKinsey & Company | 13
Consider participating in SaaSRadar
SOURCE: SaaSRadar, McKinsey’s proprietary database of B2B SaaS metrics (SaaSRadar.com)
100+
B2B SaaS participants
40 critical metrics
10+
hand-picked peers per cohort
$10M+ million ARR range
~2 hours to complete
McKinsey & Company | 14
Brian Stafford
▪ Leads McKinsey’s SaaS practice
▪ Founded and ran a $100M software company pre-McKinsey
Shawn Lankton
▪ Leads our SaaSRadar benchmark
▪ Experience with sales and pricing for large and small software firms
Who we are
2014 Gainsight, Inc. All rights reserved.
The performance waterfall
Opportunity Churn Downsell Retained Up-Sell X-Sell Total Bookings
$54,047,502.5
$8,012,106.2
$4,086,344.1
$41,949,052.2
$4,161,855.8
$8,576,439.0
$54,687,347.0
X-Sell = 16%
Churn = 15%
$M
Retention Rate = 78%
Bookings Rate = 101%
2014 Gainsight, Inc. All rights reserved.
Cross-sell is a key lever for customer retention
Q3'13 Q4'13 Q1'14 Q2'14 Total0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
10%
15%
18% 18%
16%
Cross-sell Performance By Quarter
Q3'13 - Churn
Q4'13 - Churn
Q1'14 - Churn
Q2'14 - Churn
Total - Churn
0%
1%
2%
3%
4%
5%
4%
4%
2%
1%
3%
Historical Cross-sell Performance for churned
business by quarter
Historical Cross-sell performance calculated by identifying any Cross-sell activity that occurred 4 quarters back from the quarter the customer churned (ex: the Cross-sell window for Q3’13 churned customers is Q3’12 – Q2’13).
Cro
ss-s
ell
Rate
His
tori
cal C
ross
-sell
Rate
Quarter of Cross-sell Quarter of Churn
2014 Gainsight, Inc. All rights reserved.
Cross-selling also limits churn exposure
Churn Reason Value
Competitor - Software $1.87
Lost Champion $0.84
No Traction $0.68
No Use Case $0.32
Product limitation $0.26
Total $4.16
1
2
Differentiate from competitor
Identify champions across multiple orgs
3
4 Solve multiple business problems
Drive user count across multiple orgs
2014 Gainsight, Inc. All rights reserved.
www.gainsight.com/pulsecheck
2014 Gainsight, Inc. All rights reserved.
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