Customer Loyalty is Directly Correlated to Higher Lifetime Customer Value
There is no escaping the value of customer loyalty. The lifetime customer value of customer advocates is enhanced by their referrals and references that help feed the top of the funnel for new customer growth.
Consider two companies: one with a steady 20% growth rate and a 90% retention rate, and another with a 30% growth rate and a 100% retention rate. The first company is typical of many recurring revenue companies, while the second is reflective of an organization that is committed to using their Customer Success team to deliver value to customers to ensure their loyalty and become advocates for them.
Take note of the Total Annual Recurring Revenue of both companies by year 10 – a 118% difference. Powerful, isn’t it? There’s just no getting around the value of loyal customers:
- Existing loyal customers that become referenceable advocates feed your funnel for new sales, which dramatically affects your total ARR.
- Budget and spend should be adjusted to reflect the value of customer retention over new (logo) acquisition.
Because of the high value of loyal customers, it’s worth reconsidering how you organize your customer acquisition funnel. See how referrals from loyal customers can be a large source of leads for the organization. While Customer Success Managers are not salespeople, they’re clearly responsible (directly or indirectly, depending on your charter) for account stability, growth and referrals.
A new funnel, where loyal customers refer new prospects reflects the high value of Customer Success. This understanding is foundational to the executive decision to invest in Customer Success. The math is irrefutable and the next steps are pivotal.