For most early-stage subscriptions startups, understanding your cost for customer service and customer success for each of your customer segments can go a long way towards understanding your long term sustainability. What do we mean by this? Your customers fall into buckets (or segments) based on unique characteristics (industry, MRR, # of units/seats, etc.). Understanding the difference in the customer service and success costs across these distinct groups can help uncover you ideal customer profile and highlight product-market fit issues. Let's dive into how you can calculate this.
For your customer service and success teams, time is money, the more time they spend with a customer, the most that customer is costing you and shrinking their retention margins. To start understanding how the costs differs across your customer segments we need to find the approximate cost of each of your teams customer service and success interactions. To get this, you want to go into your finance/accounting system (Quickbooks, Xero, etc.) and find all of your service and success teams costs (salaries, benefits, tools, etc.) and add them all up for a total for each category.
Once you get those numbers we then need to find the approximate number of events or activities these teams have had with customers, we typically recommend you look at the trailing 12 months and then we will divide by 12 at the end to make it monthly. Go into your CRM, Service Platform and/or Success platform, whichever tools you use, and run a query against those systems to find all of the customer events tied to the ID's of your customer service and success teams. Take our total costs from the paragraph above and divide by your number of success interactions, then service interactions and BOOM, you have your average cost per service interaction and success interaction.
Now here is where the magic happens, if you have some form of industry categorization or tag in your CRM, group the numbers of interactions by those industry tags. That is your number of service and success interactions for the last 12 month per each customer segment, then divide those numbers by 12 and you have your average number of interactions per month that your customer success and service teams typically have with each customer segment in a given month. Then take that number, multiply it by your average cost per interaction and you get your average customer success and customer service costs per month for each customer segment.
Once you calculate those numbers you can use them to help uncover quite a lot about your recurring revenue business. You can look across customer segments to spot if a specific customer segment has abnormally high or low service and success costs. Low success and service costs typically indicate good product-market fit (no need to help or service tickets) and it can also lead to strong margins and positive unit economics which means that driving growth in that segment will lead to sustainable growth and positive unit economics for your startup.
Hopefully this article can help you an d your team get started on an exploration of your cost to serve or cost of success with you customer segments. If you have any questions or would like to chat more with the Talkin' SaaSy team reach out to us on our Contact Page and we are happy to see how we can help!