Customer Satisfaction

For years, enterprises have been buying subscription software aimed at more effectively acquiring customers. Initially, it was just CRM, but with the emergence of big data technologies this has trend has expanded to include marketing and sales automation. And in each of these categories, several multi-billion dollar companies have been built. But acquiring customers is just one half of the revenue generation equation. The other half is retaining and effectively monetizing the ones you already have.

Enter Gainsight, an enterprise customer success management platform helping companies in the subscription economy monitor the health of their existing customer relationships. Today, the company announced a $20 million Series B round of funding, just six months after announcing a $9 million Series A. The latest financing was led by Bain Capital Ventures with participation from existing investor Battery Ventures and new investor Summit Partners.

The company also announced the next generation of its software platform and the addition of Denise Stokowski, formerly VP of Consulting, Professional Services at Marketo, as its new VP of Client solutions.

“Looking at the big picture, marketing and sales automation solutions are fantastic at getting customer in the door. But what happens when they become a customer?” says Bain Capital Ventures’ Managing Director Ajay Agarwal. “When you think about the amount of value that existing customers deliver – in terms of revenue, upsell potential, referrals to new customers, and references – it’s really the lifeblood of your business.”

While other customer success vendors focus on one of these above performance verticals, Agarwal believes that Gainsight is the first company to deliver a full 360 view of a customer, how they’re using your product or service, and how that’s changing over time. Bringing this information together from across various data silos allows companies to extract insights that can be invaluable to numerous areas of a business, including not only sales, but also marketing and the C-suite.

Gainsight CEO Nick Mehta aims to quantify the impact of customer success management, saying in a statement today:

A recent research study of public subscription businesses revealed that a 2 point improvement in retention rate can lead to a 20% or greater improvement in company valuation. Echoing these findings, a recent Gainsight survey of more than 100 leading subscription businesses showed that companies with a Customer Success team report a 24% lower churn rate than companies without one.

Gainsight’s views its market opportunity as the $500 billion subscription economy, and already counts Angie’s List, Castlight Health, Informatica, Lotame, Eloqua, Marketo, and Citrix among others as existing customers.

“This is way earlier than we originally planned [to raise our B round],” Mehta says. “We thought we’d go out to raise again in 2014. But the attention and demand we’ve seen from the market this year was far bigger than we originally anticipated. Combine that with what I would call a pretty sizable product roadmap and inbound interest from investors, and we decided to strike while the iron was hot and accelerate the next phase of our plan.”

In addition to its financing news, Gainsight also pulled the curtain back on the next generation of its backend platform. The platform now integrates with the post popular CRM systems, including Salesforce.com, Oracle Sales Cloud, Netsuite, Microsoft Dynamics CRM, SalesLogix, SAP, and Siebel, among others.

These integrations allow users to drill down into customer success data on individual customers without ever leaving their CRM interface. This includes access to insights like a customer’s purchase history, current and historical usage rates, helpdesk instances, and other data that reveals overall customer satisfaction. Gainsight uses natural language processing to analyze text-based data and identify critical moments in each customer’s lifecycle. These moments are highlighted in a feed analogous to the Facebook timeline, Mehta says.

With a better view into the health of individual customer relationships, sales teams can better target the happiest customer for upsell and cross sell opportunities, while marketing can strategize around who to approach for testimonials and referrals. When a customer appears dissatisfied, account managers can provide proactive outreach to reduce churn. Overall, Gainsight aims to assist companies in analyzing existing customer data to make informed and proactive decisions, rather than the reactive one they would otherwise be forced to make.

“Companies all have tons data about their customers, but they can’t make it visible to their front line people,” Mehta says. “Salesforce is just the tip of the iceberg. But if people want to go deeper, they need to ‘go see the wizard of oz,” aka their engineering team to get access. We’re working to change that.”

While Gainsights clients may relish having all this data at their fingertips, not all are able to make effective use of it without direction from the company. This is where newly appointed VP Customer Solutions Denise Stokowski comes in. Stankowski and her roughly ten person (and growing) team are in place to deliver advice around effectively implementing and leveraging Gainsight technology.

“We’re starting to build up quite a bit of expertise in certain categories,” Mehta says, adding that his company has found particular success in the health IT, marketing, and human resources software verticals. Stankowski’s job will be to distill the best practices from these existing customers and help the entire Gainsight ecosystem operate more effective.

“A big part of what Siebel did well was to educate the world that it needed salesforce automation” Agarwal says. “Gainsight will have to take a similar market leadership and educational role. The market is shifting and companies are starting to realize that they need to think about and put energy into their installed base”

Gainsight has 55 employees today, including approximately 30 engineers. Mehta expects its engineering team alone to surpass 100 within the next 12 months. The company will also need to grow substantially in both sales and customer success if it’s to keep up with the current market demand.

The CEO and his team are in the early innings of what is sure to be a highly competitive contest. While there may be no notable challengers to its market leadership today, the opportunity is far too large for this to remain the case for long. Mehta’s is the quick to acknowledge that biggest challenge at this stage is the unknown, saying “You have to think through the chess game that is scaling personnel and financing in concert with customer growth.”

There will almost surely be a billion dollar-plus company built in the customer success management vertical, as there are very few companies that wouldn’t benefit from reducing customer churn, and increasing upsell and cross-sell efficacy. With impressive early momentum, and now the resources and leadership to capitalize on the opportunity at hand, Gainsight looks to be well on its way to installing itself as the dominant force in this category.

[Image via IntoTheMinds]