What Is a CSQL, and How Does It Impact Your CAC?

For B2B SaaS businesses trying to survive the economic uncertainty of 2022, financial efficiency is the name of the game.

Executive teams should be keeping a close watch on efficiency metrics, including CAC and CAC Payback Period, to ensure they’re running lean enough.

In our recent conversation with Alka Tandan, CFO at Gainsight, Alka introduced us to the type of lead that can play a key role in reducing CAC: the CSQL.

What’s a CSQL?

A Customer Success Qualified Lead (CSQL) is similar to a Marketing Qualified Lead (MQL) except, as you probably guessed, the lead comes from your Customer Success team instead of your Marketing team.

CSQLs are generated by Customer Success based on a few different sources:

• Upselling an existing account on new pricing tiers or add-ons
• Cross-selling additional products to an existing account
• Selling to different divisions within the same parent account
• Referrals from existing customers
  

For companies focused on efficiency, CSQLs present two clear advantages over MQLs.

1️⃣ First, they’re more or less free. The greatest cost of a CSQL is the CS team’s time, which does not fall under Sales and Marketing expenses in most orgs—and doesn’t factor into CAC equations.

2️⃣ Second, they're more likely to convert into customers.

CSQLs already have a relationship with your company. (Or, in the case of referrals, they have a relationship with one of your accounts.) This means they’re likely already familiar with your products and your unique value proposition. These leads are the hottest of the hot. They’re likely to close with minimal time and effort from your Sales org.

Why CSQLs matter (and not just to the CS team)

CSQLs are inexpensive, high-quality leads that can play a major role in bolstering your company’s durability during a challenging economy.

Bain recently recommended doubling down on customer relationships during periods of inflation, rather than looking to the CS org as a place to cut costs.

Why?

It’s well known that it’s more expensive to acquire a new customer than it is to retain (or upsell) an existing one. On top of that, losing a customer is especially painful for subscription businesses that rely on monthly or yearly renewals. Your customers are feeling the heat of a tough economy, and they’re looking for places to cut extraneous costs.

👉 Now is the time to invest in retention and customer loyalty.

CSQLs are not only low-cost and high-converting leads; they’re also an indicator of the health of your customer relationships. Loyal customers are more likely to upsell, cross-sell, or refer a friend. If your company is producing lots of CSQLs, you’re in a strong position.

Lastly, a steady stream of CSQLs allows your company to run a lean Marketing org.

In a more stable economy, SaaS Marketing teams run lots of experimental campaigns with unpredictable results. Some generate a huge quantity of leads, some produce exceptionally high-quality leads, and some fall flat.

In leaner times, your budget may require the Marketing team to focus on tried-and-true campaigns, rather than moonshots. Focusing on growing your CSQLs, not just MQLs, can free up marketing budget—reducing your CAC even further.

How to start focusing on CSQLs

If you want to start increasing your focus on CSQLs as a source of lean revenue, here are three things to consider.

1. Align with Sales and Marketing leaders

A shift toward growth from existing accounts is likely to prompt questions and confusion from your Sales and Marketing orgs. Align with your partners in Sales and Marketing on why this focus is shifting and what it will mean for their teams.

This can include changes in lead sources, lead distribution, quarterly goals, budget, and more. Marketing leaders may want to consider redirecting team efforts toward customer marketing efforts rather than lead generation.

According to Gainsight, these changes can actually improve the partnership between Sales and CS, rather than causing unnecessary conflict, if each team’s responsibilities and goals are clearly defined.

2. Implement growth tactics within CS

No one in the company spends more time with customers than your Customer Success team. They have a pulse on which customers are the most engaged, the hungriest for additional products, and the most likely to refer new customers. They’re a great source of inexpensive leads, so they will need clear goals and tactics to make your efforts as successful as possible.

CS leaders should consider implementing a variety of tactics to boost CSQLs:

• A push for upsells or cross-sells once an account reaches a certain level of customer health
• Special pricing offers for upsells
• Loyalty rewards for renewal customers
• Offering incentives to customers for referrals
• Implementing performance-based compensation or bonuses for CS team members

3. Track the right metrics

Your company may decide it’s helpful to set quarterly or monthly CSQL goals. If that’s the case, you will need a clear way to track success. This can be as simple as a new lead source within Salesforce, or it can be any other way that clearly attributes the lead to CS.

The most important thing is to have one source of truth that all departments can agree upon. For most orgs, CSQLs should be attributed to the individual CSM for performance tracking.

An increase in CSQLs will have an impact on your top-level business metrics. As this shift in focus occurs, keep an eye on your CAC and CAC Payback Period. If your efforts are successful, you should notice both of these numbers decreasing.

Additionally, you’ll want to monitor your NRR. Redirecting your company efforts toward your install base will likely increase retention and upsells, in addition to improving your efficiency metrics.

In conclusion

As your organization navigates a shift toward growth from existing customers, it’s critical to measure what matters.

Subscript can help you keep a finger on the pulse of your most important B2B SaaS metrics. Request a demo today.