A quote from Andy, VP of Customer Experience, at Version One:
Outcomes management seems like it would fall into COGS. With a 15% investment on recurring ARR that seems like your CSMs would put pressure on your Gross Product Margin %. The costs for your CS Sales Rep are clearly an Operating Expense. That should give you great margins on upsell, which feels right to me. I.e. we believe that investing in customer success provides a lower product margin, but that lower margin is offset by protection of the renewal rate and more predictable LTV. Additionally, it generates Upsell revenue very efficiently. Basically what I’m saying is companies that invest in Customer Success should have a lower Gross Product Margin % during the transition period, but if the investment pays off then CAC will be lowered by more efficient Upsell and second order revenue!