What customer success does for your company?

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What is Customer Success?

Customer success simply means focusing on the results your customers get from using your product1. The more successful outcomes your product generates, the likelier they are to continuing using it. This might seem like common-sense, but involves a basic shift in thinking – from products and features to outcomes and business benefits. That is, focusing on why customers bought your product and whether those needs are being satisfied.

As Mikael Blaisdell, Executive Director of The Customer Success Association, explains2, the growth of SaaS has meant that vendor profits are no more primarily created at the point of sale of software licenses. Instead, they are spread across the entire customer lifecycle. “The basic nature of the new business model means that the burden of getting value from the software, once left almost entirely to the customer, sink or swim, has now shifted profoundly back towards the vendor.”

Customer Success versus customer support/account management

Many companies incorrectly assume that customer success is simply a new name for existing customer support or account management functions.

The prime difference between customer success and customer support is that support is a reactive process3. By the time most customers have approached your support teams, their problems have cost them time and revenue, and sped them towards disengaging from your product. Customer success takes a proactive approach, monitoring customer health/happiness as an ongoing process that can predict and resolve roadblocks before they arise or escalate.

While the reactive-proactive difference also applies to account management, you should also note that account managers are mainly concerned with your revenue relationship with the customer4. Customer success builds customer lifetime value by laying the relationship foundation on which account managers work to expand revenue streams.

What Customer Success does for your company?

The two big concerns for any company seeking growth are customer churn and revenue addition.

As an article on ForEntrepreneurs.com5 points out, most companies dependent on a recurring revenue model derive 70-95% of their revenue after the initial sale.

For such companies, churn may not seem like much of a problem in the initial phases of a company, where new bookings can more than compensate for lost customers. But as a company grows, the number of fresh customer acquisitions required even to maintain current revenue baselines grows prohibitively high.

It’s no surprise that customer success leader Totango found in its 2016 SaaS Metrics Survey6 that nearly 39% of high growth companies showed churn rates under 5%, while only 29% of low growth companies could match up to these rates.

The best scenario for companies is a negative churn rate, where the revenue from expansions, up-sells and cross-sells to the existing customer base exceeds losses from churn7. As Totango’s survey, found, this marks the difference between high growth and low growth companies, with 35% of the former having high-upsell rates over 40%, while in low growth companies this figure dropped down to just 3%.

As a proactive approach, customer success contributes to both these factors. It allows companies to identify factors producing churn and resolve them much before customers decide to terminate their relationship. And it also allows a much clearer insight into the customer base and their product usage and outcomes, so companies can decide how best to expand the engagement with their product at every step of the lifecycle.

What does successful Customer Success management involve?

There are three basic components to successful customer success management8. Firstly, a comprehensive customer success solution – software that allows you to measure user activity and the customer relationship, and the service that can use these inputs to provide the necessary support and consultation that will maximise customer outcomes.

Secondly, it requires a customer success strategy, one which helps a company decipher the various touch-points in a customer life-cycle when interventions are necessary, and the channels and methods through which they can be carried out.

Finally, successful customer success management requires a customer success team to effectively implement it. Although the make-up of such teams varies among companies, a variety of functional profiles go into a successful team – from sales and marketing to onboarding, implementation and professional services to training and documentation.

Does your company need Customer Success management?

While customer success arose as an idea primarily within SaaS companies, it applies to any B2B enterprise providing technology-based solutions capable of collecting usage information. After all, the principle that a customer should successfully use any product they buy is a universal mantra.

References

[1] http://www.gainsight.com/guides/the-essential-guide-to-customer-success/
[2] https://mindtouch.com/resources/what-is-customer-success
[3] http://www.gainsight.com/guides/the-essential-guide-to-customer-success/
[4] https://www.totango.com/blog/2014/04/the-difference-between-customer-success-managers-and-account-managers/
[5] http://www.forentrepreneurs.com/customer-success/
[6] http://customer-success-resources.totango.com/h/i/202366530-5th-annual-saas-metrics-report/190554
[7] http://www.forentrepreneurs.com/why-churn-is-critical-in-saas/
[8] http://www.gainsight.com/guides/the-essential-guide-to-customer-success/

 

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