Starting about a decade ago, pure-play SaaS companies like Salesforce.com, Workday, and Box pioneered the concept of Customer Success Management (CSM). It was an organic solution to an inherent problem: since a large part of their revenue was up for renewal each year – and since customers typically had low friction to move – these vendors created CSM teams out of necessity with the objectives of driving Adoption, Expansion, and Renewal.
As mature enterprise companies move more of their products to subscription-based pricing (even if on-premise) and cloud-based delivery (in some cases), they are starting to launch CSM efforts out of the same need. Companies like Cisco, Adobe, and Red Hat have proven the impact of CSM at scale in large enterprise organizations. It's a no-brainer that Customer Success should be an important part of any company's transition to a subscription business model. Spinning up and scaling your CSM organization, however, isn't so straightforward; it requires unique and careful planning.
Here are five questions to ask yourself on the front end of your transition:
This is such a crucial action that it always surprises me how late many recurring revenue businesses are to segment their customers. It's intuitive for sales organizations at the enterprise level to think analytically about how to divide their offerings into tiers and run their plays accordingly. For post-sales organizations, it's equally important. Don't wait until your CSM workloads become unmanageable and unstrategic. This is your first step.
Think about what levers you'll use to define each segment. At Gainsight, we use employee count and Net Promoter Score (NPS) to create four tiers. You may have more, you may have fewer. Here are a few other levers that could inform your choice on a per-customer basis:
Furthermore, think about the “lift” you'll achieve from a program. While your largest accounts are your crown jewels, they may also already get the most attention, so it may be hard to prove the incremental impact of a Customer Success program. Conversely, your smallest accounts may be too low profile. We often find that the middle of your account base is where you'll find the highest ROI.
(Click image to enlarge.)
Think of churn as a disease. It's chronic, which means there's no miracle pill or easy cure. That's where Customer Success (and Customer Success Managers) comes in. Customer Success Managers (CSMs) are like doctors for your customers, diagnosing symptoms and treating the root causes, or suggesting specialists where needed. The summary of these vital signs is a customer health score.
A lot of factors go into a customer's decision not to renew your product or service, and each one weighted differently. Customer Success is about tracking as many as you can as accurately as you can. Ultimately, the biggest driver of churn is when your customer is unsuccessful using your product to achieve a desired outcome, hence the term “Customer Success.”
Many on-premise companies think they can't measure Customer Success because they don't have the deep telemetry into their clients' usage that SaaS companies do. But in reality, even SaaS companies find that the true picture of customer health goes far beyond usage. The plethora of enterprise systems companies have invested in over the last decade, from CRM, to marketing automation, to community, to support, to billing, all create a treasure trove of data to measure customer health.
From a recent survey we conducted with enterprise organizations, below are the most common factors tracked:
Using this data, you can create a system of scoring customer health to proactively mitigate risk and capitalize on opportunities for expansion and advocacy. In other words, you'll be able to predict and prevent churn as well as operationalize upsell and word-of-mouth.
Does it ever feel like you spend as much time figuring out how to prove your value to your executive board and to your customers as you do creating that value? Until you have an established track record of consistent wins, you might have a short leash. Speaking as a CEO who regularly checks in with my CSM leaders, these business reviews are invaluable not just for gauging the ROI of the team, but for strategic planning.
That's why we're careful to separate our metrics into leading indicators and lagging outcomes. Your team may be ultimately judged on net retention, for example, but that isn't a prescriptive metric. In addition, it may take a while for the impact of Customer Success to show up in renewal rates if you have multi-year contracts.
NPS and adoption are proven predictors of retention. If they're low, you know what specific actions to take to raise them. Here's a chart we use to measure ROI separated into leading and lagging indicators, as well as lever actions to take to move the dial:
Most companies building a Customer Success program into an established business have a plan to pilot with one product line with a vision to expand across the enterprise. So where should you start?
There is no perfect answer but consider the pros and cons of each starting point:
Again, no answer is perfect but make sure you go into the decision with eyes wide open.
I don't know how cross-functional collaboration works at your company. I've seen some highly insular Product and Sales teams, but that won't work in the era of Customer Success. A lot of organizations talk about alignment, but in CSM, you'll fail without a company-wide focus on the customer's outcomes. Sales can't just close and Product can't just keep their heads down and build. Here's how every department benefits from a customer-centric vision:
Sales: Better hand-offs, increased new business and upsell.
Renewals: Higher renewal rates and expansion.
Support: Higher customer satisfaction rates and more efficient ticket resolution.
Services: Lower time-to-value and higher services revenue.
Marketing: More advocates and sales references.
Product: Improved product development with better customer feedback integration.
Finance: Easier and faster access to financial information about your customers.
Make sure you pitch Customer Success as helpful for all departments and keeping them engaged. Build a slide on “what's in it for them” for each team and operationalize processes to show the impact in the early days.
The earlier you answer these five questions, the more solid your foundation will be as you grow your CSM team. Gainsight put together a quick and effective Maturity Model to score your company's Customer Success organization compared to those at companies of a similar size and scope. Take a few moments to fill it out and you'll get some specific, actionable advice on how to scale to the next level.
Post Date: September 28, 2016
Nick Mehta is the CEO of Gainsight, a Customer Success company that helps businesses grow faster by reducing churn, increasing upsell, and driving customer advocacy. As a huge sports fan, Nick thinks of his job as being like that of a head coach. His role is to help bring the right people together on the team and put them in the best position to win for our customers, partners, employees and their families. He's a big believer in the Golden Rule and we try to apply it as much as we can to bring more compassion to our interactions with others. And he talks way too fast and overuses the word "awesome" like it's going out of style. Before coming to Gainsight, Nick was the CEO of awesome leading Software-as-a-Service E-Discovery provider LiveOffice through its acquisition by Symantec and prior to that was a Vice President at VERITAS Software and Symantec Corporation.
The Technology Services Industry Association (TSIA) is dedicated to helping services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.