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In his paper “The Four Phases to Becoming LAER Efficient,” TSIA’s executive director and executive vice president, Thomas Lah, discussed the growing need for technology companies to not only adopt a new customer engagement model called LAER, but, to also move through the stages of maturity.
In this blog, I’ll share what becoming LAER Efficient looks like for education services (ES) organizations and address the migration from the Traditional Transactional Stage to the Experiment Stage.
LAER is TSIA’s customer engagement model and it consists of four distinct groups of activities: Land, Adopt, Expand, and Renew.
To understand why LAER needs to be an integral component of an education services organization’s business model, let’s start at the beginning. For years, the standard customer engagement model has been a traditional transactional model. In its simplest form, customers pay up front to “own” the product and, in most cases, they pay an annual fee entitling them to product updates and/or upgrades and technical support.
This model is probably very familiar to most everyone and is likely the engagement model your company uses currently, was using in the recent past, or is in the middle of transitioning from, unless of course your company started as an X-as-a-Service (XaaS) company.
There are certain business activities that your company employs in support of this traditional transactional stage, as illustrated in the graphic below.
Like a well-oiled machine, this approach and its associated activities, have served businesses well, until recently.
So, what is preventing this traditional transactional business model from working as well as it has in the past? It’s the advent of XaaS, which unlike the traditional transactional model, does not require an up front purchase of product.
Instead, customers pay a recurring fee in the form of a subscription, renewable at some interval (e.g., monthly, annually, biennially, etc.). It is this pivot to managing a recurring revenue stream that is accelerating the creation of LAER initiatives across the technology industry.
Why is the pivot to LAER, not just for education organizations, but for all functions in the company, essential? Think of it this way: when the rules of a game change, you don’t want to be sitting on the bench because you don’t have the requisite skills needed to play the game. Applying yesterday’s traditional transactional model playbook to today’s XaaS model reduces the effectiveness of education organizations.
To sustain profitable growth in a XaaS model, there are three things a company must do:
Education organizations can help with all three of these things, but they must apply new playbooks and capabilities to do so. Just as there are four components to the LAER model (Land, Adopt, Expand and Renew), there are also four stages of LAER maturity: Transactional, Experiment, Effective, and Efficient.
The movement through these stages is likely to be migratory and incremental, versus a jump directly from Transactional to Efficient. This is largely true because there are capabilities that must be developed along the way and, thus, this leads to a gradual progression from one stage to the next as capabilities are acquired, proficiencies gained, and strategies socialized.
Before moving forward, a bit more context relative to capabilities is helpful, as each stage of the LAER model is comprised of various capabilities. These capabilities are categorized by capability markers and a definition for each marker follows:
Using the five markers listed above, let’s look at some of the new capabilities needed for customer training to migrate from the Traditional Transactional Stage to the Experiment Stage.
The Traditional Transactional Stage serves as the starting point, and while it looks very similar to the previous Traditional Transactional graphic, the capabilities are specific to education services instead of outlining the capabilities specific to the company. The capability markers, however, are consistent between the two.
As a level set, the following objective serves as the cornerstone that governs the need to acquire new capabilities: Everyone in the company is responsible for helping to drive customer retention and subscription renewal rates while minimizing customer acquisition costs.
The graphic below shows the capabilities associated with the Experiment Stage. It should be noted that there are some things that other organizations and/or the company will need to do, and progression from stage to stage may be hampered by the company’s progression from stage to stage. If, for example, your company does not have a customer success (CS) organization, then some of the capabilities listed may be moot points until the company forms a CS organization. However, it doesn’t preclude Education Services from acting on those capabilities over which it has control and preparing for the capabilities of the future.
Understanding what each capability is is essential to establishing a new playbook. Therefore, a description of each capability listed in the Education Services Experiment Stage column is provided.
Education Services Tracks Trained vs. Untrained Customers Against Technology Subscription Renewal Rates
Tracking education’s impact on product subscription renewal rates is critical. In its simplest form, look at trained customers (those who have consumed training content) and their product subscription renewal rate, as compared to untrained customers (those who have not consumed training content). For example, identify 100 companies that have consumed training and 100 companies that have not consumed training, and look at product subscription renewals for each. Is there a difference? Are renewal rates higher for trained customers?
Education Services Tracks Install Base Penetration Rate
While getting net new customers trained is important, equally important is addressing the opportunity presented by the product install base. Tracking the install base penetration rate provides visibility to the percentage of accounts that have consumed training content. The following formula can be used to calculate your education organization’s install base penetration rate.
Install Base Penetration Rate. Of the total product install base, the percentage of accounts that have consumed training.
Number of unique accounts that have consumed training / Total number of unique accounts that have purchased product
Penetration rate is invaluable, as it provides visibility to those companies that have not consumed training content. Providing training for the untrained helps to drive product usage, customer retention, and product subscription renewal rates.
Start collecting the following data:
Data collection and analytics are key capabilities in the conversion to a fully functioning LAER model.
A customer health score is a metric designed to predict customer retention and consists of 6-8 indicators that are measured regularly, usually by someone in the customer success organization. Scorecard results provide a probability report, of sorts, that enable line-of-sight relative to customer retention and likelihood of subscription renewal. The power of the scorecard approach lies in its dual functionality:
Training is one of the indicators that should be included in a scorecard because training drives engagement and engagement helps drive product adoption. A recently conducted TSIA Quick Poll “The Customer Success and Education Services Handshake,” asked the following question:
“How does education services participate in customer success activities and/or interact with the customer success organization?”
The following graph identifies some of those activities/interactions. Of note is the fact that only 18% of survey participants said that training is included in a customer health score. So, education organizations, go talk to your colleagues in Customer Success to ascertain how to include training in the scorecard.
Historically, in the Traditional Transactional Stage, curricula has been designed independently of an adoption curve, largely because one likely hasn’t existed, until recently. ES organizations should ask their CS organizations if an adoption curve has been developed, and then use it as the basis for structuring content, curricula, and offers.
Next Steps: If your company has a customer health scorecard, ensure that education services is a line item on the card, and also make sure that education services is integrated into your company’s customer adoption framework. Both of these items are dependent on a Customer Success organization or an individual who may have Customer Success responsibilities, so the timing of these two capabilities will be dependent on the maturity of your company and its movement through the four stages of LAER.
While the adoption curve spans across all customers, a journey map is specific to each customer. Based on the outcomes the customer wants to achieve, one customer’s road map may look different from that of another customer who is using the same product. A journey map is outcome-driven, and the more a company can support a customer in attaining those outcomes, the greater the probability of product subscription renewal and customer retention.
Referring to the “Role of Education Services in Customer Success” report, the following is cited:
Many of the interview participants said that their customer journey mapping process includes junctures at which to introduce education, support, and/or professional services. This ensures that all the service lines are included, when appropriate, and because the journey map takes a life-cycle approach, it provides the opportunity for education to be continuously represented at each critical stage in a customer’s journey.
Services Collaboration Score
In a XaaS model, a consideration for variable compensation (e.g., bonus pay) is a “services collaboration score.” Currently, variable compensation for most services organizations is not based on a collective metric, such as a collaboration score. Instead, variable compensation is largely based on each service line’s achievements. For example, variable compensation for ES staff is based on whether the education organization achieves its revenue, margin, and/or profit targets.
One of the characteristics emerging in fulfillment of the LAER model is greater collaboration between service lines. While granting variable compensation based on a collaborative metric, such as a services health score, is still nascent, it will likely become more prominent as companies mature in their usage of LAER principles. In the interim, education organizations might think of adding a component to variable pay that rewards ES staff for working cross-functionally in the design of a joint service offer, for example, or partnering with customer success to onboard customers. The point being that in a XaaS model everyone sinks or swims together, and the financial reward system should reflect that.
ES Liaison to Customer Success Organization
The reporting structure for the education services leader role is a hodgepodge, based on 2020 Education Services Benchmark Survey data. As shown in the graph below, at 26% each, the education leader most frequently reports into a Global Services or Professional Services leader. Thereafter, the results are scattered among Support, Sales, Customer Success and various other organizations. With the growing importance of customer success, it may make sense for the customer training organization, and other service-line organizations, to report to the Chief Customer Officer, or some such role. TSIA will continue to monitor this over the next few years, to see if such a change in reporting structure occurs.
In the absence of reporting into someone in a customer success role, the education function should consider appointing a liaison between ES and CS organizations. This begins to establish a relationship that is essential to subscription renewal and customer retention.
Next Steps: Appoint someone on your education services staff to act as a liaison between the ES and CS organizations. This individual’s role is to ensure that ES is represented in CS onboarding sessions, is included in the customer journey map and the customer health scorecard, if they exist, and is the voice of ES for any other CS activity in which ES should participate.
Education Services Benchmark data reveals that only 40% of ES organizations have any type of ES sales staff. Most ES organizations primarily rely on the product sales team to sell ES offers, which isn’t a great strategy, given that the attach rate for training is only 15%. If training drives adoption, and adoption drives product subscription renewals, and 85% of new product deals do not include training, then more than ES revenue is at risk. It should be everyone’s job to sell training, and there should be at least one person on the ES team whose focus is sales/business development.
A critical element in the migration from the Traditional Transactional Stage to the Experiment Stage is sales. It really is imperative that someone in customer training is digging through the sales pipeline and CRM system to identify opportunities. These opportunities can take three forms:
The point is these opportunities must be mined. We won’t dwell on number 1, as every ES organization is well aware of the importance of bonding with the product sales organization to foster ES sales. The bigger opportunity for ES is nurturing the install base — those customers who are using your product(s) but have never consumed or purchased training content.
Two strategies can be used to identify potential trainees in the install base:
Getting to all those people/companies that have not partaken of training and getting them the training that they need has direct implications for product usage and, ultimately, customer retention and product subscription renewal. The third sales opportunity listed above, cross-sell and upsell, will be discussed in a future blog post, when the transition to the LAER Effective Stage is covered.
Next Steps: Hire a sales/business development overlay and start mining data from the CRM system and the customer support call log. In the former case, ES is looking for customers that have never purchased training. In the latter case, ES is looking for companies/individuals with higher-than-average support call volumes. This creates two actionable lists of fee-based training opportunities.
Sales Rep’s Account, Someone Else’s Job to Drive Adoption
Anyone who has worked in the traditional transactional business model knows that the account manager, sales representative, or whatever the respective title, is the bona fide gatekeeper, and that most all customer conversations are routed through the rep or are sanctioned by the rep if he or she is not going to directly participate in a customer conversation. In the Experiment Stage, this does not change particularly.
The new variable in the customer culture equation, however, is renewal. If your company is in the Experiment Stage, it may well be that product subscription renewal responsibility is still a bit ill-defined. Is it the sales rep’s responsibility? Is it the customer success organization’s responsibility? Is it a separate subscription renewal function’s responsibility? Despite this, however, someone needs to focus on driving adoption, which fosters renewal, and that often falls to service organizations versus the sales function.
For this reason, in the Experiment Stage, ES needs to shift its mindset from simply providing training to driving adoption, and driving adoption consists of engaging product users via both structured and unstructured learning activities. Some of those activities can include blogs, how-to videos, chats, forums, champion groups, and communities, in conjunction with standard training offers, like instructor-led training and online learning.
The critical element is for ES organizations to understand their potential to influence product adoption by monitoring learner behavior and establishing content consumption patterns. Which users are/are not consuming training? What content is being consumed? How frequently do people consume training content? Knowing the answers to these questions paints a picture that allows ES to make some extrapolations. For example, if content consumption is low, then product usage/adoption could be affected.
When education organizations look at adoption, it consists of two viewpoints:
By default, if ES organizations can drive greater usage/adoption of training content, it follows that trained users use the product more.
Next Steps: Using the learning management system (LMS), collect learner consumption data. Identify low-level consumers and non-consumers. Develop programs to increase consumption and leverage the customer success organization, or anyone in a customer success manager role, to present this training data to customers and identify ways to drive engagement.
If education services wants to be a valued player in the XaaS game, it needs to acquire and/or develop the capabilities outlined in the Experiment Stage, and ultimately the capabilities applicable to the Effective and Efficient Stages.
Below is a checklist of the capabilities needed for customer training organizations to transition from the Traditional Transactional Stage to the Experiment Stage. Please note that capabilities are listed in a declarative form, as they are a statement of what customer training can do.
✓ ES tracks trained versus untrained companies against technology subscription rates.
✓ ES tracks the install base penetration rate.
✓ ES is a line-item in the customer health scorecard.
✓ ES is integrated in the customer adoption curve and curricula is mapped to align with the curve.
✓ ES is specified at distinct points in the customer journey map.
✓ ES collaborates with other service lines as a component for variable compensation pay.
✓ ES has appointed a liaison between the education and customer success organization.
✓ ES has appointed someone to a sales/business development role.
At our upcoming TSIA Interact virtual conference, I’ll go into this subject even more in-depth during my Power Hour session, “Leveraging Education Services to Drive Product Adoption,” and during my Business Challenge Accelerator sessions, “Developing Other Routes to Market” and “A Free/Fee Strategy in a XaaS Business Model.” In addition, you’ll hear customer training leaders discuss how their education organizations are using the LAER model to help drive product adoption. Be sure to check out all the sessions featured in our Education Services track. I hope to see you there!
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Post Date: October 19, 2020
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Maria Manning-Chapman, is vice president of research, Education Services, for TSIA. She has more than 25 years of education experience in the high-technology industry. Maria is well versed in the dynamics of running an education services business and has held leadership positions in operations, virtual learning, business development, curriculum development, delivery, and partner management over the course of her career.
The Technology & Services Industry Association (TSIA) is dedicated to helping technology and 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.