Service Revenue Generation
While it will always be important for technology companies to create great technology, they must also take a more proactive role in ensuring their customers are successfully using the technology. As a result, many technology companies have begun offering adoption services. Though traditional services focus on making technology available to customers, adoption services deliver a more compelling value proposition–they ensure customers derive value from the technology in an accelerated manner.
While some of the more basic tiers of adoption services can be included with the purchase of the technology subscription, the more labor-intensive and/or higher value adoption services should be offered for a fee. But how do you decide where to draw the line between free and fee adoption services? In this post, I will deconstruct Salesforce's approach with adoption services to help you understand what a successful monetization strategy looks like.
Here’s a quick view of the 28 known adoption services being used across the industry today, categorized into four areas.
(Click image to enlarge.)
Adoption services are designed to guide the customers down the right path to achieving their desired outcomes through the effective use of the technology. While some companies may find it difficult to move customers from a basic or free support offering into a premium fee-based offer, this traction really only starts to happen when the technology company is able to effectively combine these adoption services into their premium support services. This can be a powerful combination, as you’ll see from Salesforce.
They spend time studying the customers on their Premier Success plans in order to determine how to effectively meet their needs. They’ve found that their customers who are on the fee-based Premier Plans are experiencing an increase of 52% in user adoption and a 37% increase in productivity. These improved results come not only from support services, which are important, but also from the adoption services. A good blend of both is needed in order to successfully help your customers reach their business objectives.
To provide a better overview of Salesforce’s offers, I’ve created a framework that deconstructs their support tiers. You can see that at the top we have their free offer, and to the right there are four different premium, fee-based offers that are a combination of both support (represented here in blue) and adoption services (shown in orange).
The first thing I’d like to point out is that their free offer is scalable, as it’s self-service oriented. When you take a look at their premium bundle, it’s clear they’ve recognized that one size does not fit all, and therefore, they offer four different choices depending on their different customer profiles, segmentations, and business needs. Here’s a breakdown of their different support tiers.
In their free support tier, customers have access to the knowledge base, but can only access customer support via the online portal, which allows Salesforce some flexibility in how they manage the case volume coming in. They also offer “getting started” training, as it’s important that all customers start off on the right footing. When it comes to response time and hours of coverage, issues are resolved within two days during regular business hours.
The Premier bundle is the lowest priced support bundle Salesforce offers, and it likely appeals to a large number of customers. You’ll notice that it's not over-bundled, which is the ideal way to provide a gentle transition from a free to fee-based support offer. It’s important to make the price of your first type of entry-level into fee-based support bundle competitive, and to not put a lot of expensive labor-based services into it. Instead, make sure it’s made up of compelling and scalable support and adoption services. The goal here is to get as many of your customers off of the free model and onto the premium fee-based bundle, and you can do this by providing helpful services at an affordable price.
In this case, Salesforce’s first premier bundle is differentiated from free support by being the first point where phone access to customer support is introduced, with response times dropping down from two days to an hour, and being available 24/7 rather than during regular business hours. Customers in this tier also have full access to their e-learning library as well as “getting started” training.
There are also a number of one-to-many adoption activities ("premier success resources"), such as onboarding, which allows Salesforce to reach multiple contacts at once and extend their precious customer-facing resources across as many customers as possible. On a related note, Salesforce offers the availability of a customer success manager, but only if a customer is spending more than a million dollars on their subscription, or if their Premier bundle is priced at one hundred thousand or more dollars per year. Customer success managers are a finite resource, and Salesforce has created conditions to attempt to deploy them with customers who can benefit the most from them, that is, where there are larger Salesforce technology engagements.
For customers that have regulatory compliance rules, like HIPAA, where they have to have background checked US employees answering the phone, Salesforce has a support offer that meets these specialized needs. By being on the higher end of their support tiers, they are likely monetizing these investments that they’ve made on the background checked US employees.
The most expensive and specialized resources are reserved for Salesforce’s highest level of support, Mission Critical. Customers that are part of this tier are ones who need proactive monitoring, a TAM (technical account manager), and other skilled support staff trained to take preventative measures. Some CIOs with very large or very sensitive applications of technology will require this level of white glove treatment. In TSIA's experience, this will be 10% or fewer of your customers.
If your company has the objective of moving a high percentage of your customers off of free support and onto fee-based support and adoption services, Salesforce is a good example to learn from.
Here are my recommendations on establishing fee-based premium bundles:
The days of unlimited free support and free adoption services are over. It doesn't take long for companies in XaaS models to come to the conclusion that "free" is not a sustainable strategy for the long term. Creating a compelling portfolio of support and adoption services will ensure your customers are successful, will infuse more profitability into your cloud model, and will ensure that your organization has the funding to continue to invest in new support and adoption capabilities for the long haul.
For more case studies and examples of how to offer and monetize adoption services, be sure to watch my on-demand webinar, “Engaged Customers that Spend More Money!” where I share even more examples of successful adoption services provided by Amazon Web Services, as well as TSIA’s recommendations for free, fee-based, and stand-alone offers. What types of adoption services does your company currently offer? Let me know in the comments!
Post Date: January 28, 2016
Julia Stegman, is the former vice president of research, Service Revenue Generation, for TSIA and was with the company for 7 years. She has over 25 years of experience in the high-technology industry, and was responsible for driving the TSIA research agenda related to the growth of maintenance, SaaS, and managed service revenues as well as the expansion of product revenues with existing customers.
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