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Managed Services

Why Customer Success Is Vital to Managed Services

The Role of Customer Success in Managed Services Business

3 min read
By Luke Ronkowski

Many companies focus so much on trying to close their managed service deal that they don’t realize they lack the proper foundation to support customers once they go live. This can be a roadblock to your customer achieving their desired outcomes, and could hurt your chance at keeping them as customers.

If your company provides managed services, it is imperative that it includes a customer success function.


Ask yourself:
  • Who owns customer onboarding?
  • What happens during the lifecycle of the engagement?
  • Who owns the renewal?
  • Who owns expansions?

These, amongst other questions, are what a customer success organization can help you solve.

Why Does Managed Services Need Customer Success?

While your entire organization is responsible for owning the customer and ensuring they get value, customer success is on the front lines of this effort. Customer success ensures that your company is delivering on the promise of its product or service. This means that by using your product/service, the customer should achieve their desired business outcomes—and customer success is there to help them do that.
 
Customer success guides your customers to the value of your services through successful adoption. Customer success managers become trusted advisors to your customers. When the customer has frustrations, the customer success manager becomes their dedicated person to talk through the problem. It’s unsurprising that companies that do not have a customer success organization tend to have a higher discount rate at the time of renewal.
 
Customer onboarding, which is when your customer is introduced to your technology and begins their journey with adoption, is a crucial time to support the customer by walking them through every step. There may be services that are still tied to the old provider or information that was promised during that handoff that was never provided. Getting through this phase with minimum “bumps and bruises” with effective customer success establishes a good first impression with the customer. It also sets your company up for additional expansion opportunities and increases the chance of renewal.  
 

Developing Your Customer Engagement Model

Managed services businesses must develop a customer engagement strategy that clearly delineates who owns each process, motion, and activity.

 
As a managed services organization partnering with customer success, it’s important to place your roles and overlapping responsibilities inside a customer engagement model. LAER (Land, Adopt, Expand, and Renew), TSIA’s customer engagement model, was developed to help businesses drive growth and help companies maximize customer engagement.
TSIA's LAER Model
TSIA's LAER Model
For companies that don’t have a customer success organization, we’ve seen the sales department take ownership of LAER—this is a mistake.

Customer success should own the adoption, expansion, and renewal phases, while sales owns landing deals.

 
When sales runs motions of adoption, it is a higher cost to the company. Because sales is the highest paid resource in the company, it is cheaper for customer success to own adoption. This allows companies to shift the cost away from the sales organization and sales to focus solely on landing new business.
 
Be mindful of where teams are unnecessarily doubling your efforts to solve the same problem—develop a “divide and conquer” mindset. The more your teams communicate, the better you’ll be able to usher customers through the engagement model. 

Customer Success’ Role in Managed Services

Once customer success is able to help the customer through the adoption phase, one of their goals will be to help expand revenue through cross-sell and up-sell. Because they already earned the trust from the customer, this is much easier for a customer success manager than a salesperson.

What are some of the responsibilities for a customer success manager?  

Understand Customer Business Challenges ​

  • Identify current pain points and desired outcomes that are affected by the services under contract​.

Drive Customer Outcomes​

  • Help the customer optimize the utilization of their existing and available products and/or services​ through adoption.

Oversee activities​ such as:

  • Onboarding: Introducing the customer to your technology and making your sales promise reality.
  • Training​: Ensuring the customer is maximizing their services by training them to effectively adopt your technology.
  • Advocacy​: Engaging with customers, gaining trust, and encouraging those customers to share their experiences with other potential customers.
  • Escalations​: When necessary, providing additional support when something is not working as intended.
As a managed service provider, make sure you’re able to articulate the customer success’ role to your customers and even your own team. This will help clear up any confusion on who the customer should go to for what, creating a better customer experience.
 

Three Key Metrics to Track

Our data shows that offering customer success for managed services is a dominant practice.
Managed Service Customer Success Offering Poll
Percentage of Managed Services Providers That Offer Customer Success
Understanding the right KPIs for customer success can help you focus your time and resources towards things that matter. You can see on the chart below that there were three top metrics that customer success managers use to gauge effectiveness.
3 Metrics for Gauging Success with Customer Success
Metrics for Customer Success
For the 76% of managed service organizations that answered “yes,” the focus of their customer success managers tends to be on retention and renewals. If your customer is effectively adopting your product or service, they should naturally renew.
 
While it is important to make sure customers renew, having a dedicated resource that also focuses on expansion will help increase​ profitability​. Base revenue growth is a great metric to measure the success of expansion efforts. The goal here is to focus on any related services you offer that the customer can also utilize, and then up-sell to them. You can even compensate your customer success managers based on this metric.
 
Lastly, tracking customer satisfaction is one of the most important indicators of growth intentions and customer loyalty. We see time and time again how high customer satisfaction leads to a higher chance for renewals and business growth. Since customer success is the customer’s trusted advisor, customer satisfaction is a key metric to gauge performance.
 

Building Customer Success Into Your Organization

As you can see, if you provide managed services, there are many benefits for having a customer success organization within your business.
 
To utilize this function:
  • Understand the four phases of LAER to help you drive growth and adoption.
  • Ensure customer success is responsible for renewal and expansion efforts and employees are compensated accordingly.
  • Track the right metrics to drive better customer satisfaction and retention.

 October 13, 2022

Luke Ronkowski

About Author Luke Ronkowski

Luke Ronkowski is the director of managed services research for TSIA. He is an experienced IT Services executive with 15+ years of experience in IT and Managed Services businesses. In his role at TSIA, Luke is responsible for leading and delivering TSIA member organizations with operational best practices, fact-based education, and insight into the performance and operations of their managed services business.

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