Customer Success

Customer Success is the function at a company responsible for managing the technical and business relationships between a vendor and its customers with the intent of: (1) maximizing the value that customers generate from the solutions they acquired from the vendor by making them as profitable and productive as possible, and (2) maximizing the value the vendor can in turn derive from the customers resulting in sustainable corporate profits.[1]:25 and growth.[2]

Customer Success is an emerging but critical role in a company's success.[3]:1 The function is most commonly used in the software world and most prevalent among software as a service (SaaS) companies. Because Customer Success is a nascent, fast-emerging field of business, its organizational alignment and activities are still evolving.[3]:1 There is still a large amount of variance with respect to its scope of responsibilities, reporting structure, terminology used for describing its activities, metrics used for measuring its performance and more. While deviations exist in the specifics of the function, it always refers to the management of the relations between the vendor and the customers after the initial sale. However, successful companies do not only reorganize their teams between the pre and post sale, and rename the post-sale team Customer Success, but also instill a culture of customer centricity in decision making and goals.[4]

In fact, the explosive growth of the SaaS economy, fuels an increase not only in the importance of the Customer Success function, but also in the scope of its appeal and relevance in the industry. As put in the book Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue, Customer Success is really three different, but closely related concepts: 1) an organization, 2) a discipline and 3) a philosophy.[1]:23

Key sub-functions

As customer success is a nascent and fast emerging field, variance is still high with respect to its scope, reporting structure, terminology used for describing its activities, metrics used for measuring its performance and more. However, the key functions the CS team is often responsible for include:

  1. Technical Enablement: While the scope and level of effort (LOE) can vary drastically from a few hours to many men-years, almost every software solution, and generally any innovation, requires some level of initial setting and enablement.[5] This activity, which can also be referred to as Initial Implementation or the Customer On-boarding and Initial Engagement,[6] is normally the first that follows the initial sale of the solution and any add-on component of it and is normally governed by a statement of work (SOW) that defined the deliverables the software provider commits to provide, the timeframe for it and the commercial structure for the engagement. In many organizations, the team responsible for this function is referred to as professional services.
  2. On-Going Support: once a solution is enabled for a customer, the provider is responsible for certain guarantees of on-going maintenance and support (also referred to as technical support[6]) and in the case of SaaS, also "Operations", "Application Monitoring" and application performance management. While overlap in skill-set normally exists between technical enablement and on-going support, there are significant differences between the two in terms of the operational and commercial engagement and therefore they are almost always conducted by two adjunct by separate teams or sub-teams.
  3. Knowledge Enablement: arming the customer with the knowledge needed to make best use of the solution is a function that can sometimes be independent from the two functions noted above or sometimes provided by one of them. Formal and informal training are part of this function as well as customer-to-customer relations (like community sites) and self-service knowledge systems.
  4. Business Relations: rounding up the CS function is the team that manages the business relations between the customer and the provider. This function operates in parallel with the technical teams and is working with the customer to ensure they best utilize the provider's capabilities, expand and improve them. They will work to increase adoption of the solution, ensure renewal and expansion of contracts and manage executive relations. This includes being an advocate for the customer to various groups within an organization.

Customer Success Managers (CSM)

Presently, the Customer Success function within most organizations is embodied in the Customer Success Manager (CSM) job title.

The CSM acts as the main point of contact and as a trusted advisor for the customer from the vendor side as they are the one ultimately responsible and accountable for that customer's success.[7] The function may share many of the same functions of traditional account managers, relationship managers, project managers, and technical account managers, but their mode of operations tend to be much more focused on long-term value-generation to the customer. At its heart, it is about maximizing the value the customer generates from utilizing the solutions of the vendor, while enabling the vendor the ability to derive high return from the customer value. To enable that, the CSM must monitor the customer's usage of and satisfaction from the solutions of the vendor, identify opportunities and challenges from the way the customer engages with the solution and take action to help resolve challenges and foster expansion of the usage as well as the value from the solutions (to both sides) over time.

As a consequence, relentlessly monitor and manage the customer health is a key success factor for every CSM[8] as well as the need to deeply understand the drivers of value the customer gains from the solutions provided by the vendor.[9] Without such deep and timely understanding of these two aspects of the customer, the CSM will not be able to act effectively.

In young organizations, where the total number of employees (and customers) is small, the CSM may be the first employee of the Customer Success team.[7] As such, they will be responsible for most of the functions described above, which over time may be fulfilled by more specialized team members. Ownership of commercial responsibilities by CSM vary among companies. While some believe a CSM's neutrality from sales or commercial conversations may make a customer more likely to respond to and engage with a CSM, other view the ownership of the commercial relations natural to a long-term relations between a vendor and a customer and more empowering to the CSM.

For CSMs to fulfill the responsibilities of their role, they must be empowered by an organization's executive team to navigate freely among all parts of an organization.[10] This maintains the CSMs credibility with the customer as an effective resource. In organizations where CSMs are just another level of abstraction or a "screen" between the customer and the resources they need, the credibility of the CSM is compromised and the customer experience eroded which may result in a customer not renewing or expanding their business with the vendor. Furthermore, lacking the top-down support, will deprive the CSM the ability to garner the right resources needed by them to complete their jobs.

Background/history

Every company that sells its products and/or services to customers has functions responsible for managing the customer fulfillment and relations. In traditional businesses, those functions are referred to most commonly as "Fulfillment", "Post Sales" or "Professional Services".

In the world of technology, companies have been developing, selling and enabling software solutions for many years. At most of those companies the function responsible for managing the relations with customers used to be called "Account Management", "Operations" or "Services".

However, as the business world is changing and evolving into new fields, the method by which software is enabled to customers changes dramatically. One of the most significant changes in recent years has been the emergence of software as a service (aka SaaS).

SaaS is a method of enabling a software solution to customers in a subscription model that departs from the "old" model of granting a perpetual license that enables the customer to own the solution and therefore use it as they see fit (but also be responsible for its operation). Rather, when enabling a solution to customers as a SaaS, companies offer their products as services instead of physical objects, moving the economy to a subscription model.[3]:2 The customer "rents" the solution and is able to use it only for the period they have rented it for. The vendor enabling the solution provides not only the solution itself, but also the infrastructure that supports it.

The key implication of this new model is a fundamental shift in the engagement model between the software vendor and its customers. If in the traditional "enterprise software" model, a customer buys the license to the software and pays the vendor then, regardless of its actual usage, in a SaaS model, the customer pays a (much smaller) rent for the software every month.[11] The software vendor must therefore ensure the customer is using the solution and seeing value from it if they wanted to ensure the customer continues to pay their rent. This fundamental shift in the software industry's operating model revealed a need for a function at the company to own and ensure that success of its customers.[12]

The emergence of this function is what is now being referred to as Customer Success (CS).

While the trend towards SaaS has been going on since the beginning of the 21st century,[13] the understanding of the need for much stronger focus on Customer Success and therefore the creation of the field of customer success only began around 2010–2012.[14]:183 On LinkedIn, the world's largest repository of professional bios, only a very small number of people had titles that included "customer success" in 2010 or 2012. By 2015, this number was huge and growing rapidly.

The reason is that the impact of customer success on the performance and value of a SaaS company is huge. The CS function is responsible for retaining and growing the business that the sales team has secured. Case studies show that companies with strong CS teams outperform peers with weak or no CS teams in a multitude of financial criteria including customer retention (also measured by "churn", which is the opposite of retention), revenue growth rates, gross margin, customer satisfaction, and referrals. In fact, customer experience is the greatest untapped source of both decreased costs and increased revenue in most industries, but only if companies take the time to understand what underpins it and how they can benefit financially from improving it.[14]:20

References

  1. 1 2 Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016
  2. ↑ Definition: Customer Success Management. The Customer Success Association. www.customersuccessassociation.com/csa/definition-customer-success-management/
  3. 1 2 3 Forrester Research, Inc. An Executive Primer to Customer Success Management. April 2014
  4. ↑ Gulati, Ranjay, Silo Busting: How to Execute on the Promise of Customer Focus, Harvard Business Review, May 2007
  5. ↑ Rogers, Everett M.. Diffusion of Innovations, Fifth Edition. Free Press, 2003 Chapter 9
  6. 1 2 Lincoln Murphy, "Customer Success: the Definitive Guide", sixteenventures.com, 2015-08-11
  7. 1 2 Nirpaz G., Pizarro F., Farm Don't Hunt: The Definitive Guide to Customer Success, March 2016, p. 91
  8. ↑ Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016, Chapter 8
  9. ↑ Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016, Chapter 7
  10. ↑ Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016, Chapter 14
  11. ↑ Wood J.B., Hewlin, Todd and Lah Thomas, B4B: How Technology and Big Data are Reinventing the Customer-Supplier Relationship, 2013 P 152-3
  12. ↑ Bliss, Jeanne. Chief Customer Officer: Getting Past Lip Service to Passionate Action. Wiley, 2006 P. 5
  13. ↑ Barret, Larry (27 July 2010). "SaaS Market Growing by Leaps and Bounds: Gartner". Datamation. QuinStreet, Inc.
  14. 1 2 Manning, Harley and Bodine, Kerry. Outside In: The Power of Putting Customers at the Center of Your Business. Forrester Research, 2012

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