Customer success

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human engaged in customer success related work

Customer success, also known as customer success management or client advocacy, is a business strategy focused on helping customers achieve their goals when using a product or service. It involves providing support and guidance to ensure customers get value from their investments. This approach aims to reduce customer churn and create opportunities for additional sales. As a specialized form of customer relationship management, customer success management focuses on implementing strategies that result in reduced customer churn and increased up-sell opportunities.

Contents

The main objective of customer success is to ensure that customers meet their goals, which can lead to higher customer lifetime value (CLTV) for the company. It has become an important aspect of many businesses, with teams and tools created to support this effort

MetricDescription
NRR[ citation needed ]"Net Revenue Retention" eventually helps calculate a concrete dollar value to all the work around customer success. Net revenue retention is calculated as Initial revenue + revenue from cross-sell or ups-sell - revenue lost from churn.
NPS [1] "Net Promoter Score" is a management tool that can be used to gauge the loyalty of a firm's customer relationships. It serves as an alternative to traditional customer satisfaction research and is claimed to be correlated with revenue growth. NPS is calculated by subtracting the percentage of detractors (those who give a score of 0–6 on a 0–10 scale) from the percentage of promoters (those who give a score of 9 or 10), with the resulting score ranging from −100 to 100.
CSAT [2] "Customer Satisfaction" is a score that indicates how satisfied a customer is with a specific product, transaction, or interaction with a company. The term "CSAT" is most often used in the context of a "CSAT score", which describes a numerical measure of customer satisfaction. CSAT is typically measured by asking customers to rate their satisfaction on a scale, such as 1–5 or 1–10.
CES"Customer Effort Score" (or "Net Easy Score") is a single-item metric that measures how much effort a customer has to exert to get an issue resolved, a request fulfilled, a product purchased/returned or a question answered.
Churn [3] Churn rate, when applied to a customer base, refers to the proportion of contractual customers or subscribers who leave a supplier during a given time.
Health score [4] Health score is a metric that measures the overall health of a customer account or relationship with a company. It takes into account various factors such as customer engagement, product usage, customer feedback, and financial data to provide a holistic view of the customer's health and likelihood to renew or continue doing business with the company.


Key sub-functions

Customer success (CS) teams perform several key functions, which include:

Technical enablement

The scope and level of effort (LOE) for technical enablement can vary greatly, ranging from a few hours to increased manpower and time. Almost every software solution and innovation requires some level of initial setup and enablement. [5] This activity is also referred to as Initial Implementation or Customer Onboarding and Initial Engagement. This step typically follows the initial sale of the solution and any add-on components and is often governed by a statement of work (SOW) defining the deliverables, timeframe, and commercial structure for the engagement. In many organizations, the team responsible for this function is referred to as professional services.

Knowledge enablement

Knowledge enablement involves providing customers with the knowledge needed to make the best use of the solution, which can sometimes be a separate function from technical enablement. Formal and informal training, customer-to-customer relations (such as community sites), and self-service knowledge systems are all part of this function.

Identifying growth opportunities

During the contract lifecycle, the customer success manager (CSM) has direct access to conversations related to the client's business growth. As a "trusted adviser", it is a key function of the CSM role to identify expansion opportunities, either in terms of feature or function expansion.

Identifying churn risk

Utilizing a customer health score is crucial for identifying churn (or lost revenue). As the main point of contact for accounts, the CSM has visibility into the possibility of canceled accounts. The CSM can intervene when needed to help decrease the likelihood of a lost account.

Key tools

Customer relationship management platforms

CRM platforms such as Salesforce, Hubspot, etc.

Customer success platforms

CSP platforms such as Gainsight, Totango, Planhat, etc.

Value management platforms

Value management platforms such as Intelo.ai goes beyond CSPs to work in CRMS and project management platforms to enable customer success.

General account management

Although customer success is a more comprehensive approach to account management, a significant portion of the day-to-day responsibilities falls under the "account management" title. The CS team manages the business relationship between the customer and the provider. This function works in parallel with the technical teams and collaborates with the customer to ensure they best utilize the provider's capabilities, as well as expand and improve them. The team works to increase adoption of the solution, ensure contract renewal and expansion, and manage executive relations, which includes acting as an advocate for the customer to various groups within an organization.

Customer success managers

Presently, the customer success function within most organizations is embodied in the customer success manager (CSM), client relationship manager (CRM), or client strategy consultant (CSC) job titles.

Customer success managers (CSM) act as the main point of contact and as trusted advisors for the customer from the vendor side as they are the ones ultimately responsible and accountable for that customer's success. [6] 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 monitoring and managing the customer health is a key success factor for every CSM [7] as well as the need to deeply understand the drivers of value the customer gains from the solutions provided by the vendor. [8] Without such deep and timely understanding of these two aspects of the customer, the CSM would 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. [6] 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, others view the ownership of the commercial relations as natural to a long-term relationship 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. [9] 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 of the ability to garner the right resources needed by them to complete their jobs.

Virtual customer success managers (VCSM)

Virtual customer success managers are remote points of contact for customers and monitor the success of customers, providing important feedback.

Background and history

Every company that sells products or services to customers has functions responsible for managing customer fulfillment and relations. In traditional businesses, these functions are most commonly referred to as "fulfillment", "post sales", or "professional services".[ citation needed ]

In the technology sector, companies have been developing, selling, and enabling software solutions for many years. At most of these companies, the function responsible for managing customer relations was often called "account management", "operations", or "services".[ citation needed ]

As the business world evolves into new fields, the method of delivering software to customers changes as well. One of the most significant changes in recent years has been the emergence of software as a service (SaaS [10] ).[ citation needed ]

SaaS is a subscription-based method of delivering software solutions, moving away from the "old" model of granting a perpetual license that allowed customers to own the solution and use it as they saw fit, while being responsible for its operation. With SaaS, companies offer their products as services instead of physical objects, transitioning the economy to a subscription model. [11] : 2  Customers "rent" the solution for a specified period and the vendor provides not only the solution itself but also the supporting infrastructure.

This new model represents a fundamental shift in the engagement between software vendors and their customers. In the traditional "enterprise software" model, customers buy a license for the software and pay the vendor upfront, regardless of actual usage. In the SaaS model, customers pay a (much smaller) recurring fee for the software. [12] Consequently, the software vendor must ensure that the customer is using the solution and seeing value from it to continue receiving payments. This shift in the software industry's operating model highlighted the need for a dedicated function within the company to ensure the success of its customers. [13]

This emerging function is now referred to as customer success (CS).[ citation needed ]

Although the trend towards SaaS has been ongoing since the beginning of the 21st century, [14] 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. [15] : 183 

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. [15]

Related Research Articles

Customer relationship management (CRM) is a process in which a business or another organization administers its interactions with customers, typically using data analysis to study large amounts of information.

<span class="mw-page-title-main">Enterprise resource planning</span> Corporate task of optimizing the existing resources in a company

Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities. ERP systems can be local-based or cloud-based. Cloud-based applications have grown in recent years due to the increased efficiencies arising from information being readily available from any location with Internet access.

<span class="mw-page-title-main">Sales</span> Activities related to the exchange of goods

Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. A period during which goods are sold for a reduced price may also be referred to as a "sale".

A software company is an organisation — owned either by the state or private — established for profit whose primary products are various forms of software, software technology, distribution, and software product development. They make up the software industry.

A management information system (MIS) is an information system used for decision-making, and for the coordination, control, analysis, and visualization of information in an organization. The study of the management information systems involves people, processes and technology in an organizational context. In other words, it serves, as the functions of controlling, planning, decision making in the management level setting.

The subscription business model is a business model in which a customer must pay a recurring price at regular intervals for access to a product or service. The model was pioneered by publishers of books and periodicals in the 17th century, and is now used by many businesses, websites and even pharmaceutical companies in partnership with governments.

Database marketing is a form of direct marketing that uses databases of customers or potential customers to generate personalized communications in order to promote a product or service for marketing purposes. The method of communication can be any addressable medium, as in direct marketing.

Software as a service is a cloud computing service model where the provider offers use of application software to a client and manages all needed physical and software resources. Unlike other software delivery models, it separates "the possession and ownership of software from its use". SaaS use began around 2000, and by 2023 was the main form of software application deployment.

Supplier relationship management (SRM) is the systematic, enterprise-wide assessment of suppliers' strengths, performance and capabilities with respect to overall business strategy, determination of what activities to engage in with different suppliers, and planning and execution of all interactions with suppliers, in a coordinated fashion across the relationship life cycle, to maximize the value realized through those interactions. The focus of supplier relationship management is the development of two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved by operating independently or through a traditional, transactional purchasing arrangement. Underpinning disciplines which support effective SRM include supplier information management, compliance, risk management and performance management.

The eCRM or electronic customer relationship management encompasses all standard CRM functions with the use of the net environment i.e., intranet, extranet and internet. Electronic CRM concerns all forms of managing relationships with customers through the use of information technology (IT).

Customer attrition, also known as customer churn, customer turnover, or customer defection, is the loss of clients or customers.

<span class="mw-page-title-main">On-premises software</span> Direct information article

On-premises software is installed and runs on computers on the premises of the person or organization using the software, rather than at a remote facility such as a server farm or cloud. On-premises software is sometimes referred to as "shrinkwrap" software, and off-premises software is commonly called "software as a service" ("SaaS") or "cloud computing".

<span class="mw-page-title-main">Accounting software</span> Computer program that maintains account books

Accounting software is a computer program that maintains account books on computers, including recording transactions and account balances. It may depend on virtual thinking. Depending on the purpose, the software can manage budgets, perform accounting tasks for multiple currencies, perform payroll and customer relationship management, and prepare financial reporting. Work to have accounting functions be implemented on computers goes back to the earliest days of electronic data processing. Over time, accounting software has revolutionized from supporting basic accounting operations to performing real-time accounting and supporting financial processing and reporting. Cloud accounting software was first introduced in 2011, and it allowed the performance of all accounting functions through the internet.

Openbravo is a Spanish cloud-based SaaS software provider specializing in retail with headquarters in Pamplona, Spain and offices in Barcelona and Lille. The company was formerly known for being a horizontal open-source enterprise resource planning (ERP) software vendor for different industries.

Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company's ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually perceive as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

Lead scoring is a methodology used to rank prospects against a scale that represents the perceived value each lead represents to the organization. The resulting score is used to determine which leads a receiving function will engage, in order of priority.

Data as a service (DaaS) is a cloud-based software tool used for working with data, such as managing data in a data warehouse or analyzing data with business intelligence. It is enabled by software as a service (SaaS). Like all "as a service" (aaS) technology, DaaS builds on the concept that its data product can be provided to the user on demand, regardless of geographic or organizational separation between provider and consumer. Service-oriented architecture (SOA) and the widespread use of APIs have rendered the platform on which the data resides as irrelevant.

Customer data management (CDM) is the ways in which businesses keep track of their customer information and survey their customer base in order to obtain feedback. CDM includes a range of software or cloud computing applications designed to give large organizations rapid and efficient access to customer data. Surveys and data can be centrally located and widely accessible within a company, as opposed to being warehoused in separate departments. CDM encompasses the collection, analysis, organizing, reporting and sharing of customer information throughout an organization. Businesses need a thorough understanding of their customers’ needs if they are to retain and increase their customer base. Efficient CDM solutions provide companies with the ability to deal instantly with customer issues and obtain immediate feedback. As a result, customer retention and customer satisfaction can show marked improvement. According to a study by Aberdeen Group, "above-average and best-in-class companies... attain greater than 20% annual improvement in retention rates, revenues, data accuracy and partner/customer satisfaction rates."

RW3 Technologies is a software company that provides SaaS Intelligent in store execution, data driven field sales, survey, Dashboard/reporting consumer packaged goods (CPG) industryand Online — Instore Competitive Pricing to Retailers. It is headquartered in Austin Texas.

<span class="mw-page-title-main">Sage Intacct</span> American financial software company

Sage Intacct, Inc is an American provider of cloud-based accounting software and services available a number of regions around the globe – including the United States, Canada, the UK, Australia, and South Africa. Its products offer cloud-based accounting applications that enable business payments, manage and pay bills, and facilitate payroll functions.

References

  1. ↑ Net Promoter, 2021-04-02[ circular reference ]
  2. ↑ Customer satisfaction, 2021-04-02[ circular reference ]
  3. ↑ Churn rate, 2021-04-02[ circular reference ]
  4. ↑ "Customer Success – Health score". CSM Healthscore.
  5. ↑ Rogers, Everett M.. Diffusion of Innovations, Fifth Edition. Free Press, 2003 Chapter 9
  6. 1 2 Nirpaz G., Pizarro F., Farm Don't Hunt: The Definitive Guide to Customer Success, March 2016, p. 91
  7. ↑ Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016, Chapter 8
  8. ↑ Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016, Chapter 7
  9. ↑ Mehta N., Steinman D. and Murphy L.: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue. Wiley. February 2016, Chapter 14
  10. ↑ bebusinessed (2017-01-03). "The History of SaaS". bebusinessed.com. Retrieved 2019-07-25.{{cite web}}: |last= has generic name (help)
  11. ↑ Forrester Research, Inc. An Executive Primer to Customer Success Management. April 2014
  12. ↑ Wood J.B., Hewlin, Todd and Lah Thomas, B4B: How Technology and Big Data are Reinventing the Customer-Supplier Relationship, 2013 P 152-3
  13. ↑ Bliss, Jeanne. Chief Customer Officer: Getting Past Lip Service to Passionate Action. Wiley, 2006 P. 5
  14. ↑ Barret, Larry (27 July 2010). "SaaS Market Growing by Leaps and Bounds: Gartner". Datamation. QuinStreet, Inc.
  15. 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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