Customer success

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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

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. [1] 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 [2] as well as the need to deeply understand the drivers of value the customer gains from the solutions provided by the vendor. [3] 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. [1] 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. [4] 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.

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 [5] ).[ 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. [6] : 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. [7] 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. [8]

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, [9] 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. [10] : 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. [10]

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.

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.

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.

The software industry includes businesses for development, maintenance and publication of software that are using different business models, mainly either "license/maintenance based" (on-premises) or "Cloud based". The industry also includes software services, such as training, documentation, consulting and data recovery. The software and computer services industry spends more than 11% of its net sales for Research & Development which is in comparison with other industries the second highest share after pharmaceuticals & biotechnology.

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. SaaS is usually accessed via a web application. 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.

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

A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.

<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.

A revenue stream is a source of revenue of a company, other organization, or regional or national economy.

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.

Outsourcing relationship management (ORM) is the business discipline widely adopted by companies and public institutions to manage one or more external service providers as part of an outsourcing strategy. ORM is a broadly used term that encompasses elements of organizational structure, management strategy and information technology infrastructure.

Plex Systems, Inc. is a software company based in Troy, Michigan. The company develops and markets the Plex Manufacturing Cloud, a software as a service (SaaS) or cloud computing ERP for manufacturing.

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.

In the e-commerce industry, conversion as a service is a method of online conversion optimization that is a customized intersection of art and technology that combines analytics, behavioral targeting, software, style, and business rules to exact success. This approach advocates a holistic approach to achieve an improvement in online conversion.

Third-party management is the process whereby companies monitor and manage interactions with all external parties with which it has a relationship. This may include both contractual and non-contractual parties. Third-party management is conducted primarily for the purpose of assessing the ongoing behavior, performance and risk that each third-party relationship represents to a company. Areas of monitoring include supplier and vendor information management, corporate and social responsibility compliance, Supplier Risk Management, IT vendor risk, anti-bribery/anti-corruption (ABAC) compliance, information security (infosec) compliance, performance measurement, and contract risk management. The importance of third-party management was elevated in 2013 when the US Office of the Comptroller of the Currency stipulated that all regulated banks must manage the risk of all their third parties.

Enterprise legal management (ELM) is a practice management strategy of corporate legal departments, insurance claims departments, and government legal and contract management departments.

Software monetization is a strategy employed by software companies and device vendors to maximize the profitability of their software. The software licensing component of this strategy enables software companies and device vendors to simultaneously protect their applications and embedded software from unauthorized copying, distribution, and use, and capture new revenue streams through creative pricing and packaging models. Whether a software application is hosted in the cloud, embedded in hardware, or installed on premises, software monetization solutions can help businesses extract the most value from their software. Another way to achieve software monetization is through paid advertising and the various compensation methods available to software publishers. Pay-per-install (PPI), for example, generates revenue by bundling third-party applications, also known as adware, with either freeware or shareware applications.

References

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