November 29, 2016

The 5 Pillars of Customer Success

More than anything Customer Success is a philosophy. Of course, there is an organisational element to it; real disciplines, applications, platforms, career paths. But more than anything else Customer Success is a mindset that focuses on ensuring customers achieve the maximum possible benefit from the solution or service offered.

Gainsight Chief Customer Officer, Dan Steinman shared his experiences with 30+ members of the Notion Capital portfolio on the critical importance of customer success and the transformational impact focusing on customer success has on companies and their clients.

It is one of the biggest buzzwords in B2B, but unlike other fleeting terminology, Customer Success isn’t going anywhere. In fact, it’s becoming one of the most important factors across all types business—the difference between a company going broke and achieving mega-growth. Nick Mehta, CEO of Gainsight

The consumption gap

Dan describes this as the consumption gap:

  1. Imagine the scenario where the salesperson has sold the customer on the full benefits of the platform based on full adoption – selling the the art of the possible.
  2. Disillusion rapidly sets in when adoption is not what was promised and only a small fraction of the features are used, i.e. the consumption gap.
  3. The role of Customer Success is to bridge that gap and to move the client as close as possible to maximum adoption – more users – and full utilisation – using all the functionality and adopting new add-ons.

However, the paradox is that the business in whole – and product management in particular – is constantly innovating to increase what is possible with the product and so in reality – if the company is innovating the gap is never fully closed.

In the subscription economy there’s no such thing as post-sales

Long term success in a subscription business is predicated on a number of key principles:-

  1. Efficiently acquiring high margin recurring revenue customers;
  2. Ensuring that revenue does actually recur; and
  3. Further growing revenues by balancing acquisition of new with expansion of old customers.

Customer Success is a revenue driver in the same way as is sales and marketing. Every part of the business needs to be imbued with the fundamental ethos that everything they do is ‘pre-sales’ in so much is it is critical to the ongoing acquisition, retention and growth of high margin customers.

Not all customers are equal

Rapidly growing any successful business is predicated on knowing your ideal customers:-

  1. Those you who need and value what you offer the most;
  2. That you can reach and sell to efficiently; and
  3. Of which there are enough to grow a very big business.

A constant refrain for any customer success leader facing up to key challenges of retention and expansion is “are we selling to the right customers?”, followed swiftly by the question, “are we nurturing the right customers?” and only then do we consider the appropriate allocation of resources and actions.

The 5 pillars of customer success

Assuming we are selling to the right customers then the next step is to put in place the five pillars of customer success:-

  1. Manage the lifecycle – build a consistent, effective customer journey through one-to-many strategies and high-impact, timely one-on-one interactions.
  2. Manage customer risk – proactively identify signs of customer risk and collaborate cross-functionally to address issues.
  3. Demonstrate value – demonstrate the value you deliver to your customers to promote adoption, advocacy, and growth.
  4. Drive expansion and advocacy – make it easy to spot and act on opportunities for growth and candidates for advocacy.
  5. Enable cross functional visibility –  build a customer-focused organization by improving cross-functional coordination and measuring impact.

How to measure

Important to consider customer success in terms of both the lead indicators and the lag indicators.

Lag indicators include the obvious such as churn and revenue expansion but also the less obvious such as 2nd and 3rd order revenue.

  1. 1st order revenue = retention.
  2. 2nd order revenue = upgrades and referrals
  3. 3rd order revenue = is the effect of faster growth, shorter sales cycles and higher order values which is the ultimate outcome of the focus on customer success and value.

While lead indicators focus on:-

  • Activities – numbers of calls, customer interactions, quarterly business reviews, etc
  • Usage – tracking interactions with the product, utilisations across an organisation and best practice.
  • Status – red, amber and green is a common format used.

Customer success is now a business imperative for any SaaS company and a key driver of company value.

Customer Success is not some kind of warm, fuzzy phrase that CEOs like to say because it makes them and shareholders feel better. For recurring revenue businesses, Customer Success is very real and absolutely critical and is quickly becoming that new hot career opportunity as the subscription economy continues to transform all B2B. Dan Steinman, Chief Customer Officer at Gainsight.

Download (PDF, Unknown)

 A Customer Success Primer Slides

Posted by Stephen Millard, Chief Platform Officer at Notion Capital.

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