We are 14 years into a world that has “officially” had customer success. As such, I am surprised when Customer Success is questioned, devalued, significantly shrunk, or downright removed. A lot of CS leaders respond with “but we’re about ensuring customers get value!” While true, that doesn’t resonate with executives teams or boards.
I first want to share a couple personal stories about customer success driving financial results.
Story 1: Solving the Churn Problem Takes Longer than Expected
I joined a company right after a significant shake up (new executive team brought in) due to the companies growth having stalled out. The new business number was decent, but the churn was almost 40% annually, resulting in new business doing just enough to keep them flat. I joined at a great time as there was cross functional commitment to fix this problem. We significantly improved the quality of the product, added multiple customer requested features, improved the user experience, added in training, overhauled onboarding, and more.
This work took about 9 months to execute at which point I expected to see the renewal rate improve. It didn’t. From there we continued to iteratively improve the experience. The next quarter we still saw no improvement. Next quarter same thing, no improvement. Only after a full year after implementing improvements did we see the expected results! And they happened quickly…we jumped 13% in one quarter, 5% the next quarter, 4% the quarter, and 3% the quarter after. What did we do in these quarters compared to the first 9 months? Some additional incremental improvements, but nothing major.
What did we learn as a result? Retention is a lagging indicator. What you do today won’t show up for a year or two. This is one of the reasons why customer success is hard–you have to have the conviction that what you are doing is right and that the results will change over time.
Story 2: Yes, CSMs Do Affect Revenue
My first roll out of customer success (before CSM was a term), we implemented a good, better, best model. The good model only had an Escalation Manager, and you only got a named CSM with the better and best model. The renewal rates for these two models was 15% higher for customers in the better and best model, and we grew these accounts on average 10% more than those on the “good” model. This proved that if you do what’s right for the customer, actively listen, and proactively solve their problems, results will follow.
So why do I share these stories? Because Customer Success is the correct approach that actively drives revenue, but it’s a long term play, with long term results.
What Can We Do?
First off, Customer Success should own a financial number. Let’s face it, there’s a pecking order in most companies: you are either building a product or driving revenue, or you aren’t valued as much. If Customer Success isn’t driving revenue via renewals and retention (at a minimum by sourcing opportunities), then it’s harder to justify why Customer Success is there vs. an alternative model. The primary reason I’ve observed for why we don’t own revenue is fear of commercial conversations and responsibility. We need to become comfortable in the commercial arena.
We should also be creating advocates who are referring us into new business. Make sure you are tracking contributions to new business as part of your referral program and highlighting this financial metric as well.
Second, Customer Success needs to be proactive. CSMs talk about value, and while we do that, we also establish relationships where we proactively work to solve the customers’ problems by actively questioning and listening to them. Too often we are reacting and justifying our jobs in executing the plays and templates provided to us vs. critically thinking outside the box and challenging ourselves on what else can we do for them.
Third, recognize that likely every team is being asked to get creative on how to reduce costs. Lean into this conversation, knowing the typical reaction is to fight against it. Everyone can get leaner, somehow, so what can you do to reduce CS costs? Yes, it might come at the expense of something else you deem critical, but share those options to the rest of the executive team. You can cut here, but it means you won’t be able to do x, y, or z project. You can cut here, but it will cause stress and risk in the organization, to the point where it becomes a failure in 6 months, yes you can push more accounts on CSMs, but it drives risk of less proactive work, so medium/longer term churn risk, and 3-6 month reduced upsell/cross sell risk.
Finally, look at the team that is asking for these changes to be made. Is the current economic climate just an excuse to kill Customer Success and revert to pre-SaaS models? I have seen some executives come out boldly and essentially state that they believe that, “Customer Success is a fad and they’re looking forward to reverting back to older models.” I once had a CFO tell me “I’m going to fund your team just enough to not get us fired.” If you are working with individuals who fundamentally don’t believe in Customer Success, and you know you can’t change their mind, I recommend considering if your company is the right fit for you.
Summary
It’s good discipline to always be advocating and highlighting how valuable your team’s contributions are. Customer Success needs to be proactive, constantly advocating for customers and themselves, and leaning in with the rest of the executive team to ensure there are high retention rates, while ensuring we become more efficient over time. The bar is constantly rising, and we must rise with it.
Customer Success individuals are typically humble. Make sure you don’t allow your humbleness to stop your CS team from getting the accolades and respect they deserve.