Why Your Company Needs a Customer Success Team

Picture1Believe it or not, the idea of customer success is not a new concept.  The work of Customer Success Managers (CSM) have been around for a long time, but it was never formally named. The concept has really come into fruition with the development of the SaaS model, however people are still struggling with the concept.  So we sat down with Jamie Cappelli, VP Client Success at 360insights to gain a better understanding.

Under the traditional sales model, customers pay a large License and Service fee upfront to own and implement software.  This model usually includes a Support and Maintenance contract for 3-4 years and unfortunately tends to promote a culture that typically only engages with customers when it comes time to discuss renewal.

Under a SaaS model, the customer rents the software paying less upfront, but has higher recurring payments.   With the cost of customer acquisition, a SaaS company will only break even after the first year of a customer contract and turn a profit in the second year. Since contracts with a SaaS company are typically year to year, or even month to month, customer retention is vital in order for the company to cover the cost of sale.  This is where the Customer Success team comes in.

“Customer Success is an attitude and the whole company needs to buy in”, says Jamie.  “In a SaaS environment, if you haven’t planned for a Customer Success program, I can guarantee that one will be imposed on you when customers start churning out.”

A Customer Success team is only one part of a value-focused company.  First, Product and R&D need to develop a solution that creates a value proposition for a customer.  Then Sales department exposes that value proposition to prospects and gets them to take that leap of faith.  Once the prospect becomes a customer, the Services department delivers the value as quickly as possible.  Customer Support assists when the value is interrupted.  The CSM is the value quarterback.  CSMs advocate and facilitate on behalf of the customer to maintain the value as well as look for opportunities to grow.  A CSM’s goal is to make sure that the solution is essential to a customer’s operations.

“Job 1 for a CSM – making sure that your customers stay customers”, says Jamie, “and customer retention is easy if the customer sees value for their money.  Making sure that customers see value is not something a CSM can do on their own.”  A solid Customer Success program has the whole company working together to deliver value, which ultimately results in trust – and trust will lead to new opportunities.

“A common mistake is to look past all of the essential elements of a Customer Success program and target the upsell/cross sell opportunities”, says Jamie.  “If your customer isn’t getting what they paid for, they likely won’t be a customer for long and are certainly not going to be buying more of what you have to offer. ”.

With an effective Customer Success program, the customer feels that they can trust your organization with their investment and that the investment will return a promised value.  As a result, a customer is much more willing to renew and invest in more products and services.  If a CSM is shoring up that trust, then a CSM inevitably becomes an Account Manager’s best friend as well as the best source for leads within existing accounts.

Jamie likes use Netflix as an example of a company that delivers seamless Customer Success.  When you sign up for Netflix, you see the value of your purchase straight away since you have immediate access to content.  While not every implementation can be that fast, it is the time-to-value that every Customer Success program should target.  As you continue to pay for your monthly subscription, your virtual “Customer Success Managers” get to know you better and what you value.  They start to tailor and suggest content to you – this increases use and adoption.  Initiatives like this will improve retention since the experience is personalized without the cost and headaches of being customized.

Another thing that Netflix does is watch their customers’ preferences and takes them into account when developing content, which is what you want to be doing from a product development perspective.  Similar to HBO, Netflix developed its own unique content to drive retention however, unlike HBO, it combined unique content with an understanding of customer usage patterns.  Netflix has capitalized on the phenomenon of binge watching. Netflix shows like House of Cards and Orange is the New Black release a whole season on one day, allowing their customers to watch as they please.

What is interesting about the Netflix model is that it demonstrates how Customer Success can become a corporate-wide initiative that results in a culture that is focused on customer-perceived-value.  Netflix has managed to deliver value and high retention rates without meeting with customers individually.  “If you are building your Customer Success program, you need to focus on one thing – value.  Customers should be able to easily quantify the ROI without a lot of mental gymnastics.  Everyone in your organization should be able to deliver the elevator pitch,” explains Jamie, “If you want to operate a healthy SaaS company, understanding the impediments to value velocity is paramount.  Time-to-value is a critical KPI.  If it takes a year before the customer can actually see the value of their investment, that’s not very SaaS-y.  If an upgrade or a new release is as painful as a new implementation, that’s not very SaaS-y.  Most organizations struggle with measuring time-to-value because they are not clear on the value proposition so they don’t when they are winning.”.

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The Fruit Will Come Naturally

JGBlock-RootofSuccessThere are two components to corporate culture; the fruit and the root of a tree.  Travis Dutka, Culture Curator at 360insights, has developed this analogy to help explain and better understand the different aspects of corporate culture.

“The fruit is the part that everybody thinks they want. It’s the expression of culture, it’s the beer kegs, the Ping-Pong table, the popcorn, the after work socials. It’s the events, the shiny things,” explains Travis, “but the real roots of culture are the way things are done, not the things themselves. Often much more intangible things like, ‘what are your communication habits’, ‘do you have high levels of trust’, ‘is there passion and drive, in your teams’ or the sense of accountability”.  They are things that are not as sexy and are much harder to measure and quantify”.

Travis has found that many companies, in an attempt to develop their corporate culture, will add a “party planner” type role to their company.  However, if you do not have the roots to support this, it will not last over a long period of time and will not be able to weather the storms.  “What a lot of companies do when they want to build a great culture or want to fix something that needs a little TLC”, says Travis, “is they try to put fruit on the tree that does not exist there or it isn’t native to that tree, or worse, they have fruit that’s really rotting so they paint it!”

In other words, if you decide to get a beer keg for your team, but no one really drinks beer, they will not appreciate it.  Or if you create a mandatory bowling event when people on your team are not getting along, you will be resented for it. “If you’re only nurturing the fruit, eventually the tree will be top heavy and fall. The fruit won’t taste good and your team will resent it.”, explains Travis, “whereas if you focus on the roots, the fruit comes a lot more naturally and it becomes a lot juicier”. In addition, the fruit will even become employee initiated.

One of the biggest pitfalls however, could be perception.  CEOs wear several different hats; they are often pulled into sales meetings, board meetings, operation meetings, etc.  Then all of a sudden, they find themselves having forgotten to tell their team that they have hired a new VP of Marketing or changed where an entire team sits. There is nothing wrong or bad with the action itself – that’s part of the job of senior leaders, however, the mixed signals happen when the company prides it self on transparency or communication. Those examples erode trust even though there was nothing malicious about the actions themselves.  “A lot of companies, when they have an issue with culture, it is not because they lack intention or desire [on behalf of the leadership], it is because of the perception that is created because of specific actions or inaction”, says Travis.  “This happens all the time; it looks like someone is not living up to the company’s values, but it is actually just the way their communication style is received or genuine oversight. Because of the power of perception, especially in growing teams where there is more and more disconnection from the leadership team, it is so important to be intentional in the planning and delivery of how, what and when things are communicated to the team.

Focusing on building strong roots really helps to avoid the previously mentioned situations and keeps the focus on the important details. Building a great root system (company culture) takes work and pre-planning. “I’ve heard people say the best cultures are organic and they just happen”, says Travis, “and I think that is partially true.  With great cultures, the fruit will happen organically and naturally.  But taking care of the roots of culture is not by accident at all, it takes a lot of intentionality, especially in the tech/start up world because everyone is pulled in a ton of different directions”.

Travis was asked what his advice would be for companies forming their corporate culture. He said “clearly define what you want your culture to be.”  In other words, if you want your culture to be innovative, then the decisions you make should tie into that.  Even if there is an interruption like a paper plane throwing competition, your events should tie into your desired culture.  “Don’t party plan just for the sake of planning events and over scheduling”, says Travis, “a healthy tree will produce the fruit on its own and the farmer should not try to put fruit on the tree.  The farmer is only pruning the tree, cutting off the tree branches that aren’t doing well, picking a couple bad fruits, but for the most part the tree is doing it by itself.”