Believe 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.”.