When is the Right Time for Customer Success?

Adam Joseph, Founder, CustomerSuccessManager.com

Even though the Customer Success bandwagon feels like it has been gathering pace for some time, there are still many organisations at different stages of their business life-cycles wondering when to “pull the trigger” and implement it.

If you are a company that has a subscription model and/or relies on reoccurring revenue, in my opinion, the answer is a simple one – “NOW!”.  Put simply, Customer Success ensures that your customers achieve their desired aims with your solution and by doing so, will renew, grow and advocate on your behalf to their peers.  Given that the cost of acquiring a new customer is in the region of 10x the cost of renewing a customer, this makes both business and financial sense.

In the Age of the Customer, you can no longer acquire your way to success
 Dan Steinman, Head of Gainsight EMEA

Even before you decide to hire an individual Customer Success Manager (or build an entire team), it is important to recognise that this, in of itself, is not a magic fix to a business that is not customer-centric.  Customer Success is an ethos that needs to permeate through your entire business; especially for any customer-facing teams such as Sales, Marketing and Finance.  This should be led by the CEO and C-Team who should view every single interaction as an opportunity to “wow” your customer and by doing so, build brand loyalty.  This is especially important in a world where there is so much choice between software vendors and the differences between products is getting fewer and fewer each day.

Customer Success is where 90% of the revenue is
Jason Lemkin, Venture Capitalist

If you are still uncertain about whether you are ready to implement a Customer Success framework, here are some of the signs that might indicate your need to do so ASAP:

Unexpected Churn:

• During a recent podcast that I recorded with Alan Armstrong, Founder and CEO of Eigenworks (a company that specialises in Win/Loss/Churn analysis), we discussed the topic of “Green Churn”. Green Churn are the cancellations that occur even when everything else on the surface (e.g. usage metrics, health-scores, customer feedback, etc) looks healthy.  
• CSMs can get a deep understanding of the triggers and reasons for churn and ultimately, what is stopping a customer realising value with your solution.  Once this is established, a proactive programme can be implemented and corrective action put in place.

Spinning Too Many Plates:

• Especially in a start-up environment, it is common for the Founder to take on almost every customer-facing task (e.g. Sales, Marketing, Account Management, Support, etc).  Very early in the company’s life-cycle it becomes abundantly clear that this is not scalable and there will never be enough hours in the day to get everything completed (or to an acceptable standard).  This is especially true if you become deluged by fire-fighting Support or “how do I” type queries; this is absolutely a cue that you need a CSM who can put the proactive measures in place to ensure they don’t occur to begin with.
• For more established businesses it can be that Customer Success related tasks are delegated to other groups (i.e. Sales) that do not have the skills, knowledge or mind-set to assist and will also lead to them losing focus with their core responsibilities.

New Features Not Being Adopted:

• It can be incredibly disheartening to see your organisation put a lot of resources into new product development, only to see your user-base neglect to adopt them.  Although this could be for a variety of reasons (e.g. poor user experience/interface, lack of marketing, etc), the most important is that customers do not understand the value that this new functionality will bring to them and how it helps them be more successful in their job.  
• The CSM plays an absolutely critical role in being able to match the new features that your Product Team brings to the market with the actual business value that a customer can expect to receive in a language that’s going to resonate with them.

Very High “Consumption Gap”:

• It’s not just new feature adoption that you need to be tracking but also how your user-base are adopting your solutions as a whole.  Even if your solution offers industry-leading features, if your user-base are only logging in and using a small fraction of what is possible, then cheaper alternatives who offer much less functionality (at a fraction of the price) becomes extremely appealing.  
• My recent blog post on the “Consumption Gap”, perfectly describes this principle and is the gap between what your product is capable of verses what your customers are using.  It can be caused by many different factors (e.g. ineffective on-boarding, marketing strategy, etc) but it’s vitally important that you have the metrics and teams in place to track this type of user behaviour and put proactive measures in place to ensure that you have a healthy balance.  
• As an aside, having a "Consumption Gap" is actually a good thing!  If your user-base are using every single aspect of your solution, then there is a significant competitive risk from others who will offer the “next big thing” and your organisation will be viewed as stale and lacking innovation.  Based on my experience, you should aim for the "Consumption Gap" to be no larger than 20% (i.e. your customers should be fully utilising at least 80% of what your solution can do).  Any less will leave your business wide-open to cheaper alternatives becoming a viable option.  

Declining Net Retention: 

• There are several metrics that you can use to track the relative health of a reoccurring revenue business and one of the most critical is Net Retention. As Dan Steinman explained on our recent podcast together: 

I try and convince everyone in the world that it boils down to one metric….it is the most important metric in your company if you are a reoccurring revenue business…. that metric is “Net Retention”.  What Net Retention means is, if you never sold to another customer, is your customer-base a growing entity?

• Customer Success plays a vital role in ensuring positive Net Retention by maximising customer value and by doing so, minimising churn and helping uncover new opportunities within your account base.

We need to get every part of the company to understand why the business exists (beyond creating value for stakeholders) and that's to ensure customers achieve their Desired Outcome. Fail to do that, and you won't exist for much longer
Lincoln Murphy, Customer Success Consultant & Evangelist