Based on a recent study with 100 Customer Success executives by RegalixResearch, the majority of large and medium sized organizations in the technology space are investing in Customer Success: nearly 3 in 4 have a clearly defined Customer Success strategy. In the same survey, the top objective stated by two thirds of respondents was ‘reducing churn.’ On the other hand, only one-third expressed ‘increase revenue from each customer’ as a business objective of their Customer Success programs. Similarly, when it came to measuring the performance of CS in the organization, over half (55%) said ‘Customer churn rate’ while less than one-third (31%) mention ‘Customer Satisfaction level (CSAT).’
This begs the question: is Customer Success generally more of a reactive than a proactive initiative? If the primary objective is to reduce churn and success is measured by that same churn rate, the CS team’s underlying purpose in these organizations is to put out fires in order to ultimately maintain the status quo. If they are so focused (and potentially incentivized) on maintenance, there is likely little time and/or effort to apply toward improvement and growth.
On the other hand, if the objective is increase revenue and we measure success by level of customer satisfaction, then the CS team is enabled to move toward being more strategic in terms of how accounts are managed to avoid and/or quickly extinguish any potential fires in the first place. This brings another question to mind: do CS priorities shift as an organization evolves?
It is often said to focus on what you do want, not on what you don’t want. Applying that age-old advice here would mean a strategy founded on avoiding churn risks bringing more of it, thus the foundation should be formed based on what the organization wants more of, i.e. increased average revenue per customer. So how can we use Customer Success to drive revenue vs. just maintain it?
- Smooth onboarding: it is during these sessions that a customer either sees immediate value in your product or does not. If they do not have a positive experience at this stage, the following months can pose an uphill battle to regain trust and credibility.
- Lifetime value, with a focus on profitability: because the majority of revenue comes after the initial sale for recurring revenue business, it becomes increasingly difficult to replace churn with new bookings as they scale. Although the cost of churn becomes higher as an organization grows, it is important to note that not all accounts are created equal: the focus should be on the most profitable, highest value customers. This is something crucial that can get lost if not accounted for in churn rate if that is the key CS performance indicator.
- Word of mouth: Referrals from existing customers are the best leads, significantly decreasing the cost of sale and the time required in the sales cycle. Hot leads are your friend.
According to SaaS customer expert Lincoln Murphy, “Customer success is simply ensuring that customers achieve their Desired Outcome through their interactions with your company. That’s it.” By focusing on the happy customers first in conjunction with business benefits, CS can be leveraged to consistently drive a fair exchange of value between what you want and what they want. If the value equation is balanced, then the relationship will no doubt flourish over time.