customer success
Customer Success and Customer Support are both important functions within an organization, but they have distinct roles and objectives however these two terms are seen to be interchangeable in todays day and age. One of the prime examples are how jobs are posted on LinkedIn and how roles around support, client support and after sales support are incorrectly featured as Customer Success. Infact “Success” as a term has gathered a bit of traction where you even see HR roles being rebranded as People Success or Employee Success role. This article seeks to clarify the difference between Customer Success, a role pioneered by the advent of SaaS Models and Customer Support, a function that has been in existence for a long time now.
Customer Success and Customer Support are both important functions within an organization, but they have distinct roles and objectives however these two terms are seen to be interchangeable in todays day and age. One of the prime examples are how jobs are posted on LinkedIn and how roles around support, client support and after sales support are incorrectly featured as Customer Success. Infact "Success" as a term has gathered a bit of traction where you even see HR roles being rebranded as People Success or Employee Success role. This article seeks to clarify the difference between Customer Success, a role pioneered by the advent of SaaS Models and Customer Support, a function that has been in existence for a long time now.
Customer Success today forms the back- bone of the SaaS enterprise handling around 60 percent to 80 percent of revenues, depending on the growth stage of the firm. It also serves as a vital bridge between the internal functions (product, sales, marketing) and the Customers. For a firm to scale its business and operations, the Customer Success function must lay down processes and drive the required behavior. Since Customer Success is a new-age function and is sometimes seen from the lens of customer service and support, the founders are also primed to see the function from the same view point which can prove detrimental to the firms growth. Hence, the role of the function must be seen in the light of its capability to augment the firm in its quest towards rapid growth and sustainability.
Software as a Service (SaaS) has become one of the most critical models of software deployment within firms. As per the Boston Consulting Group, SaaS represented about 28% of the total enterprise software market and that number is expected to reach 45% by 2023. With this tremendous pace of growth, there are added challenges posed within a SaaS firm to maintain their Customer Acquisition Cost (CAC), retention cost and growth cost. In order to optimize all of these, its imperative to scale operations and Customer Success as a function plays an important role in meeting these cost objectives. This article dived into the design principles and methodology on how the Customer Success has to scale to maintain the highest levels of customer engagement
The age-old partnership between sales and marketing has always been a strategic priority for business since the age of enterprise. In the SaaS world, where product is the king, the close collaboration between product management and customer success management has rapidly garnered strategic priority. With product led sales and customer journey being seen as strategic levers for growth and competitive advantage, how these functions need to collaborate is a question on everyone’s minds
The advent of SaaS has propelled companies and their products into new heights. As companies scale, its absolutely important to make a decision on growth and acquisition. SaaS business models have from historic days segregated Customer Acquisition, Growth and Customer Success. The article dives into a simplistic framework where Growth and Success should be the prerogative of one singular function.
With the advent of Subscription Based Model laid down by SaaS based companies, it became increasingly obvious that the number of companies / users subscribing to these products saw exponential growth. Revenues were based on recurring subscription and hence renewals of accounts became top priority. Growth was see to be driven by upsells and cross sells along with new account acquisition. This necessitated a fundamental shift in the operating model of the SaaS companies and thus Customer Success Organization was set-up.
The Customer Success Priority Matrix
The Customer Success function is one of the most important functions in the SaaS space today. Organizations like Microsoft, LinkedIn, Salesforce, Oracle etc have built deep expertise around this area and have seen tremendous success added to their Software Based Applications. The Customer Success Manager has varied responsibilities and one of them being account planning and prioritization. CSMs, as they are more commonly called, have a strong revenue role in that they endeavour to grow their books of accounts every year to meet their revenue / growth targets. They achieve this objective in various ways such as upselling and cross-selling while ensuring that there is maximum revenue retention. The concept of revenue growth and revenue retention is of prime importance in the world of the CSM. To provide clarity on these two terms, the following definitions are helpful:-
- Revenue Growth- The net increase in book value from the previous year. The increase can be derived out of existing accounts( renewals and up-sells/cross sells) or from new acquisitions.
- Revenue Retention – The net renewals from the existing book of accounts. This metrics is of prime importance since the CSM plays role of a trusted advisor and a consultant.
To prioritize their objectives, its important for the CSMs to build a framework for account planning and prioritization and one such framework deployed in a lot of SaaS organizations is called the Priority Matrix. The Priority Matrix has two main parameters plotted on the graph:-
- Success Probability – X axis
- Intended Value – Y axis
Home- Runs: Accounts that have been identified to have high success probability and high intended value. Such Accounts are of the top most priority and the CSM invests significant efforts and energies to ensure the success. They are hence the number 1 priority of the CSM
Big Bets: Accounts that have a high intended value but low success probability are second in priority for the CSM. The goal is to ensure that engagement and interventions eventually change the success probability to a high and make it a Home Run.
Win: If we were to draw inspiration from the BCG Matrix, the Wins are the cash cow. They will renew every year and will bring in the steady inflows to the company.
Fill-Ins : Accounts that have a low success probability and low intended value can be de-prioritized since any effort expended on them may not result in any value. If however revenue retention is critical, such accounts need to be identified early to move the probability of success to high
While the Priority Matrix is one of the critical components, the same should be supplemented with Customer Success Plans / Account Plans. These plans capture the customers objectives, criteria for success, metrics to define success criteria, milestones, governance etc and should be revisited every quarter with the decision makers and other parties.
Rule of 40 - The SaaS metric that you should not ignore
Software firms especially in the SaaS domain are increasingly measured, amongst other metric, against the Rule of 40. Simply stated, it says that your percentage growth rate plus your percentage profit margin should exceed 40%.While new, small and mid-sized SaaS companies are able to meet this metric with ease, its the large, complex firms who may struggle to meet the metrics consistently YoY.As per a Bain & Company report in 2017, firms that consistently over-achieved the metrics had valuations twice of those companies who “fell below the line” and achieved 15% higher returns than the S&P 500
Software as a Business (SaaS) has become one of the most critical models of software deployment within firms. As per the Boston Consulting Group, SaaS represented about 28% of the total enterprise software market and that number is expected to reach 45% by 2023. With this tremendous pace of growth, there are added challenges posed within a SaaS firm to maintain their Customer Acquisition Cost (CAC), retention cost and growth cost. In order to optimize all of these, its imperative to scale operations and Customer Success as a function plays an important role in meeting these cost objectives. This article dived into the design principles and methodology on how the Customer Success has to scale to maintain the highest levels of customer engagement. Read more
Alignment of Customer Success Scale with Organizational Growth
Customer Success today forms the back- bone of the SaaS enterprise handling around 60 percent to 80 percent of revenues, depending on the growth stage of the firm. It also serves as a vital bridge between the internal functions (product, sales, marketing) and the Customers. For a firm to scale its business and operations, the Customer Success function must lay down processes and drive the required behavior. Since Customer Success is a new-age function and is sometimes seen from the lens of customer service and support, the founders are also primed to see the function from the same view point which can prove detrimental to the firms growth. Hence, the role of the function must be seen in the light of its capability to augment the firm in its quest towards rapid growth and sustainability. Read More