As you go into a planning process what should you be thinking about from the perspective of a focus on customer success? When you reduce it to its essentials you are looking to build excellent operational and commercial relationships with your customers. Starting with this end in mind let’s look at some of the desirable outcomes of a focus on customer success.
Search around and you will find lots of KPIs and objectives for customer success: probably too many. There is though fairly broad agreement on the core outcomes for customer success teams and by extension customer success focussed companies. These are delivering the following:
- A customer base able to point to the measurable value realised from their use of your solution.
- High levels of customer satisfaction
- High license renewal rates (sometimes referred to as low attrition or churn rates)
- Good levels of license expansion from the existing customer base
- Reference-able and advocate customers
The first one is the key. Roughly speaking if your customer success focus leads to high levels of measurable value being realised by your customers and you manage the relationships well and your solutions are delivered reliably and perform well then you will have satisfied customers who will renew, advocate and refer on your behalf, often agree to longer term contracts and who are more willing to expand. You don’t of course need to be doing all of this perfectly, all of the time, for all of your customers, to have a successful focus on customer success but you do need to have most of it working well, most of the time, for most of your customers.
Measurable Value Realisation
Ultimately value realisation has a hard financial value attached: a vendor charges money for their solution and customers expect a return on that investment. Ideally they want to be able to measure this in financial terms such as increased revenues, costs avoided or improvements in profit margins. However, this can be tough for vendors to show directly so what is much more common is customers and vendors tend to focus on more accessible measures of value, typically related to either use of the system or to beneficial outcomes directly related to the use of the system.
Putting that into a direct example from my own experience let’s look at the field of application security (app-sec). Generally in app-sec you are looking at cost avoidance whether that be loss of business resulting from a public security breach or perhaps compliance related fines from a regulator. Investing in app-sec software becomes a form of insurance.
How then to measure the success of an app-sec programme and the impact of a vendor’s solution? One way would be to measure activity on the platform. If you sell 1000 user licenses and you have the necessary analytics to be able to show that 950 of those users log in regularly you might claim success. And by some measures you can see why this suffices. Assuming the software is a proven solution then high levels of users on the system must surely mean value?
Well, maybe but perhaps not. It could be users are logging in because they are told to but aren’t actually doing much once they are on the platform. So the next step is to look at engagement which we can define here as using the service as intended, in this case running scans to check code for security defects. This is better but still stops short of quantifiable business value: if after running the scan the users do nothing to correct the defects found then all that has been achieved is to surface the problem. Luckily in app-sec there are ways to measure improvements in the outputs of users. Over time if the use of the software is having a positive impact then specific metrics, such as the number of security defects per 1000 lines of code, will show a measurable improvement. This is a beneficial outcome: value has clearly been delivered because the buyers ‘attack surface” is reduced in turn reducing their likelihood of a breach.
In fact we usually have a hierarchy of measurements for value realisation with simple usage at the bottom, engagement with the intended use case next, then measurable value specific to the intended use case and finally hard financial benefits at the top. As you ascend the hierarchy your ability to speak confidently about the value being delivered increases. Companies focussed on customer success must then find their own measures of value – as high up the hierarchy as possible – and ensure at the product design stage they are building into their solutions the ability to comprehensively track and report on these measures.
Driving improvements in these measures then becomes the core competency of your services teams, be that implementation teams ensuring the system is initially set up optimally or the customer success team using a structured toolset and set of best practices to deliver improvements over time.
And of course you iterate, all the way from customer outcomes back to product design and through sales to service delivery.
Customer satisfaction is an odd, multi-faceted beast. So many elements are at play and often in defiance of logic customers will report levels of satisfaction far different to your own expectations for them. What’s going on?
Here are just some of the factors involved in customer satisfaction:
- Delivering measurable value realisation: the big kahuna as is probably obvious from above. Get this right and much else will be forgiven
- The nature and strength of the relationship, across all touch-points. If a customer truly believes you are invested in their success and working diligently to deliver it they again will forgive all sorts of sins. Equally, if even one of your team is disrespectful, under-prepared or misleads the customer that will have a real and lasting impact
- The stability and integrity of the platform. If value is able to be delivered but this is compromised by frequent platform outages, poor performance or promised features not working as intended satisfaction will decline. In fact it’s not uncommon for this to be the key talking point in the relationship if it’s present at any significant level
- Execution of services whether it be a well run and on time implementation, an effective quarterly business review workshop or the swift and accurate processing of support tickets. All of this has an impact on overall satisfaction
- Management of your key stakeholders. Crucial and often overlooked this is often someone who is not involved day to day yet signs the cheque. It is important to stay close to that individual or group and ensure they are satisfied and have what they need to feel confident that they have made the right investment.
With so much going on it’s clear you need a well constructed and executed plan across the company if you are going to achieve high levels of customer satisfaction. Expecting the customer success manager alone to deliver this is misguided in the extreme although making them ultimately responsible for the metric can be a great tactic provided they are sufficiently empowered within your organisation.
Renewal (and expansion) rates, Advocacy & Referencing
If measurable value realisation is what matters to customers, renewal and expansion are ultimately what matter to vendors. If your customer stakeholders can confidently articulate the value being delivered by your solution then all things being equal your negotiations at renewal time will be made much easier. If you have also delivered well across all key touch-points and so have satisfied customers then unless there are wider issues at the customer you can feel quite confident in the renewal and in all likelihood start exploring the options to expand.
Having delivered value and built a strong and satisfying relationships with your customers you are also now in a good position to ask for help in the form of a case-study, reference call or simply a referral or two from within your customer’s network. If you can give something in return at this point, be that exposure to help someone build their own network or market perception, a small win in the renewal negotiation or insider access to your product council or advisory board all the better for the relationship. I’ll be talking about the power of reciprocity later but for now know it’s a powerful tool.
For all of this to be managed you do need a solid plan as discussed. It also all needs effective measurement and to be attached to KPIs. I’ll cover the latter point in my next post.