Customer Success (CS) remains a vital strategy for B2B and SaaS companies across all industries. While planning for the success of your customers is not a new idea, it has become a regular part of business operations in recent years with the formation of dedicated resources and teams. Increasingly, customer success platforms and tools are being used to enable more collaborative interactions with customers. From 2015 to 2018, the usage of CS platforms rose from 25% to 43%, as companies worldwide are recognizing the value that these tools can bring.
Customer success is an approach through which a company tries to anticipate potential issues that a customer may experience, and work to find a solution before a problem arises. The ultimate goal is to deliver exceptional customer service and provide a positive customer experience that can contribute to a customer’s success. In order for an organization and its leadership team to make the most of a customer success strategy, it's important to consider future product offerings from the customers' perspective. It's also vital to understand how customer success fits alongside your existing customer-focused efforts.
Customer Success and Customer Support
Customer support offers an immediate resource for customers to resolve issues, suggest improvements, and learn more about a company’s products or services. It is highly reactive and must be able to address problems quickly while keeping customers informed. A customer support team will often track metrics such as customer hold time and time to support ticket resolution to measure effectiveness. Customer success, on the other hand, has a long-term view and takes a proactive approach to support. Those working with customer success will typically look at data on customer retention and customer lifetime value to better understand if improvements are having an effect. In many ways, the customer support team represents an essential resource for customer success initiatives.
Customer Success and Customer Experience
Customer experience represents the perspective that a customer has when they communicate with your company and use its products or services. In simple terms, it is easiest to consider customer success as the “what” and customer experience as the “how” when it comes to improving the customer relationship over time. A customer success strategy would not be complete without taking into account the overall customer experience.
Why Is Customer Success Important?
Influencing customer success over time can lead to increased satisfaction, retention, and loyalty. When a business can make a clear, positive impact on a customer’s results, it's a clear indication of the value that the relationship provides. It's well known that loyal customers are often repeat buyers and can attract new customers through word-of-mouth marketing, representing a long-term positive impact on revenue.
How Customer Success Impacts Churn and Recurring Revenue
Customer churn is a term that describes customers who stop doing business with a company. In the case of SaaS companies or subscription-based businesses, the customer churn rate may be represented by the percentage of users who cancel their service over a month, quarter, or year. The more customers that discontinue using your products or services, the lower your recurring revenue – unless, of course, you can onboard new customers quickly enough to replace those who are leaving. That said, acquiring a new customer costs five times more, on average, than retaining an existing customer. Plus, a 5% increase in customer retention can boost profits by 25% to 95%.
If you’re relying on new customer acquisition to replace customers who have churned, your revenue may remain the same, but the cost of customer acquisition eats into your company’s bottom line. Another consideration is the revenue represented by customer churn. If 10% of your customers churn each year, but those 10% of customers represent 60% of your revenue, you may need to acquire twice as many new customers to make up the difference in revenue. That’s why it’s important to look at churn in terms of the number or percentage of customers as well as revenue.
According to Gainsight, customer success is the best defense against customer churn. Companies that have a dedicated customer support team have a 24% lower customer churn rate compared to those that don’t have a dedicated customer support team.
ProfitWell analyzed nearly 2,000 subscription-based businesses to gain an understanding of how customer success teams impact customer retention and revenue expansion. In terms of customer churn, their findings are similar to Gainsight’s findings: Companies with dedicated customer success teams benefit from a 15% to 27% decrease in aggregate gross customer churn and a boost of 10% or more in net dollar retention. However, ProfitWell found that customer success has an even bigger impact on revenue expansion than it does on customer churn, with a boost of 50% to 125%. As Reforge points out, “churn may likely be more influenced by correctly targeting ideal product/market fit and solving fundamental product retention issues.” In other words, while customer success can significantly reduce churn, it’s not the only area to focus on if reducing churn is your goal.
The bottom line? Not only is a robust customer success program vital for reducing customer churn, but it also offers a generous return on investment in terms of expansion revenue.
How Can I Use Customer Success?
Follow these tips and strategies for implementing an effective customer success program within your organization.
Create a Formal Customer Success Team
One of the best ways to make sure that customer success becomes a permanent part of your organization is to develop a formal customer success group. Taking the step to bring in a customer success manager or create a team that is responsible for the customer success strategy can add a great deal of focus and energy to your efforts. It's important to remember that customer success is not owned by any individual or team but is a responsibility of the entire organization. Having dedicated resources that make CS as a priority can help carry this message to all parts of the organization.
Leverage Customer Success Tools
Moving to a modern software platform will provide access to tools such a shared inbox and customer portals that can be used to streamline your customer communications. A customer success platform can help to modernize your current support activities while adding new capabilities. One additional example is a knowledge base, which provides a central resource hub to help educate employees and customers about future improvements and gives them a forum to share their ideas.
Develop an Official Company-Wide Customer Success Program
One of the best ways to manage your customer success goals is through a company-wide CS program. Through this program, you can adopt customer success management best practices and develop a roadmap based on the needs of your customers. Having a program also allows you to analyze results and have processes in place for making improvements based on key learnings.
Use Metrics to Identify At-Risk Churn and Take Steps to Prevent It
Monitor metrics like usage frequency to identify customers who are at-risk of churn and take steps to prevent it. Gainsightfound that the top reason customers churn is that their needs are not being met. In its survey of 100 subscription-based businesses, 77% of respondents agreed that the best way to reduce churn is to identify customers at-risk of churning earlier, so you have time to implement customer success interventions designed to get them to stay. Something as simple as a customer satisfaction survey can reveal insights into the overall health of your customers and allow your customer success team to take action to improve customer happiness.
Other valuable metrics to track for insights into customer health include:
- Frequency of usage (how often the customer utilizes the product or service)
Customer support metrics also provide useful information about customer health and customer satisfaction. Consider metrics such as:
- Number of customer support requests
- Frequency of knowledge base or customer portal access
- First-contact resolution rate
- Average number of contacts to resolve a customer support request
- Average time to resolve a customer support request
Conducting exit interviews with customers who have downgraded or churned provides insights into customer motivations, as well. In addition to customers’ needs or expectations not being met, other common reasons for customer churn include:
- Customers seeking lower-cost alternatives
- Customers no longer need the product
- Customers have switched to a competitor
- Poor customer service and customer support experiences
By studying the usage patterns of customers who have churned or downgraded and analyzing historical data, companies can identify the red flags that indicate a customer is at-risk of churn.
Consider a Customer Onboarding Process
The first impression that a customer has with your brand is crucial, especially after an initial purchase. One way to improve your ability to deliver value to a customer immediately is by having a formal and well-constructed onboarding process. You should aim to create a smooth process for a customer to stay-subscribed, learn about new products, and easily share information with family friends. An effective onboarding plan can help you increase conversion rates and give you a valuable platform for long-term communication.
Leverage Technology to Scale Your Customer Success Efforts
Leveraging the right technologies is the most effective way to scale a customer success program.
Data, such as the metrics described earlier in this article, should be collected from all your business’s customer-facing functions, including customer support. Tools like SupportBee’s shared inbox ticketing system and customer portals not only streamline your customer support efforts but also provide valuable reports, including data such as average first response time, the number of tickets a team has been handling each week, and the overall number of tickets and replies.
Companies can also leverage comprehensive customer success management solutions or stand-alone tools that help operationalize or automate customer-facing activities, such as tools for documenting and sharing details about customer interactions among your customer success team. By sharing documentation, customers don’t have to repeat the same information each time they interact with a customer success team member. Not only is it more efficient for your team, but it’s more convenient and less frustrating for your customers.
Companies that implement data science and analytics solutions or customer success platforms can set up trigger points and alerts to indicate that a customer is at-risk, allowing the customer success team to implement churn-prevention measures quickly to overcome customer satisfaction issues and boost retention. Develop playbooks and document processes and workflows in a central location to ensure that all customer success representatives follow the same steps and take the best actions for each situation to boost retention. As you gather more data on various churn-prevention measures, you’ll identify the tactics that are most effective for each customer situation. By keeping your playbooks and documentation up to date with the most effective tactics, you’ll be arming your team with an arsenal of proven measures to reduce churn, enhance customer success, and grow your company’s revenue.
The core of customer success is a proactive approach to customer satisfaction. By implementing tools and processes that can help you predict and resolve customer issues before they happen, as well as processes for resolving customer concerns promptly, customer success is within reach for any business.