Insights
Customer Success is Essential. So Why Do Most Companies Mess It Up?
It’s cheaper to keep your existing customers than it is to find new ones.
It’s a well-worn adage, but one that bears repeating, particularly for companies hyper-focused on growth. Because the best way to enable growth is to first make sure you don’t shrink. 🙂
And yet, many companies turn their attention to customer success (CS) only when they’re in reactive mode after seeing an uptick in customer churn. They get so caught up focusing on things they need to tweak in the product or their sales and marketing motions that they forget about customer retention.
They don’t fully grasp the benefits of a well-oiled CS function — one that keeps the customers they have happy, continually reminds those customers of the value of the product or service they’re using, and promotes cross- and upselling.
So, how do you succeed at customer success?
The first step is to recognize the importance of the customer success function early in your growth. It should have the same level of importance as sales, marketing, and product.
The second step is successful implementation of the function and team. This step is historically where things go sideways. Often, companies create a customer success team without a clear plan or strategy. This lack of foresight can lead to the team becoming an extended customer support team or an underperforming expansion sales team, rather than effectively enabling customer value through product usage, customer retention, upselling, and cross-selling.
There are typically three organizational approaches to implementing a customer success function:
- Include it in the sales organization, either as a separate team or inside sales pods
- Include it in the customer support organization as a separate team
- Create a stand-alone customer success organization, reporting to the CEO/COO
Any of these options can work if they’re managed well. But here are some things to watch out for.
The goal of a CS rep can vary somewhat from company to company. However, it typically includes quarterbacking a product implementation, ensuring its success, educating the customer, tracking the product’s usage, continually informing the customer of the value they’re receiving, mining opportunities for upsells and cross-sells, and reducing account and product churn.
The challenge comes when your CS rep gets “Stockholm Syndrome”, loses their objectivity, and becomes a 100% customer advocate. They morph into reactive customer support team members, become traffic cops for customer issues, and forget about tracking product usage, amplifying customer value, their expansion sales quotas, and cross-selling and upselling. If this happens in a sales org, all of a sudden, your sales costs look out of whack because the expansion quotas you set for your CS reps aren’t met. If in a support org or a stand-alone CS function, it now looks like your support costs are high because you now have more support reps than you planned for.
The root cause of this scenario is typically either a) your product has issues and requires more usage/break-fix support than you planned for, or b) your product requires more implementation services than you thought (usually encountered in products that change organizational workflow), or c) you hired the wrong skill set–you hired customer support rather than customer success reps.
For growth companies trying to navigate customer success, here are a few best practices.
First, define clear goals for your CS function–is the priority implementation, retention, or cross/upsell, or what mix of these? Once you’ve set those goals, decide the best organizational fit for this team. Should it be within sales, a standalone customer success function, or somewhat integrated with support? This decision depends on your specific objectives. If customer retention is your highest priority, then it makes sense for the team to be a stand-alone organization or perhaps part of a customer support organization, as long as the leader recognizes–and doesn’t blur–the lines between success and support. If cross- and upsell are your highest priorities, then consider including it in sales, either distributed within sales pods or as a separate team.
Next, establish clear metrics to track the efficacy of your customer success function. The key metrics include:
- Time to implement (unless a separate implementation team performs this function)
- Engagement, i.e., number of contacts/quarterly business reviews vs. accounts managed
- Customer churn
- Downsells
- Cross-sell revenue/bookings
- Upsell revenue/bookings
You should define targets for each of these metrics.
Be aware that many factors can impact these metrics, including product formulation (e.g., sticky ‘must have’ vs ‘nice to have’ product, product quality, product implementation, product usage, product value perception, etc.). If the CS team notices the product isn’t sticking, their job is to communicate and provide specific feedback to the product, implementation, and/or sales teams. They should suggest the necessary adjustments either in the product features or in the sales or implementation approach to enhance customer value and retention.
These changes could be subtle, like altering your go-to-market strategy to target higher-level decision makers for more significant implementation commitment. This approach contrasts with selling lower down in the organization, where people might buy but lack the authority or the resources to fully engage with your product.
Bad customer success strategies can seriously affect growth companies.
If you haven’t clearly defined the role of your customer success team, you’ll end up with an ineffectual function that costs you money but doesn’t deliver the benefits you’re aiming for — whether that’s customer stickiness or opportunities for cross-selling and upselling.
Growth companies especially need to be financially prudent. Unlike larger, billion-dollar companies, they can’t afford to sweep financial mistakes under the rug as rounding errors. It’s crucial to set specific goals, objectives, and rules of engagement for your customer success team. Without these, you’re essentially throwing money away.
When a company doesn’t clearly define what their customer success function is, what its goals are, and the metrics to use, they can rapidly find themselves in a series of failed experiments. But establishing each of those, and doing it well, sets them on a faster and easier to navigate path to the growth they’re looking for.
