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Customer success – What's in a name? Part three

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In the third article of his customer success series, Alex Monaghan focuses on measuring both the effectiveness of your CS team and the success of your customers.

25th Oct 2023

My two previous customer success articles have discussed the purpose of customer success and outlined some of the things which can help you achieve it. This third article in the series focuses on measuring both the effectiveness of your CS team and the success of your customers.

What to measure

There is a theory that you cannot improve what you cannot measure. While I don’t entirely subscribe to this theory, it’s clear that you cannot measure IMPROVEMENT in something you cannot measure – so we really need a way to measure customer success if we are going to improve it.

In fact, there are two things we need to measure. We need to measure the customer’s perception of success, and we need to measure the customer success team’s contribution to that. They are not the same thing, but ideally, they should be closely related.

Measuring the impact of the customer success team is, in fact, the easier of the two. It’s not a perfect science, but it can be defined and measured relatively easily. Yet it must be said that a lot of organisations get this wrong.

There are three important things to consider when measuring the impact of your customer success team:

  • What do you want the outcomes to be? What is the purpose of customer success for you?
  • What outcomes can the team reasonably influence? There’s no point in measuring things they can’t change.
  • What counts as improvement in the things they can influence? This has to be measurable!

I’m not in favour of agonising about whether an improvement was a direct result of the customer success team’s actions – improvement is improvement.

I very definitely am in favour of motivating the CS team to ensure that improvement happens and continues to happen.

I very definitely am in favour of motivating the CS team to ensure that improvement happens and continues to happen. Remember PPPP – Pay Plan Predicts Performance. Set achievable targets, and make sure that they are what you really want to happen.

In the first article of this series, I defined the purpose of CS as essentially three things: setting customer expectations of the value they would achieve and the steps they would need to take to achieve it, building a relationship with the customer to understand their business and their goals, and achieving specific customer goals so that they can show success. Let’s take those one by one and see how we might measure success.

Setting expectations and agreeing on steps

This can usually be measured by agreeing on a plan with the customer. Such a plan might be based on project deliverables, on a maturity model for longer-term growth, or even on a strategy for automation and transformation of business processes. The key points here are that the plan should be agreed upon, the objectives and responsibilities should be clearly defined, and there should be target dates for various outcomes such as solution delivery, staff training, and achievement of 50%, 80% or even 100% migration to new processes. These should translate easily into objectives or KPIs for the customer success team.

Building a relationship

This is a softer target, and while it can partly be measured objectively, it probably also needs to include a subjective component. Like the measurement of marketing leads and touchpoints, it’s quite easy to count the number of contacts in an organisation and the number of emails or meetings or attendances at events, but this doesn’t really tell you how the relationship is perceived by the customer. Direct customer feedback, by asking explicitly in a questionnaire or making a request for a reference quote, or even just a call between executives, is a better way to get a feel for the customer’s view. Such a direct approach may also strengthen the relationship, and it can provide an opportunity to improve things if there are any problems. From the supplier’s perspective, it’s also important to define clear outcomes from building this relationship – such as a joint case study, access to higher management, or involvement in budget planning – but calling these out to the customer is not always a good idea.

Achieving customer goals

These are the goals which were probably discussed in the sales cycle and which should have become part of your customer success plan. It’s easy for the supplier to forget them unless they are explicitly added to the customer success targets, but you can be pretty sure that the customer is tracking these goals. At some point, a sponsor or budget holder is likely to ask whether their goals were achieved: the right answer is yes. If the customer does not feel they have succeeded, then customer success has failed, so this is a key metric. Remember that goals can shift and that the definition of success can also change! For example, if the customer’s goal was to train 50% of their team in the first year, and their team grows by 100% during that year, maybe they will agree that training 25% of this larger team is actually a success since it represents the same number of trained staff. Success is negotiable and needs to be jointly agreed upon. Discussing progress with the customer should be an ongoing activity, not just a quarterly review. If your customer success team is having these sorts of conversations with multiple stakeholders, the chances are the customer will feel that the relationship is successful.

Why are we measuring customer success?

We measure customer success for two reasons – to track progress (which drives budgeting, bonuses, and business goals) and to drive improvement by identifying and addressing any issues. For both these reasons, it makes little sense to measure things which we cannot influence – customer profitability, share price, market position, or global expansion, for example. Although it would be nice to have the world’s leading companies as customers and not to be affected by downturns or budget cuts in the customer’s market segment or geographic heartland, these are not usually things where a customer success team can make a difference. Everything from personnel changes to pandemics can cripple a customer and mean that they do not expand or renew their relationship with a supplier. Should the customer success team be held responsible for this? Of course not.

It makes little sense to measure things which we cannot influence – customer profitability, share price, market position, or global expansion.

If all you measure is renewal, retention, revenue increase or decrease, then you are not really measuring customer success: you are measuring the market and perhaps your company’s position in it. Measure what your CS team can influence - customer satisfaction, customer maturity, perceived value of the customer relationship, customer references and customer goals achieved. There are reasons for rewarding employees for revenue and retention, but they are not motivators if the team cannot influence them: they just mean that everyone gets a bonus in the good times, and nobody does in the bad times, with no reward for outstanding teams or individuals.

Improvement comes from two things: identifying and fixing issues and motivating people to do better. For this to be successful, the relevant data and analyses have to be communicated clearly to everyone involved. What went wrong? Why did it go wrong? What needs to change? Too often, a customer is lost or is not developed without anyone clearly stating the reasons why. Many companies are good at celebrating and sharing success, but few will devote the same effort to understanding and communicating failure. Customer success is one area where the reasons for failure should be well known and where improvement can only come from addressing and learning from failures. I’m not suggesting a blame culture: I am advocating openness, communicating, and sharing knowledge in order to improve. Was the customer always going to fail? Was the relationship built with the wrong people? Were expectations wrongly set, or were products poorly delivered? Did the customer’s priorities change unexpectedly? The answer is rarely simple, but the questions need to be asked to understand what could be improved. Next, an improvement plan needs to be developed and shared, linked to motivation. Finally, the plan needs to be monitored, and the outcomes need to be measured so that improvement can be quantified.

Summary

This article is not a panacea – it's just some ideas to help you and your customers succeed. You know your goals, your products, your organisation, and your customers far better than I do – or at least you should. There are nuances to every step in every relationship, so there will be situations where these ideas don’t fit. Each customer is unique, and many are in a state of constant change. Fortunately, people are rather more predictable, but inside any complex organisation, it’s easy to forget that success is delivered by people. People are driven by motivation, so remember PPPP and reward your people appropriately.

Reward your customers, too. After all, they are your success. The customer’s perception of success is what matters in the end, which is why getting inside their head is vital. How do they perceive you as a supplier? How do they value your products and services? What do they think of your people? That’s the job of customer success, and that’s what you should measure. A happy, satisfied customer is a customer who is successful in their own eyes. Ask your customers what they see, what they think, and what counts as success for them. Help them see the full picture of customer success.

The only reliable way to judge success is to measure it. Sharing some of your customer success metrics with your customers may also help them to measure and appreciate a successful relationship.

The next article in this series looks at how and when the CS team should be engaged to have the greatest impact.

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