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How customer success overcame scepticism to become a foundational function

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Customer success was initially dismissed as a buzzword or a rebranded version of customer support or account management. But it is increasingly becoming the strategic red thread of business across all company functions throughout the entire customer lifecycle.

18th Oct 2021
Co-founder Success Chain
Blogger
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Customer success is a win-win business strategy to proactively generate sustainable outcomes and growth for customers and consequently for vendors.

According to the emerging jobs report by LinkedIn, the role of customer success (CS) is growing yearly by an exponential rate of +34%! This propulsion is mainly due to the change in the way of doing “business as usual”.

While this is particularly true for recurring revenue models such as SaaS where subscriptions are prime, it is also valid for more traditional subscription sectors such as telecom and media where digitalisation and customer data is more abundant. The traditional transactional relationship between vendor and customer has transformed into an interdependent partnership where the long-term success of the vendor is dependent on the success of their customers. With recurring revenue models, proof of value is paramount to ensure sustained subscriptions and additional investment from customers.

Ideally, the more the customer invests over time, the more outcomes they will gain, thereby inducive to more investment to contribute to the vendor’s own organic growth. It’s a virtuous cycle of mutual dependence on health and wealth between vendors and customers! 

What is the role of customer success?

While there is still some skepticism that CS is a buzzword, and misconceptions that CS is a form of glorified customer support, new marketing or the new account management, CS is increasingly recognised as more than just another post-sales function (customer success manager or CSM). It is emerging as the strategic red thread of business across all company functions throughout the entire customer lifecycle.

CS is being increasingly anchored as a company-wide culture and philosophy where each department (marketing, sales, product, support, finance,…) contributes either directly or indirectly to the customer achieving the results for which they made their investment. This increase is reflected in the State of CS report by ClientSuccess where 81% of respondents indicated that their company is customer-centric compared to only 71% in 2020.

While the main role of the operational CSM is to partner customers in their efforts to obtain added value, CSMs also play a pivotal role in orchestrating the collective CS efforts of all functions across the company. The goal is for all functions to act as a team to ensure sustainable wins for the customer (e.g. productivity, efficiency, savings, profit, revenues,…) and consequent growth for the vendor. Indeed, successful customers will repeatedly renew their subscriptions and invest in more licenses and additional products and services.

An important related KPI used by companies is Net Revenue Retention. NRR measures the percentage of retained revenue, taking into account how expansion revenue compensates churned revenue over a defined period. Best in class companies have a rate of NRR > 100%.

What is driving the growth of customer success?

The proliferation of SaaS and recurring revenues are not the only reasons for this explosion in CS. Short-term acquisition is expensive and it takes time for payback of customer acquisition costs (CAC). With accelerated software adoption and gains, sustained financial investment is anchored faster. This recognition of CS-led growth has been even more highlighted by the COVID impact.

CS has been cast into the limelight as a strategic business lever in a context where the acquisition of new customers has become difficult in certain impacted sectors. Here, rather than acquisition, the focus has been on how to retain and grow current customers. This has driven a wide awakening of the huge financial gain for the vendor. Indeed, according to the TSIA 2021 report, the mission of CS has evolved from being focused on adoption and retention to an indisputable growth engine: in 2015, 10% of CS missions were linked to expansion compared to 47% in 2021.

Other important factors for the surge of CS include the transfer of power from the vendor to customers. Thanks to the internet, customers are now better informed about competitive offers and can more easily decide to switch to the competition. Customers also have even higher expectations in relation to customer experience and their outcomes. The explosion of digitised offers is another reason.

Media companies such as the Financial Times for example, have now invested in CS as 63% of their subscribers read the digital version, this allowing pertinent data insights about readers. Abundant customer data, machine learning and artificial intelligence are also other key elements for the increase in CS activity. According to TSIA, the use of AI in CS has increased by 27% since 2020. Without pertinent data to the right person at the right time, customer success is virtually impossible to achieve.

What are the key skills required by CSMs?

As there is exponential growth in demand for the operational role for CS (>5 million people in LinkedIn have these two words in their title), we may ask what are the top skills required for the role. The best CSMs are those that can understand the different working contexts and challenges of their customers and propose contextualized solutions to overcome them.

This goes beyond just knowing the tool and services inside out and requires varying skill sets, the main ones being: business domain knowledge and how the tools are used within them, consulting, added value communication, leadership, empathy, data analytics, time management and prioritisation. Skill sets are evolving as the role of CSM is becoming more associated with expansion revenues and not just adoption and retention. In the 2021 State of CS survey by ClientSuccess, when asked who is involved in expansion opportunities, 74% are CS teams compared to only 58% of sales.

What does the future hold for customer success?

If COVID has helped to lock the role of CS as a growth engine, the following main challenges still persist and upon which CS professionals are collaborating to overcome: collaborating with customers to demonstrate transparent added value and gains, showing the value of CS internally with the help of data and KPIs such as NRR, aligning cross-functional teams around promising and delivering upon the common CS mantra, growing and scaling CS teams and introducing personalised automated, self-care and one to many approaches.

These challenges are being addressed and evolved by the international CS community; an amazing network of professionals motivated to move the profession forward in an impressive collaborative spirit.

Despite these challenges, the future of CS is full of promise:

  • The surge of CS jobs, innovative best practices to engage and understand customers.
  • The growing focus on delivering CX (66% of investment is spent on CX).
  • The frequent arrival of new CS platforms and periphery tools on the market to support CS operations and increased investment in such tools (according to the 2021 SmartKarrot survey, 70% of companies are either using or intending to invest in tools).
  • The rising adoption of CS by other sectors than software.
  • The recognition by venture capitalists that their portfolio companies need to implement CS in order to ensure growth.
  • The increase in the mission statement of CS being linked to revenues.

Indeed, the founder of SaaStr and investor Jason Lemkin famously quoted at a Pulse Conference: “Customer Success is where 90% of the revenue is”. Related to this and perhaps one of the biggest positive shifts is the increase in CS being represented on the board and having a seat at the table (57% in 2020 compared to 70% in 2021).

These above positive trends clearly show that CS is not just a passing buzzword, but really is a catalyst in adapting to doing business in our rapidly changing context. Stay tuned for our next article that will focus on how CS is shifting the business relationship towards a win-win partnership between vendors and customers.

 

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By Selena
24th Oct 2021 12:51

Hello there! This was informative. Thank you for sharing.

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