Customer success teams are driving value in organisations. But new research indicates that two distinct models of customer success are emerging - with one delivering far more value than the other.
More and more companies are setting up and scaling customer success (CS) functions.
Designed to proactively manage customer relationships and customer value, customer success teams are driving higher revenue and happier customers, and as a result CS has gone mainstream in the tech industry, and is starting to spread into other industries that rely on a subscription-model.
However, new research from Deloitte reveals that while CS is driving value within organisations, it is failing to reach its potential at many businesses because it is not viewed as a strategic, cross-functional initiative.
The report, 2019 Enterprise Customer Success Study and Outlook, demonstrates the tangible value that the CS function can deliver, but also the opportunities for improvement.
Based on a survey of 50 customer success leaders in hardware and software technology businesses, the research found that the most common objective of CS teams is to reduce churn and retain customers, reported as the most important goal by 35% of respondents. Unsurprisingly, then, most CS teams spend the majority of their time on post-sales activities, with respondents reporting that 60% of their time is dedicated to customer onboarding, driving higher adoption and up-sell/cross-sell opportunities, and reducing churn.
And the research suggests that customer success teams are overwhelmingly delivering against these expectations.
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More than half of respondents reported 10% increases in up-sell and cross-sell revenue, renewal rates and annual recurring revenue. Respondents also reported notable improvements in levels of customer satisfaction and brand advocacy that they have attribution to their CS function, with half of those surveyed reporting a rise in CSAT scores of 20+%.
How many organisations see customer success as strategic?
However, customer success thought leaders have emphasised that the discipline of customer success should be about far more than just post-sales support.
James Scott, general partner at Success Hacker, a consultancy and trainer for organisations seeking to accelerate their growth through customer success, spoke to MyCustomer last year for our series on the role of customer success managers. He noted: “What I see still occurring, unfortunately, is organisations taking their existing support teams and just changing the job titles to ‘customer success’ without changing the role they do. That is not real customer success - that is just giving someone a customer success title. You are not building customer success into your organisational operating model and your philosophy. It has to be clear that this is a core strategy, and also a long-term strategy.”
Although in a minority, some of the respondents in Deloitte's survey appear to have adopted a more strategic approach. 10% of respondents, for instance, reported that their most important CS objective is to help the organisation design and develop better offerings for customers. However, in the main, Deloitte’s research indicates that while customer success is developing, a lot of work still remains to ensure it is part of an organisational-wide philosophy, and not merely customer service with bells on.
While the research found that 70% of respondents have had CS teams in operations for more than two years, and 45% with a CS team in place for more than four years, in many cases customer success is still not receiving any boardroom attention, and therefore unsurprisingly lacks strategic impetus across the organisation. Deloitte concludes that while most companies understand the need for a dedicated CS function and the value it can deliver, very few tech companies have been able to elevate the strategic importance of CS within their organisations.
As a result, respondents noted that the majority of their CS team’s time is taken up with post-sales support, while more strategic duties such as designing better products, delivering more accurate business models, defining success plans, and building package structures that are more closely aligned with customer needs, only account for 40% of their time.
Overall, under a third of respondents (30%) reported that CS is considered to be a strategic priority by the board of directors, even though Deloitte found that companies that consider CS as a strategic priority report higher improvement in metrics, with roughly twice the number of companies reporting a double-digit improvement in renewal rates.
Organisations are not only unable to develop a CS mindset and philosophy across the organisation in the absence of strategic prioritisation, but it also prevents customer success teams from becoming the connecting thread binding multiple internal teams together – such as product development, sales and support - to obtain a consistent view of the customer and help the customer across different stages of the customer journey in a seamless and connected way.
Indeed, the survey found that the number one challenge faced by CS leaders today is defining a cross-functional operating model, making it harder to embed the CS philosophy across the enterprise.
The research suggests therefore concludes that there is a two-speed adoption of CS functions taking place in business - one a rudimentary version of customer success where businesses appoint CS teams to deliver post-sale support, the other a more strategic approach which is cultural and cross-functional.
The table below, from Deloitte's report, demonstrates the differences between the two approaches.
[Click to enlarge]
About Neil Davey
Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 15 years, including Internet Works, CXO magazine and Business Management. He joined Sift Media in 2007.