Will 2020 be the year of the customer success team?by
Although practically unheard of 10 years ago, the adoption of formal customer success functions is now moving into the mainstream and gathering momentum into the new decade.
Customer success is en vogue. A report by Deloitte entitled ‘2019 Enterprise Customer Success Study and Outlook’ revealed that the sector is showing many of the typical signs of maturation.
While about 70% of the 50 customer success (CS) leaders surveyed have now had a CS team in place for more than two years to help customers optimise the use of their on-demand subscription-based products and services, some 45% of departments have been operational for more than four.
These findings were backed up by research from CS software provider Totango called the ‘State of the Customer Success Industry & Salary Report 2019’. Just under two-thirds of the 500 CS professionals questioned for the research here said their function had been up-and-running for over three years, while around 30% said it had been going for more than five.
Four out of five respondents also indicated their departments had grown in size over the last year as the business increasingly began to understand the benefits they offered in terms of enabling customers to make the most of the digital products and services they were subscribing to.
As a result, 55% said their teams now consisted of 10 or more members compared with 2018, when 64% of respondents had functions comprising no more than five people. Those with more than 25 staff has also jumped 11 percentage points from last year to 27%.
Moreover, in a further sign of their growing importance to the business, three out of five of those questioned confirmed their compensation had increased over the previous year, with the average salary for a manager hitting $86,000 in 2019, up from $78,000 in 2018. The average renumeration for directors, on the other hand, is now $126,000 per annum compared with $113,000 in 2018.
Which industries are customer success functions appearing in?
While CS departments may have started life simply “as a churn-prevention team for SaaS businesses”, today they are a “growing discipline within the broader technology industry”. Indeed, such functions are now beginning to be adopted by businesses across all sectors that sell on-demand, subscription-based products or services, particularly in the business-to-business (B2B) space.
As Steve Tan, director of customer success for EMEA and Asia-Pacific at Urban Airship, explains: “Because the CS manager role relies so heavily on connecting so closely with the customer, the role is often more effective in the B2B space as customer needs vary dramatically, and they aren’t always as willing to communicate with brands.”
But as the CS concept matures and subscription-based business models increase, such teams are also starting to appear in the business-to-consumer world too, in sectors ranging from utilities to gym clubs.
CS functions are now beginning to be adopted by businesses across all sectors that sell on-demand, subscription-based products or services
Paul Fennemore, C-suite level digital transformation and customer experience consultant at customer management software supplier Sitecore, says: “Many brands, from apparel through to health, are already adopting subscription-based services, but it is the automotive market that will see the most dramatic change this year in order to reflect shifts in consumerism.”
Why are customer success functions becoming more widespread?
This rapid expansion in the number of providers offering subscription-based products and services is also leading to concomitant growth in the number of CS departments starting to materialise.
The Deloitte report explains that this is because suppliers “are pivoting from a linear sell-renew approach to a dynamic and continuous customer engagement model to help customers derive more value from using their products and services” and to develop, grow and sustain relationships with them.
As a result, about half of those questioned said introducing a CS function generally led to a 10% uptick in up-sell and cross-sell revenues, subscription renewal rates and annual recurring revenues. A further 50% also expected to see an increase in Customer Satisfaction Scores of more than 20%.
Indeed, the research added, if companies choose to treat CS as a strategic priority, they not only experience “noticeable improvements in the level of customer satisfaction and brand advocacy”, but they are also likely to “drive deeper customer relationships and uncover new business opportunities that they otherwise would not”.
What does the future hold for customer success functions?
As CS functions continue to mature, the Deloitte study expects to see their focus “expanding from customer retention to managing the end-to-end customer journey, from developing better products to driving customer adoption, retention and growth”. The idea, it says, is to ensure a “constant focus on the customer is maintained throughout all touchpoints and value creation stages.”
To do so effectively, according to the Totango report, will require CS teams not just to share customer data with other functions, such as sales (90%), product management (87%) and service/support (82%), but also to align themselves more closely with the activities of the rest of the organisation. They will also need to gain a clearer understanding of the health and adoption levels of individual customer accounts.
This is because ultimately, the real potential of the CS function lies not so much in its original “narrow goal” of reducing churn and retaining customers but in using the data gleaned in the course of CS activities to achieve the “critical goal of designing and developing better offerings for customers”.