Customer Success Management Drives Shareholder Value

 

 

 

 

 

 

 

 

 

 

 

Companies are increasingly moving to subscription based business models in an effort to disrupt incumbents. Subscription models are great for buyers because it usually lowers the price by amortizing costs over a period of time and it requires the vendor to not just sell, but also to manage the success of the customer or they will not keep them. Subscription companies are creating a new kind of business discipline called Customer Success that is spreading into other traditional businesses models.

Customer Success is maximizing the potential of your product to drive value across your customers’ entire organization.

The focus of Customer Success is making the customer an expert with the product so she buys faster and becomes an advocate post-sale. The function requires a mix of reactive and proactive execution.This is a hybrid role of customer support, account management, product information and product best practices. Creating success doesn't just happen, but rather requires planning. Planning that begins in the sales process.

Customer Success begins in the sales cycle.

A key best practice is to use a Customer Success Blueprint, which is defined during the sales cycle. This is an outline of the buyer's challenges, objectives and metrics for success. The vendor should inform the blueprint, but it's really up to the customer to define this plan. The blueprint is a plan for what should happen post-sale and this provides a hand-off from Sales to the Customer Success team.

The efforts of Customer Success are felt during the sale cycle by making sure the prospect is able to understand the capabilities of the product and the requirements of deployment. This product information and best practices are critical sales tools. This is not market-y sales sheets, but rather the real authoritative product information used to evaluate the product's capabilities. This content is produced by Product/Engineering, Support, Training and subject matter experts that could be employees of the vendors or customers and partners. Launch your Customer Success Center because it will profoundly improve your company's revenue performance. If you nail this Customer Success content--call it “Successories” if you like--you will close deals faster, accelerate customers to becoming experts and advocates and renew or upsell better.

Your Customer Success Center is a critical asset for driving sales revenue through new customer acquisition and customer retention.

 

Reacting to customer confusion with support ticket management and other reactive support modalities like chat, contact center, social channels, etc is not enough. The companies that are leading in their categories are actively driving Customer Success and this begins in sales and carries forward throughout the customer lifecycle.

Customer Success Affects Shareholder Value

Customer Success is comprised of many different facets including Customer Experience. In a six year study between 2007-2012, Forrester Research determined that there’s a measurable difference in the stock performance between companies that are customer experience leaders and those that are customer experience laggards. To establish a baseline, Forrester Research set the S&P 500 index as the control group.

The data speaks for itself. Businesses that make it a priority to support their customers throughout their entire lifecycle are outperforming their competitors:

  • Leaders saw a 43% increase in stock value.
  • S&P 500 Index saw a 15.5% increase in stock value.
  • Laggards saw a -33.9% decrease in stock value.

It is clear that Customer Success gives businesses a competitive edge. By selling through customer service, businesses can influence customers throughout their entire lifecycle and incrementally build loyalty with every effortless interaction. Customer Success prevents businesses from losing money due to churn and helps drive revenue in the form of customer referrals, brand advocacy, and upsell. Businesses can no longer afford to hold off from implementing a customer success strategy.

Image By: Guy Nirpaz, Totango

If you are in a recurring revenue (subscription) business, the majority of your revenue comes after the initial sale.

  • 70-95% of the revenues come from renewals and upsell
  • 5-30% come from the initial sale

All the more reason why ensuring the success of your customers is so critical to revenue performance.

Low Churn Can Double Your Company's Valuation

Analyst Mikael Blaisdell offers an easy to follow example of two companies that differ by only a 10% difference in churn (rate of customer loss) that demonstrates a doubling in valuation after 5 years. Two companies grow modestly over a 5-year period. Both are identical in customer acquisition, average sale price, and customer acquisition costs. The results are striking.

 

The cost of churn is high, especially for SaaS companies. Businesses must focus more of their energy on retaining existing customers. The tools for achieving this are within reach. Companies are driving customer success by capturing and serving product knowledge to customers in new ways and by creating insight from customers' behavior as they interact with this content. This content will create shorter sales cycles, increase organic site traffic, and turn new users into experts and brand advocates.

Do not stop selling. Start selling smarter by making your customers successful.

Visit the MindTouch blog for more great resources on Customer Success Management.

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