Over ten years ago, our team built a model to describe what we believe is the core of B2B sustainable growth. Called the “Customer Engagement Lifecycle,” it depicts the importance of active, meaningful engagement with your customers and why you cannot realize profitable growth without it. Market leading companies such as Oracle, AmerisourceBergen and HCL have long understood this principle, and their return to investors shows it.
Others have not been so easily convinced, and I have always scratched my head wondering why stock charts and sales figures have not provided sufficient proof. Perhaps “end results” metrics such as these do not provide the short term measurements needed to guide the daily, monthly, and quarterly activities that lead to profitable growth.
Enter Customer Success, the professional function which is becoming increasingly critical to companies in the subscription economy. Unlike Marketing, who historically has been criticized for not applying enough math to its art in order to demonstrate returns, the basic function of Customer Success is measured by a key metric, churn rate. And since churn can be measured almost daily, it is a number that can galvanize the efforts of an entire organization.
In a recent interview in the Huffington Post, Shreesha Ramdas, CEO of Customer Success Automation platform Strikedeck, explains that Customer Success has quickly become essential for companies to retain and expand their customer accounts, especially those in SaaS and subscription businesses because they feel the pinch of churn much more than other type of business. According to Ramdas, “There is pressure on public companies utilizing a subscription model to report on churn, since venture capital firms give high weightage to churn rates. As such, Customer Success has become equal in importance to Sales, Marketing, Engineering, and Product teams within SaaS companies.
“Today many companies use Customer Success as a competitive differentiator and lever for growth. The importance of Customer Success can be understood by looking at four statistics:
- There are currently more than 200,000 jobs open for CS.
- Google search traffic volume for Customer Success has tripled in last five years.
- More than $150M in investment has gone into the industry.
- There are now more than 500 new meetups, conferences, and events on this topic.
Making Customer Success a priority is no longer an option, but rather an imperative.”
To me, this means customer engagement, which is a key driver to Customer Success, now has a metric to which CXOs must pay attention and invest. Successful customers are often the ones willing to proactively endorse your company and product to the world. If you sustain long-term relationships with customers, your business will be able to use that revenue to expand and improve your offerings, resulting in more sales with higher margin. In one of our previous blog posts, 3 Keys to Retaining and Growing B2B Revenue, we discussed how 80% of most companies’ revenue comes from 20% of their established customers. By that measurement, losing just 5% of your customer base to churn can potentially sink an organization. The solution for churn is Customer Success, the post-sales retention team who ensures engagement and encourages advocacy.
Given the expansion of the Customer Success field in the past five years, toolsets to help manage its operations (and of course measure and monitor churn) have become extremely prevalent. Forrester has called Customer Success a Hot New Software Category, and points to the growth of the subscription economy as the catalyst. Vendors such as Amity, Bluenose, Gainsight, Natero, and Ramdas’ Strikedeck all provide software in this space to operationalize the way customer accounts are managed in order to “preserve revenue, expand revenue, and boost customer advocacy.”
Last week, we witnessed first-hand the Strikedeck platform bring together customer engagement and advocacy to define, enable, monitor, and optimize Customer Success. Impressed by the approach they have taken, we believe that tools like Strikedeck will be required by almost every company, be it a SaaS, Subscription, eCommerce, Service, or even non-software companies. Simply measuring happiness using customer surveys has become passé. Strikedeck’s ability to collect data on customer happiness from a variety of sources, including drops in product usage, increases in support ticket volume, and degrading sentiment in customer communications, is amazingly simple, yet innovative.
What is most powerful about the Strikedeck platform, however, is its ability to provide not only predictions on causes of potential churn in a given organization, but also guidance on actions to prevent it from occurring, such as additional user training, enhancing the skills of support staff, and even how to proactively engage with all levels of the customer base. Automation is important for scaling customer engagement, but their tools such as workflows and playbooks help standardize best practices and optimize economic value for customers.
Even further, this use of predictive analytics can help organizations proactively retain and grow its current customers by using the toolset to understand what drives their satisfaction. In his recent article on CMS Wire, Ramdas summarizes the role platforms like Strikedeck play, “The game is no longer a race to acquire new customers, but rather to hone in on retention and upsells. What can companies do to prevent churn, ensure renewals and drive upsells? The first step is to know which customers are likely to churn, and which ones are likely to renew and/or expand. This sets the stage for predictive analytics to become the hero.”
For over 15 years, our team has delivered services around customer engagement, from conducting assessments to planning and delivering the initiatives that lead to sustainable, profitable growth. I am excited to see how the profession of Customer Success management applies the science necessary to give customer engagement the credibility and funding it deserves.