Customer Success Team – First of four types of team you may want to implement
There are four types of teams you may want to implement to improve customer experience. I will cover the the membership and work of each in three blog posts. The teams are:
- Customer Success teams
- Customer Advisory Boards
- Executive Sponsors
- Project Sponsors
This week, I cover Customer Success teams.
Customer Success teams started in the software industry. They probably exist under various names in other industries that sell complex products. It is a concept that is useful and necessary where you have customer contracts that are renewed each year. Software companies sell a limited range of things. Licenses allow you to use software for the duration of the license, whether the application is in the Cloud or run locally. Implementation services help customers to get up and running. Technical support services are there for when things don’t work as promised. Educational services provide training to users.
While that may seem fairly complete, we often had surprises of two specific types at HP when customers told us they no longer wanted to use our software: first, they sometimes complained that the software lacked particular functionality that was in fact present. Second, especially with complex software, they blamed themselves if they could not get it to work as expected, and did not ask for help. Enter Customer Success teams.
Core role is to ensure customers get the ROI they expect
Customer Success teams work with your most important customers to ensure they do indeed achieve the ROI or ‘Time to Value’ that they expected when they bought your product or service. The simplest way of thinking about it would be to consider it to be usage support. There is no charge for the service. It does not replace or duplicate any of the paid services. For software, a Customer Success person goes to the customer site and sits with the key users, watching them use the software and suggesting how they can be more effective. If, for example, your business is building management services, your customer expected some specific benefits when they handed that work over to you. If the only people who visit the customer are measured on renewing the contract, they will tend to show up towards the end of the contract. Then it may be too late.
Compare renewal rates
When we introduced these teams at HP, we compared support contract renewal rates between similar types of customers that either did or did not have a Customer Success Manager assigned. (Support contracts include both the rights to use new versions of software and the ability to access technical support resources.) The effect of the Customer Success people was dramatic, bringing a spectacular improvement in renewal rates. I suppose I also need to mention that they occasionally discovered customers who had bought the software but never installed it, but had not said anything. Sales people tend not to worry too much about customers after they have been compensated for the sale, and we simply had not noticed.
Deep product expertise needed
Customer Success people should be deep product experts. A lot of ours had worked in software R&D. Each individual tends to only be an expert in one product, two or three at best. They are therefore assigned to your top customers for that specific product, rather than your top customers overall. As distinct from the people manning support helplines, the Customer Success teams are more expert than the customer’s own people. Their primary relationship is with the people using the product, rather than the ones who may have bought it. This is quite an important distinction that needs to be considered for the relationship surveys you have with your most important customers.
Renewal rates are the most important metrics
HP Software, like most large businesses on the planet, had about 40% of all customers in ‘the deadly zone of mutual indifference’. We did not talk to them, and they did not talk to us, or at least that was the case before Customer Success teams arrived. These were the customers most likely to be seduced by competitors showing up with attractive promises of a better life. The constant interaction with their Customer Success manager made it far less likely that these customers would switch.
If you are selling annuity contracts of any kind, it is easy to calculate the value of a one-point improvement in renewal rates. Start with your largest customers and work down. A reasonable starting principle is that one Customer Success person can handle ten customers. If, for example, you currently have an 88% contract renewal rate, calculate affordability based on a 92% renewal rate. Start with half of the relevant customer population for the first year, so you can evaluate whether it really produces the expected results. The Customer Success person should also participate in any regular meetings the sales leader for that customer may hold.
Don’t put them on sales compensation
I recommend that Customer Success people not be compensated on contract renewals or upsells for any individual product or customer they cover. Giving the entire team a collective incentive based on their overall improvement in renewal rates would be appropriate.
Customer Success teams discover issues that are specific to individual customers and generic things that apply to all customers. One approach to provide smaller customers some of the benefits of the investment is to record videos that show your customers how to do things that others find difficult. Make them available free of charge on your website or on YouTube.
Customer Success teams should be a great investment for any business that depends on contracts that renew from year to year. The ROI is easy to measure. Why not try it out on part of your customer base as a test.
As is often this case, this article is a modified version of part of a chapter in one of our books. This time it comes from Customer Experience Strategy – Design and Implementation. Feel free to give feedback below or by emailing me at email@example.com.