Making Sense of Customer Success | Part 1

This is part of a series of blogs, podcasts, videos, and interviews from Customer Service leader and evangelist, and the Director of Customer Success at MarketSource, Jeff Heckler. 

Welcome to the wild and wooly world of Customer Success (CS). Whatever your connection is to this world, whether you are a Customer Success practitioner with a B2B sales company, a MarketSource client who is experiencing positive results through our partnership or are interested in exploring how Customer Success can impact your organization, this blog is for you.

The “Everything Department”

Customer Success is an amazingly vibrant and ever-evolving movement that is less than a quarter of a century in the making. It’s the fastest-growing field in the business world, with the power to deliver commercial returns—revenue—to the organizations it serves.

Customer Success is often referred to as the “Everything Department.” And rightfully so. Customer Success encompasses absolutely everything that occurs in the customer lifecycle. It can also be effectively and strategically positioned within pre-sales activities to help drive value for net new customers and the company’s acquisition teams (internal sales teams, as well as external partners), as well as for Customer Success Qualified Leads (CSQLs).

This is what I have come to love about Customer Success. The breadth of Customer Success’s value proposition is what fuels my passion about it. CS professionals help drive value for customers and the business, at every point in the customer journey.

The Birth of Customer Success

When the first seeds of Customer Success were planted nearly 25 years ago, they were sown in the fertile soil of Professional Services (PS). At that time, I was coincidentally beginning my career in technology with customer-facing roles within PS organizations in which I concentrated on helping customers win with their enterprise software purchases. Due to the technical depth, heavy upfront initial capital investment, and organizational breadth of on-premise enterprise platforms, PS was almost always a given as a part of the initial installation and go-live implementation process. It didn’t matter whether it was a formal line-item purchase or internal or external implementation and engineering support.

CS grew to become an infant practice within many SaaS start-ups incubating in Silicon Valley. CS soon was necessary on the venture capital checklist to help provide a lower cost, higher volume enablement function to the next generation of SaaS models consuming the software world. Those models were a welcome counterpart to the monoliths of on-premise enterprise solutions and were often based on monthly fees paid by the customer to the vendor at an equally lower initial price point using a fractioning problem-solving SaaS methodology.

The philosophy, purpose, and procedures of CS apply in any organization that serves an outside population with goods or services. But, because the advent of SaaS is responsible for putting CS on the must-have of all org charts, it’s necessary to take a look at present-day enterprise platforms as they largely exist in SaaS.

Today, a large volume of revenue for SaaS companies is derived from repeat/renewal and add-on/expansion sales. For many SaaS companies, for a customer to return a profit to the company they must remain as a paying customer for 12 to 24 months. CS normally owns and drives the environment for continual engagement with a current customer base to secure these revenues.

Interestingly and ironically, and coming back full circle, PS orgs are now often a team within Customer Success. I know this firsthand because twice I have established PS teams to deliver both pro-bono and paid engagements to the existing customer install base within my already existing CS teams. For both the software company, as well as the end-use customer (and potential partners, where installed) the complexity and investment of enterprise engagements require the horsepower and confidence of a PS team.

Not Just for SaaS Anymore

Today, I boldly exclaim from on high, “CS is not just for SaaS anymore!”

There is abundant evidence in the market to prove this. Small and large businesses alike are instituting Customer Success in innovative ways. For example, many dentists and chiropractors have implemented annual subscription plans as part of their service offerings; and there are even stand-up paddle board companies with CS execution models providing “everything as a service.”

And why not? SaaS companies nurtured such foundational metric pillars as lifetime value, customers for life, gross and net revenue retention, churn, upsell, cross-sell, and customer retention. All of these are crucial indicators of success for B2B sales organizations and must-haves for ROI.

Customer Success Focus and Metrics

The primary, relentless focus of Customer Success is, as the term implies, the customer. To this end, CS operators need to dissect exactly what success means to the customer. Furthermore, and more granularly, they must understand what success means to everyone involved with and within the customer.

All good sales professionals know that what is important to one stakeholder may not be the same as what success means to another within the same company. Of course, we all hope every person in every company everywhere is aligned by co-owned metrics and goals up and down and across every organization, but we know this isn’t reality. To be a productive CS practitioner you must find what value, outcomes, and goals are important to every stakeholder in the customer organization. Then, discern which of these are shared commonalities with the rest of the company and which are individual goals.

Eventually, CS, Product, and Marketing need to be working on this philosophy at scale by continually iterating their deliverables to match the refined Ideal Customer Profile (ICP) for their company, to maximize their investments, and thus, their associated financial returns to the company.

The secondary focus of CS is based on the premise that CS also owes a unique responsibility to the company: financial, commercial, and revenue ownership. It is on this point that a line is drawn in the sand among CS pros. One side of the argument believes that for CS to truly be purely focused on the customer, unadulterated, they cannot be directly responsible for commercial gains. Thus, Customer Success Managers and CS teams cannot have their compensation calculated based on sales. The other side of this argument is that CS should be compensated for items such as upsells and cross-sells, thus necessitating a focus on such efforts and serving as an incentive for these behaviors. This positions CS as a commercial-facing team with revenue responsibilities.

After the revenue discussion, and the follow-on debate around compensation (one hot topic being that of pooled CS models and complex compensation breakdowns), discussions about the dozens of metrics that classic SaaS CS professionals are measured by naturally ensue. Some of the most popular metrics beloved by executives and boards are: Net Revenue Retention (NRR), Churn, and Net Promoter Score (NPS), to name just a few. Importantly, these data points can be argued as “lagging indicators” or not true indicators of directly attributed value measures to customers.

It is largely agreed that NRR is the ultimate predictor of company valuation based on its ability to return a high percentage of predictable results for future company performance. Other more “leading” indicators are adoption, consumption, and sentiment feedback metrics. These often take more time, resources, and analysis to uncover, but lead to a whole next level of sophisticated consumer and company insights.

Emerging Trends in Customer Success

Any introductory discussion of basic CS principles should include mention of evolving trends. This would encompass Digital Customer Success, pooled CS models, and Customer Success Operations (CS Ops). The short explanation of these practices is that they are directed at scaling the services CS has historically been responsible for and delivered via face-to-face interactions. The practices have methodologies for automating, digitizing, and tooling all the general talents and efforts carried by real-life Customer Success Managers (CSMs). The real question, however, is how to execute and implement the principles to ensure they deliver value for both customer and company. Can one balance driving down costs while increasing value and maintaining personalization?

Now, here’s where CS gets very interesting, and most importantly, personal. And speaks to a movement I originated and am most passionate about: Human-Led Growth.

As a baseline for Human-Led Growth (HLG), we must first make a cursory review of SaaS growth models: Product-Led Growth (PLG, and definitely the hottest one right now), Customer-Led Growth, Customer Value-Led Growth, Sales-Led Growth, Partner-Led Growth, and then a mixture of Land-and-Expand, MVP-to-scale, ICP-controlled, and Freemium blends. It all sounds like coffee or cocktails. And they share some of the same dizzying, electrifying, energizing, and sometimes misleading qualities. However, be assured, they each possess very strong principles and merit execution, varying on the model, market, product, company, ICP, staffing, budget, and goals.

No matter how your company goes-to-market (GTM), two pillars to hold up Customer Success are absolutely necessary: executive support/ownership and budget.

The Mission of Customer Success

CS should hold in its charter returning value to internal partners, as well as its parent company. CS can provide invaluable feedback loops to other teams such as Product, Marketing, Support, and Sales. Not only does CS have the closest seat to the customer, but they also have detailed, personalized customer data at scale. Everywhere I have worked in CS, whenever anyone in my companies wanted something related to customers (beta testers, use cases, references, etc.) they came to me and my team.

Customer Success should, and does, return value in the forms of outcomes, goals, and commercial returns to every person and organization it touches. Customer Success should, and does, focus on serving the company and the customer. As such, CS should be within the vision and priorities of the C-suite and the board. CS should have an executive seat at the table. Quite frankly, what CEO wouldn’t want the team that touches every customer and every revenue dollar at their right hand? CS needs autonomy, authority, and budget to operate in its best interests. Moreover, CS needs to be able to serve itself, and most importantly, its people.

I can state definitively that CS has the most wide-ranging, dynamic, deep, and profound relationships and responsibilities of any organization. To survive and thrive, it needs to nurture its most precious and vital resource: its people.

The People Factor

CS is a high-touch, high-emotion, high-stakes, high-burnout life. Here we are amid the “Great Resignation” and this has never been truer. As a parallel, what has also always been true of CS, it is a talent that is the most difficult to source and retain. Earlier this year I took pause and reflected upon the last 22 individuals I had hired into my 50+-person CS team. Only one—yes, just one—had previous CS experience. CS is a scrappy bunch! Every day, we live and breathe on the success of our ability to find unique solutions with minimum resources and maximum ingenuity. Interestingly, some of the most successful CS pros I’ve had the pleasure of developing have come from education, tourism and hospitality, technical support, military, and healthcare industries. All have been hardened, energetic, self-motivated individuals who thrive on challenges, teamwork, solid communication, and intrinsic reward.

Furthermore, with the hottest CS trends including CS Ops and Digital CS, it’s paramount to keep top of mind how we balance technological scale/digitation/automation with humanity. As technology becomes smarter and cheaper, as our need to reduce overhead while enhancing efficiency increases, and as we continually speed into modernity all-aboard Moore’s Law (that computer performance doubles every two years), we must keep human preciousness atop our consciousness.

For all these reasons, and more, I keep coming back to people. Actual individuals are involved in all facets of the equations that make CS possible and profitable. And fun… and passionate. Never overlook the fact that the most precious and costly resources are our fellow colleagues (internal and external), and that success itself is defined by the individual being engaged in their moment.

Customer Success is YOUR Success

To reiterate, CS isn’t just for SaaS anymore. Far from it! Any organization that provides a product or service to a customer has the opportunity to apply the principles and practices of CS to maximize their results. The better you understand and wisely use these principles and practices, the greater the results you will enjoy. That is the beauty, power, and omnipresence of CS in a nutshell.

Stay tuned for forthcoming posts in which I’ll delve into the precise benefits of Customer Success for your company and what you should zero in on to attain those benefits. I will be sharing best practices, cutting-edge developments, and technological advancements with you as I unpack Customer Success, one principle and pillar at a time.