Six Customer Success Activities You Need

Six Customer Success Activities You Need

Six Customer Success Activities You Need

Customer Success is a series of interrelated activities performed throughout the customer relationship lifecycle. The most effective customer success initiatives include activities from onboarding to expansion with an emphasis on assuring customers’ successful use of products. Typical customer success initiatives include multiple success-focused activities, yet nearly half of companies focus on just one or two.

Essential Customer Success Activities

Customer Success Activities Defined

Customer Success Activities Commonly Used

Source: Customer Success Practices and Metrics Study (December 2018)

Featured: Customer Success Practices and Metrics

Customer Success has become a widely used and universally accepted term to describe a variety of customer-focused activities. The term has many meanings: A department; a team; a role, a business strategy. Unfortunately, the broad use of the term has obscured the diverse and complex activities that underlie a potentially transformational initiative. This study examines the approach companies use to organize, deliver and measure their Customer Success initiatives.

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5 Principles for Service Success

5 Principles for Service Success

There are many approaches to achieve service success and each company must chart its own unique course. Regardless of the path, there are five principles that all companies must embrace.

5 Principles for Service Success

There are five principles of service success. Every company must have an established CX plan, attainable goals, well-defined offerings, optimized service capabilities and the means to measure and improve performance.  These five principles establish the foundation from which to define, execute and achieve tangible, positive service outcomes.  Each principle is described below:

Established CX Strategy

A well-defined Customer Experience (CX) strategy must describe the experience you wish to create with your customers and the means by which you achieve stated outcomes.  A well-defined CX strategy should include the following elements:

  • Clearly stated objectives about the type of experiences you wish to create for customers.
  • The expected outcomes from delivering these experiences.
  • The potential negative implications from not providing the stated customer experiences.
  • The practices and methods to be used to deliver targeted customer experiences.

See All Articles Related to Customer Experience (CX) and Customer Success (CS)

Clearly Defined Organizational Goals and Outcomes

A CX strategy will be executed by individuals and teams and it is imperative to clearly define the roles and responsibilities for everyone involved.  It is imperative to clearly define the roles and responsibilities for everyone involved with the execution of the CX strategy.  Organizational goals and outcomes should include:

  • Clear identification of all teams and individuals responsible for execution of the CX strategy – note that responsibility may cross organizational boundaries and include Sales, Services, Product Teams, and other groups.
  • Defined goals and objectives for teams involved with CX.
  • Individual goals to clearly describe how everyone will contribute to the attainment of team, organizational, and corporate objectives.
  • Incentive structure to reward exceptional performance.
  • Sustained performance management process to monitor individual and team performance to targets.

See All Articles Related to CX and Service Strategies

Well Defined Offerings

Offerings define the rights and entitlements customers receive and the price they pay.  The blending of rights to use a product and service entitlements through subscription programs and the opportunities to extend service portfolios with success programs requires careful definition of well-defined service programs and offers. Consider the following:

  • Determine if service entitlements will be combined with the rights to use a product or offered for a separate fee.
  • Establish the service entitlements customers need and want to effectively adopt and apply your products.
  • Determine which entitlements will be included and which will incur an additional fee.
  • Establish a pricing and payment model to define how customers pay for add on services.

See All Articles Related to Service Offerings

Optimized Success Capabilities

The ability to attain strategic outcomes and execute the CX strategy will rely on your ability to deliver services efficiently and effectively.   Optimization of success-focused service capabilities must include a commitment to the following initiatives:

  • Focus product capabilities and services on defining and achieving customer success.
  • Reduce service events through improved product quality, monitoring and proactive corrective actions.
  • Create opportunities for customers to serve themselves through self-help, communities and service automation.
  • Develop tools and content to streamline new customer onboarding and drive ongoing adoption activities.
  • Transition staff from reactive issue resolution to high-touch account management activities.

See All Articles Related to Service Capabilities: Support and Customer Success

Means to Measure and Improve Performance

Service success must be defined and measured.  Few companies will maximize performance immediately and the attainment of desired outcomes will take time to achieve.  It is imperative to implement ongoing and meaningful monitoring of key performance indicators with the means to take corrective actions to improve performance.  Consider:

  • Establish the metrics that will indicate performance against targeted outcomes including churn rate, satisfaction, Net RR, service efficiency and effectiveness.
  • Review individual and team contributions to attainment of performance.
  • Identify inhibitors to performance and develop corrective action plans.
  • Conduct regular team meeting to review performance and introduce corrective actions.
  • Review goals, measures of success and performance targets and timelines with executive sponsors and gain buying to execute.

See All Articles Related to Metrics and Measures

Featured: NET RECURRING REVENUE - Using Recurring Revenue to Identify Customer Service Opportunities and Risks

This report provides detailed instructions for defining, measuring and applying NET RECURRING REVENUE to identify customer service opportunities and risks.

This report is available for free – Register or login to get your copy.

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Using Net Recurring Revenue to Identify Customer Service Opportunities and Risks

Using Net Recurring Revenue to Identify Customer Service Opportunities and Risks

Net Recurring Revenue is a comprehensive indicator that reveals the extent to which you are retaining, expanding and growing customer relationship value.  Examining the specific underlying elements that contribute to the calculation of Net Recurring Revenue provides the necessary insights to identify the root causes of churn, attrition and contraction.  In addition, examining the reasons for revenue growth presents opportunities to embrace and expand practices that encourage expansion of relationship value.

Net Recurring Revenue

Recurring revenue is, or should be, predictable and expected income earned from ongoing relationships such as subscriptions and service contracts. Measuring Net Recurring Revenue provides an indication of the performance and impact of service offers, products, programs, and customer-focused policies and practices.

Net Recurring Revenue measures the impact of additions and losses to recurring revenue over a specified period and the Net Recurring Revenue Rate indicates if the overall value of customer relationships is expanding or contracting. 

Inputs

To calculate the Net Recurring Revenue Rate, you need to know how much recurring revenue is added and lost within a period.  While you can calculate Net Recurring Revenue Rate by knowing the aggregate recurring revenue you add and lose within a period, it is ideal to have as much granularity as possible. 

The type and magnitude of changes to Net Recurring Revenue Rate can provide important insights into the reasons for changes to the value of customer relationships.

Net Recurring Revenue is a time-based measurement.  Choose a period such as a month, quarter or year.  The shorter the period the more likely you are to find variations from period to period due to time-based market factors and customer behaviors.

The Formula

The formula for Net Recurring Revenue is straightforward. Start with your existing recurring at the start of a period, subtract recurring revenue lost during that period and add recurring revenue added.  See the formula below.

The Meaning of Net Recurring Revenue

Measuring Net Recurring Revenue yields obvious findings including a clear indication about the extent to which recurring revenue is growing or declining.  The more important insights from this metric come by examining the reasons for growth or contraction of Recurring Revenue.  Consider the following when examine Net Recurring Revenue:

  • What is the trend in Net Recurring Revenue – growth or contraction?
  • What is the rate of rate of change in growth / contraction?
  • What are the primary reasons for loss of recurring revenue?
  • What are the primary factors that contribute to revenue gains?

Net Recurring Revenue Trends

It is important to understand the trends in in recurring revenue growth or decline.  Of course, revenue growth is preferred, but decline may also occur.  Establish a reasonable representation of recurring revenue performance over a period that is long enough to accurately reflect typical customer buying behaviors and normal sales, adoption, and renewal cycles.

Measurement Period

The first consideration is the examined measurement period.  Short duration measurements (e.g. monthly) may reflect short-term factors that may overtime be normalized.  Measurement over longer periods can provide a more accurate reflection of the actual trajectory of recurring revenue performance.

The Sources of Growth

If Net Recurring Revenue is growing it is important to understand why so that growth can be sustained or accelerated.  Growth will come by establishing new customer relationships or from increased spending by existing customers.  Differentiation and understanding the sources of growth is important.

New Logos

Is growth coming from entirely new customer relationships?  If so, chances are that your product/services are in demand, customers are aware of your products, want access to your capabilities and that your reputation is positive.  This suggest that Sales and Marketing efforts are working.

Consider if growth can be accelerated.  Are your reaching your maximum addressable market or are there even more customers that you can win over.  Ask new customers why they choose your product over other possible alternatives.  Is it your reputation, your capabilities, price, other factors, or a combination of all the above?  You may be able to sharpen market messaging and enhance the overall value proposition to attract new customers.

Acquiring new customers is great, just make certain that you can nurture and sustain new relationships relationship.

Expanding Customer Relationship Value

How much revenue growth is coming from existing customers through increased spending? Perhaps one of the strongest indicators of customer satisfaction is their willingness to expand their relationship with you.  Expansion may be a result of the utility of your product and services and may indicate that your products are easy to use and/or that the success services you have in place effectively help customers successfully adopt and apply products.

Growth attributed to existing customers is something that every company must understand.  Engage your customers that increase their spending with you to understand why.  Determine how you can accelerate expansion of customer relationship value.

Low or No Expansion of Existing Customer Relationship Value

If you determine that very little growth is coming from existing customers, ask yourself why?  Are customers still trying to achieve value with what they already have.  If so, you may need to provide more assistance to help customers with onboarding, adoption training and success planning.  Its is also possible that growth may be inhibited by lack of value-added offers and extensions.  Examine your product and service portfolio.  Do you offer what your customers need?  Are there additional services that your customers are willing to buy from you?  If so, it is time to expand your portfolio of offerings.

Reasons for Loss

All the gains from new customer relationships and revenue expansion within your existing customer base can be quickly erased if you do not retain the customers you have.  Even if you have a positive Net Recurring Revenue Rate, losses are eroding your full revenue growth potential. 

Customer Loss versus Revenue Loss

Recurring revenue loss may occur because existing customers choose to spend less with you from period to period (e.g. downgrade their subscription level or number of licenses).  In these situations, you retain the customer relationship, yet you get less revenue from an existing customer.  Understanding why customers choose to reduce their spend level is important and should be examined so that underlying issues can be mitigated.

Most recurring revenue loses are likely the result of losing a customer relationship.  Customer attrition is inevitable.  Companies go out of business and sometimes legitimately no longer need to use your product.  Many of the reasons for customer churn can be mitigated when identified and understood.  If customers cannot derive value form your products understand why.  Perhaps it is simply a matter of not being able to achieve the outcomes they expect – if so, consider better onboarding, adoption and training programs.  Perhaps the products lack the features a customer needs or product capabilities are limited, or performance is unreliable.  These are issues that need to be raise to the attention of the product development teams. Customer attrition may also result from poor sales, service and renewal practices.

It is imperative to understand how much revenue you are losing and what percent of that can be retained if changes are made to products, programs and customer-facing practices and policies.

Retain, Expand and Grow

Net Recurring Revenue is a comprehensive indicator that reveals the extent to which you are retaining, expanding and growing customer relationship value.  Examining the specific underlying elements that contribute to the calculation of Net Recurring Revenue provides the necessary insights to identify the root causes of churn, attrition and contraction.  In addition, examining the reasons for revenue growth presents opportunities to embrace and expand practices that encourage expansion of relationship value.

Retention and Recurring Revenue Model

This article is based on ServiceXRG’s Retention and Recurring Revenue Model which helps companies examine the financial health of customer relationships to identify the factors that affect recurring revenue retention and growth.  For more information contact Tom at tsweeny@servicexrg.com.

If you don’t have the time to review a lot of data, there is one metric that can provide a great deal of insight into the health or customer relationships and indicate the performance of Services and other customer facing departments. The one indicator that rules them all is Net Recurring Revenue.  When measured on a monthly, quarterly or annual basis you can learn a lot.

Featured: NET RECURRING REVENUE - Using Recurring Revenue to Identify Customer Service Opportunities and Risks

This report provides detailed instructions for defining, measuring and applying NET RECURRING REVENUE to identify customer service opportunities and risks.

This report is available for free – Register or login to get your copy.

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Beyond Service Metrics – Focus on What Really Matters

Beyond Service Metrics – Focus on What Really Matters

Your service organization is an incredible source of metrics and measurements that describe ongoing interactions with your customers. Of all the metrics your service team tracks there are 5 important areas that you should key a close eye on.

Your service organization can tell you how many customers they interact with on a daily, week or monthly basis through a variety of communications channels. They can tell you about the top concerns of your customers, the challenges they face using your products and the features they want to see in the future.  If you dig a bit deeper Services can provide statistics on the level of service provided, and the costs and revenues associated with delivering these services. 

1.   Defects

Customers contact your Services team for a variety of reasons, and if typical, more than half of all customer service requests are related to “how-to” type questions.  These are “good” interactions – your customers are engaged with your product and this provides insights into how they are using it.

Few customers (hopefully) are contacting you because your product does not work as expected.  Defect related interactions are not always pleasant but are inevitable. Tracking defect rates is critical since they are often costlier to respond to and result in higher levels of customer dissatisfaction.  What you need to know about defects:

  • What percent of all customer reported issues are directly attributed to product defects?
  • What is the total cost to handle defect related issues (total and as a percent of total service costs)?
  • How do defect related issues affect customer satisfaction?

Dis-proportionally high defect rates can indicate a failure in process or lack of appropriate resources in Development and Quality organizations.  By understanding the cost and customer impact you can act to mitigate negative impacts from defects.

2.   Customer Health

You may receive periodic reports indicating customer satisfaction or Net Promoter Scores (NPS).  These are good indicators, but with so many touch-points with your customers expect to know how healthy your customer relationships are. 

Don’t make assumptions that NPS or satisfaction ratings indicate the health of a customer relationship.  Expect to understand if customers are generally content, or if they are anxious about the future, restless and thinking about moving to another vendor, or just plain angry with you. What you need to know about customer health:

  • What percent of your customer base is at risk of defecting to another vendor?
  • What percent of customers are at risk and likely to reduce spending or discontinue buying future products and services?
  • How much revenue is at risk?

Nurture healthy relationships but pay special attention to at risk customers and attempt to understand and repair relationships.

3.   Service Sales Performance

Selling a perpetual or SaaS license is the just the beginning of long-term profitable relationship when additional services can be attached to the initial license sale. Look at the financials of larger public software companies and you can see how important support and maintenance contracts are.  If you don’t already sell add-on services, consider it.  If you do, make sure that service sales performance is optimized.  If your products are offered as a service, then look to add-on services to grow. What you need to know about service sales performance:

  • How many customers are under an extended service contract or success plan?
  • At what rate are new contracts attached to product sales?
  • How does this differ by geography and channel?
  • At what rate do existing customers renew?
  • For SaaS companies – what rate do customers buy a higher level of service than what is provided with the subscription?

Service sales performance begins with the initial “attachment” of a service contract, but the sales process continues indefinitely with an opportunity to renew the relationship year after year.  Great service sales practices require focus and investment to sell, renew and expand the service relationship.

4.   Engagement

Your services team specializes in engaging with customers – in fact this is their job.  The frequency and quality of engagements is important.  If you never hear from your customers is that a good thing?  It certainly costs less but you have less visibility into how they are using your products or their level of satisfaction.  Too much engagement may suggest that your products are difficult to use.  What you need to know about customer engagement:

  • What percent of your customer base do you actively engage with?
  • How often do you engage with them?
  • What percent of customer engagements are positive? Negative?
  • How does the health of customer relationships correlate to engagement frequency and quality?

The correct engagement model can make the difference in the health and profitability of a customer relationship.  Engagement focused on early and effective onboarding and success coaching can help customers get up to speed and productive with new products.  High-touch engagement models may be necessary for large critical customers.  In all cases the type and level of engagement is hopefully proportional to the value of the relationship.

5.   Profitability

When we consider the role of Service, we need to think about it as an instrument to engage and retain customers.  The basic assumption is that more interaction may be good, especially if it is positive interaction, but if it costs too much it is difficult and costly to scale.  We cannot simply throw unlimited resources at customers to keep them delighted.   What you need to know about customer service profitability:

  • How much does it cost to deliver services?
  • How much direct revenue does Services generate?
  • How much indirect revenue does Services contribute to?
  • Will incremental investments in Services generate more direct or indirect revenue?
  • What impact will investments in Services have on retaining recurring revenue streams?

Service profitability, and the impact of services on overall profit can be elusive, often because the tangible return from the investment in services can be hard to connect to the costs.  For service organization that operate as a profit and loss center the relationship between the cost of services and the benefits is more apparent.  Accounting for the cost and financial benefits of service is critical.

These service insights are different from traditional service metrics such as cost per incident or time to resolution and are intended to provide a more strategic customer view through the eyes of your Services team.  Tap into the insights and perspectives services has to offer.  Services is on the front line with customers and they can offer unique insights about your customers, your relationships and the very health and success of your business moving forward.

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How to Measure Net Recurring Revenue

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Service Revenue Generation Metrics

Service Revenue Generation Metrics

Service revenue accounts for a growing and significant percent of total revenue for many technology vendors. The ability to accurately track the effectiveness of Service Revenue Generation activities is essential to maximizing revenue from new and existing customers.

Attach | Renew | Winback

There are three primary opportunities to capture service revenue including the sale of new contracts at the time of the initial product sale (Attach); renewal of existing service contracts (Renew); and as reinstatements (Win Back) of contracts that have been previously cancelled by customers.

Attach, Renew and Win Back are presented as key indicators to measure Service revenue generation performance in terms of total revenue and contracts attached, renewed and reinstated.  In addition, this report introduces the Service Revenue Generation Performance Index® to reflect the general effectiveness of service sales, renewal and winback activities.

The Service Revenue Generation Performance Index (SRG/PI) may be used to calculate sales and renewal performance for all service types collectively or individually.  The formulas, inputs and assumptions presented within this report may be applied to Support, Customer Success, Professional Services and Education.  Be consistent with your inputs an assumptions. Note: Sample benchmarks in this report reflect Technical Support industry data.

Service Revenue Generation Performance Index

 

Support Contract Attach Rates

 

This report provides specific definitions, inputs, algorithms and assumptions for calculating the following Service Revenue Generation KPIs:

  • Attach Rate measures the effectiveness of new contract sales activities (direct or through partners) by reporting the extent to which the available service opportunity associated with new contract sales has been realized.
  • Renewal Rate (measures the effectiveness of contract renewal activities by reporting the percent of revenue and/or contracts due to expire that are successfully renewed.
  • Win Back Rate measures the effectiveness of win back programs by reporting the percent of non-renewed contracts and/or revenue that is reinstated to active status.
  • The Service Revenue Generation Performance Index (SRG/PI) indicates the percent of the total service opportunity from all sources (Attach, Renew and Win Back) that has been captured in each period (e.g. Monthly, Quarterly, Annually, etc.)

Featured: Service Revenue Generation

The ability to accurately track the effectiveness of Service Revenue Generation activities is essential to maximizing revenue from new and existing customers. There are three primary opportunities to capture service revenue including the sale of new contracts at the time of the initial product sale (Attach); renewal of existing service contracts (Renew); and as reinstatements (Win Back) of contracts that have been previously cancelled by customers. This report presents a consistent set of metrics and definitions to help companies measure the overall of service sales and renewal policies, programs and personnel.

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Top Findings from the Customer Success Practices and Metrics Study

Top Findings from the Customer Success Practices and Metrics Study

Top Findings from the Customer Success Practices and Metrics Study

The State of Customer Success

Customer Success has become a widely used and universally accepted term to describe a variety of customer-focused activities. The term has many meanings: A department; a team; a role, a business strategy.

The fundamentals of Customer Success are not new, the general concept has been around for some time, but current practices suggest that something more profound is happening across the industry. There is broad recognition that helping customers adopt and apply products successfully will help retain and build customer relationship value.

Companies based entirely on “as-a-service” models have known for some time that landing new customers is just the beginning of the relationship. Companies that have evolved from the world of perpetual licensing have been slower to recognize that the imperative to retain and expand existing relationships applies to them too.

Customer success is not a one-sized-fits-all methodology and there is no right or wrong way to apply the principles of customer success provided that the outcome from success initiatives result in the ability to sustain and grow customer relationships.

Customer Success Structure

Top Findings

  • Customer Success is a series of interrelated activities performed throughout the customer relationship lifecycle.
  • Effective customer success initiatives include activities from onboarding to expansion with an emphasis on assuring customers successful use of products.
  • Nearly half of responding companies focus on just one or two customer success activities.
  • Customer Success reports to the CEO or Chief Customer Officer a quarter of the time (22.6%).
  • Typically, Customer Success is organized within an existing department, and most often within Service or Support (57.0%), sometimes Sales (16.1%) and least likely within Marketing (4.3%).
  • The primary customer success Key Performance Indicators (KPI) are strategic with an emphasis on the health and value of customer relationships.
  • The top customer success KPIs include customer sentiment as measured by customer satisfaction or NPS; recurring revenue, and retention (churn).
  • Companies report “positive” or “significant positive” results from their customer success initiatives with the greatest positive impact focused on recurring revenue rates and product adoption.
  • Customer success is reported to have the least impact on customer churn (retention) and margin.
  • 60 percent of the time the group responsible for establishing a new relationship is not responsible for the ongoing account relationship.
  • A formal hand-off from the sales channel to the team that “owns” the post-sales relationship occurs two-thirds of the time.
  • Less than half (41.5%) of companies provide formal onboarding services. Those that do are most likely to assure that customers can access and use the product or service they have purchased.
  • The initial customer welcome as part of the onboarding process, remains a personal activity using a combination of personal e-mails, phone calls and on-site visits.
  • Many (42.4%) companies use an automated welcome e-mail, but fewer than 5 percent rely on a fully automated welcome.
  • When account resources are included with product purchase they are often provided to fulfill vendor-focused objectives.
  • The responsibilities for customer retention and recurring revenue are seldom shared across multiple post-sales teams and are most often the burden of a single department.
  • Nearly half of companies surveyed indicate that they do not actively track formal Customer Success metrics.
  • The most common metric used to evaluate Customer Success team performance is customer sentiment expressed as satisfaction and/or NPS.
  • Less than half of companies have tools to enable core success activities. The majority of companies that indicate use of specific success systems built their own solution often based on their existing CRM infrastructure.

Download the full report for complete data and analysis.

Featured: Customer Success Practices and Metrics

Customer Success has become a widely used and universally accepted term to describe a variety of customer-focused activities. The term has many meanings: A department; a team; a role, a business strategy. Unfortunately, the broad use of the term has obscured the diverse and complex activities that underlie a potentially transformational initiative. This study examines the approach companies use to organize, deliver and measure their Customer Success initiatives.

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**A copy of the current findings (as of 12-4-18) will be sent upon the completion of the study.

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