Six Critical Service Practices for Business Success

Six Critical Service Practices for Business Success

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Six Critical Service Practices for Business Success

Corporate financial performance depends on Services to nurture, retain, and grow customer relationship value. Companies are taking steps to modernize services and shift them to proactive, success-focused growth engines

Being successful with Services is a company-wide strategic imperative.

Corporate financial performance depends on Services to nurture, retain, and grow customer relationship value. Companies are taking steps to modernize services and shift them to proactive, success-focused growth engines

It makes good business sense – consider the following:

  • For many technology companies over 60% of revenue comes from existing customers.
  • More than half of new revenue is (or soon will be) recurring from subscriptions.

Six Critical Service Success Practices

1. Have a Plan

Establish a service plan to enable and lead a customer-centric corporate strategy. Learn more.

2. Offer Value

Create high-value services that will drive customer outcomes. Learn more.

3. Create the Right Team

Build a Services team with the right people, in the right roles, doing the right things. Learn More.

4. Deliver Efficiently

Implement self-help and automation so you can focus on the most strategic customer issues. Learn More.

5. Measure the Right Things

Modernize Service metrics to clearly correlate service performance to tangible outcomes. Learn more.

6. Improve Performance

Harness customer insights to improve performance across the entire company.

The future for Services is bright and will continue to take center stage as companies recognize and respond to the necessity to create customer-first strategies built around effective engagement and retention activities.

Fresh, authoritative, actionable insights for Support leaders

Exclusive Research Report:

Support Transformation: The Guide to Essential Practices and Metrics

Download the ServiceXRG Support Transformation 2021 research report

From Tasks To Outcomes – Transforming The Service Organization

From Tasks To Outcomes – Transforming The Service Organization

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From Tasks To Outcomes – Transforming The Service Organization

The current organizational structure of your Services team and alignment with other customer-facing teams may be inhibiting your ability to deliver outcomes. Organizational alignment, increased cooperation, and shared goals are key to customer retention and revenue expansion initiatives.

The State of Service Organizations

Service organizations are optimized to achieve task-based service objectives such as case closure efficiency, onboarding and adoption milestones, case deflection, and attainment of target Net Promoter Scores. While these are all important objectives, they are inadequate goals if not directly aligned with achieving strategic outcomes such as retaining customer relationships, growing account value, and contributing to ARR.

Companies focused on transactional tasks are not able to maximize retention and expansion of customer relationship value. Sub-optimized organizations may:

  • Achieve transactional success but miss opportunities to identify customers at risk.
  • Create delivery efficiencies though self-help and service automation but fail to deliver services necessary to help customers adopt and use products effectively.
  • Establish new relationships but fail to retain them for more than a year.
  • Provide a timely accurate response to support issues but miss an opportunity to upsell additional services.

Are you Organized for Success?

Consider the following characteristics – and if any of these attributes describe your Services Team or your company – it’s time for a change.

The following characteristics are inhibitors to Service success:

Narrowly Defined Customer Experience Strategy

The lack of a well-defined and coordinated Customer Experience (CX) strategy perpetuates inefficient and siloed organizational structures. When specific teams and individuals are not held accountable for contributing to overall CX strategic objectives, revenue and retention opportunities will be missed.

Siloed Organizational Structures

Service remains predominantly siloed with separate departments for Support, Education, and Professionals Services and are often separate from Product Management, Sales, and Renewal teams.  Siloed organizational structures inhibit the ability to provide coordinated and efficient resource allocation to deliver the services necessary to sustain healthy customer relationships.

Lack of Common Goals

It is unrealistic to expect that cross-organizational teams will regularly coordinate activities if there are no incentives to promote this behavior. The lack of shared goals that transcend organizational boundaries assure that teams will focus their efforts only on the tasks and activities they are goaled on.

Limited Coordination

Siloed organizations do not actively coordinate activities throughout the customer relationship lifecycle. The lack of coordinated action is often the result of narrowly focused practices to achieve specific tasks and silo-specific goals with little or no incentives to promote cross-functional cooperation.

Sub-Optimized Resource Utilization

Use of overlapping and complementary resources from post-sales teams are not coordinated or pooled to drive customer success or achieve service delivery cost-efficiencies.

The Journey to Organizational Transformation

As companies refine their customer experience (CX) strategies and recognize that retention and relationship growth are paramount objectives, organizational transformation is inevitable. Here are three critical steps to successful organizational change:

 

  1. Define a Service plan to describe what you are trying to accomplish with Services and how you plan to get there.
  2. Build the right Services team with the right people, in the right roles, doing the right things.
  3. Change can be a daunting task, but often it is the only way to drive towards Service success – It’s imperative that you understand inhibitors to change and overcome obstacles.

Fresh, authoritative, actionable insights for Support leaders

Exclusive Research Report:

Support Transformation: The Guide to Essential Practices and Metrics

Download the ServiceXRG Support Transformation 2021 research report

Recurring Revenue Rate

Recurring Revenue Rate

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Recurring Revenue Rate

Recurring Revenue Rate provides an indication of how much recurring relationship value you are retaining, growing or losing. It’s a crucial metric of how well your Support organization is reaping the benefits of the subscription model. Here’s how to calculate recurring revenue rate.

What is Recurring Revenue Rate?

Recurring Revenue Rate indicates the percent change in the amount of recurring recurring revenue at the end of a specified period compared with the recurring revenue at the beginning of the same period.

Support and Success leaders can apply recurring revenue rate to a specific timeframe (e.g. quarterly or annually), or to tracking Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR). It’s an essential metric of the financial health of recurring revenue relationships such as service contracts and subscriptions.

(An important note: Unlike Contract Renewal Rate, where 100% is the maximum performance level, recurring revenue rate can exceed 100% —  indicating that the value of an existing relationship, or the net value of all recurring relationships, has increase from the previous period.)

How to calculate Recurring Revenue Rate

The formula is a simple ratio:

Recurring Revenue Rate = Recurring Revenue at End of Term / Recurring Revenue at Beginning of Term

Let’s apply it to a very basic example, calculating the recurring revenue rate for Q1:

Recurring Revenue Beginning Q1 = $100

+ Recurring Revenue Added in Q1 = $50 ($45 from new customers + $5 from expansion of existing relationships)

Recurring Revenue Lost in Q1 = $30 ($25 due to customer churn + $5 due to downgrade of existing relationships)

 

Recurring Revenue End Q1 = $120

 

Recurring Revenue Rate = 120% (20% growth)

How effectively are you managing and maximizing recurring revenue?

I’m here to help you get the answers you need.

Reach out anytime to get answers and insights about the best ways to engage and retain your customers. Use the chat button at bottom right, send an e-mail, or click on my calendar to schedule a time to talk.

New, high-return revenue streams are waiting to be unlocked.
Here’s the key.

Exclusive ServiceXRG Whitepaper:

Using Services to Retain & Grow Recurring Revenue

Download the ServiceXRG whitepaper: Using Services to Retain and Grow Recurring Revenue

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Seven Engagement Practices for a Successful Sales-to-Service Handoff

Seven Engagement Practices for a Successful Sales-to-Service Handoff

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Seven Engagement Practices for a Successful Sales-to-Service Handoff

Whether Sales in your organization is the responsibility of partners or a direct sales team, those responsible for selling and closing new business create the first impression of your product or service. A successful sales-to-service handoff is essential to maintaining that positive impression and promoting long-term customer success. To accelerate time-to-value, sustain customer relationships, and lay the groundwork for recurring revenue, leverage these seven proven practices for sales-to-service handoffs.

Effective customer engagement begins with the Sales process. This is when your organization identifies each customer’s desired outcomes and aligns its product and available services to them. In a successful sales-to-service handoff, Sales and Service need to collaborate so they can ensure that customers can successfully onboard, adopt, and realize the value of their purchase.

 During the pre-sale process Sales should invite Service to collaborate to help identify needs and formulate the right solution for the customer. However, Sales does not typically invite Services into the Sales process and in this case, Services needs to advocate for being part of the pre-sales process. Through this collaboration there is higher probability that customers will get what they need to be successful.

 The collaboration and information transfer should be complete and seamless—during the pre-sale process the Service team should know everything about the customer that the Sales Team knows.  And customer should not be expected to provide Service with information they’ve already given to Sales.

 

These 7 practices are proven to ensure successful Sales-to-Service handoffs:

  1. Establish clear expectations for the roles of new-sales and post-sales teams. Ensure that motivations and incentives are equally focused on closing new business and retaining existing customers.
  2. Provide information to Sales teams about service programs available to help customers adopt and use products.
  3. Help Sales teams understand pricing and discounting policies, prerequisites, and any other considerations for frictionless service sales.
  4. Create Customer Success-focused engagement teams and resources to help customers understand not only the product features but how they can apply products to achieve their business objectives.
  5. Involve the Service team during the Sales process to help understand and validate that customer expected outcomes can be delivered post-sales.
  6. Formally transition newly acquired customers from Sales to designated Support or Customer Success resources.
  7. Begin a formal onboarding process based on expectations set in during the Sales process.

How effective is your Sales-to-Service handoff process?

We can help you make it better.

Reach out anytime to get answers and insights about the best ways to engage and retain your customers. Use the chat button at bottom right, send an e-mail, or click on my calendar to schedule a specific time to talk.

Ready to commit to a Customer Success strategy? Learn the 5 critical milestones.

Exclusive ServiceXRG White Paper:

Ensuring a Successful Journey to Customer Success

Download the ServiceXRG whitepaper, "Ensuring a Successful Journey to Customer Success"

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From Tasks To Outcomes – Transforming The Service Organization

The current organizational structure of your Services team and alignment with other customer-facing teams may be inhibiting your ability to deliver outcomes. Organizational alignment, increased cooperation, and shared goals are key to customer retention and revenue expansion initiatives.

read more

Recurring Revenue Rate

The amount of recurring revenue a company receives may increase, stay the same, or decline for a given period. Recurring Revenue Rate indicates the percent change in the amount of recurring revenue at the end of a specified period compared to the recurring revenue at the beginning of the same period. Measuring recurring revenue rate is essential to help identify the factors that lead to revenue retention and attrition and provides an indicator of the overall state of customer relationship health.

read more

Three Critical Metrics to Retain and Grow Customer Relationship Value

Three Critical Metrics to Retain and Grow Customer Relationship Value

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Three Critical Metrics to Retain and Grow Customer Relationship Value

​If you inventory all the metrics used by your customer-facing organizations – Sales, Marketing and Service – you’ll find an impressive collection of data elements that describe how you interact with your customers. But with all your customer metrics, what do you really know about your customers? How do you assure that you can sustain and grow relationship value? These 3 critical customer relationship value metrics can point the way.

Marketing metrics describe the ability to reach and influence customers.

Sales metrics provide insights into the time and efficiency to book revenue.

Service metrics describe the volume, timeliness, and effectiveness of interacting with them.

Add to this the insights provided from customer satisfaction assessment efforts.  As an industry we have a lot of customer data, but does it tell us everything we need to know about how to engage and sustain long term profitable relationships?

We know how much effort it takes to reach and influence customers, the time it takes to convert prospects to buyers and the time, effort, and costs to service customers.  These are all important, yet too many customer metrics focus on the transactional aspects of the customer relationship—volumes, speed, and efficiency. Too few of them focus on examining the quality of our relationships.

Now we’re not saying you should stop tracking transactional customer metrics!  BUT consider adding the following measurements to examine the strength and quality of your customer relationships:

Critical Customer Relationship Value Metric #1: Adoption

Adoption tracking provides important insights into the frequency and extent of customer product use.  Customer adoption metrics answer questions such as: Are your customers using your products?  Are they using them to the fullest extent possible?  It seems counter intuitive that customers would not use what they buy, but for many reasons lack of license utilization or under utilization occurs.

Why Adoption metrics matter

If customers are not using what they have already paid for or are not able to apply products to their business, then future subscription renewals or license sales are in jeopardy.

What to measure

Whether through automated tracking or customer surveys, it is important to understand if, how and to what extent your customers use your products.  Consider the following metrics:

  • Adoption: The percentage of licenses sold that are being used.
    • Metric: % of licenses adopted
  • Adoption Extent (Feature Adoption): The features are customers using.  Are they using a basic set of available features or do they take advantage of advanced capabilities?
    • Metric: % of basic users
    • Metric: % of advanced users

How to use Adoption metrics

If you determine that customers are not using what they already have, the next step is to determine why.  Are products too complex? Do customers lack necessary skills? Are products not aligned to customer needs?  The sooner you understand the barriers to full adoption, the sooner you can take corrective actions through services, training, or product enhancements to drive higher product and feature adoption rates.

Critical Customer Relationship Value Metric #2: Success

Customer success tracking builds upon Adoption and examines the extent to which customers realize tangible benefits from your products. Customer success metrics answer questions such as: Do customers consider your products to be integral to their business?  Are they able to apply your products to meet their business goals and objectives?  The very health of your customer relationships depends upon your customers ability to apply your products to drive success with their business.

Why Success metrics matter

Even with 100% adoption rates, it is possible that customers fail to achieve the outcomes they want with your products.  Understanding the extent to which a customer can positively affect their business with your products is a critical indicator about the overall health of the relationship.  Customers that indicate positive impacts from products are far more likely to continue or expand their relationship with you.  Customers that fail to meet performance objectives are at risk of lower spending or ending their relationship with you.

What to measure

Success can be a subjective measure, yet the perception of success is the basis upon which real decisions are made.   Success measurement is most effective when there is a mutually established definition of success.  Companies that work with customers to develop success plans and journey maps with measurable outcomes can track progress to plan.  Success can also be measured as the return on the original investment in a product.  The most subjective metric is based on asking customers to express the extent to which they believe they have benefited from the use of a product.  Although not ideal, this approach provides insights to alert you to situations where negative perceptions may impact customer relationships.

Consider the following metrics:

  • Success Plan Realization: The percentage of an established success plan that has been realized.
    • Metric: % Success rate
  • Return on Investment: A tangible measure to indicate the payback from the investment in a product over an established timeframe.
    • Metric: ROI
  • Success Perception:
    • Metric: % positive impact (success rate)
    • Metric: % Neutral impact
    • Metric: % None or negative impact

How to use Success metrics

Getting customers to adopt products is just the beginning of long-term profitable relationships.  You need to be able to help customers realize tangible positive benefits from product use.  Regardless of how you measure success you must be cognizant of when you fail to meet customer expectations.  The very practice of measuring success suggests that you are attempting to establish a baseline understanding of what customers need or want from the use of your products.  When you understand customer expectations and detect that your products have not met them, you can examine the reasons why and develop corrective actions to increase success rates.

Critical Customer Relationship Value Metric #3: Retention

How many of your current customers do you keep? How long do you retain established relationships?  While adoption and success tracking provides insights into the health of a customer relationship, they do not explain all the reasons for churn in your customers base.  Retention examines the rate and duration that you sustain customer relationships and provides an opportunity to identify and examine the reasons for lost relationships,

Why Retention Metrics matter

For many companies most revenue comes from existing customers, thus keeping the customers you have is imperative.

What to measure

Retention is a straightforward metric when you establish a clear definition of what it means to retain a customer.  For our purposes retention is defined as active, revenue-generating relationships.  This is clear for subscription-based / SaaS relationships, but less so for relationships based on perpetual licensing.  When SaaS customers stop paying for their subscriptions they lose their ability to use the product or service they subscribed to.  Perpetually licensed software is different.  A customer can continue to use a perpetually licensed product but pay no maintenance fees, nor purchase any future products.  Retention examines the net number of revenue-generating customer relationships from one period to the next.

Consider the following metrics:

  • Customer Retention (perpetual and subscription): Revenue-generating relationships carried over from previous period (e.g. year to year or quarter to quarter).
    • Metric: % Customer Retention rate (relationships)
  • Net Revenue Retention (perpetual and subscription): Net value of existing contracts carried over from previous period, plus new revenue and less losses (e.g. year to year or quarter to quarter).
    • Metric: % Net Revenue Retention rate

How to use Retention metrics

Retention analysis informs about the stability of your customer base.  You can strive to get your customers to adopt products and be successful with them.  Even then, you cannot prevent all existing customers (or contract value) from going away.  You must however be vigilant and monitor customer retention rates and examine the reasons why you lose customers and revenue (e.g. you may keep a relationship, but at a lower value).  Only when you understand why you lose customers can you act to retain them.

Your Goals: Retention, Growth and Long-term Profitability

We know a lot about customers, but let’s make certain that we understand the foundations of successful customer relationships.  By measuring the extent to which customers adopt and use our products successfully we can identify situations where products fall short in fulfilling their needs and expectations.  With these insights we can take corrective action to minimize churn and identify ways to retain and expand existing relationship value.

We’re here to help.

Reach out anytime to start your own conversation about recurring revenue and customer relationship value. Use the chat button at bottom right, send an e-mail, or click on my calendar to schedule a specific time.

 

Ready to commit to a Customer Success strategy? Learn the 5 critical milestones.

Exclusive ServiceXRG White Paper:

Ensuring a Successful Journey to Customer Success

Download the ServiceXRG whitepaper, "Ensuring a Successful Journey to Customer Success"

Related Articles

From Tasks To Outcomes – Transforming The Service Organization

The current organizational structure of your Services team and alignment with other customer-facing teams may be inhibiting your ability to deliver outcomes. Organizational alignment, increased cooperation, and shared goals are key to customer retention and revenue expansion initiatives.

read more

Recurring Revenue Rate

The amount of recurring revenue a company receives may increase, stay the same, or decline for a given period. Recurring Revenue Rate indicates the percent change in the amount of recurring revenue at the end of a specified period compared to the recurring revenue at the beginning of the same period. Measuring recurring revenue rate is essential to help identify the factors that lead to revenue retention and attrition and provides an indicator of the overall state of customer relationship health.

read more

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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Related Articles

From Tasks To Outcomes – Transforming The Service Organization

The current organizational structure of your Services team and alignment with other customer-facing teams may be inhibiting your ability to deliver outcomes. Organizational alignment, increased cooperation, and shared goals are key to customer retention and revenue expansion initiatives.

read more

Recurring Revenue Rate

The amount of recurring revenue a company receives may increase, stay the same, or decline for a given period. Recurring Revenue Rate indicates the percent change in the amount of recurring revenue at the end of a specified period compared to the recurring revenue at the beginning of the same period. Measuring recurring revenue rate is essential to help identify the factors that lead to revenue retention and attrition and provides an indicator of the overall state of customer relationship health.

read more

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