Finding The Right Business Strategy For Customer Success

Customer experience is by no means a buzzword in business. As our global consumer landscape becomes inundated with product and service choices within brick and motor and digital channels, companies need to be customer savvy. Customer engagement and customer success need to be an integral part of a startup’s business process, from entry level to C-Suite engagement.

Recently, we inspired you with 13 customer engagement tactics for a customer-oriented marketing program. Now, we need to set internal assessment and metrics to ensure that engaged customers are retained.

Customer Success = Customer Experience + Customer Outcome

Salesforce’s customer success equation, CS = CX+CO, is very important to follow. It’s crucial for startups to scale. However, what is the point of scaling if current customers are not having successful customer outcomes, even if customer service is “supportive.” Most startups and companies focus too heavily only on CX for the customer journey, and less about customer health. A combination of both is needed for both the customer and company to have a win-win.

Business Strategy & Metrics

High-level Business Strategy: Most companies use the balanced scorecard (BSC) approach when setting company strategic objectives. The BSC is one of the most effective tools to structure strategy for an organization, using the following perspectives:

• Financial: Financial performance, budgeting, all uses of financial resources
• Customer: Customer types, sales channels, sales, and customer service strategy
• Operations: Business processes, operations, and inter-department communication flow
• Capacity: Understood as learning and growth, what human capital, infrastructure, and technology improvements may be needed for company growth and expansion

While the BSC structure should be adhered to, the customer outcome focus is still in a silo. Top sales and customer service companies such as Salesforce suggests that each perspective starts with the customer! For instance, ensure financial performance budgeting and metrics begin from customer retention and health outlook, instead of only a new revenue driven outlook.

Customer Success Organizational Structure

There was once a time where sales & marketing dealt with new sales, and customer service handled existing customers. Again, such a silo will not work in our Industrial 4.0 landscape. When creating an organizational structure, startups should consider having interdepartmental customer outcome relationships.

• Change the traditional sales pipeline format to include the sales executive (new business), account manager (renewals and up-sell) and a dedicated customer success manager (CSM) to be the internal customer success partner to both the sales executive and account manager.
  • Have a customer success (CS) team report to the CSM at the C-Suite level to ensure customer metrics are performed and reported
  • This team will need to liaise with Sales, Customer Service, Product Development and Marketing to be the internal voice of customer success.
  • Product managers and product owners must be aligned closely with the CS team to ensure critical UX developments truly meet potential and existing client expectations.

• Customer information systems and data management, analysis and use are of the utmost importance when it comes to customer success. A company must implement a solid sales, customer support and marketing data tracking and outreach automation as early as possible.
  • The sales, account management and CS team should have detailed customer success best practice playbooks for renewal, expansion management as well as escalation.
  • Have a closed loop system built within the customer experience program: here ticketing and case management will provide useful customer demographic data while customer health is problem-solved directly.

Key Performance Indicators (KPI)

Customer health = company financial health. This is a given. While there are numerous key performance indicators (KPIs) which a startup may have to measure outcomes across the customer journey, the following are must-haves, especially for membership based and/or SaaS companies. Remember to not only set the metric but to identify the responsible owner accountable for reporting on each KPI.

Churn Rate

It is crucial to have a low to negative churn rate! Startups must account for how many customers are lost per year, in at least quarterly segments. Negative churn occurs when additional expansion revenue from existing customers far outweighs lost revenue from churned customers. Gainsight, a leading customer success consultancy, suggests strong teamwork between sales and account management to cross-sell to existing customers.

Monthly Recurring Revenue (MRR)

MRR is a normalized measurement of annual recurring revenue, most frequently measured with a constant value in each month of the subscription period. To capture accurate MRR, annualize services that are recurring, but may have been pro-rated for the 12-month period.

Committed Monthly Recurring Revenue (CMRR)

Take MRR, add future recurring revenue to that number, minus the recurring revenue of customers that are unlikely to renew in one year.

Customer Acquisition Cost (CAC)

Most startups are introduced to CAC as a metric from inception planning. CAC measures the cash spent to acquire new customers and helps to measure time to return on investment for acquiring customers.

CLTV

This is an extremely important metric! The customer lifetime value measures the net profit a startup has from a customer present and future relationship. Calculate the average purchase value. Multiply this by the average purchase frequency rate to determine customer value. Find average customer lifespan, and then multiply by customer value for CLTV. If a company’s CAC is higher than its average customer lifetime value (CLTV), the business is in trouble. Gainsight suggests the CLTV be at least 3 times CAC.

Successful companies view customers as clients with the desired outcome that can be achieved by using your specific product or service. The business landscape today calls for companies to be in partnership with clients rather than bean-count arbitrary sales as a marker of revenue. A customer experience program that focuses not only on customer support but customer outcomes is a win-win.

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