A few months ago, we hosted a customer success meetup in Bangalore where several Customer Success Leaders shared their learnings and insights. We kickstarted the meetup by discussing Moving from reactive support to proactive customer success. For this discussion, we had an expert panel comprising of:
- Nimesh Mathur (Director of Customer Success, Pluralsight)
- Bharath Devanathan (SVP, Bounce)
- Senthilvel Prakash (Sr. Manager – Customer Success, Synup)
It all started with the panel discussing how the world is moving towards the subscription economy. In the SaaS world, the sales and marketing departments just bring in customers. Only if they stay and renew the contracts, the company actually earns. Hence along with the Cost of Acquisition (CAC), it is essential to measure the Cost of Retention (CRC).
What was the need to become proactive from being reactive?
In SaaS companies, as the company grows, the contribution of recurring revenue to the total revenue increases.
During the pre-Series A (seed round) period, recurring revenue contributes around ~20% of total revenue. In the Series A/B stage, this number increases to 50%, while in larger companies it can be as high as 80% of the total revenue.
Since recurring revenue is so critical, SaaS companies need to be proactive to survive.
What are the differences between tech support, customer success, and professional services?
Here all 3 panelists agreed that Customer Success is an umbrella term that includes customer success along with customer support and professional services. Each subset should align towards the common mindset of making the customers successful.
Customer success should work with the customer support team to understand what the major complaints are. The next step should be to solve the problems or automate the process of handling (maybe by sending an automated reply with a link to the specific support document). If done properly, this will save a lot of resources for the company.
Professional services can act as a differentiator for your company. Professional services provide extra value to the customers and are also a way of expansion for the company.
Here is the complete video of the discussion:
What was missing in support and professional services that customer success was required?
According to Nimesh Mathur, the main thing that was missing was the thought process of retaining customers for life. Earlier no one had an agenda of making the customers successful. The focus was on building a good relationship with the customer and the hope that they will continue to give business.
But now, if the customer is not successful, no amount of good rapport with the customer can help you. The whole company has to work together and be customer success focused to create the WOW factor for the customers so that they stick with you.
Essentially, customer support is transactional in nature. Meaning, that they have a beginning and an endpoint. Begins when customers reach out with their concerns and end with the issue resolution. Whereas there’s no end point in customer success. It’s a relationship-oriented function and continues to work to strengthen the relationship between the customers and the firm.
Furthermore, the customer support department act as product experts but the customer success department is domain experts who help customers achieve their business outcomes.
When should you go proactive?
Now that everyone knows that customer success is essential, the question was, “when should the company start hiring CSMs”?
The panel agreed that you need a customer success department when 20% of the customers are responsible for 80% of the total revenues. This will allow the CS department to focus on top customers by taking the help of data and insights along with sharing the learnings and customer success stories.
Bharath said the customer success mindset should be cultivated from the start because proactiveness leads to an increase in revenues and profits while reactive nature focuses on saving revenue. Being proactive is under the company’s control while reactiveness depends on the customer’s responsibility.
Ideally, maximum time should be spent on being proactive while minimum time should be spent on being reactive. While going proactive, according to Senthilvel Prakash, it is important to act on feedback so that the process/product can actually improve.
Who should be leading this Customer Success practice?
When the Customer Success function is added to your company, it is the responsibility of the whole company to make the customer successful.
But such drastic change requires instructions from the senior leadership. Here, there are several options such as CEO, Customer Success Leader or even the VP of Sales.
All panelists felt that to make the shift most effective it is advised that the CEO should lead the process. If the CS leader takes ownership, other departments will feel that they are being forced to do this so that the leader achieves his/her KRAs.
The VP of sales will end up giving 90% of his time to customer acquisitions which would lead to less attention being given to customer success.
If the CEO makes a company-wide announcement on making the company’s customer success focused and then gives constant guidance in the initial months, the shift will be much more smooth and more effective.
Who should lead the Customer Success team?
Whenever a new department is set up, a new leader also has to be chosen. Here again, there are several options:
- Professional CS Leader
- Head of marketing
- Head of sales
- Product Manager
In this case, again a Professional CS leader is the best option. After 4-5 years, the recurring revenue is going to be more than the new revenue. If you invest well enough, you will get exponential returns in a few years.
Customer success is a completely new department. They are responsible for several things like churn reduction, renewal, upsell, etc. The customer success department has its own metrics like MRR, churn rate, etc.
They use customer success platforms like CustomerSuccessBox to get a detailed view of each of the customers, and what the health of the customers is which helps them decide which customer should be focussed at what time.
Assume that the head of sales starts managing the customer success department. It is possible that the sales team signs a customer who may not actually be the ideal customer. This customer will eventually churn no matter how hard the success team tries otherwise.
Here the VP of sales may support the sales team which will cause several problems. Each of the departments will try to pull the company in a different direction which will lead to the company taking the middle path to success.
Only when the customer success department is as powerful and important, if not more than other departments like sales and marketing, can the company grow.
What should be the Customer Success Organization structure?
For the customer success department to be successful, the right leader should be chosen.
According to Senthilvel, some leaders tend to copy what other companies are doing. A leader should learn from another company’s success, but just blatantly copying from a company will lead nowhere.
That company may be having a different ARR or targeting some other segment and hence their methods won’t be applicable to your company.
A CS leader should be hands-on and be willing to talk to the customers, take the help of a customer success platform to get insights, and should have a proactive nature.
Whom the Customer Success leader reports to, depends on the stage the company is in. Usually, till $15-$20M in revenue, a Customer Success leader reports to the CEO.
Under the customer success leaders are CSMs who are each responsible for their own portfolio. Sometimes you may even need onboarding specialists if the product is complex and the onboarding process is time-consuming.
We also conducted another session on the secrets of successfully onboarding a B2B SaaS customer. Subscribe to our blog to get notified once that blog is published.