Understanding Customer Success For SaaS Companies.

With changing times, new business models have evolved. All around us, organizations are witnessing a conscious shift from an upfront capital expenditure model to a more rationalized ‘pay – as you go model. In the Information Technology space, this has sprung to life via new software delivery mechanisms. The most notable being that of offering Customer Success for SaaS.

The subscription-based model that SaaS offers allows for agile, zero-strings-attached, production-ready businesses right from day one. The popularity of the model is reflected in IDG’s Enterprise Cloud Computing Survey, 2016 which states that now 45% of the organizational cloud computing budget is allocated to SaaS. Be that as it may, a SaaS model comes with its own set of challenges for an organization offering such services.

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The marginal upfront cost and ease of adoption to SaaS have also come to be its bane – leading to a high customer ‘churn rate’ or customers who drop the service along the way. The proven antidote to this problem for any SaaS company is Customer Success Management.

What is Customer Success Management (CSM)?

(Though the acronym ‘CSM’ is used interchangeably for Customer Success Managers, for the purpose of this post, we shall stick with the broader meaning of Customer Success Management as a concept.)

Imagine the lifecycle of a typical customer on your SaaS platform. The chances are that he/she would transition through the following stages:-

Typical Lifecycle of Customer on SaaS Platform
  1. Onboarding of customer: This includes registration, activation, environment configuration and the initial training required to access the platform.
  2. Customer Handholding: Here the user is walked through the SaaS modules and is prepared to transact through them.
  3. Transacting Customer: A mature user who routinely engages on the SaaS platform.
  4. Dipping Customer: This is the early stage of the customer losing interest; which potentially leads to eventual churn.
  5. Lost Customer: A user who ceases to engage actively on the platform resulting in no business.

Come to think of it; every customer gets onboard a SaaS platform with the hopes of meeting certain outcomes. This is more pronounced for B2B enterprises where the actual user operates not in an individual capacity, but as a business user looking for objective business gains.

In that sense, there could only be two causes for a customer to move onto stage 4 & 5 (as described above) – either the nature of the business has changed, or the expected outcomes are not being met. Most often, the latter is the cause. Customer Success for SaaS addresses this problem at the very heart of it. It ensures maximisation of value to the customer right from initial onboarding to regular transactions.

The belief is simple – the platform succeeds if its customer succeeds. Hence CSM attempts to put the customer at the focal point of all enterprise activities. To achieve this, it bundles all activities ranging from Sales & Marketing to Customer Complaint Management and aligns them to provide a better customer experience. This customer experience is monitored through various CSM tools and methods; leaving room for the timely taking of both corrective and preventive actions as necessary.

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Why is CSM Important?

Consider this, a new resident comes to live on rent in your building. Not only does he/she not know people around but also has to figure out ways to go to the market, get domestic help, etc. You are committed to making the new entrant feel at ease in the new setup. So you pay daily visits, hand-hold him/her around the locality, introduce him/her to new utilities in the complex and keep a dedicated tab on how he/she feels. The moment you detect signs that the resident is at ease, you swing into problem-solving mode. With time, the resident falls in love with the building society and doesn’t consider relocating elsewhere.

In a business context, the resident is your customer, and all your visits, checks, and action mechanisms constitute the CSM bouquet. If done well, a CSM program helps ensure high customer satisfaction, engagement, and loyalty. This, in turn, translates into high Monthly Recurring Revenue and optimal Customer Lifetime Value to the SaaS business.

As easy and intuitive as the concept sounds, the actual implementation is found to be severely lacking. In fact, a Forrester study indicates that the top two challenges for a business are the lack of a unified customer view and customer insights that can drive decision-making.

These two are also key hit areas for CSM software. Not only does such software allow businesses to view their customer information through a single window, but they also track and monitor their Customer Health scores in real-time and on an ongoing basis. Remember the visits and checks on the resident to see how he/ she is doing?

SaaS firms that implement CSM software are known to be keyed in on their customers. They devise loyalty schemes for the healthiest customers (who are responsible for the cream of the revenue) and special incubation strategies for the ‘sick’ businesses so as to nurse them back to ‘health’. This is the most sure-fire way of predicting and substantially limiting customer churn.

Okay, so now that the customer is retained, what next? The simple answer is to renew and upsell. CSM software provides businesses with the ability to both service and up service customers on a perpetual basis. In fact, up to 95% of revenues are waiting to be generated in this bracket.

How to Start Building a CSM-Focused Organization?

CSM is a culture. Once the management of a SaaS organization believes in it, it is best to let it seep top–down. Start by building a cross-functional Customer Success Management team at the center of the organization. The team may comprise members with a sound understanding of the business domain, Account managers and may carry a flavor of Customer Support reps who actively manage customer queries.

This CSM team talks to all other enterprise functions internally and is tasked to deliver the best customer experience. To support this team, deploy a CSM software that will connect to various other systems such as a CRM, Billing, Support, Legacy systems, etc. to render a 360-degree view of the customers.

Long Term Outlook for CSM

Though it is still the early days for CSM, it is the only way to go. Increasingly SaaS organizations (and for that matter any company with low exit barriers) are staring at high customer churn, low engagement, and overall dissatisfaction levels. CSM is going to prove to be the elixir for all such woes and more. In fact, the Account Management role within a SaaS firm will cease to exist in its present avatar; evolving into a full-blown Customer Success Management role.

No wonder the industry is already waking up to this concept with HR functions now putting out dedicated Customer Success Manager Job Descriptions!

Puneet leads CustomerSuccessBox. He is deeply passionate about the three product joys - the joy of producing, the joy of selling, and the joy of ownership. His inspirations come from family, friends, mentors, people he works with and from free thinkers like Eric Ries (The Lean Startup), Tim Brown (Change by Design: Design thinking) and many more.