10.20.2014
The Key Capabilities of Customer Success
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Judith Platz VP of Research Customer Success and Support
Content
• Support Services Expansion • Survey Overview • Respondent Demographics • Three Profiles of Customer Success • Customer Success Organizational Models • Recommended Practices
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10.20.2014
Support Services Expansion
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Support Services Scope Expansion
• Traditional support model assisted customers with break/fix and availability
• Demand for vendors to take active role in product/service success
• SaaS companies experiencing large amount of churn • Success is now viewed as a competitive differentiator • New revenue streams are being created • Support Services has infrastructure that can be
leveraged
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The Support Services Pendulum
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Customer Experience
Cost Reduction
Revenue Gen
Fundamental Shift • Professional Services stands up the customer.
• Education Services provides technical training.
• Customer Support makes sure the system is available.
Customer Success is about adoption, retention, expansion and
overall Customer Success with our products/services.
Audience Question
• Does your company have a Customer Success Organization?
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Survey Overview
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Survey Overview • In August of 2014, TSIA opened up a forty question survey to the TSIA community. • The objective of the survey was to establish a baseline regarding fundamental
practices and performance metrics related to the Customer Success function. • The survey collected data on key performance metrics such as:
– Customer Success revenues (if revenue generating Customer Success offers were in place) – Annual budget for the function – How budget dollars are allocated between cost to deliver services, offer development, G&A,
etc. – Average cost of a Customer Success Manager (CSM) – Compensation structure for CSM (base, variable, incentive) – How many customer one CSM manages – How do CSM’s spend their time – Revenue renewal and customer churn rates
• The survey also tested critical practices related to delivering Customer Success offers such as:
– Where does the Customer Success function report? – When is Customer Success first introduced in the customer life cycle? – Can Customer Success monitor customer activity remotely? – Has Customer Success developed and documented an adoption framework it can use with
customers? – Is Customer Success responsible for renewing customer accounts? – Does Customer Success have a specific target for expanding customer account revenues?
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Summary Findings • 169 companies participated in the survey, but only 30 were able to answer all 40
questions—this speaks to how relatively new this capability is to most companies (27 months is the median tenure for Customer Success organizations responding to the survey).
• Analyzing the data, it is clear that there are three distinct profiles for Customer Success organizations (CSO):
– Adopters: CSO is mainly focused on helping customers adopt company offerings – Retainers: CSO is mainly focused on making sure the customer renews their relationship with the company.
However, this does not necessarily mean the CSO is directly responsible for renewing the customer contract – Expanders: CSO is mainly focused on expanding account revenues
• The profile of the CSO (Adopter, Retainer, Expander) influences key practices such as:
– Compensation models, hiring profiles, CSM to account ratio, etc.
• It is clear from the data that many CSO’s are in the early phases of establishing and successfully tracking critical financial and performance metrics such as margin, Offer development costs, Customer Churn rate, etc. (The median number of employees in the CSO was 18, with a range from 600 to 1).
• Only 8% of the 169 responding companies reported revenues from Customer Success activities. However, 50% of the CSO’s that were able to complete the entire benchmark reported revenues from Customer Success activities indicating the premium, fee based offers are a marker for a maturing Customer Success capability.
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Respondent Demographics
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Sign of Youth
82%
45%
18%
6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Could not answer all 40 questions
Could answer at least 40% of the questions
Could complete the entire benchmark
Could complete the benchmark AND know the actual gross margin of their
Customer Success revenues
TSIA Customer Success Baseline Benchmark N= 169
12 Source: TSIA 2014 Customer Success Baseline Benchmark
Company Types (76 Companies)
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Software 49%
SaaS 29%
Hardware 13%
Services 9%
Company Types
Software SaaS Hardware Services
Tenure of Customer Success Capability
26
15
48
6
0
10
20
30
40
50
60
ALL Respondents
Adopters Retainers Expanders
Median Number of Months Customer Success capability has been in place
14 Source: TSIA 2014 Customer Success Baseline Benchmark
10.20.2014
Three Profiles of Customer Success
Three Profiles of Customer Success
0%
10%
20%
30%
40%
50%
60%
70%
80%
Adopters Retainers Expanders
What % of CSM time is allocated to the following activities?
Adoption Retention Expansion Other
16 Source: TSIA 2014 Customer Success Baseline Benchmark
Participant Profiles
40% 37%
10% 13%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Adopters Retainers Expanders None of These Profiles
% of respondents in each profile
17 Source: TSIA 2014 Customer Success Baseline Benchmark
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Driving Adoption
Percentage of Customer Success organizations that can monitor consumption remotely: 57%
Percentage of Customer Success organizations that have a dedicated analytics team: 60%
Percentage of Customer Success organizations that have data models to predict renewal: 50%
Percentage of Customer Success organizations that have formal adoption framework: 43%
Source: TSIA 2014 Customer Success Baseline Benchmark
Do you have a resources dedicated to Customer Analytics?
60%
66%
25%
0%
10%
20%
30%
40%
50%
60%
70%
Retainers Adopters Expanders
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Can the Customer Success Rep remotely monitor actual customer usage and activity?
54%
66%
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Retainers Adopters Expanders
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Is this data being mined for usage feeds to reduce cost of service to customers? Is this data being mined to create service offerings that will help customers improve their ability to
leverage your product?
Do you have a defined Adoption Framework?
50% 54%
25%
0%
10%
20%
30%
40%
50%
60%
Retainers Adopters Expanders
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An Adoption Framework assesses how well a customer is adopting and leveraging your technology
Who Owns Customer Renewal?
23% 33%
0%
14%
32%
0%
40% 35%
100%
14%
1% 0% 0%
20%
40%
60%
80%
100%
120%
Adopters Retainers Expanders Customer Success Renewal Specialist Product Sales Rep Channel Partner
22 Source: TSIA 2014 Customer Success Baseline Benchmark
Sales Account reps are TWICE as likely to be responsible for renewal as opposed to a Customer Success rep.
Churn Rates
21%
18%
8%
0%
5%
10%
15%
20%
25%
Adopters Retainers Expanders
What is your annual customer churn rate?
23 Source: TSIA 2014 Customer Success Baseline Benchmark
Thought: Not fighting high churn—focus on expanding revenues from table customer base
Thought: Fighting high churn so Customer Success created to keep customer engaged.
Do you use predictive models to predict customer churn and customer retention?
60% 54%
25%
0%
10%
20%
30%
40%
50%
60%
70%
Retainers Adopters Expanders
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Customers will not abandon technology they are using on a daily basis. The ability to drive account renewals in a systemic, predictive manner will be the hallmark of best-in-class Customer
Success. Do you understand the key metrics that will predict a renewal?
Audience Question
• Do you currently charge customers for Customer Success services?
Generate Revenue from Customer Success
50% 50%
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Adopters Retainers Expanders
What % of these Customer Success organizations have revenue generating Customer Success offers?
26 Source: TSIA 2014 Customer Success Baseline Benchmark
Does Customer Success have a specific target for expanding revenues within existing accounts?
30%
38%
50%
0%
10%
20%
30%
40%
50%
60%
Retainers Adopters Expanders Have Specific Expand Target
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Average Revenue per Customer Success Rep
$4,360,000 $4,400,000
$5,400,000
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
Adopters Retainers Expanders
28 Source: TSIA 2014 Customer Success Baseline Benchmark
Audience Question
Do you currently offer Customer Success services to ALL of your customers?
A. YES
B. NO
Do you offer Customer Success services to all customers?
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10.20.2014
Organizational Models
Where does Customer Success live?
Sales
Technical Support
Professional Services
Education Services
Managed Services
Customer Success
Where does Customer Success report?
Less than 10% of the time
Customer Success reports to the Support Services executive
Source: TSIA 2014 Customer Success Baseline Benchmark
Where Does Customer Success Report?
75%
23%
2% 0%
10%
20%
30%
40%
50%
60%
70%
80%
CEO/President Global Services or Support
Sales
34 Source: TSIA 2014 Customer Success Baseline Benchmark
Audience Question
• Where does Customer Success report in your organization?
– CEO/President – Global Services/Support – Sales – Other
Where CSMs Come From
40%
32%
3%
41%
31% 27%
9%
17%
30%
1% 1% 0% 0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Adopters Retainers Expanders
What % of CSMs are hired from the following resource pools?
Customer Support Professional Services Sales and Marketing Product Group
36 Source: TSIA 2014 Customer Success Baseline Benchmark
Average Cost per Customer Success Rep
$136,264
$99,000
$154,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
Adopters Retainers Expanders
37 Source: TSIA 2014 Customer Success Baseline Benchmark
CSM Compensation Models
84% 84% 78%
12% 12% 10% 4% 4%
12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Adopters Retainers Expanders
What % of CSM compensation is based on:
Base Variable Incentive
38 Source: TSIA 2014 Customer Success Baseline Benchmark
10.20.2014
Recommended Practices When Establishing Customer Success
Summary Recommendations • Based on this first pass benchmark, TSIA would have the following
seven recommendations for optimizing an emerging Customer Success function:
1. Clearly establish the initial charter of Customer Success – Most likely adoption, then retention, then expansion – Ultimately Customer Success should be cost effective capability for all three
2. Align hiring profiles and compensation models to your core charter 3. If establishing a separate Customer Success organization, have it report
directly into a neutral C-Level executive (Not Services or Sales executive) 4. Invest in dedicated Analytic capabilities 5. Develop predictive models for retention 6. Develop a formal adoption framework for assessing customer adoption
rates 7. Develop fee based offers to complement services that are provided for
free. – We learned this lesson with Education, Professional, and Support Services
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