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Book Summary: CUSTOMER SUCCESS by Nick Mehta

Reading Time: 50 minutes


Nick Mehta, Dan Steinman and Lincoln Murphy

Ramu Kallepalli
April, 2020

The Setting

The Subscription business model is red hot.  Software as a Service (Saas) business led the change into the subscription economy.  For any SaaS or B2C company, to survive and thrive, it needs to 1. Reduce/manage churn, 2.  Drive increased contract value (Net Revenue Retention) from existing customers. And 3. Increase promoters (improve the NPS) by improving customer experience and customer satisfaction.  These are the exact benefits that come from executing customer success well. Customer Success Managers (CSMs) are individuals that help customers get the most value out of your products.  Nick Mehta and his co authors, share their insights and history of this growing discipline.

Customer Success By Nick Mehta


This book discusses the history and imperative of the discipline of customer success, including ten laws of customer success.  It also outlines the significance and roles of Customer Success Manager (CSM) and Chief Customer Officer. Ten laws are, 1:  Sell to the Right Customer. 2: The Natural Tendency for Customers and Vendors Is to Drift Apart. 3: Customers Expect You to Make Them Wildly Successful.  4: Relentlessly Monitor and Manage Customer Health. 5: You Can No Longer Build Loyalty through Personal Relationships. 6: Product Is Your Only Scalable Differentiator.  7: Obsessively Improve Time-To-Value. 8: Deeply Understand Your Customer Metrics. 9: Drive Customer Success through Hard Metrics. 10: Customer Success is Top-Down, Company-Wide Commitment.

Customer Success Theme


Foreword by Maria Martinez of Salesforce

When done right, Customer Success needs no justification.  It preserves the company’s book of business, opens up doors for additional opportunities and creates lifelong advocates in our customers.  When optimized, Customer Success is the best sales and marketing engine possible.

History and “Why” of Customer Success

Before SaaS, we had maintenance contracts.  The software maintenance business is the best business for vendors because no one else can provide software upgrades and bug fixes for their proprietary software. So, the renewal of a maintenance contract is mostly a formality.  For SaaS and B2C vendors on other hand: other vendors in the same market offer easy conversions to their product and lower prices.

Discipline of customer success started with David Dempsey’s presentation, in 2005 to the Salesforce executive team.  The bottom line, he shared, was despite what it looked like from the outside, Salesforce business was in a death spiral.  The culprit was summed up in one word – churn.  The churn rate at Salesforce was 8 percent per month.  You can’t pour enough business into the top of the funnel to sustain real growth if customers are leaking out the bottom at a high rate.  Demsey’s presentation awakened Benioff and set the wheels in motion around a company – wide initiative to focus on, measure, and reduce churn.  Dr. Doom had given birth to the customer success movement as a discipline and a business imperative for all recurring revenue businesses.

Customer success is loyalty creation.  There are two kinds of loyalty — behavioral and emotional.  There are customers who are loyal because they have to be (behavioral), and there are customers who are loyal because they love your brand or product (emotional).  Customer success is designed to create emotional loyalty.  Steve Jobs, at Apple, created a place in the back of the Apple store staffed with customer success managers.  Customer success managers are individuals that help customers get the most value out of your products. We desperately want our customers to become promoters.

Marc Benioff created customer success out of his need to reduce churn.  Steve Jobs created customer success out of his intuition that it would increase emotional loyalty to Apple products.

Subscriptions are all the rage right now, from software to music to movies to diet programs.  If a business is not subscriptionable, it is probably becoming pay-as-you-go, which has all the same characteristics and reasons as SaaS.

Successful recurring revenue customers today do 2 very important things:  a. They remain your customers. b. They buy more stuff from you.

In effect, SaaS → Subscriptions → Customer Success.  Revenue is no longer king but has been replaced by annual recurring revenue (ARR) or annual contract value (ACV).  If a company has six customers all on a two-year contract worth $2 million each, that company’s ARR is $6 million. There’s no guarantee that SaaS customers will continue to renew.  That’s where customer success comes in. In a perfect world, those customers pay you more money every year either because prices go up, discounts go down, they buy more licenses, or they buy additional products from you.  That’s how a company with $6 million in ARR could become a company with $8 million of ARR without ever selling their software to another customer. Fundamental elements of a successful subscription-based company — grow the value of the installed base, reduce churn and decrease time to value.

If customers are on annual subscriptions, they need to renew their contract with a vendor at least twice in order for the vendor to break even and start making a profit after recovering cost of acquisition and onboardnig.  On top of that, most churn happens in the first couple of years because of the complexity of onboarding and adoption.

Customer success is the organization that focuses on the customer experience with the goal of maximizing retention and LTV.  It is also a discipline in the form of CSMs and a philosophy which requires a top-down, company-wide commitment to truly deliver world-class customer success.

Customer Success Strategy

Customer success delivers reduced churn, drives increased contract value from existing customers and increases promoters/NPS.

Reduce/manage churn:  Churn increases detractors of your products and decreases promoters and Net Promoter Score.  Much of the daily job of the CSM in a SaaS company has to do with setting and resetting customer expectations.

Drive increased contract value from existing customers:  You can drive increased contract value by increasing net retention (NRR) and by pushing those 110% customers closer to 130%. The additional revenue delivered here will come at much less expense than new customer acquisition because there’s no associated marketing expense and almost certainly less sales expense, too.

Customer success needs a new set of skills.  It analyzes available data to determine which customers are healthy and which are not.  Customer success also drives proactive outreach to customers who appear to need assistance or who have opportunities for growth.

Determine key metrics by which success will be determined:  Net Revenue Retention(NRR), and Annual Recurring Revenue (ARR).

Focus on activities that will drive those metrics: Health checks and scoring, Quarterly Business Reviews (QBRs), Proactive outreach, Education/training, Risk assessment and mitigation.

Organizing around Customer Success as a Philosophy:

Customer success is the umbrella phrase used to describe the entire post-sales world.  Though there is an overlap in some of these roles, customer success is NOT: Customer experience (Cx), Customer relationship management (CRM), Customer advocacy (references, case studies, positive reviews, and user group participation) and Customer support.  Customer success uses data to proactively predict and avoid customer challenges and will be measured in retention rates.

Customer success IS:

  1. Revenue driver: by increasing renewals or decreasing opt outs/churn and by upsells.  Successful customers do two things: a. Remain customers and b. Buy more stuff from you.  Because the job of customer success is to make sure customers are deriving success from your product, they are a revenue-driving organization.  This means they need to be selling too.
  2. Proactive:  by using data and analytics to determine which customers should be acted on, either because they appear to be at risk or have upsell opportunities or because there’s a scheduled event such as QBR.
  3. Success oriented:  Key metrics are renewal rates, net revenue retention, overall growth of customer base, and so on.
  4. Analytics focused:  customer success is driven by predictive analytics.  Analytics drive customer success by predicting outcomes such as churn or upsell.
  5. Predictive:  Figuring out who to talk to before they need to call you.  At a customer success-driven company, the executive bonus plan will only include top-line revenue growth (sales) and retention.  One person needs to own the customer success metric, which might be renewal rate, a net revenue retention rate or an NPS. Whatever the measure, one person needs to own it.  Assign it to someone and give her the same authority that you give to your sales vice president. The primary job of the leader of your customer success efforts is to ensure that all other organizations are constantly thinking about retention.  Sales and customer success both own a target that is critical to your business. You want them to have equal authority around the company to make their number (retention and sales). You want product engineering to deliver both to customer success and sales organizations.
  6. Impact on Sales.  1. A new focus on marketing and selling only to customers who can be successful long-term with your product.  2. Overall awareness of renewals. 3. Improved expectation-setting with prospects. 4. Much more attention paid to knowledge-transfer and post-sales prep to ensure onboarding and ongoing success for the customers.  5. Incentives around renewals and/or LTV. Remember sales reps do want customers to have long-term success. The way you think about demand generation, sales and how they are incented may need to change. If the person owning retention does not have veto power over sales deals, it resides in your lap as the CEO and the one who has to balance the need to make this quarter’s number and the pain of selling to the wrong customer and possibly even losing that customer in the long run.  Refocus your demand generation team on only those prospects who have a high likelihood of a lifetime of success.
  7. Impact on Product:  Your product thinking must also shift toward retention, not just sales.  Retention thinking is 1. Building Return on Investment (ROI) measurements into your product. 2. Making your product easier to implement.  3. Design for ease of adoption, not just functionality. 4. Stickiness is more important than features. 5. Performance is more valuable than demo quality.  6. Create modules that can be upsold rather than integrating all features into the base package. 7. Make customer self-sufficiency easier to attain. VP of customer success will consistently refocus the entire company to net revenue retention.
  8. Impact on Services:  In recurring revenue business, there’s no such thing as post-sales.  Every single activity is a pre-sales activity.  Speeding up the time-to-value of your product is life or death for your company.  For the customer who will have a decision point in 90 days (60 working days) on whether to keep your product, a 2 to 3 days delay can make a huge difference.  Across the entire services team, pre-sales must be the mentality.  The person taking a customer support call needs to think of the resolution of that problem as a pre-sales activity.  Sales reps and solution consultants view every interaction with a customer as critical because the clock is ticking on the current month/quarter/year, and they need to get this deal closed.  Customer support needs to take on the same urgency. That impending deal is the renewal or the opportunity to churn or, in the case of B2C the opportunity to create a need for more of your product.  The job of customer success is not just to help get the customer over that challenge but to go to the source and apply pressure to ensure that the next customer does not end up in the same situation. This means going back to support or training or onboarding, forcing them to step up their game. Clearly, the best customer experience is not to have someone who can help when needed but needing that help less and less frequently.  Same rule applies for sales which sets the wrong expectations and for products that do NOT function as promised.

VP of customer success must have real authority and possess true leadership qualities.  So much of what she does to move your company forward has to do with influencing others who do not work for her.  She needs to have the gravitas, incentive, and skills to go toe-to-toe with the VP of sales or the VP of engineering or leaders of any of the other organizations.  The right customer success leader will bear a striking resemblance to skill set to your VP of sales with a little bit more of a service orientation instead of a closing mentality.

B2C and Non-recurring Businesses

Remember customer success is another way of saying loyalty creation.  Loyal customers stay with you and buy more from you.  Maximize the value the customer receives from your product to keep them coming back.

Although the customer success philosophy is the same, there are major differences with regard to how it is delivered for different companies.

  1. High Touch customers e.g., Workday with hundreds of customers at $1 million/year:

Customer success regardless of what it’s called is driving loyalty by delivering value.  Great high-touch customer success is usually a predefined mixture of the scheduled and unscheduled.  Scheduled interactions are a defined onboarding process, coordinated handoffs between vendor groups, monthly status meetings, executive business reviews (EBRs), on-site visits, regular health checks and upcoming renewal.  Unscheduled interactions are data driven and proactive from the vendor to the customer and designed to mitigate a perceived risk, such as: multiple outages, too many customer support/service calls, declining usage of the product & invoices overdue by more than X days.  It is important to optimize the customer touches to create maximum business benefit for the customer and the vendor for the associated cost. High-touch has a retention goal of, yes, 100%. The high-touch is the easiest to staff, deploy and execute.

  1. Low Touch Customers e.g., Clarizen with thousands of customers at $15,000/year:

The just-in-time (JIT) customer success means providing exactly what the customer needs at exactly the right time.  Not surprisingly, low touch starts to incorporate elements of tech-touch to complement the one-on-one touches. Many scheduled interactions of high-touch customers are still relevant to low-touch customers.  The tiers and associated touch models are all about driving your business toward profitability. Number of customers a CSM handles (CSM ratio) is not by number of customers but by contract value (ARR).

  1. Tech Touch Customers e.g, Netflix with millions of customers at $10/month:

Tech-touch centers around email, webinars, podcasts, communities (online portals where customers share ideas and talk virtually to other customers), user groups and customer summits.  Just like digital marketing, targeted email marketing is a tool for customer success, and it applies the same concepts to customers (instead of prospects), helping them along the customer journey and leading them to successful use of your product.  This effort is to reinforce the purchase they’ve already made or help them use the product more effectively so that they remain loyal, either by renewing their contracts or choosing to not opt-out.

Effective emails need to be timely, relevant, and include useful information.  Similar to marketing automation, there is a lot of information available about customers that can be used to create highly effective emails.  In fact, there is far more information available about customers than there is about prospects. This could be original contract date, length of time as a customer, industry, geography, contacts, contract value, contract growth rate, number of support calls, severity level of each support case, number of days each support case was open, number of invoices delivered, number of invoices paid, number of invoices overdue when paid, average time to pay invoices, customer NPS and trends, customer health score and trends, renewal date, every single click ever made on your product etc.

It is a customer’s world today, and we’re just living in it.  Customer marketing function is moving closer and closer to customer success, if not, under the umbrella already.  If the goal is to drive retention or increase the dollar value of your existing customers, viewing them through the lens of customer success is becoming fundamentally important.

CS Law 1:  Sell to the Right Customer

Selling to the right customer and being completely aligned with your product market fit (PMF) is an essential mission throughout the entire organization.  CSM needs to be the host responsible for complete customer journey, both inside and outside the company — the ultimate trusted adviser. The goal is increased expansion and decreased churn.  Your PMF must drive your complete corporate alignment, from product development to operations and throughout the go-to-market funnel. An organization commitment to understanding the data that surfaces during your customer engagement life cycle and to ask whether this is the right customer for you is extremely important.  Right customers help optimize your corporate direction. PMF is crucial for the company’s focus and its ability to execute and scale. It is important for sales and customer success to manage growth and drive scale in concert with the feedback loop from the customer base to maintain alignment with your target market and PMF.  This requires strong leadership and commitment to understanding that the right customers will enable us to be more responsible to the target market and help focus resources on the right efforts, making not only your customers but also your own employees more successful.

Selling to the right customer, means starting at the very top of your revenue funnel.  Marketing must target the right kinds of customers, and sales must quickly disqualify those who aren’t fit.  The churn itself is only the tip of the iceberg; Biggest cost is the opportunity cost of applying resources to the wrong customers, and, inevitably, doubling down on those customers when they struggle.  These resources could have gone to helping other customers who have a greater opportunity for higher customer LTV. Your marketing message and your brand are empowered by the right content, which needs to be put in the right context in front of the right people at the right time.

When a company is scaling, alignment will drive the top of the funnel activity through your marketing and demand-generation efforts: to sales, to onboarding/professional services, to customer success, and back to product, building on your promoters (NPS) and ultimately leading to reduced churn and improved expansion results.

Prioritize a scalable system to capture churn reasons and to analyze data on a regular basis. Understand what percent of churns were driven by poor adoption, what percent was driven by product fit issues or product gaps versus customer needs, and what percent were driven by factors that were outside your control, such as merger, acquisition, restructuring, bankruptcy or a pandemic.

Your customer success leadership is incented to reduce churn and partner with sales to accelerate expansion.  Are your sales leaders incented to reduce churn? ARR & NRR are some of the critical key performance indicators (KPIs) for any SaaS company’s success and valuation, doesn’t it make sense for all functional leaders to share those variables in their incentives?  Do your sales and customer success organizations report to a chief revenue officer who holds a holistic view of both new business and retained business to help drive the right decisions about which customers to target and which ones to walk away from?

Promoters (NPS) is everything to a company.  “Ninety percent of all churn happens at the time of sale.”  All churn happens because they’ve sold to the wrong customer.  Think of that time and energy being channeled instead into good customers with the opportunity to grow and thrive.  Think of increased detractors (reduction in NPS) and the word-of-mouth that will go out from this failed customer.

Use data, not just anecdotes.  If you are going to be rigorous in who you sell to, it needs to be data driven.  “We’ve done deals with 31 customers who match the same industry, discount, use cases, and price-point profile of this one, and 14 of them churned at the time of first renewal and another 4 at their second renewal.  8 of them have not had a renewal come up yet. The remaining 5 renewed but at an average contract decline of 14%. In addition, our average NPS across the remaining 13 customers is 5.2, and their average health score is 38.7.”

Make sure your VP of sales (and all executives) is incented on retention, not just new business.  The CEO needs to drive the company with long-term, retention thinking, not just grabbing deals to make quarterly numbers.

CS Law 2:  The Natural Tendency for Customers and Vendors Is to Drift Apart

Only willful, proactive interaction on the part of one or both companies will overcome the natural drift caused by constant change.  Customer success organizations and practices intervene to push the customer and the vendor back together. They get into one of the boats and start rowing.  Goal of all SaaS companies is to retain customers and prevent churn. For most, the expected LTV of a customer is 10 times the value of the initial sale.

To avoid churn, you need to make your customers successful using your product or service. Remember, sometimes the most successful customers appear to be unhappy. The real trick is putting measures in place to look for the warning signs and acting on the data when you see the signals.

Lack of ROI creates a big risk the vendor.  Telltale signs: Decrease in usage or inactivity after signup, Steps you can take:  Leverage customer success team, to review the client’s goals and guide clients through the product adoption phases so they get value early. Continuously look for ways to expand use of your product so it supports more functions, thereby generating higher return.

Stalled or Prolonged Implementation:  If customers can’t get their products into production, they aren’t seeing any value.  Define packages and service offerings that provide quicker time to value by getting customers started on the customer journey.  Define smaller phases that get the customer using your product for a subset of their overall scope.

Loss of Project Sponsor:  Offer training to new users to make sure that more than one person in the organization knows how to use your product.  Strive to maintain or create high-level relationships to keep management on board and to fall back on when one of your key champions leaves or takes a new role.

Low Rate of Product Adoption:  Customers aren’t using your product at all, or you have seen a decline in usage.  Steps you can take: Develop programs to work with customers to assess business needs, and guide them through a customer journey that outlines the functionality they can use in the product.  Ensuring that more users are logging into the product and supporting a broader set of functions makes your product more sticky. Also, building a library of customer ROI stories and testimonials for use when interest or momentum seems to wane can be beneficial.

Lack of Product Features:  Your customer is asking for new features, more product enhancements, or more aggressive pricing.  Make sure your CSM is up to speed on your product road map. Get customer feedback about product direction and ask customers what they think.  Share feedback with your product management team to let them know what matters most to customers. Engaging customers and making them feel like they are part of your process can be a very powerful.

New Leadership Driving Shift in Strategy:  You are being asked to participate in the RFP or solution evaluation process.  Place a proactive call to the new leader. Offer to provide an overview of your organization, product, and value proposition.  Reinforce value received and opportunities to get additional ROI from extended capability and usage. It’s important to get ahead of this at all costs because the comparison of your existing installed product, with all its warts, does not stand up well against PowerPoint slides and demos from your competition.

Customer Affected by Poor Product Quality or Performance Issues:  customer has logged an increased volume of support tickets or escalation cases.  Create alert when a customer goes over a certain threshold of support tickets, may be three in any given week, sets off an action plan, such as a phone call or an  email campaign. Whether you are in high-touch or low-touch, you need to be knowledgeable and empathetic, offering solutions and alternatives in a timely fashion. Escalate internally and let your customers know that their issues are receiving the highest level of attention.  Stay on top of issues and proactively provide updates on progress. If the issues persist or create significant impact, you are at risk of losing your customer.

Change is constant.  The battle to retain and increase the value of your existing customers is never ending.  Few great ways to maintain contact include: proactive outreach from the CSM, time & relevant email content, high-quality customer webinars that provide ideas about how to extend use of the product, updates & involvement from a robust customer community, regular user group meetings, customer advisory boards, user conferences etc.

Low-touch and tech-touch customers force you to do things as a vendor that are more positive and far-reaching than your high-touch customers.  The focus required in order to retain and satisfy them goes to the things that are most scalable — process and product. Your product is the most scalable part of your business.  Pouring energy and effort relentlessly into making your product, and the supporting processes better, will help you grow in a much more efficient way than delivering to special needs of your largest clients.  Your retention/churn targets for your low-touch customers verus your high-touch customers should be different. Focus on improving overall aspects of your business that are scalable, such as product or processes.

It is important, in all businesses, to follow up with a select few churned customers to truly understand what broke down and how it could have been avoided if at all.  It is more valuable to understand why a customer churned than to understand why they stayed because the churn is often a more discrete event with considered rationale. Understanding this well must be a part of running a recurring revenue business.

CS Law 3:  Customers Expect You to Make Them Wildly Successful

The value your customer places on your relationship depends not only on your product features, but also enablement, content marketing, online resources, and, in the case of larger enterprises, direct engagement by subject matter experts.  Allowing your customers to go down the wrong path will bring potentially disastrous results, so challenging customers to do it the right way is mandatory.

Delivering wild success requires 3 fundamental things:

  1. How is your customer measuring success? and what results does the customer need to declare victory ?
  2. Is the customer achieving that value?
  3. What has the customer’s experience been along the way?

Unless you can start by delivering value quickly, you risk falling into the trough of disillusionment.  With early proof points, your customers perception of success will be on a much flatter curve.  It may be as simple of delivering an initial proof of concept with basic functionality. It will quickly provide evidence to your customer sponsor that the decision to go with your technology was a good one.  It’s very important to prove value quickly. Early wins keep that momentum going. An early win will also be extremely helpful if you encounter any challenges in future phases. It will allow your sponsor to point to the value already achieved as a way to flatten obstacles and rally support.

You need to continuously provide the customer with examples of how they can use your solution to be more effective, how other customers are using it to be more effective, and, if you have the aggregate data, how some of the customer’s key metrics (usage or otherwise) compare to similar companies or industry averages.  Without a benchmark of comparison or a target to achieve the customer’s current performance data have limited value.

Return on Investment is an Equation.

Your customers might have the following objectives:  reduce churn, find upsell opportunities, improve ability to scale their team.  After you understand the expectations, set them a clear target.

Get on a cadence and Track Your Progress

Use regular business reviews (with your higher-touch customers) as a way to track progress toward the objectives and targets you’ve jointly defined.  Regular strategic business reviews (SBRs), quarterly or otherwise, focusing on these objectives, give you and your customers a reason to engage on a regular basis.

Success Isn’t a Destination; It’s a Journey

Give your customers guidance on what they should be thinking about next.  Using your product, if they have increased their retention rates from 85 to 88%, you now have an opportunity to show them how best-in-class companies are achieving 90% or more renewal rates.  You can also do this by content marketing and communication of online best practices.

The best perspective for your company to take is to look at itself through the lens of your customer.  Your customers aren’t buying a technology. They’re buying a solution to a problem, a path to a better way.  Understand how customers are measuring success, confirm that they’re achieving it and confirm that they’re having a positive experience along the way.  Wild success happens because someone asks hard questions, objectives are measured and monitored, and once those objectives are achieved, someone raises the bar and repeats. Don’t take lightly the need to handhold your users, with relevant and timely prompts, through your product or process because that’s what they expect and that’s what your competition is working on.

CS Law 4:  Relentlessly Monitor and Manage Customer Health

Customer health is at the heart of customer success.  It is to customer success what the sales pipeline is to a sales VP — the predictor of future customer behavior.  Good customer health equates to a high probability of renewal and upsell. Relentlessly paying attention to our customers is life or death.  Successful customers do 2 things: 1) they renew their contracts and 2) they buy more stuff from you.

In the subscription economy, it’s quite likely that the initial deal is worth less than 10% of total customer LTV.  Customer success — an organization designed specifically for the intent of driving value to every customer through the use of your product, resulting in high retention rates and expansion.

Customer health for a VP of customer success is a daily predictor of future customer behavior (renewal, upsell, churn, at risk) and offers a more timely way to manage your team.  Healthy customers use your product every day, even some of the advanced features. They call your support folks often enough for you to know they are actively using your product, but not too often.  They pay their bills on time, and their last NPS was 9 or 10.

Product adoption: is of great value in determining customer health.  How often do customers use the solution? Are they using your stickiest features? How many people are using it?  Do executives use it? Is it used in board meetings, executive meetings, departmental meetings,..? Nothing will tell you more about your customers’ health than whether and how they use your product.

Customer support:  How often does the customer call?  How long is the average case open (how many Sev 1 vs 2 or 3)  Healthy customers call or use support with some regularity. This is a good indicator of customer health.  So are NPS scores.

Marketing engagement:  Does your marketing email bounce?  Does the customer unsubscribe? Does the customer open, click through, or download?  What happens is revealing, no matter the outcome.

Community Involvement:   Are they asking questions or answering them?  Do they submit product requests? Do they vote on proposals from others?

Marketing participation:  Do your customers provide references? Case studies?  Speak at your conferences? Healthy customers do.

Contract growth:  A customer’s investment in your technology and services is a clear indicator of loyalty.  If after five years a customer’s contract is the same size as in the beginning, the customer is probably not as healthy as the one whose contract has doubled.

Self-sufficiency:  Customers who don’t need you to help them use your product more effectively are healthier than those who rely on you to drive them forward.

Invoice history:  Healthy customers pay their bills on time.

Executive relationship:  How good your personal relationship is with each customer, together with how high up the chain they go, can be an important component of customer health.

Whatever is your list, keep your list, and make it a running list, because many other aspects of customer health will come to light as you make this a central point of discussion and consideration.  Assessment of customer health needs to be the focal point of your customer success strategy.

Accurate assessment of customer health is a clear indicator of loyalty and a predictor of future customer behavior.  Creating a customer health score also creates actionable insights for your team to operate on. Low NPS should be acted on, to reverse a negative course for that customer.  So establish a customer health score, and then manage it under the assumption that moving health scores upward indicates increased loyalty and the likelihood of future good things — renewals and upsell.

Customers might be happy with your application and using it in all the ways you want them to.  Then, you ship a new release, which breaks a key feature and gives them trouble performing the upgrade.  Yesterday, they would have been an awesome reference. Today, not so much. Next week they will be back in a good place because of your lightning-like responsiveness to their challenges and great assistance in overcoming them.  Understanding this customer health sine wave is really important because it allows you to take advantage of the peaks and perform interventions in the valleys.

If every automated email you send to a customer looks like it comes from his customer success manager and includes highly personalized, timely, and relevant information, it will never be perceived as spam, and there will never be too much of it.  It’s vitally important to track deliverability, open rates, click-through rates, and so on on to determine whether this is really true and to watch trends moving in the wrong direction.

Customer health is your key predictor of future customer behavior.  Be relentless in pursuing it and using it effectively across all customers.

CS Law 5:  You Can No Longer Build Loyalty through Personal Relationships

Depending on your product, you will need to decide how to create a customer experience that develops a connection with your company.  Once outlined, that customer experience needs to be captured, driven, and continually refined by your customer success team and practices. The customer experience that builds the strongest relationship between you and your customer needs to start during the initial sales cycle (which could be interacting with your website or an actual human), and then move to onboarding, product quality, support, and solution adoption, while having a strong focus on communication between the two entities and your community of customers.  By having the customer experience blueprint that maps across the entire organization, and a customer success organization that drives the process, a company will now have data points to drive change and help develop stronger relationships across all customers. The data driven decisions can allow companies to institute change that includes website design and flow, more intuitive product design, and new customer success programs customized to particular sizes of customer organizations while allowing you to redirect expensive one-to-one human interaction to your highest-value customers.

Businesses scale only when customers scale.  You have to figure out how to deliver love and value to these customers without much one-to-one interaction.  This will bring out both the best and the worst in your product and your company as you learn whether customers will be loyal because of the value they get from your product, not the relationship they have with an individual.

Focus on building stronger relationship between your company and your customers:  Segment your customers, define a customer coverage model based on your segmentation, create customer interaction categories based on your coverage model, establish a cadence for interacting with customers,  help connect your customers by building a strong and loyal community and create a customer feedback loop.

Segmentation process allows you to determine the most effective coverage model.  Most recurring revenue businesses segment B2B customers by ARR. You might identify that your larger customers tend to renew more after they reach a certain milestone, while your smaller customers churn at a higher rate; however, if you can get them successful early, they have a higher propensity to buy more solutions or licenses.  Segmenting properly and analyzing trends will allow you to adjust your relationship strategy accordingly.

One approach to help understand your segmentation is to see where your Pareto principle (80/20 rule) kicks in, by analyzing where 80% of your revenue is coming from.  The range for the number of high-touch accounts can vary from 5 to 15 accounts, whereas low-touch CSMs might be able to manage from 20 to 50 accounts. You can high-touch accounts by high ARR value — say $500,000 or more.  The focus of this exercise should be on how much to invest in protecting your current revenue stream (and potential upside growth) from your most valuable customers.

You need to establish multiple programs for customer engagement.  These programs should provide a channel to make your customers feel connected to your company.  These programs should be educating your customers about features and functions but, more importantly, teaching best practices with a goal of increasing overall adoption.

High-touch:  Multiple in-person meetings during a quarter, QBR meetings, creation of blueprint success plan, One-to-one meeting with your executive staff.

Low-touch:  One in-person meeting per quarter, focus on one high-value meeting per month via online or video conferencing, one-to-one meeting with your executive staff.

Tech-touch:  Webinar style one-to-many customer meetings on product adoption, monthly to quarterly newsletter, data-triggered email campaigns, on demand training and guidance, community portal.

By building your macro-communication calendar, the frequency of interaction by your “touch” programs becomes much clearer to deliver by your organization and individual CSMs.

After establishing your customer success coverage model, macro-communication strategy, and cadence of interaction, provide forums for customers to interact with one another.  This interaction can be facilitated by a customer portal, regional user groups, meetups, conferences, or ecosystem of partners. Provide a platform for your users to engage, exchange knowledge, and ultimately build relationships that you helped foster.  Proactively planning what you want your customers to experience within the community is a game changer. Your customers are your best marketing and lead source vehicle. These company success agents help other customers become stronger while delivering your company’s value proposition to current and future customers.

Develop customer feedback loop email surveys, an electronic suggestion box, customer focus groups, one-to-one meetings, and/or a customer advisory board.  Listening to your customers gets you more product ideas that assist with adoption and allow for stronger loyalty. Follow 3 basic principles with your communication:  1) communicate often, 2) set clear expectations, and 3) be transparent. You have taken on the responsibility of providing a quality product that delivers value to your customer.  You have also taken the responsibility of uptime, performance, and delivering easy-to-use products with relevant and timely new features and bug fixes. Your customer success strategy has to mirror the value received from the customer.  The relationship between you (vendor) and the customer is defined by the products you design, build market, deliver, and service.

CS Law 6:  Product Is Your Only Scalable Differentiator

The key to customer retention, client satisfaction, and scaling the support and service organizations is a well-designed product that’s combined with a best-in-class customer experience.  A product that is easy to use and that becomes essential to the way people do business will create happy and loyal customers. CSM’s priorities are driving adoption and value of your products, fixing root causes of dissatisfaction and making sure your product is best in its class.

Framework, which includes client experience, engagement programs, executive engagement, voice of the client, release management and client communication, allows clients to know that you have an organized way to approach customer success management.  Each program should have a set objective and key metrics for determining success. Metrics and predictive analytics derive actionable insights that help drive CSM priorities or tech-touch customer success practices. Focus on key metrics such as NPS and customer effort-level score .  Main root of customer dissatisfaction is the product. The harder your product is to use, the harder it will be to make your client successful. The goal of a customer success centric company is to help your customers derive value from your products. Creating a great product that puts design front and center will make it easier to provide service and support and easier for you to help customers deliver value.  Focus on making the product intuitive. Take cues from how people are used to interacting with their favorite apps in their everyday lives. Put yourself in their shoes. Give your search, information-rich functionality, so users can find what they’re looking for when and where they need it and in the way they are accustomed to.  Build self-diagnostic tools. Make your products mobile first and friendly.

Product Advisory Councils (PACs) provide a structured, interactive platform for clients to engage with your company’s product management team by providing feedback and influencing future product direction.  The focus of the PACs should be: for understanding the actual business problems your clients face now and into the future, to discuss how your clients view your product’s approach to those problems, understand market and technology trends that your clients see and what their effects might be, help you with functional prioritization at a strategic level.

Customer (PAC member) responsibilities:  Engaging and acting on behalf of peers and the broader client base, maintaining a high level of knowledge about current and future road maps, engaging in product-specific design discovery and previews, participating in a reference program and speaking positively with clients or prospects on request.

PAC member criteria: executive-level participation to drive strategic product vision, PAC members to complete an application for PAC, members to commit active participation for one calendar year, members to commit to attending 3 quarterly roadmap review and 2 feature request prioritization meetings, member may not delegate responsibility for quarterly roadmap review and prioritization meetings, member to participate in a reference program.   A good practice is to send a quarterly communication that shares the product changes requested by clients, as well as organizational and process improvements that you have been made in response to client feedback. Communities of Practice (COPs) serve as a forum to discuss business processes, practices, and challenges relating to specific products. COPs provide a collaborative forum in which clients are connected with other peers across a variety of business sectors.  They tend to be larger groups than PACs. Both PACs and COPs provide input into the software life cycle development process by communicating the business value of features for the product.  

Company culture must be ingrained with customer success at its core.  Every person in the company has a job because of two things: the product and the customers.  Every department in the company should have goals aligned with customers. Define a customer success framework that clearly outlines the customer journey and what the journey looks like.  Input from sales, implementation, and customer support provide a holistic view on what works and what doesn’t. Get a fresh perspective by collecting feedback from new employees on the product and the processes that surround the product.  Make this a key part of onboarding. Provide new employees with the opportunity to learn the product and to provide feedback to product and process owners, including sales, implementation and customer support. Always try to have employees walk in the customer shoes.  Your best reference is using your own product.

Customer success focuses on helping people deliver results and ROI through products; good design enables that focus to be on value-added activities and not on functionality.  Customer success teams interact with customers every day and are intimate with how your product is being used. A feedback loop between them and your product team is essential.  An easy-to-use product is the basis for getting customers ready for advanced functionality. Product, that becomes essential to the way people are doing business and it’s easy to use, will make your customers happy and loyal; they will get the value.

Think about it this way:  If you made a perfect product, how many people in your company would be unnecessary?  You can optimize resources in provisioning, implementation, training, customer support, customer success, operations, professional services, renewals etc.  B2C world operates with this reality at all times. Nobody is assigned to install and start using Facebook. The product is the only path to the wild success you want to enjoy.

The dominant vendor in virtually every market is the vendor who builds the best product.  Any attempt to join the customer success movement without making your products your top priority will be fruitless in the long run.

If I’m managing 40 CSMs and telling them that product is their first priority, even while they spend 12 hours a day helping solve customer challenges, I better create a communication process that makes it easy for them to share the experiences of their customers with the Product team.  It could start simply with a monthly meeting between customer success and product in which the customer stories are shared. Within this process, capture business problems, not just requests for features. This will help drive step-function improvements, not just incremental change.

In B2C companies feedback directly comes from your product.  The parts most used are telling. The places more time is spent could be important, either positively or negatively.  Build feedback mechanisms into your product, to collect data as the customer is experiencing it. Use A/B testing for your features.  This is happening every day at Amazon, and the like.

Make your product the top priority or else your customer success will be elusive.

CS Law 7:  Obsessively Improve Time-to-Value

Companies buy because they will get value from their purchase.  If the customer hasn’t seen real value by the time renewal discussions begin, they’re far less likely to renew.  Obsessively improving time-to-value is the way to address this challenge. Delivering value quickly is key to retention and expansion.  There’s a direct correlation between the length of onboarding and the likelihood of the first renewal.

Work with the customer to establish concrete success measures, implement iteratively for early value, achieving the simplest measure first and focusing on the others later, spring into action the very moment you realize expected value is at risk.

Work with the business sponsor to define success measures early such as decreased time to reach quota, etc.  These success measures documented by pre-sales teams need to be communicated to the onboarding team at the beginning of the implementation process. It is only after these success measures are clearly defined that we start the onboarding clock. During QBRs revisit these metrics frequently 1) to determine whether they are still the right metrics for the business and 2) to validate your success against those metrics.  It will come back to bite you, if you don’t help the customer measure it.

Implement iteratively for early value.  Don’t boil the ocean. Slicing the challenge into small achievable chunks and implementing iteratively produces value early and often.  List the metrics at the top of every status report and call attention to them during every check-in call: “Just checking in — these are still the measures that we care about for this phase, right?”.  At multiple points during the onboarding, connect directly with the business sponsor to validate the measures.

Adjust in real time.  As you reach the end of the onboarding program, introduce CSM into project status calls and educate her about the success criteria.  The CSM’s highest priority in the weeks and months after onboarding is to be obsessive about ensuring that the customer achieves the stated value.  All other activities such as, introducing new features, doing quarterly business reviews etc., take a back seat to this critical item. The CSM is responsible for reporting on progress to both the customer and to the larger account management team and reengaging resources as quickly as possible if the value timeline is hitting snags.  Obsessively drive time-to-value to upsell and extend the value of customer’s investment in your technology. The process of growing customers’ overall contract value can only begin once the customer has reached the point at which she is getting real value from your product. Make sure your customers know how they’ll measure value and that they actually see the measures improve long before that renewal call comes in.

Obsessively focus on time-to-value.  Nature of subscriptions and always-impending renewal or chance to opt-out dramatically increases the urgency.  If you aren’t obsessing about time-to-value, your competitors likely are and that will differentiate them. It’s Not time-to-implementation, it’s time-to-value.  It’s never the case that project complete = value received. This is where a CSM starts to earn his keep. Once he has a fully functional solution with which to work, he can engage the customer in starting to use it to solve the business problems for which it was purchased to solve.  Identify parts of your product that have highest value and measure whether, or how much, each customer is using those features. Value could be measured by the customer’s health score. If you are going to obsess time-to-value, you need to find a way to determine and measure value. Not doing that leaves your customer success team and your company, hanging to dry.  Obsess about time-to-value. You’ll never be sorry you did, regardless of the type of product you deliver or the kind of customers who use it. It’s on your critical path to success for your customers.

CS Law 8:  Deeply Understand Your Customer Metrics

You and your company must deeply understand the details of churn and retention if you are going to maintain and accelerate your revenue growth.  Committed monthly recurring revenue (CMRR) is defined as the combined value of all of the recognized recurring subscription revenue on a monthly basis, plus signed contracts currently committed and going into production, minus churn.  Churn is the monthly-recurring revenue that is no longer committed from customers that have turned off the service or are anticipated to do so in the future. To sustain a subscription-based company for the long term, your company must have a deep understanding of both churn and retention:  churn from the standpoint of understanding why and how often customers leave and retention from the standpoint of why and how often customers stay and continue using your product or service. The earlier in your company’s life cycle churn and retention are addressed, the easier the problem is to solve.  Follow these five steps to capture, measure, annd understand churn and retention:

10 LAWS of Customer Success in 2021 by Nick Mehta, CEO of GAINSIGHT

Step 1, Define what you are measuring, and components of CMRR:

Create the ability to capture churn and retention both from a CMRR dollar perspective and from a count perspective.  Period ending CMRR = Last month CMRR + new CMRR + add-on CMRR – Churn. Breakdown renewal CMRR into multiple buckets, including cancellations, downgrades, upgrades and first-time archives.  Many cloud companies offer an archive service at a percentage of the former annual subscription fees to provide ongoing read-only access to the data after a customer is no longer actively using the service.  Your company will need to build out its order process to capture the necessary data at the level of granularity in which your company wants to be able to report on churn and retention (customer, contract etc.).  This includes capturing order type (new, add-on renewal), upgrade/downgrade amounts on the renewal, reasons for downgrade at SKU level, reasons for cancellation and new product add-ons. Your company’s order process needs to be set up to capture the difference between a quantity downgrade versus a price downgrade, for these are very different churn problems to address.  Having the downgrade/churn reasons automatically populate a churn-type field will greatly facilitate real-time reporting of avoidable versus unavoidable churn. Unavoidable churn often referred to as death and marriage. This will help you prioritize the customers, you need to address first.

Step 2, Define the period of measurement and frequency:

Once your company has determined the basis against which it is measuring churn and retention, it must determine the period of measurement and frequency of that measurement.  Often companies measure churn and retention on a more granular basis – say, monthly – but report these metrics as an annualized rate for key stakeholders to get a clear picture of the annualized effects of churn and retention.  Define how you will handle both early and late renewals relative to the period of measurement. You need to make sure the early renewal is booked in the period in which it is due. When handling late renewals, to keep your company’s churn and retention metrics accurate, move the expected CMRR and expected customer count to the next period while maintaining the same subscription start and end dates.  Ideally, all renewals are completed 30 to 60 days in advance of their subscription end date.

Step 3, Net Revenue Retention is a key metric:

Net Revenue Retention (NRR), also referred to as net dollar retention, is one of the most valuable Key Performance Indicators in SaaS Metrics. This metric calculates the health of a company based on the existing customer retention rate. Not only does it measure how successful a company is at renewing or sustaining customer contracts but also how well it is doing at generating additional revenue from this existing customer base.

By keeping close tabs on what is happening with your customer’s journeys through measuring the NRR, you are able to better gauge customer success in your company as a whole. You will have a good picture of how long customers use your product, what kinds of products they choose to upgrade, and how often they unsubscribe. Knowing this information helps to make long term plans for how to increase the value of your business in the future.

Four Factors Used to Calculate NRR
Monthly Recurring Revenue
This is the amount of revenue that a company can expect to receive in a given month.

Expansion Revenue
This is the amount of revenue that is added in a time period due to upgrades and cross sells.

Revenue Reduction
This is the amount of revenue that is subtracted due to downgrades to lower payment plans.

Revenue Churn
This is the amount of revenue lost due to customer cancellations.

Calculating NRR
To calculate your company’s Net Retention Rate, you begin by adding the MRR and Expansion Revenue together. This is the total revenue for the month. You then subtract the month’s revenue lost due to downgrades and cancellations. Then divide by the original MRR number. This result should be a percentage over 100% if your business is operating with healthy growth.

For example, let’s say last month’s MRR is $75,000 and your expansion for the month was $10,000. Reduction and Churn were low at $2,000 each. That equation would be:

(75,000 + 10,000 – 2,000 – 2,000) / 75,000 = 108%

This shows that despite reduction and churn for the month, the company is still growing without any added customers.

Step 4, Determine how to identify at-risk churn:

Measure at-risk churn.  To forecast at-risk customers, use 1) human interaction and 2) leverage signals or data points.  The first steps are to define and gain agreement on the attributes of your happiest and healthiest customers and, then, define the attributes for your at-risk customers.  Usage patterns, number of support cases, NPS, tenure, contract growth or departure of key contacts or sponsors could be the attributes.

And Step 5, Align with your executive leadership to develop a set of standard definitions and reports for churn/retention:

Your company should be measuring both CMRR and customer count churn and retention by the dimensions relevant to the company’s business, for example, understanding churn and retention by industry, size, customer tenure, geographic region, sales channel, product line, or CSM, both from CMRR perspective and a customer count perspective.  Being thoughtful early on about the data you want to be able to report on, and setting your systems up to capture this information, provides the company with strategic insight on churn and retention that can help the company accelerate growth. The reports highlight the impact of new programs and processes that have been rolled out. E.g., Product development and engineering need to understand prioritization of enhancements that will have the biggest impact on customer success.  Perhaps a segment of your customer base is consistently unsuccessful, and the sales team needs to be advised not to close more customers matching that profile. Or customers are consistently not getting the training they need to achieve long-term success. Understanding churn and retention at a very granular level can help guide every facet of the company with regard to focus, priority, and investment to accelerate performance and growth.

Customers at the beginning of the period = 40

Customers at the end of the period = 32

Customers added during the period = 2

Customer count churn = 20% ( (40-32)/40 )

The best practice is to also leverage an unbiased third party to conduct interviews with customers who churn so your company can better understand what happened and why.  Approach these in the same way your company would leverage a third-party service to conduct win/loss surveys for your new business.

Recurring revenue business depends on maximizing retention and minimizing churn for long-term success.  It’s one thing to know that your installed base ARR went up by 8% (net retention of 108%) last year. It’s another thing to know the details:  what % of customers increased their contract size? Which industry had the highest churn rate? What are our retention and growth rates by product? By what average amount did we reduce discounts at first renewal?  What is the average contract size versus original contract size of all customers who have been customers more than three years?

Law 9, Drive Customer success through Hard Metrics

You can NOT improve what you do NOT measure.  Repeatability, process definition, measurement and optimization are the hallmarks of maturation.  Defining what success means both for you and for your customers, then establishing clear metrics that will deliver those business outcomes, is a necessary part of accelerating the maturation process.

As organizations evolve their capabilities, they get progressively better and more predictable at executing their mission.  Hallmarks of progression through the levels of maturity are repeatability, process definition, measurement, and optimization.  The business objectives could be high customer satisfaction (NPS), low churn, revenue expansion etc. At Level 1 (initial), work gets done through the heroic actions of committed people without much regard for process or repeatability.  If you manage a handful of CSMs, this is your daily realifty. The objective your CSMs are focused on is along the lines of “Do whatever it takes to make your customers successful and make sure they renew!”. Progressing to Level 2 (repeatable) occurs when the necessary process discipline is in place to repeat earlier successes.  From there, achieving Level 3 (defined) occurs when the process is documented, standardized, and integrated into a standard process for the organization. At this point, the fundamentals of a repeatable process methodology are in place, and what remains is measurement (Level 4: managed) and consistent improvement (Level 5: Optimizing).

  1.  Initial.  2. Repeatability.  3. Defined. 4. Managed.  5. Optimizing.

Assuming that your customer success organization has identified its repeatable processes and clearly defined and documented them, your focus will turn to active measurement and optimization.  There are three categories of metrics to explore: 1) customer behavior 2) CSM activity, and 3) business outcomes.

Customer and User behavior

In properly instrumented SaaS applications, we are aware of every login, click, upload, download, error generated, etc.  We know the frequency with which users perform specified activities and business value of these activities. The trick is correlating usage metrics to derive business value for the customer and how that will affect retention/expansion.  Examples include NPS, logins and logouts and usage of specific product/platform features. For B2B, you need a higher-level view of customer “health”. This includes identifying risk factors that you have correlated to likelihood of churn, such as payment/non-payment, engagement with the customer’s administrator, and referenceability.  The behaviour of your customer’s users serves only as a proxy for the business value the customer is deriving. No one buys your software so they log into it. Your customer has subscribed to your solution to fulfill one or more business objectives: find more leads, generate more revenue, make manufacturing more efficient, or enhance collaboration with suppliers.  The key is to understand what those objectives are and how your product relates to them. Spend time with your customers at the beginning of the relationship to understand their business objectives and agree on how you will jointly measure the results.

Customer Success Manager Activity

Once you have defined the process for your CSMs, it is natural to wonder how well those processes are being followed.  From there, you will want to understand how the activities in which CSMs are engaging (or not engaging) affect customer sentiment and retention.  Having a comprehensive understanding and proper measurement of these processes will lead to insights into the performance of your people, as well as into how much, these activities actually matter to business outcomes.

Examples of CSM activity metrics:  Frequency of various types of interactions with customers (QBRs, email updates, phone calls), support ticket volume handled by CSMs, timeliness of risk identification, effectiveness of risk mitigation efforts.

Business Outcomes

Greater predictability of outcomes is the benefit of maturation toward measurement and optimization.  Want to know how many customers a CSM can effectively manage (ideal account ratio)? Measure the relevant business outcomes for cohorts of CSMs with varied account loads.  You must work with various functions within your organization (product, marketing, sales, finance) to determine what “success” looks like and which metrics indicate how you’re doing.  You’ll be designing your processes, activities, and metrics around the definition of success and measuring accordingly. Customer success and product are jointly responsible for ensuring that users of your product adopt it.  More clarity you can drive around ownership of these metrics, the more you can refine the processes and behaviors your team will execute. Examples of business outcomes include: Gross retention, net retention, expansion, logo retention, customer satisfaction, NPS.  Clearly defining what success means, both to you and your customers, ensures greater clarity of your customer success team’s mission and responsibility. Once you’ve achieved alignment on this definition, it’s critical to articulate the things you will measure to demonstrate how the team is performing.  These metrics enable customer success leaders to prove the value of the customer success organization and improve your contribution to the company’s overall performance over time. Finally, your CSMs will thank you for the clarity of purpose this brings them, as well as the enhanced ability to truly understand their own performance and contributions.  Remember: you get what you measure! So figure out what matters, and then start defining and focusing on those key metrics. Retention, upsell and churn are the right long term metrics, but they are lagging metrics and not particularly predictive. For customer success teams, the ultimate measure is the health score and it’s analogous to pipeline for sale teams.  An accurate health score is a great predictor of future customer behavior, such as likelihood of retention, possibility of upsell, level of risk, and so on. In the end, everything your customer success team does should be designed to create loyalty, and loyalty is measured in the long term by net retention and in the short term by health score.

Law 10: It’s a Top-Down, Company-Wide Commitment

Let’s go over what customer success is, why it is inevitable, how it drives value and where to start.  Customer success involves shifting the orientation of your company from your product or your sales to your customers’ outcomes.  All business questions are reframed around the customer’s success. Which clients are likely to be good fits for our solution (versus ones that will leave us quickly)?  In order to reduce churn, reduce time to value. Facing less headwind in the form of churn and more tailwind in the form of upsell, businesses that focus on customer success simply grow faster.  And successful customers become advocates and references to drive more new clients. In the long run, the leaky bucket effect of churn cannot be compensated by new business alone. To get started on the customer success revolution, define success, align around success by reviewing customer success feedback each month with the product team, define and refine sales qualifications criteria and review messaging regularly with the marketing and customer success teams.  Empower customer success team: Make sure the title for the customer success executive is on par with the sales leader, keep your CSM in the loop when a customer escalates to the management team, let the CSM be the hero with customers and agree that CSM represents the client’s views. Define metrics for your bottom-line results, including gross churn, net retention, NPS etc. Report on the customer success metrics and make them very visible. Spend as much time on customer success in your board meetings as you do on sales.  Create a killer customer success section in your board packet to show your board that you take it seriously. Challenge the company to hit customer success targets, such as NPS, net retention, go-lives or adoption goals. Focus on driving business success for the customer first and foremost and celebrate their success. Customer success leads to high retention, increased upsell and improved customer satisfaction. Quarterly executive bonuses are paid based on only two criteria: 1) new business bookings and 2) renewal rate.  To fund the plan above $0 requires a minimum threshold to be reached on both metrics. This sends a message that retention rates are just as important to our business as new customer acquisition. The impact of customer success needs to be felt in sales and marketing, product management and development, and services. Ask whether your CEO is truly focused on customer success by asking these questions: 1) Is she willing to say “no” to an above-ASP (average selling price) deal in your pipeline because the chances of making the customer truly successful are too small?  2) Is she willing to delay a vital product release in order to address current customer challenges? 3) Is the head of customer success in her circle of trust? 4) Does your road map include things that won’t help you sell more but only address existing customer needs? 5) Does she get personally involved in critical customer situations as often as she does in key sales deals? Your success depends on the commitment of your board and CEO and the alignment of customer success with the other organizations in your company.

Direct feedback from customers is certainly part of the overall picture of customer health and will help customer success teams prioritize customer interactions.  Because the goals are really the same for both groups (Customer experience and customer success): improved customer health and customer experience leading to increased loyalty-they are likely to start coming together organizationally.  Traditionally Chief Customer Officer has been thought of as a marketing job. In the absence of other organizations thinking strategically about customers, marketing rightly picked up the ball and ran with it. Customer support and services, with their thousands of daily interactions with customers, have a similar opportunity, but the tactical focus required for their daily success on fixing customer problems and completing service projects worked against them becoming as strategic or long-term focused as the business required.

The NEW CCO role is very common inside the sales VP, who owns the renewal process and renewal quota.  Also customer success takes shape with the broader services organization because the initial focus and efforts of the customer success team tend to look a lot like some combination of consulting and support and require many of the same skills.  Once the initial sale is complete, all effort is then applied to ensure the next sale, whether that’s renewal, a non-opt-out, or an upsell. In the subscription or pay-as-you-go economy, every single activity is a pre-sales activity. Usually a Senior VP of services is hired or promoted internally to manage all of the departments of professional services, training, customer support and implementation/onboarding.  That’s a mistake.

The primary measure of success in professional services is utilization.  VP of services’ primary task is to minimize his nonbillable hours and maximize his billable hours.  For the person who manages the professional services organizations, utilization will be the number she looks at daily and for which she is held accountable.  Primary measurement for training organization is the number of products delivered. The viability of a training group rests on the quality of the product and the number of products sold.  Primary measurement of customer support is efficiency. Customer support is the break/fix organization. These are teams of people who reactively assist customers with problems. The way you measure a call center is by efficiency metrics like number of tickets closed per day, per rep or total number of calls handled.  Implementation or onboarding teams are measured by time-to-value. Time-to-value is the key metric to drive improvement (and profitability) of your onboarding. Breaking onboarding as a separate group allows you to start tracking the improvement of time-to-value metric as the key determination of the effectiveness of this team.  Timely and high-quality onboarding is so critical to the success and retention of customers that it requires its own group and measurement.

The primary measurement of customer success is retention and expansion.  If customers have questions that go beyond what customer support can provide, they land in customer success.  Customer success is designed to build customer loyalty because loyal customers stay with their existing vendors and buy more stuff from them.  In a maturing subscription or pay-as-you-go company, the revenue/bookings coming from existing customers are often 10x of bookings coming from new customers.  

As your existing customer base becomes more and more valuable, the people responsible for nurturing and growing it becomes more valuable too.  In a subscription or pay-as-you-go business, there’s no such thing as post-sales. Every activity is a pre-sales activity, because there’s always another sale lurking whether it’s physical renewal or an opportunity for the customer to opt-out or an upsell.  There’s a separate sales function in every customer success organization because: 1) CSMs can maintain their trusted adviser status uncompromised by negotiating sales deals of any kind. 2) The CEO has one throat to choke when it comes to maintaining and growing the value of the customer base.  3) CSM will have her finger on the pulse of any customer coming up for renewal and can help prep the sales rep with the history and background necessary for the renewal conversation. 4) CSM will be the best source for upsell leads for the sales rep and will help prep him for the opportunity. CSM is responsible for the net retention number.

Marketing to existing customers involves email marketing/nurturing, reference management, community, webinars, user groups and customer summits.  Most of the synergy for the customer marketing team is with customer success. If you ask your CCO to be responsible for the entire customer journey and the sales results expected to come from the customer base, then owning all of the customer touch points, including the ones listed previously that are typically part of customer marketing, is a legitimate ask.  The percentage of bookings that come from existing customers exceeds that of new business and then accelerates rapidly to the point where it could be ten times new business. With that level of responsibility comes significant authority and organizational power.

Sell to the right customer:  Incent the sales VP on retention, give the customer success VP veto power over the pipeline.  Give ownership of a vital part of the sales organization to the person who has to live with the sales decisions.

Customer Success Technology

Customer success technology is about turning data into information and then turning that information into action.  Customer information includes, a. Demographics – industry, geography, company size, etc. b) how long they have been a customer c)  what they have purchased and when d) what they paid for every product they have purchased d) Every invoice ever sent – when, what amount, terms d) every payment ever received-when, amount e) Every services/support call-when, reason, severity, response time, resolution time f) every email ever sent and result (open, bounced, unsubscribed, clicked through) g) every  event/webinar attended or registered f) any direct mail marketing sent g) website visits and source of traffic h) support portal visits and actions taken i) every training class taken-class room or on-demand j) every survey sent, received, and any responses k) how your products are being used l) original contract value m) current contract value m) growth rate of contract n) number of renewals completed or opt-outs not exercised.

Relentlessly monitor and manage customer health.  A customer health score is just a predefined analysis of a discrete set of data that is then brought together into a single score.  Value of technology in customer success 1) optimizes CSM time 2) increases the intelligence of every customer touch 3) drives scalability 4) improves collaboration, communication and visibility 5) improves team management.

CSMs are seeking an early-warning system to provide visibility into customer health, specifically customers at-risk.  You can no longer build loyalty with personal relationships. The best indicator of customer health and predictor of future buying behavior definitely lies with how each customer uses your product.  Customers call support, pay (or don’t pay) invoices, respond (or not) to surveys, engage with your marketing messages, and so forth.

“We have 17 customers whose usage of our key features is down by more than 20% over the past six months and who either did not respond or gave us a negative score on our last survey.  Let’s contact every one of them, starting with the four that are up for renewal this quarter or are still in their first year with us. Let’s also prioritize Acme because they have a 50% contract step-up scheduled for nine months from now.

This week’s priorities are the 7 customers who have P1 or P2 support cases that have been open more than 10 days  and who are more than 30 days past due on their most recent invoice.

We have 5 customers where our executive sponsor moved on to another job or where our user champion unsubscribed after our last marketing email.  Let’s talk to them as soon as possible.

We have over 30,000 customers who have not even tried the new collaboration feature in our last release.  Let’s get an email out to them inviting them to view the on-demand training video and come to next week’s webinar on this topic.”

Consolidated, actionable information brought together into a system that triggers and tracks every customer touch, whether human or tech.  That’s how you prioritize customer interactions and optimize your team’s time.

“I just wanted to thank you for attending our webinar last week and personally follow up to see if you needed any more information or guidance on that topic.  I also noticed that you’ve opened up three support tickets in the past two weeks regarding reporting. Let me know if you want me to review any of the reports you are working on.”  Customer touches are rare and precious things, everyone in your company needs to optimize them including customer support.  

This technology solution is referred to as the 360 degree view of a customer.  Customer success solutions should enable a 25 to 30% improvement in productivity (number of dollars managed per person) by: a) prioritization – not touching customers who don’t need to be touched. b) effectiveness – information driven insights make each call more effective.  c) collaboration – making the sharing of information easier d) accessibility – key information is available to all e) proactivity – the amount of effort required to be proactive is exponentially smaller than firefighting.

When scale happens, the need to be better at collaboration and communication can exceed the need to become more productive.

A system that has all the data and tracks the workflow of the tasks associated with the CSM role a) creates the ability for future results to become predictable, b) forecasts renewals, upsell, and churn. c) helps you repeat what worked and throw away what didn’t. d) provides visibility into company-wide insights for customers.  CSM systems provides the ability to track important activities of your CSMs: a) calls made b) meetings completed, c) actions triggered, d) actions closed (by category), e) QBRs completed, f) milestones completed, g) renewals/upsell results, h) customer health score, i) NPS j) emails sent/opened/clicked-on, k) account plans created/updated …

Customer success is a revenue-driving organization just like sales.  Fictional vendor: Wingtip is a SaaS company with $40 million in ARR across 1600 customers.  ASP is now $25,000 but rising. It was $21,000 when the year started and will exceed $35,000 in the fourth quarter.  Wingtip has stopped selling below $10,000 annual contracts but still has about 200 of those customers on the books. They have 15 enterprise customers whose ARR is over $150,000.  Their VP of customer success was employee number 23 (out of now 320 total employees). He has responsibility for all post-sales functions, which includes onboarding, training, customer support, professional services, and classic customer success.  His team is 110 people, 21 of whom are on the classic customer success team. They break down into these functions:

13 are mid market CSMs with two of them focused on the top 25 customers, while the other 11 manage about 50 each.  4 are SMB CSMs who manage 600 customers in a pooled model. 1 CSM has responsibility for creating the one-to-many programs used by all the CSMs and manages the remaining customers in a pure tech-touch model.  2 are directors, one over midmarket and one over SMB/tech touch, 1 is a customer success operations person, soon to be 2.

Financiality is a technology and services company providing data analytics tools and consulting to banks and brokers and is a customer of Wingtip.

June 30: Financiality signs the contract with Wingtip for $29,000 ARR plus a one time $15,000 for the mid-market onboarding package.

July 1:  The necessary details from the Wingtip CRM system get automatically pushed to the customer success system and the appropriate project manager and CSM are automatically assigned to the account based on the algorithm that takes into account both workload and a round-robin system.

July 1: Financiality’s senior director of education, Joe Smith, who signed the contract, receives a personalized email from the Wingtip CEO, automatically triggered from their CRM system, welcoming him to the Wingtip family.  The letter also introduces Wingtip’s onboarding project manager, Shannon Jones, and outlines the expected next steps.

July 1:  Shannon contacts Joe via  email to set up the project kickoff call.

July 2: Joe receives through amazon a thank-you gift from Wingtip that was automatically triggered by the closing of the contract based on the sales rep’s choice selected in their CRM system, it’s a high-quality keychain bearing Wingtip’s logo and Joe’s name.

July 2:  Shannon studies the information about Financiality in the Wingtip CRM system to determine whether she has any questions for the sales team before proceeding with the project.  It appears to be right in their sweet spot so she chooses to proceed without initiating a handoff meeting.

July 2:  Shannon receives an out-of-office response to her email from Joe saying that Joe will be on PTO until July 14.

July 2: Shanon immediately flags the onboarding project as at risk because her SLA for project completion is 8 weeks from contract signature and a 2 week delay on the start date makes that SLA highly unlikely.

July 15: Joe responds to Shannon’s request for a kickoff meeting, and they schedule it for July 16.

July 16:  Kickoff meeting, the key milestones are agreed upon, including the go-live date of September 5.

July 16:  Shannon updates the Wingtip customer success system with the key milestone dates and leaves the project in the at-risk state because the projected Go-Live date is past her 8 week SLA.

August 14:  An automated email is triggered, introducing their CSM, Mary Harrison, and informing them that she will be inserting herself into key meetings over the next few weeks as they near go-live.

August 15: Mary sets up a standard set of rules.  Some of the rules are risk based (25% drop off in usage) and some are opportunities (more than 80% of Financiality’s licenses are active).  She also triggers the creation of an Account Health Score in the customer success system, which will start tracking overall customer health for Financiality, taking into account their purchase date and planned use cases.

September 5:  All items on the project plan are complete and the go-live meeting happens.  Shannon and Mary jointly lead the meeting as they transition Finciality from one to the other.  Financiality signs off on the completion of the project and Mary officially takes over responsibility from Shannon.

September 8:  Joe receives an onboarding assessment survey that was automatically sent to him from the Wingtip customer success system based on the completion of the Go-Live milestone.  Joe responds and gives the project a satisfaction score of 5 out of 5.

September 8:  Because the project satisfaction score was 4 or higher, the at-risk tag on Financiality is removed in the customer success system, which raises their overall health score to 78 which is at the very high end of the Q2 cohort.

September 30:  90 days after contract signature, Joe and all of the Wingtip users at Financiality received their first NPS survey from Wingtip, automatically triggered by their customer success solution.

October 7:  Mary receives a notification from her customer success system that one user responded to the survey with a detractor score of 4.  Mary immediately follows up directly with the user and helps her get back on track.

September 11 – November 3: Three different notifications: that new users at Financiality have logged into the Wingtip system but viewed fewer than 3 pages in the following 7 days.  This triggers an automated email to each of the users with some tips and tricks and a pointer to the on-demand “Getting Started with Wingtip” video training. The responses of all three  users are tracked in the customer success system as they each open the email and click on the video after which their usage increases noticeably in the following week.

September 23 onwards: Every user, when they’ve reached the thresholds of both 50 logins and 500 page views, receives a $10 starbucks card in their email, automatically triggered from Wingtip’s customer success system.

November 17:  Mary receives a notification that Financiality has opened 5 support cases in the past seven days.  This is a danger signal, and she follows up with Joe and schedules a review with her director of support to ensure closure on all issues.

December 8:  Mary conducts a video executive business review (EBR) to review progress over the first 90 days and plan milestones for the next 90.  The first EBR is done live, but she explains to Financiality that future EBRs will consist of PowerPoint slides following the same format automatically sent to them from her customer success solution along with an automated survey regarding goals for the next 90 days.

The first 90 days of a customer’s life is so important.  Remember that the biggest risk of churn lies at the time of first renewal or early on in the customer’s life cycle if there isn’t a renewal event.  Managing the customer experience really well from day one is critical. Financiality is highly likely to renew their contract for at least another year assuming Wingtip’s product provides them real business value.

Remember that the word involved is love.  It almost always takes a series of mistakes to change love to like or don’t mind or hate.


Subscriptions are all the rage right now, from software to music to movies to diet programs.  If a business is not subscriptionable, it is probably becoming pay-as-you-go, which has all the same characteristics as SaaS.

Customer success is driving emotional loyalty by delivering value.  Loyal customers stay with you and buy more stuff from you. Customer Success Managers (CSMs) are individuals that help customers get the most value out of your products.

Fundamental elements of successful subscription based company: grow the value of installed base, reduce churn and decrease time-to-value.  Focus your demand generation on only those prospects who have a high likelihood of a lifetime of success.

The Ten Laws of Customer Success offer the principles that a successful SaaS or B2C company will need to embrace and execute at a very high level.  Here are the 10 laws: 1) Sell to the Right Customer. 2) The Natural Tendency for Customers and Vendors Is to Drift Apart. 3) Customers Expect You to Make Them Wildly Successful.  4) Relentlessly Monitor and Manage Customer Health. 5) You Can No Longer Build Loyalty through Personal Relationships. 6) Product Is Your Only Scalable Differentiator. 7) Obsessively Improve Time-to-Value.  8) Deeply Understand Your Customer Metrics. 9) Drive Customer Success through Hard Metrics. 10) Customer success is Top-Down, Company-Wide Commitment.

Your customer success leadership is incented to reduce churn and partner with sales to accelerate expansion.  All churn happens because they’ve sold to the wrong customer. Your Product Market Fit (PMF) must drive your complete corporate alignment, from product development to operations and throughout the go-to-market funnel.  For most, the expected LTV of a customer is 10 times the value of the initial sale. It is more valuable to understand why a customer churned than to understand why they stayed. Delivering wild customer success requires 3 things:  1) How is your customer measuring success ? 2) Is the customer achieving that value? 3) What has the customer experience along the way ?

Customer Health is at the heart of the customer success – the predictor of future customer behavior (renewal, upsell, churn, at risk).  In order to drive loyalty/customer success, monitor and manage customer health score. Your company must have a deep understanding of both churn and retention:  Churn for understanding why and how often customers leave and retention for understanding why and how often customers stay and continue using your product or service.  We must be aware of every login, click, upload, download, error generated etc. from our SaaS application. The trick is correlating usage metrics to derive business value for the customer and how that affects retention/expansion.  Everything your customer success team does is designed to create loyalty, and loyalty is measured in the long term by net retention and in the short term by health score.