Maintaining and growing annual recurring revenue (ARR) is a central determinant in the valuation of tech companies and one of the biggest challenges for those looking to scale their recurring revenue businesses (subscription or consumption) is driving customer adoption.
In response, more and more technology companies have deployed customer success managers (CSMs) with a charter to help build a robust, enabled community of users that derive the stipulated business value from a product or solution.
Yet, Alexander Group’s client experience suggests that enabling a robust CSM’s capability is merely table stakes for building a successful subscription revenue model. Leading XaaS companies are extending the concept of Customer Success beyond a single role to a broader organizational mindset. If the goal of a subscription revenue business is to maximize customer lifetime value (CLV), then the organization can’t merely focus on Customer Success in the adoption phase of the customer buyer journey; it must embed a Customer Success focus as a mantra across functions and points of interaction with current and prospective customers.
To illustrate the concept of Customer Success as an organizational mindset, let’s consider the modern tech buyer journey. Alexander Group defines this journey as ILAER, which is simply an acronym for Identify, Land, Adopt, Expand and Renew. As previously noted, CSMs serve a vitally important function in the adoption phase, but in true Customer Success-centric organizations the concept is embedded into all aspects of the buyer journey and across multiple functions. Below are some of the most common applications of Customer Success concepts across the I, L, E and R steps of the buyer journey and the functions that utilize those concepts to enhance customer experience and deliver higher CLV.
Identify
- Use usage data to uncover patterns in customers indicative of propensity to adopt and expand; re-segment markets and utilize data to redirect prospecting efforts to new logos that are more likely to produce CLV (Marketing, Demand Generation, Sales Operations)
- Utilize customer feedback and product telemetry data to structure offering that to a broader potential audience; use data to adjust product road mapping and innovation (Marketing, Product Marketing/Development)
- Determine how different users benefit and derive business value from products and solutions to more accurately identify and message viable buyer personas (Marketing, Demand Generation)
Land
- Utilize user data and customer feedback to inform the configuration and deployment of solutions (Sales, Technical Sales, Product Management)
- Plug prospects into user communities to enable a prospective customer to observe how customers experience the product in a live environment (Sales)
- Deploy CSM adoption techniques and knowledge during trial/freemium period to improve the probability to build a loyal community of influencers and drive conversion to fully deployed lands (Sales, Try-and-Buy Program Specialists)
Expand
- Leverage data to determine potential features and workflows not currently utilized or under-utilized; provide access to use cases from other customers to demonstrate business value of deploying additional features (Account Management)
- Display usage patterns to customers in quarterly business reviews; assist customers in developing a technology roadmap that scales solution efficacy to match changing priorities and market conditions (Account Management, Post-Sales Cross-Sell Specialists)
- Deploy Enterprise License Agreements (ELAs) to give customers maximum flexibility to consume additional product/solution functionality (Account Management)
Renewal
- Monitor customer “bursting” in variable consumption contracts (e.g., customer uses more than they anticipated and pays incremental costs); restructure contracts to provide customers with more favorable terms (Account Management, Renewals Reps)
- Provide access to usage data and customer health index to more effectively target customers in need of intervention (Account Management, Renewals Reps)
- Utilize user feedback and interactions to arm renewals teams with advocacy from within the customer organization, helping buyers tangibly quantify business value of products and solutions to speed renewal approvals (Account Management, Renewals Reps)
It is increasingly clear that building a Customer Success management organization is a linchpin in fostering a viable recurring revenue business; the financial implications of customer loss from suboptimal solution adoption are self-evident. Accordingly, it should not be surprising that extending the concepts of Customer Success throughout the organization has benefits for customers and prospects across the buyer journey. Revenue leaders should be asking themselves how they are embedding a customer mindset into the entire organization, from product development and R&D, to marketing and business development, to sales, account management, and customer support. Not only does an organizational ethic of Customer Success drive better CLV, ARR growth and valuation, it serves as a strong, differentiating signal that an XaaS vendor is genuinely invested in the business outcomes of its customers.
Are you looking to transform your organization to center around the 24×7 customer experience? Alexander Group will continue to pursue this topic further at our 20th Annual 2020 Executive Forum November 18 – 19th. Learn more about the event or contact us to discuss your specific Customer Success situation.
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Author
Sean Ryan is a principal in the New York office. He is a leader of the Technology practice on the east coast. Sean focuses around leading software, hardware and technology services companies through the difficult challenges of sales transformation, from traditional selling models and building the sales effectiveness and sales compensation structures required to effectively transition. Sean works primarily with technology clients in areas such as sales and marketing strategy formulation, sales transformation, direct, indirect and inside sales channel management, and sales compensation. Increasingly, Sean’s focus has centered around working with companies attempting to establish a presence in Cloud/XaaS markets for both traditional technology players and “born-in-the cloud” companies. Sean has significant experience working with both large companies and start-ups, with all forms of ownership including public, private equity-funded and privately held companies.
