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What is Customer Success and How Does it Drive Revenue?

What is Customer Success and How Does it Drive Revenue?
Veronika Wax
July 1, 2020

The key to running a thriving business has always been built on acquiring new customers as well as retaining them. But there is an up-and-coming methodology, centered around helping customers succeed, that many companies are quickly implementing. So, what is customer success and why has it become such an important role within B2B?

Today’s SaaS business environment is dominated by subscription-based plans and recurring revenue. This has essentially redefined how companies approach customer retention and customer lifetime value.

Once you close a deal, your goal shifts to ensure that customers find immediate value in your product and continually see results. Smart companies don’t leave the customer’s success to chance. Instead, they invest in a customer success (CS) strategy to:

  • Learn more about each customer’s goals
  • Develop a deeper relationship
  • Work with them to ensure they thrive.
cost to acquire a customer vs retain a customer.

It is has been found that the cost of acquiring a new customer can be anywhere from five to 25 times more expensive than retention. The risk of customer churn in a highly competitive SaaS market is too great to leave customers to their own devices.

Hence, companies are being proactive by implementing this new discipline dedicated to making customers happy. It is simple. When customers succeed, they remain customers and continue to spend money.

But does every company need a CS team? In this article, we will explore:

  • The definition of Customer Success
  • Why it is important to your bottom line
  • Which types of businesses benefit the most from Customer Success

What is customer success?

what is customer success? Defined

Customer Success is a methodology that brings together a cross-functional team with the mission of helping customers adopt the company’s products and use them in a way that will ensure they reach their goals.

Instead of completing a sale and letting the customer aimlessly use your product, the CS team takes the baton from the sales team. Then they focus on developing a strategic relationship with the customer. The CS representative acts as the point of contact for anything the customer might need throughout their use of the product.

There are three important factors needed to make Customer Success work well:

  • An understanding of the customer’s business and goals.
  • Data-driven insights into when and how customers are using your product.
  • Expertise that will guide customers on exactly how they should be using your product to succeed.
what are the key activities in CS?

To accomplish this, CS teams must integrate several functions within the company including sales, marketing, business strategy, technology, and account management.

Customer Success becomes the advocate and voice of the customer within the company. On the other hand, they also represent the company when consulting the customer.

Here at Demodesk, we utilize our CS team to make sure that customer needs and goals are always brought to the forefront and demonstrated through each representative.

How the rise of SaaS led to the emergence of customer success

Customer retention and the fear of churn has always been an important aspect of keeping a business afloat. But something changed when SaaS products began to dominate the B2B marketplace.

The preferred model of SaaS has become subscription-based plans, which means that customers can now leave as early as one month into the relationship. No more one-year contracts where companies can take a breather after a sale. The focus has now turned into recurring revenue. This heightens the importance of reducing churn and as a result, Customer Success was born.

One major benefit of SaaS products and other digital applications is that they generate a lot of user data informing Customer Success when, where, and how the customer is using the products. When companies can see the ways their customers use the product(s), they can give data-driven advice on how the customer can use the product better to generate greater results.

establish trust and increase customer retention with interactive screen sharing

CS teams can also use this data among customer feedback to make suggestions to the product team on what features and functionalities people could really benefit from.

Over the past few years, CS teams have evolved from a trendy tech function to one of the most important initiatives within the organization. The importance of CS teams continues to grow year after year.

The difference between customer success and customer support

customer success vs customer support

Many people lump Customer Success with Customer Support together, but they are different. Simply put, Customer Success is a proactive approach to helping customers while Support is reactive. When a customer has an issue with the product, Support is called to fix the problem.

Great customer support is still extremely important and contributes to overall success, but it is not enough to prevent churn and drive new revenue. If customers are not happy with the product, it is unlikely Customer Support will ever get a call. Instead, customers will just leave without explanation.

By being proactive from the start, Customer Success knows what goals the customer wants to achieve and helps them get there. A good Customer Success program will anticipate concerns and roadblocks, keep the customer experience positive, and help them set a path for continuous improvement.

From an operational standpoint, customer support is a clear cost-center, which means that it is a necessary function that hits the books as an operational cost. On the other hand, Customer Success has the potential to generate a return on investment. With the right incentives and metrics in place, management can see how Customer Success contributes to the bottom line and nurtures customer lifetime value.

3 ways customer success drives return-on-investment

There are three areas where Customer Success positively impacts a company’s bottom line:

  • Upselling and cross-selling
  • Churn reduction
  • Renewal conversions
how CS impacts the bottom line

Let’s take a closer look at how a Customer Success function can influence each of these areas.

1. Driving upsell revenue

Your customers’ needs and business goals are always evolving. For effective Customer Success, you constantly need to assess your customers’ needs so they can reach their objectives.

When this happens, your CS team is uniquely positioned to advise customers which features or services they need to add to achieve these new initiatives.

This type of upselling happens organically and aligns with a real business need. It is not a pitch from a salesperson whom the customer has not seen in months. It is based on a sound recommendation from a trusted partner.

2. Reducing churn

  • Customers are in control.
  • They have access to your competitors’ pricing and reviews.
  • They are usually on monthly contracts.

The reality is that they can leave you at any moment. The best way to keep customers from leaving is to anticipate it before it is too late.

While your CS team is already building relationships to avoid churn altogether, they can also predict potential exoduses by analyzing user data that correlates to a customer leaving. In this scenario, Customer Success can get in early to address any issues and steer the customer back on track.

Remember how expensive it is to acquire new customers? The other side of the coin is even more powerful. Research from Bain & Company shows that when your retention rates increase by just 5%, profits increase by 25% or more.

when retention increases, profits increase.

3. Facilitating the renewal process

For B2B SaaS products or any company with a subscription revenue model, renewals can become a sticky situation. While many tech companies attempt to automate this process, customers sometimes still need reassurance or a confidence boost during these times.

Customer Success can take on two roles for renewals. If a company has a renewal team, then the CS team can help them with data points and customer progress reports to empower the renewal team with the right insights.

However, Customer Success can handle the renewal conversations themselves. If they are capable of balancing their strategic partnership role with the renewal tasks, it makes sense that they would lead the process. They own the relationship and are best suited to handle objections.

Does your company need customer success?

B2B SaaS, companies with subscription-based plans should all have Customer Success programs within their organizations. Whenever there is a risk of frequent customer churn, a CS strategy will help you tremendously.

That being said, every company will have its own approach. Some might have a separate department dedicated to Customer Success, while others will combine the discipline with another function.

Beyond typical business models, the core ideas of Customer Success can benefit and apply to almost any company. When you invest in helping your customers reach goals, that essentially leads to the growth of their business. In turn, they will then invest in your product.

While the concept of Customer Success is not new, the strategies and use of technological tools are. For that reason, any business can make some changes and take advantage of a CS methodology to better their relationship with their customers.

how will you help your customers be successful?

Up next: more customer success knowledge and insights

This is the first article on a series of Customer Success guides meant to give you the foundational knowledge of how you can implement the strategies and know-how into your customer relationships. We will dive deeper into more details including:

  • Positions & roles
  • Tools to use
  • How to set up an effective strategy for your unique business
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