Although originally conceived as a cost center, Customer Success has become a source of revenue for those who know how to make it profitable. How can you turn your Customer Success Management programs in profit centers? What steps should you take to drive profits, and lead your customer to recognize the value of your service?
In this webinar, we’ve partnered with Tri Tuns to discuss:
- CSM as a Profit Center vs. CSM as a Cost Center
- Driving Profits Through Customer Success
- Providing Value Your Customers Will Pay For
Jason Whitehead, Tri Tuns Founder and CEO, and Rick Matney, Senior Consultant at Tri Tuns, tell you how you can drive profit from your Customer Success Management program.
Jason:
Rick:
Thanks, Jason, hi and good afternoon everyone.
My name is Rick Matney, and my educational background is in business economics and organizational management
I’ve been involved with IT user adoption and change management for about 7 years now where I’ve lead large-scale user adoption and change management initiatives
What I’ve witnessed throughout my time working in the IT industry is that it is a constant struggle for organizations to keep pace with the rapidly changing landscape.
As a result, I've focused largely around assisting organizations with strategic approaches to turn newly faced challenges into business opportunities.
Rick:
The topics that we’ll cover in today’s webinar:
Viewing customer success as a profit center, where we will look at how the industry has evolved to highlight the differences between operating your customer success program as cost center versus a profit center
Next we will move onto providing services that your customers will pay for, where we will take a look at what effective customers success is all about, and finally,
At a high-level, 5 actionable steps that you can take to drive profits with your customer success efforts
Just a reminder, we will take time to answer as many questions as we can at the end, and
If, at the end of the webinar you still have questions or would like to learn more about customer success and how to turn it into a profit center we will show you where you can go to get the help you need.
Jason:
Tri Tuns as been operating in the SaaS space for over a decade, helping clients of all shapes and sizes drive effective customer success and user adoption efforts to achieve the results they desire. Because our time is limited today we will be sticking to a higher-level of discussion in this webinar, but if you you have specific questions that we aren’t able to fully answer, or would like additional advice and direction with your own customer success efforts please feel free to contact us and we’ll be happy to help.
Jason
Jason:
First we need to differentiate what it means to operate a customer success function as a cost center versus a profit center
With the traditional approaches to customer success CSM teams were typically setup and viewed by Vendor executives as a cost center.
They viewed these as departments necessary to prevent churn, but treated them as every dollar spent on customer success was either adding additional costs (hitting bottom line revenue) or simply insuring against churn.
They didn't view these departments as a potential new revenue streams.
While they did help identify where customers could use more features, that’s where they stop, delivering only limited (or no) new value to the customer.
To operate customer success as a profit center you need to take action to solve the root-cause issues that are hindering the value your customers are realizing from your solution, and charge for it!
Rick:
These are exciting times in the software industry!
As such of our everyday lives are impacted by, and revolve around technology, software vendors are now presented with more opportunities than ever.
Before we begin to discuss the topic at hand, lets take a brief look back at the evolution of the IT industry to provide some context and help get us up to speed with how we’ve gotten to where we are today.
Jason
Tri Tuns has been on the front edge of this evolution, operating in the Customer Success space for over over a decade where we’ve assisted numerous organizations work through the complexities of customer success in order to address their customers’ needs by driving actions that matter.
Jason:
Prior to the turn of the century the typical software model was the on-premises model where software was physically installed on the customer, or users’ premises.
Here, customers made large upfront investments to purchase software applications to own indefinitely.
Unfortunately, more times than, potentially valuable software would turn into shelfware, contributing nothing more to the organization but sunk costs.
With this traditional model, it was completely up to the customer organization to derive their own business value from the IT solution by driving use of the solution themselves.
For vendors, the typical approach was go-live and go-home, with success defined as on-time and under-budget implementations
What happened after go-live was of little concern, as by that time vendors had already cashed the check.
Here, the how successful the customer was with actually using a solution had little effect on the vendor success
Jason:
Then the SaaS model emerged within the IT industry around the year 2000, completely upending several industry characteristics.
Instead of customers making large upfront investments to purchase software outright as they traditionally did, the new subscription pricing model enabled customers to essentially rent software, on-demand for relatively low, recurring licensing fees.
With lower licensing fees and shortened contract terms customers now enjoy more power and more choice than ever before.
Now, if an IT solution is not delivering upon anticipated outcomes and delivering measurable business value it’s easier than ever for software customers to vote with their feet and leave for another.
With customers maintaining more leverage in the vendor/customer relationship and a tendency towards churn, vendors now face more risks than they ever have before!
Jason:
As the industry continues to evolve to where we’re at today there is still a critical piece missing from most customer success efforts, creating a value gap, causing your customers to churn
Vendors must look to the future by understanding this root-causes of this value gap and deliver services to fill it
***EXPAND?
Rick:
Until vendors make the fundamental mindshift…
Rick:
Discussion:
You know jason, prior to about 2012 companies were still unsure of what to call this new function that essentially served as technical support.
Basically, they tried doing more of what they knew how to do, and what they had always done in the past.
Google
Vendors slowly realized this wasn't solving the problem, so they moved on to trying new things and coalesced around what’s now known as customer success management.
Many organizations simply moved existing staff into new departments and changed their title, making only minor modifications to their traditional roles.
Oftentimes this involved creating Customer Success Managers to act largely as account and relationship managers, with the responsibility of explaining to customers how they could get more value from system they sell.
They concentrated on introducing new product features and functionality, explaining roadmaps to inform what new things could be valuable to them in the future, and highlighting for their customers where they’re using the system well, where they could use more of what they have, and the value they are getting during quarterly business reviews.
However, where this approach falls short is that although vendors are making their customers aware of their issues, they’re not actually taking actions to help them solve there issues.
And this is where we’re at today.
Good first step…surface good thing to do
Rick:
***CONVO
Though the typical customer success services truly are a good-faith effort to understand customers' needs and identify where systems could add more value to their existing operations, it‘s not enough.
These efforts don’t go far enough towards actually helping customers through root-cause issues to realize value, which many vendors still struggle to understand.
Earlier customer success efforts would leave a significant amount of value unrealized, because they weren’t helping their customers achieve it by delivering solutions to the problems they were identifying
This created a significant value gap – your customer success services must fill this gap in order to be profitable.
Taking actions that go beyond simply creating awareness is fundamental to driving the value that your customers desire and will pay for
The more successful that you can make your customers by assisting them with what they either can’t, or won’t do for themselves, the more successful that your organization will be.
To utilize customer success as a function that generates profits your customer success team needs to develop new services that deliver new sources of value for your customers that have never been delivered before.
Jason
Reminder to enter questions in chat
So what does all this mean for how think about, communicate and go about Customer Success?
Jason;
Your CSM services need to focus on both knowledge and action to drive success within your organization and your customers.’
What we’ve seen consistently with the current approach is that CSM teams are focused on the knowledge piece only. (QBRs, explaining modules and functionality, explaining roadmap, etc.)
What your CSM team or department needs to do to be profitable is address the "action" piece.
These are new services and activities that vendors can provide, and charge for, to help customers achieve success. Only by providing the services that will solve your customers' root-cause issues will your customer success efforts effectively prevent churn and expand revenues.
***Potential benefit to achieved benefit
Rick:
We don’t won’t to belabor the point, but If all that you’re doing is focused on the tip of the iceberg and creating an awareness within your customer organizations then you’re forfeiting the bulk of the value that lies beneath these surface level engagement
***CUT Content
Too often customer success teams leave most of the actions that are critical to driving value with their solution in hands of their customers, in hopes that they will do all of the right things to drive ROI on their own
Vendors frequently attribute this lack of action to a lack of time and resources available within their organization
So how can you combat the problem of not having the resources to take the necessary actions within your customer organizations?
Simple, you don’t have to provide them all.
These are services that third party vendors like Tri Tuns have been providing to software vendors for over a decade to solve this issue
FINISH
Jason:
IT projects typically started with a vendor getting selected, and then IT driving - or at least having the majority role - in the system implementation within their organization.
Original IT developments lead many IT projects and their methodologies (agile, waterfall, etc.) only focused on the technology build and getting system live.
People assumed that with a little training at go-live, technical support 100% adoption would just happen – not so!
Eventually, organizations added some communication, thinking that was all that was needed.
These communications mostly focused on WIIFM, with the notion of selling people on why they should use the system, but this approach, which is still very common today, only works to drive low to moderate levels of adoption and ROI – not enough to mitigate customers from churning out.
Jason:
You must now shift your approach from a technology focus to a customer success focus
Here, you need to offer services before go-live that prepare the adoption of your system and then, after go-live, work with your customers to deliver the services that drive value realization and ROI for your customers
Root cause issues that customers need to solve is driving and sustain effective user adoption that results in the value creation (ROI) that customers require. Only then will you get renewals.
***REVISE
Rick:
****CONVO
Jason you made such a good point about the fact that you can’t focus on the technology…
Although adoption has increasingly become recognized as a responsibility of the customer success function, where most vendors are getting stuck is understanding that adoption is NOT a technology issue.
In fact, low levels of adoption likely have nothing at all to do with the actual software itself.
User adoption is an organizational issue, not a technical one, that requires new approaches
You need to shift your approach and develop services that address work practice and people needs.
There is no piece of functionality that you can build in your system that will solve your customers’ adoption issues, and traditional onboarding and training on your software is not enough
You need to provide new tools and services for customers that will help them identify and fix organizational barriers contributing to the root-cause problem – a lack of software adoption.
Rick:
Because the power balance between vendors and their customers has been upended and customers now enjoy lower barriers to switching between products your customer success team is critical to your organization’s ability to thrive, if not simply survive.
Your CSM team must work maniacally to help your customers realize a return on their investment from your software application by driving and sustaining effective user adoption.
Your customers expect you to make them wildly successful by solving their business needs with your product!
The bottom line is really quite simple: if your customers aren’t using your solution they’re not realizing it’s potential value. If they’re not realizing the value that you sold them on originally they’re going to churn out.
No adoption equals no value, which equals no renewal
By not helping your customers to solve their adoption problem you’re discounting potentially the greatest threat to your customers’ success and yours!
So how do you develop and deliver profitable service offerings that drive adoption and create a real return on investment for your customers?
Jason:
Example of NEA/Salesforce implementation
80/20
Jason:
Three key points:
Actionable services
Fill the value gap -- need to solve the adoption and ROI
Do what your customers can’t or won’t do for themselves
Now we’ll walk you through the 5 big steps to create a profitable CSM practice
Jason:
The first step you need to take to turn your Customer Success department into a profit center is to get your executives onboard
To accomplish this, you must show that your customer success department can be new source of revenue for your company
P&L???
Get CEO to see direct value that your CSM pratice can provide
Dept. can generate new services of revenue , which can pay to operate the dept.
By filling this value gap you need to claim credit from reduced churn
People need to understand that your department will drive expansion (people will not buy more until they are using what they already have
Jason:
To develop proftible services you need ot understand that youll need more than one service
Customers need different products based on where theyre at
Develop and deliver in cost effective and profitable way
Rick:
At Tri Tuns we do not advise that you take a one-size fits all approach to customer success services.
Instead, we advocate for the need to segment your customers and offer different levels of service to meet their different needs.
Consider this, about 80% of your company’s revenue will come from about 20% of your existing customers.
With this in mind, it is critical to understand the correct level of touch that you should provide for each customer segment based on the value that they provide to your organization.
Rick:
So let’s take a look at what this might look like:
For your smaller customers that can't afford as much and don't have as complex needs you should consider offering smaller, cheaper, and simpler success services.
For example: tier one services should incorporate 1 to Many type self-service offerings.
These would largely consist of automated tools such as emails, video, drip campaigns, webinars, etc where you could utilize an application like Amity’s to provide these types of services in a scalable and cost effective manner
Jason:
Even with automated content you still need the right content
Must still take action
Just keep in mind that these automated tools shouldn’t have a technical focus, but rather an adoption & value creation focus
Moving up to a higher touch points, are tier 2 and tier 3 services, which are more of a professional service to drive adoption, similar to what a company like Tri Tuns would offer clients.
***EDIT in to script
For your larger customers that are spending a large amount of money with you, It’s likely that they’ll have more complexities, and thus will need more support to effectively drive user adoption.
However, these are the customers that are willing to spend more for success services to insure their investment in your technology
Your medium sized customers will have needs that fall somewhere in the middle
Jason:
All of these service offerings you provide are new, value-added service to your clients.
To be profitable you need to charge for these just like you would for any other professional service you might offer like project management, implementation, technical customizations, etc.
HOW you present these charges to your customers will vary.
For the tier 1 - 1:Many segment, you will probably make this available to all customers and, so it is not a separate line-item for customers.
If you do this, a portion of all license revenue that is recognized needs to be internally credited to your Customer Success department and be reflected in your department P&L calculations.
For services in tier 2 and 3, you can separate different service offerings, each having different price points.
These would be add-on, fee-for-service that you charge directly to clients for providing whichever additional services they require.
Over the past decade we’ve seen firsthand that organizations are becoming increasingly aware of their need for these types of services. Your customers are in need and WILL pay for these.
Rick:
In order to get all of this to work you need to be able to sell these services to your customers, which begins with the marketing process
You should strive to involve your marketing team early in the process to create messaging around these new customer success services and the value-added they’ll provide to your customers
Jason:
Define for new and existing customers
Existing customers:
Variety of things you can do
New customers
Overall must articulate value of services
Jason:
Finally, in order for these services to be effective, you must also make sure that you involve your sales teams
Your sales team needs to have sales targets around these service offerings and a commission structure to motivate them to sell these new value-added services to clients.
Rick:
Just to sum this all up:
In order to achieve profits through your customer success function you need to get a few things figured out, including:
Identifying what services that your customers need to drive adoption and realize value from your solution
How to develop these services in a repeatable and scalable way
And how to sell & deliver these new customer success services in a cost effective & profitable manner
Jason:
Does all of this sound complex? Well…that’s because it is!
Rick:
Remember, If you still have questions that we weren’t able to answer during the webinar contact us, we can help
We are not a one-size-fits-all organization. All of our services are custom tailored to meet our customers needs.
We have a variety of services offerings aimed at helping our clients build their user adoption and customer success capabilities including our quick start strategy services, ROI rescue services for projects that aren’t achieving the desired results, in-person and online training, coaching, full program implementations and partnerships, where we provide customer success services for your customers on your behalf if you don’t want, or have the capacity to provide them on your own
If you have questions, give us a call. We welcome the opportunity to speak with you and help you and your organization accelerate your customer success and user adoption results.
Jason:
Partnership opportunities
Jason:
For more information about the most effective approaches to Customer Success please visit our online learning portal at TriTunsAcademy.Com
We offer a variety of online and in person training tools to provide you with the information that you need, where you need it
If you’re interested in taking a deeper dive into the topic of “Customer Success as a Profit Center” Tri Tuns is now offering expert lead, interactive sessions where we’ll guide small cohorts of learners to get all of the answers that they need to questions that are specific to their situation
Our first “ask the expert” session will be held on August 31st at 1pm, which we anticipate to fill up quickly so make sure you sign up soon!
Thank you very much. We hope this was helpful. Please enter your questions in the chat window and we will answer them at the end. Now I’ll turn it over to our wonderful host, founder and CEO of Amity, Paul Philp.