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One has only to look at our daily routines to realize that customers' relationships with companies have evolved significantly in recent years. If you're running low on hand soap, you can log on to Amazon.com and order a fresh supply through your Prime account. When you're visiting an expansive and unfamiliar city, you can tap into your monthly Zipcar subscription and summon a GPS-equipped car for the amount of time you need it.
What do these two companies have in common, and why is this a big deal? The answer to the first part of this question is subscription services. And that's important because both companies are succeeding with subscription services in industries that traditionally haven't had them.
The subscription model has long been—and still is—the preferred method of payment for utility companies, newspaper and magazine publishers, and cable providers. It piqued the interest of many business leaders when the model proved successful in the CRM industry, which once thrived on large, one-time sales. Today, as the Amazon.com and Zipcar examples suggest, other industries are following suit. But before your organization falls in love with leasing, it should be ready to implement a customer success management (CSM) strategy.
The subscription model is appealing to businesses and customers alike. Businesses value the predictable revenue stream. Plus, it enables them to maximize the lifetime value of their customers. Customers, on the other hand, appreciate the better pricing, access to premium products and services, and fixed costs that a subscription model offers.
Some organizations are already evolving the model to appeal to a larger audience, one that includes budget-conscious and commitment-phobic consumers. These companies have combined the subscription model with the standard purchasing model, enabling people to enjoy the benefits of membership while paying only for what they need. This allows customers to buy items in smaller quantities before deciding whether a product is right for them. Companies like Birchbox and Dollar Shave Club give people the opportunity to order and sample beauty and grooming products rather than commit to large quantities at once. Blue Apron applies a similar logic with cooking supplies, as it seeks to allow culinary wizards to minimize the amount of ingredients they must commit to before making a meal.
These developments suggest that the nature of customer relationships is changing. Businesses might once have had the power to dictate the terms of purchase without worrying about competition luring customers away, but that's no longer the case. "We're in the age of the customer," says Kate Leggett, vice president and principal analyst at Forrester Research. "[They are] in the driver's seat, and they hold the power."
And, Leggett adds, "our world is moving towards a subscription economy"—an economy, she explains, in which customers can opt in or out of deals with relative ease and not lose significant amounts in the process.
Under this model, companies that fail to provide products and services when they're most needed are at risk of losing those recurring customers, who will jump ship in favor of a business that can deliver the goods.
In the case of a Web site like Netflix, for instance, customers "subscribe, and if [they're] not getting the movies they want to watch, and on time, [they're] going to end up leaving them," Leggett points out. Competing entertainment platforms might do better at recommending the kind of content people are most interested in viewing.
In light of all this, customer success management, or client advocacy, has in recent years emerged and gained popularity as an area with strong ties to customer relationship management. And, fortunately, the means for tracking customers effectively is maturing, thanks to CSM.
Leggett defines CSM as a strategy and a process, aided by tools, to ensure that "customers are properly 'on-boarded' and getting the maximum economic value from their purchase."
"There was a time when [everyone was concerned with] acquiring new customers," says Karl Rumelhart, vice president of products at Gainsight, a vendor of CSM technologies. But "the industry has come to realize that the management of your existing customers is somewhere you should really focus."
Guy Nirpaz, CEO of Totango, a provider of CSM technologies, estimates that for mature software-as-a-service (SaaS) businesses, an average of 65 percent of revenue comes from recurring customers.
Leggett adds that if a customer is getting the most out of a current product or service, it is much more likely that he will continue to do business with the company and invest money in its offerings.
For this reason, among others, companies "need to get a really good understanding of how customer success impacts the company as a whole," Rumelhart says.
Many companies are focusing their energy on assembling personnel who are dedicated to customer success, ensuring that users of products and services are thriving. More than half of the companies Totango spoke to in its most recent annual SaaS Metrics Survey are investing more heavily in customer success staffing than on technology or programs. This suggests that they are even more interested in getting the teams in place than they are in building the infrastructure necessary to scale customer retentions.
These teams work to maintain what they refer to as customers' "health scores." To calculate these scores, they rely on data stored in CRM systems combined with billing information, customer support tickets and feedback, Net Promoter Scores, survey information, and insight on the particular ways in which products are being used by the consumer.
For instance, a typical problem with software is that those who are using it are unaware of new features and updates that are being made available by the vendor. While a marketing automation company or a provider of service desk software might send out an email to customers informing them that they are eligible for an upgrade, it means nothing if they don’t get the memo. If customers don't open the email with the release notes, they are unlikely to update their system and be able to utilize the best the company has to offer. Customers' impressions of the company are bound to drop in that case.
Keeping track of behaviors with a product or service also allows companies to tailor experiences to meet a customer’s specific needs. Maria Martinez, president of sales and customer success at Salesforce.com, notes that all of the company’s customers have a unique set of expectations, depending on the size of their business, their company's vertical or industry, and the products they use. "This means we have to focus on value on a customer-by-customer basis," Martinez says. CSM "allows us to get to know our customers in very specific ways, so that we can coordinate the right offerings to ensure the best outcomes in the shortest time possible."
The discipline, in fact, extends to sales, marketing, and customer service efforts. "I don't see a lot of companies having a customer success team that is independent of sales and service," Leggett points out.
The responsibilities of customer success managers at times appear similar to those of marketers or even service agents. CSM professionals often work to anticipate service issues before they become issues. They’ll explain how to use a product in a way that is understandable, which may prevent complications and misunderstandings later on.
The success team will want to know the right time to reach out to a customer with informational material, and how to present it so that the customer is engaged and pays attention and learns something from it.
"The more you engage, the more you understand, and the more effective you're going to be moving forward," Rumelhart says.
These teams will also want to analyze customers’ behavior with products and automate messages they can send to customers, ones with tips to help customers get the most out of products or services they’re using.
According to Leggett, CSM tools collect data from different systems into one hub. They track and report on the status of accounts and offer up opportunities for improvement. Analytics can help companies identify patterns in usage and elements that lead to churn. The systems can also trigger alerts that notify users when they should tend to an account.
Gainsight's Customer 360 option, for instance, centralizes customer information from different sources—including a CRM system, service desks, usage tracking software, survey tools, and financial systems—to give customer success managers a more immediate view of their customers that enables them to act quickly.
The client relations directors at Bright Horizons Family Solutions, a company that provides child care services in workplaces, has used the tool to keep better track of client information. "They [needed] a tool that would help them manage accounts and make sure that they're successful—that people are attending the day care, having a good experience, and will renew that contract—so that they can sell additional services," Rumelhart says.
Using Gainsight's solution, the company reduced the amount of time and work required to make sense of the data that lived in different systems (data that could tell them how each client fared). Armed with this information on client health and history, Bright Horizons’ client relations directors could better understand which clients needed immediate attention.
The CSM market is still maturing, analysts say. There are around 20 serious vendors in the nascent industry, and most of these have emerged in roughly the past five years. Natalie Petouhoff, vice president and principal analyst at Constellation Research, identifies the top vendors in this market as ServiceSource, Totango, Gainsight, and Bluenose.
"There is a lot of venture capital funding going into this area," Leggett says. But because it is so closely tied to CRM, Leggett anticipates that the two will eventually merge into one.
Before investing in technologies, Leggett notes that companies should have discussions about customer success strategies, and let those discussions guide their efforts. "The first discussion point is what are your metrics and indicators of success," Leggett says. Then a company can begin to figure out what data it will need. Once the metrics and data are defined, a company can begin the process of tracking them, either with a homegrown CSM system or a commercial one.
CSM solutions are clearly beneficial to organizations that have implemented a subscription services model. And if CSM is not on your radar now, it will be: As the Internet of Things takes hold and the number of digitally connected devices increases, organizations will have ever greater opportunities to study customer usage patterns, making a CSM solution not only appealing but necessary.
Media Inquiries: Contact Anne Ting, SVP Marketing