Though the pandemic isn’t exactly in the rearview mirror yet, we are beginning to understand the effect it’s had on B2B firms across the country — and around the world.
One of the biggest paradigm shifts is an increased appreciation for the customer base. We can’t take our customers for granted — ever. Investing in customer success (CS) isn’t a nice-to-have anymore — or even merely a high priority — it’s existential.
In fact, customer success is the critical growth engine driving net revenue retention (NRR) for subscription-based businesses.
Quick Level Set: What Customer Success Is, and Isn’t
Probably the simplest way to define the difference between customer success and what many companies call customer service is that customer success is about taking care of your customers by providing proactive guidance to help them achieve their desired business outcomes. It’s a continuous partnership anchored in an outside-in lens focused on delivering value and an exceptional experience for your customers.
Customer service (or account management) is about being reactive and solving problems for your customers to keep them in “status-quo mode.” As Gainsight CEO Nick Mehta says, “The difference between account management and customer success is like the difference between a backyard telescope and the Hubble.”
Why NRR Matters
Investing in and operationalizing your customer success team is the number one way to increase your net revenue retention. In fact, even if you keep your sales, marketing, and product efforts static, you’d see improvements to your NRR if you invest in customer success. It’s not just your current bottom line that’s affected: NRR is also the top metric that investors look at when making decisions about where to put their money.
Here are five important recommendations that Chief Customer Officers should focus on to drive net revenue retention:
1. Demonstrate the ROI of customer success to increase corporate spend in CS and CS Ops teams.
Companies that invested 10 percent of revenue in customer service saw the highest NRR. So, if your executive leadership team isn’t up to speed with this data, it’s time to call an all-hands.
Get the organization to understand that CS can be a force multiplier for your business with a compelling framework and data to support it. Show them the stats that investing in CS doesn’t just increase revenue (it’s a growth engine); it also increases the overall valuation of the business.
CS operations needs to be a cornerstone of this conversation. Synonymous to sales and rev ops, if you want to drive operational excellence and scalability within your CS org, there’s a heavy dependence on having the right CS Ops org structure in place to effectively do so. This is critical to nail all three dimensions of people, process, and technology.
2. If your customer success organization isn’t owning NRR yet, it’s time.
Long gone are the days of customer success solely being about “churn management” and customer retention. This is an extremely limiting view of the real impact that your team is having and the power of our customers.
Nearly two-thirds (63 percent) of companies say their customer success organization “owns” their NRR performance. What we’ve all come to learn and appreciate is that our customer base is truly the growth engine for our business. This is how we sustain our recurring revenue, how we efficiently expand and grow our customer base (by delivering on those outcomes) and where our customer advocates are born (fueling net new logo acquisition).
By orienting the organization around this philosophy, it naturally makes sense that NRR should be a metric owned by CS yet impacted by all. Being able to tie the high-value activities of your CS organization to leading and lagging outcomes across all three vectors is key.
3. Focus on having more direct revenue responsibility, in particular with the renewal motion.
Our research shows that 45 percent of companies give their customer success team ownership of renewals. This can show up both in CSMs owning the renewal transaction but also with renewals teams now increasingly reporting into CS.
While the organizational stage and maturity of your business can dictate the various customer-facing roles and responsibilities you need, what is a constant is at minimum having your CS teams involved in the renewal forecasting process. They are laser focused on your customers and often have the longer-lens view on renewal probability and risk.
You can also leverage rich customer health scoring to build predictive GRR forecasting models. CS teams are often at the tip of the spear when it comes to expansion identification. So be sure to give them credit where credit is due.
Partner with your marketing and sales teams to have a customer success qualified leads (CSQL) process and account planning process to pass these to your sales counterparts and execute against them.
4. Invest in digitally-led customer success to scale CS efforts and drive better business outcomes.
One of the hottest topics that comes up in my conversations with CS execs is “how do I scale our CS efforts.” Leveraging digitally-led motions can not only impact your bottom line by automating processes that don’t require human intervention, but they can also be an incredibly powerful vehicle to drive better outcomes for your customers.
In the era of “product-led growth,” users are expecting intuitive journeys and the ability to self-serve where possible. By better understanding our users through product analytics and leveraging technology to tailor their user experience we are delivering against the promise of an exceptional customer experience.
One of the most significant areas of opportunity our research identified was using digitally-led data tools to predict and forecast churn. Fifty percent of companies reported using basic product analytics, such as monthly and daily active user trends and their relationship to predict potential churn.
This reveals an opportunity to use more sophisticated digital tools, such as enhanced product analytics, in-app engagements, coupled with assessments on the business value received to improve retention, as well as drive adoption and expansion. It’s important that your customer success org evolves from a 100 percent human capital structure to one that uses data and analytics to deliver value to your customers and increase NRR.
5. Align the organization around a common value framework to drive end-to-end outcomes.
Though your customer success org should own the NRR metric, it doesn’t mean your team alone is responsible for it. It’s imperative to align the organization around a common language and value framework to prescriptively drive customers to value realization.
This process needs to begin in sales discovery and be seamlessly captured and carried through the onboarding and customer success management phases of the lifecycle. I’ve found that establishing this to be the connective tissue across functions that orients the broader organization around a value driven, customer centric driven strategy.
Another powerful way to break down silos is to create a “voice of the customer” program to ensure you’re aggregating and socializing customer feedback to the teams (like product, for example) that can make long-term positive changes.
The key here is to make sure you have the right processes in place to drive action against the feedback, such as NPS and customer effort scores. Our research shows that the companies that really lean into these types of programs and processes have some of the best NRR rates out there.
It’s clear that NRR is the key metric for companies that want to succeed in a hyper-competitive modern economy. There’s no better way to ensure you’re hitting your target NRR than making sound and strategic investments in your customer success organization.