80% of all software companies will run a subscription based business model by 2020. What will determine whose products the users will love most? Takeoff Academy organized a workshop among 9 companies to look into the best practices of Customer Success Management.
The entire SaaS community talks about Customer Success Management
(CSM); so much so that it has become a discipline of its own, it’s being taught
at business schools and there are blogs, websites and consulting businesses
entirely dedicated to the best practices of running successful CSM operations. But
what is CSM in the first place?
The Customer Success Association explains:
“Customer Success Management is an
integration of functions and activities of Marketing, Sales, Professional
Services, Training and Support into a
new profession to meet the needs of recurring revenue model companies.”
The Emperor’s new clothes or a new management discipline?
Takeoff Academy recently gathered together with a handful of
Finnish SaaS companies, with the task of getting to the bottom of Customer
Success. What is critical to understand about CSM, and how should the operation
be established and managed?
Also, considering the traditional Marketing, Sales, Account
Management, and Customer Support functions, what is it that makes CSM such a
novel concept that it deserves its own vocabulary and best practices? Is
Customer Success Management just the Emperor’s new clothes, or is there
something substantially different to it from the traditional customer
In the Takeoff Academy workshop discussions, nine companies participated:
Humap Software, Futures Platform, Pilvi, LATO Tools, Videoly, and Cuckoo
Workout. In addition, we heard insightful presentations from Meltwater, ZEF,
and finally ClientSuccess (yes indeed), joining in online from the US.
Customer Success is the new Sales
The fundamental driver for a new discipline in customer
management is the recurring revenue model of SaaS businesses. With a globally
scalable online business model, SaaS companies focus first on nailing their
product, then scaling their business as rapidly as possible, month by month.
It’s an execution game; for every viable SaaS product,
there’s normally plenty of competition from different corners of the world, so
the fastest runners will be rewarded, while most contestants will never make it
to the podium.
‘Running fast’ in this context means selling fast, and
keeping the already won customers around the world happily locked in. How? You
guessed it – Customer Success Management. Customers that genuinely benefit from
your product will be the best guarantee of both recurring and new sales.
CSM should be on the customer’s side
The key to understanding how CSM differs from the
traditional marketing, sales, account management and customer support lies in
taking the customer’s point of view. For the customer, adopting a new product
or service usually means obtaining a budget, learning to use the product,
engaging colleagues to also use it, and making sure the new product makes the
organization’s life easier than the previous products in use.
That’s a complex set of activities, and there are a million
things that could go wrong and lead to the product being dropped after a short
trial period. From the vendor’s point of view, making sure the customer will be
successful in using their product will require sales efforts, consulting,
training, and after-marketing almost in parallel.
So the Customer Success Manager should be the customer’s
best friend and advisor, making sure the customer won’t miss any of the
benefits at any point in time that they could get from using the vendor’s
product. What makes things more complicated is that the CS Manager is, after
all, paid by the vendor. So while focusing on the customer’s point of view,
they should not lose sight of the vendor’s own interests which is, of course,
A lone CS Manager wears many hats: S/he’s a consultant,
salesperson, marketing champion and support person in one. The perceived
complexity of CSM is largely about the complexity of constantly switching those
hats on the fly, as the customer’s needs evolve. As the CSM function grows,
people in it typically adopt somewhat specialized roles.
How do you map out a Customer Journey for so very different customers?
Raekallio, Humap Software Oy
So the customer’s needs will evolve over time, and indeed
the customers may also be very different from each other. One of the key best
practices in running a systematic CSM operation is mapping out the customer’s
journey (or the alternative journey paths).
Customer journey mapping deserves a whole lot of time and
effort since the customer’s typical path(s) with the vendor will inevitably
become the framework for the daily CS activities. Like Dave Blake from Client
Success, Inc. put it: “Entire books could be, and have been, written about
customer journey mapping alone”.
It pays to spend time with what happens at each stage of the
customer relationship. That way, the vendor can anticipate where CS efforts
will be needed to make sure the amount of churn is minimized and the sales
opportunities maximized. The product itself will give a lot of data, too to the
process; how the customer is using the product may direct sales efforts and
Leveraging data: ‘Customer Health Score’ captures the state of the
Westerlund, Meltwater Oy
We mentioned data. One of the key components of the modern
CSM is indeed the data that accumulates because of the scale of the SaaS
businesses. When the business expands, usage and transactions data accumulates,
and analytics will quickly reveal patterns in the customers’ behavior. With
patterns, it becomes possible to predict the customer’s future behavior based
on their journey so far.
Juha Westerlund described in the workshop how a customer ‘Health
Score’ can help in evaluating the state of the business relationship. The
relationship may receive a value between 0 and 100 based on data from the
product’s usage, potential satisfaction survey results, open comments by the
customer, and so forth. Naturally a Health Score can never be an exact estimate
of how the lifecycle of the customer relationship will evolve, yet it usually
correlates with how committed the customer is to maintaining the business
Scoring and predicting the customer’s lifecycle is also
interesting from the investors’ point of view. In SaaS businesses, one of the
most critical metrics to watch is net churn: The level of net churn will have a
huge impact over time on the scalability of the business and, consequently, on
the current valuation of the company. Low levels of net churn combined with a
steady growth of new business will eventually result in the much desired hockey
stick shaped growth curve, while high churn rates will mean the business may
never really scale up.
Data is a reason to contact and inform the customer
One more point about data: In the spirit of modern content
marketing, the customers will expect SaaS vendors to come up with valuable
insights and best practices every now and then; to serve as consultants and
thought leaders essentially. Data comes in handy for this purpose: With
analyzed data, it’s possible to communicate how the customer’s organization is
benefiting from the vendor’s product, benchmark its usage against other user
organizations, and point out best practices and new ideas. This will be very
helpful for the customer – and it will also provide the vendor’s CSM people an
excuse to contact the customer, strengthen the relationship, and potentially
Building a CS organization: Make sure the costs won’t exceed the
customer lifetime value (LTV)
Lahtinen, ZEF Oy
Many companies first struggle with resources when setting up
a CS function: Its importance is recognized, yet it may not be possible to
fully dedicate even one person to develop the function with high quality. Hence
the first CS efforts in many companies tend to be reactive rather than
proactive just because time and human resources become a bottleneck.
Balancing resources remains a topic throughout the
customer’s lifetime. The company may direct lots of support, sales and
marketing efforts towards the customer, yet if the efforts won’t result in an
increased lifetime value of the customer, part of the CS effort is wasted. So
whatever the CS resources put their efforts on should be measured and evaluated
Rules of Thumb:
Each CSM should manage ~$2 million in Annual Recurring Revenue (ARR)
CSM managing > 50 clients needs automation
Client Success, Inc.
How much should be invested in the CS organization as the
company grows? As a rule of thumb, one CS person can handle 50 accounts, after
which automated processes and tools will be required. The participants in the
workshop agreed that in particular, a good CRM system from the very beginning
pays off as the company’s business scales up.
Tools and systems for CSM are a topic as such and let’s just
say that most companies use a complex combination of different systems in
parallel. The complexity of coexisting software tools has paved way for tools
that are entirely dedicated to CSM; such as Dave Blake’s Client Success Inc.
Marketing automation plays a big role in CSM; expectations are created
What is the CS organization’s most important role then? As ZEF’s
Maria Lahtinen put it, at the end of the day it’s sales. According to the old
truth, it’s way easier to sell more to an existing customer than to win
entirely new customers. So the CS organization should aim at upselling and
cross-selling to existing customers, while preventing churn. Because of the
strong sales nature of the CS roles, the persons involved should be
incentivized by salary models and bonuses similar to those in the traditional
The CS organization should also make sure the product and
the customer’s experience with it lives up to the promises made in the
marketing phase; not a small task especially if the customers have expectations
that end up being in contrast with the reality.
Customer Success Management is a team sport: Invest in Culture
Is Customer Success Management an art or science? Since data
and metrics play a big role in establishing and developing a high quality CSM
organization, one would think a scientific approach is a safe bet. Yet every
presenter in our workshop stressed the huge impact of company culture on the customer’s eventual
Judging by the experiences of the participants, data, KPI’s and
significant financial incentives will be very necessary and helpful in running
CSM. Yet as the customer’s eventual success will be a result of so many people
with different roles sharing the same goal – the customer’s success - the
culture of cooperation will be perhaps even more important than KPI’s. As
Meltwater’s Juha Westerlund put it, people are generally not very fond of being
managed with KPI’s; they’d rather serve the customers as best they can, as
suggested by the strong customer success culture.
One can even argue that a very strong and customer-oriented
company culture may make some of the more formal CSM work unnecessary over