What is Customer Success — A Smart & Actionable Guide

What is customer success
Customer Success

What is Customer Success and why do you need it? This mini guide talks about this and more. Also inside are actionable steps to get started with CS!

Gain a new customer, you increase revenue. Lose an existing one, your company’s sales potential drops. What happens when you lose more customers than you gain?

Doomsday — and the painful clarity of failure.

It may happen sooner or later, but failure is the only prospect a business faces when customer loyalty plunges.

It was in this context that the field of Customer Success (CS) emerged in the final years of the 20th century. The creeping fear of failure drove many business leaders in the tech sector to build a reliable safeguard against runaway customer attrition rate (churn).

The solution was powerful in its simplicity: Your success ultimately depends on the success of your customers.

To prevent business failure, keep your customers winning at the things they care about while using your product. Only then will they stay loyal and keep replenishing your cash flow.

Guide overview:

  1. What is Customer Success?
  2. Why do you need Customer Success?
  3. Customer Service/Support vs. Customer Success
  4. Sales and Customer Success
  5. Marketing and Customer Success
  6. Metrics and KPIs
  7. Getting Started with Customer Success

What is Customer Success?

Customer Success is the business solution for keeping customers loyal by meeting or exceeding their expectations about your product or service.

It may refer to a formal field, an organization, a methodology or a culture depending on context. But the mission of Customer Success remains the same. Focus on helping customers consistently achieve the outcomes they desire throughout their journey.

Related: The Essential Guide to Landing Your First Customer Success Job

Why do you need Customer Success?

The tide has turned. Sellers don’t call the shots anymore. Buyers do.

In the buyer-centric digital economy where access to product information is just a touch away, the likelihood of business success depends primarily on the buyer experience.

Here are some eye-opening facts:

  • Customer experience will topple the product itself and its price tag as the key brand differentiator by 2020, according to a Walker study.
  • Nearly 9 out of 10 buyers are willing to pay more for a product if they receive a better customer experience, based on a study by Oracle.
  • Gartner projects that the vast majority of businesses (89%) will compete mainly on customer experience.
  • An Accenture study found that the cost of customer attrition due to poor customer service in the U.S. alone was at $1.6 trillion.
  • Businesses that prioritize customer experience outperform competitors by as much as 60% in terms of profit generation, according to the Gartner Group.
  • Bain & Company found that companies providing excellent customer experiences grow their revenues 4-8% better than market average.

Beyond delivering demonstrable business benefits, Customer Success has become indispensable. It has become a core element in the processes that —

  • Drive revenue
  • Mitigate churn rate
  • Improve long-term competitiveness

Customer Success vs. Customer Service/Support

CS is a relatively new field and is preceded by customer service/customer support.

However, Customer Success and Customer Service/Support have distinct rationales even when they might overlap in some aspect or function.

Both units/fields focus on the customer. But they differ in several key areas:

What is customer success: table

While Customer Service/Support adopts a reactive strategy for customer engagement, Customer Success is highly proactive.

For example, Customer Service reps help address user issues through a user-initiated hotline, with the aim of:

  • Guiding customers in how to properly use a service/product
  • Troubleshooting known issues about specific products or services.

The aim is to fix specific problems reported by users in order to prevent frustration and improve satisfaction.

On the other hand, Customer Success looks at the bigger picture and adopts a long-term strategy for customer engagement. They assess issues from the vantage point of a customer — not from cost-vs-benefits lens of the organization.

Customer Success takes effect well before specific problems are reported and well after customer satisfaction has been affirmed.

That’s because for a Customer Success team, satisfaction is just the minimum. The ideal behind Customer Success is to make customers so successful in using your products that you transform them into fiercely loyal brand evangelists.

Customer Success and Sales

Where Sales often focuses on the (hopefully) one-time process of moving an entity through the sales pipeline, Customer Success focuses on a cyclical relationship with the customer.

CS impacts top-line revenues by helping:

  • Reduce churn rates
  • Drive renewals
  • Inspire new sales (upsell, cross-sell)
  • Establish income streams
  • Convert new brand advocates.

The key moment of truth for Customer Success is typically the renewal, which can be driven by Customer Success, Sales, or a Renewals role.

Upsells and cross-sells can also be driven by a variety of roles and at moments throughout the cycle. They are almost always initiated by Customer Success and predicated on delivering value to the customer prior to the “ask”.

Based on their experiences, many business leaders have come to think that a company’s revenue potential highly depends on how effective its Customer Success strategy is.

Writing for Forbes, entrepreneur Alex McClafferty even claimed that CS is the best kept secret of hyper-growth startups.

Meanwhile, Sixteen Ventures’ Lincoln Murphy pointed out the importance of orchestrating the alignment between Customer Success and Sales:

At the end of the day, Customer Success goes beyond ensuring customers remain happy using your products and services. It also involves translating your customers’ successes into a platform for orchestrating repeat business, recurring income, referrals, upsells, cross-sells, and brand advocacy.  

Customer Success and Marketing

Like many other organizational units, B2B Marketing has evolved as the business landscape shifted towards a buyer-centric model. In the B2B space, this has led to the widespread adoption of buyer-focused customer engagement.

Functionally, Marketing shares ownership of the following areas with Customer Success:

  • Ideal Customer Profile
  • Buyer Journey
  • Customer Experiences
  • Product Advocacy

Because the operational roadmap of the two units intersect in these key areas, a unified strategy and a strong alignment between Customer Success and Marketing is crucial.

More than information exchange and collaboration, this can be accomplished through:

  • Mutual transparency,
  • Synced assets
  • Joint campaigns
  • Cross-team members
  • Complimentary performance metrics
  • Shared goals/experiences.

Customer Success Metrics and KPIs

Customer Success can and should be measured. This is the only way to drive operational improvements.

While the ideal set of metrics varies across sectors, operational models, and specific companies, here are some Customer Success metrics and KPIs that can be adopted:

1) Churn Rate

This is the percentage of your customers who quit or stopped subscribing to a product or service during a given period.

Formula: Monthly Churn Rate = Number of Customers Lost in Current Month / Number of Customers in Previous Month

2) Churn Rate Reduction/Expansion

This metric checks whether improvement efforts  on customer retention over a given period were successful or not.

Formula: Churn Rate Reduction = Churn Rate for Current Period – Churn Rate for Previous Period

3) Monthly Recurring Revenue (MRR) Churn

This is the percentage of revenue lost to total revenue due to customer churn (including losses due to service downgrades)

Formula: MRR Churn = Lost Revenue due to Customer Churn and Downgrades in Current Month / Total Revenue in Previous Month

4) Revenue Expansion

This metric is the opposite of churn and shows how much existing customers are upgrading their subscriptions or signing up for additional services.

Formula: MRR Expansion = New Revenue from Upsells/Cross-sells in Current Month / Total Revenue in Previous Month

5) Portfolio Growth

This metric show whether existing customers subscribed to additional or upgraded services, and whether there’s a net positive business growth.

Formula: Portfolio Growth = MRR Expansion – MRR Churn

6) Customer Satisfaction Score (CSAT)

This is among the most popular methods of measuring customer satisfaction. The method uses the survey format and an arbitrary scale (usually from 1 to 5, or from 1 to 10) by which respondents (customers) can grade or rate a service/product.

The survey usually includes questions such as “How satisfied were you with the features?” and “How well was the experience to your liking?”

7) Customer Onboarding Cost

Often booked as part of Customer Acquisition Costs, this metric computes the total costs in terms of time and money required to onboard, train, and support customers using your product.

8) Net Promoter Score (NPS)

This metric is similar to CSAT in that it uses the survey platform and an arbitrary scale to gauge the likelihood of customers sharing the good news about your product.

9) Referrals

This is the natural outcome of an excellent Net Promoter Score. These are generally new customers brought in that are booked as referrals from existing customers.

10) Customer Health Score

This is the metric that tells whether a customer enjoys using your product or whether she is ready to bail out. Different companies adopt different methods and sets of criteria for computing their Customer Health Score.

Some of the more commonly used customer health indicators across companies and sectors include: product usage rate, account growth, length of time as customer, number of completed renewals, number of upsells, number of cross sells, community involvement, CSAT, NPS, and volume/depth of customer interaction.

Customer Maturity — the ability of the customer to realize the value of the solution based on their own internal speed/knowledge/technology etc., is outside of the control of Customer Success but another important consideration when investing time and energy based on the Customer Health Score.     

Getting Started with Customer Success

Any organization looking to drive revenue growth over the long term cannot ignore Customer Success.

If you have yet to institutionalize Customer Success in your organization, here are some points to consider:

1) Define what CS means to you

Clearly define what “success” means to your customers as they move through each stage of the customer journey.

2) Make it people-centric

Put people at the core of your Customer Success apparatus — from product development, strategy formulation, team building, customer experience map, and performance measurement.

3) Customize it for your business model

Formulate a Customer Success strategy that fits your business model, customers, and goals. While Customer Success might be subjective in some areas, actual results are not. That means your CS strategy must aim to deliver measurable benchmarks of success.

Your Customer Success Strategy should integrate these:

  • A roadmap showing the current state of customer experience leading to a desired state.
  • The processes, channels, and resources needed to effect the desired change.
  • An operational plan for establishing a customer success culture across the organization.
  • A performance assessment schedule to fine-tune progress.

4) Define your Customer Success Process

  • Determine your company’s ideal customer persona
  • Identify the stages and milestones of the customer journey
  • Automate workflows
  • Formulate reward programs
  • Schedule customer surveys
  • Establish a customer communication plan

5) Build a focused team

Build a dedicated and competent team to spearhead Customer Success. Each person on the Customer Success Team should have the necessary skills and training that will enable them to proactively facilitate the experiences customers desire.

A Customer Success Team primarily performs the following functions:

  • Provide value that makes customers happy and compels them to stay.
  • Train customers how best to use your products so they can achieve success faster, easier, and in a much bigger way.
  • Create positive mood for renewals, upsells, cross sells, and referrals.
  • Work with clients to iterate existing solutions or create new ones.

6) Don’t compromise on tools

Future-proof your Customer Success organization with forward-looking tools, tactics, and technology.

The Customer Success Stack involves your company’s CRM platform as well as the software systems used by finance, marketing, and sales.

The technology tools you need depend on your market, strategy, process, and budget. Some of the top-rated Customer Success Tools in the market include Gainsight, ChurnZero, ClientSuccess, FullStory, and STAMP.

Change the Rules with Customer Success

Inward-looking businesses run the risk of encountering doomsday sooner than later.

New economic realities compel businesses to focus instead on the journeys of their customers and how their customers envision success.

By accurately mapping your customers’ route to success, you are also blazing the trail that leads to yours. Execute your Customer Success plan perfectly to make it easier for customers to keep using your services.

Customer Success is not an option. It has become a baseline for the world’s most successful companies to drive higher revenues, stronger brand loyalty, and sustained business growth.


Also published on Medium.

Chris Schwass

Chris is the Director of Customer Success for OpenGov, a tech startup powering more effective and accountable government. Chris has led Customer Success, Account Management, and sales strategy at startups and tech companies including LinkedIn.