tsia's key capabilities of customer success

10.20.2014

The Key Capabilities of Customer Success

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Judith Platz VP of Research Customer Success and Support

Content

•  Support Services Expansion •  Survey Overview •  Respondent Demographics •  Three Profiles of Customer Success •  Customer Success Organizational Models •  Recommended Practices

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Support Services Expansion

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Support Services Scope Expansion

•  Traditional support model assisted customers with break/fix and availability

•  Demand for vendors to take active role in product/service success

•  SaaS companies experiencing large amount of churn •  Success is now viewed as a competitive differentiator •  New revenue streams are being created •  Support Services has infrastructure that can be

leveraged

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The Support Services Pendulum

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Customer Experience

Cost Reduction

Revenue Gen

Fundamental Shift •  Professional Services stands up the customer.

•  Education Services provides technical training.

•  Customer Support makes sure the system is available.

Customer Success is about adoption, retention, expansion and

overall Customer Success with our products/services.

Audience Question

•  Does your company have a Customer Success Organization?

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Survey Overview

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Survey Overview •  In August of 2014, TSIA opened up a forty question survey to the TSIA community. •  The objective of the survey was to establish a baseline regarding fundamental

practices and performance metrics related to the Customer Success function. •  The survey collected data on key performance metrics such as:

–  Customer Success revenues (if revenue generating Customer Success offers were in place) –  Annual budget for the function –  How budget dollars are allocated between cost to deliver services, offer development, G&A,

etc. –  Average cost of a Customer Success Manager (CSM) –  Compensation structure for CSM (base, variable, incentive) –  How many customer one CSM manages –  How do CSM’s spend their time –  Revenue renewal and customer churn rates

•  The survey also tested critical practices related to delivering Customer Success offers such as:

–  Where does the Customer Success function report? –  When is Customer Success first introduced in the customer life cycle? –  Can Customer Success monitor customer activity remotely? –  Has Customer Success developed and documented an adoption framework it can use with

customers? –  Is Customer Success responsible for renewing customer accounts? –  Does Customer Success have a specific target for expanding customer account revenues?

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Summary Findings •  169 companies participated in the survey, but only 30 were able to answer all 40

questions—this speaks to how relatively new this capability is to most companies (27 months is the median tenure for Customer Success organizations responding to the survey).

•  Analyzing the data, it is clear that there are three distinct profiles for Customer Success organizations (CSO):

–  Adopters: CSO is mainly focused on helping customers adopt company offerings –  Retainers: CSO is mainly focused on making sure the customer renews their relationship with the company.

However, this does not necessarily mean the CSO is directly responsible for renewing the customer contract –  Expanders: CSO is mainly focused on expanding account revenues

•  The profile of the CSO (Adopter, Retainer, Expander) influences key practices such as:

–  Compensation models, hiring profiles, CSM to account ratio, etc.

•  It is clear from the data that many CSO’s are in the early phases of establishing and successfully tracking critical financial and performance metrics such as margin, Offer development costs, Customer Churn rate, etc. (The median number of employees in the CSO was 18, with a range from 600 to 1).

•  Only 8% of the 169 responding companies reported revenues from Customer Success activities. However, 50% of the CSO’s that were able to complete the entire benchmark reported revenues from Customer Success activities indicating the premium, fee based offers are a marker for a maturing Customer Success capability.

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Respondent Demographics

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Sign of Youth

82%

45%

18%

6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Could not answer all 40 questions

Could answer at least 40% of the questions

Could complete the entire benchmark

Could complete the benchmark AND know the actual gross margin of their

Customer Success revenues

TSIA Customer Success Baseline Benchmark N= 169

12 Source: TSIA 2014 Customer Success Baseline Benchmark

Company Types (76 Companies)

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Software 49%

SaaS 29%

Hardware 13%

Services 9%

Company Types

Software SaaS Hardware Services

Tenure of Customer Success Capability

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15

48

6

0

10

20

30

40

50

60

ALL Respondents

Adopters Retainers Expanders

Median Number of Months Customer Success capability has been in place


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Three Profiles of Customer Success

Three Profiles of Customer Success

0%

10%

20%

30%

40%

50%

60%

70%

80%


What % of CSM time is allocated to the following activities?

Adoption Retention Expansion Other


Participant Profiles

40% 37%

10% 13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Adopters Retainers Expanders None of These Profiles

% of respondents in each profile


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Driving Adoption

Percentage of Customer Success organizations that can monitor consumption remotely: 57%

Percentage of Customer Success organizations that have a dedicated analytics team: 60%

Percentage of Customer Success organizations that have data models to predict renewal: 50%

Percentage of Customer Success organizations that have formal adoption framework: 43%

Source: TSIA 2014 Customer Success Baseline Benchmark

Do you have a resources dedicated to Customer Analytics?

60%

66%

25%

0%

10%

20%

30%

40%

50%

60%

70%

Retainers Adopters Expanders

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Can the Customer Success Rep remotely monitor actual customer usage and activity?

54%

66%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%


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Is this data being mined for usage feeds to reduce cost of service to customers? Is this data being mined to create service offerings that will help customers improve their ability to

leverage your product?

Do you have a defined Adoption Framework?

50% 54%

25%

0%

10%

20%

30%

40%

50%

60%


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An Adoption Framework assesses how well a customer is adopting and leveraging your technology

Who Owns Customer Renewal?

23% 33%

0%

14%

32%

0%

40% 35%

100%

14%

1% 0% 0%

20%

40%

60%

80%

100%

120%

Adopters Retainers Expanders Customer Success Renewal Specialist Product Sales Rep Channel Partner


Sales Account reps are TWICE as likely to be responsible for renewal as opposed to a Customer Success rep.

Churn Rates

21%

18%

8%

0%

5%

10%

15%

20%

25%


What is your annual customer churn rate?


Thought: Not fighting high churn—focus on expanding revenues from table customer base

Thought: Fighting high churn so Customer Success created to keep customer engaged.

Do you use predictive models to predict customer churn and customer retention?

60% 54%

25%

0%

10%

20%

30%

40%

50%

60%

70%


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Customers will not abandon technology they are using on a daily basis. The ability to drive account renewals in a systemic, predictive manner will be the hallmark of best-in-class Customer

Success. Do you understand the key metrics that will predict a renewal?

Audience Question

•  Do you currently charge customers for Customer Success services?

Generate Revenue from Customer Success

50% 50%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%


What % of these Customer Success organizations have revenue generating Customer Success offers?


Does Customer Success have a specific target for expanding revenues within existing accounts?

30%

38%

50%

0%

10%

20%

30%

40%

50%

60%

Retainers Adopters Expanders Have Specific Expand Target

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Average Revenue per Customer Success Rep

$4,360,000 $4,400,000

$5,400,000

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000



Audience Question

Do you currently offer Customer Success services to ALL of your customers?

A.  YES

B.  NO

Do you offer Customer Success services to all customers?

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Organizational Models

Where does Customer Success live?

Sales

Technical Support

Professional Services

Education Services

Managed Services

Customer Success

Where does Customer Success report?

Less than 10% of the time

Customer Success reports to the Support Services executive

Source: TSIA 2014 Customer Success Baseline Benchmark

Where Does Customer Success Report?

75%

23%

2% 0%

10%

20%

30%

40%

50%

60%

70%

80%

CEO/President Global Services or Support

Sales


Audience Question

•  Where does Customer Success report in your organization?

–  CEO/President –  Global Services/Support –  Sales –  Other

Where CSMs Come From

40%

32%

3%

41%

31% 27%

9%

17%

30%

1% 1% 0% 0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


What % of CSMs are hired from the following resource pools?

Customer Support Professional Services Sales and Marketing Product Group


Average Cost per Customer Success Rep

$136,264

$99,000

$154,000

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000



CSM Compensation Models

84% 84% 78%

12% 12% 10% 4% 4%

12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


What % of CSM compensation is based on:

Base Variable Incentive


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Recommended Practices When Establishing Customer Success

Summary Recommendations •  Based on this first pass benchmark, TSIA would have the following

seven recommendations for optimizing an emerging Customer Success function:

1.  Clearly establish the initial charter of Customer Success –  Most likely adoption, then retention, then expansion –  Ultimately Customer Success should be cost effective capability for all three

2.  Align hiring profiles and compensation models to your core charter 3.  If establishing a separate Customer Success organization, have it report

directly into a neutral C-Level executive (Not Services or Sales executive) 4.  Invest in dedicated Analytic capabilities 5.  Develop predictive models for retention 6.  Develop a formal adoption framework for assessing customer adoption

rates 7.  Develop fee based offers to complement services that are provided for

free. –  We learned this lesson with Education, Professional, and Support Services

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10.20.2014

Thank you

Judith Platz VP of Research Customer Success and Support [email protected]

tsia's key capabilities of customer success

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