Customer Success Management: The 8 Elements of this Valuable Business Function

the-8-elements-of-customer-success-managementCustomer Success is when your customers achieve their Desired Outcome through their Interactions with your Company.

To actually ensure your customers achieve their Desired Outcome – or what they need to achieve, the way they need to achieve it – and not just hope it happens, you need to actively work your customers toward that goal.

That’s where Customer Success Management comes in.

I define Customer Success Management as the process of moving customers toward their ever-evolving Desired Outcome.

And Customer Success Management is made up of the following things:

1. Segmentation

Logical Customer Segmentation is at the core of a sound – and scalable – Customer Success Management strategy.

Segmenting customers based on how much they pay us (ARR, LTV, ACV, etc.) is one of those traps that a lot of Customer Success organizations fall into.

It seems logical (from your perspective, at least), plus it’s what the industry has been doing for a long time (it’s a holdover from traditional Account Management).

Just because that’s how it’s been done, doesn’t mean it’s right!

Each customer segment has it’s own Appropriate Experience (AX) – even if they share the same Required Outcome – so if we understand what their AX is, we’ll know the type and level of coverage (humans – required skills, characteristics, etc. – plus technology) to get them there.

Segmenting your customers based on AX is the only way to both give the customer exactly what they need and the coverage levels to do that.

2. Orchestration

One of the simplest – and yet amazingly effective – things you can do to ensure your customers aren’t just on the path toward success but to know what to expect along the way is what I call Orchestration.

Orchestration is made up of three main elements:

  1. Properly Manage Expectations
  2. Lay out Joint Accountabilities
  3. Tee-up future Expansion and Advocacy

Managing Expectations with your customers during onboarding by telling them what to expect in the first 30, 60, 90-days as a customer and what the major Success Milestones are along the way are some very simple ways to reduce any anxiety they might have and to build trust in you.

Giving the customer a list of things they need to do – both in the product and outside of it, on their own – and what you need to do – and showing that if both parties hold up their end (that’s why I call it Joint Accountabilities) they’ll reach their goal.

But if they fail to do what they need to – and said they’d – do, then they won’t reach their goal. Of course, you have to do what you say you’ll do, too… and if both parties complete their Joint Accountabilities, the customer should reach their goal.

Finally, letting the customer know that you rely on word of mouth (maybe you say to keep costs down so you stay cheap; don’t say this if you’re the high-priced option!), and that once they hit a certain Success Milestone, you’ll ask them to give you a testimonial or do a case study. But not right now, obviously, they haven’t gotten any value.

Or that when they hit a different Success Milestone, you’ll “let them know about this add-on that other companies like theirs always buy… but you don’t need that right now.”

Then you can start orchestrating Customer Success – manage expectations, define joint accountabilities, and tee-up expansion and advocacy – right now; a very low-cost thing.

3. Intervention

To operationalize Customer Success Management, you must proactively intervene in the appropriate way for that customer segment (a mix of technology and human touches; the “appropriate” part will dictate the ratios therein) to get them to do the things they need to do to move from one Success Milestone to the next.

If they do those things, great; they’re on their way to being successful.

If they don’t do those things, however, you need to change up and/or escalate intervention modalities to get them to take action.

Intervention can be done a timed basis (after x number of days, send an email or every three months do a Quarterly Business Review), based on data (the customer is not doing what they need to do to move to the next Success Milestone), or Triggers (our internal champion just changed jobs).

You’ll likely intervene based on a mix of all three of those factors, and the modalities for intervention (email, call, in-person meeting, etc.) will be determined by the Appropriate Experience of the customer (see Segmentation above).

4. Measurement

There are two types of measurement that must happen in a Customer Success Management organization:

  1. How are the customers doing?
  2. How are we doing?

If the second one (how are we doing?) is not based off the first one (how are they doing?), you’re doing it wrong.

When it comes to Customer Success, you actually want to pay attention to a financial metric (usually Net Revenue Retention or NRR) and a Customer Success-specific metric like Success Vector.

It doesn’t matter if we’re hitting our retention or expansion goals if we’re doing it in a way that’s not aligned with our customer’s success, that new (or renewed) revenue won’t stick around.

If you meet your NRR goals for the time period, but your Success Vector is getting worse, that could mean you did things to meet the financial KPIs in a way that had a negative impact on the customer.

5. Expansion (and Renewal)

It’s typically said that Renewal and Expansion (upsell, cross-sell, etc.) happen because a customer is successful.

But looking at it that way is what allows for the error of applying “new business” sales or traditional account management tactics to renewals and expansion when that’s the exact wrong approach.

Rather, Renewal and Expansion are simply part of a customer’s success; in order for the customer to achieve their ever-evolving Desired Outcome, they’ll likely need to stay past a renewal and they’ll also likely need to consume more of our core product, adjacent products, etc.

This is part of Customer Success Management because even if your organization decides to have dedicated Account Managers to handle Upsells, Cross-sells, and Renewals, those should roll-up under Customer Success Management.

Traditional Account Management failed because it treated customers like Accounts… numbers. It was focused on Renewal and Expansion from the company’s perspective only. Account Management didn’t care if the customer was “successful” only that they would take the latest offer we’re trying to shove down their throat.

Traditional Account Management doesn’t work anymore, but Customer Success-driven Growth absolutely does; which is why this function should sit within, roll-up to, or otherwise be governed and monitored by Customer Success Management.

6. Communication

It’s obvious that a major part of Customer Success Management is to communicate with the customer (including users, champions, sponsors, and other personas).

Perhaps it’s proactively guiding the users to take the next logical step, giving the champion a status update, or scheduling the next Quarterly Business Review (QBR) with the executives or other appropriate personas.

Or maybe it’s intervening reactively when the customer hasn’t taken the action necessary to reach their next Success Milestone.

Those are rather obvious times when customer communication is critical; but one type of communication with the customer that’s not so obvious is Customer Marketing, of which there are two types:

Marketing to your existing customers to drive adoption and increase the breadth and depth (land and expand) of use, including upsells, add-ons, etc.

Using your customers in your marketing (case studies, testimonials, etc.)… combine 1 & 2 for a Customer Marketing power play

Customer Marketing is either the responsibility of – or heavily influenced by – Customer Success Management. The former is ideal.

There is a fourth type of communication that Customer Success Management is responsible for and that is internal communication.

It is critical that the Customer Success Management organization communicate what they’re learning from customers, how they’re impacting customers, and the value they’re bringing to the company by getting customers to stay longer, buy more, bring us into other parts of their company, and advocate for us externally.

Not only does that internal communication enrich the rest of the enterprise with customer intelligence, it also lets the rest of the company know just how valuable Customer Success Management really is.

Level-up your Communication with these two resources:

  1. Introducing the Customer Engagement Communication Model
  2. Introducing the BEAST Message Framework for Customer Engagement

7. Instrumentation

Elements 1 – 6 really don’t require much technology or engineering work. Certainly, everything I’ve mentioned can be greatly enhanced by leveraging technology, but it really doesn’t require it.

But these final two are where we start bringing technology into the mix.

Far too many companies jump to buying a purpose-built Customer Success Management software product assuming it’ll fix any problems they have, give them the structure they need, etc. But just like any other part of your business, if you select a piece of software without knowing what it is you’re trying to operationalize, you’ll end up building your strategy around the capabilities of that software.

Figure out what you need first, then find the solution that you think fits that model. Sure, you many not be 100% right out of the gate, but you’ll be a lot closer to where you need to be if you work in that direction.

Instrumentation is the process of collecting data on the customer’s interactions with your company, across their lifecycle.

From gathering usage data from your product to interaction records with the client, to Integration with other systems, Instrumentation is critical step in leveraging technology to guide your customers along the path toward success.

Context is everything when it comes to Customer Success Management, so the more visibility you have into whether your customer is moving toward their Desired Outcome, the higher value your intervention will be.

What you collect all of this data in – Excel, a BI tool, a purpose-built Customer Success Management product, is something you’ll need to figure out.

And the next, and last, Element on this list will help you figure out what that should be.

8. Operationalization

Wrapping all of this – Segmentation, Orchestration, Intervention, Measurement, Expansion, Communication, and Instrumentation – with processes – called Operationalization – is what takes Customer Success Management in your company from a lovely thought experiment, and turns it into the Growth Machine that it can be.

Operationalization is the simply the process of taking the data from Instrumentation and acting on it. Whether the system acts on it without human interaction or the system notifies a human within your organization to take a certain action should depend on the Appropriate Experience of the customer.

That’s why it’s so critical to have a clear idea of what the Appropriate Experience is for your various customer segments. If you try to operationalize across a normalized view of all customers, you’ll likely create a mix of technology and humans that is inappropriate for most of your customers.

Best case, you’ll over-deliver to customers that don’t need such high-touch and lower your profit margins. Worst case, you’ll provide an experience that is so incongruent with that the customers actually need, you’ll drive them away. The latter is really bad, but don’t assume the former is okay; one of the biggest barriers to scaling that I’ve run into is when companies over-deliver for their customers; don’t over-deliver, just deliver an experience that is appropriate.

Customer Success Management is not a technology-centric initiative; it requires you to understand what Customer Success is, how Customer Success Management is the orchestration of Customer Success, and what all of that means in the context of your customers.

From there, you can – and probably should – leverage technology to enable you to perform Customer Success Management activities in a predictable, operationalized manner, which is absolutely required at scale. After that, the technology decisions will be easier as those that fit into your well-defined Customer Success Management needs will be few.

About Lincoln Murphy

I invented Customer Success. I focus primarily on Customer Engagement. Learn more about me here.