A customer success framework is an absolute necessity for enterprise SaaS. This guide will help you build a customer-centric framework for your business.
Although the SaaS market has been growing rapidly in the last decade, according to a recent industry report – "Enterprise SaaS still accounts for barely more than 20% of total enterprise software spending and therefore remains small compared to on-premise software, meaning that SaaS growth will remain buoyant for many years to come."
It would be reasonable to forecast that it’s only a question of when (not if) the majority of on-premise software companies will go through the transformation to become SaaS providers.
As we have already seen in the last few years –some very large on-premise providers have lost significant market share to SaaS providers, so most likely there will be new winners and losers emerging in the next few years.
As part of this transformation, companies will need to embrace one major evolution step – to establish and scale CS (Customer Success) function, which will be critical in order to have a ‘sustainable growth’.
Because, unlike in the on-premise model where the Sales function brings the majority of revenues, in the SaaS model, as the company’s client base grows, the CS function will get an increasing share of the company’s revenue (through renewals and expansions) and new logo bookings (from Sales) will continue to be a smaller percentage of total revenue.
There are also some powerful economics of SaaS businesses on the cost side that drive the ‘profitable growth’ and successful SaaS companies are already taking advantage of these, for example:
For those who like to see stats in terms of ARR and CAC – this report from David Skok (one of the leading VCs in this space) shares their survey results.
Interestingly, last month, a leading SaaS CRM provider announced the appointment of the company’s first ever CCO (Chief Customer Officer) after almost 15 years since the company was founded.
This indicates the emerging significance of customer success at the C-level and focuses on driving excellence in post-sales operations — as this will actually determine a SaaS company’s profitable growth in the future.
It seems that the leaders of many B2B software organizations are at different stages of figuring this out, i.e., how to transform the company from a legacy on-premise provider to a leading SaaS player globally and, if they are already a SaaS player, then how to establish the customer success function or how to scale an existing customer success function.
If you (as a Founder/CEO/CCO/Head of Customer Success) can associate with one of the above situations, then you might find this customer success framework useful.
So here are the 5 Ps (in the order of importance) – Purpose, People, Package, Priorities, and Practices.
The first step should be to define the customer success vision and build a well-defined CS playbook (covering ‘what and how’ for the CS function).
Based on this, define the roles and responsibilities (for each level) in the CS organization to make an impact not only on the company but also on the client’s business outcomes. This then also helps in the next point on ‘People’ to attract good CS talent.
Below are a few key areas (among others) to plan for:
If your organization is truly customer-centric, then it needs to be driven from the top by the company’s vision, values, and culture. At what stage should you start to build a CS function and at what stage should you hire a CCO (Chief Customer Officer) reporting to the CEO to take ownership of CS goals?
How would the CS team co-exist with other similar functions like Customer Support, Professional Services, Account Management, etc.?
A number of people are required in CS org to manage your existing clients and also to manage new clients expected to come on board in the next quarter.
Hiring people with the right types of skill sets and experience. Given CS function itself is new, so (unlike other mature functions) you won’t find people with 15+ years of experience in CS. So what combination of other skills/experience levels works well for CS?
From an attitude perspective, – passion for Customer Success and high EQ are critical for success in this role – as it involves multi-stakeholder management, conflict resolution, being an evangelist internally and externally, and doing whatever it takes to deliver value to clients!
Once you have onboarded the right CS team, the next step would be to ensure they are motivated! So you need to ensure the CS team has the right incentive structure to reward their performance.
I have seen several organizations getting this wrong, as in some cases they are simply renaming the existing ‘Customer Support' team (with no variable bonus at all) to ‘Customer Success’ (with revenue retention & growth as their new KPI) but the team’s package hasn’t been revised.
In some companies, the CS team also gets pulled by Sales (as technical pre-sales) to help in the closure of a new deal (either new or existing client) by leveraging their knowledge of the product, solution architecture, and implementation process — but the CS team doesn’t get incentivized on the closure.
Note: According to this report from LinkedIn – CSM (Customer Success Manager) is now in the top 10 promising roles and, of course, in huge demand already.
Interestingly, the YoY job openings growth for CSM is 80%, which is higher than that of even a Data Scientist (at 56%). Although this report is for the US, it sort of reflects what would happen in the rest of the world very soon (if not happening already).
So it’s important to have the right ‘purpose’ & ‘package’ for the CS team to stay motivated, otherwise, it would be difficult to retain the top-performing customer success managers.
IIt’s essentially a three-step process:
For example – the Tech team’s KPIs should also include client NPS/CSAT scores as a metric because if your product has too many P1 bugs or regression bugs on a frequent basis, then that will directly have an impact on client NPS/CSAT scores and churn rates, and the CS team can’t do much about it.
Another common example of debate is – who owns the KPI of upsell/expansion with existing clients—is it Sales or CS or both? And how would it work? And what are the pros and cons of each approach?
Ensure you have a comprehensive checklist for internal and external best practices for the CS team to execute. Some examples (just a small subset of a longer checklist):
Every enterprise SaaS company is now struggling to have the right "Customer Success" framework in place so as to scale their business. The more customer-centric your business is, the lesser customer churn your business would face.
So everything boils down to adopting "customer-centricity" at an organizational level if you intend to stay in business for the long run. If you are looking to adopt customer-centric onboarding and implementation to help your customer success team, you would want to get in touch with us!
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