When it comes to travel, they say half the fun is getting there—though it usually depends on which airline you take!
Similarly, establishing customer success (CS) at the enterprise level can be quite an exhilarating journey, both challenging and rewarding. The question is, what do you do once you are “there”? Is it enough to simply arrive at customer success, or is there an opportunity to truly make an impact on growth?
To maximize the potential for customer success, you must implement strategies that proactively drive growth and revenue. Your relationship with customers needs to shift from prevention to attention. In other words, you will be closely monitoring how your customers interact with your product so that you can identify opportunities to upsell and expand. That is because expansion with existing customers is the most efficient way to grow revenue, fast.
Another way to look at it is that if you really understand what your customers need and then deliver the outcomes that make their businesses thrive, your product will be indispensable. When you have established a relationship like that, they will be enthusiastic about expanding with your company.
Sounds great, doesn’t it? The problem for most companies is that they don’t actually have a good way of tracking what outcomes customers want and identifying the right opportunities to expand. They also don’t know which expansion opportunities will have an impact on their own growth. But properly executed customer success strategies can help you connect these dots.
What Do Customers Need?
Understanding what customers want starts with figuring out how they are actually doing—what we call customer health. Most companies use a three-color system, like a stoplight: red, yellow, and green. The customers that are healthiest are green, customers in the middle are yellow, and customers that aren’t so happy are red. If that sounds a little subjective, that’s because it is. If a customer health score isn’t based on quantifiable metrics, it doesn’t lend itself to accurately assessing how customers are doing and finding the best way to help them achieve their desired outcomes.
To make a customer health score meaningful, you have to calculate it using metrics that capture important aspects of the customer’s relationship to the product. There is no one silver bullet metric that every organization can use because there are too many variables; however, there are definitely some common metrics to consider as a baseline.
While this list is by no means exhaustive, it should get you thinking in the right direction:
- Overall product usage
- Depth and breadth of usage
- Account growth
- Number of renewals
- Number of upsells
- Length of customer engagement
- Need for support
- Survey results
- Product feedback
- Invoice history
- Community involvement
- Overall relationship
- Time to value
When choosing metrics for the customer health score, select approximately three that are the most relevant—much more than that and you may experience metric overload. The last thing you want is to drown yourself in too much data and lose the ability to extract meaningful insights.
Don’t forget that customer health score metrics are not the same thing as customer satisfaction. Your goal is to move relationships beyond passive adoption and toward enthusiasm that will lead to upsell opportunities. The more fine-tuned customer health scores are, the easier it will be to create customer success strategies that lead to revenue growth. Standardizing the customer health scoring process will help you identify opportunities for expansion.
Let’s Talk about Expansion
Expansion has become increasingly important for customer success. 49% of companies are giving bonuses to customer success managers (CSMs) when they successfully expand. Over half of pacesetting subscription companies are including an upsell in conjunction with a renewal, resulting in an average of 21% of the renewed contract value. Year over year, this can lead to exciting revenue growth. But to achieve expansion, customer success needs to earn the right to ask customers for expansion.
Ultimately, what customers want from your product is end-to-end value that makes their business wildly successful. To understand what that means to each customer, you will need to identify specific outcomes and then create metrics that quantify those results.
The most efficient way to create metric-based strategies is to identify the outcome goal and then work backward. This goal should be shared by the entire organization, with all functions working toward creating value in this context.
Once you have defined this outcome, customer success efforts should be applied from the very beginning of the customer journey. The more quickly you reach the first value moment (typically, adoption), the sooner you can drive the customer toward usage maturity. The more quickly you reach the desired outcomes and the further you drive them along the maturity curve with your product, the more likely they are to expand when renewal rolls around.
So what metric-based strategies work best? Here are some examples, by no means exhaustive!
- Usage milestones: This strategy targets natural usage milestones to trigger promotions to customers. This process could be completely automated, with preplanned emails sent to a customer when they reach a certain usage threshold. High-value customers could generate a notification to a CSM so they can reach out with a more personal touch.
- In-product behaviors: With this strategy, you offer upsell opportunities within the product based on specific customer actions. For example, when a customer accesses knowledge-base content or content marketing focused on advanced features, that could trigger an in-app request to upgrade. If the users aren’t the purchasers, as is often the case, it will still build demand momentum.
- Customer database: Using aggregated data from all your customers who have upgraded or expanded in the past, this strategy identifies patterns that show situations where customers typically expand. When these situations occur with individual customers, it would trigger upsell notifications to Customer Success, Sales, or both.
The Journey Leads to NRR
Net revenue retention (NRR) is the north star metric for not only customer success, but the entire organization. NRR incorporates churn, retention, adoption, and expansion. It gives you the ultimate insight into the health of your business because it tells you whether your relationships with customers are sticky and leading to upsells, in addition to avoiding churn.
You could also say that NRR is the ROI of customer success. While revenue growth is important, once you reach a certain plateau, investing to achieve a 1% increase in growth delivers diminishing returns. Those resources would be better used to land the right customers who are likely to expand and deliver exponential growth. Who is the right target customer?
Your efforts at assessing customer health scores and building metric-based strategies based on those insights should result in you identifying the customers who are most likely to drive NRR. Those metrics should become a single source of truth that informs your NRR. In other words, NRR is how you test those customer success strategies you developed based on the metrics. Reporting in a single tool ensures everyone is working from the same information and provides visibility for other departments. This is especially important if your Sales team is responsible for upsells and cross-sells.
The Impact of Customer Happiness
In many ways, metrics are like the photos you took on your vacation: the proof that the journey was successful. Customer success is essentially a journey to happiness for your customers and your business. Because happy customers want more, which means upgrades and expansion. Let the good times roll, and don’t forget to quantify them with metrics.