Earlier this month, I had the opportunity to attend the Technology Services World (TSW) conference hosted by TSIA, and the Pulse conference hosted by Gainsight. Between the many keynotes, breakout sessions, and discussion with attendees, I've put together a quick list of the top four themes I heard from the two conferences that I'd like to share with you as TSIA's new VP of customer success research.
The Growing Importance of Customer Success
The Pulse conference hosted an impressive 3200+ attendees, which is 10x greater than the first Pulse conference just 4 years ago. One of the major reasons that customer success has been so highly sought after in SaaS startups and now in more traditional on-premise vendors is the impact on customer churn.
Todd Gardner from SaaS Capital shared his insights on this topic.
In the above graphic, the important concept is compounding effect of churn. The two hypothetical companies being referenced, Retention Inc and Churn Co., have churn rates of 5% and 20% respectively. That compounding effect represents 40% impact on revenue after 5 years. Additionally, there is also a secondary impact on Total Addressable Market, which impacts future upsell and cross-sell opportunities.
In his TSW keynote, Thomas Lah spoke about the critical role of the Customer Success Manager (CSM) in the context of TSIA's LAER (Land, Adopt, Expand, Renew) framework.
As we have found in our 2015 Customer Success Baseline Survey, CSMs are primarily focused on the Adoption or Renewal phase of the lifecycle, with some focusing both of those initiatives. That effort directly combats the negative impact of churn.
Traditional On-Premise Suppliers are Struggling with Adoption
Many suppliers are finding it difficult to help their customers adopt their technology. I heard on several occasions that Customer Success Managers became "Product Gap Fillers". Another way to interpret that statement is that the CSMs are the go-between the customer and other parts of the supplier organization, whether that is support, product development, or sales. The suppliers' product teams have not built in the necessary data analytics tools needed to enable their customer success teams to achieve their key objective: to ensure their customer base is extracting the most value from their technology purchase and solving its business goals. This is something that the companies that were born in the Cloud have nailed. Pendo and Gainsight announced a partnership that may begin to help customer success and product development teams begin to close this gap.
Business Outcomes are Top of Mind
While several new to the concept of customer success are still grappling with viewing business outcomes in the context of the supplier, many are moving this concept into practice. For example, at TSW, Kelly Leslie and Mike Ulaky from the Citrix ShareFile team shared their experiences in helping a major airline reduce its fuel costs by making all of their flight manuals electronic. At Pulse, there were also some thought-provoking comments on the topic. Chris Carrington, CEO of ServiceSource, said, "Customers no longer buy products, they buy outcomes." Ganesh Bell, Chief Digitial Officer, General Electric, had mentioned that they were selling outcomes-as-a-service with a shared risk/reward. At TSW, TSIA also announced a partnership with Outcome Chains, Inc. that will give our member companies a more intuitive step-by-step approach to achieve their service business outcomes leveraging TSIA research, frameworks, benchmark data, and other member resources.
The Future of Customer Success
With the introduction of TSIA's newest book, Technology-as-a-Service Playbook, J.B. Wood took the Customer Success discipline to a different level, stating in his Pulse keynote that customer success will play a central role in profitable XaaS 2.0 companies. He also mentioned that customer success will go well beyond driving Net Promoter Score (NPS) and adoption and then concluded his presentation by stating that customer success will help drive down sales costs, optimize waterfall economic performance, and diversify revenue streams.
Roger Lee from Battery Ventures also provided his three predictions for the future of customer success:
- Customer success and sales will become more deeply intertwined.
- Customer success will become a strategic imperative for CEOs and board members.
- Our next generation of CEOs is going to come from the Customer Success discipline.
The wealth of information I gained from these back-to-back conferences was a lot to take in, but I'm really excited to see where the future of customer success is headed and am honored to have the opportunity to play a part in TSIA's research initiatives in this exciting area. Thanks for reading!
About the Author
Phil Nanus is the vice president of customer success research for TSIA. In this role, he works closely with member companies to deliver research and advisory programs focused on helping them optimize their customer success organizations and effectively deliver customer outcomes. Throughout his career, Phil has held various positions related to enterprise software and IT services, including global leadership roles in customer success, support, professional services, managed services, and cloud services. Prior to TSIA, he was the vice president of customer success at Infor, where he led a team of Customer Success Managers (CSMs) focused on driving customer adoption of their technology.
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