Q&A: The Case for Billable Customer Success
The most commonly quoted challenge facing Customer Success leaders worldwide over the past ten years or more has been confusion over the role and definition of Customer Success. The question “What do Customer Success people do?” has been expressed by senior management and members of other groups within SaaS organizations. While responses have been given as to the many vital activities that fall under the heading of Customer Success in well-organized groups, the questions persist. It’s past time for a different, and more effective, answer.
Regardless of whether or not you ever actually offer Customer Success as a billable option to your customers, it’s vital that you be able to prove the real, measurable increase in profitability that you bring to them and to your company as well.
Research has shown that the trend towards connecting Customer Success to revenue is growing ever stronger, but there is still much to be done.
To delve more into this idea, earlier this week we partnered with the Customer Success Association to bring you a webinar on the topic of – The Case for Billable Customer Success. During the webinar, Mikael Blaisdell, Executive Director of the Customer Success Association, talked about why companies should offer Customer Success as a billable service — and how to go about designing the product.
We got a lot of positive feedback on the Q&A portion of the webcast, and we wanted to recap that here to share with you.
So, let’s take a look at some of the questions the audience had and the expert advice that Mikael had to share.
Mikael Blaisdell, Executive Director, The Customer Success Association
Q: What type of activities do you categorize as Customer Success? And where is the line between Customer Success, Support, and Sales?
A: Excellent question. The mission of Customer Success is to increase sustainable, proven value for both the customer and the company. Looking at the customer it means you identify the opportunities for increasing their profits, their productivity and you work with them directly to attain those goals.
The difference between Support is – break/fix. I come out of twenty-five years of background in Customer Support Operations Strategy and Technology. The essence of it has been break/fix. Meaning, something breaks, you fix it.
Customer Success is – let’s look at the customer, where they are, lay out a Customer Success plan to take them to where they want to be and make suggestions to them as to what’s possible, and work with them to get there.
The difference between Customer Success and Sales is quite easy. Salespeople are hunters. With every Sales rep I’ve ever met, the thing that they want to do the most is be in front of a prospect making a new sale. They’re the fighter pilots of the business world.
I find that Customer Success people can work very effectively with them if you do a controller for a fighter operation. You say – okay – there’s a target, this is what the target looks like, these are the question they will ask, the benefits they want to receive, their timetable, this is what a tier one customer in the making looks like for us, here’s how you recognize them, here’s how you talk to them. So, the salespeople go out and they close and at this point the Customer Success team needs to say thank you very much, we’ll take it from here.
Now about this new prospect over here, so I know a lot of Customer Success groups are getting involved earlier and earlier in the process. They’re serving as Sales Engineers and there’s a particularly good advantage to that because, one of our challenges as a community and profession is getting access to the information and Sales doesn’t always document all the players and all the things that happen during the sales cycle well. If you were there as a Sales Engineer, you don’t need their documentation because you were there to see it and you’ve already been keeping your own records. So, it’s a matter of focus. Sales makes the sale. Customer Success takes over after that and runs everything from there.
Q: What is your advice to companies who haven’t ever billed for Customer Success to start introducing the concept to existing customer? How are you able to get clients excited about paying for something they’re used to getting for “free”?
A: I would advise to start with a small group of your customers and really dig into and analyze what they want. The classic thing we used to do in the old Support days is send them what we call the “zero invoice”. You invoice them for the services that they had received, you zero out the invoice. They’re not actually paying anything for it, but it still documents what you did and the value of it and the expected return.
Similar thing would work well here with a small group of customers to define the plans, to define the values, to test the market, and then once you’ve got the buy-in from them, then what you do at that point is broaden the game.
Q: What challenges should we anticipate with trying to transition from non-billable to a billable model of Customer Success.
A: Oh, there’s going to be a lot of them. First and foremost is, that Customer Success in many ways just sort of grew up. It usually starts as ad-hoc churn fighting groups, so you’ve got all of these expectations and people who think they know what it is, and it surprises them when they are told, well no actually, we’re doing more than that. The key is having data when you want to work with other groups.
For example, to stop sales that should not have been done, you know problem customers, the earlier you manage to know and get rid of those or to avoid ever making them a customer, the better. But you can’t just sit down with the Vice President of Sales and go, I don’t like that prospect, we’re not going to sell to them, because it’s just not going to happen that way. What you need to be able to do is, talk to them about this particular prospect, and explain why this prospect doesn’t really fit our model. And show, here’s the data from past scenarios where it’s cost us money to have done a sale.
I first learned of this from Katherine Blackmore, way back when she was Vice President of Customer Success at Badgeville. She did this weekly, but she said you have to have the data. You’ve got to walk in there knowing what you’re talking about and be able to show it in dollars and cents terms or otherwise you won’t have the credibility.
Q: What are your thoughts on breaking out certain pieces of the Customer Success function and only charging for maybe certain aspects for example, implementation or technical training?
A: Absolutely. I’ve seen a lot of organizations starting to move Professional Services into the Customer Success organization. And to charge for them is nothing new. Back in the old traditional perpetual license on-premise days, when I was advising Customer Support clients about purchases of case management systems, knowledgebases, phone switches and all of that, I would tell them you have to realize something upfront. Which is, you can expect to pay somewhere in between two times to ten times the license fees in your implementation costs. Companies are betting that it’s going to be more so if you don’t make up your mind of what you want first and you make a lot of changes, you’re going to be towards the ten times amount. This has an enormous profit potential to it and companies aren’t slow to pick up on that.
Initially when SaaS came out, they said yea that’s not the purpose of SaaS. It needs to be quick and dirty. We’ll just flip a few buttons and get into it and get running. Well, yes but to fully implement it, to roll it out throughout your organization takes some guidance and that guidance has a lot of value to it. So, yes, I would think it’s a great idea to break off pieces of implementation and to offer specialized training.
A perfect example are your power users, the ones who really know how to use a product and make it do all kinds of things. Customer Success need to have a community of power users and to have training programs to create more. That way you can go to a customer and you can say, look this is what you’re using right now, these are the benefits, this is the ROI you’re getting right now from what you’re using, we would suggest that you consider using these other functions that may be a little more complex and we have a training program that will train your people to do those. That’s another source of revenue but again it’s selling value to the customer and I think that’s the key to it.
Q: Would you say that the required CSM skills change at all if you’re explicitly charging for Customer Success?
A: Yes, because domain expertise becomes absolutely vital. You have to be able to speak to the customer with a voice of authority. You can train people in your product. You’ve got technical training groups that do exactly that with your customers. You train people in soft skills in how to manage a relationship with the customer. Those are trainable things and they don’t take very long to instill. But acquiring that voice of authority does take a long time.
For example, I can walk into a Customer Support department and ask a few questions and know what’s going on. I know what’s going on in that department because I did it for so many years. Same thing is true of a Customer Success group. Of course, you don’t acquire that in two months or six months. Frankly you don’t acquire it in a year. It’s going to take longer to get that domain experience and that’s why it’s so expensive to have it. But to be able to speak to the customer so that they hear you, you know you’re going to have to pay for that and justify it.
Q: What are some suggestions on recovering clients who do not have data to support ROI?
A: Take their CFO to lunch. ROI is a challenging thing for a lot of people. I was told years ago by an enterprise sales guy in the CRM field that the most terrifying moment in the entire sales process is the headquarters visit when you’re sitting down with their senior management team including their CFO and you present your ROI figures and you’ve got your fingers crossed and you’re praying nobody will say, but that’s not how we do business, those figures are invalid. He said because, if you get past that moment, they’re never going to talk about ROI again. So, you’re home free.
Well, we don’t that that luxury, we have to be able to talk ROI to customers because we’re selling value. It’s not all about the technology. Technology is the table stakes to get into the game. It’s the value, the continuing sustainable proven value that matters. If we can’t describe that to our customers so they get it, we’re going to lose.
I mean after all, what you really want, is a customer that will say to a prospect- working with XYZ our profits are up 30% in the last six months. You can’t buy that; you have to earn it and the way you earn it is all the discomfort of working with a customer to identify exactly how your product makes their life easier and put a dollar and cents value on that.
Q: Who should sell Customer Success if it is billable? Would that be the Customer Success Managers (CSMs) themselves or would Sales step in?
A: This is one of our long-standing problems. Salespeople want to sell to new customers, and they want big license deals. That’s what their commission plan is based on, so to encourage them to do add-on stuff of services, typically that’s not their forte and you run into situations where they actually want to give away the cost of services in order to get the license sale, because of course that’s what they get commissioned on. The commissions on the add-on services aren’t quite as big and therefor they’re not interested in them as much.
So, my recommendation is to use your sales team as hunters. It’s what they want to do and what they’re best at. Get them to get the new customers in and then you as the CSM develop that relationship with the customer. Now does that mean they Customer Success Managers themselves do the selling, probably not. I mean some of them can, but you have to be careful.
You could have a team in the CS group that works on expansion sales and sales of additional products. I would recommend that route because these are the people with the domain expertise that will be able to talk to the customer and say for example- you know I noticed that you’re not using this area of the product feature set and I have other customers that are and they’re getting a lot of value from it so help me understand why this doesn’t seem workable for you or of interest for you. And in that kind of context they can work with the customer to introduce them to what’s going on and to bring them up to speed to get it implemented and in use across their organization.
The consulting fees to do that make sense when you can show the value of its functionality and when you can say- well okay it’s going to cost this much to get you up to speed and your return is going to be X that. This typically takes somebody that’s closer to the customer on an on-going basis than the salesperson who you know worked with them intensively when they were making the sale and then went away to work intensively with other prospects, so to bring them back in when they’ve been out of the picture for awhile doesn’t make much sense. I’ve seen it work for some companies, but in general I wouldn’t recommend it.
Q: Can you comment on how to structure a billable Customer Success model for lower revenue self-service clients versus high revenue, high-touch clients?
A: First you need to establish your basic cost structure of what your utilization of your Customer Success Managers is, in other words what the billing rate is. So, if you devote X number of hours to a particular project you know the cost of that project and then you figure out who’s going to pay for it. Is this something that a lower value customer who’s not as far up the adoption chain, is going to find an interest in, maybe not? So, you selling it to them is probably not something you want to do. These are things that you can use to set your strategies of which things do I do through technology and which things do I do human to human.
Where is the return on it, where is the return for the company, where is the return for the customer? Again, start with a small group. Figure out okay let’s analyze some of our tier one customers and see if there something else we could be providing them that they would find of enough value that they’d be willing to pay for it. So you start working that way and you gather data of what works, what doesn’t work, what’s the return, how long does it take, all that kind of fun stuff, and then once you have that beginning of data then you ask yourself the question – is this something we can roll out to our lower value customers? Is this something that they will buy? Can we condense it and automate it, so it’s available to them but it doesn’t cost us as much? It’s a one-to-many approach. It’s not a one-on-one thing. Can we do it on a cost-effective basis? These are things you are going to have to learn over time as you play around and experiment and as you gather data on it.
Special thanks to Mikael for providing answers to these questions surrounding making Customer Success a billable service. No worries if you missed the full webinar, or would like to view it again, you can do so on-demand here. And we hope to see you at our next webinar!
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