How Can we Monetize Customer Success?

A LinkedIn friend wrote to me yesterday and asked me the following question:

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Hi Rick,

I hope you're doing well and staying safe. There's a question I'd come across regarding monetizing the Customer Success function. So is there any way you've observed CS being monetized beyond the usual stuff like - renewal, upsell/cross-sell, professional services and education sales efforts? Would love to hear your thoughts on this topic.

Thanks, XXXXX

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A good question! Below is my answer... but what answer would YOU have given? Please let me know...

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Hi XXXXX,

I would say first of all that people seems to me to be too focused on whether CS is a "cost center" or a "revenue generator". At the end of the day, ALL departments/functions of the business (including Sales) are a cost to the business in salaries, IT, office space, energy usage, training, HR, management, etc, etc. Also at the end of the day revenue ONLY comes from customers (for most companies anyway, and certainly for the purposes of this conversation). We do not think we should do away with the HR function or the Buildings Maintenance function or the Product Development function - or the Board of Directors for that matter - just because they do not directly bring in revenue, and nor do we think we should find dome way to "monetize" them all, so why should CS be any different?

Again, ALL revenues comes from Customers - NOT from Sales. So my opinion is that people should stop worrying about the perception of CS as being a cost center or revenue center, and start focusing instead on what VALUE the CS function returns, in terms of its contribution to the overall success of the business.

Some of that value may be more direct in its nature - an increased renewal rate and/or increased numbers and sizes of expand sales, and increasing the average customer lifetime being some obvious examples. Other parts of that value may be more indirect in nature - a differentiator within our service compared with our competitors to entice prospects with during marketing and sales activities, increased customer satisfaction levels from our activities, and a greater understanding of true customer needs to help R&D efforts would again be obvious examples here.

Also and as a minor point, I would suggest that EVERYTHING that CSMs do for customers, whether it is considered to be generating revenue or not could be labelled as "Professional Services" since this term covers all the types of activities that CSMs are ever likely to get involved in.

So with that said and to actually answer your question...

Aside from direct and indirect contributions to the bottom line as discussed above, I would say that the CS Function could potentially "productize" CS and sell it as an actual product (or product range) with a commensurate fee or range/scale of fees, so that rather than be a non-chargeable (though NOT free - never ever call it "free") service that is extended to all customers who purchase one or more of our core products/services, we offer it as a paid for and additionally billable option. Or perhaps we offer both a basic CS service that is non-chargeable and included anyway, together with a portfolio of extensions to that basic service that can be selected by the customer as desired and are separately billable.

These "CS Services" might include customized onboarding and awareness campaigns, change management strategy planning and implementation, training services (planning, management, delivery, measurement), end user adoption services and value realization services.

The only other way you could make revenue out of your CS team would be to start selling outsourced CS-as-a-Service solutions to other companies - for example reseller partners - , so that your CS function now covers more than just CS for your own needs, but also CS for other companies' needs, and you bill those companies on either a time or a (more risky) results basis.

Does that help at all?

Kind regards,

Rick

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As an addendum, another LinkedIn friend read the above article and wrote me a great follow-up question...

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Amazing thoughts, Rick Adams! Thank you. An additional thought + question popped up. A plain-vanilla approach to monetize CS would not work as expected at present. So, with your experience working with many businesses, have you come across customers who would pay for Customer Success? What would be the best way to change this behaviour?

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I thought this was a great question, which is why I am including it plus my answer below. Here was my response...

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Hi XXXXX and thank you for your question.

In short, yes I most definitely have known customers who would expect to be charged for some of the things we associate with the Customer Success team - most notably onboarding and adoption. These have particularly been in situations where a complex solution touching multiple functions across several parts of the business is being implemented, and even more particularly where the implementation is seen as being strategic in nature (ie core to the customer's business needs).

In these circumstances, customers are most likely to recognize the value of de-risking their investment in the new solution (typically a porfolio of technologies plus professional services to customize, implement, configure and manage them) by getting "expert help" in planning, communicating, implementing and managing change.

Paid for professional services are going to be easiest to justify in the above types of situation where the investment level is high, the complexity of the initiative is high, and the importance of the initiative's success to the customer's business is high. However, the fundamental principle can work in any setting.

This fundamental principle is:

"What services can we offer our customers that will provide for a recognized need that they have, and is something that they either cannot do for themselves at all (best), cannot do for themselves as well as we can do it for them (next best), or do not wish to do for themselves (often still very powerful)?"

Once you have identified what these services are, it is then a question of marketing them. This might involve firstly evangelizing their need, so that the customer recognizes that they absolutely require these services to be fulfilled by "someone". Then of course it becomes a case of answering the question "why should I buy this service from you?".

I hope the above helps!