Why Customer Success Fails and Two Ways To Fix It

Every company is jumping on the Customer Success bandwagon and if not, it’s because leadership is not open to change, which will doom them. In the wake of this new phenomena is the idea that Customer Success means “Retention, Renewal, Upsell, Cross-Sell, Adoption, and Consumption.” If we find these words to be part of our Customer Success vocabulary, then that’s great, but let’s update our program a little.

It’s not that retention, renewal, upsell, cross-sell, adoption, and consumption aren’t important to the business or Customer Success because it is. The problem is that as Customer Success professionals, when we take this approach, we focus on ourselves and not on what’s important, our customers.

We know we want increased retention, renewals, upsells, cross-sells, adoption, and consumption, that’s a given. The question arises, “How do we implement a strategy that will bring about those wonderful business results?” We don’t hear much about this, but instead a lot of squawk and emphasis on wanting results that positively impact retention, renewal, upsell, cross-sell, adoption, and consumption.

There is a simple answer that most Customer Success organizations haven’t found yet. They miss an important piece of the puzzle that lands them into contemplating the question, “What went wrong?” To make matters worse, after getting mediocre results, they opt to abandon Customer Success completely, telling themselves “it doesn’t work for us.” The answer to implementing Customer Success correctly is to “Solve the customer’s business problems” or “Deliver to the customer’s business outcomes” in a pleasing way.

Technology Services Industry Association (TSIA) describes this customer centric approach to Customer Success as PIMO, standing for Plan -> Implement -> Monitor -> Optimize. Organizations report getting amazing results by using this approach when working with clients.

There are two changes that help to ensure a successful implementation of Customer Success. They are:

1)     Find and solve business problems.

2)     Be accountable to customers.

Find and Solve Business Problems

Keenan from A Sales Guy Inc. teaches that we can really help our customers by being their trusted advisor, consultant, or partner. When we act in this manner, retention, renewal, upsells, cross-sells, adoption, and consumption are automatic. This is because we are showing our customers how to reach their goals by guiding them in ways that will benefit them.

TSIA spoke about retention and renewals saying it should be a natural occurrence and not some kind of heroic sales event. I agree. When we deliver in a consultative manner as our clients’ trusted advisor and partner, we greatly reduce the possibility of churn. Renewal surprises become less common because of having led our customers in a way that delivers way more value than the cost of our product or service. Keenan calls this the gap.

Keenan’s book Gap Selling delivers the tactical and strategic framework necessary for a Customer Success professional to be successful, whether they hold a quota or not. This is because Keenan works from the perspective of partnering with a client to help them find and solve business problems they may or may not know about.

Keenan emphasizes how important it is to understand what the problem is that our client is dealing with, its impact, and ensuring that their emotional state is in alignment. He helps a client understand how the root cause of those problems can be solved through our product/service offering.

Keenan takes the customer on a journey that exposes and details the problems of a customer’s current state as compared to the joys of having achieved their desired future state. It takes practice and commitment to become effective at this challenging skill. Asking the right question at the right time requires creativity, empathy, and a deep understanding of their business and gap selling techniques.

When done correctly, the client’s current state and future state can be represented by a dollar value (or in some other tangible way). This helps us and the customer understand the ROI of making the change to buy and implement our expansion or upsell recommendation. The difference between the current state and future state is the gap. The larger the gap, the more likely the sale will occur.

For example, if revenue will increase $100M by implementing our $1M product or service, then the gap is $99M. That would be a sufficient gap to move forward and make the upsell. The gap doesn’t have to be huge, just large enough for the buyer to agree it’s worth moving forward. Even a $20 service could create a large enough gap to make the sale work, if the value (saved time, money, and/or stress) is much greater.

Retention and renewals come from establishing ourselves as our customer’s trusted advisor. Making observations and recommendations that benefit our client combined with current product value metrics that map to their business outcomes ensures retention. When we bring value to our customer, we position ourselves as the trusted advisor we want to be.

Be Accountable to Customers

TSIA introduced The Four Phases of Becoming LAER Efficient, where LAER is Land -> Adopt -> Expand -> Renew, describing the progression a client takes as they achieve an optimal state of Customer Success. The same holds true today, as it did when first introduced, that most organizations have yet to achieve the most advanced stage, called LAER efficient. LAER efficient gives our organization its best likelihood of achieving or enhancing profitability.

There are 30 key capabilities an organization should consider when attempting to reach an efficient Customer Success level. Let’s take a look at one of them, Outcome-Based Pricing Models. This efficient capability means we’ve created a profitable pricing model for our offering that is based on our customer achieving specific business outcomes. If we use a subscription or consumption-based pricing model, then we’re not there yet.

Outcome-based pricing models can vary in how they are structured. Our company is paid based on the success our client achieves, as defined in an outcome business goal success plan. It could be a percentage of value delivered, variable amount with a base payment, or capped at a certain amount.

Customer Success is driving the outcome-based pricing model with some companies already using it, but most are not. Some people may see this move as shocking or too risky to even consider. However, using an outcome-based pricing model ensures that a customer isn’t going to be left high and dry after having paid for a product or service. For the vendor, it means they’ll share in the customer’s ROI from their offering, which has a significant upside over a customary recurring revenue model.

Companies that adopt an outcome-based pricing model will enjoy an increase in sales and an easier sales cycle (lower CAC), because a buyer’s barrier to entry and risk are reduced. Vendors will require a customer to commit to making their solutions work. As mentioned in Keenan’s Gap Selling technique, the gap or value (difference between current state and future state) to the client needs to be big enough to make the sale happen. That’s the way it should be, and the way Customer Success works.

Are you ready to move to the next level of Customer Success? How long will it take for us to make these transitions?

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