building a business case for customer success

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Building the Business Case for Customer Success at Scale

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• Serves as Gainsight’s top customer officer• Professional trajectory: BCG, Bain Capital, Gainsight• Leads the entire post sales organization including CSM,

Services, Support, Operations and other teams. • Allison’s weekly Customer Success blog on Gainsight.com is

considered required reading for customer success pros and she was recently named one of the 50 people you should know in sales and business development.

Allison PickensVP Customer Success & Business [email protected]

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• Has held senior leadership positions in service sales, service product management, and service operations

• Professional trajectory: Accenture, Veritas, Symantec, Infor• Led teams of Customer Success Managers (CSMs) focused

on driving customer adoption and retention• Managed and monetized on-premise and cloud customer

success portfolios

Phil NanusVP Research, Customer [email protected]

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Agenda

New organizational alignment for customer growth

The critical funding conversation

7 steps to scale Customer Success

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TSIA Overview

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TSIA is the world’s biggest vault of…Technology services data insight & best practices.

Everything you need to optimize your service organization in one place.

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Our Unbiased Independent Research Model

7

155 Operational

Best PracticesAudits

9.6K Analyst Inquiries

1,310 Benchmark Analyses

1M Benchmark

Data Points

548K Survey Data Points

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• Improving service margins

• Increasing product & service revenue growth

• Optimizing organizational structures

• Improving customer adoption & value realization

• Innovating service delivery and experience

• Successfully transitioning to the cloud

• Designing profitable XaaS offers

To solve these problems…

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A Peer Network Like No Other

9

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Learn From Our Thought Leadership

10

Our New Book!

201320112009

Best Sellers – Amazon Tech Category

7 Steps to Scale Customer Success

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Charter Financial Model Practices Metrics

Skills Offers Technology

12

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13

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TSIA Customer Engagement Model

Land: All of the activities required in selling an offer to the customer and the initial implementation of that offer

Adopt: All of the activities involved in making sure the customer is actually adopting the solution that was implemented

Expand: All the activities required in helping current customers expand their budget spend with the company

Renew: All the activities required to ensure the customer renews their current relationship with the company

Land Adopt Expand Renew

14

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Charter of Customer Success

What is your primary charter of customer success?

45% 45% 10%Adoption Renewal Expansion

15

Source: TSIA Customer Success Baseline Survey

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Charter of Customer Success

What is your primary and secondary charters of customer success?

35% 44% 22%Adoption Renewal Expansion

16


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CSM Expand Responsibility

Primary Responsibility Today

Primary Responsibility in the Future

Account Executive/Sales Rep

Industry Specialist/

Product Sales Specialist

Technical Account Manager/

Project Manager

Customer Success Manager

Renewal Specialist

61% 3% 12% 24% 0%

37% 9% 18% 30% 6%

Expand

Expand

Source: TSIA Expand Selling Practices and Metrics Survey 2015

17

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18

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Funding Model for Customer Success

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Cost of Goods Sold These are the costs associated with making, installing, and supporting the specific instance of the product purchased by the customer.

Sales and Marketing These are the costs to acquire and retain customers.

Research and Development These are the costs of developing new product capabilities.

General and Administrative These are the costs left overthat don’t fit neatly into one of the previous buckets.

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20

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Segmentation for CSM Coverage

Account Size Geography Customer Line of Business

Growth Potential Product Touch Other0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Source: 2016 TSIA Customer Success Baseline Survey

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CSM Activities

22

Cross Sell/Upsell

Lead Generation

Oversight for initial Implementation

Customer Training

Value Visioning

Success Plans

Conduct Quarterly Business Reviews

Renewal

Provide Customer Best Practice Material

Monitoring Adoption

Onboarding

Execute Individual Get Well Plans

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


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23

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27%

Customer Success Metrics

Churn Rate

Renewal Rate

Expansion Rate


9%

89%

24

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What is the impact of Customer Expansion and Retention Costs?

Customer Acquisition Costs These are sales and

marketing costs associated

with acquiring new XaaS customers.

Customer Expansion Costs These are the sales

and marketing costs associated with expanding

revenues with existing customers.

Customer Retention Costs

These are the sales and marketing costs

associated with renewing existing

customers.

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Median Ratio

CSM Ratio

13:1

ARR

$2.5M


24

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What is your Account to CSM ratio?

Adopters

15:1Retainers

66:1Expanders

8:1


25

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Revenue Attributable to Customer Success

1. CSM-qualified leads (CSQL) for Sales

1. CSM “Save”• Red to Yellow

2. CSM “Win”• Yellow to Green

1. CSM Qualified Advocacy (CSQA)

1. Sales References2. Testimonials3. Events4. Referrals5. Repeat Purchaser

2. CSM in sales cycle

ExpandRetain Land+ +

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29

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The Trinity of CSM Skills

Customer Success Manager

Functional

Technology

Customer Service

30

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Where do CSMs come from?

Adopters Retainers Expanders0%

5%

10%

15%

20%

25%

30%

35%

40%

45%40%

32%

3%

41%

31%27%

9%

17%

30%

10%

20%

40%

Customer Support Professional Services Sales and Marketing Other


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Higher Subscription Renewal Rates with a CSM

10%


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Expand SellingLand Selling Adoption Renewal

Customer Success Sales Sales1 Sales

2

3

4 Sales/Customer Success (shared)

Renewal SpecialistSales

Customer Success

Renewal Specialist

Customer Success

SalesSalesSales

Sales

Sales Customer Success

Sources: TSIA 2014 Customer Success Baseline Benchmark; SRG Pulse Webinar Sept 2014; SRG Executive Forum Sept 2014

What Customer Success Engagement Model are you using?

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34

TSIA Emerging Offers Study

ADOPTION PLANNING

CONSUMPTION MONITORING

CONSUMPTION OPTIMIZATION

PROCESS CONSULTING

• Vision & strategy alignment• Onboarding• Governance / Decision making authority

• Adoption/usage monitoring• Adoption scoring• Adoption benchmarking vs. peers• Business KPI monitoring

• Business KPI scoring• Business KPI benchmarking vs. peers• Industry-specific business metric dashboards

• Customer success manager• Account reviews• Feature deployment

& utilization assistance• Industry-specific feature

utilization training

• Assessment/audit of current state/goals/gaps

• Best practice playbooks• Success story webinars• Web-based workshops• Super user programs

• User group meetings• Performance optimization based

on best practice insight• Capacity analysis & optimization

based on best practice insight

• Business or workflow process improvement• Best practice consulting / advise

• Co-develop new capabilities with customers to deliver innovation to the market

35

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A Closer Look at…

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Monetized Customer Success Offerings

Source: Workday, SAP – SuccessFactors, Symantec 37

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Customer Success

Monetized Offers - Observations

38

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Support Services

39

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Education Services

40

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Professional Services

41

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42

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Non-Monetized

Source: Oracle

43

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Observations

44

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45

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IntelligentSearch

Knowledge Management

Proactive Support/Intelligent

Diagnostics

CRM/Incident Management

Recurring Revenue Management Reporting/Analytics

Consumption Monitoring

Contract/Entitlement

Management

Upsell/Cross-sell

Voice of the customer

CustomerFacing Layer

ProductivityLayer

InfrastructureLayer

What Technology Solutions Are Necessary for Customer Success?

Technology is incredibly important to customer success organizations. Various platforms and applications are required. TSIA has identified 10 separate

application categories recommended for highly productive, scalable Customer Success teams.

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CommunityExpertisePlatform

Gainsight: Powering the Customer Success Movement

Leaders & Innovators

Proven Results

5 Points Growth 4 Points Churn

45

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5 Pillars of Customer Success

46

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PROSSEGMENT

High Touch

Mid Touch

Tech Touch

ENTERPRISE

MID-MARKET

SMB

HIGH PROFILE

QUICK LIFT

LIMITED CHANGE MGMT.

PARTNER DIRECT

Customer Success Strategies

47

www.tsia.com

Gainsight Customer Success Platform

Support

Marketing

PSA

Web

Finance

DB API

Surveys

SFA

Strategic Customer

Management

Proactive Customer

Management

Scaled Customer Management

Early Warning System

48

The Critical Funding Conversation

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Monetize Customer Success49%


www.tsia.com 53

Key Questions

• What is the target financial model your company is attempting to achieve?– COGS, COS, Sales and Marketing, R&D, G&A

• What responsibility does Customer Success have?– Traditional Support– Adoption– Renewing the customer’s subscription– Cross Sell and Upsell or lead generation

• What are the economic drivers per resource?– ARR coverage for renewing and expansion of existing customers and new customers– On Target Earnings– Ratios

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XaaS Revenue Streams

52

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CPM Revenue Streams

53

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Key Questions




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Funding Customer Success

Five Questions 2 3 4 5

Support Adoption Own Renewal

Expansion

Y Y Y Y

Subscription Revenue 100%COGS 25%

Datacenter, Etc. 15%Support 10% 10%

GROSS MARGIN 75%Sales and Marketing 30%

CAC (65% of S&M) 19.5%CEC (15% of S&M) 4.5% 4.5%CRC (20% of S&M) 6.0% 3% 3%

R&D 15%G&A 10%OI 20%

20.5%Total % of Revenue Allocated to Customer Success

1YOUR TARGET

FINANCIAL MODEL

Source: Framework for Funding Customer Success

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Sales and Marketing Effectiveness

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Sales & Marketing as % of Rev Rev Growth

58

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Key Questions




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Sales Rep vs. Customer Success

60

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End Game Coverage

UNLIKELY TO EXPAND LIKELY TO EXPAND

LAND SALES ACCOUNT MANAGER

CUSTOMER SUCCESS MANAGER

LAND ADOPT EXPANDRENEW

RENEWAL SPECIALIST

SMALL EXPAND SPECIALIST

LARGE EXPAND SALES ACCOUNT MANAGER

61

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Renewal Responsibility

36%

2%36%

24%2%

Sales Responsibility for Renewal

Sales/Account ExecOutsourced RenewalsRenewal Special-istCSMChannel Partner

40%

20%

13%

24%2%

Admin Responsibility for Renewal

Sales/Account ExecRenewal Opera-tionsRenewal Special-istCSMChannel Partner


62

www.tsia.comLowAverageHigh

% of Total Sales & Marketing <100M Annual Revenue

10%

20%

30%

40%

50%

60%

70%

0%Customer Acquisition

Costs (CAC)Customer Retention

Costs (CRC)Customer Expansion

Costs (CEC)

Source: Pacific Crest, TSIA 63

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The Accounting of Customer Success

Sales and Marketing – CS Delivery Costs/PM/Other

COGS/Cost of Services – CS Delivery Costs

General and Administrative 8%


36%

56%

64

The Organizational Dynamic

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Scenario

• ARR Growth Is the Goal

• Two Teams: Land Team and Growth Team

• Services and Success Part of Growth Team

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Why We Think It Will Optimize Profitable ARR

• Expand and Renewal will be maximized

• Sales will focus more on Land

• Revenues will be diversified

• Processes can be more easily automated

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The Process Owns the Customer!

TSIA Believes…

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TSIA’s 1st Step Organization Structure – 3 “Teams”

69

SUCCESSSCIENCE

CUSTOMERSUCCESS

FINANCE/ADMIN

CEO

LEAD GEN

CUSTOMER ANALYTICS

SERVICE REVENUE

GENERATION

EDUCATIONSERVICES

SERVICEDELIVERY

MARKETING

PORTFOLIOMANAGER

CUSTOMER GROWTH OFFER DEVELOPMENT

INFRASTRUCTURE

MEDIUM

RENEWALSPECIALISTS

LAND SALES

VERTICAL 2VERTICAL 1

SALES RESOURCES

SALES RESOURCES

LARGE

SUCCESSMANAGERS

SMALL

SMALL EXPANDSPECIALISTS

INDIRECT

SUPPORTSERVICES

EfficiencyEffectiveness

Tight Alignment 1:Land Team

Tight Alignment 2:Customer Growth Team

Tight Alignment 3:Infrastructure Team

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Two XaaS Playbook Assertions

The act of selling will undergo radical change.

Delivering and measuring customer success will become a defining characteristic of market leaders.

Contact Information

Phil NanusVP Research & Advisory Services, Customer Success, [email protected]+1 407 547 3150

@philnanus

Q&AQ&AQ&A

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