These days, customer success management or CSM is a prerequisite for companies to be successful, especially when it comes to software companies. In the first of two blogs on CSM, experts from the Main network give valuable tips on how to build your CSM operations.
As a way of thinking, customer success management is without doubt about as old as doing business itself. In a nutshell, CSM stands for pro-actively listening to and talking with your customers, so these customers really get to understand how your company’s products work and where the added value lies. Also, it means engaging with your clients in a systematic way so as to improve your offerings and make them happier.
So when customer success thinking is such a logical thing, why is it so young a discipline? The first company known to have had a customer success department was a supplier of customer relationship management (CRM) systems by the name of Vantive. This was in the year 1996.
Breakthrough for CSM
The real breakthrough for CSM as a stand-alone skill was at that point still years away. In 2005, software group Salesforce really put the focus on CSM when it launched a big customer success department, called Customers for Life. The buzz regarding CSM has been increasing ever since.
So back to the question: why now? For a long time, companies felt no apparent need for CSM. The Swedish company Assessio provides assessments as a consultancy service and via software tooling. The company dates back to 1954, but only recently did it start with CSM. Max Lagrell is the company’s head of customer success. He says, ‘When you sell a product or service, the customer pays upfront. Because of this upfront payment, there is a relatively small financial incentive for the supplier to ensure that the customer uses the product optimally.’ Assessio has been part of the Main family since 2019.
This has changed now that companies tend to focus on recurring revenues. Especially in software, because of scalability, it has become the preferred model to provide software as a service (SaaS). In this model, the relationship between customer and supplier is very different. Lagrell: ‘Customers are not buying, but renting. That means customers have relatively small upfront costs and also high flexibility to change supplier.’
Enter CSM. In a subscription-based software world, CSM is all about being constantly – and non-obtrusively – in contact with your clients, so that they get the maximum out of your services. The ultimate goal is keeping them as a customer. Lagrell: ‘It all started with churn reduction.’
Colin Nelson is a chief consulting officer at Hype Softwaretechnik – a German software company that provides software for innovation management. Since 2019 Hype is part of the Main portfolio. Nelson says: ‘The United States was the first country in which we seriously implemented CSM. In the US, the net renewal rate (NRR), which measures the rate at which existing users are renewing and expanding, is now around 102 percent. Our German-speaking region was the next area to have a CSM. Back in 2017, we struggled to achieve even 60 percent NRR. That has now improved to over 100 percent NRR. Nelson: ‘The investment is worth it. It’s just math.’
And then, there’s more math. Given that CSM means listening to your clients and also bonding with them, it constitutes an ideal starting point, not only for retention or renewal but also for cross-selling and up-selling.
‘Department of everything’
So, how to start? According to Lagrell and Nelson, there’s a lot of trial and error going on because CSM is fairly new. Lagrell: ‘One risk for CSM is that it becomes the department of everything. Whether a customer is successful depends on so many different things, a lot even beyond reach. Nelson: ‘You need to focus on specific steps where you can make a difference. And since there can be a lot of these, you also need to prioritize.’
Software-investor Main Capital Partners, who have been supporting software companies in improving their business performance since 2003, believes that CSM requires a specific and rich set of skills. Bram Kaashoek is Main’s Managing Director of Market Intelligence. He says: ‘We see that CSM roles like Customer Success Manager or even Customer Happiness Architect are among the most frequently posted job openings in the software industry. The customer success manager has a central role in the delivery of software solutions.’
Main stresses the potential but also the challenges of customer success management. ‘We have created a manual on how to develop and implement a CSM approach in your business processes’, says Kaashoek. The full manual is only being shared with companies within the Main Capital portfolio.
A way of thinking
Whatever the roadmap companies choose, the consumer journey plays a pivotal role in customer success management. Literally, every phase of the customer journey is interesting from a CSM perspective, even the pre-sales and offboarding phases. Max Lagrell: ‘Customer success management is very much a way of thinking.’
For those starting with this discipline, the main focus will be the phases right after a customer has signed up. This phase, followed by the phase where the product is in (full) use, and the moments when renewal is on the table – are critical. In a lot of situations, it will be logical to seek live contact with customers in order to listen to them but also train them how to use the product, and nurture the relationship. In the case of a very large and fragmented customer base however, CSM relies more heavily on automated contacts.
Next in this series: 3 important steps towards customer happiness
Main Capital Partners has worked with many software companies and researched numerous CSM strategies and success cases. Based on this research, we have developed a playbook for deploying a customer success management strategy. The next blog will give a breakdown of 3 important steps.
Main Insight Event 2021: How to win with your customer
To promote knowledge sharing with a wider network of software entrepreneurs, Main organizes the yearly Main Insight Event. The next Insight event centers around the topic of CSM and takes place in Stockholm on the 18th of November. At the event, CSM experts from Medallia, Workday and Simon Kucher will share their best practices on CSM. Also Colin Nelson from Hype Innovation will present more learnings on CSM. The Benelux edition of the Main Insight Event on CSM will take place in May 2022.
We will keep you informed on the most relevant developments of Main Capital