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Building a Business Case for Customer Success

Join Phil Nanus, VP of Research of Customer Success at the Technology Services Industry Association (TSIA) and Allison Pickens, VP of Customer Success and Business Operations at Gainsight, as they discuss scaling your Customer Success organization.

In this hourlong webinar, Phil and Allison will discuss:

Developing a business case for Customer Success
The 7 steps needed to scale your teams
The critical funding conversation between sales and Customer Success to ensure profitable Technology-as-a-Service growth

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Building a Business Case for Customer Success

  1. 1. www.tsia.com Building the Business Case for Customer Success at Scale
  2. 2. www.tsia.com • 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 Pickens VP Customer Success & Business Operations apickens@gainsight.com
  3. 3. www.tsia.com • 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 Nanus VP Research, Customer Success phil.nanus@tsia.com
  4. 4. www.tsia.com Agenda New organizational alignment for customer growth The critical funding conversation 7 steps to scale Customer Success
  5. 5. www.tsia.com TSIA Overview
  6. 6. www.tsia.com 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.
  7. 7. www.tsia.com Our Unbiased Independent Research Model 7 155 Operational Best Practices Audits 9.6K Analyst Inquiries 1,310 Benchmark Analyses 1M Benchmark Data Points 548K Survey Data Points
  8. 8. www.tsia.com • 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…
  9. 9. www.tsia.com A Peer Network Like No Other 9
  10. 10. www.tsia.com Learn From Our Thought Leadership 10 Our New Book! 201320112009 Best Sellers – Amazon Tech Category
  11. 11. 7 Steps to Scale Customer Success
  12. 12. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 12
  13. 13. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 13
  14. 14. www.tsia.com 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
  15. 15. www.tsia.com 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
  16. 16. www.tsia.com Charter of Customer Success What is your primary and secondary charters of customer success? 35% 44% 22%Adoption Renewal Expansion 16 Source: TSIA Customer Success Baseline Survey
  17. 17. www.tsia.com 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
  18. 18. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 18
  19. 19. www.tsia.com Funding Model for Customer Success 19 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 over that don’t fit neatly into one of the previous buckets.
  20. 20. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 20
  21. 21. www.tsia.com 21 Segmentation for CSM Coverage 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Account Size Geography Customer Line of Business Growth Potential Product Touch Other Source: 2016 TSIA Customer Success Baseline Survey
  22. 22. www.tsia.com CSM Activities 22 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 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 Source: TSIA Customer Success Baseline Survey
  23. 23. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 23
  24. 24. www.tsia.com 27% Customer Success Metrics Churn Rate Renewal Rate Expansion Rate Source: TSIA Customer Success Baseline Survey 9% 89% 24
  25. 25. www.tsia.com 25 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.
  26. 26. www.tsia.com Median Ratio CSM Ratio 13:1 ARR $2.5M Source: TSIA Customer Success Baseline Survey 24
  27. 27. www.tsia.com What is your Account to CSM ratio? Adopters 15:1 Retainers 66:1 Expanders 8:1 Source: TSIA Customer Success Baseline Survey 25
  28. 28. www.tsia.com 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 References 2. Testimonials 3. Events 4. Referrals 5. Repeat Purchaser 2. CSM in sales cycle ExpandRetain Land+ +
  29. 29. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 29
  30. 30. www.tsia.com The Trinity of CSM Skills Customer Success Manager Functional Technology Customer Service 30
  31. 31. www.tsia.com Where do CSMs come from? 40% 32% 3% 41% 31% 27% 9% 17% 30% 10% 20% 40% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Adopters Retainers Expanders Customer Support Professional Services Sales and Marketing Other 31 Source: TSIA Customer Success Baseline Survey
  32. 32. www.tsia.com Higher Subscription Renewal Rates with a CSM 10% Source: TSIA Customer Success Baseline Survey
  33. 33. www.tsia.com 33 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?
  34. 34. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 34
  35. 35. 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
  36. 36. www.tsia.com 42 A Closer Look at…
  37. 37. www.tsia.com Monetized Customer Success Offerings Source: Workday, SAP – SuccessFactors, Symantec 37
  38. 38. www.tsia.com Customer Success Monetized Offers - Observations 38
  39. 39. www.tsia.com Monetized Offers - Observations Support Services 39
  40. 40. www.tsia.com Monetized Offers - Observations Education Services 40
  41. 41. www.tsia.com Monetized Offers - Observations Professional Services 41
  42. 42. www.tsia.com Monetized Offers - Observations 42
  43. 43. www.tsia.com Non-Monetized Source: Oracle 43
  44. 44. www.tsia.com Observations 44
  45. 45. www.tsia.com 7 Steps to Scale Customer Success Charter Financial Model Practices Metrics Skills Offers Technology 45
  46. 46. www.tsia.com 46 Intelligent Search Knowledge Management Proactive Support/Intelligent Diagnostics CRM/Incident Management Recurring Revenue Management Reporting/Analytics Consumption Monitoring Contract/Entitle ment Management Upsell/ Cross-sell Voice of the customer Customer Facing Layer Productivity Layer Infrastructure Layer 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.
  47. 47. www.tsia.com CommunityExpertisePlatform Gainsight: Powering the Customer Success Movement Leaders & Innovators Proven Results  5 Points Growth  4 Points Churn 45
  48. 48. www.tsia.com 5 Pillars of Customer Success 46
  49. 49. www.tsia.com PROSSEGMENT High Touch Mid Touch Tech Touch ENTERPRISE MID-MARKET SMB HIGH PROFILE QUICK LIFT LIMITED CHANGE MGMT. PARTNER DIRECT Customer Success Strategies 47
  50. 50. 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
  51. 51. The Critical Funding Conversation
  52. 52. www.tsia.com Monetize Customer Success49% Source: TSIA Customer Success Baseline Survey
  53. 53. www.tsia.com 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 53
  54. 54. www.tsia.com XaaS Revenue Streams 52
  55. 55. www.tsia.com CPM Revenue Streams 53
  56. 56. www.tsia.com 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 56
  57. 57. www.tsia.com Funding Customer Success 57 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 1 YOUR TARGET FINANCIAL MODEL Source: Framework for Funding Customer Success
  58. 58. www.tsia.com Sales and Marketing Effectiveness -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Sales & Marketing as % of Rev Rev Growth 58
  59. 59. www.tsia.com 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 59
  60. 60. www.tsia.com Sales Rep vs. Customer Success 60
  61. 61. www.tsia.com 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
  62. 62. www.tsia.com Renewal Responsibility 36% 2% 36% 24% 2% Sales Responsibility for Renewal Sales/Account Exec Outsourced Renewals Renewal Specialist CSM Channel Partner 40% 20% 13% 25% 2% Admin Responsibility for Renewal Sales/Account Exec Renewal Operations Renewal Specialist CSM Channel Partner Source: TSIA Customer Success Baseline Survey 62
  63. 63. www.tsia.com LowAverageHigh % 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
  64. 64. www.tsia.com The Accounting of Customer Success Sales and Marketing – CS Delivery Costs/PM/Other COGS/Cost of Services – CS Delivery Costs General and Administrative 8% Source: TSIA Customer Success Baseline Survey 36% 56% 64
  65. 65. The Organizational Dynamic
  66. 66. www.tsia.com 66 Scenario • ARR Growth Is the Goal • Two Teams: Land Team and Growth Team • Services and Success Part of Growth Team
  67. 67. www.tsia.com 67 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
  68. 68. www.tsia.com 68 The Process Owns the Customer! TSIA Believes…
  69. 69. www.tsia.com TSIA’s 1st Step Organization Structure – 3 “Teams” 69 SUCCESS SCIENCE CUSTOMER SUCCESS FINANCE/ ADMIN CEO LEAD GEN CUSTOMER ANALYTICS SERVICE REVENUE GENERATION EDUCATION SERVICES SERVICE DELIVERY MARKETING PORTFOLIO MANAGER CUSTOMER GROWTH OFFER DEVELOPMENT INFRASTRUCTURE MEDIUM RENEWAL SPECIALISTS LAND SALES VERTICAL 2VERTICAL 1 SALES RESOURCES SALES RESOURCES LARGE SUCCESS MANAGERS SMALL SMALL EXPAND SPECIALISTS INDIRECT SUPPORT SERVICES EfficiencyEffectiveness Tight Alignment 1: Land Team Tight Alignment 2: Customer Growth Team Tight Alignment 3: Infrastructure Team
  70. 70. www.tsia.com 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.
  71. 71. Contact Information Phil Nanus VP Research & Advisory Services, Customer Success, TSIA phil.nanus@tsia.com +1 407 547 3150 @philnanus
  72. 72. Q&AQ&AQ&A
  73. 73. www.tsia.com 73 Get there faster. Advisory Sprints Leverage TSIA research executives to assess, identify operational gaps, apply proven frameworks, overcome specific business challenges, and accelerate transformation. Workshops Align leadership with discipline specific and cross functional engagements. Get board ready insight, thought leadership, and best practices from TSIA industry experts. Speaking The latest insights for state of industry and market trends right from the executive research source. Hours Days Months
  74. 74. Questions from the Audience
  75. 75. Thank YouThank YouThank You

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