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CSM PRIORITIES SURVEY
BY PREACT AND SERVICE EXCELLENCE PARTNERS
2015
Executive Summary
This study aims to uncover the Customer
Success community’s current priorities as the
practice matures. Preact, which provides
Customer Success software, and Service
Excellence Partners, a consulting firm that
specializes in reducing customer churn,
collaborated to understand the forces
affecting the profession. Our major
conclusions:
2
3
Maintaining and increasing sales with customers
under contract was one of companies’ biggest
challenges, with only 30% of companies saying
they’re growing revenue from their current users.
Half said they were losing 10% or more in top line
renewals annually.
Many CSM professionals say they’re firefighting too
much. While nearly half reported they were
aggressively improving their approaches, about
35% of said they were “firefighting” and 14% didn’t
know their annual account churn rate.
Say they are growing revenue
with current usersOnly
30%
14% Didn’t know annual
churn rate
?
4
Intuitively, a greater degree of personal attention
should lead to stronger relationships and fewer
defections. By contrast, our study did not show a
conclusive link between Customer-to-CSM ratios
and impact on either logo churn (p=0.574) or
revenue churn (p=0.876).
Top leaders support Customer Success—70% of
respondents said the CEO is fully behind it. This
growing level of commitment bodes well for those
involved in building and resourcing their Customer
Success organizations.
Percentage of respondents who said the
CEO supports Customer Success
70%
5
The following details our findings and
recommendations to increase customer loyalty,
expand revenue and bolster productivity.
Respondent Profile
Service Excellence Partners and Preact collected 78
observations mostly from California and
Colorado-based Software-as-a-Service (SaaS)
companies. These organizations tended to be
smaller with a median of 95 employees. CSM teams
were also modest in size with a median of 5
employees. The vast majority of respondents had a
business-to-business focus, serving primarily either
medium-sized ($10M-$1B revenue) or enterprise
(more than $1B revenue) customers with a median
subscriber base of around 450 accounts. Survey
participants had a range of titles, from individual
contributor through senior leader.
6
Responses were kept strictly confidential. The firms
promoted the survey through e-mail and social
media and boosted response rates with a drawing
to win an Apple Watch®
. Service Excellence Partners
collected data using SurveyGizmo, removed
personally identifiable fields, and analyzed results
using Minitab 17.
7
The Business Situation
The people we surveyed said there’s work to be done.
About 55% said their logo churn currently exceeds
5% per year, and 13% reported it was excessive (more
than 15%). Maintaining and increasing sales with
customers under contract was even more of a
challenge with only 30% of companies saying they’re
growing revenue from their installed base. Results
overall tended to be worse. Half the respondents said
they were losing 10% or more in top line renewals
annually. Given analyses suggest typical SaaS
companies must keep their customers for at least
three years to profit from them,1
customer defection
remains a significant problem affecting long-term
financial success.
1
Skok, D. (2013) SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters. for
Entrepreneurs website accessed 6/14/2015.
Said logo churn is more
than 5% per year55%
8
Many CSM professionals say they’re firefighting too
much. While 17% are maintaining control by
following processes, and nearly half reported they
were aggressively improving their approaches,
about 35% of said they were “firefighting” and 14%
didn’t know their annual account churn rate.
Companies also face challenges growing revenue
from their happy customers. Of those reporting very
low annual account churn, 40% said they still lose
more than 10% of revenue from their customers
each year. We didn’t find a strong connection
between Customer Success improvement efforts
and results, which may imply that team actions are
ineffective, the fruit of their work is yet to be
realized, or true causes of churn lie beyond the
influence of CSM teams (e.g. product value, service
quality, customer support, customer fit, etc.). Clearly
many companies need help keeping and growing
customer relationships.
9
Most companies reported facing moderate to
intense competition in their industries. This study
showed that being in a highly competitive space,
especially one that allows customers to easily
switch to a rival, was correlated to annualized
account churn (p=0.038). About 44% of
companies in moderately competitive markets
said they had less than 5% customer defection
compared with 24% claiming the same in highly
contested markets. This finding supports
previous studies showing that when customers
enjoy a range of comparable options and
changing providers is relatively easy and cost
effective, churn tends to be higher.
Companies had less
than 5% customer defection
44%
10
There is good news, however. CEO advocacy is
generally strong for Customer Success with nearly
70% of respondents indicating their top leaders
were in full support. This stands in stark contrast to
just a few years ago when most CEOs seemed to be
on the fence. With a more favorable environment,
Customer Success teams may have better
opportunities to make an impact than ever before.
70%
Say their top leaders
were in full support
11
Actions of Customer Success Teams
Leaders say team structure is something they still
need to figure out. Although Customer Success
teams are currently small in comparison to total
number of employees (about 7%), we calculated
median Customer-to-CSM ratios to be about 500:1
in consumer-based businesses vs. about 20:1 in
enterprise and medium-sized B2B accounts.
Intuitively, a greater degree of personal attention
should lead to stronger relationships and fewer
defections. But unlike anecdotal evidence to the
contrary, our study did not show a conclusive link
between Customer-to-CSM ratios and impact on
either logo churn (p=0.574) or revenue churn
(p=0.876). This type of realignment may be in the
early stages.
12
Asked how CSMs spend most of their time, about
72% said it was on product adoption while only
about 10% indicated revenue expansion. This
finding echoes the Technology Service Industry
Association’s recent study.2
Some have suggested
that changing the strategy to focus CSMs on
revenue expansion instead of product adoption
will lead to better outcomes. It does not appear,
however, that CSM teams’ current emphasis
negatively impacts results: we found no significant
connection between focus and either logo
(p=0.753) or net revenue churn (p=0.278). This
could indicate that both strategies are required
and doing one should not come at the expense of
the other.
2
Platz, J. (2015) The State of Customer Success 2015, Technology Services Industry Association.
72%
Product
adoption
13
Here’s a rundown of the highest customer
success organizations’ priorities.
Tier 1
Improving CSM processes
Improving customer experience
Tier 2
Define processes and metrics
Analyze causes of churn
Improve customer training
Increase cross-functional cooperation
Tier 3
Human resource concerns (hiring, training,
compensating CSMs and structuring teams)
14
Technology Chops
When it comes to enabling technology, many
companies reported gaps. About 39% of
respondents said they had CSM productivity
tools, but 22% of these were platforms not
specifically designed for Customer Success (e.g.
Zendesk, Salesforce). This situation may not
change soon. In the study, only about 4% listed
CSM technology investment as a top priority.
CSM Technology
Investment
4%
15
Chronic Challenges
People frequently commented that reducing
churn remained their top challenge despite
widespread efforts to address it. Improving CSM
productivity, generally defined as doing more with
less, was a continuing area of scrutiny.
Respondents said economically justifying
investments in staff, technologies, improvement
initiatives, and the time and capability to define
and document processes were ongoing concerns.
Finally, finding and hiring CSM talent, given the
limited previous experience of job candidates and
a tightening labor market, also causes tension.
RESUME
16
Conclusions
Demonstrating a significant link between
competitiveness and annualized account churn
our study affirms that SaaS companies must do
what subscription-based businesses in other
industries have known for years: they must
continually differentiate via product value, quality,
and customer attachment to remain viable and
successful. That means executives must maintain a
sharp focus on the entire customer experience,
which transcends the Customer Success function
and includes all dimensions of product, service
and customer interaction. Many SaaS companies
face significant performance gaps, and since
competition will intensify due to low market entry
barriers, increasing customer retention, loyalty, and
revenue growth after the sale become essential for
long-term success.
17
Against this backdrop, Customer Success clearly
plays an important role. As the study shows, most
CSM teams engage early with customers to foster
product adoption and help them realize value.
Some teams actively renew contracts, up sell, cross
sell, and referral sell, something that directly impacts
revenue. But CSMs also have a unique vantage point
from which to see whether their organization
actually fulfills the promises it makes to customers.
This means CSMs may naturally advocate for
customers and promote improvements that go
beyond their job descriptions. Several respondents
prioritized the need to overcome internal silos,
suggesting they are indeed fulfilling this role, too.
Customer Success
is important!
18
There’s much work to do and Customer Success
leaders feel pressure to perform. The study
showed a significant percentage “back on their
heels,” spending time in reactive instead of
proactive mode. Of the people having greater
chaos containment, most said they were
rigorously improving processes and enhancing the
customer experience. They stated that stratifying
accounts, realigning resources, refining customer
training, and adding more self-service options
were among the tactics underway or being
considered. Despite this high level of
improvement activity, however, our study did not
show a clear link between their efforts and results.
19
Finally, Customer Success leaders face a number of
obstacles. They lack clarity in metrics and process. A
minority have adequate tools to do the job. Growth
is hampered by hiring challenges. And despite
strong CEO support, CSM teams must still estimate
ROI from their proposed changes and investments
before gaining approval.
In the coming weeks, we’ll break down each of
these findings in greater detail and provide
recommendations around problem areas.

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2015 Customer Success Priorities Survey

  • 1. CSM PRIORITIES SURVEY BY PREACT AND SERVICE EXCELLENCE PARTNERS 2015
  • 2. Executive Summary This study aims to uncover the Customer Success community’s current priorities as the practice matures. Preact, which provides Customer Success software, and Service Excellence Partners, a consulting firm that specializes in reducing customer churn, collaborated to understand the forces affecting the profession. Our major conclusions: 2
  • 3. 3 Maintaining and increasing sales with customers under contract was one of companies’ biggest challenges, with only 30% of companies saying they’re growing revenue from their current users. Half said they were losing 10% or more in top line renewals annually. Many CSM professionals say they’re firefighting too much. While nearly half reported they were aggressively improving their approaches, about 35% of said they were “firefighting” and 14% didn’t know their annual account churn rate. Say they are growing revenue with current usersOnly 30% 14% Didn’t know annual churn rate ?
  • 4. 4 Intuitively, a greater degree of personal attention should lead to stronger relationships and fewer defections. By contrast, our study did not show a conclusive link between Customer-to-CSM ratios and impact on either logo churn (p=0.574) or revenue churn (p=0.876). Top leaders support Customer Success—70% of respondents said the CEO is fully behind it. This growing level of commitment bodes well for those involved in building and resourcing their Customer Success organizations. Percentage of respondents who said the CEO supports Customer Success 70%
  • 5. 5 The following details our findings and recommendations to increase customer loyalty, expand revenue and bolster productivity. Respondent Profile Service Excellence Partners and Preact collected 78 observations mostly from California and Colorado-based Software-as-a-Service (SaaS) companies. These organizations tended to be smaller with a median of 95 employees. CSM teams were also modest in size with a median of 5 employees. The vast majority of respondents had a business-to-business focus, serving primarily either medium-sized ($10M-$1B revenue) or enterprise (more than $1B revenue) customers with a median subscriber base of around 450 accounts. Survey participants had a range of titles, from individual contributor through senior leader.
  • 6. 6 Responses were kept strictly confidential. The firms promoted the survey through e-mail and social media and boosted response rates with a drawing to win an Apple Watch® . Service Excellence Partners collected data using SurveyGizmo, removed personally identifiable fields, and analyzed results using Minitab 17.
  • 7. 7 The Business Situation The people we surveyed said there’s work to be done. About 55% said their logo churn currently exceeds 5% per year, and 13% reported it was excessive (more than 15%). Maintaining and increasing sales with customers under contract was even more of a challenge with only 30% of companies saying they’re growing revenue from their installed base. Results overall tended to be worse. Half the respondents said they were losing 10% or more in top line renewals annually. Given analyses suggest typical SaaS companies must keep their customers for at least three years to profit from them,1 customer defection remains a significant problem affecting long-term financial success. 1 Skok, D. (2013) SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters. for Entrepreneurs website accessed 6/14/2015. Said logo churn is more than 5% per year55%
  • 8. 8 Many CSM professionals say they’re firefighting too much. While 17% are maintaining control by following processes, and nearly half reported they were aggressively improving their approaches, about 35% of said they were “firefighting” and 14% didn’t know their annual account churn rate. Companies also face challenges growing revenue from their happy customers. Of those reporting very low annual account churn, 40% said they still lose more than 10% of revenue from their customers each year. We didn’t find a strong connection between Customer Success improvement efforts and results, which may imply that team actions are ineffective, the fruit of their work is yet to be realized, or true causes of churn lie beyond the influence of CSM teams (e.g. product value, service quality, customer support, customer fit, etc.). Clearly many companies need help keeping and growing customer relationships.
  • 9. 9 Most companies reported facing moderate to intense competition in their industries. This study showed that being in a highly competitive space, especially one that allows customers to easily switch to a rival, was correlated to annualized account churn (p=0.038). About 44% of companies in moderately competitive markets said they had less than 5% customer defection compared with 24% claiming the same in highly contested markets. This finding supports previous studies showing that when customers enjoy a range of comparable options and changing providers is relatively easy and cost effective, churn tends to be higher. Companies had less than 5% customer defection 44%
  • 10. 10 There is good news, however. CEO advocacy is generally strong for Customer Success with nearly 70% of respondents indicating their top leaders were in full support. This stands in stark contrast to just a few years ago when most CEOs seemed to be on the fence. With a more favorable environment, Customer Success teams may have better opportunities to make an impact than ever before. 70% Say their top leaders were in full support
  • 11. 11 Actions of Customer Success Teams Leaders say team structure is something they still need to figure out. Although Customer Success teams are currently small in comparison to total number of employees (about 7%), we calculated median Customer-to-CSM ratios to be about 500:1 in consumer-based businesses vs. about 20:1 in enterprise and medium-sized B2B accounts. Intuitively, a greater degree of personal attention should lead to stronger relationships and fewer defections. But unlike anecdotal evidence to the contrary, our study did not show a conclusive link between Customer-to-CSM ratios and impact on either logo churn (p=0.574) or revenue churn (p=0.876). This type of realignment may be in the early stages.
  • 12. 12 Asked how CSMs spend most of their time, about 72% said it was on product adoption while only about 10% indicated revenue expansion. This finding echoes the Technology Service Industry Association’s recent study.2 Some have suggested that changing the strategy to focus CSMs on revenue expansion instead of product adoption will lead to better outcomes. It does not appear, however, that CSM teams’ current emphasis negatively impacts results: we found no significant connection between focus and either logo (p=0.753) or net revenue churn (p=0.278). This could indicate that both strategies are required and doing one should not come at the expense of the other. 2 Platz, J. (2015) The State of Customer Success 2015, Technology Services Industry Association. 72% Product adoption
  • 13. 13 Here’s a rundown of the highest customer success organizations’ priorities. Tier 1 Improving CSM processes Improving customer experience Tier 2 Define processes and metrics Analyze causes of churn Improve customer training Increase cross-functional cooperation Tier 3 Human resource concerns (hiring, training, compensating CSMs and structuring teams)
  • 14. 14 Technology Chops When it comes to enabling technology, many companies reported gaps. About 39% of respondents said they had CSM productivity tools, but 22% of these were platforms not specifically designed for Customer Success (e.g. Zendesk, Salesforce). This situation may not change soon. In the study, only about 4% listed CSM technology investment as a top priority. CSM Technology Investment 4%
  • 15. 15 Chronic Challenges People frequently commented that reducing churn remained their top challenge despite widespread efforts to address it. Improving CSM productivity, generally defined as doing more with less, was a continuing area of scrutiny. Respondents said economically justifying investments in staff, technologies, improvement initiatives, and the time and capability to define and document processes were ongoing concerns. Finally, finding and hiring CSM talent, given the limited previous experience of job candidates and a tightening labor market, also causes tension. RESUME
  • 16. 16 Conclusions Demonstrating a significant link between competitiveness and annualized account churn our study affirms that SaaS companies must do what subscription-based businesses in other industries have known for years: they must continually differentiate via product value, quality, and customer attachment to remain viable and successful. That means executives must maintain a sharp focus on the entire customer experience, which transcends the Customer Success function and includes all dimensions of product, service and customer interaction. Many SaaS companies face significant performance gaps, and since competition will intensify due to low market entry barriers, increasing customer retention, loyalty, and revenue growth after the sale become essential for long-term success.
  • 17. 17 Against this backdrop, Customer Success clearly plays an important role. As the study shows, most CSM teams engage early with customers to foster product adoption and help them realize value. Some teams actively renew contracts, up sell, cross sell, and referral sell, something that directly impacts revenue. But CSMs also have a unique vantage point from which to see whether their organization actually fulfills the promises it makes to customers. This means CSMs may naturally advocate for customers and promote improvements that go beyond their job descriptions. Several respondents prioritized the need to overcome internal silos, suggesting they are indeed fulfilling this role, too. Customer Success is important!
  • 18. 18 There’s much work to do and Customer Success leaders feel pressure to perform. The study showed a significant percentage “back on their heels,” spending time in reactive instead of proactive mode. Of the people having greater chaos containment, most said they were rigorously improving processes and enhancing the customer experience. They stated that stratifying accounts, realigning resources, refining customer training, and adding more self-service options were among the tactics underway or being considered. Despite this high level of improvement activity, however, our study did not show a clear link between their efforts and results.
  • 19. 19 Finally, Customer Success leaders face a number of obstacles. They lack clarity in metrics and process. A minority have adequate tools to do the job. Growth is hampered by hiring challenges. And despite strong CEO support, CSM teams must still estimate ROI from their proposed changes and investments before gaining approval. In the coming weeks, we’ll break down each of these findings in greater detail and provide recommendations around problem areas.