Rethink the way you look at customer service and customer success, and see the latest data from TSIA's Customer Success & Support research team.

1. The Key Capabilities of Customer Success
10.20.2014
1
Judith Platz
VP of Research
Customer Success and Support

2. Content
• Support Services Expansion
• Survey Overview
• Respondent Demographics
• Three Profiles of Customer Success
• Customer Success Organizational Models
• Recommended Practices
2

3. Support Services Expansion
10.20.2014
3

4. Support Services Scope Expansion
• Traditional support model assisted customers with break/
fix and availability
• Demand for vendors to take active role in product/
service success
• SaaS companies experiencing large amount of churn
• Success is now viewed as a competitive differentiator
• New revenue streams are being created
• Support Services has infrastructure that can be
leveraged
4

5. The Support Services Pendulum
5
Customer
Experience
Cost
Reduction
Revenue Gen

6. Fundamental Shift
• Professional Services stands up the customer.
• Education Services provides technical training.
• Customer Support makes sure the system is available.
Customer Success is about adoption, retention, expansion and
overall Customer Success with our products/services.

7. Audience Question
• Does your company have a Customer Success
Organization?

8. Survey Overview
10.20.2014
8

9. Survey Overview
• In August of 2014, TSIA opened up a forty question survey to the TSIA community.
• The objective of the survey was to establish a baseline regarding fundamental
practices and performance metrics related to the Customer Success function.
• The survey collected data on key performance metrics such as:
– Customer Success revenues (if revenue generating Customer Success offers were in place)
– Annual budget for the function
– How budget dollars are allocated between cost to deliver services, offer development, G&A,
etc.
– Average cost of a Customer Success Manager (CSM)
– Compensation structure for CSM (base, variable, incentive)
– How many customer one CSM manages
– How do CSM’s spend their time
– Revenue renewal and customer churn rates
• The survey also tested critical practices related to delivering Customer Success offers
such as:
– Where does the Customer Success function report?
– When is Customer Success first introduced in the customer life cycle?
– Can Customer Success monitor customer activity remotely?
– Has Customer Success developed and documented an adoption framework it can use with
customers?
– Is Customer Success responsible for renewing customer accounts?
– Does Customer Success have a specific target for expanding customer account revenues?
9

10. Summary Findings
• 169 companies participated in the survey, but only 30 were able to answer all 40
questions—this speaks to how relatively new this capability is to most companies (27
months is the median tenure for Customer Success organizations responding to the
survey).
• Analyzing the data, it is clear that there are three distinct profiles for Customer
Success organizations (CSO):
– Adopters: CSO is mainly focused on helping customers adopt company offerings
– Retainers: CSO is mainly focused on making sure the customer renews their relationship with the company.
However, this does not necessarily mean the CSO is directly responsible for renewing the customer contract
– Expanders: CSO is mainly focused on expanding account revenues
• The profile of the CSO (Adopter, Retainer, Expander) influences key practices such
as:
– Compensation models, hiring profiles, CSM to account ratio, etc.
• It is clear from the data that many CSO’s are in the early phases of establishing and
successfully tracking critical financial and performance metrics such as margin, Offer
development costs, Customer Churn rate, etc. (The median number of employees in
the CSO was 18, with a range from 600 to 1).
• Only 8% of the 169 responding companies reported revenues from Customer
Success activities. However, 50% of the CSO’s that were able to complete the entire
benchmark reported revenues from Customer Success activities indicating the
premium, fee based offers are a marker for a maturing Customer Success capability.
10

11. Respondent Demographics
10.20.2014
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12. Sign of Youth
TSIA Customer Success Baseline Benchmark
82%
45%
18%
6%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Could not answer all 40
questions
Could answer at least 40%
of the questions
Could complete the entire
benchmark
Could complete the
benchmark AND know the
actual gross margin of their
Customer Success
revenues
N= 169
Source: TSIA 2014 Customer Success Baseline Benchmark 12

13. Company Types
(76 Companies)
13
Company Types
Software
49%
Services
9%
Hardware
13%
SaaS
29%
Software SaaS Hardware Services

14. Tenure of Customer Success Capability
Median Number of Months Customer Success capability has been in place
26
15
48
6
60
50
40
30
20
10
0
ALL
Respondents
Adopters Retainers Expanders
Source: TSIA 2014 Customer Success Baseline Benchmark 14

15. Three Profiles of Customer Success
10.20.2014

16. Three Profiles of Customer Success
80%
70%
60%
50%
40%
30%
20%
10%
0%
What % of CSM time is allocated to the following activities?
Adopters Retainers Expanders
Adoption Retention Expansion Other
Source: TSIA 2014 Customer Success Baseline Benchmark 16

17. Participant Profiles
40%
37%
10%
13%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Adopters Retainers Expanders None of These
Profiles
% of respondents in each profile
Source: TSIA 2014 Customer Success Baseline Benchmark 17

18. 18
Driving Adoption
Percentage of Customer Success organizations that
have a dedicated analytics team: 60%
Percentage of Customer Success organizations that
can monitor consumption remotely: 57%
Percentage of Customer Success
organizations that have data models to
predict renewal: 50%
Percentage of Customer Success
organizations that have formal
adoption framework: 43%
Source: TSIA 2014 Customer Success Baseline Benchmark

19. Do you have a resources dedicated to
Customer Analytics?
60%
66%
25%
70%
60%
50%
40%
30%
20%
10%
0%
Retainers Adopters Expanders
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20. Can the Customer Success Rep remotely
monitor actual customer usage and
activity?
54%
66%
75%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Retainers Adopters Expanders
20
Is this data being mined for usage feeds to reduce cost of service to customers?
Is this data being mined to create service offerings that will help customers improve their ability to
leverage your product?

21. Do you have a defined Adoption
Framework?
50%
54%
25%
60%
50%
40%
30%
20%
10%
0%
Retainers Adopters Expanders
21
An Adoption Framework assesses how well a customer is adopting and leveraging your technology

22. Who Owns Customer Renewal?
23%
33%
0%
14%
32%
0%
40%
35%
100%
14%
1% 0%
120%
100%
80%
60%
40%
20%
0%
Adopters Retainers Expanders
Customer Success Renewal Specialist Product Sales Rep Channel Partner
Sales Account reps are TWICE as likely to be responsible for renewal as opposed to a Customer Success rep.
Source: TSIA 2014 Customer Success Baseline Benchmark 22

23. Churn Rates
What is your annual customer churn rate?
21%
18%
Thought: Not fighting
high churn—focus on
expanding revenues
from table customer
base
8%
25%
20%
15%
10%
5%
0%
Thought: Fighting high
churn so Customer
Success created to
keep customer
engaged.
Adopters Retainers Expanders
Source: TSIA 2014 Customer Success Baseline Benchmark 23

24. Do you use predictive models to predict
customer churn and customer retention?
60%
54%
25%
70%
60%
50%
40%
30%
20%
10%
0%
Retainers Adopters Expanders
24
Customers will not abandon technology they are using on a daily basis. The ability to drive
account renewals in a systemic, predictive manner will be the hallmark of best-in-class Customer
Success. Do you understand the key metrics that will predict a renewal?

25. Audience Question
• Do you currently charge customers for Customer
Success services?

26. Generate Revenue from Customer
Success
What % of these Customer Success organizations have
revenue generating Customer Success offers?
50% 50%
75%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Adopters Retainers Expanders
Source: TSIA 2014 Customer Success Baseline Benchmark 26

27. Does Customer Success have a specific
target for expanding revenues within
existing accounts?
30%
38%
50%
60%
50%
40%
30%
20%
10%
0%
Retainers Adopters Expanders
Have Specific Expand Target
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28. Average Revenue per Customer Success
Rep
$4,360,000 $4,400,000
$5,400,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
Adopters Retainers Expanders
Source: TSIA 2014 Customer Success Baseline Benchmark 28

29. Audience Question
Do you currently offer Customer Success services to ALL
of your customers?
A. YES
B. NO

30. Do you offer Customer Success services
to all customers?
30

31. Organizational Models
10.20.2014

32. Where does Customer Success live?
Sales
Technical
Support
Professional
Services
Managed
Services
Customer
Success
Education
Services

33. Where does Customer Success report?
Less than 10% of the time
Customer Success reports to the Support Services executive
Source: TSIA 2014 Customer Success Baseline Benchmark

34. Where Does Customer Success Report?
75%
23%
2%
80%
70%
60%
50%
40%
30%
20%
10%
0%
CEO/President Global Services or
Support
Sales
Source: TSIA 2014 Customer Success Baseline Benchmark 34

35. Audience Question
• Where does Customer Success report in your
organization?
– CEO/President
– Global Services/Support
– Sales
– Other

36. Where CSMs Come From
40%
What % of CSMs are hired from the following
resource pools?
32%
3%
41%
31%
27%
9%
17%
30%
1% 1% 0%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Adopters Retainers Expanders
Customer Support Professional Services Sales and Marketing Product Group
Source: TSIA 2014 Customer Success Baseline Benchmark 36

37. Average Cost per Customer Success Rep
$136,264
$99,000
$154,000
$180,000
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
Adopters Retainers Expanders
Source: TSIA 2014 Customer Success Baseline Benchmark 37

38. CSM Compensation Models
What % of CSM compensation is based on:
84% 84%
78%
12% 12% 10%
4% 4%
12%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Adopters Retainers Expanders
Base Variable Incentive
Source: TSIA 2014 Customer Success Baseline Benchmark 38

39. Recommended Practices
When Establishing Customer Success
10.20.2014

40. Summary Recommendations
• Based on this first pass benchmark, TSIA would have the following
seven recommendations for optimizing an emerging Customer
Success function:
1. Clearly establish the initial charter of Customer Success
– Most likely adoption, then retention, then expansion
– Ultimately Customer Success should be cost effective capability for all three
2. Align hiring profiles and compensation models to your core charter
3. If establishing a separate Customer Success organization, have it report
directly into a neutral C-Level executive (Not Services or Sales executive)
4. Invest in dedicated Analytic capabilities
5. Develop predictive models for retention
6. Develop a formal adoption framework for assessing customer adoption
rates
7. Develop fee based offers to complement services that are provided for
free.
– We learned this lesson with Education, Professional, and Support Services
40

41. Thank you
Judith Platz
VP of Research
Customer Success and Support
Judith.platz@tsia.com
10.20.2014