Moving to a Subscription-Based Business Model?
Here's Why You Need a Customer Success Function
Once you decide to transform customers into subscribers, it's crucial to retain them for the long haul. Robbie Kellman Baxter says investing in a customer success team can help reduce attrition and create long-term loyalty.
San Francisco, CA (February 2019)—More and more companies are looking to move to a subscription-based business model. No wonder: Offering membership to your customers has many benefits. You'll enjoy predictable revenue, enviable cash flow, and the kinds of customer interactions that foster long-term relationships and loyalty. But it's going to be tough to make the transition and stay successful long term without considering customer success.
"You have to engage customers in a forever transaction, and that requires a whole different mindset from what most companies are used to," says Baxter, author of The Membership Economy: Find Your Superusers, Master the Forever Transaction, and Build Recurring Revenue (McGraw-Hill Education, ISBN: 978-0-071-83932-7, $28.00, www.peninsulastrategies.com) and creator of Sales: Customer Success, a class on LinkedIn Learning and Lynda.com. "You must stay constantly connected to the customer, deliver very personalized service, and earn their trust. This is what today's customers want.
"This kind of relationship won't happen on its own," she adds. "You have to get very intentional about it. And many companies are finding that establishing a customer success function is the answer."
Customer success is a functional area that first became popular among B2B software companies, but today is being embraced by all kinds of subscription-based businesses, says Baxter. They realize once they lose a subscriber, it's very hard to win them back—so it's better to make sure subscribers don't leave in the first place.
Here are a few reasons why this function is a "must-have" for any organization seeking to move to a subscription-based model:
Customer success goes far beyond customer service. Customer service is a cost center, and its goal is to resolve complaints as quickly as possible. It's reactive, as reps wait for calls and then respond. In contrast, customer success is proactive and can be a profit center. From the moment of the initial transaction, customer success managers (CSMs) are reaching out to customers to ensure that they are getting value from the products and services they are already paying for.
"Customer success specialists can be the subscriber's BFFs—insiders who engage them and help them get the very most out of their product," says Baxter. "They are problem solvers and connectors. They're a little bit account management, a little bit support, and a little bit consultant. They do whatever it takes to make their customers happy, and work best when they're not hamstrung by bureaucracy."
Customer success prevents churn. It does this by helping members see the full value of your products and services right away. If a service is hard to use—say, a sporting events streaming service—the CS specialist helps new members get set up, find the games they want, suggests others they might be interested in, etc. In other words, CS gets customers engaged and helps them make your product a habit in the days, weeks, and months after they sign up.
"Customer success also keeps customers engaged by periodically checking in to make sure they are using the service," says Baxter. "Engagement is the number-one predictor of retention. If you're not going to the gym, or playing games, or downloading movies, or whatever, you're probably thinking about canceling your membership. The CSM tracks engagement. She notices when something's not right and fixes it before the member cancels."
Customer success wins loyalty through engagement. A CSM is ultimately judged on customer engagement, which is a leading indicator of retention, which leads to revenue and profitability. Additional metrics beyond engagement and retention might include net promoter score (a customer's likelihood to make a referral), actual referrals made, and willingness to serve as a reference. All of these metrics tie to lifetime customer value (LCV).
Customer success fosters trust. "If your mom or a friend called you to ask for help, you'd go out of your way to do what you could for them," says Baxter. "You'd use your smarts to find the answer to their problem, even if it wasn't in your manual. You'd be honest about whether they should or shouldn't upgrade. You'd share insider tips and tricks to get the most out of the services they're paying for. That's what customer success people do every day. It's a powerful thing and it's easy to see how it builds trust."
Customer success is generating the development of new side industries. "Companies like Zuora, Gainsight, and Totango have invested in software optimized to support CSMs," says Baxter. "Their annual conferences are 'standing room only' because so many people are trying to learn about customer success."
Customer success has become a hot new career niche. As companies try to establish strong customer success discipline in their organizations, refugees from customer support, account management, and inside sales are flocking to customer success in search of a more exciting career. In fact, customer success is one of the fastest growing and most exciting careers available today.
Customer success teams are popping up everywhere these days, notes Baxter. Businesses that depend on long-term engagement to maximize LCV, such as retail and consumer subscriptions, are adding CSMs to their teams at lightning speed. A few unlikely brands with thriving customer success functions include Zipcar, Dun & Bradstreet, and Visa.
Baxter says any company looking to upend itself as drastically as it must in order to move to a subscription model would be foolish not to at least consider a customer success function.
"It's right there in the name," she says. "You're helping your customers succeed, not just at the outset but throughout the life cycle of your relationship. When you do that, they'll help you succeed too, which means sticking with your brand for the long haul."
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For more information on the class Sales: Customer Success, please visit LinkedIn Learning here, or Lynda.com here.
About the Author:
Robbie Kellman Baxter is the author of The Membership Economy: Find Your Superusers, Master the Forever Transaction, and Build Recurring Revenue. She is the founder of Peninsula Strategies LLC, a consulting firm based in Menlo Park, CA, that helps companies excel in the Membership Economy. Her clients have included large organiza¬tions like Netflix, SurveyMonkey, and Yahoo!, as well as smaller venture-backed start-ups. Over the course of her career, Robbie has worked in or consulted with clients in more than 20 industries.
Before starting Peninsula Strategies in 2001, Robbie served as a New York City Urban Fellow, a consultant at Booz Allen Hamilton, and a Silicon Valley product marketer. As a public speaker, Robbie has presented to thousands of people in corporations, associations, and universities.
Robbie has been quoted in or written articles for major media out¬lets, including CNN, Consumer Reports, NPR, and HBR.com. She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business.
For more information, visit www.peninsulastrategies.com.
About the Book:
The Membership Economy: Find Your Superusers, Master the Forever Transaction, and Build Recurring Revenue (McGraw-Hill Education, ISBN: 978-0-071-83932-7, $28.00, www.membershipeconomy.com) is available from major online booksellers.
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I’m writing to pass along some new data and insight from J.D. Power based on a recently conducted pulse survey on the same topic that reveals consumer perceptions about the potential of the merger for health options.
J.D. Power's December 2018 pulse survey delves into consumer perception of the CVS-Aetna merger and the prospect of receiving care in a CVS retail pharmacy setting. It generated 1,000 responses. More than half (53%) had visited a CVS store within the previous 12 months and 96% said a CVS store was located less than 30 minutes from their home.
Here are some of the findings:
https://www.linkedin.com/pulse/jd-power-pulse-survey-consumer-perceptions-cvs-aetna-merger-beem/
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