When one of your customers receives a monthly bill for your subscription or consumption offering, it's a regular reminder to consider whether or not they are getting their money's worth from your product. Instead of annual renewal conversations that were sufficient for a perpetual product, the customer success formula for XaaS products and services requires a closer, more frequently engaged relationship with customers and more attentive recurring revenue management. This is both an opportunity (to ensure continued value delivery, for increased upsell/expand opportunities) and a burden that requires additional training for sales and support staff, complete reconfiguration of incentive and compensation structures, and a system for managing massive quantities of data.
The upside of successful customer relationship management (and recurring revenue management) within a XaaS model is that it can contribute to reduced customer acquisition costs, reduced customer churn, higher account value, and an overall more profitable and sustainable business model. Within this context, the ability to foster strong (and profitable) customer relationships is referred to as "customer success."
Essentially, customer success is where the provider helps a customer continually achieve their business initiatives. To achieve this, you must understand what the customer's business drivers and needs are and then work together with them to achieve their goals. This positive result establishes a baseline of trust and will pave the way for future opportunities and strategic recurring revenue management with that customer.
How to Create Customer Success
What are the most direct strategies to enabling customer success? Let's take a look at five strategies that work particularly well in a XaaS environment (although they certainly apply across delivery-models and industries):
- Know Your Customers. In order to deliver on your customer's needs and provide valuable solutions to their problems, you first need to know and understand what their problems s are. Use a range of strategies to gather information from customers, including asking for regular feedback. Marketing should also develop a detailed customer journey map that shows the ongoing relationship path, including the likely order of features customers will adopt, the questions and hurdles they face at each step, and the measurable benefit they will realize.
- Target the Right Customers. In order to deliver value and enable success for your customers, they need to be the right fit for your business. They will have needs that can be fulfilled by your offerings, and have the resources, capacity, and budget to implement your solutions.
- Set Expectations In Your Favor. One (well-known) secret to a happy customer is to surprise and thrill them; to not only deliver on your promises, but to go above and beyond. When you deliver ahead of time, come through with a better solution than your customer expected, or provide a better Return On Investment (ROI), they will be thrilled. This strategy also gives your relationship a solid foundation, and you will be better able to deal with any challenges as the relationship evolves.
- Act Like a True Partner. When building a customer relationship based on delivering success, you cannot simply make a sale or close a renewal and walk away. An ongoing, trusted relationship depends on your investment in your customer's success. When you offer expert advice or suggest a solution to a problem—even if your solution holds no resulting benefit for you—you can establish yourself as a real partner and resource. This is a key part of a long-term customer partnership.
- Keep the Customer Engaged. "A customer who doesn't use your product (adoption) isn't going to keep paying for your product," says Neil Patel at Kissmetrics. He goes on to explain that from a survey of more than 1 million XaaS customers, almost every cancelation was "preceded by a period of non-use."
Keeping your customers engaged—meaning making sure they are using and deriving value from your solution—is the number one driver of success for XaaS companies.
How do you keep your customers engaged? One strategy is to always monitor usage logs. When a customer's usage level begins to drop off, or their login frequency declines, it's time to check in to find out what's driving the decreased engagement. Is the solution not working for your customer, and if so, how can you resolve the issue? Addressing engagement decline early on is a great way to prevent churn and strengthen your customer relationships.
Continue to Evolve the Customer Relationship
Have you achieved customer success for your customer? Great! But the challenge with this new paradigm is you need to constantly achieve customer success. Your customers will always have new business initiatives and evolving challenges. Create a plan for regular reviews to explore new business goals, upcoming changes, historic challenges, or new upgrades and features to your solutions.
By helping your customers feel less like a sale and more like a partner, you can establish a platform for an ongoing customer relationship that will support recurring revenue management and long-term revenue growth throughout your transition to a cloud subscription model and into the future. Customer relationships aren't the only hurdle to a successful XaaS transition, but they're an important step to long-term success.
Learn more about the process of transitioning to a cloud subscription or consumption model and the impact on recurring revenue management by downloading our free ebook, “Your Guide to Transitioning to a Cloud Subscription or Consumption Usage Model.”