There are seven different ways to define customer success. Only one counts

Phil Wainewright Profile picture for user pwainewright March 9, 2022 Audio mode
Summary:
There's nothing more important than customer success in today's digitally connected economy - but how are you defining it?

Successful team on pier in silhouette with blue evening sky © crazymedia - shutterstock

At diginomica, one of our pet peeves is the mischaracterization of customer success. It riles us because there is nothing more important than customer success in today's digitally connected economy. It's at the core of what we call the XaaS Effect, where XaaS (pronounced 'x-ass') stands for Everything-as-a-Service, and continuous digital connection allows vendors to engage with customers, monitor their experience, and iteratively improve the contribution they make to customer success.

Trouble is, we often find ourselves at cross-purposes in conversations with vendors. We've come to realize that their understanding of the concept is different from what we have in mind. Despite all their assertions of customer centricity, the metrics by which many vendors measure customer success remain staunchly vendor-centric. Often they're influenced by existing notions of customer satisfaction and customer experience, which are frequently seen as synonymous with customer success (spoiler: they're not). Recognizing that there are many different ways of interpreting the term, I decided to sit down and work out all the various definitions people seem to have in mind when they talk about customer success. I came up with seven — but only one of them really stands up in my view as being fully centered on the customer and the outcomes that really matter to them.

1. Purchase success

I'm constantly surprised to discover that many people seem to define customer success as successfully completing a purchase. Customer experience is about so much more than the sale. I presume this misconception a hangover from the days when vendors weren't digitally connected to their customers and therefore the purchase transaction was the only point of contact — unless the customer subsequently complained. But nowadays there are so many ways of tracking customer success that this metric should be way down the list.

I can concede that it does have some value, in that if an offering is hugely popular then you must be doing something right. XaaS vendors ought to be tracking their renewal and net retention rates, since if customers are churning rather than extending their commitment, it's a sign that something's awry. But any vendor that pops up a survey form as soon as the customer has placed their order to ask how it went is sending a message that the only thing they care about is closing the deal. The same applies, by the way, to enterprise technology vendors who issue press releases when customers sign contracts, long before the product is fully implemented and operational.

The buying experience does matter — it should be smooth, responsive and efficient — but there are very few products (NFTs perhaps?) where the act of buying them is the sum total of the customer experience they provide.

2. Delivery success

Next in line on my hate list are those vendors who want you to rate them as soon as their product arrives. This is one of the most irritating thing about reviews on Amazon. While it's reassuring to know that the vendor does actually ship what you've ordered, the fact that it arrived on time doesn't help me decide whether the darn thing is worth buying.

But as surely as night follows day, as soon as the consignment arrives, there's an email asking for detailed feedback. These emails turn up even if the package itself didn't arrive because the courier delivered it elsewhere by mistake! Let me share some kudos with storage vendor PlasticBoxShop, who actually took the trouble to wait two weeks before asking me to review their product. This exception to the norm shows a rare thoughtfulness about the customer experience.

3. Project success

Customer success in projects is a big deal in the enterprise technology world — and many similar B2B markets — because of the huge amount of work that's needed to get the acquired product ready for use. Even when you're talking about an entirely digital, cloud-based product, it can still take many months to configure the various functions to the customer's specific circumstances, prepare necessary data transfers, train people, and so on. The roll-out may then be spread over many more months, especially in a global organization where each country can roll out separately, or in a multi-function product where it makes sense to delay certain modules until later.

Furthermore, project success when you're dealing with enterprise software is often elusive — many are delivered late, fail to achieve the expected benefits, or are even abandoned entirely. Nor is it solely down to the vendor. Customers also bear huge responsibility to properly resource and manage the project. As Josh Greenbaum notes in his outspoken article on this topic:

It takes all three parties to really screw up a project: the vendor, the service provider, and the customer.

At the end of such a project, it's all too easy to let out a hugh sigh of relief and consider it a success just to have got it done. But as Greenbaum notes: "Lots of patients died on the operating table despite a 'successful' implementation." Helping customers to achieve project success is an important and necessary step forward, but it's not the final destination. In an XaaS world, it's not even the final project, as there will be a succession of further implementations as both the offering itself and the customer's needs continue to evolve over time.

4. Resolution success

Customer service has its own take on customer success. This is one of those cases where the allied notions of customer satisfaction and customer experience muddy the waters. Success is defined as resolving the customer's issue, and whether the customer is satisfied with their experience of how it's been resolved. Internal metrics and processes are then created for meeting those goals, which often have no relationship to the outcome the customer actually wants.

I had an extreme example of this last summer, when I contacted FedEx about a package that hadn't arrived. My call was escalated to one of their top agents, who said all the right things about resolving my issue. That call was a great customer support experience. But it wasn't followed through. FedEx's broken systems meant that the company continued to insist that the package had been delivered and signed for, even though it had no proof of delivery apart from the driver's own declaration.

Customer service is a key touchpoint between an organization and its customers, where agents and field technicians have direct contact with customers and their situation. But it cannot make a realistic contribution to customer success if the function is measured solely on vendor-centric metrics such as resolution times and net promoter scores. Instead, its processes and culture have to be truly oriented around engaging with those customers and understanding what they're trying to achieve.

5. Net promoter success

I have reserved an entire section to squarely direct my ire against the overused and largely bankrupt concept of Net Promoter Score (NPS). Developed almost thirty years ago as a simple means of measuring customer satisfaction, NPS is the reason why so many companies so frequently want to know how likely you are to recommend them on a scale of 0-10. Pretty much everyone knows these days that if you either like or feel sorry for the agent you just spoke to, you should answer this question with a 9 or 10, otherwise they won't get their bonus.

The overuse of NPS in such inappropriate settings over the years has rendered this metric all but useless as a measurement of how your customers feel about you. It's even less relevant to whether they're achieving success, which is a separate issue from whether they like you or not.

Back in the day when touchpoints with customers were few and far between, NPS did serve a purpose. But when digital connection and XaaS business models allow for continuous engagement with customers and prospects, there are many other data points you can collect that will give you a much more detailed view of how they feel about you and your brand. Keep measuring it if you must, but don't rely on it as your sole guide to whether customers are achieving their goals from their relationship with you.

6. Adoption success

Cloud software was the first product to benefit from continuous digital connection to customers and to their usage patterns. This makes it possible to monitor how successfully the customer is using the product, by measuring metrics such as the number of daily active users and the product features they actively use. This monitoring can even identify functions or processes that people's behavior shows they find difficult to use. There are vendors who now specialize in providing software to collect and report on these adoption success metrics, such as Gainsight and Totango.

Such metrics are often the focus of the Customer Success function that you'll now find in pretty much every company in the SaaS industry — and increasingly in other industries too as they too adopt the XaaS model. Gathering data and proactively making sure that customers are making the best use of your product is fundamental to the model, and it's a world away from the old product-centric relationship. Rather than simply making a sale, implementing the product and then sitting back until the customer asks for help, continuous monitoring means that the vendor can pre-empt any difficulties, sometimes even before the customer becomes aware of them. This is in the vendor's interest, because when the customer comes round to renew their subscription, that renewal is much more likely if any issues have already been ironed out and the customer is making full use of the offering.

Adoption success metrics therefore play a core role in enabling customer success, and every company should be paying attention to them. But they still fall short of the whole picture, because whether a customer is making full use of your product or service remains a vendor-centric metric, albeit a very important one.

7. Outcome success

A customer-centric definition of customer success has to focus on the outcomes the customer is trying to achieve, rather than what the vendor has sold them. An example came in my interview with Zuora CEO Tien Tzuo last week, when he explained the thinking behind a new capability that helps customers move towards calculating their revenue recognition on a continuous close basis. Having previously introduced tools that automate revenue recognition, Zuora realized from looking at the usage metrics that customers were still taking an average of 13 days to close their books each quarter. Therefore the company created a new tool that helps customers change their processes to achieve the business goal of getting a much earlier view of their actual revenue.

Another example is spend management vendor Coupa's use of benchmarking to help customers see where their performance lags behind that of their peers, so that they can identify where they need to improve. As well as benchmarking metrics such as supplier risk and approval cycles, its latest offering uses aggregated statistical pricing analyses to suggest items for which they might be able to negotiate better prices.

These are truly customer-centric outcomes, but such examples are still few and far between. It requires an advanced degree of engagement with customers and insight about what matters to them. Most vendors are not even formally gathering data about their customers' business goals when deploying their offerings, let alone measuring their contribution towards achieving those goals. Therefore the conventions and tooling to support this level of maturity in customer success remain at an early stage of development — just as the tooling to support subscription billing didn't exist when the SaaS industry first emerged more than twenty years ago.

Getting this right also means discarding many of the old mindsets that still persist from the old product-centric days when the only customer-related goals an organization could measure or incentivize were sales revenues and support volumes. Once the switch has been made to an XaaS mindset and culture, it becomes natural to refocus on customer outcomes. As more and more enterprises make their way down this path, outcome success will become commonplace and examples of this most mature manifestation of customer success will multiply.

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