While the acronym SaaS was originally coined in 2001 by SIIA (the Software & Information Industry Association), subscription software grew legs in the first decade of the 21st century, and by 2010 was a $10 billion industry. It’s now about $90 billion and growing. When software companies made the shift from selling out-of-the-box (perpetually licensed) solutions to cloud-based subscriptions, the selling/support model changed. Renewals became more critically important – VALUABLE – than ever. SaaS companies needed to know how to continue to capture new market opportunities, and capitalize on existing customers for upselling and renewals at the same time.
Knowing that 90 % of the lifetime value from a given customer would happen through subscsriptions after year one , SaaS execs tried a variety of models for capturing renewals. The given was that they needed to continue to demonstrate value to their customers. But, how would they do this? In many cases, they offered nominal commission incentives to sales teams (often members designated as Account Managers) to garner renewals, while they were still actively working upselling and cross-selling opportunities within their accounts. The problem with this model was that customers didn’t want to feel as though they were continually being asked about renewing, and since the big money was in new business, this model didn’t always prove fruitful. Additionally, this Account Management approach was costly.
Essentially, sales efforts weren’t focusing on knowing the customer’s needs and experiences. Nor were they focused on ensuring the customer was gaining value from their platform.
Realizing that the customer needed to be central in the renewal equation, the first iteration of Customer Success (somewhere around 2010) involved hiring relationship people onto Customer Success teams. Often these people came from the marketing arm of the company. While these new CSMs were not as costly as their Account Manager counterparts, they were still fairly high ticket resources, but the hopes were that their relationship skills would pay off in securing stronger ties with customers – and thus, the elusive renewals. Unfortunately, this model for Customer Success lacked technical expertise , cost organizations a significant amount of money, and still didn’t truly hit the mark. While the relationships were strong, customers weren’t getting all their platform needs met.
So, execs began looking for an alternative way to secure renewals using a Customer Success approach. V 2.0 came in the form of moving a different type of resource into the Customer Success department, project manager types who knew how to marshal resources to address problems. They were provided account background information, basic product knowledge, and a new title of Customer Success Manager. These resources had fairly decent technical skills, but often lacked the relationship skills that are essential in Customer Success as we’ve come to know it. They could find the answers to questions, or identify the right resource, but when it came to listening to the customers’ needs (desired outcomes) and working consultatively with them through a process, they weren’t fully equipped to add real value to the relationship. This was a step in the right direction, but Customer Success 2.0 didn’t quite cut the mustard in terms of reducing churn.
Before we get to Customer Success 3.0, let’s pause to look at how SaaS companies have been supporting their Customer Success teams. (Let’s assume everyone had some need to advance beyond sticky notes to manage their work.)
As we at Bolstra lead the way to Customer Success 3.0, we think of it as supporting the true unicorns of Customer Success Management. We now know that the model for Customer Success must incorporate knowledge of the platform, strong relationship skills, AND the ability to provide expert services to our customers. They’re hard to find, but critical in the elusive renewal models. Often times they can be found within our pre-sales or field resources. Solution architects may also make good CSMs. All of these people are accustomed to listening to customers and recommending personalized approaches to meet their desired outcomes. These unicorns of Customer Success have hard jobs that require the ability to juggle multiple and varied needs across numerous accounts, and, most importantly, do so before the customer asks. A platform that truly compliments this work effort must trigger those events/needs proactively in order to enable the CSMs to do their job well.
And, since it’s a new year, and we’re feeling confident, let’s go ahead and make some predictions about CS 4.0. As CS teams become stronger and more enabled in organizations, they will become the bridge between product and sales, and their implicit value will only grow. Many customers are in need of professional services, in addition to software. CSMs, because of their technical knowledge and customer relationships, are fast becoming the right resources to provide those services. CS 4.0 is where the Customer Success Manager’s role becomes monetized, essentially paying for itself. Supporting the CSM in their work has never been more important. In fact, we’d say it’s THE critical element in getting the math to work in the renewal game.
Don’t just stay tuned. Join us.