Across the nation, companies of all sizes are focusing on customer success. It’s a smart move because, depending on a range of factors, it can cost up to five times more to acquire a new customer than it does to retain an existing one. What’s more, according to some estimates, the close rate for new customers ranges from 5% to 20%, whereas the conversion rate for upselling or cross-selling existing customers can top 60%. Let’s say it costs a software company $3,000 to acquire a new enterprise-level customer, losing just ten of them will mean a $30,000 loss. Additionally, the company will need to spend another $30,000 to make up the revenue.
It should come as no surprise to anyone that finance teams across the country are actively promoting robust customer success programs within their organizations. To CFOs, it just makes good financial sense to invest in customer success.
What is Customer Success?
Customer success isn’t the same as customer support. Customer success is all about ensuring your customers derive real value out of the products or services you sell them, and it requires a different level of skill set. Customer support is reactive — one waits for a customer to raise his or her hand to report a problem. Customer success is proactive — it’s constantly asking oneself: did my customer benefit from their interactions with my brand? Is the product performing to their expectation? Are we exceeding the promises we made? It’s also defining the right metrics that will best allow you to measure success.
Customer success should also be continuous. With each engagement, a customer success-focused company asks: Did that go as well as the customer hoped for? What can we do better with the next customer? And most important of all: Is our customer better off now that they use our product or services?
As you can see, customer success is a mind set of constant evolution with an eye towards improvement.
Where the Finance Team Fits In
The finance team has an important role to play in delivering customer success. First and foremost, they can help the company understand which kinds of customers (industry sector, size, locations, etc.) are most likely to succeed with each product, which is instrumental in extending the lifetime value of their customer base. This insight can then be deployed throughout the organization in strategic ways. For instance, it will help the marketing department target the most profitable customers and sales teams to close deals.
Equally important, the finance team can profile customers who don’t succeed with a product or service and remove them from their acquisition initiatives. If customers in retail tend to not have success with a particular software provider, it makes sense for that software company to focus its efforts in other industries. Of course, successful and unsuccessful customer profiles are more complex and nuanced than this example, but the finance team has the skill set to look at all the variables that spell success, and tie them together in meaningful ways. For instance, they can look at total acquisition, onboarding and ongoing customer care costs by product and market, map it to customer attrition rates, and offer strategic advice for honing the sales, marketing, product development and customer care strategies.
The finance team can also be tapped to identify areas that are ripe for optimization — an essential goal of customer success. Did a customer implementation take longer than others of similar scope and requirements? What was the cause of the delay? Did it require an implementation manager to fly out to a customer location? By monitoring when and where costs go above the norm, the finance team can help the organization identify trouble spots, thereby enabling the company to provide better service to customers and promote customer success.
In our company, the finance team has helped us optimize our organization, including restructuring customer-facing teams in order to deliver better services faster, which has driven our customer success. For instance, we presented a compelling case for merging multiple customer-facing teams into a single Customer Success department led by a VP that reports directly to the CEO. As a software company, we naturally have high customer acquisition costs, and it’s a smart strategy to elevate customer success to the highest level in the organization. Our customer attrition rates are low.
I hope more companies invest in customer success in the year ahead. It’s a wise move to constantly think about how you can drive even more value to your customers. When building your customer success strategy, don’t forget to tap your finance team, because their insights are critical.