Knowing where not to spend your time is as important as knowing where you should spend it. Today’s buyers are more savvy, and demanding than they were just yesterday. They are also more comfortable doing business with multiple providers versus selecting one preferred provider. Left unattended, or worse ignored, buyers will seek to fulfill their needs as quickly and easily as possible. The question for your business is simple: do my customers know everything I can offer them? If you’re like most businesses, the answer is simply “no”, our customers don’t know the depth of our capabilities, and this gap creates a significant risk to future revenue.
Customer Success focuses on three primary areas: increasing customer retention rates, capturing a deeper share of wallet via cross-sell initiatives, and improving Net Promoter Scores. Happy, more satisfied customers, tend to feel better about committing more of their spendable dollars with a business. This translates into buying more products, additional services, or extending current terms of their services. Effective Customer Success models can be measured by evaluating CLTV, or Customer Lifetime Value. An increase in CLTV may be attributable to the effectiveness of your Customer Success program.
So how do you determine whether or not create and launch a Customer Success program? Answer these 7 questions:
- What is the current retention rate on your existing customers over the past 12 months, and further 3 years? If retention rates are low, or declining over a period of time, this is an indicator – although lagging – that a focus on Customer Success may be needed.
- What is your current Net Promoter Score and how often are you measuring it? Low NPS scores can be an indicator of your customers willingness to move, or leave your company. Dissatisfaction, lack of trust, unrealized value, are just a few sentiments that can be traced to low NPS scores. Bottom line, the lower the score the more at risk your revenue is.
- What is the ratio of products per customer? The retail banking industry has long tracked this ratio yet it hasn’t moved much. The average bank has 2.3 products per customer. Wells Fargo for years has been the king of this ratio touting an impressive 3.2 products per customer. Of course this ratio must be evaluated against the total number of products you can offer to your customers. The more products, the higher you want your ratio to be.
- What is your current account management strategy for engagement and interaction? How often are you engaging your current customers? What methods are you using to touch your customers? Email, phone calls, visits, quarterly business reviews? Does your customer have an assigned account manager? Is that account manager’s compensation dependent upon a rise in NPS scores, and/or increase in customer revenue?
- How many referenceable customers do you have? How many customers have agreed to be a reference for your company? How many are willing to provide a testimonial either video or written? How many of your customers are willing to engage in issuing a press release publicly demonstrating their chosen alliance with your company?
- How much of your current revenue is generated from existing customers versus new logo sales? The more reliant a business is on existing customer revenue to make its number, the more exposure that business has to any volatility in customer attrition. Furthermore, if your existing revenue is overweighted with a handful of customers, your revenue risk exposure is even greater. It’s likely time to look at a Customer Success model.
- What is your 3 year history of renewal rates? Have they increased, decreased, or remained the same? If renewal rates are flat, or decreasing you likely have a need for Customer Success.
If your company is experiences decreasing retention rates, low NPS scores, and fading revenue from its existing book of customers, it may be time to focus on developing and implementing a Customer Success model. Remember, your cost of acquisition is already sunk, yet your customer lifetime value can still be influenced. Focusing on building meaningful relationships with your customers translates into increased revenue, improved brand value, and drives new logo sales by providing a stable of referenceable customers who become brand ambassadors.
If you would like to further explore whether a customer success model is right for your business contact me at firstname.lastname@example.org.