In our ‘View From The Top’ Series, we’re bringing together top C-Suite leaders and investors in the software industry to share their stories and elaborate on why investing in customer success has become a must-have for any business today. We’ll hear how these leaders have invested in customer success to help their entire organization increase revenue, reduce churn and drive business outcomes.
In this episode, we sat down with, Mike Vandiver, CFO of Tricentis, to discuss why customer success is critical to subscription companies, how to segment CSMs by tiers of customers, the importance of renewal and expansion revenue, and what’s at stake for companies that aren’t investing in customer success.
There’s been a shift from customer success being looked at as a cost center, to customer success as a revenue driver, especially as companies consider how important renewals and expansion revenue become over time. How do you view customer success?
Vandiver: For any subscription company, this function is critical and we view customer success as a key function with the goal of ensuring retention and expansion with our customer base. We regularly measure and report to the executive team and the board, the macro metrics of gross and net retention, so the keen focus is on that. Tactically, our CSMs are tasked with fully understanding the goals of our customers as it relates to our customers’ use of the product, as well as working jointly with the customer to ensure that they achieve these goals.
The team is focused on regular updates with the customers to understand if the customer’s goals or IT environment change, to provide the customer data on how we continue to add value to the customer. Also, if there are any changes in key customer personnel that impact the sponsorship of our products. You want to be out in front with the customer, understanding their environment and making sure that you’re driving value.
“You want to be out in front with the customer, understanding their environment and making sure that you’re driving value.”
We segment our CSM team by tiering of customers. For smaller customers, we have a fully digitized form of engagement. Everybody gets some form of engagement. Of course, not every customer is created equal, but we’ve allocated a material amount of headcount to this function. And we’re focused on ensuring that we have CSM coverage for key accounts. A subset of our customers account for about 75% of our ARR, and we view it as a very strategic function. Once again, if the hole in the bottom of that bucket is too big, you’re never going to offset it with sales, so you better make sure you keep those customers.
Not every customer is the same; that’s true. And, at each of those customers, not every user of the product is the same. And they’re all in different stages of the journey. It’s great that you’re getting out in front of it, being proactive with watching that customer help and any type of retention risk. And it sounds like there’s a board-level metric that you report up.
Vandiver: It’s a key focus of the board and executive team understanding, what our gross retention is, and then what our net retention is.
Customer success might even be one of the most critical teams in the company, and yet, so often it is one of the least talked about departments within the company. What’s your take on why?
Vandiver: I think it’s a function that most companies are focused on and heavily monitor sales. It’s just natural because the sales function is sexy, and it clearly is a key visible driver of growth. And the CS function is post-sales. And it’s critically important to any subscription business, but it’s a little bit like the offensive line in football. No one notices until someone misses a block, right? And then everybody notices.
“Customer Success is like the offensive line in football. No one notices until someone misses a block, right? And then everybody notices.”
The activities that CSMs are responsible for are longer-term in application, as well as impact. You’re building a relationship, you don’t see the results of that until someone comes up for renewal, and depending if you have one or three-year contracts, that impact could be delayed.
We live in a world of short attention span, unfortunately. Most people, it just fades from their memory, unless we have an issue with retention. That’s why I think it’s really critical that the executive team carry the banner for the CS organization, and make sure that the organization understands what that team is doing every day and the criticality to everyone’s success.
What do you consider to be the stakes for companies that aren’t investing in customer success?
Vandiver: I think over the longer term, it’s just pure survival for the company. The company’s future is at stake if they don’t invest to manage this function properly. The subscription business model is dependent upon keeping your retention at a high rate – 90% or north preferably and continuing to show value to the customer.
Every software market these days is getting hyper-competitive, and the switching costs are steadily decreasing. You have to regularly engage with your customer to show value and expand that value proposition over time. It’s one thing to show value, kind of an outset value, but you have to continue to hone that and improve on that. If not, the customers will find a competitor that will do that.
Stay tuned for more interviews in our ‘View From the Top’ Series to hear why other organizations are investing in customer success.
If you want to hear the full audio recording of Mike’s interview, you can listen to it here. Have questions about retention? Head over to our Success Masters Community to chat with like-minded C-Suite leaders.