Customer success is an exciting and relatively new concept in business. To be sure, the goals of a customer success initiative have been around for many years. Companies have long understood the importance of delivering value to a customer, and successful sales professionals know that it’s much easier, and cheaper, to nurture a relationship with existing customers than to land entirely new ones.
However, as more companies are moving to deliver their products in a SaaS format, some of the critical leadership members of an organization might not be completely up-to-speed on the importance of ensuring customer success. No, we’re not referring to your company’s C-suite — by now, executive management should be well aware of customer success as much more than a buzzword. We mean your company’s board of directors. Is customer success the sort of metric that boards should be concerned about? Answering that question requires delving a bit into the role of the board, and the basics of customer success and how it impacts that role.
A corporate board guides, even if from a distance
A board of directors is a group of individuals charged with the responsibility of governing a corporation. Day-to-day governance is delegated to management — the C suite of executives that can include the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and others. The board handles “big picture” decisions such as selecting chief executives, reviewing their performance regularly, and governing the organization through broad policies and objectives.
Board members meet between six and eight times a year on average but also get involved in “on-call” situations when an issue arises at the company. Members are often highly literate in finance, with strong leadership experience. They use their expertise and experience to guide a company from a distance.
Customer success might not be apparent to your board
As crucial as a board of directors is to a company, the individual members are often not involved in the day-to-day actions of management and employees. For this reason, boards often look to executives and key employees for education. Customer success is one way to provide a clearer picture of your company’s progress towards its goals through measurable results. And, if your board members aren’t up to speed, you can educate your board on the importance and impact of it.
When relaying information on customer success to your board members, focus on these areas:
Basic financial information
Your board must understand the value of individual accounts. Before you discuss a concept like a churn rate, you should give context to the board members. Average Revenue Per Account (ARPA) lets your board put a dollar figure on churn more easily. But, it is an average, so if you have a wide range of pricing, the figure can be less useful. Other financial information that can help your board understand customer success include Customer Acquisition Cost and Customer Retention Cost.
All providers of subscription-based services need to be mindful of churn rate, as it tells you how many of your existing customers are unsubscribing. If a customer is no longer using the service then, unless the service was for a limited duration project, the cancellation means the customer was not achieving the right level of success.
Use and adoption
Are your customers fully using your solution? Are they using the solution to its fullest potential? It’s entirely possible that a new customer might not understand all of the features that your product provides. But, a disengaged user is a big risk for cancellation. Surveys or account managers follow up emails can ask questions about usage, and any gaps addressed.
Net promoter score (NPS)
NPS is a metric that reflects existing customer opinion on a company by asking the likelihood of referring customers to the company. A high NPS means you have many fans. A lower score means your company has a problem. NPS is collected via survey and can help identify accounts that may need customer success team intervention.
Your board should know the pertinent metrics and understand your strategies to improve customer success in any areas that are lacking. It provides some of the most illustrative and concise information on a SaaS company’s own success.
Customer success should be on everyone’s minds
Another reason for the importance of customer success to your board is the importance of making it a company-wide endeavor, and that includes the board. If your company is looking for the transformative benefits of a new focus on customer success, then the effort must lead from the top-down.
It boils down simply to the overarching importance of customer success. SaaS companies cannot wish for the best and hope that customers will be wowed by their product and never need to be sold again. In fact, with SaaS, you stand before your customers every month and ask for a renewal. And every month without measurable and recognized value means you risk losing your existing customers at a higher rate than your customers.
In other words
Should your board care about customer success? If they do not know what it is or do not have it on their agendas at every board meeting, then it’s executive management’s role to educate the board. This education is not only on the benefits of evaluating customer success but also on the specific metrics for your company. Measuring it helps facilitate accurate communication with the board.
SmartKarrot helps businesses scale and operationalize Customer Success by improving loyalty, adoption, and overall lifetime value.