What's the Secret to Keeping Repeat Customers Committed to Your Business? [Part 1]

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You should consider creating a customer success organization unless your business loves to chase new customers to maintain current sales levels and then grow.

Why? Because Customer Success is a synonym for Customer Value Creation.

And people buy products and services for one reason – they need the value they will get from buying and using what you are selling. The sooner they start receiving value and the longer they keep receiving value, the longer they will remain a customer.

The opposite of remaining a customer is leaving or churning. According to Lincoln Murphy, the leading Customer Success expert, “Churn is just a symptom of an underlying disease. That disease is that our customers are not achieving their Desired Outcome.”

What Does It Mean When a Customer Churns?

To better understand churn, here are some critical churn statistics from Small Business Trends that you should keep in mind about the importance and impacts of customer churn rate:

• 65% of a company’s business comes from existing customers.
• The probability of selling to an existing customer is 60-70%; The probability of selling to a new prospect is 5-20%.
• 80% percent of your future profits will come from just 20% of your existing customers.
• A typical American business will lose 15% of its customers each year.
• The average repeat customer spends 67% more in months 31-36 of their relationship with a business than they do in months 0-6.
• A 5% increase in customer retention can lead to an increase in profits of between 25-95%.
• A 10% increase in customer retention levels results in a 30% increase in the value of the company. 

These statistics create a compelling case for reducing customer churn and time to value to gain the benefits of selling additional products and new services and capabilities for the existing products. 

What Is Customer Success, and Why Is It Critical?

According to the Customer Success Association, “The mission of Customer Success is to increase sustainable proven value for both the Customers and the Company.”

And according to Gainsight CEO Nick Mehta:

"Customer Success is the business methodology of ensuring customers achieve their desired outcomes while using your product or service. Customer Success is relationship-focused client management, that aligns client and vendor goals for mutually beneficial outcomes. Effective Customer Success strategy typically results in decreased customer churn and increased upsell opportunities."

The early roots of the Customer Success profession were in the software industry. According to the Customer Success Organization, here is a brief summary of the three earliest documented cases where customer success took hold.

1. 1996-1997 - A CRM Company called Vantive: John Luongo, Vantive’s CEO, had encountered a very innovative usage of his company’s application by a customer and wanted to bring that innovation back to Vantive. The newly hired Head of Service created a new department, called Customer Success, and began introducing the team to prospects prior to the signing of the contract. “This is the Customer Success team that’s going to ensure that you’re successful in using Vantive. And their compensation is based on your success.”
   
   
2. 2004 - Siebel On-Demand: Bruce Cleveland became the General Manager of the on-demand subsidiary of another CRM company: Siebel. After taking a thorough look through his new organization, he realized that while he felt confident of the Sales team’s ability to bring in new business, there was no one specifically responsible for retaining and expanding the customer relationships post-sale. Bruce recognized that the customers who were realizing the most value from their usage of the company’s application were the least likely to churn. So, he created a new organization that would be responsible for increasing the customer's usage of the application feature set and thereby the value to the customer. He also named this new group of roles the Customer Success Management team. (Oracle acquired Siebel in 2006).
   
   
3. 2005 - Salesforce and “Customers for Life”: In 2005, there was good news and bad news at Salesforce, a software as a service CRM business. The good news was that the company was acquiring new customers at a stunning rate. The bad news was that customers were churning in horrific numbers. Like Bruce Cleveland before them, Salesforce’s executive team quickly realized that bringing in new customers couldn’t be the end of the story and that there was no way to add enough new customers to survive if they were leaving in greater numbers.

How Salesforce's Challenge Led to the Rise of Custom Success Teams

Salesforce didn’t invent Customer Success (CS) as a new profession, but the company quickly built what was then the largest CS department in the industry. The group was (and still is) called Customers for Life, and while it was not responsible for renewals, up-sells, or cross-sells, it was specifically chartered to address customer retention by increasing user adoption.

Today, all types of businesses all around the world use customer success teams! And the reason is straightforward:

1. People buy products and services because they need and/or want the outcomes achieved from using their purchases. 
2. If they do not achieve the desired outcomes, or if the outcomes take too long to materialize, the buyer will be disappointed and may either not sign-off on the purchase, not fully use it, not buy services and parts, and definitely not recommend the product to their friends and associates.
3. The seller has all the costs associated with acquiring and setting up the customer and will not achieve their desired long-term payback from a happy user.
4. Therefore, the astute seller will do everything possible to ensure that each sale results in a successful buyer who will use, upgrade, recommend, and buy more products with minimal additional selling expenses.

As my British friends would say at this point: “And Bob’s your uncle.”

["Bob's your uncle" is a phrase commonly used in Ireland, United Kingdom and Commonwealth countries that means "and there it is" or "and there you have it." Typically, someone says it to conclude a set of simple instructions or when a result is reached.]

This article is the first in a two-part series on customer retention through a focus on customer success and consistent custom value. The second article in this series can be found here.

Sam Klaidman is the Founder and Principal Adviser at Middlesex Consulting. He helps his B2B product manufacturing clients grow their services revenue and profitability by applying the methodologies and techniques associated with the Customer Value Creation and Customer Experience professions to assist his clients as they design and commercialize new services and the associated business transformations. Contact Sam here.

Image Credit: Olivier Le Moal / Shutterstock