United Airlines had a challenging week.
First, a video went viral of a passenger being dragged off the plane. CEO Oscar Munoz apologized for “having to re-accommodate … customers.” Then, in the face of a looming lawsuit, he issued multiple additional apologies. Most recently, a couple was kicked off a United flight on their way to their wedding after sitting in the wrong seats, reigniting more negative publicity and late-night TV jokes.
United’s handling of and initial response to these incidents reinforces a two-word HR and management key – customer success – with huge implications for those in HR, management or customer-facing roles.
Why is Customer Success So Important?
“If a company does not view customer success as strategic, not only will they have higher churn, but they will also lack the customer insights necessarily to be truly successful,” says Evan Liang, CEO and founder of LeanData. “When I hired my VP of product, I made him own customer success because I felt I couldn’t trust his product roadmap unless he had full transparency into how our customers were using our product.”
Indeed, in the world of high-tech and software, the importance of customer success can be even more pronounced. Look at the large SaaS companies that have gone public in the last five years – including Box, Atlassian, Twilio and Coupa Software. They all have at least one thing in common: Each has become great at customer success.
What exactly is customer success?
“Customer success is at the heart of our mission and purpose here,” says Leandra Fishman, senior vice president of sales and customer success at SendGrid, which has 120,000 active customers and 45,000 paying customers. “We define it as our ability to provide world-class service directly aligned with the customer’s goals.”
The essence of SendGrid’s definition is nicely captured with this description from the 2016 book “Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue.” The authors, Dan Steinman, Nick Mehta and Lincoln Murphy, define customer success as “delivering on the sales promise.”
Why is it so critically important to deliver on that sales promise? Bryon Deeter of Bessemer Ventures answers simply: “Customers can walk.”
The Customer Success Revolution
With the increased importance of customer success, HR changes are coming. Customer success is still too often categorized as account management or support, but today’s subscription business models depend on proactive engagement to drive return business and upsell revenues. Furthermore, with online transparency and social media, word-of-mouth spreads faster than ever – and the penalties for poor customer experiences have never been higher. Witness United Airlines and the multiple customer videos. Customers are increasingly vigilant and vocal in holding businesses accountable.
What Are the HR and Training Implications?
Customer success remains nascent and inconsistent across companies. In Totango’s 2016 Customer Success Salary Survey & State of the Profession Report, 75 percent of companies reported teams younger than three years. Today, customer success teams often own many important performance metrics ranging from repeat customer revenue to customer onboarding to upsells.
The function can sit prominently – or be buried – in multiple places in the organization, including Sales, Support, Marketing, Operations or Finance. In more traditional businesses, such as airlines, customer success principles can and should be taught and reinforced throughout the organization.
Many senior executives have traditionally overweighted new customer acquisition and undervalued customer success. This dynamic is now changing, particularly in high-growth or rapidly changing businesses. For example, the laws of subscription economics in many tech-driven businesses lead to existing customer revenue quickly outpacing new customer revenue, often within four years, as highlighted by Redpoint’s Tomas Tunguz.
HR and Training Keys to Customer Success
Earning a customer’s business year after year is a company-wide engagement across Sales, Client Services, Product and Engineering. Effective mobilization requires buy-in at the executive level. Many companies address challenge this by employing a chief customer officer. If customer risk is not well understood and addressed at the executive level – independent of shorter-term sales-based incentives – the customer voice may not be heard, thereby damaging the business.
Just as customers need to be managed proactively, so, too, should management of customer success efforts. Changing and emerging companies often wait to focus on customer success until customer complaints spike. This mistake results in lost customers and higher churn, which have long-term revenue and reputational impacts – and can quickly force companies out of business.
Enhancing customer success in an organization requires an iterative approach to ensure optimal team structure and incentives. Customer success principles should also be elevated and instilled throughout the company, starting with employee hiring and continuing with ongoing training efforts for all employees, particularly those in management and customer-facing roles.
These principles will help increase customer satisfaction and maximize lifetime value with the customer.
As United Airlines experienced this past week, Jimmy Kimmel is not as fun to watch when he spends five minutes denigrating your company. So, make customer success a guiding principle of your business, and continue to adapt your HR and training efforts accordingly.