Customer Success Management (“CSM”) Systems are a relatively new software category that is finding particular traction with SAAS and other subscription based revenue model customers. What these systems do, is manage the post sale implementation and ongoing customer usage of the system or services with the idea of identifying issues and risks of customer retention (non-renewals) before they happen. For example, customer buys your (subscribes to) SAAS service but isn’t implementing. This lack of implementation, for example, could indicate a high probability of a non-renewal. If they are not using the system, they are less likely to renew their contract than a customer that is using it. Whether a customer implements it but they aren’t using it much or with a more complex metric that compares their use of it to other organizations of similar size and industry would be a metric a CSM measues.
Metrics these systems monitor are things like:
- Number of logins and number of users created
- Use or the lack of use of certain features and functions in the software product
- Amount of customization done by the subscriber to their system
- System engagement and breadth of engagement (how broad is the use of the system)
- Support cases and their resolution (can indicate frustration with the system if “fixed in a future release” or “working as designed” are the case resolutions)
- Net Promoter Score in surveys and their trending for a particular user. Much can also be determined from a customer not filling in the forms
- Amount of data being used and how it is growing (or not)
Gainsight (a leader in the Salesforce add on space for CSM systems) and competitive systems, identify and predict those customers a company is at risk of losing by applying logic rules, (or AI) and a scoring methodology to metric and those metric can be used to drive notifications, reports, dashboards and automated responses.
Every company on a subscription model should have tools like that. I think there is a realization in IT departments that as the number of subscriptions creeps up, CIOs are getting annoyed with subscriptions that people aren’t using. How many of us have found a subscription on our credit card statements and realized we haven’t used the system or service in months? Does Netflix ring a bell! Unlike consumers that can be lazy for small amounts of monthly fees, IT budgets are under constant scrutiny. SAAS and service providers need to be on guard to make sure that subscriptions sold, remain sold. CSM systems can trigger interventions before it is too late.
This is particularly acute with systems that are not central to an operation but are operational enhancement or marketing systems. The less tightly bound the system is to the organization, the greater the risk of non-renewal.
As a final point, SAAS revenue is great! VCs love the recurring revenue model, but the key factor that differentiates the revenue models of SAAS vs traditional software acquisition is that it may take more than a year before a particular transaction shows a profit. The cost of customer acquisition, including marketing and sales, may far exceed the first year subscription revenue. Poor retention will yield poor company profit results.