How Low Can You Go?! Customer Success for Your SMB Segment

November 04 2019 0comment

Some foundational questions still require attention in our growing customer success community. These questions include customer success funding and reporting, as well as appropriate customer segmentation. As SaaS companies mature, they are presented with bigger challenges that are associated with scaling.

Over the years, TSIA has conducted surveys, published researches, held webinars and virtual summits in the customer success community. These efforts are geared towards presenting viable solutions to the challenges of building customer success at scale. Mature SaaS companies are generally more concerned with the elements of scaling customer success. Their inquiries include the best approaches to:

In this blog, we’ll explore the discoveries of one of such TSIA studies on creating an effective customer success strategy for the long tail of customers. Starting with segmentation strategy, we’ll discuss observations from the study and popular myths.

Segmentation Strategy

Proper customer base segmentation precedes an effective low touch/digital customer success strategy. Customer-centric businesses aim to deliver excellent customer experience at all levels of segmentation. However, a growing customer base results in limited CSM resources. Interestingly, the best customer experience doesn’t always require a Customer Success Manager (CSM).

To remedy the limitation, companies invest in their customer experience capabilities and execute customer journey maps to uncover the best experience for each segment. Segmentation is often based on revenue or ARR but it can also be based on geography, industry, product, etc.  This splits the customer base into SMBs, mid-market, and enterprise companies.

A customer to CSM ratio is then applied for each segment with as low as 1000:1 for digital touch model and as high as 15:1 for high touch model. The right segmentation is crucial to success since each customer’s experience is ultimately determined by their assigned segment.

The Low Touch Study

In 2018, TSIA worked with 30 members to explore the low touch/digital strategy. It aimed at discovering operational metrics and useful practices that have increased customer success in the segment. Some of the questions asked in the survey were similar to the core TSIA benchmark. The TSIA core benchmark is the gold standard with results that are similar to the high touch model using a 15:1 CSM ratio.

Defining the Low Touch Segment

The survey revealed how the participant’s defined the low touch segment in their organizations:

The threshold for Low Touch Segment

39% of the participants set their low touch threshold at $50k. This indicates that there is no common practice for the segmentation of low touch capability.

The threshold for low touch CSM ratio

46% of the participants identified with a 100:1 customer to CSM ratio. This indicates that there is no common practice for the segmentation of low touch capability.

Resources distribution

28% of customer success team’s total resources are dedicated to the low touch segment.

Key Observations from the Low Touch Study

Here are the three key observations from the study:

1.   Time is of the essence

Although CSMs play a key role in the low touch segment, they cannot focus on tasks that require heavy time commitments. CSMs are introduced 73% of the time but activities that require human customization instead of digital engagement must be evaluated as a challenge.

There is a significant lower focus on escalation management and in time that CSMs dedicate to the renewal activities, in the lower touch model.

2.   Technology and Analytics are critical to Scale

Mature companies invest in advanced technology and analytics to expand their lower touch capability. This is evident in their acquisition of a dedicated customer success platform such as Gainsight, Totango, Client Success or Bolstra One can find the full list of customer success systems on the Customer Success Association portal.

In general, we note that there’s a larger investment in data analytics functions and a  customer health score in organization with heavy concentration of customers in the low touch segment . This investment reduces the need for additional CSMs to manage the SMB segment.

3.   Deal with the long tail and leaky bucket

Companies with a higher volume of churn typically have a larger low touch segment of small customers. Participants in the study combat the volume churn by implementing new billing and payment processing systems. The new systems allow for recurring monthly or annual credit card charges in order to promote frictionless renewals. They are usually more commonly implemented for organizations with annual contract value of below $10k ARR.

Myths Debunked By the Study

Outputs from the study debunked two common myths in the customer success community:

1.   NPS drops in the low touch segment

There is only a 2 point difference between the NPS scores obtained from the low touch study and the TSIA benchmark. Hence, customer satisfaction and loyalty can be retained in the low touch segment with adequate investment in technology and a digital-first approach.

2.   Monetized customer success stops in the low touch segment.

42% of TSIA members who took the study monetize some portion of the low segment which is similar to the TSIA benchmark.

Summary

Customer Success in the low tail of customers can be achieved with appropriate investment into technological and analytical support. Through this, fewer CSMs will be required to handle the segment. Monetization can also be achieved by adding suitable payment options that accommodates SMBs.

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Written By:

Irit Eizips

Irit Eizips brings deep expertise in the area of Customer Success. As an early member of Gainsight's executive team, Irit has been pivotal in shaping Customer Success methodologies and best practices. For the past 3 years, Irit has been voted as a top Customer Success influencer and is frequently featured as a speaker at conferences and Customer Success public events. Irit serves as CEO for CSM Practice, a global Customer Success consultancy firm. The firm specializes in working with customer success leaders to accelerate the creation and implementation of Customer Success strategies, derive extensive value from Customer Success technology solutions as well as certify and train customer facing teams in becoming more proactive and efficient.

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