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 research, 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:
- Operationalizing the customer journey
- Defining the role of Partners in the customer success organization
- Acquiring analytics and data science skills for the CS team
- Scaling sales capability with customer success
- Choosing the right technology for the customer success team.
- Crafting a low-touch/digital customer success strategy
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 the segmentation strategy, we’ll discuss observations from the study and popular myths.
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 the digital touch model and as high as 15:1 for the 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 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 participants 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.
28% of the 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 significantly lower focus on escalation management and time that CSMs dedicate to the renewal activities, in the lower touch model.
2. Technology and Analytics are critical to Scale
Mature companies investing 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 an organization with a 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 an 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.
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 accommodate SMBs.