If any role has become prevalent in the last five years, it is the "Customer Success Manager" at Business Application vendors. The premise is that successful customers buy more software - simple, clear, and difficult to dispute. But customer success has many dimensions - short, mid, and long term. The most important question to ask is - how is Customer Success measured? The prevalent measure is the objective KPI: number of software licences consumed. There is a correlation between business growth and software consumption, but correlation does not equal causation.
The correlation error
"Ice-cream is cold - therefore if it is cold it must be ice-cream" - A simpler analogy to the correlation error cannot be made - correlation does not equal causation. When business are successful and experience business growth - they may purchase or subscribe to more licences - but that is not a given. Businesses that make a pivot towards a disruptive manner of serving their customers are not necessarily growing the employee (and therefore software licence) base. You would not measure companies like Uber or Lyft on the number of vehicles they own in their respective fleets. In the same logic - "if a business grows it needs more software - therefore if a business licenses more software seats it is because it is successful" is as flawed as the ice-cream and cold causation reversal.
The absolute error
Next to the correlation error, there is also the absolute error - "growth compared to what?" Absolute growth is meaningless if not compared to peers in the market. For example - if your business experienced a growth of 10% year over year, that might sound positive - but when the overall segment grows by 15%, your relative position has declined. It is therefore folly to measure business success merely on growth.
So - how would we measure customer success?
Customer success means how much your customer is enabling the success of their customers (at least in the B2B market). As per the above-mentioned correlation and absolute errors, this is not measured by merely taking your KPI's such as licences purchased as a measure of success. So why are we not measuring beyond what is easy, even if we know the measurement is not a useful success indicator? Why are we not really measuring success? If it was easy, we would all be doing it today - instead of measuring what is useful and reflective, we measure based on the data we easily have available. A war analogy - you do not fight a battle with the information you need, but with the information you have. You may not have all measures you wish to effectively measure customer success - nor will you have access to the full causality chain. But, there certainly are measures available that can be incorporated into the success metrics. The difference with the metric of "licence consumption" is that they require collaborative goal setting with the client.
Easy metrics that make more sense than licence consumption
Following are easy data points to capture with your clients:
- Days sales outstanding (DSO) - if your solution addresses this by getting the customer paid faster
- Profit before tax (but after depreciation) - efficiency introduced should reflect in the profitability of the overall business
- Inventory turnover - by better planning, an increased return on inventory
In conclusion - customer success management concerns many facets and a long-term focus
Customer success management is more than just taking a periodic metric. Especially metrics that only infer customer success because they buy more product of you is flawed - not only that, it is exceptionally lazy and does your long term relationship with the customer a considerable disservice.
Customer success is a journey, where client and vendor agree on metrics for growth to measure. This is not a transaction metric, where we measure it once and claim result - it is a development metric, a journey undertaken with client and vendor, with periodic measurements and where applicable, adjustments.
- Customer success is not a single metric, but a combination of multiple metrics as applicable in the customer journey
- Customer success management cannot be executed or measured independent of the customer, it is a collaborative effort where the vendor truly wants what's best for the customer
- Customer success management is a multi-year journey, where a mutually profitable and beneficial relationship is cultivated between customer and success manager
Aurelian Group Digital Business Services Business (Gold and Premium) contain a Digital Business Success Transformation component, where metrics are established and your progress plotted, measured, and directed over the course of the engagement. This is in addition of the expedited Accounts Receivable Management process that is part of the plan (minimise your days sales outstanding to directly increase your cash-flow position).