Customer Success & Customer Intimacy
all organizations need to excel in Customer Success, and some (but not all) should make Customer Intimacy their competitive differentiator
At the heart of the Salesforce.com value proposition is Customer Success.
For years, their tagline of “your success is our success” was repeated in every one of their webinars, events, and marketing pieces. It was and is a powerful assertion of what matters to them, individually and as a company.
SaaS companies from early-stage startups to established industry leaders (including Salesforce) are primarily valued based on recurring revenue. In fact, companies in many industries are moving from transactional pricing and one-time fees to a subscription model. In doing so, they are able to establish recurring revenues based on monthly or annual contracts. Since recurring revenues tend to be more predictable, they are a great bellwether of past, current, and forward-looking results. Organizations should continuously monitor recurring revenues at a customer, segment, and overall level.
Other means of measuring Customer Success include:
- Net Promoter Score (NPS)
- Product “stickiness” through repeat usage, new feature adoption, and more immersive usage over time
- Competitive moat as measured by the value attributed to capabilities that only you provide; value can also be assigned to “high barriers to exit”
- Revenue (or customer) growth outpacing churn
Let’s take the last point. Revenue or customer churn means that an organization loses a contractual commitment for a product or service subscription. That is obviously costly. And may have been avoidable.
The reason that so many organizations fixate on Customer Success is that maintaining and growing a current customer (“book of business” collectively) is far less expensive than winning a new customer. As such, the economics of customer retention are compelling. Further, the power of happy customers providing strong credible testimonials and serving as reliable references are worth orders of magnitude more than they cost to earn. So effective Customer Success programs are worth the investment.
Core to an effective Customer Success strategy being operationalized is a robust Customer Relationship Management (CRM) platform. Whether your organization uses the industry-leading Salesforce.com suite or another solution, the power of a cloud SaaS platform with mobile, social, and AI-enabled capabilities is a key differentiator in every industry and geography.
It is also imperative that best practices are put into place for each stage of the customer lifecycle. These strategies, metrics, and tools are necessary to manage customers from marketing and pre-sales to transaction / subscription commencement, to retention, expansion, and referenceability.
Critical in understanding how Salesforce has been so successful, and how their platform enables organizations around the world to be, is a robust understanding of foundational Competitive Strategies, which are:
- Customer Intimacy
- Product Leadership
- Operational Excellence
As is so articulately outlined by Michael Treacy & Fred Wiersma in The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market and summarized by MaRS Discovery District:
companies must choose — and then achieve — market leadership in one of the three disciplines, and perform to an acceptable level in the other two
Let’s look first at Customer Intimacy. It really boils down to customization (the ability to modify a system to suit your needs) and personalization (the ability for a system to know enough about you to help achieve your goals). As the marketing adage goes, it’s always ideal to target a customer segment of “1”. More than this though, to effectively pursue the Customer Intimacy strategy, an organization must have a deep understanding of each customer and the business process(es) that are critical to their operations.
There are a number of companies that are known for their outstanding commitment to and delivery of Customer Intimacy. Those include Zappos, Nike, Ritz-Carlton, Nike, and Salesforce.
This competitive strategy for differentiation isn’t for every organization. Some… in fact most… choose an alternative strategy. Let’s look at those.
Product Leadership involves consistently bringing superior products to market. It’s rather easy to think of leaders in this strategy: Tesla and Apple often come to mind, but they don’t have to be consumer products. Business-oriented companies like 3M also make the investment and choose to prioritize Product Leadership.
Operational Excellence is all about cost leadership. This can be achieved through any number of techniques, including vertical integration, scale which affords buying power and leverage, and process maturity like Six Sigma, Lean Manufacturing, etc. Because the leaders in this strategy tend to be some of the largest and most recognizable in their respective industries, the names will be familiar: Walmart, Ikea, Southwest Airlines, McDonald’s. And let’s not forget Amazon, the leader in effectively every industry they participate in.
Other resources on the topic of competitive differentiations strategies:
Customer Intimacy is the chosen path of organizations that believe they can differentiate their products and services from their competitors by focusing on a level of customization and personalization that cannot be matched. This is a powerful model for “value creation” and “value capture” that is defensible and sustainable. But the strategy of Customer Intimacy is not the only playbook. Product Leadership can allow for premium pricing and the designations of thought-leader and industry-influencer, which have great brand benefits. Operational Excellence can certainly be the winning competitive strategy, especially in lean economic times, when customers are cost-conscious, and when access to capital is constrained.
Regardless of which competitive strategy is chosen, it is imperative that organizations fund and prioritize a Customer Success strategy that puts key measures of recurring revenue, customer retention, and customer satisfaction at the center of their financial and organizational goals. The capital markets reward the organizations that do this effectively, and customers are quick to punish those that fail to deliver or never set the goal in the first place.
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