If you’re on the fence about buying customer success software, or if you recently have, you’re reading the right article. Naturally, you want assurance of what kind of return to expect from this investment.
On this page we discuss the return on investment (ROI) of implementing customer success software, and how this differs from customer success metrics. We also talk about three signs that indicate you need customer success software — pronto.
The fact that you’re reading this means you’ve probably looked at customer success software before, and have a good idea of what it does. In case you don’t, here’s the gist of it:
Customer Success Software in a Nutshell
At its core, customer success software is any platform that measures, in real-time, whether or not you’re delivering on every customer’s desired outcome.
The software does this by constantly monitoring input data, such as customer interactions, adoption, engagement, retention, lifecycles, survey responses, and churn. Because of how closely this data is collected and analyzed, customer success software is a great indicator of where and how you’re frustrating and, ultimately, losing customers.
The key word here is “indicator”. Customer success software measures and reports back to you with actionable insights. For example, a point in a sign-up process where abandonment is high, or at what point in a client’s lifecycle you’ll most likely see a drop in engagement.
The software in itself cannot make your customers happy, but it can point out to you what is making them unhappy. Your job is to improve your product, service, or customer journey according to the information you receive. Then you get to watch the effect this has on your customer success metrics.
Given how valuable these insights are, we were surprised to learn that globally 38% of companies still haven’t invested in customer success software. In fact, according to a 2021 survey, 37% of the responding companies don’t have a clearly defined customer success strategy.
For more detail on what customer success is, and what customer success metrics you can measure, refer to our ultimate toolkit for designing your customer success strategy.
Measuring the ROI of customer success improvements you make is easily established by using customer success metrics. But these are not the same metrics you’d use to measure the ROI of using customer success software.
What is The ROI of Using Customer Success Software?
Customer success software puts fragmented sources of customer information in a dashboard that updates in real-time — a single source of truth that reports as it learns. In addition, this type of software can extrapolate from experience and predict the loss of a customer. This insight gives you the power to intervene and retain them.
For example, if a customer’s engagement score drops, you can choose to activate an offer, arrange a meeting, or simply connect over email. Be honest, without this ability to manage customer satisfaction on a granular level, would you know exactly how and when every lost customer fell off the wagon?
Furthermore, wouldn’t any effort you make to improve your customer success without this data be a shot in the dark?
Here’s a hypothetical case study to prove our point:
Reducing Customer Churn - Scenario 1
A SaaS company itsres their annual voluntary customer churn rate at 40%. They wish to reduce this churn to 30% within the next 6 months.
They can identify that the churn rate is due to clients choosing not to renew their subscriptions to the platform after the first year. The company believes this is due to a large chunk of users that don’t get the full value of their subscription, because they don’t use the more advanced features of the product. Upon examining why, interactions (measured by customer success software) showed these features are a bit too complicated for a large percentage of users to master by themselves.
To address the success barrier, the company creates a learning tool for subscribers only. Building the tool and integrating it into the product platform costs them $80,000. Since their subscribers are learning and benefiting from this tool, they stick around. As a result, the churn declines every month, and by the 6-month mark, it is reduced to 27%.
Instead of losing an anticipated 2,400 subscribers by the end of the year, the company has 1,620 subscribers who choose not to renew. This means they generate an annual resubscription payment from 780 more customers than they would have.
At $250 per renewed subscription, the resulting income from increased re-subscription comes to $195,000. So, by subtracting the outlay ($80,000) from the gain ($195,000) the company establishes a monetary customer success ROI of $115,000.
Reducing Customer Churn - Scenario 2
Now, let’s look at the same scenario again, but this time without customer success software. The company identifies the 40% churn and sets the goal of reducing it to 30% within 6 months.
They do diagnostic tests on their product and find the software’s processing speed to be frustratingly slow. They also find a blind spot in its reporting features. Could either of these issues be the reason customers aren’t sticking around? It’s likely, but who knows? Because they are not measuring client interactions specifically, the cause of the drop-off is still unclear. As the company wants to be thorough, they decide to address both issues.
The company spends $10,000 to remedy the speed issue, and another $70,000 to build the reporting features they lack — $80,000 in total.
They do see an improvement in retention, but by the 6-month mark their churn rate is at 37% — a far cry from their goal. Furthermore, the re-subscriptions gained from these efforts peak at 180 customers. At $250 per subscription, this generates an increased income of $45,000. Significantly less than their outlay.
The most disparaging thought is that increasing the site speed for just $10,000 might have yielded the exact same result, but now it’s too late to tell.
Customer Success ROI vs Customer Success Software ROI metrics, AKA the Plumber
The difference between the two scenarios above is that the most significant pain point, or customer success barrier, was addressed in the first scenario, but not in the second.
In the first scenario, the company used customer success software which could track and alert them of customer success barriers. In this case the barrier was frequent incomplete interactions with their tool’s advanced features, leading to abandonment. Native expert guidance on using these features solved the problem. Customers learned how to use the product to its full capabilities and could therefore enjoy the full value of their spend.
In the second scenario, the company made an educated guess that they had speed and reporting issues. Although these are legitimate issues, neither was the one driving customer churn. So the spend they incurred didn’t generate the customer success ROI they wanted.
There’s a saying that goes, “You don’t pay the plumber to bang on the pipes. You pay him because he knows where to bang.” Buying customer success software is like paying the plumber. What you get out of it is knowing exactly where your success barriers are.
This insight means you incur spend only where you can see the most potential gain. Effectively then, your customer success software ROI metrics include the time and money you don’t waste on product updates that won’t delight your customers.
By the way, projecting and calculating the ROI on implementations you make, such as buying customer success software (or other forms of HR tech) is a valuable skill that surprisingly few people in HR have. Set yourself apart from the pack by taking our free course on HR tech ROI calculations.
Three Signs that You Need Customer Success Software - Pronto
The first signs of dwindling customer engagement or unfocussed spending are easy to overlook or misdiagnose. Don't let missing these signs fool you into delaying your prioritization of customer success.
Here are our top three (often missed) indicators that your customer success situation needs urgent and insightful improvement.
1. You’re too busy working on your product to ever really improve it
If you’re non-stop busy making small changes to your product, you have to ask yourself why.
Are the changes that you make based on what the majority of your customers want, or is it driven by a vocal few? And, if you’re being honest, are the changes you make driven by customer feedback at all, or did someone within the company decide it is important?
Customer success software makes it possible to categorize product updates based on two things: Features that need attention because they’re making customers unhappy, and updates that will delight the majority of customers (in other words, add value). Since any updates you prioritize in these two categories will improve your product, not just change it, your time and money will be well spent.
2. You have an inexplicable increase in customer churn
No product or service provider can keep every customer happy forever, so some churn is inevitable. Increased churn is a legitimate reason for concern though.
As we saw in our case study above, pinpointing the exact cause of churn is incredibly difficult. A spike indicates that something has changed, and the churn is the resulting fallout. It could be something internal, such as a product update your customers don’t like, or external. Maybe you have a new competitor who offers the same solution with a smaller price tag, a unique feature, or better service.
A gradual increase in churn is harder to diagnose. Only knowing at exactly what point you’ve lost the interaction and engagement of these customers will tell you the full story. You can’t do much about a customer that has moved on. However, knowing where the seed of doubt in your product was planted is an actionable insight that you can use to address churn before it happens.
3. You’re spending more on customer support than on development.
Customer success efforts that aren’t scalable shouldn’t be part of your business plan. Post onboarding you want your customers to be empowered to navigate your product with only the occasional query or need for guidance from their account manager.
If your customers are inundating you with functionality questions, something about the user experience is tripping them up. But what? Of course, if you get the same question all the time, you know a problem exists. But do you know of every hurdle in the way of your customer success?
By monitoring customer interactions and feedback with customer success software, you can prioritize product upgrades according to how big a barrier it removes. You can then also monitor exactly how this affects your overall customer success, and how much strain you’ve removed from your customer support team.
By now we have established that the ROI of buying customer success software is undeniable. We’ve even scrawled the marketplace to find and review top options on your behalf. Be sure to check out our list of the best customer success software options out there.
The Real ROI is Knowing
To sum up, let us ask you three questions:
- How would you rate your customer success right now?
- What are your priorities in improving customer success?
- How will you determine and compare the ROI of these improvements against your current situation?
If you’re not currently measuring customer success, you can’t accurately answer these questions.
Now for the ultimate question: Do you want to offer a product that is both profitable and that continually delights your customers?
Of course you do! But how can you achieve this without having concrete answers to the first three questions?
Investing in customer success software means you’ll have the insight to give customers the solutions they want. In addition, every dollar you spend on making your customers happy will be an educated and directed investment in creating a stellar product.
