Enterprise software: a case study in driving customer success
As enterprise software companies have faced the migration of software to the Cloud and SaaS delivery models, the following challenges have emerged:
- Changing revenue model/mix driving the need for significantly more effort post sale to reach target EBITDA levels and combat increasing churn
- Companies continue to experience increasing customer acquisition costs that may not be offset by current/legacy customer retention efforts
- Services revenue is declining for many tech companies, resulting in loss of critical customer experience touch points
These shifting market dynamics have driven an increased need for enhanced services and customer success and retention capabilities to drive profitability within the subscription model, deliver against increasing customer expectations, and grow recurring revenue within the account.
Through our work with software companies around their Cloud-enabled transformation to SaaS models, we have identified four key imperatives that are very relevant and transferable to the rapidly changing merchant acquirer/processor space:
Applying software's customer success lessons to the payments ecosystem
Following is an exploration of the four key customer success imperatives outlined above and the implications to merchant acquirers/processors:
1. Monetizing Additional Offerings: Merchant expectations are increasing. Products and services must be expanded to address omnichannel operations and to support and help drive merchant market success. Acquirers/processors need to explore additional revenue and value-add opportunities such as offering premium options, cross-selling additional offerings (proprietary or third party), and supporting/promoting any downstream services of its own or from key partners.
To this end, acquirers/processors must take a broad view of offering portfolios (e.g., how far across the value chain) and proactively manage offer development (independently and/or with existing and new partnerships). Key considerations include defining offers and services to bundle with base service, how to price incremental offerings, and minimum acceptable margins to justify given acquisitions costs and churn/retention impact.
2. Embracing New Service Delivery Channels: Acquirers/processors should proactively manage customer service delivery cost and effectiveness, particularly as they move into an omnichannel environment. This may mean augmenting traditional phone and email support with new delivery channels, including self-service portals, online communities, and social customer relationship management (CRM).
However, these new delivery channels are not without challenges. While self-support is a low-cost option, support sites and digital channels are still relatively nascent from a proof of concept point of view. B2B social CRM has become an attractive channel given its low cost and broad reach. However, it is still in its formative stages and there is not yet a comprehensive understanding of its effectiveness. People are still a significant driver of effectiveness and there is a danger in relying on business cases that focus too heavily on technical solutions.
Companies need to embrace B2B digital support channels, but operate them fundamentally differently than consumer-oriented businesses, including managing them under the customer success umbrella rather than by the traditional marketing, website, or other stakeholder groups. Additionally, performance of these channels must be clearly measured, potentially including customer resolution rate, time to resolution, and customer satisfaction, much as they are in contact centers today.
Lastly, online communities and forums should be actively monitored for potential customer-support and product-related issues, and leveraged as a valuable source of customer insight. A recent study by Edison Research showed that over 40% of customers that contact a company via social media expect a response within an hour and nearly 60% expect it within the business day. While the use of social channels are still evolving within the B2B space (and in some cases may not be directly replicable from the B2C world), carefully targeted and curated user communities have proven to be effective across a variety of dimensions (e.g. lowering call center costs, increased stickiness with users, lower churn levels, and lower education/training costs). In addition, the ROI and strategic value of different solutions will vary across the enterprise-to-SMB continuum. Therefore, there is risk in deploying a one-size-fits-all model.
In summary, while digital channels and social CRM have tremendous potential to lower cost-to- serve and improve the customer experience, especially with SMB/middle market customers, a blend of legacy customer support strategies augmented by new digital tools carefully deployed over time (and on a segmented basis) is likely the optimal approach.
3. Proactively Managing Customer Success and Retention: Acquirers/processors must proactively manage customer experience and success over time, particularly as companies move towards "as-a-Service" models. This may be a new mindset versus waiting for a contract renewal or believing that "no news is good news." We see clients creating clear roles and accountability in account management and support—if not a dedicated "customer success management" function—to drive value, adoption of additional products/services, and, ultimately, enhanced retention.
Acquirers/processors, both directly and with their partners, should a) proactively manage each customer touch point to ensure product usage/business success, b) identify new customer needs and new leads, and c) enable their "customer success" capability with enhanced CRM and other technologies. The idea is to strike a better balance between investments in customer acquisition and customer success/retention, and to take advantage of new technologies while not underestimating potential required changes to workflow and people management processes.
4. Rethinking Additional Services: Services has the potential to become an even more important part of the business model—beyond initial merchant setup and training—with an offering portfolio that can support a customer throughout the life cycle. This may require developing new offerings and skills sets internally as well as clear alignment with partners in the value chain (e.g., ISVs, VARs, and ISOs).
New offerings may include packages designed to speed merchant on-boarding as well as enhanced training and content development and delivery to help drive volume and adoption, particularly with new technology-based offers and services (e.g., mobile, beacon, loyalty/analytics). Post-implementation and performance improvement services can be considered to help the merchant customers maximize solution value/ROI. The ultimate goal is to ensure that the service portfolio helps the customer achieve its desired business outcomes while transforming services to drive usage, adoption and higher perceptions of value creation.
The customer success imperative
Given the rapid changes in both capabilities and customer expectations, and pressures on traditional profit pools, the time is ripe for merchant acquirers/processors to establish a renewed focus on optimizing customer experience and support to drive growth and strengthen recurring revenue and ROI.
"I think many acquirers suffer from far too high attrition and we all believe there is not much to solve for in this challenge. We spend more time winning customers than we do keeping those customers. … So looking after our customers, keeping every single customer longer, making it easier for them to do business with us, are all things that will drive growth within our business as opposed to just chasing after loads and loads of customers. … I think this change in philosophy is just the start, and it's making Elavon relevant, exciting, and helping us grow in the marketplace…." – Guy Harris, President of Elavon North America, August 2014
As highlighted by Guy Harris of Elavon above, key merchant acquirers/processors have already begun to recognize the opportunity to generate value by focused improvement in customer success. As merchant services become increasingly technology enabled/dependent and potentially move toward more "as-a-Service" models, the lessons we take from the software industry are very relevant and transferrable – but potentially even more challenging to execute in the complex and dynamic ecosystem of payments solutions and service providers. While next generation customer success models are still in the early stages of evolution, the potential to drive higher levels of performance has never been greater for companies that take a strategic approach to business model design and execution.
- Scott Haug is a Partner at Waterstone Management Group. Laura Green is a Principal at Waterstone Management Group.
Are you a pro? Subscribe to our newsletter
Sign up to the TechRadar Pro newsletter to get all the top news, opinion, features and guidance your business needs to succeed!