How Customer Success Increases Contract Value(a Revenue Driver)

How customer success can be a revenue driver for your organization.

Customer success is critical in the process of renewing, upgrading, and expanding contracts. It is essential to engage the renewal and upgrade processes throughout the customer lifecycle rather than merely sending out notices to customers near the expiration of a contract. Reaching a customer at this stage in the lifecycle is commonly too late. The overall value of contracts decrease with churn, and the overall value of contracts remain stagnant without upgrades or expansion. Contract value is increased when customers are convinced of the value they receive from their current product and associate further value in expanding their use of products or services.

How Customer Success Increases Contract Value

A few different conclusions exist at the end of a given contract with the customer. The customer can choose not to renew, they can renew at their current level, or a customer can renew, upgrade, and expand products. Customer success teams exist to manage each of these potential outcomes, but the last result is the focus of this section. CSM strategies do not merely exist for the time of renewal. Opportunities for increasing contract value—upgrades, cross-sells, add-ons—exist along the customer lifecycle's full length.

Let’s examine how customer success management contributes to increasing the value of a customer’s contract.

Dedicated Relationships and Strategies

customer success as a revenue driver

As a result of the close and dedicated relationships that CSM maintains with customers, success teams have a deep understanding that contributes to advancing customers to higher levels of products or services. More extensive and nuanced knowledge of the customer often results in a broader understanding of the customer's other projects and initiatives. A customer success manager learns more about the customer than they may initially present to the organization. CS teams can use this broader knowledge to incorporate expanded features, services, and products.

Being able to ensure renewals and increase the value of contracts requires a dedicated strategy. Essential to this process is the accessible apprehension of the customer at an individual level offered by the CS teams. An effective success manager knows why and how customers are using their product and what hurdles exist to further adoption. CSM also understands what features the customer is using, how they are being used, the position of the customer in their lifecycle, and plenty of other metrics that influence renewals and expansions.

Indirect Contract Support

CSM strategy is also useful when it is not engaged directly in the renewal process. There can be challenges for a success manager between executing sales and maintaining a trusted advisor role. Thus, it can be an effective strategy for an organization to distance the CSM from direct sales efforts. Even in this context, customer success modalities can guide other departments to increase a customer's contract value. CSM can act as an instructor for a sales agent, or CS tools can be used to inform the specifics of a sales opportunity. The success manager knows which features the customer most commonly employs, features that are less applicable, features that are underutilized, or features that the customer may have fully maximized. The CSM also knows the customer’s triggers, victories, difficulties, and pain points. Even more, CSM identifies short-term, intermediate, and long-term goals. All of this information can be used to inform the renewal and upgrade processes that result in higher contract values, whether handled by CSM directly or with CSM as a guide for other teams.

Utilizing Customer Success Tools

customer success increases contract revenue

Customer success requires efficient and expedient communication with the customer that is refined my effective automation and measurement. These tools are critical for allocating reminders about renewals, awareness of product information, and numerous recurring messages about feature upgrades or renewals. Measured data is also a vital tool in CSM. This data concerns the level of adoption, feature usage, license utilization, a customer’s time to value, and other metrics (examined in the next page) directly contributing to the increasing contract value. Monitoring and analyzing these areas of information also provides viable feature usage trends, areas of focus, and churn risks to renewals, upgrades, or expansions. As an example, if CSM data shows that a customer is fully maximizing a specific feature but underutilizing another feature, this could be an opportunity for refinement, upsell, or cross-sell.

Customer success management is uniquely positioned to offer suggestions and guidance across the customer lifecycle and long before the expiration of a contract. This permits CSM the liberty to be judicious and patient in their efforts on expanding the value of a customer’s contract. A success manager can offer an immediate suggestion in response to a pressing need, or they can wait until the customer is in a more viable position to utilize and perceive the elevated value in expanding their contract with the company’s product or service.

NEXT: How Customer Success Drives Loyalty »