Why Customer Success is ImportantIncluding customer success as a part of your business strategy can have a huge impact on your customers' satisfaction and your bottom line.
Why is Customer Success Important?
Customer success is important because it has a direct impact on the bottom line of your business. It improves your profitability by reducing customer churn, increasing customer lifetime value, and creating a more stable revenue base for success.
- Reduces Customer Churn Rate
One of the main reasons customer success is important is because it reduces customer churn rates. When a customer has a continually positive experience with your product or service, they're more likely to stick with you for the long haul. Conversely, when they have a poor experience with your product or service, they're more likely to cancel or discontinue use.
Reducing churn is a major underlying goal of most customer success strategies. It is often achieved through helping prevent or resolve challenges your client may face when using your product or service and improving client education and advocacy so they can be successful with its use.
- Stabilizes and Strengthens Revenue Stream
Any business with customer churn knows they can expect a certain ratio of customers to turn over each month—but they also know they can expect a certain ratio of customers to stay. By improving customer success, companies can increase this ratio of "staying" customers, which improves the stability of your revenue stream.
One of the most important financial metrics for subscription businesses is annual net dollar retention, the measurement of the percent of revenue from current customers you retained from the prior year, after accounting for upgrades, downgrades, and churn.
While additional sales and marketing efforts can bring in more clients, a better customer success strategy keeps more of these clients. Slowing the leak of existing customers means a larger base of continuing clients driving a higher predictable amount of revenue each month.
- Improves Customer Satisfaction
Another reason customer success is important is that it improves customer satisfaction.
Customer success, at its heart, is the strategy of ensuring a customer has the best experience possible with your product or service. We know that satisfied customers not only stick around longer, but they're also more likely to leave positive reviews, provide important referrals, and be more open to additional purchases or add-ons.
- Increases Opportunities for Referrals
We know that the power of referrals in business is strong. Not only are referred customers less expensive to acquire, but they are also more likely to close than a cold customer. Since customer success improves customer satisfaction and loyalty, it also enhances the chances of receiving referrals from happy customers.
Many companies use referral marketing to augment otherwise expensive marketing costs. By using customer success strategies to turn your clients into enthusiastic advocates of your company, you're decreasing the average acquisition cost-per-customer while helping your sales team become more effective.
- Strengthens Ability to Upsell
Another reason customer success is important is that it increases your probability of securing repeat or subsequent sales to a customer, up-selling them to a more expensive product or service, or selling them add-ons. This increases the average subscription amount per customer with little or no additional marketing or sales costs.
When a customer has a positive experience and relationship with your company, they're far more likely to be receptive to additional offers from your company, making customer success an important sales and revenue strategy.
- Improves Your Product or Service
When you have a customer success strategy in place, you're turning more of an internal eye toward your product, service, and processes. Your goal is to create as positive of an experience as possible for your customers, and doing so repeatedly and predictably. While customer support can help turn around negative situations, customer success helps prevent them in the first place. This means that harnessed correctly, customer success can improve your product or service.
- Increases Employee Engagement & Satisfaction
Another often overlooked reason customer success is important is because of how it impacts your internal team. No one wants to work for a company that people dislike or distrust, or one in which customers are constantly complaining or dissatisfied. By improving the customer experience and empowering employees to make positive changes to impact the customer experience, you're creating a company culture your employees can be proud to be a part of.
- Strengthens Business Reputation
Customer success is also important for improving your business reputation. This is something that money can't buy—or if it can buy it initially, it can rarely keep it. By improving customer success, you're genuinely improving customers' perceptions of your business.
So much of business today is reliant on the information that can be found online from previous customers. Before making a large purchase or subscription, most customers are reading customer reviews online, scouring forums for descriptions of interactions with your product/service/company, and researching the general sentiment surrounding your company. By improving customer success, you help to ensure the information and feedback they find is positive—in turn, increasing their likelihood of becoming a customer.
- Decreases Customer Acquisition Cost
Another reason customer success is important is that it decreases customer acquisition costs. Customer acquisition costs are the costs of finding and closing a new client. This means marketing and sales expenses, as well as the time and effort associated with bringing a new client aboard.
Customer success—done well—can be an important step in decreasing cost per acquisition. This is because it can be influential in creating outspoken advocates for your company. These essential reviews, word of mouth, and referrals all result in faster, easier sales than traditional sales and marketing, decreasing your average CPA.
- Increases Customer Lifetime Value (LTV)
Finally, customer success is important because it increases customer lifetime value. In most businesses, the longer a customer sticks around, the more their value increases. This is because the first year or month of a customer's life cycle includes costs associated with the acquisition. In some companies, these acquisition costs may even exceed first-year revenues for that client. The biggest returns come in subsequent periods, where you continue to receive revenues but are no longer spending money in sales and marketing for that customer. What may have been a 10% customer profit in the first year will significantly improve as the customer continues to provide revenues without additional sales or marketing costs.
More About Customer Success
More and more companies are recognizing the importance of customer success, but what does a successful customer success strategy look like and how do you begin implementing one? Learn more about customer success, including "What is Customer Success?" in our Resource Center.
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