What is Customer Success?

Short answer

What is Customer Success?

Customer Success is the systematic work of making sure customers achieve what they bought the product or service to achieve – so that they stay, buy more and create lasting value for the company. It is not the same as Customer Support, and there is no organisational model that fits everyone.

The definition is simple. The practice is not. In some companies, Customer Success is a separate team responsible for renewals and upselling. In others, it is a new title for Customer Support. Both may be sensibly organised for the company in question – but it is not the same work, and it is not the same responsibility.

This article explains what the discipline is about, where it comes from, and why it looks so different from one company to the next.

A definition#

There is no official standard for what Customer Success is. There is nonetheless a core that recurs among most of those who have written about the discipline: Customer Success is systematic work to ensure customers get value from what they have bought, so that they remain customers and often buy more.¹

Two things set this definition apart from general “good customer service”.

The first is that the starting point is the customer's goal, not the customer's enquiry. An accounting firm that buys a new practice system does not want a practice system. It wants to deliver accounts faster, with fewer errors and less manual work. The system is a means. Customer Success is about making sure the means actually leads to the goal.

The second is that the work is tied to business results. Customer Success is not just a wish for satisfied customers. It is an assumption that customers who achieve what they want stay longer, spread less dissatisfaction and buy more – and that this can be measured.

Why the discipline emerged#

Customer Success as a separate function grew out of the software industry when subscription models replaced one-off licences.¹ With a traditional licence, the customer paid most of the price at purchase. Whether the software was actually used afterwards only became the vendor's problem at the next major upgrade.

With subscriptions, the economics change. The customer pays continuously, and can therefore also leave at any time. Revenue is not realised at signing, but over time – and only as long as the customer continues to see value in what they pay for.

Revenue is not realised at signing, but over time.

This moves part of the responsibility for revenue from the moment of sale to the whole customer relationship. Someone has to own the question of whether the customer actually achieves what they wanted. That is the question Customer Success was established to answer. One of the earliest known examples is the software company Vantive, which set up a dedicated Customer Success department in 1996.² Salesforce made Customer Success a priority after churn was raised as a serious problem at a leadership meeting in 2005.¹ The background is described in more detail in Why Customer Success became a discipline of its own.

Today the thinking is not limited to software. It is relevant to every company with ongoing customer relationships: payment services, telecoms, insurance, accounting services, equipment subscriptions and professional services with framework agreements. What they have in common is that the customer has a real option to leave, and that the value of the customer relationship is built over time.

The customer's outcomes and the company's outcomes#

A useful way of thinking about Customer Success is that the work should create two kinds of outcome at the same time.

The customer's outcomes are what the customer wants to achieve. They are often commercial (lower costs, higher revenue, less risk), but can also be operational (faster workflows, fewer errors) or personal (a manager who wants to show that a purchase was the right one). The idea resembles the “jobs to be done” framework, in which customers are described as “hiring” a product to get a particular job done.³

The company's outcomes are what the vendor needs: that the customer stays, that the relationship becomes more valuable over time, and that the cost of serving the customer is in proportion to the revenue.

The two are connected, but not automatically. A customer can be satisfied without achieving anything measurable, and can achieve their goals without renewing – for example because the need disappears or because a competitor offers the same thing more cheaply. Customer Success is about understanding both sides and working where they overlap.

From reactive to proactive#

Much of what sets Customer Success apart from traditional customer service is when the effort is made.

Reactive work starts when the customer gets in touch. Proactive work starts before the customer knows they need help – or before they have decided not to ask for it.

An example: a customer who has adopted a payment solution for their online shop has completed registration, but has not received a single payment after three weeks. The customer has not contacted anyone. Seen reactively, there is no case. Seen proactively, this is a clear signal that something has stalled – a technical integration, an internal priority, or an uncertainty nobody has asked about.

Proactive work requires three things:

1. Signals that show where the customer is, and where they are stuck. This can be usage data, transaction data, enquiries or simply time since the last activity.
2. An understanding of what is normal, so that deviations can be spotted.
3. Capacity and mandate to act before the problem becomes an enquiry or a cancellation.

That does not mean Customer Success is never reactive. Customers get in touch when something is wrong, and then someone has to answer. The difference lies in what the function is built to achieve.

Customer Success through the customer lifecycle#

Customer Success follows the customer through the whole relationship, not just a single moment. Most companies will recognise some common phases, even if the names vary:

The customer lifecycle

1. 01

   Handover from sales

   What was promised carries forward.

2. 02

   Onboarding

   The customer gets started and reaches first value.

3. 03

   Adoption

   The product is used so that the goal is reached.

4. 04

   Maturity

   The customer gets more out of the solution over time.

5. 05

   Renewal

   When the agreement expires – or every day the customer uses the service.

6. 06

   Expansion

   More needs are met where it makes sense.

New needs, new users or new products restart parts of the cycle.

In practice the phases overlap, and many customers move back and forth between them.

The early phases often get too little attention. A customer who never gets properly started rarely becomes a loyal customer later. That is why onboarding and time to first value are among the most effective places to invest in Customer Success.

Renewal is not always a date#

The “renewal” phase looks very different depending on how the customer pays. It is useful to distinguish between two main types, because they require different work. The distinction is a professional judgement of common patterns, not an established standard.

Contractual renewal. The customer has an agreement with an end date, typically annual or multi-year. The decision to continue is made at a known point in time, and a customer who wants to leave has to cancel. Churn is visible: there is a date to work towards, and a cancellation to learn from.

Continuous renewal. The customer has no minimum term, or pays for usage or per transaction. In practice the customer then renews every day they choose to use the service – and can leave without saying so. Usage falls, moves to a competitor or stops altogether, without any cancellation being recorded. This is often called silent churn.

Two ways to renew

Contractual renewal

1. Agreement signed
2. Use through the period
3. End date
4. Renews or cancels

Churn is visible: a cancellation at a known time.

Continuous renewal

1. The customer gets started
2. Uses the service
3. Uses it less
4. Stops using it

Churn is silent: no cancellation and no date.

Customers with annual agreements can also leave silently: they do not use the product, but the cancellation only comes at expiry. The difference is that the agreement gives the company a deadline. With continuous renewal, the revenue disappears at the same time as the usage.

One decision-maker or many?#

Who decides matters just as much. In a small company, the same person often buys, uses and pays. In a larger organisation the roles are often spread across several stakeholders, and the person who signs is not necessarily the person who uses the product.

When there are many stakeholders, they need to be mapped. A simple starting point is four questions:

1. Who pays? The person who owns the budget and has to be able to justify the cost.
2. Who uses it? The people who have the product in their daily work, and who notice first when something does not work.
3. Who champions it? The internal champion who wanted the solution, and who speaks for it when you are not in the room.
4. Who can stop it? Functions such as IT, finance or procurement, which rarely choose the solution but can say no.

The answers are rarely found in one place. The handover from sales shows who was involved in the purchase. Usage data shows who is actually active. And the customer can be asked directly: who would notice if you stopped using the solution, and who would make the decision?

Influence does not always follow job title. Assess each stakeholder on two things: how much the person influences the decision, and how much value the person experiences themselves. The person with a lot of influence who experiences little value is the biggest risk. The map also has to be kept up to date, because a change of contact or champion often changes the whole picture.

Retention and expansion#

Two concepts are central when the value of Customer Success is discussed.

Retention is about keeping customers and revenue. The opposite is churn: customers who cancel, or revenue that disappears. Even small monthly losses become significant over time.

Hypothetical example

−21.5%

A company with 2,000 customers that loses 2% of its customers every month has around 1,570 customers left after twelve months – before new sales are counted.

Customers remaining at 2% monthly churn

Show the numbers

Month	Customers
0	2,000
1	1,960
2	1,921
3	1,882
4	1,845
5	1,808
6	1,772
7	1,736
8	1,702
9	1,667
10	1,634
11	1,601
12	1,569

Expansion is about existing customers buying more: more users, more products, higher volume or a more expensive plan. In many subscription businesses, expansion within the existing customer base is a significant part of growth.

It is common to point out that keeping customers is more profitable than acquiring new ones. A frequently cited analysis is Reichheld and Sasser's 1990 article, which estimated that companies could increase profits by 25 to 85 percent by reducing customer defections by five percent, depending on the industry.⁴ The figures are widely repeated, but also criticised: the effect depends, among other things, on how profitable the customers are and on how high churn is to begin with.⁵ The principle is well founded, but the size of the effect should be calculated for your own company rather than borrowed from others.

How retention and expansion are measured – and how much of the result can actually be attributed to Customer Success – is the subject of a separate article: How do you measure the value of Customer Success?

Different ways to organise Customer Success#

There is no organisational model that fits everyone. How Customer Success should be organised depends on, among other things:

• The business model. Do customers have subscriptions, transaction-based pricing or long-term contracts?
• The customer segments. Are there a few large customers, many small ones, or both?
• The complexity of the product. Does the value require extensive implementation and change at the customer, or can the customer get started on their own?
• Maturity. Is the company at an early stage where basic customer journeys are still being built, or at a stage where optimisation gives the most?
• The commercial strategy. Should Customer Success own renewals and upselling, or should sales do it?

Some common patterns:

Dedicated account owners. Each Customer Success Manager is responsible for a portfolio of customers. The model is common where customers are large and the relationship is complex.

Grouped or “pooled” model. A team shares responsibility for a larger group of customers, often with a shared queue and workflow. The model is used where customers are many and the value per customer is lower.

Digital or scaled model. Most of the work happens through automated customer journeys, content, in-product messages and data-driven interventions, while people are used where the signals show it is needed. This model is described in more detail in Customer Success in the SMB market.

Combined models. Most companies with varied customer segments end up with a mix: dedicated follow-up for the largest customers, digital customer journeys for the smallest, and something in between for the rest.

Common misconceptions#

“Customer Success is a new name for customer service.” Customer Support and Customer Success overlap, and in small companies both are often done by the same people. But they have different starting points: Customer Support resolves the customer's enquiries. Customer Success works towards the customer's goals. The difference is explained in more detail in Customer Success vs. Customer Support.

“Customer Success is about keeping customers happy.” Satisfaction is useful, but not sufficient. A satisfied customer who gets no value from the product is a customer who may disappear at the next budget round.

“Customer Success is sales with a friendlier name.” In some companies Customer Success owns renewals and upselling. In others the function has no commercial responsibility. Both can be right. What matters is that the mandate is clear, and that commercial targets do not undermine the trust that makes the work possible.

“Every company needs a Customer Success department.” Not necessarily. Some companies get more out of improving the product, onboarding or Customer Support than out of building a new function. Customer Success is first and foremost a way of thinking about the customer relationship. How it is organised is a separate question.

“Customer Success is only relevant to software companies.” The discipline originated there, but the principles apply to every company where the customer relationship lasts over time and the customer has a real option to leave.

What this means in practice#

For a leader considering Customer Success, it helps to start with a few simple questions:

1. Do we know what our customers bought the product to achieve?
2. Can we see which customers are on their way towards that goal, and which have stalled?
3. Who in the company is responsible for doing something about it – and do they have the mandate and capacity?
4. Are we measuring the outcome of the work, or just the activity?

The answers say more about how mature the company is in Customer Success than whether there is a department with the name on the door.