Business leaders recognize that there is great value in retaining their best customers. Forrester’s research bears this out: Devoted customers pay price premiums, buy additional services, and help attract other good customers. But how do customer experience (CX) leaders convince executives to invest in the customer success management programs that are focused on value realization?
CX leaders need a framework for building a business case for customer success management. To that end, my colleague Sarah Musto and I recently published a report called The Business Case For Customer Success Management. Using Forrester’s Total Economic Impact™ (TEI) methodology, we concluded that a well-designed customer success program can yield a 91% return on investment over a three-year period, a headline that will pique the interest of any executive.
To create the model, we interviewed a number of customer success executives, customer success software vendors, and business consultants about the costs and benefits of a customer success program. Using those insights, we built a composite company model, which showed a customer success program:
- Improved customer retention. Based on our interviews, we estimated this composite organization would see an improvement in retention for clients in its customer success program.
- Increased cross-sell and upsell opportunities. The composite company’s client accounts enrolled in the customer success program had an increase in revenue per account.
- Grew new customer conversion rates. We estimated that the composite company would raise its conversion rate after it implemented its customer success program.
- Reduced customer support costs. Our research showed that the composite company could expect to see a substantial reduction in support ticket submissions per customer for those clients in the customer success program.
These benefits are tempered by common costs that we identified through our interviews:
- Program development and rollout costs. To build the program, the composite company would have to pull together executives to design the program and then, over the course of three years, roll out the program to successive groups of customers. Each stage would require investments in planning processes and continuous training for staff.
- Staffing costs. The composite would need to hire a customer success leader and then build teams of success managers to serve different customer groups. Additionally, the business would likely need to create an operations staff to handle process management and analytics.
- Technology costs. The business would need software to manage customer success processes, as well as technology to facilitate collaboration, build customer communities, and track customer issues to support the program.
- Program marketing costs. To ensure both sales personnel and customers are aware of the program and its benefits, the composite company would need to build internal and external marketing campaigns.
As part of the standard TEI process, we introduced a set of discounting factors to risk-adjust each benefit and cost, accounting for possibilities like the program being misaligned with customer needs and imbalances in how the business employs customer success resources to its different customer segments.
If you want more details on Forrester’s methodology and findings, please click on the report link. As an added benefit, we’ve included an Excel spreadsheet that allows you to plug your own numbers into our model, helping expedite your business case development process. And if you have additional questions, please feel free to reach out to us or set up an inquiry.