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Customer Success: Six Steps to Communicate and Quantify Realized ROI

By Tom Pisello | September 2, 2021

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Evolving from Usage and Adoption to Proving and Improving Outcomes and Business Value Delivered

The importance of existing customers came into clear view during the pandemic.

Prior to the crisis, many organizations had prioritized adding new accounts and hunting way ahead of retaining and growing revenue with existing customers and harvesting. Fast forward into the pandemic and we saw a significant shift, a “circling of the wagons” around key customer accounts and focus on retention and expand selling.

And for good reason:

3 to 4x – Expansion reveniue from existing customers is 3 to 4 times less expensive to acquire than revenue from new logo customers (TSIA)
60 to 70% – The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is only 5 to 20%. (MarketingMetrics)
25 to 95% – Increasing customer retention by just 5% can increase profits from 25 to 95% (Bain)

Is it any wonder that 63% of sales leaders said that their top priority is now “Driving growth through existing customers” (Forrester). Couple this reprioritization with the fact that more revenue and business models built on subscription services, and we have more significant investments in customer success groups than ever before, to assure renewals and help drive expansions.

So how do you assure customer success groups achieve better retention and expansion in existing accounts, so important to today’s business priorities and achieving growth goals?

It’s not easy, and will require a decided change in the quarterly business reviews and engagements to achieve success.

Value Enablement: a Requirement for Renewals and Expansions

First, your customers have gotten more frugal. Renewals or expansions that wouldn’t be under scrutiny are now experiencing additional scrutiny and constraints. According to LinkedIn, 51% reported their customers experiencing budget cuts, and more extreme, Gartner reported that 26% of organizations have implemented zero-based budgeting due to the pandemic, meaning that every renewal, expansion and purchase decision has to be justified.

According to Forrester, 75% of purchase decisions now have Executives as decision-makers (versus just 58% prior) and 51% have Finance as decision-makers (versus 35% prior). These team members don’t care about the typical discussions Customer Success is having with operational stakeholders like adoption and usage, and instead want to understand how the investments in your solutions have yielded tangible business results.
Customer success must make a shift, from reporting on the tactical to reviewing the business outcomes. It all comes down to Realized ROI.

Our advice, implement Value Enablement for your Customer Success team, enabling them to have quarterly executive business reviews, evolving from discussing operational objectives and metrics like adoption and usage, elevating to outcomes, business value and ROI.

Six Steps to Value Enablement for Customer Success

Here are six steps for Customer Success to leverage in order to better engage with customers to communicate and quantify Realized ROI and achieve Value Enablement:

1. Align to key customer business objectives – Any improvements you are able to achieve with your solution only become significant to the executives and finance if they are contributing to key business objectives. First and foremost, the customer success team should understand from the customer what the successful solution delivery will mean to helping acheive key business objectives.

Typical business objectives that you can align solution delivery to include:

a. Accelerate digital transformation
b. Improve customer experience (Cx)
c. Grow the business
d. Reduce costs and improve margins
e. Open new markets
f. Shift the business model
g. Improve agility and flexibility
h. Reduce supply chain risks
i. Improve regulatory and compliance
j. Accelerate and ease M&A

2. Identify the right metrics to track in order to illuminate outcomes – aligned with these key business objectives, next the Customer Success team should work to document the key performance indicators (KPIs) that the solution can positively impact. These key performance indicators are usually divided across the following Value Map categories:

a. Costs – spending on legacy systems, maintenance contracts, business service fees and expenses
b. Productivity and processes – team members and contractors spending time doing work and tasks that can be automated, reduced or eliminated. Process steps and errors that can be streamlined or avoided.
c. Business risks – current security, availability, disaster compliance and regulatory risks.
d. Business growth – revenue growth, expansion and customer experience opportunities.

It is important to have a catalogue of KPIs aligned to business objectives, in order to guide customer success and your customers, as many customers do not know what KPIs to leverage.

As well, it is important to focus on a select group of KPIs to start with, the ones aligned to the business objectives, most easily measured and tangible, and relevant to the stakeholders involved. This means assuring there are a few “elevated” metrics, above the tactical / operational impacts, to consider. These will help customer success better engage and communicate value in a way that finance and executives will care about.

3. Tally historical benchmarks – once the right metrics are identified, it is time to record the starting value, where the customer was at with their KPIs prior to the solution implementation and improvement. This can sometimes be difficult, as your customer may not remember the starting value. It can be helpful if you

a. Have created a pre-sales business case that documents this starting value, and the predicted improvements.
b. Use customer success kickoffs to document starting values of the KPIs
c. Leverage surveys to get input from several stakeholders to assure a more complete understanding of the KPIs across the business areas to be improved
d. Leverage real customer KPI benchmarks to document what other customers have as their starting value
e. Leverage the solution itself to measure and report on actual key metric values where and when available.

4. Quantify improvements – In each business review and at least once a year, for each KPI identified, improvements need to be measured and communicated to the customer. Collaborate with the customer to estimate the impact the solution has had on each metric. The tally of quantified improvements can be done

a. via surveys of key stakeholders or discovery questions to determine the specific savings or business value improvement to document
b. via reports or an API with the solution application, leverage metrics collected to directly determine improvements.

Over time, the improvements can be tallied and recorded to show improvements in the indicators.

If a pre-sales business case was developed, the target impacts can be compared to the current progress to determine how well, or how short the progress is compared to expected outcomes. This is important for triage, perhaps focusing on adoption, usage, change management or process improvements to drive to the expected outcomes.

5. Convert KPI impacts into quantified business value – For each metric improvement, it is valuable for the customer success team to move beyond just a list of KPI impacts, additionally converting the improvements into financial business benefits. Each KPI can be converted into a savings or growth financial impact. For example,

a. if the solution helped to accelerate time to market for new product launches by 2 months, use an average value per product per month to quantify the incremental revenue, and a margin to determine the margin contribution.
b. If the solution helped to reduce the time spent on tactical operational tasks each week by 8 hours, tally the financial value using average fully burdened salary rates.

In order to tally the financial impacts, you will need additional information, for example information about average salaries or product value per month. These can be obtained by asking the customer, and leveraging customer benchmarks from prior analyses or industry research from sources like Payscale on salaries or research firms like Gartner or Forrester as a guide.

For each quarterly, semi-annual or annual review of the value, it is important to tally and record each improvement, to show the progression of savings and growth provided, and understand how well the solution is in delivering anticipated outcomes.

6. Compare to investments and tally ROI / key net financial impacts – once the value is documented, it is important to compare the savings and gains the customer has achieved versus the investment made. For the investment, it is key to collect not just the licensing and infrastructure cost for the solution / service but also the expenses for services, customization, deployment, project and change management, training and learning spent from initial kickoff to date.

The comparison of the investments versus the benefits is best summarized over time to show some key financial summary values, of importance to the financial and executive stakeholders, including:

a. Net Benefits – a tally of the total benefits achieved minus the total investment
b. Return on investment (ROI) – a ratio of the net benefits / total investment
c. Payback period – a determination of how many months it jas taken for the project to pay for itself, for the cumulative benefits to overtake the cumulative investment (if that line has indeed yet been crossed with realized value).

Capability and Maturity Improvements for Realized ROI Success

In order to implement Realized ROI for Customer Success successfully, you should not just implement the six steps, but additionally look for several key capability / maturity improvement across five areas, each evolving as you initially develop, deliver and scale your program:

1. People – In order to engage your customers on realized value, a shift and elevation in skills within the Customer Success team may be needed. This means assuring that your team is comfortable transitioning discussions from the current implementation project management, triage, adoption / usage to discussing business objectives, KPIs and business value. As well, the team needs to be enabled with using the analysis and value assessment tools put in place to scale your Realized ROI success. Training and certification, role plays, continuous learning and active coaching are all important to assure that your Customer Success team is capable of evolving to a more business value approach.

2. Process – The process of customer success is often driven by Quarterly Business Reviews (QBRs) and managed by customer success platforms such as Gainsight. Many organizations who have implemented a Realized ROI / value-centric approach to customer success have elevated one or more of their QBRs with customers to Executive Business Reviews (EBRs), evolving from operational reporting to outcomes management. One or all of the reviews conducted throughout the year will be reshaped to drive discussions about business objective alignment, KPI improvements, business value achieved and ROI realized.

3. Tools – An interactive Value Enablement platform, and in particular a Realized ROI business value component / tool is essential. This application can serve as the heart of the Realized ROI program (and more, supporting all value engagements and value enablement throughout the customer lifecycle – from initial touch, through pre-sale, into post sale and expansion). The interactive Realized ROI application will help automate some key functions for the customer success team:

a. Documentation of key business objectives and challenges being addressed with the solution
b. Discovery of key performance indicators including historical metrics and achieved improvements
c. Quantification of the savings and business value from the KPI improvements
d. Summary of the key financial impacts including ROI, payback and net benefits
e. Comparison to proposed targets from the pre-sale financial justification / ROI business case
f. Tally and visualization of the improvements and value over time
g. Provide great visuals to make the tool easy for customer success to use in collaborative meetings with key customer stakeholders
h. Automatically create customer ready assessment reports and presentations for use in QBRs / EBRs.

4. Integration – Any commercial applications and tools need to be integrated into the platform where the sellers and success reps live and breath every day. Integration into Gainsight is key for any RealizedROI application, where the interactive Value Enablement tools can leverage security / access control, run from Gainsight environment, get key customer licensing, usage, profile and insights information from Gainsight, and share key discovery and Realized ROI data back into Gainsight.

More advanced, your solution may be able to collect key metrics to help inform the KPI with actual data, versus discovery and surveys. Integration of the Value Assessment tools with your solution as well as other third party systems could provide a running tally of actual data to inform the Realized ROI assessment.

5. Intelligence – The Value Assessment tool should be leveraged to inform the customer success data set with business objective, challenge, historical and value achievement information. This data can be centralized in Gainsight for action and reporting in customer success platform, or leveraging a third party data and analytics solution.

With the data in place, you can leverage Machine Learning and Artificial Intelligence / ( ML / AI ) to identify where processes are being followed (or not), determine which customers are most likely to attrite, especially to guide precious customer success engagement focus and triage. There isn’t a customer success group I have talked to that isn’t struggling with hiring enough good customer success reps and assuring coverage on key accounts, so the AI / ML can. Really help to prioritize resources and time where they are needed most.

Success Examples?

Okta value engineering and customer success partnered with us for the past three years in order to evolve their customer engagements from discussing deployments, adoption and usage, to discuss value realization.

The Okta team uses a Mediafly customized Realized ROI to assess the value achieved by each customer in leveraging Okta solutions, helping the customer success rep discover historical and actual KPIs, and tally financial impact and Realized ROI. Significant improvements in elevated engagements and retention have resulted from leveraging the Realized ROI assessment tool to automate this time consuming and difficult process for the customer success team and scale to cover most key accounts.

Importantly the Realized ROI tool also helps the Okta team to quantify the value “left on the table” by not having complete adoption and not having complete coverage. This has been invaluable in expand selling success within accounts.

The Bottom-Line

Taking a value-centric approach to Customer Success has significant benefits, especially improved retention and accelerated expansion.

According to our partner Value Selling Associates research, 87% of high growth companies take a value-based approach with their customers compared to 45% of negative-growth companies. And the main reason for this improvement, leveraging a business value approach not just in pre-sales, but also and especially in Customer Success.


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