Philipp Wolf, Guest BloggerMay 26, 2020

Customer Success vs Customer Service vs Customer Experience – The Definitive Guide

Given how competitive our market is today, customer success is the core of SaaS businesses. A good customer success strategy can make or break a company.

At the same time, customer service and customer experience also play an important role in the success of a business. It’s hard to differentiate one from another because they’re so closely intertwined, but we’ve taken a look at the main differences between the three. So let’s dive in.

Customer is King

“It takes years to build a reputation but just moments to ruin it”. You might be familiar with this line as it perfectly highlights how important keeping your customer happy and satisfied is.

As customer happiness and the success of a business are co-dependent, businesses are increasingly focusing on delivering an exceptional experience to their customers. How you treat your customers goes beyond having a customer service team - it indirectly reflects your brand's values.

Growing companies know this, which is why they’re more likely to prioritize customer success than companies with stagnating revenues.

At the end of the day, customer success is an investment in your business' growth. It helps you engage and guide your customers, enabling them to grow into happy power users, and later down the line, into advocates that will recommend your brand and help grow your business as fast as sales and marketing.

What is Customer Success?

Customer success happens when your customers achieve the desired outcome through interactions with your company.

There are two key elements that determine success:

  • The outcome customers expect: customers have a certain expectation or result in mind they want your product/service to achieve;

  • The interaction with your company: the focus on interactions with your brand or company overall; success comes from experiences at each stage of the buying cycle across different teams.

Why is Customer Success important?

“Customer success is where 90% of the revenue is” – Jason Lemkin

Helping customers become successful is beneficial for your bottom line. It’s always easier to drive revenue through upselling or cross-selling instead of finding new customers.

Source: Ted Goff

Another benefit of customer success is that it drives new business. Not only do successful customers become repeat customers, but they even advocate the products they like, and bring new customers through referrals.

These are just some of the benefits that amplify the importance of customer success, which you might already be familiar with:

  • Customer retention;

  • Customer acquisition;

  • Churn reduction;

  • Brand promotion;

  • Profitability.

Customer Success metrics to track

Relationships with customers are crucial to the success of a business. If customers don’t find your product helpful, if they don’t understand the value, they’ll stop paying for it and switch to a competitor.

This is why investing in customer success is important. If you’re being proactive and solve issues before they arise, customers won’t have a reason to leave.

Here are 4 metrics to track to ensure customer success:

1. Churn

We’ve all heard of churn. But did you know that there are actually three types of churn you can track: customer churn, gross dollar churn, and net dollar churn.

Customer churn is the percentage of customers that stopped using your product during a certain time frame.

Gross dollar churn is the percentage of total revenue lost from downgraded contracts (when customers switch to a less expensive plan). It’s also known as “monthly recurring revenue churn” or “MRR churn” if it’s measured monthly.

Net dollar churn takes into account the revenue lost from customer churn and downselling but also factors in the revenue that comes from upselling/cross-selling existing customers. It’s also known as “net MRR churn” when measured monthly.

2. Expansion revenue

The percentage of new revenue that’s coming from your existing customers is called expansion revenue. If you’re measuring it monthly, it’s called “expansion MRR”.

Upgrades to higher-tier plans or buying additional features are only two examples of expansion revenue.

Unlike churn, which measures retention, expansion revenue measures whether you’re doing a good job getting customers to grow with your product.

3. Customer satisfaction

Now, the previous metrics are used to determine what customers are doing. But how do you measure how they’re feeling about your product?

Measuring customer satisfaction regularly enables CS teams to analyze customers’ behavior and prevent downgrades and taking action before they have a chance to make a drastic decision.

The Customer Satisfaction Score (CSAT) is used to determine short-term happiness, but it’s not a reliable measure of growth or customer loyalty.

To determine your CSAT, ask your customers “How would you rate your over­all sat­is­fac­tion with [our product]?” and rate their responses. The most popular format is:

1 = “very unsatisfied”

2 = “unsatisfied”

3 = “neutral”

4 = “satisfied”

5 = “very satisfied”

Once you’re finished collecting answers, make an average; that’s your Customer Satisfaction Score.

4. Net Promoter Score (NPS)

Last but definitely not least, we have the NPS, the most important metric for SaaS businesses. Compared to CSAT, NPS is more closely tied to growth. That’s because the Net Promoter Score has a direct impact on earning loyal customers and predicting customers’ behavior.

With an NPS survey, a customer is asked a single question, “How likely are you to recommend [our product] to a friend or colleague?” The customer then picks their response from a 0-10 scale.

Based on the responses they give, customers are then grouped into three categories:

0-6 = “detractors”

7 or 8 = “passives”

9 or 10 = “promoters”

To determine your actual NPS score, subtract the percentage of people in the “detractor” category from the percentage of people in the “promoter” category.

How to help customers succeed

1. Have a customer success strategy in place

Every business is different, so every company should meet their customers’ expectations. The only thing you should keep in mind is that your strategy will need adjustments as your product/service grows.

2. Educate your customers

Prevention is better than treatment. Instead of waiting for your customers to run into problems, educate them so they know how to avoid any issues that might arise while using your product.

If you have a software product, you can create a knowledge base where you list product and feature descriptions.

3. Optimize your onboarding

The onboarding phase is the perfect opportunity to get your customers acquainted with your product and answer their questions at the same time.

Examples of onboarding materials include step-by-step tutorials, trainings, resources, and knowledge they need to get the ball rolling.

4. Promote customer loyalty

There are many ways to promote customer loyalty:

  • through a customer loyalty program;

  • by developing a community for your current customers to interact with each other;

  • by establishing a point and discount system for current customers making additional purchases.

What is Customer Service?

Customer service is the range of services you offer to help your customers resolve their problems. Depending on the industry, these services can range from call centers (phone support) to ticket-based help desks and email support.

Although some companies use these terms interchangeably, customer success is not customer service. However, the larger principle remains the same – you need to make sure your customers get the best value possible from your product.

The main difference between Customer Success and Customer Service is Customer Service’s primary goal is to solve customer issues as they arise.

With customer success, you’re proactively helping customers work toward goals, whereas with customer service, you’re reactively fixing things and answering customer questions.

Why is Customer Service important?

How do you know you’re building a great product? You take a look at how happy your customers are, how engaged they are, how many of them stick around for longer periods, and how many give you feedback regarding your product.

And each of those factors can be influenced by support more than any other function of your business.

The main reason customer service is crucial to any business (but especially to SaaS businesses!) is that customer retention is cheaper than customer acquisition. As simple as that.

An increase of 5% in customer retention can determine a 25% increase in profit. Repeat customers are 67% more likely to spend more with you.

Ultimately, investing in customer service can decrease your churn rate, which decreases the amount you must spend on acquiring new customers, and decreases the overall customer acquisition cost (CAC).

The key difference between “great” and “good” customer service is that in the latter case, you’re doing the bare minimum to keep your customers satisfied. But in the first case, you’re not only keeping them satisfied, you’re going above and beyond to retain their loyalty.

The key features of Customer Service

1. Type of service

How will you communicate with your customers? Via email? On the phone? By using third-party apps?

Choosing one over the other depends on the product you have, how complex it is, and how comprehensive your explanations are. If you need to link your documentation or provide a video tutorial, maybe phone support is not the best option.

2. Tone of voice

The same tone of voice you use for your marketing initiatives should be used by your customer service representatives as well.

And although you need to have clear procedures in place to support your customers, you don’t want to get them to hang up; avoid making your team follow instructions like robots and encourage them to sympathize with customers.

3. Quality of service

Who you hire is crucial to the quality of the support you can offer. Well structured and resourced user onboarding can also help quickly and effectively address your customer’s needs.

4. Speed

Ideally, you should have real-time conversations with your customers. But that’s not always possible. Instead, you should determine what’s the latest you feel comfortable answering your customers.

5. Language

This is a tricky one. If your product is local, you should offer support in your local language. But if your product is global, then English is a must, and other local languages should be added at an earlier stage.

Customer Service metrics to track

1. Average ticket count (daily/weekly/monthly)

Calculating the average number of daily, weekly and monthly tickets helps you in a number of ways. For example, you’ll be able to identify frequently occurring issues and determine whether they can be automated or not.

2. First response time

Customers feel positive about a brand that gives a quick first response, even if it’s ineffective. Companies that really care about their customers have quick first response times and bind their services staff to approach clients as soon as possible.

3. Average ticket resolution time

Having quick first response times is great, but if you take too much time resolving the customer’s concerns, it will eventually hurt your customer experience. The average time your service team takes to resolve a ticket is a great indicator of their efficiency.

4. Number of interactions per ticket

Too many interactions mean that your support staff is not asking the right questions about the customer’s issue, or the customer is not being directed to the right people. If you see the average number of interactions per ticket rising, find out the reasons for it.

5. Issue resolution rate

This means the percentage of issues your staff actually resolves from the total queries received. A rising resolution rate is a clear indication of your team’s efficiency.

What is Customer Experience?

The best way to define customer experience is as the impression you leave with your customers.

Are customers blown away by the performance of the product? Are they delighted by the attention customer service reps give them to help solve their problem? These are some general examples of what factors are at play when creating a great customer experience.

Why is Customer Experience important?

The better experience customers have, the more repeat customers and positive reviews you’ll receive. This helps reduce the friction of customer complaints and churn.

The benefits of delivering a great customer experience include:

  • increased customer loyalty;

  • increased customer satisfaction;

  • better word-of-mouth marketing;

  • positive reviews;

  • recommendations.

All business models can benefit from offering a great experience, but for SaaS businesses, this is especially important.

How to measure Customer Experience

1. Use customer satisfaction surveys

Just like with customer success, a great way to measure customer experience is Net Promoter Score.

To get the whole picture, make sure you gather the NPS from different teams. What is the NPS for in-product usage? What is the NPS for customer service teams across communication channels? What is the NPS for sales?

2. Identify reasons for churn

All businesses have churned customers. That’s normal. What matters is that you learn from churn when it happens so you can (hopefully) prevent it from happening for the same reasons.

3. Ask for feature requests

Asking for their opinion will make your customers like you even more. This doesn’t mean you should implement all their suggestions. But if there are any recurring trends popping up again and again, it might be worth it to research to see if you should add them.

4. Analyze customer support tickets

This is where angry customers usually go to, so it’s easy to find out how happy customers are with your product.

If there are recurring issues that cause a lot of pain for your customers over an extended period of time, make an effort to try to resolve them.

Successful businesses ensure continued happiness and success for their customers. Creating a customer success program, preventing issues from happening or solving them promptly, and ensuring a great customer experience overall is key to growing a successful SaaS business.

About the author

As the CEO of Custify, Philipp Wolf helps SaaS businesses deliver great results for customers. After seeing companies spend big money with no systematic approach to customer success, Philipp knew something had to change. He founded Custify to provide a tool that lets agents spend time with clients—instead of organizing CRM data.

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