THE

BUILDING
BLOCKS
OF
CUSTOMER
SUCCESS
By Stephen Fulkerson,
VP, Customer Success Research,
TSIA

www.tsia.com/cs 1
 CONTENTS

Introduction..................................................................................................... 3

PART 1: CUSTOMER SUCCESS BASICS...................................................... 4

What is Customer Success?.............................................................5

Why is Customer Success Important?..............................................6

How Do You Execute Customer Success?........................................8

When Does Customer Success Happen?.......................................10

Who Are the People Who Perform Customer Success?.................12

PART 2: FUNDING CUSTOMER SUCCESS............................................... 14

5 Questions to Help You Get Started.............................................16

PART 3: CUSTOMER SUCCESS MATURITY.............................................. 18

Forming.........................................................................................19

Storming........................................................................................19

Norming........................................................................................20

Performing.....................................................................................20

PART 4: MEASURE YOUR PROGRESS...................................................... 22

Customer Success Power Index.....................................................24

Conclusion..................................................................................................... 26

2 The Building Blocks of Customer Success

INTRODUCTION
Whether you sell hardware, soft-
ware, subscriptions, or services,
the best way to secure a solid re-
curring revenue stream is to ensure
that your customers achieve their
desired business outcomes. This
goes beyond culture and maintain-
ing good relationships, requiring
you to consistently deliver against
the promise of your technology and
your customer’s desired engage-
ment throughout their lifecycle with
that technology. Many companies
are choosing to focus more on their
customers by helping them achieve
specific outcomes with their tech-
nology purchases in an initiative
known as “customer success.”
In this ebook, you’ll learn the basics
of customer success and how to get
started with applying this crucial
function to your current operation,
thereby securing your own desired
outcomes as a technology supplier.
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 PART 1
CUSTOMER
SUCCESS
BASICS
Before you can establish and grow your
own Customer Success function within
your company, you must first have a firm
understanding of the basics. Whether
you’re brand new to the concept or
need a refresher, here are answers
to some common questions about
customer success.

4 The Building Blocks of Customer Success

WHAT IS
CUSTOMER SUCCESS?
Customer success is the intersection between the promise
of a supplier’s technology and the business outcome the
customer wants to achieve.
Today’s customers aren’t buying the
latest tech simply for its shiny new
features, but are instead investing
in products and services that
will solve their biggest business
problems. As a technology supplier,
you are making a promise to your
customers that their investment
in your products and services will
lead to them overcoming those
problems.
Customer success is about all the
activities related to helping your
customers achieve their goals
through the effective use of your
technology. For some, this begins
in a thematic customer-centric
culture, but the ultimate destination
should be aligned as a continuous
engine that supports and grows the
company’s recurring revenue.
While the promise your company
offers extends throughout your
entire organization, (e.g. your
Product Management team
conceives the promise, you have
engineers that develop and build
the promise, Marketing advertises
the promise on your website, Sales
sells the promise) it’s ultimately up
to the Customer Success team to
deliver the promise.
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 WHY IS CUSTOMER SUCCESS
IMPORTANT?
For many technology vendors, find-
ing and maintaining recurring reve-
nue streams has always been top of
mind. The primary goal of custom-
er success is to enable the effec-
tive adoption of technology, which
in turn leads to high renewal rates
6 The Building Blocks of Customer Success
and expansion opportunities. By
ensuring that your customers can
extract the most value from their in-
vestment through the effective use
of your offers, they are more likely
to stay on your platform and spend
more with your company.
3 Stages of Adoption
It’s worth noting early on that not all levels of
adoption are created equal. The reality is,
adoption exists as a gradient of low,
high, and effective:

EFFECTIVE ADOPTION

HIGH ADOPTION, The customer is using ev-

NOT EFFECTIVE ery aspect of your tech-
nology with a high rate
LOW ADOPTION The customer is using
of frequency to achieve
your solution, but still
The customer has pur- their desired business
has some bad processes
chased your solution, outcomes. They are ef-
or poor organizational
and you are able to track fectively consuming your
structures in their cur-
that they’re not using it offer, leading to quan-
rent operating environ-
with any frequency that tifiable results, whether
ment that are preventing
would give them the it’s measured in dollars,
them from being effec-
results they’re looking time, optimization, or
tive. While they might
for. In some cases, they whatever is the basis of
be consuming your
might not even be us- their desired outcome.
technology, they’re not
ing it at all. Because of The customer’s desired
using it in a way that will
this lack of use, they are outcome that was per-
lead to achieving their
not able to receive a re- ceived has been re-
desired goals, and as a
turn on their investment ceived. Because they are
result, they are unable to
in your solution and actively receiving value
realize the full potential
therefore are not likely from your products and
of your offer.
to renew their contract. services, they are most
likely to expand their
spending and renew
CUSTOMER SUCCESS IS ALL ABOUT their contracts.
HELPING THE CUSTOMER ACHIEVE
EFFECTIVE ADOPTION.
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 HOW DO YOU EXECUTE
CUSTOMER SUCCESS?
Before you can plan ways to better serve your customers, you should first
determine which type of Customer Success organization you are or would
like to have.

Establishing Your Company Charter

To do this, you must decide what defines “success” for your organization
based on your company goals. TSIA research has shown that many
technology businesses can be divided into three primary charters.

ADOPTION RETENTION EXPANSION

Help customers ensure Make sure customers Expand the company’s
quantifiable value renew their relationship existing account
realization from the with the company. revenues.
company’s offerings.

What is your customer success charter?

88% 78% 61%

ADOPTION RETENTION EXPANSION

8 The Building Blocks of Customer Success

TYPES OF CUSTOMER
SUCCESS INTERACTIONS
It’s only after you’ve established your primary charter that you can think
about how to execute on your mission. Customer success is delivered
through time, event, and value-based interactions between the customer,
the supplier, and the supplier’s technology. Primarily, these are prescriptive
motions that allow for a pre planned response. For example:

TIME-BASED: A customer success manager (CSM)

engages with a customer via a quarterly business review
(QBR) or executive business review (EBR).

EVENT-BASED: A customer achieves a

predetermined milestone.

VALUE-BASED: A CSM implements an effective

adoption strategy for the customer’s technology
purchase that will allow them to meet and exceed their
business goals.

While your charter will set the tone for your customer success activities, the
categories of activities and interactions listed above are relatively standard.

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 WHEN DOES CUSTOMER
SUCCESS HAPPEN?
Customer success requires pre-
scriptive customer engagement
between both supplier and cus-
tomer throughout the entire lifecy-
cle to ensure the promises of the
suppliers’ technology are realized.
This engagement requires constant
communication, ensuring that your
customers receive a consistently
positive experience with your com-
pany and offers.

The LAER Model

To better map out this lifecycle, TSIA has developed a customer engage-

LAND ADOPT EXPAND RENEW

ment framework called the LAER EXPAND: Encouraging customers

model, which is made up of four to buy more of your products and
parts: services.

LAND: Activities leading to a RENEW: Convincing your customer

prospect becoming a customer. to renew their relationship with your
company.
ADOPT: Helping the customer
effectively use your offer to achieve
their business outcomes.

10 The Building Blocks of Customer Success

 LAND ADOPT EXPAND RENEW

The Role Customer Success Plays in the Adoption Stage

When it comes to new customers, one of the primary questions we at TSIA
ask our members is, "When do you start the adoption activities?"

A During the sales cycle

B Right after the customer signs the contract

C After the customer is up and running on the platform

D Three months before the renewal is due

Customer success typically gets in-
volved after the sale has landed, but
we’ve recently seen a growing trend
that engagement begins before the
deal is closed. This has resulted in
smoother handoffs from Sales to the
next team, and a much faster time
to value for the customers, with less
time for the customer to wait to see
their first outcome. Time to value
greatly impacts a customer’s adop-
tion of your solution, as well as their
decision to continue and ultimately
renew, so it’s important to focus on
shortening that time.

TSIA RECOMMENDS: Define your success plan

before the customer signs on, when there’s an
85-90% certainty that the deal is going to close.
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 WHO ARE THE PEOPLE
THAT PERFORM
CUSTOMER SUCCESS?
The people whose primary respon-
sibility to ensure customers are
receiving the most value from
their investment are members of
Customer Success teams and are
commonly referred to as customer
12 The Building Blocks of Customer Success
success managers (CSMs). These
teams are important, however,
it is critical that these resources
synchronize with the thematic
customer-centric processes found
throughout the entire company.
Hiring Customer Success Managers
When it comes to finding your ideal customer success manager (CSM), here
are three must-have skills to look for:

CUSTOMER SERVICE: This is the most important skillset needed for a

great CSM, with the most common skills cited as being communication
and presentation skills, as well as a history in account or relationship
management.

TECHNOLOGY: A CSM needs to fully understand your company’s

technology from the user’s perspective, including its use within their unique
operating environment, in order to help move customers from low, to high,
and ultimately to effective adoption.

FUNCTIONAL: If they’re to connect your technology to your customer’s

desired business outcome, then your CSM will need to understand some
of the finer points of that customer’s business or industry. This functional
knowledge, or domain expertise, may also be commonly referred to as
having a “consultative” approach.

Your ideal customer success manager will possess all three of these skills
which align to the charter of adoption. When adoption is performed well,
then expansion and retention follow. When adoption is done poorly, that
leads to customer churn.

CUSTOMER SUCCESS MANAGER

Customer
Technology Functional
Service

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 PART 2
FUNDING
CUSTOMER
SUCCESS
After you’ve established the primary
goals of your Customer Success
organization, you’ll need to know how
to fund it. Based on conversations with
TSIA members, it’s clear that a majority
of companies do not have a model to
determine how much money should be
spent on customer success. Here are
some tips to keep in mind.

14 The Building Blocks of Customer Success

WHERE SHOULD
CUSTOMER SUCCESS
FUNDING COME FROM?
While most “born-in-the-Cloud” businesses tend to have a Customer
Success function already established, many technology companies who are
still making this transition need to incubate a Customer Success function
from within another department’s budget. Some of these sources
frequently include:

COST OF GOODS SOLD/COST OF SERVICES These are the

COGS
costs associated with making, installing, and supporting the
specific instance of the product purchased by the customer.
This would also include monetized customer success.

SALES AND MARKETING These are the costs to acquire

S&M
and retain customers.

RESEARCH AND DEVELOPMENT These are the costs

R&D
of developing new product capabilities.

G&A GENERAL AND ADMINISTRATIVE These are the costs left

over that don’t fit neatly into one of the previous buckets.

While the ideal funding model and source is different for every company,
the charter of your Customer Success organization will have the heaviest
impact on the amount of funding needed as well as the best source.

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 5 QUESTIONS TO HELP YOU
GET STARTED

Building a Customer Success Funding Model

Whether you’re building a new Customer Success team or are streamlining
your existing organization, here are a few questions to ask yourself that will
help you get started in building a customer success funding model that
works best for your company:

1 What is the target financial model your company

is attempting to achieve?

2 Will the Customer Success organization have

responsibilities for traditional services and support activities?

3 Will the Customer Success organization be

responsible for adoption?

4 Will the Customer Success organization be responsible for

renewing the customer subscription?

5 Will the Customer Success organization be responsible for lead

generation, cross-selling, and upselling existing customers?

Once you’ve answered these five key questions, your company will be able
to document your model for funding customer success. By establishing a
funding framework, businesses at any stage in their customer success
journey can start making rational decisions regarding the future of this
function along the way.

16 The Building Blocks of Customer Success

TSIA RECOMMENDS: CONSIDER IF THERE ARE
OTHER TASKS YOUR CUSTOMER SUCCESS TEAM
IS RESPONSIBLE FOR BEYOND TRADITIONAL
ADOPTION, RETENTION, AND EXPANSION
ACTIVITIES THAT COULD IMPACT FUNDING.

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 PART 3
CUSTOMER
SUCCESS
MATURITY
The next step in your customer success
journey is to find out which capabilities
your team will need in order to grow,
face challenges and problems, find
solutions, plan work, and ultimately
deliver results for your customers.
However, the priorities for developing
these capabilities will be different for
each customer success organization
depending on their level of maturity.

18 The Building Blocks of Customer Success

4 PHASES OF CUSTOMER
SUCCESS MATURITY
In the 1960’s, Dr. Bruce Tuckman developed a model of group development
which listed the phases needed for teams to advance, which fell into 4
categories: Forming, Storming, Norming, and Performing. In TSIA’s
Customer Success Maturity Model, we’ve applied this concept as it relates
to customer success.

FORMING STORMING NORMING PERFORMING

Phase 1: Forming
Technology suppliers in this phase of maturity have just begun to under-
stand the importance of combatting churn as they make the pivot towards
embracing new “as-a-service”/subscription-based business models, rather
than just selling products and services. Especially for subscription models,
where customers pay gradually over time only for what they consume,
reducing customer churn and keeping them on the platform is critical.

Companies in this phase tend to not yet have a formal Customer Success
team in place, no adoption plans, and are still determining what “success”
means for their company.

Phase 2: Storming
This is the phase in which we start to see customer success being consid-
ered as more of a theme, and is run as a project or series of projects where
funding is supplied on a project basis. We also see voice of the customer

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 and customer feedback programs beginning to be established, such as
customer effort score, CSAT, or Net Promoter Score. There also might be
a leader of customer success or customer experience, and oftentimes they
are matrix-managing other resources in the company.

However, Customer Success organizations in this phase of development

still show limited signs of organizational alignment to technology adoption
initiatives, so TSIA refers to this stage as “thematic” customer success.

Phase 3: Norming
At this point, one of the three key charters of customer success mentioned
above has been established, whether that’s adoption, retention, or expan-
sion. Technology adoption is still considered to be low at this stage. There
may be more proactive customer success initiatives, such as customer
journey mapping, quarterly business reviews, or a formal onboarding program.
Customer success managers may have also been hired and put into primar-
ily reactive roles, in addition to helping with escalation management.

Phase 4: Performing
Finally, this is the stage where a company will exhibit more than one or
all three charters of customer success, including adoption, retention, and
expansion. The technology is being effectively adopted by customers, and
how their business outcomes are being impacted by the technology are
being measured and quantified. There are documented customer success
plans, workflows, and playbooks established that align to value-, event-, or
time-based triggers. Finally, there is a more proactive customer success
manager role that reports into a customer growth team.

20 The Building Blocks of Customer Success

THE BIG “C” CUSTOMER SUCCESS ORGANIZATION
Chief Customer
Officer

Portfolio Customer Services Shared

Management Success Delivery Services

Offer High Support and

PMO
Definition Touch Field Services

Offer Low/Digital Professional

RMO
Engineering Touch Services

Partner Education
Analytics
Led Services

Renewal Managed Knowledge

Specialists Services Management

Cloud
Finance
Operations

SUCCESSFUL RETENTION AND EXPANSION

OPPORTUNITIES DEPEND ON COLLABORATION
BETWEEN DIFFERENT FUNCTIONS WITHIN
A COMPANY, WHICH TSIA REFERS TO AS A
“CUSTOMER GROWTH TEAM.”
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 PART 4
MEASURE
YOUR
PROGRESS
The only way to quantify the impact of
your Customer Success organization is
through detailed metrics. This way, you
can know “what good looks like” and
communicate the value customer
success brings to the rest of the
organization, thereby securing
future funding and internal support.

22 The Building Blocks of Customer Success

CUSTOMER SUCCESS
METRICS
When it comes to the metrics and measurements your Customer Success
team should focus on, here are the most common ones TSIA sees from our

Retention Rate 90%

How many current customers renew their contracts?
Measured year-over-year on a dollar basis.

Churn Rate 11%

How many customers have been lost?
Measured year-over-year on a volume basis.

Expansion Rate 18%

How many new and current customers have been
upsold to additional products and services?
Measured year-over-year on a dollar basis.

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 MEASURE THE INFLUENCE
CUSTOMER SUCCESS HAS
WITHIN YOUR COMPANY
Once your Customer Success organization is well-established, you can
take your metrics even further. TSIA has developed the Customer Success
Power Index, a measurement that puts a hard number on the economic
impact, metrics, and practices of your Customer Success organization.

Strengths Weaknesses

Growth

EFFECTIVENESS ECONOMIC
RATING IMPACT RATING
Roadmap

Work with TSIA to...

DETERMINE UNCOVER DESIGN
your organization’s your strengths, your roadmap for
effectiveness and weaknesses, and improment and define
economic impact. growth opportunities. how to get there.

24 The Building Blocks of Customer Success

www.tsia.com/cs 25
 CONCLUSION
Setting up a Customer
Success function within your
organization might seem like a
lot of work, but it is an incredibly
valuable function that will
ensure recurring revenue and
profits for years to come.

At TSIA, we believe customer

success is a services motion
with a sales result. By focusing
on what your customers hope
to achieve with your offers, you
are proving your value to their
businesses, which is becoming
increasingly more important
than providing products and
services alone.

26 The Building Blocks of Customer Success

 ENSURE
RECURRING
REVENUE
AND
PROFITS
FOR
YEARS
TO
COME

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 TSIA offers deep insight on how
to increase adoption and grow
accounts by helping your cus-
tomers achieve business out-
comes. By becoming a member
of the TSIA community, you’ll
gain access to the resources
you need to effectively develop
and optimize your Customer
Success organization.

To learn more, visit

SHARE THIS WITH
YOUR PEERS

www.tsia.com/cs

© Technology & Services Industry Association | 17065 Camino San Bernardo, Ste. 200 | San Diego, CA 92127 | www.tsia.com

Sources:
TSIA Blog: “3 Steps to Determining Your Customer Health Score”. TSIA Research Report: “Customer Success Maturity Model”, “The Case for
Services Convergence and Big “C” Customer Success” and “The Three Charters of Customer Success”. Studies: 2022 Customer Success
Compensation Study, TSIA Benchmark Data.

28 The Building Blocks of Customer Success