History of Customer Success – Storytime

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What’s the history of Customer Success? Ever wondered where it all started?

Customer Success is not just a buzzword anymore. Most successful SaaS/Tech companies have an army of Customer Success Managers who are working round the clock. Ensuring that their customers get the maximum value out of their product.

Back in the day, enterprise software companies followed the below post-sale customer relationship approach.

  1. Sales Team negotiates and closes the deal
  2. Implementation Team handles the technical implementation
  3. Training/Onboarding Team takes over the account post the implementation
  4. The customer reaches out to Support team for any issues
  5. Account Management Team renews the contract

You see the problem here? All the above teams had their own goals/KPI’s. There wasn’t a single team or performance metrics for customer’s success. To ensure that the customer was deriving the expected value out of the product. Now, what do you think happened to customers during the renewal of their contract? Especially the one’s who were not getting the expected value out of the product? You guessed it right, they churned.

In the history of Customer Success, which company established the very first Customer Success Team?

Hint 1 : It wasn’t Salesforce

Hint 2 : It wasn’t a SaaS company

Hint 3: It was before the year 2000

In the year 1996,

A CRM company named Vantive realized that their product was having a high churn rate. In the pre-SaaS era, enterprise software companies followed a very common practice. To sell perpetual licenses which passed the ownership rights to use the software from the vendor to the customer. And the companies then charged for their maintenance and support contracts. So here, if the implementation failed, the customer would not renew their maintenance and support contracts. And would find a new vendor. The company would lose on the revenue and possibly future upselling potential.

John Luongo was the CEO of Vantive back in 1996. He hired Marie Alexander as a Senior VP of Support and Services. Marie, in the year 1996-1997 created a new department in the company called Customer Success. She began introducing them to potential customers prior to signing the contract. And aligned the compensation of the Customer Success team based on the customer’s success.

The initial idea was simple, yet effective. They asked two simple questions to the customers:

  1. How are you going to define your success?
  2. And, what do you expect from us?

Customer Success Manager documented this in their CRM. They would work with the customer to ensure that their expectations were met. After the first six months, they would revisit the documentation. And checked with customers if they were happy with the services. If there were any issues, the Customer Success Manager would work on fixing them. And then revisit the conversation after the next six months. Thus writing the history of customer success

Note: Vantive existed as an independent corporation until its merger with PeopleSoft in 1999. Later PeopleSoft itself was acquired by Oracle Corporation. Vantive as a brand no longer exists, as only the PeopleSoft name and product line are marketed by Oracle.

In the year 2004,

Bruce Cleveland was the General Manager of Siebel a popular CRM company. Because of the product’s success, he was fairly confident in his Sales Team’s ability to get in the new deals. But there was no specific team responsible for retaining and expanding the existing accounts. Bruce realized that the customers who were deriving the most value from their product were least likely to churn. So he created a new organization that would be responsible for increasing adoption and usage of their product. He named the new organization as the Customer Success Management team.

Note: On September 12, 2005, Oracle Corporation announced it had agreed to buy Siebel Systems for $5.8 billion. “Siebel” is now a brand name owned by Oracle Corporation.

In the year 2004-2005

Salesforce was one of the earliest successful SaaS companies. SalesForce IPO’d with a market capitalization of $500 million in 2004. Back then, Salesforce left little doubt that the software business model has changed forever. In the year 2005, nearly 20,000 customers had purchased the company’s CRM solution. This was up from less than 6,000 two years prior. David Dempsey realized that the company had a churn rate of 8% PER MONTH. This was while everyone was celebrating the company’s success. That was a huge hole in the bucket which couldn’t be filled fast enough with new sales. No other SaaS company had dealt with that magnitude of Churn. Thus, the Customer Success movement was born in SalesForce which was later adopted by other SaaS companies.

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