Customer success is a relatively new undertaking. Is a "traditional" customer success model what you need, or are your needs better fit by a Consumption Based Customer Success Model?

While Customer success is a relatively new undertaking, we are fortunate to have many great content writers. Gainsight, TSIA, and Sixteenventures all provide high quality, actionable content. With that said, most of what is available is focused on a subscription based, SaaS environment.

 

We have worked with several clients, in what we call a “consumption based” Customer Success model, and there are several unique needs of these clients, but let’s first define “consumption based.”

 

Download The 2019 Customer Success Strategy to implement and optimize your Customer Success strategy, leverage our experience working, launching, and improving Customer Success teams, and properly align your Customer Success resources to your highest value and highest potential accounts.

 

What Is a Consumption Based Customer Success Model?

 

In a “consumption based” customer success model, the value you generate for your end customer is dependent upon utilization. While this is similar to the “traditional” model, a key difference is that to utilize your product, an active decision by the end user is required. Frequently, for these type of companies, their pricing models, and therefore their revenue and earnings are heavily dependent upon those customers continuing to make a buying decision.

 

Here are some examples:

 

Examples of Consumption Based Services

 

  • Background Check Services. Customers pay per background check delivered, and most enterprise customers retain multiple vendors who can provide these services.   Often the more responsive company, or the one that manages user relationships more effectively wins the discretionary business.

     

  • Messaging Services in Telecommunications. In this model, there may be a small subscription fee, but both the carrier, and the companies that provide the messaging services charge on a per message basis.

     

  • Logistics Companies. In this model, the value generated by the customer, as well as the fees received by the service provider are driven by the number and/or size of shipments (ie, TL vs. LTL) routed to the vendor.

     

What Makes a Consumption Based Model Unique?

 

It is important to keep the focus on the value generated for the customer, however, in the consumption based model, there is terrific alignment of interests.

 

Here are some other key differences:

 

 

What Do I Need to Do Differently?

 

Segmentation – Segmenting accounts in a consumption based model is more challenging, and more important. You need to determine the drivers of purchasing as well as any seasonal and/or cyclical components. Having this information will help define roles and responsibilities, and help CSMs engage at the right time.

 

Budget Planning – Because this model requires more frequent touches with the customer, it tends to require a higher touch model.  This means that you will need more CSMs, all things being equal.

 

Customer Onboarding –In the subscription based model, the focus is on ramping up initial usage, and there is a natural scaling effect in most well designed software. That is, once I begin to use it, it gets easier. The initial usage is important in the consumption based model as well, but there may be fewer scaling effects, and therefore, the CSMs must proactively engage to drive continuous usage.   Relationships must be built and nurtured at the user level, and this requires a more detailed user mapping at onboarding.

 

Value Creation & Messaging  – Communicating value proactively, in the language of your customer is vital, regardless of your revenue model. In both models, you must engage users to validate this messaging, and then help them convey the value messaging to buyer personas. In the consumption based model, this goes beyond the expansion and renewal cycles. Value messaging must be done on a regular cadence, which will help maintain and increase usage.

 

Advocacy – Value messaging is the building block of advocacy. Utilizing this information, you can access other business centers inside the company. While your end goal is to increase revenue, you do this by showing them how they can generate even more value by using more of your services.

 

Roles and Responsibilities – This is often the most challenging component of any of our engagements. As a new function, we always have to account for the current skillsets on the team. As a result, we tend to have a couple different scenarios that play out. Ideally, you have people on your team that can do the Customer Success and Account Management Components, but for your larger customers, this may need to be split into two different roles.

 

Customer Success Operations – Usage and value reporting is necessary across models, but in a consumption based model, this information needs to come much more quickly. Getting as close to real time as possible is vital. Getting visibility to utilization will help you encourage utilization and convey value to the Customer.

 

Download SBI’s 2019 Customer Success Strategy which will help you implement and optimize your Customer Success strategy.   Whether your revenue is subscription based or consumption based, leverage our experience working, launching, and improving Customer Success teams across both business models and a variety of industries.

 


 

Additional Resources

 

Schedule a working session at SBI’s Studio. 

 

Located in Dallas, TX, our facility offers state-of-the-art meeting rooms, lounge, full-service bar, and a studio used to tape our TV shows. SBI provides the location and facilitators, all at a compelling price point.

 

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ABOUT THE AUTHOR

Fred Penteado

Guides private equity portfolio companies in a variety of industries on how to make their number.

Prior to joining SBI, Fred held a variety of leadership positions with multinational Fortune 50 companies. He has worked in product/program/channel management, sales operations, and served as a Chief of Staff.

 

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