Getting Customer Success Measurement Right

The other day, the local news featured a story about the increasing number of San Francisco Bay Area cities and towns removing their red-light cameras. For most cities, the original goal of these cameras was to improve public safety by reducing accidents. While there are now fewer cars running red lights, it turns out accidents have actually increased, mostly due to drivers coming to sudden stops (to avoid a ticket) and getting rear-ended.

It also turns out the company that provides these cameras to most of the cities in this news report (RedFlex) takes, as part of its payment, a percentage of the revenue from the tickets issued using pictures from these cameras.

What does this have to do with customer success measurement? For RedFlex — and for you — everything.

How to get it wrong:

I can’t say what RedFlex knew about their customers’ (the cities, and presumably, their police departments) objectives when they sold the system. But I can tell how RedFlex defines the success of their customer: more tickets issued equals more success.

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How do I know this? Because (according to the news report) they get paid on the revenue from tickets, and therefore have an incentive to make products that maximize ticket revenue.

But that’s not the main goal of the their customer. The police department’s goal is to improve public safety by reducing traffic accidents. RedFlex appears to have no incentive to do this.

RedFlex is using the wrong measurement: They don’t seem to understand how their customer defines success, or they don’t align to that definition. As a result, they are now losing customers.

How to get it right:

ShotSpotter (disclaimer: ShotSpotter is my client) sells a gunshot detection and location system. Like RedFlex, they sell this to cities, in particular to police departments.

When ShotSpotter sells a system to a new customer or renews a contract with a current customer, they ask questions such as: “How many more gunshots have you identified using our system?” or “How often were you able to get to a crime scene faster and make an arrest because of our system?” or even “How many times were you able to prosecute a perpetrator because of evidence from our system?”

These questions and the measurements that result from them align perfectly with the definition of success their customers have for themselves: Police want to respond to crimes quickly and catch perpetrators, and the district attorney wants to prosecute those perpetrators effectively and get them off the streets.

When it comes time for ShotSpotter’s customers to renew their contract (their main product is sold similarly to SaaS or cloud services), the customer and ShotSpotter both know exactly how successful they were using the system, and the customer can make a renewal decision based on exactly the right criteria. And ShotSpotter has a strong incentive to make a product that helps their customers meet those criteria.

What you should do right now:

Your customers may not be police departments. But every single organization, including your customers, has a reasonably well-understood definition of their own success. They know what they are trying to achieve, and they are looking to you to help them get there. It’s now your job to know what success means to them and be quite certain you can align your work to their goals.

Ask yourself: How do you measure the success of your customers, specifically as it relates to the use of your product or service? Do you know how your customers use your products to make themselves more successful?

That’s the easy part.

The hard part is looking at your own organization, not just at customer success, but at everyone who plays a role in how successful your customers become as a result of your products. That includes sales, marketing and product development, just to start. I’d bet it includes everyone in your organization.

Now you have to ask: “What incentives do we give our people to advance the success of our customers?” and then ask the most important question: “Are those incentives producing the right results for you and your customers?”

If the answer to that last question does not EXACTLY align to how your customers define success for themselves, then you are not using the right measurements or incentives.

And if your measurements and incentives are not quite right, you are left with two choices:

  1. Change them, or
  2. Watch your customers disappear

Do you have a good story about how you measure customer success? Or do you know companies that can’t quite seem to get it right? Share your story in the comments below!

Feature Photo Credit: Bludgeoner86 via Compfight cc

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Comments: 1

  • Correction: In this post, I used RedFlex’s earning a percentage of ticket revenue as an example of measurement and incentive missing the mark. RedFlex informed me that this is incorrect (in fact, in California, they are legally prohibited from doing this). RedFlex is paid fixed fees for their systems and services.

    My point, however, stands. It is still critical to your customer success efforts that you understand how your customer measures success because of your product or service, and to ensure that your people have incentives to deliver that value.

    Thank you to RedFlex for providing the correct information. (the news outlet has received an appropriately strongly worded email). – See more at: http://www.dsthree.com/getting-customer-success-measurement-right/#sthash.KnsjhTOn.dpuf

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