Five Reasons Technology Vendors Focus on Business Outcomes
Most vendors understand they need to focus on outcomes. But what type of outcomes? And why should they make the effort? The answers have implications for Customer Success.
What Outcomes?
Customers don’t care about a vendor’s products. The products are a means to achieve a business outcome the customers do care about. Simple logic would suggest that vendors should focus on the thing the customer cares about – the business outcome.
But, many vendors still think their job is to maximise the customer’s use of their product. Surely, they say, that’s success – it’s what the customer is paying for. Here’s the issue – the product can work as expected, but the customer still fails to achieve their business outcome. That’s because the product is only a subset of what’s needed to achieve the business result.
And customers who don’t achieve their business outcome may cancel their subscription, decrease usage or not grow their usage. And that can happen even if the product works as expected and the failure isn’t the vendor’s fault. Regardless of fault, the vendor’s revenue suffers.
Advanced vendors understand everything the customer needs to achieve the business outcome. And to help the customer get everything right, they build an ecosystem of products, services, tools, methodologies, complimentary products and partners.
Five Reasons
Here are the five reasons advanced vendors focus on business outcomes –
# 1 – Increased Revenue
This occurs in three ways
- reduced churn – if the customer achieves their business outcome, the likelihood of voluntary churn is low. Preserving existing revenue is the first step in revenue growth.
- Increased upsell and cross-sell – once a customer has achieved an initial business outcome, they’ll look for further improvement. This increases the opportunity for upsell and cross sell.
- Improved new-business win rates – a vendor able to help with everything the customer needs to achieve their business outcome will win against a vendor focused only on their product. This increases new-business win rates.
# 2 – Increased Profit
Particularly for vendors of complex products, it’s expensive to run a sales team. In the past, the profit point (the point in time at which revenue from a sale exceeds the cost of the sale) occurred a short time after the sale is made. That’s because the customer paid upfront.
With subscription pricing, the profit point occurs much later. If the customer doesn’t achieve their business outcome, they may cancel or reduce their subscription before the profit point is reached. And that damages profitability for the vendor. Ensuring the customer achieves their business outcome maximises profit for the vendor.
# 3 – Increased Stickiness
For executives in the customer, achieving the business outcome will get them promoted or a bonus or internal recognition. That’s what they care about. If a vendor helps them with almost everything they need to achieve that business outcome, they will not drop that vendor.
And if another vendor approaches the customer with a better product, the customer won’t change vendors. They won’t put the business outcome at risk. The other vendor would need both a better product and the ability to help with everything else needed for the business outcome.
# 4 – Increased Executive Engagement
Executives don’t care about vendors’ products. If a vendor tries to talk about their product, the executive will lose interest. A vendor who talks about the business outcome will get the executive’s attention. And if the vendor can show they can help with most things required to achieve the business outcome, they’ll keep the executive’s attention. And that builds much stronger engagement.
# 5 – More Successful Projects
Scope creep in projects presents a significant problem for vendors. It increases cost, duration and complexity. And that increases the chance of the project failing. Agreeing a clear and measurable business outcome for the project helps anchor the scope. And it helps focus both the customer and vendor project teams on why they are running this project. A clear scope and focus on outcomes increase the chance of the project delivering a positive business outcome.
Enabling a Business Outcome Isn’t (Only) the Responsibility of Customer Success
Lots of vendors sell the traditional way, then hand over to Customer Success. Or, worse still, they sell and implement the traditional way, then hand over to Customer Success. In those cases, it’s difficult for Customer Success to enable the customer’s business outcome.
Advanced vendors understand the need to focus on business outcomes much earlier. Marketing should promote the importance of the business outcome and the vendor’s ability to enable that business outcome. Sales should show the customer how they can enable the business outcome. Services/ onboarding should ensure that every significant project achieves a measurable business outcome. Customer Success should help the customer measure the business outcome and provide input on how to further improve it. Even Support and Product Development should focus on improving the ability of customers to achieve their business outcome.
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Next Steps
First, vendors should develop crystal clarity about what their customers consider success to be – the business outcome they can help the customer achieve. They should do this internally first. They can test the outcome with customers. But, they shouldn’t ask the customer’s first.
Second, they should start the journey to be a business outcome enabler, not only a product outcome enabler. Try some marketing campaigns based on the business outcome. Work with receptive customers on jointly evaluating ways to improve the business outcome. Try some new-business sales campaigns based on selling the business outcome. Begin the process of agreeing a business outcome with the customer for significant projects.
In time, enabling business outcomes for customers will become the heart of a technology vendor’s business. And that will help the vendors thrive.
Paul Henderson is an author, speaker and consultant on outcomes and customer success. He spent five years designing and running outcome-based customer success programs across the Asia Pacific region. He’s written two books. The first, on execution capability, was published in 2016. His second, on customer success, was published in September 2018.
This article is extracted from his second book – The Outcome Generation: How a New Generation of Technology Vendors Thrives through True Customer Success