Increasing Customer Retention for Managed Service Providers

//Increasing Customer Retention for Managed Service Providers

Increasing Customer Retention for Managed Service Providers

By | 2019-07-29T10:10:17-04:00 July 24th, 2019|Customer Retention|Comments Off on Increasing Customer Retention for Managed Service Providers

Why Customer Success is an Ideal Fit for MSPs

Check out TSIA’s findings about the retention rates of Managed Service Providers with and without a dedicated Customer Success Manager. The numbers speak for themselves.

managed service providers retention rates graph

Jeff Connolly, senior director of managed services research for TSIA, sums up why Managed Services lends itself to a Customer Success model for delivery:

Unlike most other lines of services within a provider’s portfolio, managed services has always had an intimate, informed, critical, and ongoing relationship between the provider and the customer … Managed services is essentially taking over all the operations, as well as the risk, of running some or all of a company’s infrastructure. The critical nature of this relationship has mandated that the customer have continuing and available paths of communication with their managed services provider.

These “continuing and available paths of communication” are wheelhouse skills for a CSM, who, ideally, is someone with emotional intelligence as well as technical expertise. In essence, the Customer Success Manager for a Managed Services group becomes the trusted advisor to the customer. It’s important to note that in order to optimally fulfill this role, the CSM must not force upsells or focus on expansion. Their job is to capture loyalty. Ideally, they take full responsibility for the health and well-being of the account by both delivering value and quarterbacking the customer’s overall experience. As the single point of contact for the customer, the CSM helps the entire organization, including the Managed Services team, overcome some of their biggest challenges.

Top Challenges for MSPs

According to TSIA’s report The State of Managed Services and XaaS: 2019, these are the top 10 challenges MSPs face:

  1. Understanding and Measuring KPIs for Managed Services
  2. Optimal Delivery Structure
  3. Defining Market-Focused Offers
  4. Managed Services Pricing Methodologies
  5. Creating an Executable and Measurable Managed Services Strategy
  6. Managed Services Platforms and Tools
  7. Defining Managed Services Organization Structures
  8. Benchmarking Managed Services Performance
  9. Establishing SLAs
  10. Creating Operational Processes

While not all of them can be mitigated by incorporating Customer Success, several of them can absolutely be addressed by modifying delivery practices and organizational capabilities.

What Does Customer Success Look Like in Managed Services?

The world is rapidly evolving toward an as-a-service model for purchasing and adopting technology. This fast-paced shift is forcing businesses to adapt their organizational capabilities and delivery approaches to ensure customers derive fast and continuous value on their way to becoming loyalists. This model for knowing what customers need and delivering it on an ongoing basis already essentially exists in the managed services model. Imagine what augmenting that with a vital customer success approach can do.

Here are some Customer Success best practices that will assuredly benefit MSPs in increasing customer retention rates:

  • No more SOWs. Consider an agile approach to delivering services. Rather than recrafting a SOW for each new project, sales can sell blocks of retained services and then CS can utilize sprints to accomplish the customer’s goals. A Customer Success Manager is an ideal project manager for agile sprints because he/she can preserve the relationship with the customer on the front end and keep the team focused on the goal behind the scenes.
  • A REAL trusted advisor. Because CSMs should not be sales focused, they actually add value to the relationship with the customer. Even if they don’t have all the technical expertise the customer requires, they should have a strong working knowledge of the solutions that were sold, and this skillset set should be perceived as valuable by the customer. In fact, to be a trusted advisor and a single point of contact, the CSM must have a valuable skill set or the customer may resent them as a resource.
  • Standardized menu of offerings. As of January of 2019, 74% of Managed Services have a standard service catalog, according to TSIA.  Pre-packaged offerings help in the sales and delivery of managed services. Standardizing offerings requires that you have an operationalized way of delivering them. Ideally, these offerings are packaged as retained hours that allow for an agile approach to delivery. CSMs can quarterback the relationship and set priorities for each sprint, monitor the attainment of outcomes, and coordinate the right resources for each customer goal.
  • Accurate and ongoing assessment of customer vitality. Managed Service providers have an intimate view of customer health. While there may be other ways of knowing how delighted a customer is (i.e. surveying), the providers have a more direct line of sight into their customer’s organization. Together with a great CSM, the entire services delivery team has a more comprehensive and realistic view of the health and anticipated future state of a customer. This is great customer data to incorporate into meaningful “health scoring” to accurately predict churn risks and understand opportunities for growth.
  • Staying focused on customer outcomes. Today’s technology buyers aren’t purchasing for features. They are focused on solving business problems. This means they’ll turn tail if they aren’t meeting their business goals. Customer Success is a model built around ensuring not just adoption, but continuous value attainment. Incorporating this focus into Managed Services is key to customer retention and the identification of expansion opportunities.

Customer Success Approach Helps Mitigate Some of Managed Services’ Biggest Challenges

While a Customer Success approach to Managed Services is not a panacea, it can be the key to minimizing some of the challenges the organization faces. MSPs that are incorporating CS into their delivery model are:

  • optimizing their delivery structure,
  • operationalizing (and standardizing) their processes, and
  • reducing SLAs and SOWs (which results in more organic renewals).

These are palpable improvements to the way Managed Services has operated in the past. More importantly, though, are the results that MSPs who have CSMs are seeing in their customer retention rates. Who doesn’t want to improve their overall retention rate by 5%?

About the Author: