With the growing popularity of SaaS and many companies’ efforts to build customer success programs, we hear the term “customer onboarding” more and more often. The importance of customer onboarding is now voiced loudly in the field of customer success, but many people may have a vague understanding of its actual meaning. In this article, we would like to explain the meaning of customer onboarding, its importance, and points to note when implementing it.
Customer onboarding is the process of helping customers become acquainted and comfortable in using the services/products offered by a company.
Originally, the word “on-boarding” referred to “the process of assisting new crew members and passengers on a ship or plane to quickly become accustomed to their environment.
It has now become a term associated with training human resources, as it refers to how an organization retains and develops newly hired members.
This term is also used to describe the way a company helps a new customer to learn about a service/product while rapidly familiarizing them with its operations.
Customer onboarding is arguably the most important responsibility that customer success teams should focus on.
Your customers will have difficulty in using the service/product and generating outcomes if this is not addressed.
Importance of customer success from the Customer Lifecycle perspective
Using the customer lifecycle, we determine the impact of failing at customer onboarding on the customer’s future usage of your service/product.
The customer lifecycle is the concept of managing customer phases based on the duration of service/product usage. Segmenting customers by their length of usage results in efficient and effective customer success, especially in the case of subscription models that require building long-term relationships with customers.
Although how you divide each phase of the customer lifecycle varies from company to company, it can generally be summarized into four phases; introduction, operation, utilization, and retention. Customer onboarding is commonly implemented in the first phase “introduction”.
Below is a summary of the characteristics of each phase and which customer success methods you should implement on it.
This is the stage when customers decide to adopt your service/product and begin to use it. Since they have just started, you need to give them a training on its basic usage while communicating its value. This process is called customer onboarding.
After the customer onboarding process is completed, it is time for your customers to integrate the service/product into their workflow. Since many customers have not yet succeeded using your service/product, you need to support them to succeed on their own by providing training menus and introducing best practices to help them make better use of the service/product.
This is the stage where customers have used your service/product for a certain period of time through several contract renewals, and they aim for further significant success. At this stage, the difference between successful and unsuccessful customers becomes clear, so you need to have many touch points with unsuccessful customers to develop a good relationship. You can also build a community and have users interact with each other.
This stage is when customers feel successful and use your service/product on a stable and continuous basis. In many cases, they serve as good cases for other customers, thus you may want to ask them to collaborate with your community’s activities, such as creating case studies or speaking at events.
As you can see from the above, the customer lifecycle is a step-by-step process. For customers who do not understand how to use the service/product, it is probably difficult to integrate it into their workflow or to succeed. Therefore, the state of later stages depends on whether customer onboarding is successful or not.
In order to maximize the number of customers that feel successful and reach the “retention phase”, customer onboarding must be successful in the first place.
ARR/CSM is the metric used to estimate the efficiency of customer success activities.
The larger the number is, the better from an efficiency perspective because it means a CSM can manage more revenue.
The way to calculate ARR/CSM is really simple.
You divide the total ARR today by the number of CSMs you have.
If you want to get a more precise number, you may want to exclude the CSMs not ramped up yet.
Typically you include Senior CSMs that are in customer-facing roles, but not CS directors that supervise the CSMs
It all depends on your industry, pricing model, business phase, and so on.
However, from our experience supporting a lot of customer success professionals, we share the industry benchmark.
ARR$1M per CSM is the first milestone for high-touch customer success(≒enterprise customers) and ARR$2M per CSM for low/tech-touch(≒SMBs) oriented customer success.
You don’t have to be at this level in the early phase. Ideally, you meet this level of scalability when you hit $10M of ARR.
If the total ARR you have is <$1M, don’t be bothered by the efficiency. Your focus should be solely on your customer’s outcome and the quality of customer success activities.
Also, the appropriate number to achieve varies depending on the average salary per CSM because it all circles back to the profitability of your company.
Let’s say you have to achieve ARR$1M/CSM if the average compensation is $100K/year for a CSM.
You can target $0.9M ($1M multiplied by 0.9x) if the average comp is $90k/year per CSM.
The development of the customer success team leads to better customer onboarding
Customer onboarding is a field where the development of the customer success team really matters. While it is the most time-consuming phase for service providers, it is also the phase where you can easily reduce time through systemization and automation. Therefore, you can measure the development of a customer success team by “how effective and systematic the customer onboarding process is”.
As the service/product improves, more customers will enter the introduction phase, thus it requires a more refined customer onboarding process.
An effective way to reduce time spent on customer onboarding is to enhance self-service content, by which customers themselves solve their problems. While help pages focus on the functional aspects of services/products, self-service content focuses on typical customer usage scenarios. By understanding customer usage scenarios and providing a large amount of content accordingly, your customers’ ability to solve problems on their own will improve.
It requires a certain amount of cost and effort to create videos or write articles, so you need to prioritize. There are two key points to be aware of when doing so
What are the types of use cases that your customers often ask for?
How many minutes per customer do you spend explaining the problem?
You may prioritize creating content of topics that require high frequency and time to explain so that you can reduce a significant amount of time.
In order to properly implement customer onboarding, you need to consider the following three points.
1. Define the “duration” and “success”.
You need to measure “how many customers were successfully onboarded during a given period” in order to effectively apply the PDCA cycle of the customer onboarding process. In some cases, the definition of duration and success is left to each customer manager, but if the process ends with no specific criteria, it is impossible to make a pattern of success or gain insight from failures. By quantifying the outcomes, you will be able to look back on the customer onboarding process with a shared understanding, and your measures will naturally become more refined.
2. Understand the customers’ actual circumstances
In many cases, each customer has very different objectives, background knowledge, and operating environment. However, if you force customers with different circumstances into a standardized process, it is difficult to get them to stay on track successfully. The customer onboarding process must take into account the diverse circumstances of each customer, some of which may require unique configurations and approaches. Therefore, you need to understand the circumstances of each customer, including who is actually using the system, what it is used for, how it is used, and what their concerns are in doing so.
3. Communicate with them regularly
Although the time required for customer onboarding depends on your service/product, it is critical to keep communicating with your customers on a regular basis regardless of their duration. One of the most common cases in training sessions is that a customer understands the product at the session, but does not understand it when they actually try to use it. Once you have taken action, you may want to contact the customer a few days later to confirm that they have implemented according to your explanation and to ask if there is any other point that is unclear.
This will help the client understand the service/product and accelerate the customer onboarding process. You can repeat this type of communication to help improve the customer’s sense of familiarity and trust in the company.
Customer onboarding is the step you should focus on the most in the process of leading customers to success. This is because if customers do not understand how to use your service, the following measures will be meaningless. If the customer onboarding process fails, they will not understand the value of using the product, which may lead to churn rather than success. To avoid such situations, you should keep in mind the three points above and design the customer onboarding process appropriately.
