When To Tier Your Customers

customer success tiers

Think about the last interaction you had with a service provider. Whether it was a livechat agent or a first-class flight attendant, your lasting impression of that interaction was primarily shaped by expectations around the level of service you would receive. The same is true of the relationship your Customer Success Managers have with customers.

Without Customer Success tiers you limit your ability to appropriately manage your customers’ service expectations. Your team will stretch itself to over-deliver to certain customers in ways they don’t appreciate, while under-delivering to customers who require more attention. Uncover what tier of support different types of customers need and determine what you can reasonably offer. Then, tier customers to ensure you’re best equipped to help them meet their goals and objectives — without overextending your team by trying to offer unrealistically high service to everyone.

When To Create Service Tiers

The short answer is as soon as something breaks. I’m a firm believer of not rushing to put in place solutions for problems you don’t have. If your Customer Success team isn’t running into issues with time management and scale, and your customers are meeting their goals and objectives, then no need to make sweeping changes. Or, start small by testing out a basic VIP program before implementing a complex tiering system. Aim to establish service tiers before your Customer Retention Costs (CRC) become unsustainable.

Creating service tiers won’t solve all your CRC woes, so take a moment to examine other inputs that are contributing to an inflated CRC. First, make sure sales isn’t bringing on customers that are a bad fit. These are customers for who your product doesn’t meet their needs or your team can’t deliver on their goals and expectations. Second, evaluate whether you’re charging enough for your product. Your price point should be high enough that you can properly staff a team and invest in the infrastructure necessary to adequately service your customers.

Service tiers have traditionally been applied to Customer Support teams and while Customer Success differs from Support in many ways, the concept of tiers can apply to both. It makes sense for a company to have a single tier structure that encompasses Customer Success, Support, and any performance SLAs.

Considerations When Creating Tiers

  • Revenue

The most common metric teams consider when assigning customers to different service tiers is revenue. And for good reason, since customers with a greater Annual Recurring Revenue (ARR) are inherently more valuable. However, revenue is just one piece of the puzzle. Companies paying more probably expect a higher level of service, but they also have more internal resources to support their employees who are using your product. Depending on your relationship, large companies can be hard to even get on the phone. They often have a narrow use case for your product and aren’t interested in working together to expand your relationship. These types of companies, despite representing a huge amount of revenue, might not require an elevated level of service.

  • Revenue Potential

Current revenue isn’t everything; you also need to look at potential future revenue. The current ARR from a pilot launch might not qualify a company for Tier 1 service, but if there’s a lot of revenue potential post-pilot, it might be worth bumping them up a tier to increase the likelihood they’ll expand their usage.

  • Customer Expectations

Certain customers just expect a higher level of service than others. While one of the benefits of establishing tiers is to appropriately manage customer expectations, it’s worth evaluating if there are types of customers who you want to offer more hands-on treatment. Do some research into qualities high touch customers share- profile, industry, use case, etc., and you might find characteristics that can help you more effectively categorize customers into the appropriate service tier.

  • Advocates

Customers that act as advocates for your company should be shown appreciation. If a customer has acted as a reference, been featured in a case study, or regularly sends you referrals, look at placing them in a more premium service tier.

How To Get Started

First, you’ll need to clearly define your tiers while taking into consideration the factors above. Create documentation that can be shared with current and prospective customers that outlines services offered in each tier. Ensure Sales understands tier qualifications and how to position them to new customers. Next, come up with a plan for how you will roll out these changes to current customers. Customers will likely express displeasure if they perceive a decrease in the level of service they are currently receiving. If you anticipate a lot of push back, explore offering an ala carte professional services menu or the option to pay for a higher tier of service. Express empathy, explain the reasons behind the changes, and remember to reset expectations.

First posted on the Software Business Growth blog.