The transcript of a lecture given at the Customer Success Associations “SuccessCon” customer success conference in London 2019, on the difference between direct and indirect benefits and ways to enabale measurement and reporting on the often hidden financial value contained within indirect benefits



I was recently given the opportunity to talk to the delegates at the Customer Success Association’s 2019 European SuccessCon conference in London. My talk was about how to uncover the hidden financial value of indirect benefits, and below is pretty much a word-for-word transcript of that talk.

The Importance of Financial Value

I am going to talk about direct and indirect financial benefits, but before I get to that, I want to talk more broadly about value and in particular about why I believe that understanding, analyzing and presenting financial value is so fundamentally important – especially where our solutions are being used to support more sophisticated customer initiatives that perhaps are more strategic in their nature and that therefore attract the attention of more senior customer stakeholders.

My start point for my talk therefore, is what I describe as “the value conundrum”, and this conundrum stems from the fact that if not for all then certainly for many customer initiatives, there are multiple perspectives that may need to be considered when discussing or evaluating “value”.

The Customer’s Perspective

Let’s start with the customer’s perspective. The product, service or solution was initially selected based upon its perceived ability to produce more value than other alternatives

All customers want value, but the definition for value will differ between different customers and sometimes even between different stakeholders within a business customer

Once the purchase is made and the solution is being used, customers need a way to measure the amount of value that either that solution or perhaps the initiative that the solution is supporting produces for them, so they can make decisions about it, such as whether to renew service agreements, or indeed whether to purchase more of it, whether to continue to use it at all.

The Supplier’s Perspective

The supplier has a different perspective. The supplier has a vested interest in ensuring as much as possible that the customer attains maximum value from the solution it purchased, in order to maximize likelihood of renewals, expand opportunities for that solution and in order to improve supplier/customer relationships that will potentially lead to other future sales as well. This is part of the reason why suppliers employ CSMs, since part of the role of the CSM is to help customers to maximize the value they attain from the solutions they have purchased, and another part of their role is to help customers to measure, calculate and present that value to the customer’s BDMs in order to help them make informed business decisions regarding renewing and expanding contracts for the services the supplier is providing them with.

The Project Owner’s Perspective

The project or initiative owner, or the owner of the “challenge” or “problem” within the customer’s organization may also have their own, more specific perspective. This project owner understands what “value” means for this particular project, eg: less time taken to perform a process, greater customer satisfaction levels, less energy used to produce something, greater availability of a service, increased quality of a service, and so on.

So when measuring and calculating and presenting value to the Project Owner we can talk in terms of this specific value and they will understand it. For example we could reduce time taken to implement a new service by three weeks, or increase CSAT from average 7.5 to 8.5, etc.

The Business/Financial Decision Maker’s Perspective

The strategic BDM or FDM may be responsible for decision making for many different initiatives, projects, or strategies. For example the CFO or for some companies may even now employee a full time Chief Investment Officer, who may be responsible for all financial decisions for investments over a certain amount and as such they will have yet another perspective. There may be a Funding Committee or Investment Committee that sits once a quarter that need to be reported to and maybe they will decide whether to go ahead or not in the first place and also whether to continue funding a project or initiative past Phase 1 for example, or when major service contracts come up for renewal. Their decisions needs to be based not just on the project or the initiative itself, but on much wider criteria, so that even if a particular initiative is succeeding on its own terms, it may still not be attractive to continue being funded from the perspective of these more strategic thinkers.

Views and Viewpoints

What we are discussing here is perspective. Different stakeholders will have different views (opinions) based upon their viewpoint (the position from which they are viewing the initiative). Department Heads might be concerned about meeting their department’s targets. Process Owners might be concerned about their process’s quality and efficiency. Team Leaders might be concerned about their team’s productivity levels. For a strategically important initiative, what the CSM may have to do is understand all of the views from all relevant viewpoints, and determine what “value” means overall, based upon all these different views and taking into account the relevant levels of authority and concern over the initiative from each stakeholder. For the “bigger” initiative this will therefore include not just the project or initiative owners, but also the business and financial decision makers.

Comparing Apples with Apples

To influence the B/FDMs, the presentation of value can no longer be left to be in the form that makes sense internally to the initiative, since these stakeholders need a way to be able to compare and contrast the value being returned against preset corporate criteria (usually known as an “investment plan”) and also against other projects/initiatives both existing and potential, in order to make global decisions about how to make best use of the company’s finances by supporting only those initiatives that bring the best results.

Just as it is difficult to compare apples with pears and oranges and decide which fruit tastes the best, so it is difficult for these B/FDMs to compare an initiative that has increased the average CSAT by one integer point on the scale with an initiative that has reduced service implementation times by two weeks and with another initiative that has increased a process’s quality by 10% to determine which of these three initiatives is bringing the most value to the company overall and which the least. Perhaps they cannot afford to continue funding all three and need to decide which one to discontinue the funding for. Just as it is much easier to taste three different apples and decide which one is the tastiest apple, so it is easier for these B/FDMs to analyze values from all initiatives in the same format in order to compare them and determine which is providing the greatest value and which the least. 

Money is a Universal Measurement of Value

From the perspective of “normal” everyday people, money is a means of exchange that enables us to perform commercial transactions with relative ease. So long as we have enough money, we can buy whatever we might need including food, clothing, shelter, energy, communications, transportation, health services, education services, entertainment, and so on.

Because of this quality of universality, for B/FDMs money has a second use. As well as being useful for performing commercial transactions, it is also useful as a way of modeling different scenarios to determine the relative value of each scenario. So by turning all different types of value into one type of value – financial value – the B/FDM is able to better understand the relative value of the different strategic initiatives that they are being asked to fund and support.

This is not to say that financial information is the only information that these decision makers will consider, as there will be other considerations as well. For example, an initiative that enables the company to meet a new law that comes into effect at the beginning of the month may well take precedent over another initiative that brings in a handsome financial profit in two years’ time. But nevertheless, for most strategic financial decision makers whose profession and expertise is in helping to make investment decisions that lead to the greatest potential returns for an acceptable level of risk, a considerable part of their decision making will be on “the financials” that are presented to them.

CSMs and Financial Decision Making

In fact, there is a “best practice” methodology that is taught in universities for students enrolled on courses relating to corporate investment decision making, and this methodology follows a set process of evaluating investments from various financial angles, such as profitability, return on investment, time to value, yield, internal rate of return, and so on. Any B/FDM who is professionally employed to assist their company with making investment decisions will understand this best practice methodology and will utilize it to greater or lesser extent within their company’s own approved investment decision making process.

It is therefore my own belief that mid to senior level CSMs whose companies supply solutions that support strategic initiatives where investment decision making is entirely or even partially centralized into the hands of professional B/FDMs should all learn this “best practice” methodology so that they can present financial information relating to the initiatives their solutions support in the format that these decision makers need or desire it to be in, and so that they can hold a conversation with those B/FDMs in the language of those stakeholders in order to communicate with them, which will in term allow them to educate, learn from and influence these stakeholders to maximum effect.

Providing more detailed information about how to analyze and present financial investment decision making information is beyond the scope of this discussion, but it is something I teach, and as I said a moment ago, I think it is something that more senior CSMs will increasingly need to get to grips with, if not to actually create the financial analyses themselves then at least to be able to read and understand them and thus be able to discuss them meaningfully with those who do create them and those who use them to inform their investment decisions.

Direct and Indirect Value

So now we come to the crux of what I do want to discuss with you here today, which of course is about direct and indirect value. Hopefully you will have seen from your own experiences and from what we have discussed already, that it could potentially be very useful for more senior CSMs who are engaged with more senior customer stakeholders about solutions that support more complicated and higher value customer initiatives to be able to create or at least be able to read and understand a report not just on the specific value being returned from the initiative being supported, but the financial value that is being returned.

Some types of value are very easy to convert into financial terms, but others can be more difficult, and for some types of value it can be quite hard to find a way to convert it into money, and this of course is what is meant by the terms direct benefits or direct value and indirect benefits or indirect value.

A direct benefit is something that is more or less already formatted in financial terms from the get go. Direct benefits would tend to relate to either savings in the costs associated with producing, marketing, selling, providing or supporting the product or service, or increases in the numbers of products or services sold, or increases in profit per product or service. So for example, if we can find a way to reduce the energy consumed by a service then we can reduce the costs associated with that service because we will have reduced the bill we receive from our energy supplier. If we know how much energy costs per unit and we know how many units of energy we have reduced our consumption by per period eg per month, then we can multiply one by the other and come to an amount of money saved per period, and we can for example multiply it by 12 to get a per annum saving. So energy saving is an example of a direct value or a direct benefit.

An indirect benefit is not so easy to convert to or calculate in financial terms. Let’s go back to the example of our customer satisfaction level. Let’s say we increase the average CSAT score by one integer point from 7.5 to 8.5. This time there is no direct or immediate causal financial value we can ascribe to it, and therefore an increase in customer satisfaction could be said to be an indirect value, or an indirect benefit. The way to deal with this is through business research and analysis of the data associated with customer behavior. Whilst there may not be a direct causal link, what we may be able to do is analyze the data to determine the average per annum spend.

Perhaps we find that on average, our customer’s customers who indicate a CSAT score of 8.5 spend 5% per annum more than our customer’s customers who indicate a CSAT score of 7.5. Therefore (and assuming there is sufficient data rather than just relying upon one or two customers’ data points) we can state that by moving the average CSAT score up from 7.5 to 8.5 we should be able to increase per customer sales by 5% per annum. Of course, unlike the direct benefit of the energy reduction, this is no guaranteed, because the link is indirect rather than direct. However what we can then do is to take measurements and to use these measurements as indicators of performance, from which we can learn whether or not a change in average customer satisfaction levels will have an effect on average customer annual spending.

The Problem with Indirect Benefits

From the perspective of the B/FDM, whilst indirect benefits that have not been recalculated in financial terms are understood to be “beneficial”, it is very difficult for them to know or estimate “how beneficial” they are. Given that part of these senior decision makers’ role is to manage risk on behalf of their company, it becomes quite difficult for them to recommend either to go ahead with a proposed new initiative in the first place, or to continue to fund existing initiatives on an ongoing basis, where the expenditure is known in financial terms (which it usually is) but where the income from the initiative is not known.

For many projects or initiatives and especially for larger, more strategic ones, there may well be multiple benefits – some direct and some indirect – that accrue from it. Some such initiatives may potentially be justifiable based upon the direct benefits alone, but for many initiatives the indirect benefits are important and indeed they make up the majority of the value being returned. In those circumstances, it makes the task of “proving” (as best one can) the financial value of the indirect benefits through the conversion of format from the internal measurement into the financial measurement an essential one.

Of course the trick here is credibility or what I describe as “believability”, and this in turn comes down to the ratio used to convert the existing non-financial value into whatever monetary unit is being used – dollars, euros, pounds, etc. It is therefore vitally important that the customers’ stakeholders “buy in” to the methodology used to calculate the dollar value of the indirect benefit. This means that considerable care and attention needs to go into working closely with relevant customer stakeholders to determine that calculation and to provide relevant justification through historical data, as alluded to previously. Much more could be said about this, but I am of course limited in time, so I will leave it there.

The Sliding Scale

Using the terms “direct benefits” and “indirect benefits” make it sound like it’s either one or the other – direct or indirect – and that’s it. In reality I’d describe it more of a sliding scale running from “most direct” through to “least direct” or “most indirect”. As an example of this, let’s consider an indirect benefit such as “improving employee happiness”. The concept behind an initiative to do this might potentially be entirely altruistic or ethical in nature, but more than likely there is also a desired return on investment in terms of things like “increased employee engagement”, leading to increases in productivity, efficiency and quality, “improved employee retention”, leading to reductions in recruitment costs, and increases in staff knowledge, skills and experience, and “reduced employee absenteeism”, leading to overall higher productivity levels.

Whilst the financial income returned by an initiative for “improving employee happiness” may be difficult to calculate, it should not be impossible. Existing data should exist for the costs associated for example with things like absenteeism and recruitment of new staff, and it should not prove to be impossible to find ways of measuring things like average number of days sick and average lifetime of employees in order to track improvements. So again it then only comes down to two things – firstly determining the metrics to use and secondly agreeing the ratio to apply to changes in those metrics that will enable the conversion from the internal value format into a financial format.

The Power of Case Studies and Pilots

Naturally, once a CSM has learned from the experience of working with Customer A then he or she can potentially apply this knowledge to Customers B, C and D if they have sufficiently similarities in terms of who they are, what solutions they have purchased and what outcomes they are trying to achieve. In this way, the experienced CSM becomes even more of a valuable asset for customers, since they can provide expertise based upon previous real-world experiences with other customers facing similar challenges.

Additionally, case study information can be built up that can be used during the marketing and sales processes as well as post sales. Additionally, pilots can be offered as “proof of concept” initially and ultimately as “proof of value”, since there would now be a way to measure and prove value both internally to the project (ie in the terms of what the initiative itself is trying to achieve, such as “increased customer satisfaction levels”) and strategically for the business as a whole (eg how this fits into the wider vision and corporate strategies that the business is currently executing) and finally financially (through the combination of all direct benefits plus the converted financial values from all indirect benefits).


In summary then, it is my belief that financial justifications for initiatives have become and will continue to become more important, particularly larger, more expensive and more complex or strategically important ones. To win the business in the first place and (more importantly from the CSM’s personal perspective perhaps) to continue to renew contracts and potentially even expand those contracts, our customers’ investment committee, Head of Finance, or other senior budget holders and decision makers and their advisers are increasingly relying on financial data both to help them perform comparative analyses between ostensibly very different types of projects and initiatives that are proposed to them or that require ongoing funding from them, and to help them understand both the overall value being returned and the potential levels of risk involved.

Expenditure is usually straightforward to determine, as are direct benefits. The trick is to find ways to convert indirect benefits into direct financial value and to gain agreement from key stakeholders as to the correct financial value to place on these indirect benefits, as otherwise the process is meaningless. This therefore needs to be done in collaboration with and indeed by preference should be led by the customers’ stakeholders themselves, using their own data wherever possible and with those stakeholder either determining or at least agreeing the ratio to use when converting from the internal, indirect benefit into a comparative financial value.

Learn More

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Thank you for reading, and I wish you every success with all your future initiatives!

Rick Adams, September 2019.