Customer Success - How Innovative Companies are Reducing Churn and Growing Recurring Revenue
I have recently finished reading this book and have learned a lot from it. I am going to share some key pointers that look at what Customer Success does as an organisation, how the internet has changed the way we do business, the subscription economy, what you can learn and hopefully apply some of these processes into your own business. The Customer Success tsunami is coming and you might want to embrace it sooner to keep that customer retention number high.
The 1st law of Customer Success: Sell to the right customer
Being aligned with your product market fit is a must across all your organisation. Sales tend to focus more on closing new deals to see that quarter milestone being reached and that's not always ok.
Reason why is because the stress of selling to the wrong customer falls on to your Success, Support and Product teams to keep that client onboard. That energy can be better spent on the right customers, not wasted on someone who isn't aligned with your vision. It's important to have a unique direction towards your product market fit at all times.
The 2nd law of Customer Success: the natural tendency for Customers and Vendors is to Drift Apart.
This is true across all types of customers. Company values change for both you and your client base. If there’s no constant reassuring of the shared values, then distancing from one another is unavoidable. It’s like having 2 boats starting a journey side by side, but if there’s nothing holding the boats together, they drift apart.
Some of the reasons why this phenomenon happens:
Financial return or business value not realised
Stalled or prolonged implementation
Loss of project sponsor
Low rate of adoption
Acquisition by a company that uses another solution
Lack of product Features
New leadership
Customer affected by poor product quality or performance issues
Your product is not the right solution
The human factor
The 3rd law of Customer Success: Customers expect you to make them wildly successful
To help your customers become wildly successful, you have to understand what success means to them as they didn’t just buy your product for its features, they bought it to achieve a business goal. Make sure you know what that is by:
How are they measuring success?
Are they achieving success for those metrics?
What is their experience along the way?
You have to have hard conversations and ask even harder questions. You’re in this together and your success depends strongly on one another.
Your customers aren’t buying a technology. They are buying a solution to a problem, a path to a better way. It’s your responsibility to understand the customer’s goals and objectives and to steer the customer along the path. Once you’re able to understand how customers are measuring success, confirm that they’re achieving it, and confirm that they’re having a positive experience along the way, you’ll have the most valuable thing possible: an advocate. And in a world where social media and the network are accelerants that help both negative and positive opinions spread like wildfire , advocacy is priceless.
The 4th law of customer success: Relentlessly Monitor and manage customer health.
Author: Dan Steinmen, CCO, Gainsight
In a subscription based business, customer health is at the heart of customer success and as the laws' name suggests, that informs and also drives appropriate action to be used when needing to do customer health. Find ways in your organisation to measure customer health.
You can monitor customer health in this multiple ways:
If your customer uses your product.
If your customer pays for the product on time.
What is the current survey satisfaction score?
If they reach out to customer support in means they indicates that is a healthy client.
If they are involved in your community by asking or answering questions, asking for feature requests, it’s also a good sign
Do you have executive relationships with them?
Each business is different, and the above are some of the ways to go about monitoring the health of your customers. Find yours inside your organisation.
In theory, if your success team does not act on increasing the clients’ health, then they are doing activities which are unnecessary. In other words, if they are not working on increasing the health score of your customers, then it means that they are performing the wrong tasks.
Please bare in mind that customer health is not a straight line, it's more like a sinusoid.
The 5th law of Customer Success: You can no longer build loyalty through personal relationships.
Author: Bernie Kassar, Mixpanel
Vendors nowadays realise they have to create programs that will allow interactions between them and their clients. However, the time for one to one interactions is dawning as you can only have so many resources to rely on. Depending on your product and service, vendors need to decide on creating a customer experience that develops a connection with your company.
A few ways of focusing on customer retention by:
Segmenting customers by a specific metric that works for your business
Define a customer coverage model based on the segmentation
Create customer interaction categories based on your coverage model
Establish a cadence for interacting with customers
Help connect your customers by creating a loyal community
Create a customer feedback loop
The takeaway is that customer success-centric organisations need to become highly skilled at delivering success to their customers without building personal relationships. For volume B2B and for all B2C businesses, this is the norm now.
The 6th law of Customer Success: Product is your only Scalable Differentiator
Author: Kirsten Mass Helvey, Cornerstone
At the heart of customer retention, client satisfaction and scaling is a great product that is combined with a solid customer experience.
Everyone in your organisation, including your user base has to have the opportunity to give feedback for your product. Your internal team knows your product best and they need to be able to contribute to driving your product forward. Your user base needs to be able to have access to how you plan ahead as well, they need to see that their needs for product usage can and will be met. Create a product advisory council and a communities of practice which communicate to you what the pains of the extended community are having. Put these two in contact with your product and development teams. Create a framework to collect feedback from a community forum, surveys and great design.
Frequently measure Customer Satisfaction (CSAT) - (see my 5 tips to improve customer satisfaction vlog series), Net Promoted Score (NPS) and Customer Effort Score (CES).
Your business consists of 2 things: your product and your customers. If you don't have a clear goal to serve both, you might be doing something wrong.
A well designer product that enables self-sufficiency and delivers value is crucial to customer success. It will not only build loyalty but also enable your to have more meaningful discussions with your customers and drive further growth.
The 7th law of Customer Success: Obsessively improve time to value
This law refers to something we've mentioned previously and that is to improve the time you need to show value to your paying customers.
Try to understand the success metrics that your clients have and what they want to get out of your product from a business perspective. If you have this laid out from the very beginning, you can always circle back to it and see if your client is achieving these goals.
In the subscription economy or pay-as-you-go, this is crucial. Your clients buy your product because they think it will bring them value. If they are unable to see it as soon as possible, what do think that renewal commitment will be? Imagine that your client buys your Saas app for a 1 year subscription. If you need say 11 months to onboard them properly and with everything set, that leaves them with 30 days to see the value that they get. Not a lot, and it's not very likely that they will renew their commitment.
Your sales and onboarding team need to be well aware of this and keep in the back of their minds. Always! And you as the CSM, need to be obsessively concious about needing to constantly reduce the time to value, aka the time it takes to show the customer the value that they get from using your product. Think about a tech touch example from Dropbox, it takes 5 minutes from the time you hit the download button until you upload the first file, which is the end goal of Dropbox. Arrows, useful comments, a seamless process and excellent design make the time to value great. If you won't obsess about it, someone else will and reduce that onboarding from 5 to 4 minutes and that's how you make clients stay.
How to measure the level of maturity of you Customer Success Organisation
According to the Capability Maturity Model (for Software), a model designed by a software engineering institute in the late 80s that is relevant in present day just as much.
Level 1 - initial - where your CSMs do what they can in order to achieve customer success
Level 2 - repeatable - where you are repeating the processes that offered success in the past
Level 3 - defined - where you have your processes documented, standardised and integrate into your organisation
Level 4 - managed - where you manage these processes well
Level 5 - optimising - where you constantly improve and tweak your processes to perfection
The 8th Law of Customer Success: Deeply understand your customer metrics
Author: Kathleen Lord, Intacct.
In the subscription -based economy, it is imperative you deeply understand your metric in order to take the correct action in your success team. From the very beginning, companies want to accelerate customer acquisition, however, as soon as that picks up, someone is bound to notice the customer count and the committed monthly recurring revenue(CMRR) is declining.
In order to sustain your business long term, you have to have a very good understanding of both churn and retention and the metrics that reflect these. Companies can follow 5 steps to capture, measure and understand churn and retention:
Define what you are measuring and components of CMRR
Define the period of measurement and frequency
Determine the expected CMRR and categories of churn
Determine how to identify suspected / at risk churn.
Align with your executive leadership to develop a set of standard definitions and reports for churn/retention.
The more granularity you have for your metrics, the more insight you’ll get about your clients and why they churn or stay with you.
The 9th Law of Customer Success: Drive Customer Success through Hard Metrics
Author: Jon Herstein, VP for Customer Success, BOX
Also, just as there are many metrics to measure the sales pipeline, there are many metrics to measure what customer success means for your and for your clients. Each company needs to see what metrics matter most and how to define and measure them. Below a few examples
Customer and user behaviour
NPS
Login an logouts
Usage of a specific product feature/platforms (online, mobile, API)
Customer Success manager activity
Frequency of various types of interactions with customers (QBRs, email updates, phone calls)
Support ticket volume handled by CSMs (rather than your support team)
Timeline of risk identification
Effectiveness of risk mitigation efforts
Business outcomes
Gross retention
Net retention
Expansion
Logo retention
Customer satisfaction
NPS
Just like your sales team has a pipeline, the customer success team has a customer health. It is a must in a maturing company!
The 10th Law of Customer Success: It’s a Top-Down, Company Wide Commitment
Author: Nick Metha, CEO, Gainsight
CS is not just a department, rather it’s a mindset, a philosophy that needs to be spread throughout the entire company. It’s the law that encompasses all the previous ones I’ve listed until present day. Before, it used to be 1. Build the product, and 2. Sell the product.
Let’s look at these following points:
What is customer success (for real)
Just as sales is not just a department, rather a cross-functional activity, CS is a company concerning matter. Besides building and selling your product, you have to look int a third: driving customer success. If you focus on delivering success for your customers, then success for your business will follow. For the CEO, it comes down to driving CS through to customer success, finance, marketing, sales and product teams. Focus on which features will truly help your clients achieve success and who is your ideal customer.
2. Why CS is inevitable
CS is bound to appear at your doorstep due to massive changes in the way we do business nowadays: globalisation, lower friction business models and clients who have an abundance of choice.
It’s not a matter of if it will happen, rather it’s a question of will your organisation be ready to react quickly enough when it happens?
3. How CS drives value
The companies that embrace CS from a top down company wide manner, will expect to see results in:
Growth - less churn and more upsell. Companies that focus on CS grow faster. Successful customers become advocates for your product and they drive more new clients who are already a better fit.
Valuation - more and more subscription based Saas companies are appearing and having IPOs
Differentiation - customer success management can become the differentiator within an organisation if done well because products become commoditised in time.
4. Where to start
Here’s how to start: Define success, align around success, listen to your CS team, prioritise CS, empower your CS team, measure CS, report on CS, incent toward CS, challenge the company, celebrate success.
CS doesn’t just need help, CS needs commitment from your whole organisation.
Download the 10 laws from Gainsight here: https://www.gainsight.com/resource/the-10-laws-of-customer-success/
Buy the book here: https://www.amazon.com/Customer-Success-Innovative-Companies-Recurring/dp/1119167965