The term “Customer Success” means many things to many people. At Coordinate, we believe that most approaches to Customer Success do not actually put the customer first, especially for high-value customers. In this article, I’ll explain our thinking and how we came to it, and give you a couple of practical ideas on how you can start improving your approach to customers.
The idea behind Coordinate was forged by our own challenging experiences over the past decade building and selling enterprise analytics at our last startup.
Over the years, we tried to measure customer success in many ways. We built (multiple) data warehouses and red/yellow/green dashboards that combined internal customer data, including usage data, sales notes, support tickets, etc.
While these types of automated dashboards may work for low-touch, high-volume customers, we came to realize that they were perpetually inaccurate for high-value or high-touch customers. We’d be surprised by both unexpected expansions and unexpected churn, and our lack of understanding made it hard to effect change.
After we sold that company, we knew there was a better way. In our subsequent conversations with fellow B2B vendors, we learned that almost every B2B company struggles with the same lack of visibility into their own customer relationships. They too were surprised by the inaccuracy of their understanding of customer health.
Vendor Success vs. True Customer Success
Unfortunately, the Software-as-a-Service industry’s approach to customer relationships has been largely self-serving by focusing on questions like: Did revenue increase? Did usage increase? Did user engagement increase?
Customer Success metrics often measure how well the relationship serves the seller and not the customer. What began as Software-as-a-Service, quite ironically, missed the mark on the service part.
This is starting to change. Smart leaders are realizing that customer success is as much about how your SaaS company is performing for your customer as it is about how customers are performing for your company.
The problem: A lot of attention is spent on the initial sale, but not what happens afterwards
When businesses focus only on the initial sale, usually with heavy incentives for the sales team, nurturing the complex relationships with existing customers becomes an afterthought. This usually results in missing out on expansion opportunities.
The typical scenario is something like:
- Land a customer
- Sign a contract or expansion
- Pat yourself on the back
- Move on, with a note to the customer: “Get in touch if you need us.”
Representatives don’t call existing customers until it’s time for renewal or when an automatically-generated indicator starts going red on an internal dashboard. By the time these warning signs appear, it’s often too late for you to do anything and the customer is already thinking about switching to your competitor. The account is lost.
Focusing only on the initial sale and not customer success is also not economical. According to Harvard Business Review, companies that work to foster customer success and build customer loyalty “grow revenues roughly 2.5 times as fast as their industry peers and deliver two to five times the shareholder returns over the next 10 years.”
The solution: Be a partner, not a seller (+ 4 tips to do it)
In our decade long journey, we eventually discovered two fundamental truths about customer relationships exist:
- Customers are the only ones who decide whether or not you’ve delivered success.
- Vendors have a lot of expertise relevant to their customers’ business challenges and the problem space. They’re well-positioned to help the customer be successful as consulting partners, making them more successful.
To truly become a customer-focused company, the key is to listen to our customers and understand what they are trying to accomplish. Their business goals need to be front and center. Not just the goals that were discovered in the sales process or the last EBR, but their goals as they stand today. In our experience, when we are aligned with customers on their current business goals, we are well situated to help them with their next challenges and make sure they successfully hit their goals.
The SaaS vendors achieving top-quartile revenues are doing so by “seizing the recurring revenue opportunity.” They are investing more in existing customer success that creates an experience so valuable, churning never even crosses their customers’ minds.
Now SaaS companies have a superior model to adopt: Be a part of the end-to-end customer journey by acquiring customers, helping them fulfill the business value they set out to accomplish, and supporting them along the way to make sure they achieve it. This is how:
1) Move from a reactive to a proactive approach with your high-value customers
Existing customers are your most prized assets, especially in a recession or a pandemic. When new sales drop, retaining and growing existing customers is essential for the survival of your business. Your best bet to keep those customers is to develop a proactive, ongoing relationship that regularly evaluates the customer's current challenges and how to overcome them.
When relying on our internally generated red/yellow/green customer health dashboard, we were often very reactive to customer challenges. It turns out, customers are in the best position to understand their needs, expectations, and challenges.
By building a better relationship with customers, we were able to develop an accurate picture of customer health by understanding their perspectives and goals. If they were thinking about churning, we knew early enough to address issues rather than at a point when they had already decided to churn.
It’s hard to overstate just how good customer retention can be for your business. A 5% increase in customer retention can boost company profits by 25% to 95%. Renewals and expansion from existing customers directly impact your net revenue retention rate. This important metric reflects your ability to satisfy customers and motivate them to increase their spending over a period of time.
2) Understand customer success is more than internal dashboards
Most SaaS companies think they have a 360-degree view of their customers because they use advanced analytics and dashboards with the help of support tickets, Salesforce notes, usage, and more. These are almost always limited 180-degree views, since they’re based only on internal data and leave out (the more important) half of the data: the customers.
These are often based on overly optimistic internal notes, or don’t incorporate the latest changes at the customer’s company.
Switching to a more personalized approach based on regularly confirming with the customer their goals, expectations, and perspective can help you both 1) better understand where they’re at, and 2) find ways to offer your expertise to increase the likelihood that they’re successful.
3) Look beyond Net promoter scores — they miss the mark
Traditionally, SaaS companies have used Net Promoter Scores (NPS), which is a single question asking a customer how likely they are to recommend the company to others. This can be a vague and misleading indicator because it doesn’t directly address the most important thing: whether your customer is getting value out of your tool.
There are many ways that NPS can be inaccurate. For example, at our last company we used software that was generally good for the job it set out to do. But, due to our internal processes it didn’t quite work for our situation.
When the company that created this tool sent us their NPS survey, our team gave them a score of nine out of ten because, although the tool didn’t work for our specific intended purpose, we agreed it was a powerful tool and would have suggested it to others. The high NPS score might suggest we were loyal customers, but we were looking for alternative tools because it was easier to switch than to fix the mess we had made.
Reducing a customer’s perspective to an NPS score of red/yellow/green often misses how they feel.
4) Compensate the right people on your team for the right results
One thing that has been very surprising to us is how differently customer-facing teams are compensated. Some compensate the sales team for landing a customer and expanding the contract. Others compensate them on the land but not the expansion. Yet others have whole different sets of compensation plans that are extremely difficult to understand.
These different standards create crazy incentives, and it becomes very hard to drive the desired behavior. Instead, you should set up the team to have clear owners of lands, renewals, and expansions.
The person responsible for maintaining the happiness of that account over time is the person who should be getting compensated on those renewables and upsells because they are best positioned to make the customer successful. They’re also best positioned to identify and introduce potential expansion opportunities.
In today’s world, true customer success isn’t just about preventing churn, it’s about net revenue expansion which means you need to land high value customers, then expand them, then expand them again.
You're not successful until your customer is successful
Customers are looking for solutions, not tools. Customers are looking to realize business value, of which your product is a piece of the puzzle. Your product completes the picture only when your expertise and guidance accompany it. That expertise and guidance is the bridge from software to service and true customer success.
If you’d like to learn more about how Coordinate can help you better align with your high-value customers and hold each other accountable, we’d love to talk here.