Getting Customer Success Right
In the SaaS world, customers can come and go. Losing a customer can be particularly damaging. Loss does not have to be inevitable. New customer success practices can reinvent relationships, keeping and growing customers for the long haul.
Customer acquisition is expensive. The median startup spends about 92% of the first-year average contract value on the sale, implying an 11 month payback period on the Customer Acquisition Cost (CAC), according to figures published by Insivia. Startups need an additional month of revenue to upsell a customer and close to the same to secure a renewal. Most organizations, and any that stick around long, understand the importance of investing in customer acquisition. The most successful also understand the importance of investing in keeping that customer.
While winning a customer is expensive, losing one may be more so. Losing a customer not only affects revenue, but it can be potentially damaging to the company’s brand and reputation, negatively impacting sales pipelines. While winning customers is a top priority, retaining them must be a close second. Companies, especially startups, must actively protect against churn and build long-lasting relationships with customers who often have a low barrier to switching to a competitive offering.
One statistic claims that SaaS companies that make less than $10 million in revenue are likely to have a churn rate of a whopping 20%, though most SaaS companies report a churn rate between 5-10%. Some level of churn is unavoidable. A churn of 5% can have a significant impact, but a 20% churn rate is likely unsustainable and could lead to the demise of the company.
Happy customers create recurring revenue, and keeping customers happy can cost significantly less than acquiring new ones. Building long-term, positive customer relationships can involve multiple aspects, but the key is a mature customer success practice.
Getting Customer Success Right
The difference between a mature, successful customer success practice and a failed program is frequently a matter of perspective. Too often, ‘customer success’ could more accurately be called ‘company success’, defined by a focus on the company’s own success factors or the ones they have pre-determined for customers. True customer success programs take the time to understand what success for the customer looks like and works to make that a reality.
Having such a focused practice involves a commitment to the principle that customer success is dedicated to actively listening, checking in, communicating, and advocating for customers. Customer success should be free from most operational responsibilities, such as accounting issues, technical support, sales, and other things that can bog down a success program and get it off track. Ideally, customer success should be its own independent organization.
Customer success also needs to be empowered to drive change or action. While not directly responsible for addressing needs or issues, such as technical support, training, onboarding, or setting configurations, customer success teams should have direct connections to organizations that can help and are vested in providing the proper assistance.
Similarly, customer success needs a direct conduit to organizations across the company to provide intelligence that is heeded. A customer success team may uncover necessary product changes that product management or development needs to consider for a subsequent release. The team may have valuable information about additional configuration steps, modules for training, support practices, and a myriad of other things. These changes will benefit new and existing customers and contribute towards healthy, long-lasting relationships.
Customer success can also help long-term customer relationships by broadening the base of individuals involved with the company’s product. This may involve selling additional seats, but it also may be a matter of helping customers to use value and disseminate information or metrics within their organization and how to “market” its value and contribution internally. Customer success can help identify additional “power users” or more current seat holders trained and enabled to use the product.
Customer success should be considered a catalyst for long-lasting customer relationships. They cannot and should not be responsible for carrying out all the duties and taking on the work. Instead, they should be connectors and managers for other parts of the company. They should be an early warning system for problems before they become large or unsurmountable. They should understand what success means for each customer and create accountability to ensure that reasonable factors are met.
Long-lasting customer relationships are necessary, and they can be obtained. Those companies that understand and commit to customer success for long-term relationships are the ones that will be around for the long term. Those who do not will be just another SaaS company with a good idea that was unable to create its own future.
– Sheesha Ramdas, GM and SVP, Strikedeck-Medallia.