Nowadays, you cannot rely only on paid acquisition. All the markets get so over-crowded the value lies into your brand and relationship with customers more than your product. Better relationships with customers lead to better lifetime value and more referrals. But it's also much harder to get right than buying ads.
What is Customer Success?
The most cited definition is from Lincoln Murphy – a customer success consultant.
Customer Success is when your customers achieve their Desired Outcome through their interactions with your company.
Desired outcome is what customers need to achieve and how they successfully complete it. They realize it not just by interacting with your product, but with your business. The earliest interaction comes from sales and marketing.
According to SaaS Capital, businesses using Customer Success can see a 40% increase in revenue, 50% faster growth, and experience many positive effects on churn and customer satisfaction.
Another lesser-known benefit is the cost reduction induced by Customer Success. Tomasz Tunguz – Venture Capitalist at Readpoint – has an interesting article on the subject: How Customer Success Meaningfully Reduces Cost of Customer Acquisition.
In a nutshell, if 20% of customers become evangelists and each refers 5 customers, the effective cost to acquire a customer falls by more than 50%, the monthly recurring revenue (MRR) increases by 100%, and the MRR sales efficiency also doubles. Not bad!
Customer Success isn't a list of tasks you can go through overnight. It is an initiative spanning across the whole company. The rewards from such an effort may take a while to materialize. As a result, patience is essential when building and managing Customer Success.
What's in the guide?
- First I am going to go through the changes your company will have to do to be set for success.
- Onboarding is an integral part of Customer Success and spending time on it is extremely rewarding. But it's a lot of work so I will go through what needs to be done and what needs to be avoided in order to improve onboarding.
- Customer Success couldn't exist without listening to customers. That's why gathering feedbacks must be a priority. I will go over a few techniques to get more of them and how to reward customers from giving feedbacks.
- Measuring the results of Customer Success is a powerful motivator to keep on improving. But with so much data available it is easy to get the wrong KPIs. I will recommend you a few KPIs that I think are best to monitor.
A strategy across the whole business
Customer Success isn't just a department. It must be a strategy adopted by everyone in the company. That is why it must come from the top. Without the active participation of the CEO, nothing will change.
Salespeople need to stop selling to bad-fit customers. If it is not stopped, then Customer Success is just a band-aid, and nothing will improve in the long-term. Revenue will take a hit at first, but the growth from a good Customer Success strategy will make you forget about it soon enough.
Salespeople care about their incentive plan. If you change it to be Customer Success friendly, you will remove bad-fit customers from the sales pipeline. Make their compensation based on CLTV (Customer LifeTime Value) and up-sells/cross-sells.
How do you prove they sell to bad-fit leads? High churn is one way to show it. Surveys are another. Once you know you acquire too many bad-fit customers, establish a persona for both bad-fit customers and good-fit customers so everyone in the company can quickly recognize the type of leads they are talking to and filtered them.
The marketing team should, like the sales team, target the right customers. Personas are useful not only for sales but also for marketing, and all the other teams too.
Publishing free content to educate your target audience is one of the best ways to acquire customers. Here are some statistics from ProfitWell:
47% of buyers still view 3 to 5 pieces of content before engaging with a sales representative, companies with blogs tend to get 67% more leads than those who don’t have a blog, and inbound marketing close rates are still 8 to 10 times higher compared to those of outbound efforts.
This is impressive! And it's even better if the content focuses on how to improve the usage of your product:
When it comes to retention, companies who are deploying content are seeing 5 to 10% better retention, especially when they deploy content that is more customer success focused.
Publish in-depth use cases, success stories, advertorials, and guides. Make useful content that delights your audience and make your customers understand the best way they can use your product.
The support team work shouldn't just be about closing tickets. They are the team that will have the most interactions with your customers. They are an essential part of the relationship with your company. As such, they need to be able to spend time on improving this relationship in various ways.
- Knowledge base: Contacting the support for simple questions because the knowledge base is empty is frustrating. Make sure your knowledge base is useful and has enough content.
- Pro-active interactions: Detect issues before customers contact support with good analytics. Follow-up when changes have been made, so customers feel like they are listened.
- And for more: Always ask customers if they need something else after the request has been fulfilled.
A study made by UserIQ – a Customer Success platform – revealed that 70% of product managers say they spend little to no face time with customers. Instead, they rely on their Customer Success team for daily or on-demand feedback in 46% of the SaaS businesses they surveyed.
The product team needs to spend more time with customers to understand their issues, come up with ideas from researching through the information they collected, and prioritize features depending on the value it is going to bring to customers.
I am sure you are already aware of some of the things I have highlighted in this part. But if just one team doesn't have Customer Success oriented goals, you won't succeed. You need to make sure to implement a Customer Success strategy across all teams.
Customer Success-driven onboarding
An onboarded customer has experienced "initial success" with the product and sees the real value potential in their relationship with you. But 40-60% of software users will open an app once and never log in again. Onboarding is critical to customer success, yet is often neglected.
Why? Because nobody is responsible for it. Onboarding should be a cross-team effort, and everybody should be responsible for it.
Lifecycle emails and in-app messages give you the ability to reach beyond your product to help new signups make progress towards long-term success. But they are the same for every customer.
You need to go further than that to deliver the magical experience that will make customers feel special. You need to send personalized emails and in-app messages and foster early interactions with customers.
In order to make a delightful concierge onboarding, you need everyone to be involved. Customers may have many different types of questions, and the support or the customer success management team alone won't be able to answer all of them. Sales and marketing need to chime in. The product team needs to be reactive if major bugs prevent customers from successfully onboard.
Customers should feel productive. They need to get the value of your product right away. If you have a long onboarding process, you especially need to make sure customers get real value out of it.
One way to achieve it is by providing sample data and templates to get started quickly. For example, project management products will provide you with an example project so you can already know how to organize your data.
Marketing can also help with this by making advertorials on common use cases that will use these sample data and templates.
If customers can feel they got value from your product within minutes, it will highly increase the chances they will get successfully onboarded.
Reduce friction by reducing choice anxiety, total workload, and perceived complexity. But many popular ways to onboard nowadays are horrible.
- Carousel cards don’t reflect how your product actually works. It's a wall customers quickly dismiss or forget after a few seconds. Add a button to skip it to improve conversion.
- Only ask for the most essential information in your onboarding forms. The longer a form is, the more boring it is, and the more error-prone it gets.
- Overlay and tooltips. Similarly to carousel cards, you are putting obstacles between the product and customers. Tooltip tours are controlling and distracting. It’s incredibly frustrating. The user is likely to ignore the instructions and dismiss useful information in pursuit of what they want.
- Text instructions are best but you need to use them in subtle and engaging ways throughout your product. A wall of text is going to be dismissed.
As we saw in this part, everyone has a role to play. The onboarding includes the product, support, sales, marketing, and customer success management teams. They need to work together to identify all the ways onboarding can be improved.
Collaboration will foster a unique onboarding experience that will delight customers and multiply your onboarded rate.
Feedback needs to be the backbone of your SaaS
Although there are apparent best practices to improve Customer Success, you won't get far with guesswork. You need an objective way to understand what your customers want. That's why you need to gather feedback. But customers don't give feedbacks easily so you will have to ask for it.
1:1 interviews and discussions are a time-consuming way to get feedback even though you can dig very deep into customer pains to find valuable insights. Surveys, on the other hand, won't take you much time to set up and you will get feedback from a lot more customers than when you conduct interviews. If time is a limiting factor, I recommend you to focus on surveys.
For more information on customer surveys, I have written the following article: 6 customer surveys to grow your SaaS company.
Most of the interactions with your customers will happen with the support team. It's a big responsibility, and you need to give this team the time to do it properly.
Get to the bottom of customer issues. You have to understand their pain points with your product in order to help them.
Use a rating system with your knowledge base to make it easy to measure its quality. If a customer is unhappy with the knowledge base, pro-actively reach out to them.
Follow-up as much as possible when issues have been resolved and ask customers for feedback. This way you have shown them that you care and in return, they will give you feedbacks more regularly.
Customer interviews are a great way to get a lot of valuable information and know more about their pain points.
You can ask for feedbacks directly inside the product. For example, when a customer wants to cancel their plan, make it mandatory to fill a survey. Knowing the reasons behind cancellations is immensely valuable.
Having a public roadmap help share your long-term goals with your customers and allows them to voice their opinions. It's an easy way to get feedback, but only your most active customers will interact with your roadmap.
81% of customers say they would be willing to leave feedback if they knew they would get a fast response. So in order to foster customer feedbacks, you need to communicate anytime you release something. Here's how:
- Changelog: Notify customers in-app or by email when there are changes to your product. You can use Headway to manage your changelog. You can also use your live chat solution.
- Thank you emails: Send messages to all the customers that left feedbacks related to the changes you have just released.
- Personalized messages: For your most active and cherished customers, send personalized emails so they will feel special.
To measure and improve your customer success strategy, you need more feedbacks.
Although, following up with customers and making them aware of the effects their comments have on the business has an interesting side-effect. As they feel like you listened, they will become more engaged with your company and will be more likely to recommend your product.
The right KPIs to monitor your product strategy
After all this hard labor, it is finally time to find out how well it worked. There are a lot of metrics available to you. But spending too much time to analyze all those metrics are a waste of time. Focus on just a few KPIs.
Obviously, you are going to look at financial metrics. While it offers a good and easy to understand indicator, it is not sufficient to get to know what worked and what didn't in details. That's why you also need customer-centric metrics.
Are your customers more engaged with your product? Do they spend more time with it? Do they send fewer issues to the support? Are they using everything in your product?
There are many analytics solutions, and you are probably using one already. If not you can take a look at Mixpanel and Heap. Your customer software solution also has a lot of useful metrics to make your life easier. While advice on what to track can be different depending on a lot of factors, I chose to make a small list of metrics that are going to be the most useful for almost every business.
- Support: Volume isn't a meaningful metric to know about customer satisfaction because customers can contact you for anything, but the speed of closing down tickets is.
- Onboarding speed: We saw previously that onboarding is critical for growth. The faster customers onboard, meaning they have initial success with the product, the more confident you can be they are going to stick to it in the long-term.
- Product activity: Are they using the product on a regular basis? It's up to you to define what is the most meaningful measure here because it varies widely depending on the product.
Traditionally in the SaaS world, MRR is king. But it's not a very relevant KPI when measuring the effectiveness of Customer Success. MRR is dependent on your paid acquisition. If your Customer LifeTime Value is lower than your Customer Acquisition Cost, your MRR could actually be growing, but you definitely have an issue retaining your customers long enough.
Reduced churn is a good indication that you are doing something right, but it isn't enough. Your churn may decrease but if you don't have any up-sells or even worse people are downgrading, then you are not on the path of success.
That's why it's preferable to use the Net Revenue Retention. It captures the impact of churn, cross-sells, up-sells, down-sells, and change in seats of your current customers. Here's the formula:
(Starting MRR + expansion - down-sell - churn) / Starting MRR
If your NRR > 100% then, in theory, you are successfully growing. If NRR < 100% then your business is shrinking and you have to improve your customer success.
Focus on retention
Customer success is all about building a strong relationship with customers because it will last longer and they will be more likely to up-sell. It's a focus on retention instead of acquisition. Your KPIs should reflect that.