Issue 66 - You Can’t Spell SaaS Without Customer Success
Okay maybe not literally but the point is that without loyal customers how can a business survive? As a SaaS company, you’re dependent on recurring customers and the only way you are going to create recurring customers is by creating customer loyalty. In this issue of the SaaS Tattler we look at the pivotal importance Customer Success holds within a SaaS business.
What does it take to create customer loyalty? Keep them happy. That objective is the reason why every SaaS company should create a Customer Success department. Not to be confused with a customer support department, an investment in Customer Success is a guaranteed tactic to grow your SaaS business. In this article, Zach Bulygo shares his insights into what it takes to drive SaaS growth with Customer Success.
Customer Success Is Not Glorified Support – it is a Growth Driver
Customer success is not an afterthought. It’s not something you put off until you’re big enough. That’s the wrong thinking. Customer success is an investment to start now.
Many companies in the B2B space believe that the more salespeople they hire, the more revenue they’ll receive. Salespeople don’t drive growth; lead generation drives growth. Salespeople help fulfill the growth.
But not all leads are created equal. There are three types of leads:
Seeds: One-to-many, these are leads from word of mouth. It’s largely done through customer success.
Nets: One-to-many, these are leads from your marketing. This is typically from inbound marketing.
Spears: One-to-one, these are leads from outbound prospecting.
Customer success is a growth driver. It is not glorified support. The executive team of the future should have a Head of Sales, Head of Marketing, and Head of Customer Success. These three roles should be of equal importance.
But there’s a problem – executives and entrepreneurs don’t want to make a big investment in customer success without first knowing how the department helps the company make money. The way to do this is to have customer success handle renewals and upsells.
Customer Success shouldn’t be referred to as a cost center but instead a revenue enhancer. A SaaS business should hire their first Customer Success Manager as early as they can afford to but it’s important to remember that you can’t expect to see the ROI overnight. Instead, give it a few months and you are guaranteed to see results. In this article, Jason Lemkin explains why the two most important things you can do with Customer Success are (1) hire early, and (2) measure constantly.
So let’s talk more about this uber-critical position, what it is, when to hire for it, and what to expect and measure.
A modern SaaS Customer Success Manager is something more than an old school Account Manager that would on-board a new customer from sales and then fade away 90 days after implementation. Rather, Client Success owns the customer from point of inception (sometimes pre-close) all the way through the entire life and lifecycle of the customer. Sales closes the customer, and Customer (or Client) Success takes it from there — for years. 3-4 or more years, if that’s your Customer Lifetime Value. So actually, Customer Success has a much longer, and ultimately deeper, relationship with the customer than sales or anyone else in your company, including you.
Client Success is actually your secret sauce to success. Because in a typical SaaS company, even if you are growing 100% a year — well 50% of your revenue is existing revenue. And of that growth? Often as much as 50% of that growth is upsell / additional seats / more revenue from your existing customer base. So directly, or indirectly, Client Success manages as much as 75% of the revenue of a typical SaaS company.
Churn just part of being a SaaS company, nothing we can do but accept that. Customer Success is the recurring revenue business’ response to churn. It’s the reason why people are starting to take Customer Success very seriously. In this article, Liam Gooding helps ensure that your customers are realizing greater success in their business.
Customer Success Metrics
“If you cannot measure it, you cannot improve it” – Lord Kelvin
We need to understand the basic metrics around customer success so that we can improve it. The problem is, the most obvious metric is actually one of the least useful:
Churn % (Revenue and no. Customers)
Churn is a trailing metric. Which means by the time it has happened, the customer has already left and there isn’t much you can do about it. At the end of the month when we know our churn rate got worse, from 1% to 2.4%, there’s not much we can do about those extra 1.4% of customers. All we can do is look backwards at the month, see where we went wrong, and put changes in place to not repeat those mistakes
It’s important to track Churn as a % of number of customer accounts lost, and Churn as a % of recurring revenue lost.
If we’re churning a high number of customers, but hardly churning any revenue, then that paints a picture that we’re losing a huge number of our very small users (maybe hobby or developer accounts) but we’re keeping around our bigger business and enterprise customers. From there, we can look at whether we can make our smaller customers more successful and perhaps learn from what we’re doing with the bigger customers.
Is Customer Success really of the same importance of sales, marketing and product? In a market filled with competition, it’s worthwhile for your business to have loyal customers. Simply put, if a customer is happy with your product or service, then there is no reason for them to stop using it. In this article, Benjamin Brandall provides a guide to the importance of Customer Success for SaaS companies.
Your competitors will steal your unhappy customers
Disgruntled customers who didn’t get the support (or even explanations) they wanted will seek out your competitors.
If your competitor is smart, they’ll have a great Customer Success team who will get them set up with the product the same day the bill goes through. They’ll make certain that the customer is happy, and set up to get the most value they can out of the product.
Since 2009, the popularity of customer success has increased 800%. It’s not becoming something which differentiates a great company from a good one — it’s becoming a requirement.
It doesn’t matter how good your marketing is or how many deals you close, if customers experience the disconnect between promise and reality and it isn’t patched up by a Customer Success team, you’re going to get a high rate of churn.
The Best of Customer Success Today
You cannot afford to pass up an opportunity to articulate the value you offer, yet many of us do. Learn about The $100M Problem You Do Not Know You Have when you pass up these opportunities.
10 SaaS Analysts Walk Into A Bar… They grab a table, order a variety of drinks ‒ some PBRs, a bottle of wine, a few pitchers of beer ‒ and start discussing the nuances of SaaS metrics.
Customer Success isn’t just a way to retain clients – it’s the most potent way to grow your SaaS business. Here are 10 Ways to Grow Your Business with Customer Success.
Every week I issue this roundup of relevant articles from the customer success industry so we can learn from each other and share best practices. If you like what you read here, please consider forwarding to others. New reader? Subscribe.
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