CS Boston – July: The CFO as Customer Success Ally

August 8, 2014

Customer Success is gaining significant traction, but it is still the “new kid on the block” in the leadership ranks of most SaaS companies. And just like the new kid, CS leaders need to find an ally who can guide and support them in obtaining both an appropriate share of spending and a voice in strategic decision-making. At the recent inaugural session of the Boston chapter of the Customer Success Association, I led a discussion with a panel of two CFOs who, through their comments, made a strong case for the CFO as a prospective ally.

If these two CFOs were at all representative of their peer group, we learned that there are several reasons for CS leaders to be optimistic about developing a fruitful relationship with that member of the executive suite. Specifically, CFOs:

Understand the financial necessity of capturing renewals and maximizing CLV
Aren’t caught up in who-should-be-responsible-for-what; they just want to see the financial impact
Are interested in a strategic view of improving the long-term health of the business and customer relationships
Believe in data

For CS leaders to forge strategic relationships with CFOs, they need to take leverage the CFOs’ mindset and respond to their motivations. The case for investing in Customer Success needs to be made based on evidence that spending—on CSM software, on an onboarding program, on additional headcount—will provide a return above baseline in the form of improved retention and/or increased lifetime customer value. This evidence, according to the CFOs, can take the form of plausible outside benchmarks or (and better) can be derived from testing.

Importantly, in calling on CS leaders to create tests to make the investment case, they are not looking for elaborate experiments that could be blessed by a statistician. They simply want real-world evidence of efficacy. For example, to make the case for the impact of CSM software on renewals, select a test group and more closely monitor customer utilization for a month. To make the case for investment in a customer marketing program, send several newsletters to a test group and analyze the correlation between engagement and the likelihood of renewal. Moreover, the tests themselves are an opportunity to forge an alliance with the CFO: by working with the CFO on the test design, CS leaders can not only assure buy-in if the test proves successful, but can also gain credibility and earn trust.

Four Things I Learned at Gainsight’s Pulse 2014

May 17, 2014

Gainsight held their second annual Pulse Customer Success Management conference May 13^th and 14^th in San Francisco. With a reported attendee count of 900 (and as one of the 900, that number rings pretty true) and lots of breakout sessions, the event was full of people, content, and energy. Here are my key take-aways, with the caveat that all those concurrent breakout sessions meant that I missed a lot of content:

1. The Customer Success wave is definitely rising. Between the turnout of attendees and the large number of high-quality speaker panels assembled, Pulse definitely made the case based on sheer quantity. But beyond the numbers, the content of sessions and hallway discussions also evidenced the rising wave: this wasn’t a large collection of people collecting their swag; attendees were hungry for serious information and tips and advice on how to do things better, smarter, more efficiently. The excitement around sharing ideas fueled the conference.

2. There are real—and interesting—differences between the Customer Success challenges and goals across industry verticals. While the core objectives and challenges in CSM—deliver and demonstrate value to customers; improve retention and CLV; define roles, responsibilities, and incentives for customer relationship management; develop and implement ways to measure and monitor customer health—are common to every team at every company, there are definite differences from one industry to another. For example:

In the session on CSM in security, there was a discussion about the need for and challenges of demonstrating value and measuring customer health when an application largely works passively (i.e., email and other digital security threats are automatically scanned and stopped) and at least some value is delivered outside the product entirely (e.g., being a resource for authoritative information to combat ill-founded hysteria around a security threat).
In the session on CSM in HR, panelists highlighted the fact that they often have to think about not one customer persona but three: in addition to the users (HR managers), they need to nurture relationships with the buyer (HR Director/VP), and even in some cases the candidates themselves. If they lose sight of managing the relationships with any of those customers, it erodes value for the whole system.

3. “Land and expand” is core to the SaaS model…but requires a commitment to and investment in making up-selling and cross-selling effective and efficient. A key part of the value proposition of SaaS—ease of deployment, controllable trial—naturally leads to the model of establishing “beachheads” within larger accounts and increasing CLV by expanding the contract footprint. One problem with that: doing it with any kind of scale requires not only a rock-solid onboarding program to deliver a rapid time-to-value for that first customer, but an efficient and disciplined approach to leveraging the initial success to find and capture other opportunities. Just as customer acquisition (aka, sales), has marketing support for lead generation, CSM needs support for building the pipeline for cross/up-sell.

4. Strategy is a luxury in which many CSM teams don’t have time to indulge. I think part of the reason for the high-level of conversations pursued in the halls and the significant numbers of attendees at break-out sessions is that many CSM team leaders and members simply don’t have time to grapple with strategic issues because they are too busy with tactics. The good news is that conferences like this or virtual venues like the Customer Success Management Forum group on LinkedIn give practitioners the space away from the tactical to think strategically, learn about alternative approaches, and gain insights from their peers. The bad news is that it doesn’t make it easier to keep strategy in mind when back at the office.

The Measure of Success in Customer Success

January 29, 2014

If you listen to Customer Success Management professionals talk about what they do, you’ll get the message loud and clear. In order to be viewed as a growth engine rather than a cost center, the CSM must move beyond being firefighters, which relegates the CSM function to the world of support – helpful, but totally reactive. Just because it is part of the story of how many CSM teams got started doesn’t mean that it needs to be part of how the CSM team is positioned going forward.

I’d like to take things one step further. I believe that success for CSM can be defined as the day that Success managers and executives no longer talk at all about how many customer relationships they and their team have “saved.” I understand the motivation – it’s a tangible demonstration of the value of their function and one that explicitly and clearly relates to the activities of the CSM team. However, there are three problems with ”saved customer” refrain:

It continues the focus on reactive impact, as saving implies that the customer was “at risk” until the successful intervention of the CSM team.
It undervalues the total impact of CSM on the top line because it doesn’t account for up-sell or cross-sell revenue and on the bottom line because, among other things, it doesn’t account for the lowering of customer acquisition costs through advocacy and word-of-mouth.
Finally, why should saving customers even be necessary? The strategic, pro-active approach of the CSM team should ensure that customers are kept on a path to value and rarely or never get diverted to end up at risk.

Not only does talk of saves do a poor job of positioning the CSM team within the organization, it has the potential to create or foster antagonism between CSM and other functions. The need to save results from some misstep, whether by marketing or sales in poorly setting expectations, product development in delivering an application with feature shortcomings or bugs, or support in failing to respond to requests quickly or thoroughly enough. Does the CSM team really want to be the nagging parent of the organization that always talks about cleaning up everyone else’s mess?

While we’re at it, maybe we should do away with the outward focus on “churn rate.” Talking about CSM in terms of churn still mires it in a framework of prevention rather than expansion and growth. Every customer relationship is an opportunity for growing revenue through renewal, upsell, cross-sell, and advocacy. So why not refer to the performance of the CSM team responsible for managing and nurturing those relationships in terms of conversion of that revenue opportunity? Sales isn’t measured by their loss rate (yes, win/loss is an element of sales performance analysis but it’s rarely the primary sales measure mentioned), but rather by their bookings against quota or their conversion rate. I’m not suggesting that churn should be ignored or even that it not be a/the primary measure used internally by the CSM team. Rather, I’m suggesting that perhaps CSM does itself a disservice and perpetuates the stale paradigms that it is trying to shift by highlighting “saves” to the non-CSM world.