Last week I kicked off a new series of blog posts about customer success for SaaS companies by answering the question ‘what is customer success?‘. This week, we’re going deeper and examining why it’s important for SaaS companies.
Tomasz Tunguz, venture capitalist at Redpoint, says customer success is ‘equal in importance to sales and marketing and engineering and product within SaaS companies’. But why? Technically, it didn’t exist 10 years ago, so why do we need it?
We need it because products are developing faster than our capacity to understand them, we need it because competition in the SaaS world is harsh and we need it in place to reduce churn and keep users sticking around for the long haul.
Let’s take a closer look at these points.
Customer Success connects promise to reality
Here’s a theoretical situation to explain.
Pretend I just signed up for an analytics product because I know I need to start tracking user activity in my mobile app. The landing page copy told me that’s what I can do with the app, so I bought it. I go in, and within 2 minutes I’m confused and wondering exactly how I can load it up with my app’s data or set conversion goals.
In an ideal world, the platform’s customer success manager should have been on the phone to me the same day of purchase, guiding me through the steps to get it set up and teaching me everything I need to know.
Analytics platforms and CRMs are just two examples of complex products that can be configured in numerous different ways — for these products, a user guide or support ticket system isn’t always the best thing to offer.
You don’t want your customer having to work harder to get what was promised by the sales team because your product should be easy to implement for all customers and deliver value from day one.
Your product’s initial setup, or even basic use, won’t be obvious to everyone. Not to mention how businesses grow and their needs change over time — every time the monthly bill for your product comes through, the customer is questioning whether they really need it.
With every month an opportunity to cancel, it’s obvious that the customer success process doesn’t stop after the initial set up. Customer Success teams need to be constantly available to stop customers falling out of love with the product, no matter what.
According to Outreach CEO Manny Medina, customer success should be ‘uncomfortably close‘. While an exaggeration, it’s a good way of imagining how easily reachable and responsive your service should be.
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.
Successful customers don’t churn out
In an earlier article on concierge onboarding, which I excitedly wrote when first discovering customer success, I note that customer success is a method of making customers happy and keeping them that way.
If a customer is happy with your service, there’s no need for them to stop using it — what’s known as ‘churning out‘. The amount of customers you lose each month is known as your monthly churn rate, something I’ll explain fully next week.
For now, it’s enough to know that customer success isn’t just about the unscientific art of making people feel warm and fuzzy. Like all business processes, it’s about making money.
As you can see, a small adjustment to churn rate can have a huge effect on overall revenue. It can make the difference between an MMR (monthly recurring revenue) of $700,000 and one of $2,700,000 with an adjustment of just 8%.
In fact, while we’re on the subject of money, Gainsight’s Jason Lemkin says “customer success is where 90% of the revenue is”. It doesn’t just mean that customers keep paying their monthly charge, it also means that they will be inclined to promote the product to others in their company and buy the more expensive packages.
With SaaS, successful customers compound your revenue massively because they are the ones who encourage their companies to pay for more users, give you referrals and are promoters of your product.
Once your product becomes the go-to solution for a large company, that one customer could be paying your entire Customer Success team’s yearly salaries every month.
Once again: why is customer success important?
Let’s look over the key points again and wrap up this week’s Customer Sucess Guide for SaaS Companies chapter.
- Customer Success teams help connect your new customer’s expectations with the promises made by your marketing and sales teams. By offering a go-between for your product and customers, your customers always have someone to turn to who will be willing to work closely with them to solve any issues.
- Software is complex. If you offer a product that can work in a different way depending on who uses it, you need someone to work with your customers and get it set up for them right from day 1.
- Your competition is doing it! They’re holding onto the customers you lost and killing you with kindness.
- A watertight customer success process reduces churn and increases your revenue. Even a churn reduction of 4% can double your MMR.
Next week I’m going to take a deeper look at churn and explain how to calculate it to help your SaaS product generate more revenue.
A note for those reading this on the blog in its first iteration — I’ll be publishing one chapter per week, starting last week. Hold on for next week’s installment where I’ll go over churn. If you want to skip ahead a little, check out the high-touch customer onboarding for SaaS companies checklist)
Get the Ebook: The Complete Guide to Customer Success for SaaS Companies
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This guide will teach you how to stop users abandoning your software before they’ve seen how awesome it is.
You’ve put 90% of your effort into building and promoting your app…
…But it all goes to waste if you’ve not got a system to manage existing customers. This includes a proper support and success process aimed at making sure that most recently subscription payment you got through won’t be the last.
Get the book to start keeping your customers, compounding your revenue and boosting every customer’s lifetime value.
What’s in the book?
- What is Customer Success?
- Why is Customer Success Important?
- What is Churn?
- How to Calculate NPS with the Perfect Customer Happiness Survey
- How to Shape Customer Retention Strategies That Beat Churn
- A Smart Way to Manage SaaS Customer Support
- Enhance Your SaaS User Experience
- How (and When) to Automate Your Customer Success Process
- What Customer Success Managers Actually Do All Day