If any point in the last decade emphasizes the importance of a customer success strategy, it’s the COVID-19 downturn. While slowing customer acquisition rates might be easily explained by companies cutting or pausing budgets, customer churn almost always indicates one thing: when push came to shove, your product was dispensable.
As a startup without substantial data at hand, figuring out why a customer left may prove difficult. Instead of playing guessing games after the fact, you need to invest in keeping customers in the first place. That’s why it’s critical to define customer success in the early days of your company, ensuring that your product or service is indispensable through both ups and downs.
In an earlier post, I wrote about a subtle, but powerful, shift in understanding customer success: It’s not about ensuring your company thrives because of its customers, but ensuring your customers thrive because of your products. If you make yourself vital to customers, you won’t simply achieve growth—you’ll achieve sustainability. And with more and more investors questioning the billion or bust model, sustainability matters.
Lately, I’ve been reflecting on two conversations I recently had with experts in the space—Andrew Kahl, former Chief Customer Officer at Sailpoint and Dan Balcauski, a customer churn consultant—on our podcast, Capital GEEK. In today’s post, I’ll walk through some reasons why you can never start thinking about customer success too early, and how to determine what your company’s unique version of success looks like.
Before you hire your first sales person or think about building a customer success team, you need to align on what success actually means to your customers (and understand how long it takes to achieve).
As a startup, you likely have the benefit of a relatively small and knowable customer base. Take the time now to create a process for sitting down and aligning on expectations:
As Kahl shared during our conversation, “The people that you are selling to—and who are making the buying decisions—aren't always the same people handling implementation. If you don't have a mutual understanding of what the value is, what the milestones are going to be on the front end... you're not going to have a match.”
A concrete customer success plan accounting for time to value (TTV) will not only show your customers that you’re invested in their success, but will also give them a clear understanding of your product’s expected impact and benefits.
Balcauski echoed Kahl’s emphasis on optimizing customer onboarding: “If you aren’t successful in getting the product set up in the first place, [your customer] is going to be playing from behind the whole time.” You need to show them value as soon as possible.
Similar to aligning on what success means to your customers, you need to internally align on how you’ll measure it. Balcauski highlights that there are more than 40 ways to calculate customer retention. Since retention is one of the most popular measures of customer success, the wide range of definitions leaves plenty of room for confusion in meetings with team members or investors.
Customer retention has a major impact on your company’s growth—just 10% growth from existing customers can raise your enterprise value by over 100%, and defining how you measure “retention” makes all the difference. Even better, start tracking multiple retention metrics to determine what makes the most sense for your startup as you evolve and grow.
Balcauski recommends sorting through what he calls “anecdata” first to figure out what metrics you should track. In other words, there’s a lot of anecdotal data floating around your team, so ask people what they’re observing and hearing from customers and use that insight to decide what matters to you, at least for the time being. All of these customer success insights will ultimately enable you to better understand the lifetime value of your customers (LTV)—helpful context for informing product roadmap discussions and navigating nuanced product economics.
Speaking of LTV, as you grow your business, you’ll gain different types of customers who realize different benefits from your software—and provide different value propositions for your company. One of the biggest mistakes you can make as a startup is failing to recognize (and then track) different customer personas in order to expand and invest your resources strategically.
There are many ways to segment your customers: geographic location, company size, seats deployed size, product behavior and more. In the B2B world, you may have 10 or 20 small customers who collectively don’t match the revenue of the top 10 percent of customers (another reason to pay close attention to LTV).
As Balcauski told me, “From a product perspective, you need to ask yourself if you’re going to think differently about the largest customers versus the smallest ones. And there's not necessarily a right or wrong decision there.” A lot of it depends on your plans for growth: Do you see more opportunity with lots of small customers or a few larger ones? Do you need to move markets to reach your ICP?
Defining clear customer segments will help you evaluate the various value propositions (and LTV) of particular segments to determine your priorities as a team. Once you know how to categorize your customers, you can develop appropriate customer success approaches for each segment—and then deliver results in a scalable, sustainable way.
The concept of product-led growth, which advocates for focusing on building something that improves an end-user’s day-to-day, has gained tons of traction in the SaaS world. We’re advocates of pragmatic product-led growth: the idea that it’s possible and preferable to appeal to both end users and their leadership teams.
In our perspective, you want to create a product that not only addresses a real problem customers are desperate to solve, but convinces them to continue investing in your software to solve future problems, too. Customer success can be a bridge between product-led growth and a broader value-led growth strategy.
In other words, you want to build a long-term relationship with customers (both leadership and end-users). As Kahl said “You're selling a product, and you want to get that customer comfortable with the product. But it's all of the tangential things that go with it that make the product valuable—and make it valuable today, tomorrow, as well as in the future.”
Once you have an understanding of what “success” means to your customers and your team, think about all of the ways in which you might build stronger relationships with your most valuable customer segments.
Customer success means positioning yourself as a partner, not just a software vendor.
The B2B software world is beginning to realize that there’s a lot of value in running a good business—not simply chasing fast growth. As you think about your startup’s goals, whether it’s an acquisition or an IPO, you’ll need loyal customers to get you there. By investing in a deeper understanding of your customers’ behavior today, you’re already ahead of the curve.