Just the other day, while talking to a cloud software vendor, we started talking about customer satisfaction and retention. They shared with me their examples of what is becoming a story that I hear all too often from SaaS vendors - that is, they have a great product and get lots of initial sales, but they lose a ton of customers at renewal. And, it’s really hurting their bottom line.
The more I talk to cloud vendors the more I notice a growing awareness among them that the subscription business model has unexpectedly (and, arguably, unintentionally) shifted what it takes for the vendor to be successful. Cloud vendors now realize that if the customer is not successful – that is, getting measurable business value from their SaaS purchase – they will not renew. Unfortunately, many vendors are not prepared to deal with this new reality.
SaaS vendors now realize that they cannot afford to just sell software, rely on the user interface (UI) design and overall user experience (UX), and hope the customer uses it. Retaining customers – and preserving revenues – means needing a comprehensive, actionable strategy to drive and sustain customer success. Here are six reasons why this is true.
1. SaaS software transfers IT adoption risk from the customer to the vendor.
In the old days of traditional, on-premise software, customers made big up-front software purchases. The software vendor made their profits based on license sales, regardless of usage. With subscription software, customers will only pay for (rent) licenses that are actually being used. Lower usage (IT adoption) = lower license revenues.
2. SaaS profits require long-term customer renewals and retention.
The low cost, pay-as-you-go pricing means that customers need less up-front cash to purchase software. However, the lower up-front fees means that vendors need to retain customers longer to get the same amount of revenue. Suddenly, customer retention is critical to vendor profitability.
3. If customers are not successfully adopting your software, they are not renewing.
OK, this is a no-brainer. Savvy customers – and even the not-so-savvy customers – will not keep paying for things they are not using. If customers are not adopting your software, they will not keep paying for it. Now, this doesn’t mean they will drop all licenses (though many will). It may just mean that they dramatically cut the number of paid licenses to eliminate those that are not being effectively used.
4. No matter how intuitive, fluid or beautiful the System, it’s still a change for the users.
Software vendors love to talk about how “usable” their product is, and many (most?) claim almost prescient intuition on the part of the UI. So suggesting that people might not actually use the software is virtual heresy. But really, it’s not about the software. It’s about the fact that the software is a change in users’ daily work lives. Some will love it, some will hate it, but left on their own, not all will use it to its fullest, business-value-creating extent.
5. Customers will not buy more until they use what you have already sold them.
Software vendors love to add new features to their products. It’s how they keep the product fresh and competitive. It is also how they can charge you more per user.
The problem is customers won’t pay additional fees for new features if they are not using what they have already been sold. So, if you are a software vendor, before you go paying developers to create lots of new features for your software, you better make sure that people are using what they already have. And this should start with your existing customers.
6. Customers don’t know how to maximize and sustain successful IT adoption.
This is by far my favorite. For years, customers and vendors alike assumed that if they deployed a system and trained people to use it, that everyone would. The reality is that very few systems are fully adopted. In fact, one report shows that up to 24% of the value of an IT system is lost due to poor IT adoption.
Many IT implementation efforts focus on getting the system live, but do nothing to ensure it is effectively used and delivering measurable business value to the customer organization. The methods used to develop and deploy a system are very different from those used to help organizations manage change and maximize IT adoption. Unfortunately, many organizations do not know how to effectively manage and sustain IT adoption programs.
SaaS vendors need to invest in Customer Success Management Strategy
SaaS vendors are quickly learning that having a great product alone is not enough. They now need to have a strategy in place to help customers quickly adopt it and make sure it is delivering business value. We are already starting to see SaaS vendors create new positions – such as Customer Success Managers – to help clients get the most from their software. This is just the first step. In the future, customers will demand – and vendors will need to provide comprehensive customer success management programs.
Be part of the conversation. Join the Customer Success Practitioners group on LinkedIn
OBSERVATIONHave you noticed that you spend a large amount of time documenting process flows but fail to measure their IT implementation? How do you know if the end-users are enacting the system as designed and contributing to the business goals? We know that process documentation is necessary to ultimately guide system end-users once an implementation is complete. However, many fail to realize that metrics need to be prepared to adequately determine if the new process flows are followed by system end-users. User Adoption metrics is the link between the new process design and the organizational change effort.
CONSIDER THISWhen determining which particular metrics to focus on, it is critical to consider user behaviors that both follow the new process design as well as behaviors that deviate from your intended process. Important user adoption metrics determine how much deviation there is between end-user behavior and the intended new process. Knowing these levels of deviation will help you determine how to influence and guide end-users toward the new process. The right metrics don’t necessarily need to be complex or sophisticated to provide accurate insight into the impact of current business processes (e.g. how long it takes to perform a particular process).
THINGS TO THINK ABOUTBrainstorm both intended and unintended behaviors and outcomes during implementation in order to create the proper user adoption metrics. Here are some examples of insightful metrics: • How many resources touch a process from beginning to end? • List which resources touch that process. • What is the scope of the process activities performed by each resource? • Are there fewer or more resources (or handoffs) required due to automation? Remember, when planning user adoption metrics, determine what is valuable to know about a particular process. Metrics must be designed to ensure that the behavior of the new processes deliver the intended results. With proper metrics and planning, you will have the insight needed to reinforce desired behavior.
RELATED RESOURCESCheck out these other resources for more information related to this topic:
- Check out MyUserAdoptionPlan.com - an all-in-one User Adoption Portal
- Take the Tri Tuns User Adoption Challenge - a free online assessment tool
- Explore the array of Assessments that Tri Tuns offers
- Read: “Accelerating User Adoption”
- Read: “Motivating User Adoption: Commitment, Compliance Or Wiifm?”
In the olden days (you know, about a week ago), before the rise of cloud computing, software vendors could use a lot of big words, slick demos, and fancy marketing props to entice people to buy a system. They were selling hope.
Sales are easy. Customer Retention is hard.
And many vendors are feeling the pain. The above video from Adobe does a great job of highlighting the issue. SaaS systems, with low upfront fees and the relatively easy ability to switch to a completely different system, enables customers to learn for themselves what your system can deliver.
Subscription pricing means you need to prove your worth. Everyday.
The impact: every time you have a renewal sales discussion, your customer immediately knows if you are BSing them or not. And they won’t tolerate BS.
Ensure your customers' success if you want to keep them.
What this means is SaaS vendors need to ensure they stop BSing customers and start ensuring their success. Make sure your customer has achieved measurable business value from investing in your system. To do this, evolve your sales, implementation, and customer management processes.
Help customers address the two biggest issues they face – namely, driving and maintaining full, effective user adoption of the system AND realizing the clear, measurable business benefits. If you can’t do this, your only choice is to try to BS your customer.
Good luck with that.
Please share your thoughts and experiences on the Customer Success Practitioners group on LinkedIn.
This famous clip from the movie Office Space is a quick reminder of one of the most commonly overlooked issues when implementing IT systems – motivating people to work. And sure, Initech is a fictional company, but it actually resembles a lot of organizations with which I have worked over the years.
In this scene, the employee Peter Gibbons tells the efficiency consultants how his organization approaches motivation and the impact it has on his work efforts. Does this sound like your organization?
Watch video here.
How do you motivate people to use your IT system?
Whenever you implement an IT system, look at all things affecting employee motivation. Sometimes there are issues with compensation and incentives. Other times the management may actually be demotivating employees.
As Peter says, “I have 8 different bosses right now…so that means when I make a mistake I have 8 different people coming by to tell me about it. That’s my only motivation – not to be hassled.”
Would WIIFM motivate this employee?
Convention wisdom (which is high on convention, and low on wisdom) often says that when implementing an IT system you should try to “sell people on what’s in it for me”.
Do you think trying to sell Peter on WIIFM would work in this case? Of course not. There are bigger issues that need to be fixed here. And unless these other items are fixed, WIIFM will not work.
So, what will you do to make sure you have motivated people to use your system? Please share your thoughts and experiences with us on the Customer Success Practitioners group on LInkedIn.