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.
Let me know if this one sounds familiar. When at happy hour, do you or your friends typically spend time talking about the latest dumb thing that happened at work, how clueless the boss is, or how demoralized people are with their jobs? Not exactly a “happy” hour, is it?
I have several friends who work for organizations that have great missions that are very meaningful to my friends. They work hard and regularly put in extra effort because they believe in the mission and they take pride in their work. And yet, they don’t feel that their contribution is acknowledged, valued or appreciated.
Employees want to know that they are valued
It is not enough just to value the work of your teammates and employees. You need to let them know that they make a valuable contribution. You need to align your words and actions so that they internalize the feeling of being appreciated.
Words are great, but actions are better
Many leaders – from the CEO down to front-line supervisors – actually appreciate the contribution of their team. They may even say the words. But they don’t often show it. You need to demonstrate that you value the contribution of others.
Small gestures make a big difference
Demonstrating that you appreciate your employees does not require major time, efforts or expense. Sure, there is a time and place for big awards, cash gifts and bonuses. The problem is that these big ticket appreciation gestures are expense and happen quite infrequently. People appreciate them at the time, but then this feeling of appreciation quickly fades and needs to be renewed.
If you want to keep people motivated, you need to let them know that you are paying attention to the little things they do that make a big difference to the organization.
For example, do your people stay a little bit late to finish something up or stop what they are doing to help a co-worker with a problem they can’t fix on their own? Do they put in just that little bit of extra effort in a meeting or on a deliverable just because they care? Oh, and don’t forget the person who helps protect you from yourself by saying “no” when you are going off-course or taking on too much.
Get creative in showing you care
Acknowledging all of these small contributions is a great way to show that you are paying attention and that you value your co-workers, teammates, and direct reports. But what should you do?
Get creative! For most people, the act of acknowledge their contribution is more important than what they may actually receive. If you have just a couple dollars or a few hundred, you do a lot to demonstrate you care.
Technology can make all of this quick and easy. For example, using the free app Treater, you can instantly send friends a cup of coffee, free drinks, or a night out. And since you can do it right from your smart phone, you can do it while sitting at the airport, while waiting for your next meeting to start, or when waiting at the bar for your friends to arrive. It takes so little effort for you, but makes a big difference to your employee.
Want to go the extra mile? If you can find something that fits with their personal interests it not only shows that you appreciate their contribution, it also shows that you have taken the time to get to know them as a person. Does the person always comment that their kids make a mess? Why not go to Living Social and send them a free house cleaner? Are they a Civil War history buff? Why not get them a carriage ride on the Gettysburg Battlefield?
The point is, taking a few minutes to thank people on a regular basis and show them you care is quick, painless, and goes a long way to helping make them happy and productive. Oh, and it feels pretty good to put a smile on someone else’s face. Try it, you won’t be disappointed!
Things to think about
- What are all the ways you make small acts of appreciation for the little things your employees do every day?
- How could you use small gestures to acknowledge the little things that people do to help adopt to changes (new systems or processes) in your organization?
- How can you get other leaders in your organization to routinely acknowledge the little contributions of their team members?