Watch out, SaaS vendors…your customers have a BS detector!
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.
“We don’t care. We don’t have to.” …uh, yes you do.
Do you remember this Saturday Night Live advertisement skit with Lily Tomlin as a phone company employee?
Customer choice means vendors need to care
Now, just a few years (ok, decades) later, these same phone companies are struggling to reduce customer churn. They are (finally?) realizing that things have changed and the customer now has more power in the relationship. And customers are not afraid to use it.
SaaS vendors need to focus on keeping customers...
Like phone companies, SaaS vendors – or any vendor selling on a subscription basis – realize that reducing churn and keeping customers for as long as possible is essential to their success. Unlike the phone companies of yesteryear, they can’t hold customers hostage and just expect the money to keep rolling in.
…but what do they need to do to reduce churn?
Many organizations recognize the need to retain customers, but they are not sure how.
The secret is simple. If you want to retain customers, make sure they:
1. Are getting value from your product or service, and
2. They enjoy their experience with your organization
If you can do that, you will keep them. As soon as these two things fall short, your customer will leave.
Focus on customer success to reduce churn
Many companies have invested in improving the customer experience and increasing customer satisfaction ratings. Now they to focus on making sure customers are getting full value / benefits realization.
For many organizations, this means creating a Customer Success Management program. Customer success is not account management or even customer service. It is all about helping the customer achieve the measured benefits and ROI that is meaningful to them. It requires different methods, tools, and activities than before.
Do you have a Customer Success Management program? If not, why not? If so, how has it affected your customer churn?
Please share your thoughts and experiences on the Customer Success Practitioners group on LinkedIn.
Differentiated Customer Success Management (CSM) Services
When speaking with Customer Success Management professionals they consistently tell me they provide different CSM services depending on the customer. Even basic customer segmentation has allowed them to prioritize their efforts and adjust their services to meet the specific needs of different customer groups.
Not all customers are equal
While all customers are important, they are not all equal. Some customers are more profitable. Some require more support and take more time. Some customers start small, but with a huge potential lifetime value, whereas others may have limited potential.When developing your CSM program, make sure you understand both the needs and the potential value of your different customers. And then, prioritize accordingly.
Differentiate B2B or B2C
You will need to adjust your Customer Success Management approach to meet the unique needs of B2B and B2C customers.
• B2B customers often have less individual control and discretion when it comes to the systems and tools they use. In addition to individual user habits, you have to navigate a plethora of organizational issues, including internal business processes, incentives, policies, procedures, technical and data quality issues.
• B2C customers tend to have a high degree of individual control and discretion when it comes to using your product or service. You may need to help them develop new habits that involve regular, sustainable use of your system.
Delivering B2B CSM services is more complex than B2C, but the revenue amounts at stake often make it a priority.
Differentiate size & budget
It will take some experimentation to determine the optimal size and budget for your CSM program. The type of CSM services you deliver will influence the number of customer success management staff you need. It will also affect things like the amount of travel (face-to-face) service vs. the amount of remote (web and phone) service.
Many CSM programs start relatively small and then grow as the customer base grows. When you building your CSM program be sure to include plans for how you will add additional capacity as your customer base changes and as their needs – and your software - changes.
Change your methods based on customer need and value
You can help customers be successful with your product or service in many different ways. For some customers, it may make sense to provide services that are largely automated and uniform. For others, especially those with a high potential lifetime customer value, you may need to provide more hands-on, customized CSM services. And, as your customers grow, you may need to adjust the level of service they receive.
Everything You Need for Success
Check out these great resources to help make your Customer Success Management program the best in the industry.
Do You Have a Customer Success Management (CSM) Program? You should.
If you are like most SaaS vendors, you have a great product that is developed, implemented and supported by a team of gifted professionals. You can win new sales. Everything looks rosy.
But you have a problem. You keep losing customers at renewal time. And this is costing you big-time!
Customer Retention is Key to SaaS Vendor Success
The SaaS business model, with its low upfront costs and low, regularly scheduled payments means that SaaS companies need to keep customers longer in order to profit. Every customer that cancels their subscription – or even reduces the number of licenses under contract – has a dramatic impact on your bottom line.
The simple truth is you cannot have a successful SaaS business if you have high churn.
The impact of customer churn is cumulative and drastically underestimated
According to the resources developed by SaaS Capital, customer churn has a cumulative impact on the vendor. Not only does it decrease revenues in the period during which the customer cancels their subscription, it also reduces all future revenues.
For example, in their webinar, “No Churn: Keep Customers & Improve Your SaaS Company Valuation”, showed a comparison of two companies, one with a 95% customer retention rate and the other with an 80% retention rate. After 5 years, the company with a 95% retention rate had revenue that is 40% greater and a growth that is 50% higher. By year 10, revenue is 80% higher and growth rate is 2.5 times faster.
Recurring revenue is critical component of SaaS company valuation
With customer churn having such an impact on revenues and growth, investors are now looking very closely at customer retention when calculating SaaS company valuations. According to SaaS Capital, business are traded on a multiple of revenue (not EBITDA) and, “recurring revenue is a better proxy for future cash-flows than current income.”
Customer Success Management programs reduce churn, increase revenues
Given the importance of reducing customer churn, it is not surprising that you’re focusing efforts in this area. Effective CSM programs can help you reduce churn. And if your customers are getting more value from your systems, they are more likely to increase the number of licenses they purchase. All of this adds up to increased revenue for you.
Now the problem… how do SaaS vendors deliver the elusive customer success?
Sounds great, right? There is just one hitch. How do you create and deliver effective Customer Success Management programs?
This opens up a lot of questions.
- What tools, methods, skills, and resources do you need to facilitate customer success across your entire customer base?
- How will you build this new capability?
- How will you integrate this new service into your existing business model?
Resources to help with your Customer Success Management efforts
Once you realize that you need a Customer Success Management program, you then need to figure out what this looks like and how to build this capability in a quick affordable manner. If you are not sure where to get started, check out these resources:
- Tri Tuns Customer Success Management service can help you quickly assess your CSM needs and develop a strategy for moving forward. We can also partner with you to execute your strategy.
- Sign-up for our Customer Success Management email tips and insights.
- Check out The Hotline Magazine by Mikael Blaisdell. Mikael is a widely recognized thought leader in the Customer Success Management space and his events and writings reach a large global audience.
