Last week my team and I had the opportunity to spend a full day with Customer Success leaders representing over 40 growth-stage B2B SaaS companies at the JMI Equity Customer Success Round Table.
These companies serve a wide range of industries ranging from healthcare, telecom, nonprofit, education and more. Their customers run the gambit of small businesses to Fortune 100 companies with sales cycles ranging from days to years.
Despite the diversity of the end markets they serve, these companies face a number of common challenges as B2B SaaS providers.
Here’s a rundown of key themes we heard:
Data is scattered and insights are elusive
There are at least three core data sets that we need to combine to fully understand our customers:
- CRM / Marketing – Demographic information which describes who our customers and how they are interacting with our brand (website, marketing content, etc)
- Revenue – Financial information about customer commitments (contracts) and payment history
- Behavior – Data that describes how customers are interacting with our product
Companies are struggling with disparate CRM, ERP/Financial, marketing engagement tools and product data. This situation makes it hard to assess the current state of the customer base, much less plan strategically.
Customer Success teams are looking to harness data to produce insights they can act against to reduce customer churn and increase satisfaction and upselling opportunities. The key isn’t just getting “as much data” as possible but rather starting with data they can readily access start using it to make informed decisions
This matches our perspective. Companies should start simple and create a segmentation model based on the most readily available data about their customers. They may even have to go create data sets for themselves by calling customers they haven’t spoken to in a while.
From there, working with finance, they can overlay revenue history to analyze and track key metrics like retention, renewal and expansion rates.
The key is not to boil the ocean, start with the data you have, make progress and iterate. Speed seems to trump precision in nearly every situation we see.
Customer value realization has never been more important
One of the JMI operating directors, Krishna Potarazu, noted that the US economy has enjoyed bull market conditions for the past decade. History tells us that there will be hard times ahead as the economy inevitably cycles through troughs.
What does this mean for SaaS companies?
When economic conditions change, companies who have made their value known to customers have a better chance of retaining them. We find that most B2B SaaS companies aren’t doing a good enough job of creating “high and wide” relationships within their customers.
Customer Success teams often confuse users with buyers. They are surprised when good customers churn despite the fact that users “love us.” Reality is, if the economic buyers of the product don’t see value or worse, don’t know we exist, the customer relationship is at risk.
And this risk isn’t limited to companies that serve large enterprise customers. Even SMB SaaS companies need to find ways to communicate their value. My favorite example of this is Zendesk’s Monthly Account Usage Emails which go out to all contacts, not just their end users.
Equally import is rapid time-to-customer-value. Our companies and revenues are at risk every day that a client is paying for a solution from which they have not received value.
Customer and revenue accountability is nuanced
We held multiple sessions about revenue ownership including a panel discussion with several Customer Success teams who are transitioning to renewal and upsell ownership.
In general, Customer Success teams are trending toward revenue ownership, but the answer as to whether this is right for your company is nuanced.
It turns out there are a number of factors that determine how customer and revenue ownership should be structured. Here are several examples:
- Company maturity – startup, growth or mature
- Company growth mode – new logos vs. customer upsells
- Product maturity
- Product stickiness
- Sales velocity – high vs. low velocity
- Customer expansion model – big upsell vs. small upsell opportunities
- Available leadership talent
Despite the complex calculus required to get an answer, what is 100% clear is that there are actually two questions to answer. First, what roles do we need to drive required customer engagement? And second, who should those roles report to – sales or customer success?
To us, the most important question to answer is the first: what roles do we need? It’s critical that there be an accountable owner for each aspect of revenue – retention, upsell and new logo.
Early on, we were brought into a client to investigate their low gross retention rate. We were surprised to discover that no one in the organization was accountable for the gross renewal number. Resolving that was the first step in improving customer engagement strategies that have lead to increased retention.
With so many variables, finding the appropriate customer accountability model can be daunting. We find it easiest to start with key business indicators and work backward, ensuring that each has an executive owner: Gross/Net Renewal, Gross Retention, Net Retention, Expansion Bookings, Customer Lifetime Value and so on.
Making it clear who owns each metric drives execution accountability and serves to clarify necessary roles where they should live within the company.
Execution is the name of the game
The SaaS companies we spent time with are all taking steps to become more proactive with their customers. They are defining the customer journey and proactively engaging in the moments that matter.
They also exercise discipline in the sales cycle, set better expectations and target ideal clients which improves chances of retention and expansion. They are carefully managing time-to-value as well as the transitions between sales, onboarding and customer support. They are building high and wide relationships, and customers don’t have to question who to go to for what.
Most importantly, they are managing to both leading and lagging indictors of business health. They aim to achieve great outcomes and to increase their ability to forecast them.
The combination of all these factors help customers feel the love. Consistent execution around the “grunt work” of customer success seems to be half the battle.
Customer success is a top-down culture, not just a team
Customer Success is a discipline but it’s also a culture. Companies are embedding customer success into daily operations and it typically starts with the CEO and executive team.
We’re seeing more companies align all post-sale client-facing teams under a customer success executive who reports directly to the CEO or President. This trend acknowledges the changing nature of our customer relationships.
As my friend Donna Weber says, “our customers now own us.” We can balance customer relationships with contract terms, but at the end of the day our customers typically have the upper hand. We need them much more than they need us. CEOs and boards who give the customer a voice on the executive team understand this fact.
It’s up to customer success executives to ensure the company understands the factors that are driving customer outcomes and lifetime value.