Chapter 5
Seeds—Customer Success
Seeds are many-to-many campaigns; they're based on word of mouth and relationships. Some companies, like Dropbox, Box, and Slack, have been able to take off by creating products that spread like wildfire through word of mouth. But for most companies, seeds will mostly come through systematizing how you ensure your customers stay happy and get value from your service, and who then generate more referrals and lower attrition rates.
Figure 5.1 Customer Success is a beautiful way to fertilize growth.
All the great work you do to help others succeed, while building relationships and networks, is “planting seeds”—whether they're with employees, partners, investors, or customers.
It's getting what you want by helping them get what they want. In so doing, you can succeed and feel good at the same time. The results look like this:
- Happy customers telling others about your service.
- Getting customers or partners through your own friends, networks, and relationships.
- Launching a product, post, or video that goes viral and creates results beyond views, such as increasing active users or sales.
Seeds in many ways are the best type of lead, but they aren't perfect.
- Pros: Highly profitable—word-of-mouth leads are the fastest to close and have the highest win rates.
- Cons: You have much less control over how fast they grow.
How to Grow Seeds Predictably
The best way to methodically grow your seeds is with a repeatable program or with systems that ensure your customers are successful. This field is now commonly called Customer Success Management or just Customer Success. It means systematically reducing customer churn, increasing upsells, increasing referrals, and helping capture more and better case studies and testimonials.
But this is really important: Customer Success is not about increasing customer satisfaction, but creating revenue growth.
Customer Success is not about increasing customer satisfaction, but creating revenue growth.
What Customer Success Isn't
Customer Success is not free help. It isn't glorified customer support. And, like sales, it should be a revenue driver, not a cost center. As with sales, you should make money, or avoid losing it, by investing in this role. Most important, though, Customer Success is a mindset, starting at the CEO level—on targeting, creating product for, and servicing the kinds of customers that need your product.
We believe that the future standard for all executive teams will include a head of Customer Success who's on the same level as the heads of Sales, Marketing, and Demand Generation.
Turn Your Sales & Marketing Funnel Into A Revenue Hourglass
Customer Success is a growth investment just like marketing and sales. Instead of a triangular funnel, think of it as an hourglass:
Figure 5.2 Turn your revenue funnel into an hourglass by tracking how Customer Success affects revenue.
By investing in Customer Success, you should see:
- Lower churn: The easiest revenue comes from keeping the customers you have.
- More revenue: More referrals to new customers; more willingness to try and buy your other offerings (upselling & cross-selling).
- Better marketing: You can improve everything in lead generation and sales with detailed case studies (success stories) and testimonials from happy, successful customers.
Six Keys to Customer Success
Do you retain 95% of your customers month-to-month? That sounds like something to be proud of—until you do the math. That's 5% churn per month, or 60% per year. In other words, you have to replace 60% of your revenue every year just to break even.
What if you have monthly 98% retention/2% churn? That's still 25% a year, or a quarter of your revenue.
The best-run SaaS companies can see up to –2% churn per month (on a revenue basis). Yes, that's negative 2%, which means they make more money every month. How? Because the customers who stay with them buy and spend more over time than what the company loses from other customers leaving.
If you're a CEO, you need to take Customer Success as seriously as marketing, sales, or product development.
Rule 1: Customer Success Is Your Core Growth Driver
All great companies' customers come from one main source—word-of-mouth, whether the leads come via referrals directly, or whether new customers are closed using case studies, references, or testimonials. This is much more measurable in recurring revenue models, where we can track renewal rates, upsell amounts, and referrals. But the principle applies to every business, even if you must be creative in applying them.
Rule 2: Customer Success Is 5x More Important Than Sales
Yes, sales is your priority. But sales begins what will hopefully be a longer-term relationship. To function at all, Sales needs Customer Success resources—like high-retention, references, stories, and case studies.
Generally, founders do a good job of whatever it takes to get a big deal closed—but often they do a poor job of everything after that, because they're off to help with the next fire, drama, or big deal. CEOs and founders: don't focus on getting new customers so much that you ignore your current customers.
Rule 3: Start Early, Hire Early
In SaaS, Customer Success is a “single-digit hire”—one of the first 10 hires. Another SaaS rule of thumb is having one Customer Success manager per $2 million in revenue—hired in advance of that revenue, not after you have it. Silicon Valley companies with enough funding often now invest big at the beginning, with two to four people on the team right away.
Remember, a Customer Success person, like a salesperson or a marketing budget, is an investment that should make money (a lot); it's not a cost to be put off.
Rule 4: Visit Customers in Person
Unhappy customers don't (always) complain before they leave. In-person visits can make all the difference in identifying their problems and in changing their attitudes. Here's a 5+2 rule on this point for every cofounder, the CEO, plus every Customer Success Manager:
- Must meet onsite with five customers a month (that's 60 per year)
- Get two customer badges every year as a bonus (that is, you visit so often they give you your own ID badge)
A phone call is not a meeting. By visiting in person, regularly, your company will learn more about what's really working or not, earn more trust—and those customers will (almost) never churn. It's much harder to tell a friend you're leaving them than some faceless company. What if you have nothing to say? Just show them your roadmap and ask for feedback on it, and on issues they are having today. That alone will fill the meeting.
Rule 5: Customer Success Needs Financial Responsibility and Metrics
When your Customer Success function doesn't have financial goals, its value can get muddled. One bad assumption is that “a great product will automatically create happy customers,” and therefore you won't need to hire people to actively work with your customers. However easy or incredible your product is, you need humans talking to select categories of your customers.
One bad assumption is that “a great product will automatically create happy customers.”
The whole point of Customer Success is to increase net negative churn, so you need tools and processes to measure and improve the function, including how the people on your team perform. To justify investment (such as in headcount or tools), and to create the hunger that a Customer Success leader and team will need in order to deliver measurable results, Customer Success needs to own some financial results: usually at least on retention rates and perhaps even on upsell revenue. (For example, see the Gild case study in the next section.)
Rule 6: Evolve Customer Success Goals and Metrics as You Grow
For example, SaaS companies experience these phases (courtesy of Gainsight):
- Traction ($0–$1 million): What do customers want, and what do they do with our product?
- Adoption ($1–$5 million): Why and how should customers include our product in their daily business?
- Retention ($5–$20 million): Why do customers need to keep on using our product after the honeymoon?
- Expansion ($20–$100 million): Why should customers expand to more seats, more features?
- Optimization ($100 million–plus): Automation and improvements driven by data.
Your phases may be different. The point: never assume Customer Success is “done,” and won't need extra investment or executive attention next year.
Customer Success Indicators
Most Customer Success efforts still involve a lot of guesswork and manual reporting. But get your data act together—perhaps manually at first and later with the growing category of Customer Success software options—to get smart about gauging who's at risk of leaving and who should buy something else from you.
Some examples:
- Contract data: Customers stagnating, or renewal or key dates coming up
- Support interactions: Lots of low-priority tickets, or customers that have stopped calling
- Billing/payment history: Delayed invoice payments, perhaps due to frustration
- Product and feature usage: Which features are sticky and who's using them
- Marketing engagement: Unsubscribing to newsletters
- Survey feedback: Negative input from key person
- Sponsor changes: Exec contact leaves, new CMO
- Data can't alert you to every problem: You will always need humans talking to humans to uncover and resolve issues. But this data will help you to:
- Develop triggers for when to intervene proactively before bad stuff happens. Obviously it's easier to save a customer before they send you a cancelling notice! First the team does this based upon intuition, and over time it can be based more and more on historical data and automatic triggers/alerts.
- Standardize interventions so that each Customer Success Manager is using the same set of best interventions; with this consistency you can better measure the effectiveness of each intervention or type of problem/solution.
Case Study: How Gild Dropped Monthly Churn from 4% to 1%
Gild is helping companies recruit engineers more effectively by using data available on the web (including developers' actual code) to help measure their abilities. Brad Warga is their SVP Customer Success. He joined when there were just five people: CEO, CTO, CSO, head of Sales, and head of Marketing (now there's more than 50 people). Brad had been in HR/recruiting for 20 years, including recently as VP of Corporate Recruiting at Salesforce, where he helped organize and execute thousands of hires.
The team wasn't exactly sure what Brad would do at first, but they felt he could bring a lot of credibility—and he did. First, he helped bring in new customers.
After the First Year of Selling
During most of the first year of selling, Brad helped bring in new customers, until there were about 50. Churn was artificially low—as everyone was on annual contracts! When the contracts began coming up for renewal, churn jumped to 3 to 4% a month, or over 30% per year—two to three times their target. SaaS companies typically want (a) 15% or less churn per year on their total number of customers, and (b) 0% or negative revenue churn.
Gild starting measuring and analyzing churn, and realized many of their assumptions were wrong. For example, it turned out that how often people logged in wasn't a great way to tell who would stay or go. Gild actually needed to look at which parts of the product were being used, and how. How savvy were the users? What were their recruiting needs and methods? By digging into these root causes of churn, Brad and his colleagues at Gild were able to systematize Customer Success and drop churn to lower than 1% per month. (And this made Gild much smarter about targeting the right kinds of customers from the very beginning with their lead generation.)
The Three Methods That Dropped Gild's Churn
- “90-day adoption”: The Customer Success team's relationship with a customer starts when the customer purchases the product and starts using it. The team trains the new users how to use the product, what the best recruiting practices are, and resells/re-evangelizes Gild to the users to get them excited.
Gild found out that if there's successful usage of the product in the first 90 days, usage will be three × higher for the rest of the year compared to a customer who didn't adopt as quickly.
- Quarterly business reviews: These reviews are formal and help hold the customer accountable to what they signed up for. Ideally, they're onsite with the right customers.
- Using predictive tools: Gild's main Customer Success application is Gainsight, along with Zendesk (to capture trouble tickets and feature requests), Salesforce.com, and Olark (chat).
Gild found out if there's successful usage of the product in the first 90 days, usage will be three × higher for the rest of the year.
Team Structure
The Gild Customer Success (CS) team has about 10 people across three roles (out of 50 employees!):
- Inside CS reps train, monitor usage, and run analytics; there's one rep per 70 users.
- Outside CS reps handle, and are measured on, renewals; there is one rep per 30 users in their relevant customer segment.
- Executive CS reps are responsible for upselling, and work mostly with large and fast-growing customer segments.
The teams have dashboards to help spot earlier both at-risk customers and customers who should buy more product, giving reps a reason to call a customer to talk.
C-Level Customer Success
A lot of companies treat Customer Success as an afterthought, or glorified customer support. Companies need to treat it (at least) as importantly as sales or marketing. At Gild, Customer Success owns:
- 90-day adoption
- Feeding usage data and customer feedback into the product roadmap
- Renewals
- Upsells
By owning these functions and being able to clearly articulate them, it's easy for Gild's board to recognize the value of Customer Success.
Case Study: Customer Service Excellence at Topcon
Frustrated customer support agents help create frustrated customers.
Customer support typically reacts to fix problems that have happened. On the other hand, Customer Success works best in preventing problems from being created in the first place. They are two sides of the same coin in supporting customers.
For most, companies, support is a hard job: intense work, often dealing with irate customers, with low pay, and (often) low respect. This is unfortunate—because customer support (like sales or sales prospecting) doesn't have to be a burnout, boiler-room job.
Why are the two teams that interact with customers the most (sales, support) so commonly mistreated or unappreciated? That needs to change, since frustrated agents (and salespeople) help create frustrated customers.
Topcon Positioning Systems (part of the $1 billion/4,000 employee global Topcon Corp.) is the world's largest developer and manufacturer of… yes, positioning systems. Topcon's customers are in industries like civil engineering, surveying, and agriculture—where mapping and positioning are vital. Topcon has contact centers around the world. Topcon's Angie Todd supervises the company's 18 U.S. agents in Columbus, Ohio, and in Olathe, Kansas.
Angie spent four years as a support agent and four years as a supervisor. The team handles 25,000 calls per year, which are all recorded and reported on. Angie says their goal is to provide predictably excellent service.
Angie's Expert Advice—Five Tips
- Get agents away from the phone: Spending 40 hours a week on the phone and interacting directly with frustrated customers can be a recipe for agent burnout. Get agents away from their desks regularly for product cross-training and to visit customers at their locations. This will keep agents interested, refreshed, and engaged. It will help develop more experienced and confident agents with better attitudes and a more skillful ability to help customers, increasing first-call resolution rates.
In the past few years, it's finally easy with Internet-based call center/telephony applications to route calls to any agent's phone (mobile phones, home phones, etc.). Now agents don't have to be chained to their desks, making the job friendlier and more flexible for them.
40 hours a week on the phone with frustrated customers can be a recipe for agent burnout.
- Use technology to help customers as well as yourself: Don't forget that technology is not only about improving the experience for customers but also reducing your costs.
The last time you called a bank, how many × did you have to enter your credit card or account number before you got to the right person? When a customer calls Topcon, their call center/telephony system, NewVoiceMedia, compares the phone number against data in Salesforce.com (used as their Global Case Management system) and can automatically route that person to the right agent. The customer doesn't have to type anything. For example, if they are marked in Salesforce as a gold-level client (with the best service level agreement), that caller can be automatically bumped to the front of the phone line, with no wait.
- Continuously listen to feedback: In most organizations, the customer support group interacts with the customer the most. Unfortunately, some organizations overlook the support team and all their valuable knowledge. The support team is the voice of the customer.
Some organizations overlook the support team and all their valuable knowledge.
- Create a career path: Your best employees won't want to stay in the same job their whole lives; they'll want to grow. At Topcon, agents know they will spend two to four years in Support, learning everything about Topcon and its products, as a first step in their career path. If you hire right, you can use Support as a great training experience that develops experts to later transfer or promote throughout the rest of your company.
- Specialize agent roles: Topcon has five “first-level” agents who have a basic understanding of all products, and 13 other agents who specialize in a given application or industry. With a variety of support specialists, customers can get better service—and this also creates different opportunities for reps to grow within support.