It goes without saying that customer success is essential for any brand regardless of industry. However, customer success is vital for SaaS brands because the business model runs on recurring revenue.
You see, unless the customer understands the benefits of a product, is onboarded efficiently enough that they can realize those benefits, and is held accountable to those realization goals, they cannot justify why they should continue subscribing to that product.
This means customer churn and sunk acquisition costs. Moreover, given that it costs several times more to get a new customer than to maintain an existing one, SaaS brands without a customer success plan spend large amounts simply to maintain their customer base.
In other words, growth and scaling become that much harder. By contrast, here are some of the benefits for SaaS companies that invest in customer success:
- Investors offer the business negative retention rates (i.e., above 100%, which only happens with business expansion).
- Every 1% increase in revenue retention boosts company value by 12% after five years.
- Annual recurring revenue rates and High Customer Lifetime Value (HCLV) go up.
- Brands with a customer success leader enjoy a 22% rise in net retention rate.
- One can implement a consistent customer journey across all touchpoints.
Pave the way for success-led transformation
Digital transformation comprises procedures, systems, and plans that increase a company’s effectiveness to grow market share and revenue by moving or expanding operations online. The same ingredients are essential in SaaS customer success.
Traditional definitions of customer success focus on the aspects of helping customers gain value from a product and achieve their desired outcomes, which is fine but a little vague in terms of what ‘value’ and ‘outcomes’ really means.
Customer success connects why customers purchase your product with what they receive in return through a proactive customer guidance and management approach, enabling both customer and company goals to be met.
One such SaaS digital transformation examples is Dropbox, the popular file hosting service platform. When it started its operations, Dropbox gave out licenses in the six-figure range and bound the customer with 5-year contracts to make the model work.
By digitizing itself, it did away with selling licenses for on-premise software and charging annual maintenance costs and revamped itself as a subscription-based service provider. Dropbox opted for a freemium model, allowing customers to sign up and get 2GB of free cloud-based storage.
Another great example is Netflix. When the subscription-based streaming service provider announced it would not be streaming Friends, that caused a colossal fan uproar. This led to Netflix changing its mind and continuing streaming the sitcom.
They knew what their subscribers wanted and gave it to them. Netflix met customer expectations. If you are convinced by now about the importance of a customer success strategy, the next step is to design one that fits your SaaS brand. Here is how:
Eight tips for building a customer success strategy
Let us break down the elements of a customer success plan that cuts down churn, optimizes resource allocation, and delights customers:
1. Define your Ideal Customer Profile (ICP) and customer fit
ICP refers to all the attributes of the ideal customer you would like to sell to. Involve all relevant departments when defining the ICP, and revisit it from time to time to see if new data has changed any aspect of it. In this context, clarifying customer fit is also essential.
Distinguishing between stretch-fit customers (to whom you can deliver some immediate value with a chance of providing more specific value in the future) and bad-fit customers (with whom there is an apparent mismatch in terms of needs and value expectations) is crucial to target customer success efforts to the right audience.
2. Segment your target customer base
Segmentation is a powerful tactic to divide your customers into groups with similar characteristics and expectations so that you can tailor your service offerings to each of them. Some of the criteria you can use to segment include demographics, company maturity, product fit, product use cases, potential value, and so on.
3. Give your customer goals a shape
This involves using a data-powered approach to define customer goals for each segment. Taking customer feedback and usage history into account is crucial here, as is considering purchase intent and your product’s functionality. Involve your customers as much as possible by encouraging them to state their own goals in their own words.
4. Create a customer journey roadmap
A customer journey is a clear roadmap designed to help your customer achieve their goals with your product. Involve your sales and customer support teams to define aspects of the journey such as the end goal, the key milestones along the way, resources needed, and critical personnel required at each step. Ensure all departments have equal clarity on this roadmap.
5. Put renewal and expansion plans in place
The customer success manager plays a crucial role in encouraging renewals as the go-to person customers approach to raise questions and solve grievances. In an ideal customer success plan, this manager should also be equipped to discuss renewals with the customer.
Taking ownership of renewals is what cements the position of customer success as a value-creating business function rather than a nice-to-have.
6. Think of a way to compensate your customer-facing teams
How you reward your customer success executives is a vital part of obtaining their wholehearted buy-in. Overall, a base salary plus a bonus linked to performance is the best incentive for each executive to keep doing their utmost.
How you split the pay structure between the two depends on various factors, including the industry climate also holds relevance. For instance, a low-churn industry might have a higher variable component to boost expansion numbers.
On the other hand, a more volatile business climate could have a heavier base component to make up for the unpredictability. In addition, clearly define the metrics based on which team members will earn their variable pay.
7. Bring organizational alignment around customer-centricity
Once you have defined your relevant customer success metrics, it is crucial to align your top leaders and the other departments with those metrics.
The best way to positively influence customer-centric behavior is by assigning a metric to each department based on function and outcome. Once everyone holds a stake, everyone will be invested in making it work.
8. Set Key Performance Indicators (KPIs)
There are many SaaS metrics you use, but a good customer success plan focuses on only a few of the most relevant. These include net revenue retention, customer lifetime value, customer health score, and customer satisfaction. Involve relevant departments in the setting of these, including top leadership, and be prepared to justify your choice for each of them.
What does a proper customer success organization look like?
What your customer success team looks like depends on the complexity of your organization, your maturity as a company, your market strategy, and other factors.
Overall, however, here is how we can divide the roles and skillsets needed for a customer success initiative into a basic structure:
- A Chief Customer Officer (CCO) to oversee the entire function and take ownership of revenue
- Customer success managers to directly work with the customer base to help them realize the value
- Customer success operations to set up repeatable processes with relevant metrics attached
- Customer support to take care of inbound customer queries and offer market guidance
- An implementation team to handle the customer onboarding process
- Training to develop supportive learning programs for the customer after they join
- Professional services to provide extra expertise when a customer has advanced needs
Get started with customer success
At the end of the day, there is no ‘perfect’ customer success manual or team structure that you need to wait for. The most uncomplicated advice to get started is to do just that — start.
You will learn what works for you through ideation, experimentation, and evaluation and invest more in those avenues. Put in the work, keep the big picture in mind, and make the most of new opportunities that open up along the way. All the best!