Loyal customers are the foundation of any SaaS business. That’s why it’s so important to keep your customers happy and ensure they are benefiting from your software.
SaaS companies are increasingly recognizing this fact, which is why customer success has become so highly valued. A focus on customer success is a key enabler for sustainable growth, and solves two of the biggest challenges facing any SaaS business.
First, it reduces churn.
As a SaaS company grows over time, even relatively small amounts of churn can pose a serious problem. This is because churn occurs in a percentage of your subscriber base, so the absolute number of churned customers increases as you grow. With a base of 100 customers, a 5% churn rate means just five lost customers, but on a base of 10,000, that equates to 500 customers leaving every month.
It’s extremely hard to replace those 500 customers through new acquisitions alone, so retention becomes paramount. Since customer success is the function mainly responsible for keeping your customers subscribed, the importance of that success scales alongside your overall growth.
Second, it attracts new customers.
According to EchoSign founder Jason Lemkin, SaaS companies get 80% of their new customers from their old customers. This “second order revenue” can occur in several ways. In some cases, it occurs through word of mouth. In others, the individual buyers or users of your product might change companies, and bring your product on board with their new company.
However it happens, second order revenue can be up to 5x as valuable as a first-time sale, and depends on a high degree of customer satisfaction. So while sales are important for initiating a new customer relationship, it’s customer success that is critical for maintaining and expanding the value of that relationship over the long term.
To get customer success right, it’s first important to understand what it is not.
Customer success is not the same thing as “customer support”. The latter is an essentially reactive business function, and your support reps are there to serve as a resource for customers if something goes wrong or if they have any specific questions. In contrast, your customer success team should be operating proactively, trying to “get ahead” of the customer and helping to maximize their results from your software.
Due to the proactive nature of customer success, there is really no universal, cookie-cutter approach to developing a great program. You will just have to listen closely to your customers and tailor a program to suit their exact needs.
Having said that, there are three key principles that will serve you well in designing your customer success program:
Customer success is not fundamentally about technical features, but about business outcomes. Your customers bought your software so they could achieve specific business results, so the success of your service is best measured directly against those goals.
For example, if you sell marketing automation software, it’s a good bet your customers are aiming to increase the number and quality of their online leads. So you would want to measure the number of additional leads your software is helping them to generate, as well as any improvements in conversion rate. That would give you a good idea of how much value your software is generating for the customer.
These quantified metrics would form a good baseline for your customer success efforts, and suggest areas for improvement. If a particular customer is spending a lot of time in the SEO module, without seeing much of an increase in organic traffic, a customer success rep might want to send them an email with some tips on SEO best practices, or even suggest an alternative traffic channel that might be more promising for their specific business.
In addition, these metrics could be reported to the customer on a monthly basis, as a direct reminder of the value that your software is providing to their business over time. If the value is there, these reports can act as a pre-emptive reminder of why the customer should continue to renew their subscription with you.
In the words of customer success expert Lincoln Murphy, “the seeds of churn are planted early”. What that means is that 80-90% of the time, customers cancel their contracts because of obstacles that occurred very early in the lifecycle. These early challenges derailed their progress to the point where they never really managed to get value from the software, which then led to an eventual cancellation.
It doesn’t have to be this way. Many of those early bumps in the road only happen because the SaaS company has not designed a solid onboarding process to ease the initial learning curve. By letting the customer fend for himself, you are essentially leaving his success to luck. In other words, you are telling the customer that you don’t really care about his experience, now that you have his money. That’s hardly a good strategy for long-term customer loyalty.
Because first impressions are so important in SaaS, onboarding is arguably the most critical element of your customer success program, and it’s worth investing the time to get it right.
The ideal onboarding program should:
• Clearly explain how to use your software
• Highlight useful features that are easily overlooked
• Describe how the customer can obtain help if he has questions or problems
• Have a customer success rep make direct contact with the customer to offer guidance if needed
• Introduce the customer to other useful learning resources such as your knowledge base, blog articles and training webinars
This might seem counter-intuitive. Many companies are focused on encouraging upgrades, or cross-selling other products to existing customers, but an exclusive focus on sales might not actually be the most productive way to maximize customer lifetime value.
If your customers know that they can trust you to have their interests at heart, and that you will only recommend products and services that are beneficial for them, they are a lot more likely to regard you as a valued advisor. So instead of focusing on sales, you should focus on providing value with every communication.
One of the best ways to do this is to provide educational resources above and beyond what is normally expected. These can include training webinars, how-to blog articles, instructional ebooks and cheat sheets, and even in-person customer meetups.
Hubspot has mastered the art of customer education. With their proprietary “Customer Happiness Index” (CHI), they have been able to retain 33% of previously unhappy customers by providing the exact types of value those customers care about. One especially important plank of the CHI program has been the company’s heavy emphasis on inbound marketing education. According to Hubspot’s own metrics, customers who implemented their inbound marketing guidelines “get double digit increases in leads every month”. By helping customers achieve success, Hubspot has developed a loyal following that continues to support their growth to this very day.
Customer success might not always show immediate, quantifiable ROI, and it can take some work to get it right. But if you’re willing to invest the effort, you’ll be rewarded with a sticky, resilient customer base that refers new business to you on an ongoing basis. By following the principles in this article, you’ll be able to develop a strong customer success program that keeps them coming back for years.
For more ways on how to make your SaaS stickier to its users, click here and check out our guide.