Customer Success Is a Growth Function
There are still a lot of misconceptions about what customer success is all about in the SaaS universe. So let’s first start with the most important ones that get it wrong:
- It’s not the rebranding of customer support with a more fancy name – customer support and customer success services are different.
- It’s not your anti-churn brigade, which is unfortunately its status in most SaaS companies because the seed for (most of) churn is laid before.
- It’s not a cost center where scalability and efficiency are the primary goals.
Customer success is exactly what the name says – customer success is dedicated to make customers (more) successful. This is the only reason why customers buy your product in the first place. They want to increase their revenue, save costs, improve their productivity or achieve an intangible goal like being free of pain.
Too often it’s forgotten, that this is the only reason why customers buy your product in the firstplace. Too often the talk goes about customer experience but not the one thing that is essential to it.
And customer success is a growth function. Even when customer retention would be entirely the responsibility of the customer success team it would still be only the minimum goal. Because what happens after you’ve secured it?
If customer success would have a single goal from the company’s point of view then it would be helping customers outgrow their current tier so they BUY more.
Yes, expansions are not sold, they are bought and they have to be earned. Customers buy more when they see growing success but their current tier puts a limit to it. Simple examples would be a tier limited to 1k contacts or 1k customer feedback pieces.
That also sets the scope of customer success. It’s not about making customers masters of your product. It’s about making customers masters on the job for which they need your product. At least, if you care about growth.
Expansions are a highly powerful growth lever. Because if a customer pays you twice as much there is a high probability that they will do so for the rest of their lifetime – or – buy even more again at some point.
Customer Acquisition And Churn
“Everybody needs our product” – this is the mindset high churn rates are born from. There is nothing mysterious about churn. If there are no reasons outside of your reach, like your customer going out of business, customers churn because they don’t get enough value out of the product.
And that happens because:
- Customers had the wrong expectations about the outcomes.
- Customers had the right expectations but had no sufficient success potential (e.g. they lacked of basic knowledge and skills)
- Customers did not see first value quickly enough (onboarding)
- Customers did not see value beyond the onboarding.
So what customer success is responsible for is churn from customers who had the right expectations and fit. But the majority of churn happens before, it’s homemade, it’s inevitable.
However, as customer success teams, unsurprisingly, are the ones with the closest customer relationships they become your most important customer data miners.
They discover who are the great- and the bad-fits and what they each have in common. Shared with marketing and sales churn can be decreased in a strategical and sustainable way. And when your acquisition forces spend less time with bad-fit customers they can spend more with great-fits.
The result are higher conversion rates, higher initial ACVs and a reduced CAC payback period.
The intelligence customer success’ teams are mining does not end with identifying great- and bad fit customers, it’s just the beginning.
Because with the classification you are now able to put everything customer-related into the right context. A common struggle for SaaS companies is the prioritization of building new features and the decision whether to build them at all.
And they don’t look at it from the right angle. The features you build and prioritize need to further increase the value for your ideal customers. It’s not about appeasing each and everyone. It’s not about making bad-fit customers stay.
Every feature request that comes from your customers needs to be connected to your customers’ profitability. Boldly speaking, who brings the money, makes the calls.
But of course, customers tend to want to have everything. That means, being a highly profitable customer, is not a guarantee for getting all your wishes granted. Ideally, customer success teams determine what features would further enhance their value with the customer together.
It’s important to not only understand what but why they want something. So customer success teams’ contribution to product growth is to discover the features that really add value. And if they add value, you can charge for it.
Last but not least the arguably most forgotten, yet very powerful growth lever comes to play. How much can you charge for your product? As much as your customers are willing to pay. How much are they willing to pay? It depends on the value they get. And as we’ve learned, this is up to you.
On the surface, every price increase would look the same. But there are actually 2 different reasons for:
- Adding new features (as discussed above)
- Raising prices according to growing customer success
Most SaaS companies put little effort into their pricing. The most common approach is to copy and adapt the competitors’ prices – either add or take a few percent. And worse, they never look back. Which means leaving a pile of money on the table.
Because if you only charge 1$ more it will affect every new acquisition, every renewal and every expansion. And in many cases, adding 1$ to the margin, will greatly affect profitability.
But a true customer-centric company does not obsess about competitors but customers. And that also includes customer-based pricing or how I’d like to put it – value-based prices.
Now, the challenge for setting prices based on customer-value is to discover how much value customers actually get. And as you’ve guessed already, it’s the customer success team who gets access to that information. More as this is not a one-time thing.
It’s (hopefully) the course of nature that customers get more value out of your product without any changes to it. Because they become better and your customer success efforts become better. And if that happens for the majority of your customers, it’s time to raise the bottomline pricing.
Customer success is the most powerful growth function for SaaS companies in 2021 and beyond. Its influence spawns across all 5 forces of growth – pricing, product, acquisition, expansion and retention.
Its primary growth goal is to help customers outgrow their current tiers so that buying more resources is the logical consequence. From the close relationships it builds with the customers
But none of that will happen if customer success teams don’t get the recognition and budgets they need to flourish.