Characteristics of a customer-centric SaaS company
It’s almost a cliché for a SaaS business to put the customer “front and center” of their business. But most of them are actually self-centric. Customer-centricity is merely a buzzword for marketing purposes. Of course, it would not be smart to not say it when all your competitors do.
But you can’t escape karma. Saying to have the customer’s best interest at heart and not acting like will backfire rather sooner than later. However, there certainly are SaaS companies who are serious about it. All they may need is a mirror and a little guidance.
The positioning revolves around customer success
This is the customer era. Your customers don’t care who you are. What makes you different from your competitors. They want to know what you can do for them none else can. How you can make them more successful.
Many SaaS companies still think declaring themself as a leader in something-none-cares makes them more attractive. Customers also don’t care about whether you are an award winning company or not. The only market leadership that you should care about is customer success.
Your positioning needs to explain what customers get out of your offer, who it is for and the new approach you are using. If you don’t use a new approach, it’s just more of the same. Why would customers believe that you can deliver significantly more value than the pack?
Marketing and sales talk about value
There is little worse in SaaS than feature comparisons. For once – surprise, surprise – they always end up with the respective vendor being the clear winner. And second, more importantly – who could could potentially enjoy something that complex and cumbersome?
Customers don’t care about features and functions. They care about value. But of course, if your product is virturally the same as all its alternatives it will come down to comparing the functionality – and price. So many SaaS companies complain about customers discusssing the prices. Yes, customers do that because you leave them no alternative.
Talk about how your product will change your customers results, their workday and their state of emotions.
Customers buy renewals and upsells
A recurring question in SaaS is whether customer success- or account managers should be responsible for selling renewals and expansions. The right answer to the question is neither. Selling is what you do when the customer has not used your product yet. Once they do it your product needs to sell itself.
When do customers renew their contract or buy more resources from you? When they get enough value from your product respectively when they can’t scale their value any further because they’ve hit a ceiling. Renewals and expansions have to be earned and then they are bought.
If customers don’t get enough value no amount of sales effort will make them buy. The only role you play is the one of an advisor who makes recommendations about what they should buy next.
Collect feedback for improvement
An important memo unfortunately not everybody got yet is that customer feedback is a massive growth driver. They put so little effort into leveraging the gold mine. Instead they do what’s convenient for themselve. They rely on superficial surveys with low response rates.
Not taking the time to talk to your customers directly, in good old-fashioned conversations shows a lot about how much you value your customers, their opinions and experiences. What most people also seem to forget is that taking surveys actually means work for your customers.
A customer-centric SaaS company designs the feedback process after how their customers would like to give it. But the most important thing is that they actually act on customer feedback. Because before they gather feedback they define in advance what they need to know and how to make the insights actionable.
Invest into high quality customer services
Customer success and services still play the roles of the ugly ducklings in many SaaS companies. As a result they as cost centers that need to run at optimized costs. So they already initially get low budgets and are the first to cut when the leadership decides it’s time to cut costs.
But customer services are essential for any SaaS business. Because you are running on recurring revenue. If you fail to deliver the outcomes and experience customers expect they will be gone. It’s never been easier to switch to another vendor.
Of course, you want to scale 1:n things and optimize your costs. But it’s purpose is not to run everything on auto-pilot. It’s not to maximize the number of customers each CSM can “handle”. You do it to free resources for the important things – solving complex highly-valuable customer problems.
Restricting budgets and deliver a “minimum viable” customer experience is a save way to generate high customer churn. With customer acquisition costs growing further and further it becomes more harder to replace. It will cost you far more than you could ever save from optimizing the costs of customer service. Investing into customer services is investing into continous long-term growth.
Teams are aligned on delighting customers
It’s only logical that in a self-centric company all teams chase their own goals. But they are not to blame because they are not doing it by choice. A typical goal for e.g. marketers in misaligned SaaS companies is to create a high number of leads per month. The quality? Who cares?
Similarly sales has a quota to achieve and at least when they might miss it they will sign-up bad-fit customers as well. In a customer-centric company this won’t happen. Customers will only be acquired when they have sufficient success potential and come with the right expectations.
The typical team silos will cease to exist because everybody is part of something bigger. Friction among the various team will disappear and information to float freely. As a result, everybody gets a 360° view to understand the customer’s behaviour and actions. This is how you build operational excellence.
Focus on long-term quality growth metrics
Most SaaS companies care about their growth metrics. They are obsessing over MRR, ARR and YoY. But none of these metrics actually tells the whole story. If you’ve got enough cash on your hand you can achieve ridiculously high growth figures even when your churn is high.
A high churn rate means that you are not customer-centric. You either follow a “everybody needs our product” – mindset and acquire bad-fit customers or your customers success efforts fail. If you’ve got any in place at all.
Customer-centric SaaS companies focus on long-term quality metrics instead. One of my personal favorites is the net revenue retention. If you’ve never heard of it before it’s the revenue you generate YoY with your existing customer base. Put simply, your growth without any new acquisitions.
The best-in-class achieve more than 150% meaning that they’ve made 50% revenue from upselling within a single year. It’s quite impossible to ever get there with a lot of cancels and downgrades.
Another great quality metric is your LTV growth. And this is really simple – if your LTV grows it means customers stay longer, bought more or even better, they do both.