Alison HolmlundAlison HolmlundFebruary 27, 2018
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5min536

In recent years, there’s been a significant shift in the software industry – applications moving from on-premise deployments to be managed and hosted in the cloud.

The implications of this move have caused significant reverberations in the way software organisations operate, and especially so in the customer service and support functions.

In today’s Software-as-a-Service (SaaS) world, software renewals are brokered every year or two; this is a huge departure from days-gone-by, when there was a large up-front software buy-in that essentially ‘locked’ organisations into a long-term relationship – no matter whether that relationship was good, bad, or indifferent.

Today, customers demand ongoing value from their SaaS software investments; and if they’re not seeing the value, they know the switching opportunity cost is low and there are plenty of companies that will vigorously compete for their business.

Churn is the single metric that determines the success or failure of a SaaS company – if you can’t keep your clients happy, you can’t keep your clients. As a result of this Customer Experience imperative, we’ve seen an entirely renewed, reinvigorated, and re-energized emphasis in this area with new best practices bubbling up – something organisations across all sectors can study and learn from.

Have a customer success manager for every customer – regardless of shape or size

Many companies don’t take this to heart, but it’s a vital practice. Assigning the Customer Success Manager before a customer comes on board, so they can understand the client’s requirements even before day one, can be a very powerful sales tool. The Customer Success Manager should then be engaged throughout the onboarding process – whether the software implementation is done via internal resources or through a third-party partner.

From there, the Customer Success Manager is responsible for a customer’s ongoing success and is the key customer advocate/champion, whose job is to continuously develop and nurture the relationship with that customer.

I often view the Customer Success Manager as akin to a conductor in an orchestra – ensuring all the right cross-functional resources are summoned and synchronised as needed to ensure proper execution against the vision set forth between vendor and client.

Invest in developing a thriving customer community

One of the best investments brands can make is to develop an online customer community forum where customers can organically connect with one another, 24/7, to learn tips, tricks, and best practices; new ways of leveraging functionality; and even gain insights and answers to solve similar problems. This has been shown to drive loyalty and lower churn.

Put in place a customer-centric technology framework

Many organisations evaluate customer satisfaction via surveys. These feedback mechanisms are very valuable for benchmarking and trending. What’s more, automation and dashboarding/analytics can help organisations scale customer service and support and provide critical insights to help identify key engagement opportunities to deliver the right support at just the right time.

With today’s technology platforms (and thanks to the integration benefits of the cloud) organisations have the ability to support one holistic view of the health of the customer and a full accounting of customer history, i.e: how many times they’ve renewed their software, how many users are licensed, how they are using the application, and even when customers are logging into the application – as well as corresponding survey responses.

If a customer hasn’t logged in for a while, a Customer Success Manager can be alerted to reach out to the customer to understand why.

Make sure your org chart reflects your company’s commitment to customer success

If the executive in charge of customer success has a C-level position, then you are effectively giving your customers a voice and a seat at the table. After all, customers are the lifeblood of any company – shouldn’t the voice of the customer resound throughout the boardroom?

Whether or not you work in the software industry, the increased digitisation of goods, services, and business models is leaving its mark: newfound customer flexibility and choice is giving organisations new impetus and a new urgency to hone their Customer Experience strategies.


Alison HolmlundAlison HolmlundJanuary 9, 2018
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6min597

As the Chief Customer Officer for a software-as-a-service (SaaS) company, much of my day is spent thinking about customer success and retention.

Like any subscription-based business, renewals are our lifeblood and the success of our customers is paramount to our success as a company. A focus on customer success should be embraced by every business, because if your customers are made successful by doing business with you, they’ll keep doing business with you. It’s a ‘win-win’ or ‘lose-lose’ proposition.

Managing customer success means constantly improving the Customer Experience, from first sale, onboarding, and implementation, to support, account management, and renewal. It’s a journey that requires you to evaluate customer needs, proactively engage with them regularly, and identify the most effective ways to meet their goals.

It might seem that, with so many moving parts, customer success management would be difficult to evaluate. But it can be done with the right collection of metrics. While there are many possible metrics that touch on customer success, I rely on a handful that tell me what I most need to know.

I recommend no more than a dozen metrics, or you risk missing the most important data. For deeper understanding of those metrics, I drill down into the details behind the data, as well as talk to customers to identify possible causes.

Top six customer success metrics:

Churn rate

This is the metric most subscription-based businesses use. Churn looks at what is leaking out of your recurring revenue bucket. There are different types of churn and churn metrics, but I concentrate on three: simple churn, gross churn, and logo churn.

• Simple churn is the net change in ARR (annual recurring revenue) from existing customers divided by starting period ARR, annualised. It calculates the change in the level of your bucket and I think this is the best metric for valuing the ARR annuity. Not only does it measure what is leaking out but it also accounts for expansion (up-sell and cross-sell) from existing customers.

• Gross churn looks at everything that leaked out of the bucket without being off-set by upsell or cross-sell. It shines a light on products or offerings that aren’t being renewed and forces you to answer the question, “why?”.

• Logo churn tells us the percent of customers who, given the chance, chose not to renew with us. Since it is independent of customer size or shape, leaks in the bucket are created equally and it’s therefore a good indicator of customer happiness.

Net promoter score (NPS)

NPS is an increasingly popular way to measure customer satisfaction and is based on the answer to the question: “On a scale of 0 to 10, how likely are you to recommend us to a friend or colleague?”

NPS is calculated by subtracting the percentage of customers who are Detractors (who respond with a 6 or less) from the percentage of customers who are Promoters (9 or 10). The nice thing about NPS is that the Passives (7 or 8) are not included in the calculation which in turn amplifies the message from your Promotors and Detractors.

Lifetime value (LTV)

This measures the value of your customer base. LTV is calculated by taking your average yearly profit (ARR minus operating costs) and multiplying it by the average number of years a customer stays with you.

LTV/CAC ratio

This measures the relationship between the lifetime value of a customer and the cost to acquire them as a customer (CAC). The higher the LTV/CAC the better because ideally a customer’s worth should be far greater that what you spent to acquire them.

Cost to renew

This simply looks at what it costs to renew a dollar of ARR. It is calculated by dividing the operating expenses of the Customer Success department by the ARR renewed in a given period. The key to scaling a Customer Success department is lowering your cost to renew over time while at the same time maintaining low churn and high NPS.

ARR/CSM

This measures the recurring revenue each Customer Success Manager has to protect and renew. Simply looking at the number of customers a CSM owns is not enough, it’s critical to look at the book of business they are managing.

Selecting a few key metrics isn’t easy and it’s natural to grow and evolve your metrics over time. The key is regularly to ask yourself “what is this data telling me?” and “what else do I need to know?”. While a good set of metrics can serve as indicators or smoke detectors, don’t stop there.

A key part of measuring customer success is taking the time to speak regularly with your customers and solicit their direct input. Qualitative elements like feedback through conversations also play a critical role in driving customer success and, ultimately, your success.




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