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When in Rome…

31 Dec

I was recently in a meeting in Europe and found myself talking to an experienced enterprise sales leader from another company about Customer Success. She asked me “How do you approach Customer Success in different countries and cultures where there’s a need for face to face interaction?  In the US you do so much by phone: Inside sales, Automated support, Customer Success Management, and here relationship building is still important. We need the face time.”

Which got me to thinking…

While I certainly don’t advocate running a high-touch, high-cost business model for customer success if the revenue model doesn’t support it, creating that personal relationship is incredibly powerful. As many US companies begin to expand their Customer Success efforts into other markets, it’s essential to recognize that each geography can provide some valuable lessons and examples for others. Organizations can learn quite a bit by exporting and importing best practices across regions. I’ve certainly learned by observing interaction models in different markets and applying best practices from one region to others. Taking this approach benefits both your company and your customers.

As you look at taking the “best of” from each of your regions, you’ll find that you can increase touch in some regions while increasing efficiency and scalability in others. As you dissect how and what to apply across geographies, it’s important to understand what makes each approach successful.

The Case for a Higher Touch Model:

Many of the effective Customer Success models outside the US are higher touch (more face to face) for a few reasons:

  1. The culture dictates it;
  2. In many countries it’s easier due to the higher concentration of businesses in fewer regional city centers
  3. It works. As much as we do over the phone and online in the US, in some cases it’s still important to build personal relationships through face to face interaction.

So when the opportunity arises, it’s important to engage with customers in as personal a way as you can. In many cases, an in-person meeting with a large customer is a great investment of time and money. It also proactively sends the message that the customer is worth your time and effort.

Other Ways to Connect:

As our conversation progressed, we also agreed that it isn’t possible to meet every customer face to face, and it certainly isn’t possible to meet any customer face to face 100% of the time. In every case, though, it’s important to connect with your customers in a way that is A) relevant and appropriate to them; and B) true to your company’s brand and mission. For example, companies who do content marketing extremely well don’t need to have face to face interaction with the vast majority of their customer base in order to connect with them.  Companies like MailChimp, HubSpot, and ZenDesk build incredible connections with their customers via mainly digital communications. Their messaging is so good and so authentic that as a customer you feel like you’re a connected insider.

Authenticity and Relevance Trump All:

Whether its face to face or through broader communication, you need to connect with your audience in a relevant way.  You have quite a bit of information about each of your customers. Make your communication with them relevant, whether you’re targeting digital content based on their behavior or you’re tailoring a detailed Quarterly Business Review based on their specific metrics.

Even in the case of broader-based digital marketing or one-to-many communication, it’s critical to both create targeted content for your specific audience and to deliver that content in an engaging, authentic, personal way. I’ve attended webinars with solid content, but disconnected, impersonal presenters. In almost all cases, the disconnectedness of the presenter unfortunately trumped the relevance of the content.

Engaging with someone face-to-face, especially one-on-one (or few-to-few) inherently creates a strong connection. In the cases where you’re engaging digitally with customers en masse, you need to do so with a compelling, consistent tone and voice. Many of us will communicate with the largest segments of our customer base primarily through a digital channel. We have to make that channel engaging, personal, and authentic. Send the message to the group, but communicate with the individual.

Do something different

As you think about face to face meetings, it’s worth noting that not all face to face interactions need to be at your customer’s site.  If your office is in a major metropolitan area, chances are your customers might find themselves in your neighborhood occasionally.  If so, host them for a corporate visit.  Do your quarterly business review with them in your offices. Introduce them to some of your executives who they wouldn’t otherwise meet if everyone needed to travel to the customer site. Share your vision with them. It’s easy for us to fall into routines with our customers, so by holding meetings in a different context or venue, you have the opportunity to create memorable experiences.

As you engage with your customers, how are your learnings and practices from one geography creating more personal, authentic, relevant, and memorable experiences worldwide?

A Practical View of Your Customers

7 Oct

A few months ago I wrote a post about customer segmentation titled All Customers Are Equal, But Some Are More Equal Than Others.  I graphically represented the concept of customer segments with a pyramid, because it was a simple and straightforward representation of the concept.  When it comes down to actually segmenting your own customer base, though, and making decisions about how to service them, I’ve found the best way to do that is to use a Pareto Chart.


Figure 1: Pareto Chart of 2000 Hypothetical B2B Customers

The Chart Described

If you aren’t familiar with the concept, a Pareto Chart is great way to visualize how your revenue is distributed across your customer base and how much your largest customers contribute to your overall revenue.

The chart above came from a hypothetical set of 2,000 customers I created from data that I made-up to represent a typical B2B customer distribution curve. The grey portion of the Pareto Chart is actually a bar graph made up of 2000 data points in descending order. Each (very thin) bar represents a customer’s Monthly Recurring Revenue (MRR) and maps to the axis on the left – in MRR dollars.

The blue line shows the cumulative percentage of revenue represented by the customer base as it moves along the X axis and maps to the axis on the right – in percentage of total revenue.

Creating Your First Segment

The Pareto chart quickly shows you a couple of things:

  1. How your customers are distributed
  2. How many customers fall into each bucket so that you can efficiently allocate resources to manage a large percentage of your revenue base.

The image below takes this hypothetical (but not uncommon) B2B case and creates a first segment of customers. This segment happens to consist of approximately 10% of the customer base (It’s 200 grey “bars” wide, representing 10% of the 2000 bars in the graph) and approximately 45% of the revenue (the right edge of the green area intersects the blue “% of revenue” line at about 45%). You’ll also see that the MRR value at the right edge of the green area is approximately $5,000 – which represents the minimum MRR for a “Tier 1” customer.  Again, these numbers are examples. The process for creating customer segments requires a little art to go with this science and is going to take some iterations to get right; however 10% of your customer base is a reasonable baseline number for a high-touch CSM organization.  You may choose to make it larger or smaller for a number of reasons (which I’ll cover in a future post), but this framework is a good way to illustrate it and justify whether you’re covering a reasonable amount of your revenue base.

Figure 2: The First Segment

Figure 2: The First Segment

The Second Segment

Now that you’ve created a high-revenue customer segment that can justify a high-touch CSM, you might want to see whether it makes sense to cover another relatively small number of customers that still might represent significant revenue with a somewhat lower touch, but still personal, approach.  Based on this customer distribution, you can see that a second segment can be created that consists of twice as many customers as the first segment, and in combination with the first segment gives you coverage for approximately 75% of monthly revenue.

Figure 3: The Second Segment

Figure 3: The Second Segment

Pareto Charts can illustrate pretty clearly how much revenue is represented by each segment of customer as well as show the baseline MRR that can be used to define the “floor” of each segment.  Figure 3 shows that in this hypothetical situation, 75% of the revenue is represented by approximately 30% of the customer base, with an MRR of $1,700 and above.

So Now What?

Now that you have a framework for segmenting your customers, you can optimize your investment in your CSM function.  In this example, the first segment of customers represents significant revenue that can justify high-touch named CSMs who can engage with customers in a personal, frequent, and customized manner. The second segment consists of roughly twice as many customers and a little over half the overall revenue of the first segment, so the amount of engagement per customer that can be justified for each CSM is significantly lower. The third segment represents approximately 3/4 of total customers yet only 1/4 of total revenue and can be effectively managed with Customer Success Automation and Marketing Automation. I’ll discuss how to address these three very different customer segments in more detail, and how Customer Success Automation applies across all three in a future post.

Renewals, Up-Sells, and Cross-Sells: CSMs, Sales, or Online?

18 Jun

One of the most common organizational questions/challenges facing SaaS companies is figuring out which group has responsibility for up-sells and cross-sells. Is it CSMs or Sales?  If Sales, is it the same sales team that does the hunting for new customers?  If it’s some combination, where do the lines get drawn?  Before getting into the framework for making this decision, though, I think it’s important to clarify the primary purpose of a CSM organization in a SaaS company: Ensuring customers are getting value from the SaaS offering.

Value: The Primary Role of the CSM

The framework I’m proposing makes the fundamental assumption that the primary objective of a CSM function should be to help a customer base achieve measurable value and results from a company’s product or service.  Without that value-based foundation, any renewal, up-sell, or cross-sell attempt is an uphill battle.  The objective of the CSM function should be first and foremost about creating and maintaining a value-based relationship across a set of customers, whether high-touch or low-touch.  That foundation then breeds loyal customers, advocates, and additional revenue.

So… if the CSM role is fundamentally about the value relationship, how involved in the up-sell, cross-sell, and renewal transactions should they be?

The reality is that every organization has different characteristics and there is no one “silver bullet” organizational structure for Sales vs CSM responsibilities.  One way to approach the question and determine what’s right for your company is to look at the key factors that determine how that responsibility is distributed across the following three potential groups or methods:

1) Web / Self Service

2) CSMs

3) Sales


Figure 1.

The Service Dimension: Complexity of the Customer Service Interaction

CSM involvement (and value) in the sales process will be greatly influenced by the amount of assistance/interaction your solution requires in order for your customer base to really get value.  Is it completely self-service, self-installing, requiring zero human interaction or does it require significant assistance, mentoring, education and coaching by someone on your CSM team?  While there is no absolute way of measuring degrees of complexity, you may want to ask yourself a few questions like: “Can my customers (or some segment of my customers) achieve value without the interaction of a CSM?”; or “Is my company’s product meant to be completely self-service without the need for any human interaction, or is there a heavy Services and consultative component required for my customer base to obtain real value from my product?”  This line of questioning will give you an idea of how much value a CSM would provide in the upsell, cross-sell, or renewal opportunities.  If a high-touch CSM relationship is necessary to help customers get value from your product, a similar interaction model is likely necessary in order to position the value of additional services or offerings.

The Sales Dimension: Complexity of the Transaction

Some solutions have a low-friction commercial aspect to them.  Think online transactions.  Low-volume, online purchases from a published price list clearly fall into that category.  A small business user signing up for MailChimp, or an individual or workgroup signing up for DocuSign can be completely accomplished via web-based transactions with little (or no) human interaction required.  Enterprise, high-volume, or non-standard pricing scenarios, however, will require interaction and likely negotiation with a sales rep.

While each of these dimensions is straightforward in and of itself, looking at your offerings across both dimensions can give you better insight into how to structure your organizations.  Also note that this framework isn’t intended to apply to your entire company and/or product line.  It can be applied to individual customer segments, markets, product lines or service categories.

The scenarios also tend to get more interesting when you look at high complexity service offerings which also have high complexity transactions.  An example of this would be a high volume / enterprise agreement with a customer for a highly consultative solution offering or managed services provided in addition to the SaaS platform.  Any modification to this kind of agreement will require custom pricing, negotiation, and a consultative sale involving an expert in the deal.  In this scenario, Sales and CSMs might team together in a manner similar to Sales and SEs would for new business opportunities.  This scenario is represented in the upper right hand corner of the charts.

The Third Dimension: Revenue

There is an obvious third dimension here, and that’s the ACV (or CLV) of a customer.  In those cases, the quadrants would shift closer to the axes for high ACV/CLV customers as they would warrant a higher touch, while the quadrants would shift away from the axes for low ACV/CLV customers as they would warrant a lower touch (see figures 2 and 3 below, respectively).

Figure 2

Figure 2

Figure 3

Figure 3

So… while there is no single answer for assigning responsibility across the organization.  This framework provides a way to help distribute responsibilities based on some key factors.

Which factors have you used in determining how to structure your organization’s up-sell and cross-sell responsibilities… and how have you addressed compensation and incentives in each model?

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