Tag Archives: Customer Success

The Pyramid of Customer Success

29 Apr
Customer Success is about proactively managing a customer relationship towards demonstrable value… and creating a great experience in the process. As anyone who has ever had the responsibility for doing this can attest, it takes more than just a CSM team to be successful. You’ve heard people talk about “a culture of customer success” or “a customer-centric company”, and while much of what it takes to win and be successful is empathy for and an understanding of the perspective of the customer, those can be pretty empty words without a way for the whole organization to put the philosophy into action.


In order for a company to help its customers achieve success, every part of the organization needs to engage… and deliver, but how do you do it in a way that scales?


As in many subjects related to Customer Success there is no one answer that fits every situation. The subscription economy is continually expanding and evolving, and what it takes to make an enterprise B2B customer successful can be very different than what it takes to make a large number of B2C customers successful. The model in this article can be applied to a number of different products and industries and is offered as a framework to ensure that different functions in your company are thinking about the success of your customers from every aspect of their experience.


As a software solution provider, you are no longer expected to just deliver a product. Your customers expect you to help make them better at what they do as a result of doing business with you, but it isn’t reasonable to think that hiring a bunch of CSMs is going to be either a scalable or an effective way of making that happen. In fact, if you’re expecting the success of a company and the satisfaction of your customers to be completely on the shoulders of your CSM team, then you’re setting yourself (and your CSM team) up for failure.


So how do you implement a culture of customer success across your organization?


A CSM can play many roles in the customer relationship. At any point in time, a CSM can be a number of things in a customer relationship:
  • A rudder – to steer the customer relationship in the right direction;
  • A thermometer – to truly understand the customer’s temperature,
  • A subject matter expert – who can provide guidance to a customer,
  • A relationship broker – who can connect the customer with the right resources inside the company in order help them be successful. These can be resources from product marketing, professional services, support, finance, or any other department
But actually delivering the value and making the customer successful takes much more than a CSM.


In fact, in many companies, the customer success organization doesn’t have a deep relationship with every customer, and in all companies, it isn’t the most scalable way to impact the customer experience (you do have a product, after all).


A pyramid provides a very effective model for how different aspects of what you do can influence the success of your customers, On the bottom of the pyramid, as a true foundation, are the components that scale the best, primarily because they are upstream in the user experience and reach the broadest audience. As you move up the pyramid are components that don’t scale as well; however they provide immense value to the subset of customers who need (and use) them.


I wouldn’t argue that any of these is more important than another, and each type of product (consumer, SMB, enterprise) will have a different Customer Success pyramid, or will have different dependencies on different layers of the pyramid. In some companies and for some products, the specific levels of the pyramid may differ, and in consumer products, some levels may not even exist. The diagram I show here is designed for delivering Customer Success to B2B customers. A consumer-only product will likely not have a Professional Services component to it; however as even some “consumer” products are moving into the B2B space, they’ll need to add less scalable, and more specialized offerings in order to make their higher value customers successful.


Here’s a breakdown of the Customer Success Pyramid layer-by-layer:


1. Product
Customer Success starts with your product: It fundamentally has to work well; it must do what it is supposed to do; and it must do it in a way that ensures adoption of the features that truly differentiate you and will make your customers sticky. As your organization learns from customers, you need to ensure that you’re getting that feedback into your product. Every layer above this in the pyramid will only deliver incremental value to what your product offers, and if there are fundamental deficiencies or usability issues with your product, then you are eroding the potential incremental value that those layers can deliver. I can’t stress the importance of this enough as I’ve seen and lived it in the real world. If your product has fundamental shortcomings, the time and effort of everyone else in your organization is spent on “propping up” your core technology. You won’t have the time and credibility to deliver incremental value.  To some extent, no product is perfect, and the layers above will always help plug some gaps, but to the extent your product is intuitive and accessible, you can use the other layers to really provide a differentiated, service-oriented experience. It’s also important that you use every layer above Product in the pyramid to gather actionable information that will help you improve your product and the experience it delivers to your customers.


2. Documentation
Similar to the product, your documentation has the potential to touch every user… well, every user who can access it quickly and easily. Given the broad potential reach of documentation, it’s vital that your documentation is accessible, contextual, and modularized, with specific relevance to the part of the application or function that the user needs to learn more about. If your documentation isn’t easily accessible by your users *at the time and in the context in which they need it*, then many of them aren’t going to read it.


3. Training
Training material can take a number of forms, from multi-day customized on-site courses to short, focused, easy to digest, “how to” examples. Best in class companies have a range or training materials available and have implemented comprehensive LMS systems to gather feedback to understand which courses are providing the most value to customers. Course content should continuously be updated based on feedback gathered at higher layers of the pyramid. For example, if a significant number of cases are being opened related to system configuration, then your training team should be delivering additional modules around configuring the system. By creating those courses, you’ll not only be lowering the number of support cases that your support team has to deal with, you’ll also be creating a better customer experience by not having your customers face the issues at all. Your customers are telling you (via support) that parts of your application aren’t intuitive. The short term answer is to develop better training, the longer term answer is to make the product  more intuitive.


As your training curriculum evolves, it should be about more than just your product features, it should also include best practices for using your product and should complement your content marketing. For example, if you provide a CRM solution, your training shouldn’t just cover how to create an opportunity on your platform, it should provide guidance on what information is relevant in an opportunity as well as how best in class companies manage opportunities and how they use that information to better understand their forecasts and predict their business. If developed properly, training material will also highlight strengths and differentiators of your product without coming off as additional sales collateral.


4. Online resources
This layer can really help your organization scale and should be monitored and updated constantly: both proactively based on what you want your customers to know; as well as reactively, based on what your customers are asking you and what they are consuming. Online resources can be updated many times per day by many people. These updates can be as involved as developing best practices derived from a large number of customer engagements, then formally publishing them; or as effortless as having a customer or partner respond to an open forum question. The analytics around online resources can provide incredibly valuable insights around what your customers are reading, talking, and thinking about.
Some online resources don’t even need to be owned or managed by your company. Participate in forums that your company doesn’t manage, but are relevant to your space. If you have a partner ecosystem, both you and your partners should be providing online content for each others’ sites.  Many companies that provide solutions directly to consumers enable the vast majority of their customer success through these four layers alone, with the majority of content/investment/usage happening in layers 1 and 4 (product and online resources). By far, you get the most reach and scale from these first four layers as they’re all based on delivering  functionality and content to your audience in a “one to many” model. Working with your Marketing, Customer Support, and Professional Services teams you can target and develop content that will be relevant for and specific to a number of different customer segments.


5. Support
While the first four layers of the pyramid may be sufficient for some consumer products, enterprise products require enterprise support. World class enterprise support requires both rich and relevant online content (layer 4), as well as a strong team that can help customers dig in to complex issues. Your team members in support need to have deep product and technical skills in order to provide your customers with resolution to their issues as well as “soft” skills to manage your customers through challenging situations. For a great resource on how to deliver a great customer experience via your Support team, I’d highly recommend Flavio Martin’s blog.


6. Subject Matter Experts
Generally CSMs fit one (or in some cases both) of two profiles: 1) a subject matter expert; and 2) a relationship manager. Assuming the relationship manager role transcends all levels of the pyramid, subject matter expertise delivered by people who know your product, the industry, and your customers can help ensure your customers are getting off on the right foot and that they’re not getting “stuck” along the way in their implementations. A common question I get is “how is this role different than what a company should offer in professional services?” The main difference is that this subject matter expertise is delivered in very small doses, sometimes reactively, and in many cases at no additional cost to the customer. An efficient Professional Services organization would have a hard time delivering this expertise without a negative impact on profit margins. Subject Matter Experts can also help position the value of a deeper, longer term Professional Services engagement as a result of their interaction with the customer.


7. Professional Services
Professional Services are a great opportunity to drive success with higher value customers. Those services can be delivered by both your internal PS team and an ecosystem of partners. Generally, I’ve found the best services to perform with your internal team (vs partners) are the ones that meet three criteria:
  1. Services that your team can deliver successfully (this sounds obvious; however unless you’re really clear that the purpose of your PS organization is to drive subscription revenue in a way that is fiscally responsible, you can get caught up in trying too hard to indiscriminately drive Services revenue. As a result performing services that your company isn’t ready to do well);
  2. Services that are instrumental to your customers’ success; and
  3. Services which you can deliver while making sustainable profit margins and where you aren’t competing against low cost, “commodity” resources for a lower price.
While a professional services team needs to operate in a manner that contributes positively to the company’s margins, it’s fundamental purpose, if it’s part of a subscription software company, should be to drive the success, retention, and growth of your subscription customers. We measure our PS team’s performance not only on basic PS metrics, but also on delivery success, time to value, customer advocacy, and, yes, our renewal rates, because our PS team has significant impact on the success of our customers.


A common theme:
It may take a slightly different set of activities and roles to deliver success to your customers than the ones I’ve outlined; however a couple of fundamentals will hold true:
A) Your product is, without a doubt, the most scalable way to deliver a positive experience to your customer, so if you can take input from all of the other activities to ultimately improve the product experience, you will maximize impact and reach;
B) Product alone, CSMs alone, in fact, none of these layers by themselves can make customers, especially enterprise customers, successful. A culture of Customer Success needs to think about customer experience in the context of all of these layers.  As you focus on your customers’ experience, try to think about it in the context of this pyramid. Socialize it with the rest of your leadership team. Share it with the rest of your company. Especially as your colleagues ask “what can I do to help improve the customer experience?”

The Customer Engagement Model

27 Jan

Proactive customer engagement. It’s a tenet of Customer Success. We all do it to some extent – some of us better than others. The question is “How do you best go about structuring that proactive engagement so that you can scale a team and provide a consistently great customer experience?” The answer is “With a good Customer Engagement Model.”

A good Customer Engagement Model needs to be flexible in two key ways:

  • It needs to accommodate different phases of the customer lifecycle; and
  • It needs to support both scheduled and unscheduled interactions with customers

In a prior article on Time to Value, I pointed out that it’s critical to keep momentum going once the initial sales deal is closed and ensure that you aren’t diverging from your customer’s original path to reaching their objectives. Your Customer Engagement Model should, therefore, start at the time of sale in order to maintain momentum and achieve a first “quick win”.

Good Customer Engagement Models should also help keep you focused on answering the three key questions you need to know about every customer:

  1. How is our customer measuring value?
  2. Are they achieving that value?
  3. Are we providing an experience that will result in loyalty and advocacy?

Irrespective of whether your company provides high personal touch Customer Success or whether your Customer Success model is more self-service, your proactive engagement with customers should be governed by an Engagement Model. A good Engagement Model helps you understand: A) what the engagement “moments” are for customers throughout their lifecycle; B) who in your organization is responsible for interaction with customers at those moments; and C) what the objective or expected outcome is for each of those moments.

I’ve illustrated what that model looks like conceptually in the image below:


The Phases:

The first key point of an engagement model is that it needs to work across two very different phases of the customer lifecycle, the Onboarding Phase and the Ongoing Usage Phase.  The first phase, onboarding, is the much higher intensity, much more critical, and much more interactive of the two. I think of these two phases very much like the takeoff phase and the cruise phase of airplane flight. In the takeoff phase you’re in close proximity to the ground, there’s quite a bit at stake, it’s the phase where more incidents happen, and it generally requires a high degree of pilot focus. During the cruise phase of flight, it’s important that pilots monitor their instruments, ensure they’re on course, and pay attention to external factors. They can’t ignore that they’re flying an airplane during the cruise phase; however the workload, intensity, and immediate consequences are lower than during the take off phase. Pilot’s don’t need to give the airplane nearly as much of their attention during cruise as they do when they’re screaming down the runway, getting it airborne, dealing with heavy air traffic, and monitoring for even the slightest anomaly – which could have dire consequences if left unchecked. During cruise, a pilot can leave the cockpit to use the restroom. During takeoff, on the other hand… not so much.

The Onboarding Phase:

The Onboarding Phase serves two purposes:

  1. It ensures that your customers are getting off on the right foot and are set up for success with your solution; and
  2. It creates a logical opportunity for both you and your customer to think about, articulate, and agree on how you’re going to measure value in the ongoing phase.

In a “high-touch” customer engagement scenario, much of the onboarding phase may be done by a CSM or someone from the customer onboarding or training team. The customer needs to become familiar with your solution during this phase, and you need to ensure that they’re able to be self-sufficient when using it.

A “low-touch” customer engagement scenario will have the same objective, but will achieve it more with automated marketing/email campaigns, automated measurement and exception handling of early adoption indicators, and automated training for the customer.

In both the high and low touch models, it’s critical to measure early indicators of user adoption and determine what course corrections need to be applied. The method for measuring the indicators and for communicating to customers needs to be much more automated in the case of a low touch engagement model.

In addition to ensuring adoption and self-sufficiency, the onboarding phase in a high touch B2B/Enterprise Solution world provides an opportunity for you to validate key assumptions with your customer on how they are going to measure value and how they’re going to quantify the success of their implementation of your solution. If your sales process is value based, you have probably already begun identifying use cases, measurements, and customer ROI expectations. You may very well have also quantified the expected ROI from adoption of your solution. The bad news is that too many companies don’t do any further measurement once the deal is closed.  A good onboarding process not only ensures that a customer is adopting your product but positions you as a partner to help ensure they’re making progress against their stated objective.

Example Engagement Moments during the Onboarding Phase (some of which are included in the sample model above) include:

  • A kickoff meeting to ensure that the customer meets your team (either virtually or face to face, as appropriate)
  • Confirmation that the customer has dowloaded / activated / or logged in
  • Initial Product Training
  • A formal review of the first set of metrics delivered by your solution. These should provide an indication of the customers adoption, usage, and effectiveness (how well they are doing x, not just that they are doing x).
  • A checkpoint with the customer to ensure that they understand how the product works and that they feel self-sufficient

In the spirit of Time to Value, it’s vital during the onboarding phase that the process moves as quickly and efficiently as possible and that customer momentum is maintained in the process. I’d strongly recommend two things to manage momentum:

  1. Once you have defined your Engagement Moments, measure the time that it takes each customer to progress from one to the other. Analyze your metrics and determine whether there are any systemic delays in any of your phases of onboarding and work quickly to get to root cause.  I’ve had teams shave weeks off of implementation/onboarding by measuring individual phases, identifying root cause for the delays, and then fixing the process.
  2. Set escalation triggers if you don’t see adoption events occurring with your customers according to expected timeframes during the onboarding phase.  If your customers haven’t created x accounts in y weeks for example, that should trigger proactive engagement on your part – in addition to the predefined moments in your plan.

The Ongoing Phase

The focus of the Ongoing phase is to ensure that your customer is achieving the objectives identified in the Onboarding phase and that you’re keeping a pulse on their experience.

Engagement Moments in this phase can be categorized into one of two types: 1) Time-based; or 2) Event-based.

Time-based Moments

Time-based moments are ones that you can put on a calendar, such as a Quarterly Business Review, Monthly Metrics Review, Annual Account Review, or even Weekly Meetings for your highest of high-touch customers. Time-based moments are great ways to keep your customers interacting with you for the duration of the lifecycle – as long as you clearly set expectations and provide valuable feedback to them during those engagement points. If you aren’t continuously providing value to your customers during these moments, they’ll lose interest and stop attending regular calls/meetings, so be careful not to over-schedule them, and be sure to provide relevant engaging content in each of these engagements.  Dan Steinman from Gainsight recently wrote an informative blog post characterizing a good Quarterly/Executive business review.

Event-based moments are ones that are triggered by the occurrence of an event (or non-event in some cases), such as a customer logging a high-severity case with your Support Desk; a new product release from your company; a change in leadership or executive sponsorship at your customer; a poor or mediocre survey response; an absence of support cases over a defined period of time; a decrease in overall usage; or a decrease in key usage metrics from a given customer. The purpose of event-based triggers is to help you react quickly and appropriately to events that can influence the health of the customer relationship –  for better or for worse. In either case, the sooner your team reacts to the event that triggered the engagement, the better off you’ll be.

Customer Engagement Models are unique to companies, products, and customer types. An Engagement Model for an enterprise customer with a highly complex solution will look very different than one for a consumer with an off-the-shelf SaaS offering and both will engage different parts of the organization. Logically breaking down that model into two key phases (Onboarding and Ongoing) and defining the Ongoing phase in a way that supports both Time and Event-based moments of engagement with customers should help you optimize for your products and customer types. You will likely end up with more than one engagement model for different customer segments.

Have you employed a Customer Engagement Model and what methods or tools have you used to ensure that the model is consistently applied across your customer base?

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?

B2B Customer Segments: Where Do You Draw the Line?

17 Oct

Whether you’re facing explosive growth or trying to manage your Cost of Services as you build out your customer facing organization, you know that you are going to be faced with real-world resource constraints as you fund and build a Customer Success function.  And after all, you’re a responsible leader and this is 2013, so you know better than to just throw people at a problem.  So how do you efficiently manage growth in a Customer Success organization while effectively empowering your customers?

In my last post, A Practical View of Your Customers, I introduced an approach for understanding and mapping your customers by revenue using a Pareto chart. While I focused that article on how to look at your customer segments based on revenue, I’d like to focus this article on where to draw the line for each segment and why. If you haven’t read the previous post yet, I’d suggest doing so now. If you’re familiar with Pareto principles, my prior post certainly isn’t rocket science. You may still want to read it, though, as I’ll be re-using a chart I introduced there to illustrate my points.

Customer Segmentation and Engagement Models

Customer Segmentation and Engagement Models

The First, High-Touch Segment

Unless your company is a rare blue unicorn and you have a completely homogeneous customer base, you’re going to have some distribution of current and potential revenue across that customer base. Creating a Pareto Chart will show you which of your customers make up the largest revenue contribution. While my hypothetical (but not uncommon) example in my previous post showed a top tier segment where 10% of the customers accounted for 45% of the revenue, your results may differ – possibly significantly. It is almost certain, however, that a minority of your customers will account for a majority of your revenue and very likely that a small tier will account for a significant percentage (greater than 30%).  If this is the case, you have a great opportunity to create a premium service offering via Customer Success that will focus on retaining and growing those customers.

This tier of customers is incredibly valuable.  You can afford to (and need to) provide them with some attention, and ensure that you have great two-way communication in place in order to both guide them as well as learn from them. If you’re in the early stages of building your Customer Success team, I’d suggest this first cut at determining how to build out this team:

  • Think about the key activities that are required to ensure your top tier customers are getting value from your product
  • Understand how much of a person’s time it will take to provide those activities
  • Multiply that time by the number of customers you have in your top tier, and then staff accordingly, understanding that your CSMs will likely be able to spend less than 100% of their time on the activities  you just defined

Note that this is a bit of an iterative process, and you’ll be doing a few “reality checks” as you understand how much time is needed for your customers – and as a consequence, how many people will be needed to deliver the experience you want your customers to have.  There truly is a combination of art and science to this process, and if you can’t afford to hire enough resources to adequately service the group you’ve identified as your top tier, then you have three options:

  1. You can redefine and reduce the size of that tier then only expand it once you can adequately staff to support a larger number of top-tier customers;
  2. You can redefine (reduce) the level of service you provide to your top-tier customers; or
  3. You can introduce automation (customer success automation, marketing automation) to assist the CSM in managing the customer relationship

How much service and effort you provide to each customer is going to be specific to your offering.  Once you’ve done your calculations, you’ll likely want to perform a reality check based on the Book of Business each CSM is projected to be responsible for. I’ve seen organizations where each CSM has a Book of Business of as little as $1M of annual recurring revenue and others where that number is closer to $10M… or more. Metrics and “standards” are still all over the map on this topic and are really dependent upon your industry and the level of service you need to provide to your customers.  Early stage, highly-technical solutions will require more CSM effort than later stage “commodity” solutions. Whatever stage or solution you’re at, though, be sure that you’re creating a role that is going to be sufficiently engaged to help your customers achieve value.

A Second, Hybrid Segment (Optional, but likely)

Depending on your customer distribution, you may want to define a second segment of customers who still represent significant revenue, but are probably closer to a 1:1 ratio of percentage of customers to percentage of revenue. In the hypothetical example I provide, the second customer segment represents 20% of the customers and 30% of the revenue. Again, your mileage may vary; however if you have a second tier of customers that makes up a sizeable percentage of your revenue, then you can (and probably should) identify a less intensive, but still personal, level of relationship with them (perhaps less frequent interaction than tier one and perhaps assisted even further by marketing automation). By doing this, you now have created personal relationships with two segments of customers that likely cover a majority of your revenue, but only a relatively small minority of your customers.  My example in the last post shows 30% of customers representing 75% of revenue. While my example data is hypothetical,  I’ve seen a number of companies within +/- 10% of these ratios, especially in the B2B space.

So how many CSMs should you assign to this space?

A good reality check for the number of CSMs to assign to this group is to use your Book of Business per CSM as the great equalizer. You may have CSMs in group 1 covering 10-15 customers and $3M in ARR. In Group 2, with smaller customers , a CSM might need to manage 50-75 customers to cover $3M in ARR.  Automation will play a key role here to help identify customers in need, customers at risk, and to trigger targeted communications to customers at the right time.

The Third, Highly Automated Segment

While you’ve likely covered a majority of your revenue base in the first two segments, you still have a long tail (actually a very long tail in cases like freemium) of customers who are using your services but – at least for the time being – provide you with very little revenue. This customer segment is certainly important, both from a numbers, lead generation, and future revenue perspective; however you can’t afford to provide them with the same level of service you provide to customers who are paying orders of magnitude more than they are per month, so what does automation for this segment look like?

Whether this long tail represents 300 or 300,000 customers, you’re going to benefit greatly  from an automation solution (or solutions) that help you:

  • Identify customer usage patterns
  • Identify at-risk customers
  • Send appropriate communications to those customers based on behavior, triggers, or their lifecycle
  • Keep your entire customer base engaged by helping you connect with them in a relevant way

While the long tail doesn’t represent a majority of your revenue, both this segment and your second segment are going to contain customers who represent incredible upsell opportunities – if you do some analysis that will help identify them. If you spend the extra effort up front, you can also leverage marketing automation to target relevant messages to those customers based on their behavior, activity, and other usage metrics.

If your strategy is to land and expand, you’ll need to look everywhere for the expansion opportunities, not just in the top tier. And if you’re using analytics, segmentation and automation appropriately, you can drive meaningful action with the right customers, whether they’re in your “top” tier or in your long tail.

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.

The Importance of a Framework for Customer Success

19 Jul

In my last post, I introduced the concept of an Effectiveness Model as a framework for engagement with your customers.  I introduced it in the context of four other steps to delivering value, but since it’s so fundamental to value delivery, I’d like to drill down on what it is and why it’s so important:


The Concept

The Concept is straightforward. As a provider of a solution, you should be doing more than just throwing software over the transom to your users.  In fact, as a SaaS provider, you need to be proving value to them on an ongoing basis. That’s today’s reality. If you don’t, you risk losing your customers to  competitors who will.  Harsh, but true. Providing a framework for mapping your customers’ progress, comparing their behavior (and results) to “best in class” companies, and showing a path of progress to best practices will help your customers remain engaged with you.  The idea isn’t new.  The “Maturity Model” concept has been around for years in a heavier weight format, and while more complex models and engagement levels apply in B2B, B2C solutions can also benefit from defined models that encourage additional types of usage and provide your customers with a roadmap to become more effective at using your product.

In the image above, each box represents a stage in an example Effectiveness Model for CRM.  The bullet points next to the boxes each represent behaviors representative of each phase.  The process of creating a maturity model for your industry and solution isn’t complicated, but it isn’t just something you can churn out quickly without some careful thought.

Identify 3-5 phases that are indicative of customers’ implementation of your technology.  You may want to start with the bookends.  For your first phase, identify the basics that someone absolutely needs to implement in order to get value from your application.  For your last phase, identify what the absolute, best-in-breed, thought leaders who have, or will implement, your type of technology are doing.  Then map out 1-3 interim phases that are indicative of how companies would progress through the phases.  The CRM Effectiveness Model I put together above is an example of what that might look like.

The concept is simple.  Getting it right, however, will take iterations, critical review, and more iterations.

The Name (Effectiveness vs Maturity)

While “The Industry” has traditionally referred to models like this as Maturity Models, I’ve stopped using that term in customer interactions and internally. I was once in a meeting with a large, strategic enterprise customer and presented the concept of a “Maturity Model” that my team and I had created. I thought nothing of it for a split-second, as these types of things had been called Maturity Models for years. My team and I had spent a good amount of time developing and iterating on a model specific to my company’s industry and showed them characteristics of “mature” vs “less mature” companies. As I listened to the words come out of my mouth, however, and observed my customer’s body language, I realized that the term “maturity” sounded arrogant and condescending. From that point on, I’ve referred to these as Effectiveness Models given that we’re simply trying to make our customers more effective. It’s ok for me to use the term “maturity” when talking to my kids about assuming more responsibility as they get older. It isn’t ok for me to imply to my customers that they are immature because they aren’t using automation and deep analytics. Trusted advisor trumps arrogant vendor. Every time.

Giving Context to Your Customer Communications

Your customers are busy. They’re struggling with priorities just as you are. Whether you know/like it or not, you’re competing for their attention every time you reach out to contact them. I think any customer facing team needs to be aware of two golden rules: 1) Make sure the customer goes in to the call looking forward to getting value from their interaction with you; and 2) Make sure you’ve delivered that value by the end of the interaction so that they are looking forward to their next meeting with you. An Effectiveness Model sets you up for success. Your conversations with your customers are framed around objectives that you’ve set out with them. Your standing meetings and conversations with them can then be framed around what they’re doing (and how you can help them) to make progress.

The Value of Demonstrating Progress

There’s always a need to justify ROI, and to the extent you can do it with hard data, by all means, continue to do so in a way that is meaningful to your customers: Point out how many transactions they’ve performed in your system; if there’s a way of quantifying end objectives, like e-commerce transactions that have resulted from use of your application, then be sure to communicate those. In addition to those concrete numbers, or in cases where the concrete numbers are difficult to capture, it’s important to show your customers progress towards stated objectives. The Effectiveness Model provides a picture and path with clearly defined behaviors and objectives to map that progress. You can use this as a way to both map progress over time as well as identify activities and strategies to achieve the next phase of Effectiveness. Demonstrable progress, together, is a great foundation for a loyalty-based relationship.

An Opportunity to Position Key Features of Your Solution

As you create your industry/company’s specific Effectiveness Model, you have an opportunity to define how key features in your product can help your customers advance along the model. Be extremely careful, however, to avoid being overly self-promotional here or to “force-fit” your features into the model. An Effectiveness Model is just a tool to help advance a trust-based relationship with your customer. The model needs to be genuine and in your customers’ best interests. The reality is that if you have a great product and if you understand your customers, you can make some wonderful, insightful recommendations for them that will provide them with significant benefits, increase their use of your product, and make them more loyal in the process.

If you’ve been using an Effectiveness Model with your customers, I’d be interested in hearing about your learnings and feedback from them. If not, what have been your obstacles to developing one?  Send me a dm on Twitter: @nfranco.  Thanks!

Demonstrating Value and Progress to Your Customers

9 Jul

Creating demonstrable value is the single most important objective of a Customer Success organization.  Renewals, upsells, references all happen when you have a relationship based on value with your customers.  While achieving that objective requires input and contributions from Marketing, Sales, Professional Services, and other parts of the company, the Customer Success function owns the primary responsibility.  Some companies do an incredible job at delivering and proving value to their customer base; however many companies (some would argue most) are working to put a model and plan together to demonstrate value for their customers.

The steps I propose for getting there are, at a high-level, very straightforward:

  1. Identify a Framework and Representative Behaviors for Each Phase
  2. Identify Meaningful Quantitative Metrics
  3. Perform a Benchmark
  4. Create an Improvement Plan
  5. Measure Against Plan, Provide Feedback, and Revise

Getting them right, however, is by no means easy. Each one of them takes thought, analysis of data, and iteration.  The metrics and behaviors you need to identify are going to be unique to your space – and if identified well, will actually be unique to your company, so that you can measure value based on true differentiators that you offer.

So I offer these 5 steps not to make the process look easier than it is, but rather to provide some guidance as you take on your most important task as a company: continuing to earn your customers’ business.

Step 1: Identify a Multi-Phase Framework and Representative Behaviors for Each Phase

Every exercise needs an objective, and ideally a roadmap to get there.  A framework provides your customers with a “bigger picture” view of the landscape and what they should be thinking about in order to be more effective at what they’re doing.  Frameworks also give customers some perspective on where they fall with respect to industry leaders and laggards.

Figure 1: Example of Maturity/Effectiveness Model

Figure 1: Example of Maturity/Effectiveness Model

One framework that works well is a Maturity (or “Effectiveness”) Model.  These models generally consist of 5 (plus or minus 2) categories that represent different levels of maturity/proficiency/effectiveness in your space.  In order to define these categories (or levels of maturity), identify behaviors that are characteristic of each of those levels and associate those behaviors with each level of proficiency/maturity as shown in Figure 1 above.

Customers can look at a framework like this and quickly conceptually grasp the types of behavior/activities necessary in order to advance along the model.  As you develop this framework for your product and space, ideally try to map some of the behaviors that are associated with maturity levels to features of your product, so that you can easily associate customer usage of valuable features with their progress along the Maturity/Effectiveness Model.

Step 2: Identify Quantitative Metrics that Matter and Can Be Measured

In order to objectively measure progress on an ongoing basis, you will need to identify relevant quantitative metrics that drive value, are measurable, and ideally are good indicators of customer health/stickiness.  For example, in the case of a CRM company, you may want to know your customers’ conversion rate of leads or opportunities in order to understand whether you might be able to help them become more effective with your marketing automation solutions.  In the next steps, you’ll compare this data to benchmark data for a given customer and measure improvement.  You can also compare these metrics to aggregates for “like” companies.  As you identify target metrics, you’ll need to distinguish which ones are considered “usage” metrics that you can obtain directly from your SaaS application and which ones will require consent and participation from your customers to obtain.

Step 3: Benchmark Your Customers on Day 1

It’s important to understand the specific stage where each of your customers fit in the model/framework you’ve created, and it’s also important to get some baseline data on quantitative metrics as well.  For larger, higher-touch customers, you should be able to understand this during a consultative sales process; however even with lower touch customers, you should be able to characterize/segment new customers based on system configuration, features purchased/implemented, and initial capture of the quantitative metrics you identified in Step 2 for that customer segment.

Step 4: Create an Improvement Plan

This step is critical and is a combination of art and science as it can be challenging to set targets at the right level.  Your primary objectives should be to:

  • Set targets that are based on incrementally improving from the baseline you measured;
  • Encourage practices and usage of product features that will advance your customers along the Effectiveness Model you defined in Step 1;
  • Create a structure and context for the ongoing digital and interpersonal communications you will have with your customers.

Step 5: Provide Constant, Ongoing Feedback on Progress Against the Plan – And Revise as Necessary

Now that you’ve defined a framework, key metrics, and a plan for improvement against a baseline which you’ve captured, you can engage with your customers in a meaningful way that is focused around helping them get value from your product and become better at what they do.  And you can measure their progress against defined objectives.

As a first step, you may want your CSMs to interpret system data and personalize recommendations to individual, high-value customers.

As you expand this offering to additional customers, you will need to define customer behavioral segments based on the metrics you’re capturing and provide those customer segments with extremely relevant digital content.  For example, if you’ve identified a subset of your customers whose systems data indicate that they haven’t been using a key marketing automation feature of yours and that their conversion data hasn’t improved since their baseline, you can begin a drip marketing campaign to them on best practices in marketing automation and how to use your product to improve those metrics.  That specific message should only go to that identified segment of customers, though, as you don’t want to “spam” your other customers with information that isn’t relevant to them. Your marketing team segments prospects based on behavioral data and delivers relevant content to them.  You should target communications to your customers using similar logic.  Great technology already exists to help you do this.

Helping customers improve and become better at what they do through their partnership with you is one of the greatest ways that you can demonstrate value.  You don’t need to demonstrate it for all customers on Day 1. In fact, the sooner you can deliver it to some customers, the better.  You can begin by implementing this model in a manual way with your most valuable customer segment, then roll it out to your broader customer base by segment – perhaps as you deploy additional Customer Success Automation and Marketing Automation tools. Hmmm… I bet a Customer Success Maturity/Effectiveness Model would fit in perfectly right about now…

Are Your Early Warning Signs Early Enough?

19 Jun

Good Customer Success teams are analyzing data in order to understand the characteristics of their customers.

Great Customer Success teams are analyzing the right data in order to understand the characteristics of their customers.

Nowhere is analyzing the right data more critical than in understanding the early warning signs of at-risk customers.  In generating awareness for this Thursday night’s CSM Forum Event: Detecting the At-Risk Customer Relationship, Mikael Blaisdell points out in his most recent blog post the one certainty behind at risk customers: “A customer that is not getting the desired level of measurable value out of their relationship with your company is one that is surely headed for the exit door.”  I couldn’t agree more… or sooner.

In my last post, I indicated that the primary objective for a CSM organization should be to ensure that a customer is getting value from the implementation of your company’s solution.  The CSM organization, whether highly personal, highly leveraged, or highly automated, needs to know which customers are at risk due to a lack of demonstrated value.  Most organizations try to identify indicators of risk.

Generic Indicators: The Lowest Common Denominator

There’s one great thing about generic indicators of risk, such as system login/usage trends, support cases opened, and NPS values:  Everyone can relate to them.  There is almost always a correlation between one ore more of these factors and the level of churn risk associated with a customer, so everyone knows that they’re relevant.  The problem with most of these indicators, however, is that they don’t always provide you with an early enough warning to allow you to take action that will save the customer, and in some cases, there isn’t even a cause/effect relationship between these criteria and churn.  By the time most of this data is available, the customer knows they have a problem, and in some cases (like NPS) the customer has already gotten to the point of communicating it to you.  In the case of usage metrics, I recently spoke with an executive who came from a financial services company.  She told me they initially looked at usage data to determine which customers were at risk; however when they dug deeper and looked at the process that customers who defected went through, it was clear that by the time usage had declined, the customer had already run a month in parallel on a competitor’s solution and had already migrated off of theirs.  Horse gone …no need to close the barn door.

Getting Beyond the Generic and Going Upstream

Really understanding whether a customer is getting measurable value from your solution requires that you look at indicators that are specific to you and to them.  Think about your key selling points.  Establish a Value Roadmap that you plan out with your customers and help them measure progress on a regular basis.  This can be done with CSMs in a high touch environment or with system metrics and drip campaigns for low touch / high volume customer relationships.  For example, if you offer a digital marketing solution, help your customers benchmark their existing conversion rates, then set goals and objectives for improvement and measure progress against those goals.  If they aren’t achieving those objectives, then get out ahead of the problem.  Do what you can to make them successful on your solution.  Especially in the case of low-touch / high-volume deployment models (think B2C SaaS), great products will have relevant metrics reporting and prescriptive recommendations built in.  Your offering shouldn’t just be about creating a technical solution to a problem, it should be about helping your customers get better at solving that problem with your offering. Keep in mind that your full “offering” includes product, services, and additional company interactions.  Think about applying marketing automation principles for your installed base where the overt goal isn’t conversion, but successful use of your solution.

Also look at other data you have that might either indicate or result in a poor customer experience:

  • Have you had any recent system performance issues? If so, which customers were logged on at the time?
  • Have any of your key customers recently started following or connecting to your competitors on social media?
  • Are they not engaging with your drip customer marketing campaigns even though you’re sending them relevant content?
  • Are they not implementing the recommendations your team or the system has been providing on how to be more effective with your solution?

Are Generic Indicators Useless?

No.  Absolutely not.  And in many cases, they can still be useful as early warning indicators, especially in combination with other indicators.  Every company, however, is going to need to take a good, hard, honest look at their own data to really understand which elements are early indicators – in their world – and which elements are simply correlated, but might be able to provide them insight on the trajectory of the customer relationship once they’ve been identified as “at risk” and a plan of action is put in place.

What early warning signs have you identified that are specific to your business and how have you used them to: 1) address the existing at-risk customers in the short term; and 2) and put a proactive plan of action into place to keep those issues from affecting other customers in the future?

The Case for Customer Marketing

3 Jun

I’ve been jotting down notes on this blog post over the weekend, wondering how “front of mind” this topic is, then I saw David Edelman’s blog post on LinkedIn this morning about his presentation at SAP’s Sapphire Conference and thought:  Good.  Someone else is thinking about this… in a similar way… and it’s important.

Conventional Wisdom:

Most, if not all, companies with a Marketing function focus their efforts (and metrics) on activities that drive net new customers.  These metrics generally include new leads, qualified leads, analytics on web traffic/behavior, conversions, etc.  Over time, a number of organizations have gotten better at focusing less on “vanity metrics” and paying more attention to the ones that really drive sales; nonetheless, the primary focus of the marketing department’s effectiveness, and value to the organization, has been related almost exclusively to its impact on the company’s ability to acquire new customers.

One Level Deeper:

Now don’t get me wrong, I’m a huge advocate of top line growth and customer acquisition; however top line growth doesn’t just happen by bringing on new customer logos. Most companies have a huge revenue growth opportunity in their existing customer base, and fundamentally, in a SaaS world, where value needs to be proven continuously, the initial acquisition of a customer is not the end of the Customer Journey, it is merely one of many Moments of Truth to come in a much longer customer journey and relationship. Once a customer is “on board”, organizations must now focus on ensuring that customer is getting value from the solution.  Paying attention to the data a SaaS solution can provide helps you understand what’s happening – on a customer-specific basis.  Effectively automating your communication, and nurturing your customers, not just your leads, through something that looks a lot like Marketing Automation, creates many 1-1 dialogs …that scale …that are relevant …that create loyal customer relationships …that build brand advocates …that generate more revenue.

Freemium to Paid: The Transition Begins

The freemium model has made the need for customer marketing clear for a number of “consumerprise” companies.  In many ways, converting a free customer to a paid customer is very similar to “up selling” a paid customer to a higher level of service.  A customer will go from one level of financial and emotional commitment to a higher one.  In order to get there, customers need to see value.  Conceptually this isn’t very different from the old enterprise sales model where a company would “pilot” a solution for little or no cost, then once they were able to prove value, the license sale would occur.  In the world of SaaS, however, this needs to be a highly repeatable, highly automated, highly scalable process, and has the opportunity to occur many times during the life of a customer.  Freemium SaaS companies get this, and the good ones are doing an excellent job understanding usage and behavior data from their free customers, and applying automation to nurture/market to them effectively (relevant in a 1-1 kind of way) and drive conversions.  The great ones are also using that data to constantly improve their product and make the customers’ product experience consistently better.

Connecting with Customers:

The fundamental objective behind customer marketing should be to create a connected experience.  Customer Experience is made up of two key components: 1) the experience a customer has with your product/service; and 2) the experience a customer has with your company via other interactions – online, in-person, on the phone.  The data and technology exist to create a connected experience with your customers and communicate value in a personal, targeted, yet scalable way.  I’ll cover those topics in a future post.

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