Customer Success has become a must for every SaaS business with the advent of the subscription economy. But just having a customer success department does not solve issues with your churn rate, customer lifetime value, retention rate, or MRR/ARR. It starts by understanding why customer success is important. And what the crux of an effective CS department is.
The success of your business goes hand in hand with the success of your customer. For so many years, SaaS has focused so strongly on the acquisition that they have been blind to other aspects of the customer journey. This is highlighted by the fact that the onboarding process is when 50% of the churn happens. What customer success does to mitigate a lot of the problems that SaaS companies go through is put proactive measures in place. Proactiveness brings the insurance that your customer will be using your product to their desired outcome. What you require to pull this off are people, processes, and a truckload of data.
Customer Success is all about delivering value
As explained above, proactiveness is the central pillar of Customer Success. It makes the distinction between customer success and customer service easy. Customer service relies on triggers. Customer service is all about filling the holes in the hull of your boat while customer success is all about ensuring those holes don’t appear at all.
Here is a free guide to take your SaaS business from a Reactive approach to Proactive approach!
The subscription model has become the majority in the B2B SaaS industry. The difference between the ownership model and the subscription model is that you don’t purchase the product anymore. A consumer now pays regular installments to avail of the offerings of the product. This has given the power to the consumer to cancel if the product is unsuitable to them or they cannot utilize it. But it is also a boon to the SaaS businesses because now you can earn much more through recurring payments. This is where customer success thrives and is so important for your B2B SaaS business. This process of providing them with constant value converts your customer to a long-lasting partner. You can retain them for years on end!
What Customer Success brings in more than others is dimensions to the company. With CS, you have a continually evolving product. It adds better services over time to grant additional value. This creates opportunities for upselling, reselling, & cross-selling. Your customer success efforts organically lead to an increase in your bottom line. But how do you know your customer success efforts aren’t getting wasted? Therein come the metrics for your efforts.
The Golden Benchmark in Customer Success
You have to be very clear with the milestones you set with your CS department. When do you KNOW that you can retain the customers? With the data available it is clear that the value lies in not just retaining a customer. It is going beyond what the customer was originally paying.
Let’s break it down with a simple example. Assume your company starts with 100 accounts at the start of the year paying you a million dollars. Even if you acquire new customers over the year, those 100 accounts should get you more than a million next year. This can be achieved through expansions or upsells. Thus you want your Annual Recurring Revenue to go up from one million dollars to 1.25 million dollars. Your net dollar retention becomes 125% and above. 125% is the critical value to hit and is the generally perceived golden benchmark for a CS department.
It is not a hard value to reach but it takes effort. Just having an expert acquisition and sales team doesn’t cut it anymore if you are bleeding churn. The statistics tell us that only 10% of SaaS businesses are above this 125% net dollar retention today. If you are a smaller company, this benchmark should be even higher.
Some other key metrics to realise growth within the Customer Success department.
Some churn is inevitable because you cannot always control a situation. Losing customers will be a part of your growth. But if you lose 5 accounts out of 100, those 95 accounts should make up for lost revenue and go beyond that. The upselling and expansions come into play at this stage.
How to create an Effective Customer Success Strategy
Now that you know what you want from your customer success department, we get down to how you achieve it. First, why will a customer stay? In the SaaS subscription economy, you are not asking for a one-time charge but rather a stream of revenue month on month, quarter on quarter, year on year. Likewise, your customers expect a steady stream of value and not just a one-time and off thing. You have to keep your net dollar retention 125% or up. Your aim should be to keep your customers forever. Showcasing the right value for your product at the right time is the key to it.
Here a CSM that provides you with customer behavior is a factor too. You need to know if your client is happy or not. You have to track them to the ends of the earth. A client can just get up and leave if they are unhappy & thus you can’t wait till a customer complains. The CS department needs to learn how to solve their problem before a problem even arises. You have to keep track of their engagement with your product. It is the only way to know if they are getting value from you. But let’s talk about the different types of engagements you can track from a CSM.
- Account Health: This is a big factor when you are looking at retention. An account health provides you with an overall look of the customer. This means you will know when a customer is at risk of churning or at the good stage of upselling. CSMs have automatic notification (risk alerts) if an account falls below a health threshold. This reduces your monitoring efforts.
- Usage: Monitoring the usage is beneficial to detect upcoming churn as well. This also helps put proactive measures in place. Like sending a playbook to a specific module/use case that the customer wanted to use but couldn’t.
- Account 360 view: Some CSMs like Customer Success Box provide you all the data in one place. Integrated with your CRM, Helpdesks, Billing System, and customer engagement system. This account overview can help you send personalized alerts, notifications, make tasks and make calls inside a platform.
Fundamentally what customer success is making sure is that you proactively reach out. If they are not getting the value, you want to be there with them addressing those challenges. The problems can vary from training problems, implementation problems, or understanding problems but what matters is your way to get the customer out of the pickle. When you do this, you will attain higher lifetime customer value, higher retention rates and it will all seamlessly come together.
Additional Resource: Customer Health Scoring
Customer Success as an oil to your SaaS Business Cogs
Customer Success is all about driving growth, it is a profit center. The B2B SaaS industry needs to understand that acquisition-led growth is dead and customer success-led growth is the future or already here. The metric you should care about when starting is the net dollar retention. Make it above 125%. You can start from 80 or 90 but set the goal 5% higher for your next cycle and you will start seeing results. In the end, Customer Success is a journey. You cannot experience the growth from customer success within a few months. These are slowly moving parts that come together.
The first step should be to nail the onboarding process. Make sure it is data-driven and define it well. Provide the customer instant value after the onboarding.
Becoming data-driven is essential to a good CS department at any stage of the business. Don’t take the word of the customers when they say we love your product, track and make sure that they even are logging in.
If you still are concerned that Customer Success is not the right fit for your B2B SaaS business, look around. Your competitors will be running away from you while you are stuck! Apply these ideas to your business, learn more about customer success and see the result. If you are in the early stages of your customer success department, understand that growth and success take some time & patience. We have a set of comprehensive guides available to help you with your customer success journey.
P.S. – The main image has been taken from pexels.com