In today’s installment of our Influential Women in CX series, we’re continuing our conversation with Irene Lefton, a customer success executive and evangelist.
In part one of our interview with Irene, we discussed the relationship between customer success and customer experience and the impact that customer success can have on other departments across the organization.
In part two below, we explore how customer success has evolved as SaaS and other subscription-based companies increase in popularity and what being customer centric truly means.
(Please note that the following interview has been edited slightly for clarity.)
How has the role of customer success evolved with the rise of SaaS companies?
In the past, software companies got all of their money upfront. So companies could make a lot of money selling software without having to provide ongoing value to the customers using it.
Then businesses began implementing the subscription model during the dot-com era. Private companies known as Application Service Providers hosted and rented enterprise software, which was deployed in their own data centers without purchasing licensing. I would consider them the predecessors to today’s Software as a Service (SaaS) companies.
Under the now-prevalent SaaS model, companies have to be successful not only in selling the product but also in deploying the software and adding value because customers pay for their subscription over time. Typically it can take from one to three years for companies to recoup their costs to acquire a new customer.
With the growth of SaaS, companies shifted their sales models and began to figure out the break-even point for customers. Companies started measuring the cost to acquire a customer (known as CAC), which is a very common measurement in software sales now. They started measuring each aspect of their marketing and sales efforts to determine how much a lead costs and how many leads are needed to translate into a qualified opportunity versus a qualified sale. In this way, the now-common sales automation processes sprung from the era of SaaS.
In a subscription business, companies must also provide a good customer experience and proactively retain customers at least long enough to recover the cost of acquiring them. Of course, hopefully they retain customers much longer and expand their purchases through upsells and cross-sells in order to not only break even but reap a profit. After all, people are in business to make money. To do that, you have to add continuous value to your customers; otherwise they won’t continue to pay for their subscription. In a nutshell, that’s how the field of customer success was born.
The emergence of customer success led companies to focus on a lot of different things in business, such as better product-market fit. Companies realized it didn’t make sense to sell to unfit customers that are never going to be successful with the product.
It also led to a more proactive view of support. Rather than just reacting to customers, now products are often built with internal telemetry, artificial intelligence, and machine learning that can predict when customers are going to have problems. So companies can be proactive about addressing issues before the customer even notices them. You see this a lot in the IT and IT services space — customers will get alerts before they have a problem, so that they can take action to fix it.
In addition, the emergence of customer success led to a reformation of the post-sales process. I came of age in a time when companies considered deployment and professional services to be a profit center. Now the focus is on getting the product adopted and providing customers with value more quickly. This ensures that customers are happy and continue to pay their subscription. Even better, they will potentially expand their business with you or become an advocate to help you continue your growth.
What are the characteristics of SaaS companies that truly understand customer success?
I’m surprised even today at how many companies don’t really understand the value they can get out of the growth engine of customer success. The ones that are really successful with it have a few common traits.
One commonality is that their leadership is very customer centric. They have a founder or CEO who understands both the economics and the importance of customer experience and proactive customer management.
These leaders will hire customer success professionals early in the company’s life cycle as opposed to waiting until they start to have a churn problem. And they don’t focus from the beginning solely on acquiring customers. Instead they take a more holistic approach as to how they’re going to acquire and retain those customers.
It’s important to note that achievement in customer success is a long game. This is challenging for public companies as most live quarter to quarter for their shareholders. Even many private companies live quarter to quarter for their stakeholders. Unfortunately, quarterly metrics don’t really help in providing a long view of what the customer needs. Instead, the short-term focus is usually on top-line revenue.
Companies that truly understand customer success, however, always keep the customer’s needs in mind and formulate a customer experience strategy for the long haul.
Can you say more about what it means to be “customer centric”?
Everybody in the world says they are customer centric. I dare you to find me a company that’s going to make a public statement that they’re not customer centric. But there’s a difference between actions and words. In fact, you see a lot of companies who even have customer centricity in their culture statements on the walls of their buildings, but they don’t actually behave as a customer-centric company.
What do I mean by that? They don’t collect customer feedback. They don’t implement NPS, customer satisfaction, or customer effort metrics. They don’t do any measuring because they don’t really want to know what their customers think.
They also don’t invest in telemetry in their product to tell them how customers are using it, including what features they’re actually using. They are driving product decisions independent of customer feedback. And like I said, they don’t hire a customer success team early.
In contrast, companies that are truly customer centric provide the Chief Customer Officer or other CX executive with a seat at the table. This enables them to go to battle professionally with sales to find the right balance for that stage of company between customer acquisition and customer retention.
In early-stage companies, it’s all about customer acquisition. You can’t have a company unless you have customers. But there comes a time where renewal revenue starts to approach newly-acquired customer revenue. At that point, you better start making investments in customer success or you’re going to get behind this revenue trough and wind up burying yourself.
The really mature companies — and there’s very few of them — go even further. They look at the cost to retain a customer in a similar way that earlier-stage companies measure the cost to acquire a customer and then they also factor in the cost to expand the customer. These companies focus on the ROI they’re providing to their customers to better manage the customer experience post-sale.
To me, the company that starts with mapping their customer journey and then makes that a living, breathing, changing center of how they do business is the company that has real long-term sustainability.
Any final thoughts?
Because customer success is a relatively new function, companies are just beginning to build out success teams, and most of the companies that are really mature in this area are native SaaS companies. So it’s going to be really interesting to see what happens as we get beyond these types of businesses.
Consumer-oriented companies are starting to move in this arena to some degree, as well as other B2B companies that offer more traditional, non-subscription products. I’ll be keeping my eye out as they build out their customer success efforts.
Thank you, Irene!
You can connect with Irene by following her on LinkedIn. And we hope you’ll continue reading our Influential Women in CX series as we continue to shine a spotlight on customer experience superstars.
Featured image credit: Pxhere