The relatively new SaaS industry has experienced explosive growth over the last few years, and is expected to total $75 billion in 2014, with growth at 20% through at least 2020. Due to this growth, people are still in the process of figuring out the keys that will allow a SaaS company to become successful. This has led to the consideration of customer success as a focal point in a company’s strategy. So why is customer success so important?
A successful customer is a happy customer, and a happy customer is less likely to churn. How much does this matter? A subscription service relies on lengthy customer lifetime value as a driver for revenue. If one of your customers churns six months into a potential lifetime of two years, you’ve just lost 75% of the revenue you could have made, not including upsells and referrals! This slide by Guy Nirpaz, CEO of Totango, visualizes how much of your revenue comes after the initial sale:
Moreover, the effects of churn compound. A 2% monthly revenue churn rate means a decrease of almost 25% in annual revenue. On top of this, it costs an average of 6-7 times more to acquire a new customer than to keep an old one. So now that we established the importance of keeping a customer happy, how do we do it?
The first component of a great customer success is focusing on your product. As a SaaS company, your product’s goal is to serve your customer’s needs. This is directly in line with making your customer successful. Here are a few ways you can focus product development to achieve customer happiness:
- Make your product as frustration free as possible.
- Make sure your customers see a clear ROI from using your product.
- Quickly correct bugs in the code, data loss, performance issues, and UI issues.
- Talk to your customers regarding product features and integrations.
However,make sure to focus on their goals, not yours. It can often be easy to get obsessed with your product’s metrics, such as usage and engagement. It is a common mistake to forget that delivering better product metrics does not necessarily mean your customers are getting more value from it.
Key Performance Indicators
If your product is designed to help your customer become successful, then it follows that the more important KPIs to measure are your customers’. Stop worrying about how much you customers are using your products and start figuring out how to measure their success. This is the second component of a customer success strategy.
Build your own customer lifecycle. You want to be able to report on the effects that customer success has on your revenue. This will allow you to come up with quantifiable KPIs for your customer. By making clear the benefit you are providing to them, you make it easier for them to justify renewing with you. Furthermore, this will allow you to measure your customer success team’s impact on your company’s bottom line.
Structure the company for success
Make sure you have resources dedicated to customer success. Customer success starts at the top with you, the owner. Provide each department with clear, quantifiable goals and build teams around the KPIs in your customer lifecycle. You want dedicated people thinking about customer success all the time, and focusing on:
- customer on-boarding
- customer training
- customer service
- renewal sales
Each team should own their KPI and be focused on driving it north. This can have a huge impact on your revenue, as satisfied customers are more likely to refer other customers to you. On top of reducing user churn, referral leads have one of the highest conversion rates.
By using this framework for customer success, you will be on your way to keeping loyal customers. Remember, for every customer who bothers to complain, nearly 26 others remain silent. So go make your customers happy!
-Guest Blogger: Wilbur Han, Growth and Marketing at Framed Data