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HOW INNOVATIVE COMPANIES ARE REDUCING CHURN AND GROWING RECURRING REVENUE

Nick Mehta, Dan Steinman and Lincoln Murphy

The Subscription business model is red hot.  Software as a Service (Saas) business led the change into the subscription economy.  For any SaaS or B2C company, to survive and thrive, it needs to 1. Reduce/manage churn, 2.  Drive increased contract value (Net Revenue Retention) from existing customers. And 3. Increase promoters (improve the NPS) by improving customer experience and customer satisfaction.  These are the exact benefits that come from executing customer success well. Customer Success Managers (CSMs) are individuals that help customers get the most value out of your products.  Nick Mehta and his co authors, share their insights and history of this growing discipline.

Customer Success: The Guide to Keeping Customers Happy

This book talks about why it’s important to focus on keeping your customers happy, which is called customer success. It also explains different ways to achieve this depending on the size and type of your business.

Why is customer success important?

Imagine you sell a subscription service, like a gym membership. You want people to sign up, sure, but you also want them to stay members and keep paying each month. That’s where customer success comes in. It’s about making sure your customers get the most out of your product so they stick around.

How do you achieve customer success?

There are a few key ideas:

• Sell to the right people: Not everyone is a good fit for your product. You want to target customers who will actually benefit from it in the long run.
• Help customers win: Your job isn’t done after the sale. You need to show your customers how to use your product effectively so they achieve their goals.
• Keep an eye on your customers: Track how your customers are using your product and identify any potential problems before they arise.
• Make it easy for customers to get help: If your customers need help, make sure it’s easy for them to find answers and get support.

Different approaches to customer success:

• High-touch: This is for big customers who pay a lot. You might have a dedicated account manager who works closely with them to ensure their success.
• Low-touch: This is for smaller customers who pay less. You might rely more on automated emails and self-service resources to help them.
• Tech-touch: This is for a massive number of customers who pay very little. You’ll use technology like email marketing and online communities to help them succeed.

The key takeaway

By focusing on customer success, you can keep your customers happy, coming back for more, and recommending you to others. This will help your business grow in the long run! Isn’t that what we all want?

here’s the breakdown of the Customer Success Laws (CS Laws) for you:

Law 1: Sell to the Right Customer

• Align sales and marketing: Target the right kind of customers throughout the entire sales funnel. Avoid wasting resources on customers who are not a good fit for your product.
• Data-driven decisions: Use data to identify ideal customers and avoid deals that are unlikely to succeed in the long run.
• Incentivize the right behaviors: Make sure all departments (sales, customer success, etc.) are incentivized to acquire and retain the right customers.
• Focus on promoters, not detractors: Pay attention to customer sentiment (NPS). Focus on keeping happy customers happy and avoid acquiring customers who will likely churn.

Law 2: The Natural Tendency for Customers and Vendors Is to Drift Apart

• Proactive customer success: Be proactive in engaging with customers to prevent churn.
• Identify early warning signs: Look for signs of customer dissatisfaction and take action before they churn.
• Offer solutions to common customer issues: Have solutions in place to address issues like lack of ROI, stalled implementation, loss of project sponsor, low product adoption, lack of features, and changes in customer strategy.
• Maintain high-touch relationships: Maintain strong relationships with key decision-makers at customer companies.
• Focus on low-touch and tech-touch customers: Develop processes and a great product to ensure success for customers who require less hand-holding.
• Learn from churned customers: Understand why customers churn to improve your customer success efforts.

Law 3: Customers Expect You to Make Them Wildly Successful

• Understand customer success metrics: Track metrics that matter to your customers, not just product usage.
• Deliver value quickly: Help customers achieve early wins to show the value of your product.
• Provide ongoing guidance and best practices: Help customers get the most out of your product and achieve their desired outcomes.
• Set clear expectations and track progress: Work with customers to define success and track progress towards those goals.
• Focus on customer experience: The entire customer journey, from initial sales interaction to ongoing use, should be designed to deliver a positive experience.

Law 4: Relentlessly Monitor and Manage Customer Health

• Customer health is a key predictor of churn: Track customer health metrics to identify customers at risk of churning.
• Customer health score: Develop a customer health score to assess the overall health of your customer relationships.
• Multiple data points: Use a variety of data points to assess customer health, including product usage, customer support interactions, marketing engagement, community involvement, contract growth, self-sufficiency, invoice history, and executive relationships.
• Take action to improve customer health: Proactively address issues identified through customer health monitoring.

Law 5: You Can No Longer Build Loyalty through Personal Relationships

• Customer experience blueprint: Define a customer experience blueprint that outlines how you will interact with customers across the entire customer journey.
• Segmentation and customer success programs: Segment your customers and develop targeted customer success programs based on their needs and value.
• Customer communities: Build strong customer communities to foster connections and knowledge sharing among customers.
• Customer feedback loop: Establish a system for collecting customer feedback and using it to improve your product and customer success efforts.

Law 6: Product Is Your Only Scalable Differentiator

• Focus on product design and usability: A well-designed, easy-to-use product is essential for customer success.
• Collect customer feedback: Use customer feedback to inform product development and roadmap.
• Product Advisory Councils (PACs) and Communities of Practice (COPs): Engage with customer advisory councils and communities of practice to gather feedback and input on product development.
• Customer success is about product value: Customer success teams should focus on helping customers derive value from your product.
• Align the entire company around customer success: Every department in the company should have goals aligned with customer success.

Law 7: Obsessively Improve Time-to-Value

• Reduce time-to-value: The faster customers see value from your product, the more likely they are to be successful and renew their subscriptions.
• Streamline onboarding: Make the onboarding process as smooth and efficient as possible.
• Deliver early wins: Help customers achieve early wins to show the value of your product.

Law #8: Deep Dive into Customer Numbers

Imagine you run a pizza delivery app. You gotta understand why people order and why they stop ordering, right? Same idea here. This Law says you gotta track how many customers you keep (retention) and how many you lose (churn). This way, you can figure out what keeps them happy and what makes them ditch your service. The earlier you do this, the easier it is to fix any problems.

Here’s a quick guide:

1. Track the Money: Figure out your monthly recurring revenue (MRR), which is basically the money you get every month from subscriptions. Then track how much you gain from new customers and add-ons, and how much you lose from downgrades and cancellations. This will show you if your business is growing or shrinking.
2. Figure Out Who’s at Risk: Not all customers are created equal. Some might be more likely to ditch you. Look for signs like low usage, lots of support calls, or unhappy feedback.
3. Speak the Same Language: Make sure everyone in your company agrees on how to measure churn and retention. This way, everyone’s on the same page and can work together to keep customers happy.

Law #9: Numbers Don’t Lie, Use Them to Win!

You can’t improve what you don’t measure! This Law says you gotta track stuff to see what works and what doesn’t. Figure out what success means for both you and your customers, then track the numbers that show you’re achieving those goals.

Here are the types of things you should track:

• Customer Behavior: How often do they use your product? Are they using the features that help them succeed?
• Customer Success Manager Activity: Are your CSMs (Customer Success Managers) doing their jobs well? Are they interacting with customers enough?
• Business Outcomes: Are you keeping customers happy? Are they renewing their subscriptions? Are they buying more stuff from you?

By tracking these things, you can see what’s working and what’s not, and then make changes to improve your customer success efforts.

Law #10: Everyone Needs to Be on Board!

This Law says that customer success isn’t just a one-person job. The whole company needs to be focused on keeping customers happy. This means everyone from sales to marketing to product development needs to be working together to make sure your customers are successful.

Here are some things you can do to get everyone on board:

• Define Success Together: Agree on what customer success means for your company and your customers.
• Reward the Right Things: Make sure everyone is incentivized to focus on customer success, not just making sales.
• Align Your Teams: Make sure all your departments are working together towards the same goal: happy, loyal customers.

By getting everyone on board, you can create a company culture that’s focused on customer success and long-term growth.

Customer Success is all about keeping customers happy and using your product. Imagine you run a music streaming app. You gotta keep people hooked on your jams, right? Same idea!

Here’s the gist of it all:

• Customer Data is King: Track everything you can about your customers, what they buy, how they use your product, how often they contact support, etc. This goldmine of information helps you understand what keeps them happy and what makes them want to ditch you.
• Customer Health Score: This is a fancy way of saying you gotta figure out how healthy your customer relationships are. It’s like a checkup for your customers! By looking at all that data you collected, you can give them a score that shows how likely they are to stick around.
• Early Warning System: The sooner you know a customer might be unhappy, the sooner you can fix things. This tech helps you spot customers who might be at risk of churning (leaving) so you can reach out and mend fences.
• Don’t Just Rely on Personal Relationships: These days, it’s all about how much your customers actually use your product. You gotta make sure your product itself is awesome and delivers value, that’s the key to keeping them around.
• Automate Everything You Can: There’s a bunch of repetitive tasks you can automate with fancy customer success technology. This frees up your customer success team (CSM) to focus on the important stuff, like personally reaching out to unhappy customers.
• The 10 Laws of Customer Success: These are basically the golden rules for keeping your customers happy. They include stuff like selling to the right people in the first place, making sure your product is amazing, and constantly tracking how your customers are doing.
• Customer Success is a Team Effort: Everyone in your company, from sales and marketing to product development, needs to be focused on keeping customers happy. It’s not just a customer success team thing!

So, that’s the customer success story in a nutshell. By tracking your data, using customer success technology, and working together as a company, you can keep your customers happy and coming back for more!