It’s 2020. If you’re reading this, you’re already acutely aware that customer success is a critical operating philosophy for businesses today and that it’s more than just customer support or account management. It’s about revenue.
Customer Growth is an evolution of the customer journey that reflects the potential for SaaS businesses to generate revenue growth from beyond the traditional sales funnel. It focuses largely on customer success as a means of driving adoption, increasing retention, expanding accounts, and creating advocates after the sale has been made.
You will learn:
- What the customer journey looks like
- How customer success extends what has been possible with sales and marketing alone
- The keys to driving customer growth throughout the customer journey
- Why the customer journey is the future of business
The traditional buyer’s journey (awareness, consideration, decision, and purchase) is just the beginning of the process for a B2B company. Recurring revenue businesses must work to keep their customers every month and capitalize on new opportunities for growth. The real power in a business model has shifted to the customer journey, which reflects the increased focus on growing customers beyond their initial purchase of a product or service. In this hourglass-shaped pipeline, once a lead becomes a customer, they begin to move through the adoption, retention, expansion and advocacy stages.
A little history of customer success
In the early 2000s when marketing automation proved itself as a billion-dollar industry, it was necessary to carve out new roles and initiate new processes around it. Experts in the field developed a better understanding of the buyer’s journey, which forecasted the path a potential buyer would take before making a purchase. This allowed marketers to see when, where and how they could connect with buyers at relevant points along the journey. But often, once the deal was closed, the marketer’s job was considered done.
The buyer’s journey is certainly still a part of just about every company and industry today, but as SaaS, subscription, and recurring revenue models gain a foothold in business, customer success is picking up speed. Companies have recognized that it’s easier (and cheaper) to retain a customer they already have than to obtain new ones, so they have begun to invest in customer success strategies to keep customers longer. This has opened up new opportunities for companies to capitalize on better experiences for their customers. Not only do successful customers stay longer, but they also tend to spend more with the company over time and become brand champions. This enlightenment has expanded the conventional funnel into something that more resembles an hourglass, illustrating the customer growth phase in which a business can generate revenue growth far beyond what is possible at the initial purchase point.
In the traditional funnel, there is no clear depiction of what happens with a customer after they’ve purchased. After working hard to get a buyer to the point of purchase, what happens? Maybe the marketing or success team sends them emails or newsletters to check-in and typically there are support teams at the ready, but that’s not enough. A company needs to know if the customer is using the product, if they are achieving their intended goals, if they are likely to churn, and much more to begin understanding the other half of the journey where there are significant opportunities to bring each customer’s value full circle.
The hourglass depicts the entire path a customer takes from becoming aware of a company to becoming an advocate. It’s the most logical (and ideal) progression that sales, marketing, and customer success efforts should take.
The 4 stages of the customer journey (post-sales)
A closed deal is an open door for Customer Success teams to plant what Jason Lemkin and Aaron Ross call “seeds,” or word-of-mouth leads. Seeds are often overlooked in favor of “nets” and “spears,” likely due to a lack of focus on creating formal seed-planting processes. This is why Customer Success teams must be the driving force behind the customer journey—someone must be accountable for designing scalable, repeatable practices to ensure success for each customer from day one.
Note: Not every customer will flow through every phase of the customer journey seamlessly. They may jump around, they may skip a step completely, and that’s okay. If a customer decides not to expand their account, that doesn’t mean they won’t make a great advocate.
The adoption phase starts when product implementation and exceptional onboarding takes place. This is where Customer Success takes over from sales and/or marketing to make the time-to-value short and sweet. It’s where a company must deliver on all the promises made during the sales process. It’s critical that customers transition into the adoption phase quickly and smoothly so that they are unlikely to churn before there’s been a chance for the company to prove its value.
By this point, the customer’s pain points should be understood and it’s time to develop a plan to achieve their goals. Lincoln Murphy calls these goals their Required Outcome; each customer has a particular Required Outcome they need from the product and they are each expecting an Appropriate Experience to accompany it. He calls the combination of these the Desired Outcome. In this phase, initial success milestones should be set to ensure customers are receiving optimal value in a timely manner, increasing the likelihood of complete product adoption.
Tips for Adoption Stage:
- Send out a welcome email with implementation instructions and helpful tips for getting started as soon as someone becomes a customer. Provide documentation and other materials they will need as they learn to use the product.
- Schedule kickoff and onboarding calls, introduce the Customer Success team, and link to support resources.
- Keep a close eye on usage during this stage to confirm user champions are logging in regularly and accessing the features that are most important to their needs.
In their 2015 report on how retention rates increase company valuation, SaaS Capital found that for every 1 percentage point increase in revenue retention, a SaaS company’s value increases by 12% after five years, indicating that the relationship between retention rate and a company’s ability to grow revenue is directly causal.
Additionally, in From Impossible to Inevitable, Aaron Ross and Jason Lemkin break down the math on churn: Even if a company is retaining 95% of customers each month, that’s still 5% churn per month, or 60% per year. “In other words, you have to replace 60% of your revenue every year just to break even.” They go on to note that the “best-run SaaS companies can see up to -2% churn per month (on a revenue basis), which means they make more money every month because the customers who stay with them buy and spend more over than what the company loses from other customers leaving.” The easiest revenue comes from keeping the customers who are already invested, which is why smart companies are becoming laser-focused on customer success to prevent churn. Any company that is really good at making their customers successful finds that retention comes more naturally and puts them on a fast track for growth.
Tips for Retention Stage:
- Define churn indicators and measure customer health in weekly reviews to help stay on top of any users who may be at risk for churn in order to chart a correction course as early as possible.
- Gather intelligence on how users are behaving within the product to make sure they are reaching their goals, hitting success milestones and getting the most out of their experience.
- Trigger more frequent check-ins if a customer is struggling, losing momentum, or missing a key feature to help get them back on track.
Expansion, also commonly known as “negative churn,” is a key indicator that customers have been satisfied with their experience, so much so that they are willing to invest more money into the company. This is where cross-selling and upselling further their experience within the website application and help them solve other problems they may not have considered previously.
In his blog post on Why Negative Churn Is Such A Powerful Growth Mechanism, Tomasz Tunguz presents two hypothetical cases: one with 5% churn and one with -5% churn. In the case of the company with -5% churn, it still loses 5% of its customer base each month, but the remaining 95% of the customers grow their spend with the company by 10 percentage points, so the total revenue from the cohort is equal to 105% of the revenue from the previous month. Each month, each account becomes more valuable. I
t’s important to point out that expansion isn’t always an option, especially for nascent products that may not have additional features to add-on just yet, but undoubtedly these opportunities will arise as a product grows, as customers request specific changes, etc.
Tips for Expansion Stage:
- Strive to be proactive and logical in account expansion efforts rather than forcing an upsell or cross-sell only at renewal periods or to hit a quota. By staying involved with customers throughout their lifecycle, suggestions for upgrades can come more naturally as needed.
- Consider hosting a monthly product webinar to showcase new product features to customers so they are up to speed on new offerings.
- Share case studies and new use cases with customers so they have an idea of how other companies are using the product and can begin thinking about how those successes can work for them.
When making a decision on where to spend their money, customers are increasingly likely to take the advice of their peers into account. For most companies, that means there is power in the ability to create successful customers and to get these customers talking.
Customer advocacy covers a variety of ways customers can be directly involved in the growth of the company. Each of these strategies helps to refill the top of the hourglass with new leads that are often more qualified and less costly to acquire with higher lifetime values and higher retention rates, which means higher ROI and faster revenue growth.
Advocates also help the marketing department. Successful customers are more likely to provide case studies, testimonials, referrals, engage with and share content. Customer advocacy is a key indicator that customers are willing to stake their reputations on referring people in their network. That’s some pretty serious buy-in.
Tips for Advocacy Stage:
- Implement monthly or quarterly NPS surveys to take note of trends and identify top promoters. Consider making those surveys actionable—for example, if a customer identifies as a promoter, prompt them to share their experience on social media.
- Encourage product reviews and gather testimonials to support word-of-mouth marketing efforts and sales needs.
- Create a client advisory board (CAB) that meets quarterly so key customers are not only financially invested, but emotionally invested in the product and the team. This gives them a stronger voice, provides them with a community of fellow users, and makes them a significant part of company growth.
What are the keys to driving growth throughout the customer journey?
While there isn’t a formal process or a one-size-fits-all solution for every company, there are two basic functions companies need under their belt to create successful customers and ignite growth.
In the buyer’s journey, once a company has attracted a lead, they’ve started to gather data to track that lead through the buying cycle. The same data is needed to track customers through the customer journey. We call it user intelligence and it’s vital for knowing things like :
- Which features a customer is using and how they are using them
- Which features they might be missing
- If their subscription is up for renewal
- If they’ve added new users or if the product champion has changed
- What their health score is
- What NPS category they’re in
… and so much more in order to decide on the best course of action to take to keep them on track.
Additionally, each interaction with a customer should be contextual to their entire relationship with the company, even as far back as the initial contact from sales. For this, a single source of truth is necessary to provide a complete view of each customer’s lifecycle and every touchpoint within it. Establish this source of truth early on to ensure all data is complete, accurate, and accessible across the company. This allows companies to create the right messages that reach the right customer at the right moment and keeps the organization ahead of any accounts at risk for churn.
Similar to the best practices for the buyer’s journey phases, it’s necessary to deliver relevant engagements during each stage of the customer journey and those engagements should be highly-targeted, which means segmenting customers based on a variety of behaviors, demographics, account statuses, and much more. Segmentation is fundamental to getting granular in targeting and staying relevant across messages. All communications should be as contextual and customized as possible to be most effective.
In the customer journey, companies can go beyond just email and/or social media engagements to make an impact. Everyone everywhere is overwhelmed with information flying at them every day, so consider the one place customers are spending the most time engaging with the company: inside the product. For example, showing a renewal reminder to an account administrator the moment they log in is much more effective than trying to reach them by email where they’re juggling every newsletter, forward chain, and work conversation.
Customer health is another critical piece to fully understanding the customer journey as a success criteria and measure of churn risk.
Why the customer journey is the future of business
Modern customers expect to be treated as individuals, and why shouldn’t they be? The capabilities for contextual and targeted messaging are vast, and customers know that. And as more companies get better at customer success, they raise the bar for those without it.
Gary DeAsi, Director of Marketing, Demand Generation at Pointillist, puts it this way, “The modern customer demands to be treated as an individual; for their digital experiences and communications to be personalized and highly-relevant, and catered to match their specific needs, interests, and preferences. And while customer expectations are increasingly reaching all-time highs, their patience and tolerance for sub-par experiences are at all-time lows. As a customer, if you don’t give me the quality experience I expect; exactly what I want, how, when and where I want to experience it, I’ll simply get it from someone else who will.“ In order to drive each user through all phases of the customer lifecycle and grow revenue through adoption, retention, expansion, and advocacy, it’s critical to create timely, highly-targeted messages letting the customer know that their journey is the top priority. This leads to:
- Lower churn because customers receive what they need from the product and the company
- Increased revenue because customers are staying longer, expanding their accounts, and telling their friends
- Greater opportunities for marketing because successful customers are more willing to share their knowledge and successes with others
Customer growth isn’t just a new way of looking at the sales pipeline or the marketing funnel or customer happiness; it’s a whole new way of thinking about growing a business. It requires the entire company operating on the philosophy that customer success is the ultimate goal in order to ignite growth beyond what has traditionally been possible.