In our ‘View From The Top’ Series, we bring together top C-Suite leaders and investors in the software industry to share their stories and elaborate on why investing in customer success has become a must-have for any business today. We’ll hear how these leaders have invested in customer success to help their entire organization increase revenue, reduce churn and drive business outcomes.
There’s been a shift from customer success viewed as a cost center, to customer success viewed as a revenue driver. This is especially true when companies consider how important renewals and expansion revenue are over time. How are you seeing your portfolio companies prioritize customer success?
Buffington: It’s a growing trend. The term customer success is a great term. In my day (I’m about 50 years old) and when we first started thinking about how companies take care of their customers and clients, we called it account management. But, the term customer success is much better. It contemplates the relationship between a company and its customers, and how the use of their products and services makes them successful in their daily lives, or makes their jobs easier, or does something at a better price, or all of the above.
Clearly, there’s been this movement towards a broader thinking away from just customer service or account management, towards the actual success, or the value that is derived out of the use of a product or service. We’re seeing that mindset shift across all of our portfolio companies, and it doesn’t matter if it’s a SaaS or predominantly software business, or if it’s a tech-enabled service business. Anybody that has customers that interact with both human beings and/or technology is starting to think about how to drive better outcomes for their customers through better service, better product usage, feature development, etc.
“Anybody that has customers that interact with both human beings and/or technology is starting to think about how to drive better outcomes for their customers through better service, better product usage, feature development, etc.”
My view is that we’re in the early innings of the customer success market development, but we’re starting to see a very broad, and frankly better thinking on what customer success is, and how different companies are adopting it.
What’s at stake for companies that are not investing in customer success?
Buffington: The companies that are investing in customer success are going to take the customers of those who are not. I think about customer success as an evolution. When the industry first started, most of the thinking was around churn prevention, enabling companies to prevent companies from leaving them and no longer paying them for that service or product.
Our thinking, and the thinking of our portfolio companies, and other companies that we study and watch is that for customer success the bare minimum is churn prevention. But, we’re really focused on expansion revenue. So, how are the customers that are using our product actually using it? How frequently do they log in, what features do they use, how is that helping to fill their needs? What you really get into is how deeply are we penetrating our customers’ desired value set or the value proposition that they’re looking for?
Here at BIP Capital, we think a lot about what we call compulsory demand, something that embeds in a workflow, or embeds in the way people do things, or is valuable to people. This becomes a habit over and over, and those types of things are really hard to displace, they’re sticky. They tend to viral well, and people tend to pay more, pay a premium for those types of products and services.
What we see with all of our companies that start investing in customer success is that, they first start with churn prevention, then they move to expansion revenue, so selling more things, or more features, or broader services to a great number of users within their existing customer base. Then there’s this strategic evolution that really starts to leverage customer success intelligence as an overall strategic weapon. So if businesses are not investing in customer success their competitors are just better informed about what their customers need, want, and how they’re using those services.
You sit on a number of boards for software companies. As a board member when it comes to customer success, what should companies be reporting up to you, sitting in that board seat?
Buffington: Certainly we want to know churn statistics. Who’s churning, why are they churning, what’s the pace of that churn, what’s the logo churn, versus the dollar churn, all of that. I believe that’s table stakes. A lot of platforms can do that now, and it can be tracked. Expansion revenue, as you said. But, the things that empower boards to help and support their companies more are really more of a richer look at how a set of customers, a group of customers, or segments of customers are utilizing a given product.
“The things that empower boards to help and support their companies more are really more of a richer look at how a set of customers, a group of customers, or segments of customers are utilizing a given product.”
I’m very interested in constantly pushing our companies to say, “How frequently are people using the product? What features are they using?” If you think about that in terms of quality, or adoption of value prop, and frequency of that adoption in some kind of two-dimensional matrix, that could be plotted into that space, and then you can really get a sense of whose really reliant on that product, using it, using what features. Then you can segment those people so that you really gain very valuable insight into your customer base, and how they’re using that product. Then ultimately, that gives you an advantage in building new features, and in looking at different ways to compete and create differentiation.
I really look at it in those three buckets: churn, understanding churn, and expansion revenue. But, then also really strategic, it really gets into how are the dogs eating the dog food? Whatever product that may be. And, how do you build and make products that essentially are, to use the analogy, better dog food?
For those who have been on a board with me, they know that I am constantly asking questions. I can read a board deck in terms of what was churn, or what was logo churn, or what was revenue churn. What I’m really interested in is how competitive we are in the market. What is the intrinsic value that a company has that really drives exceptional success? I think to the extent, if customer success platforms enable boards to do that, they will have come a long way.
How do you segment your client base to deliver the right level of attention to every client?
Buffington: One of the businesses we own is a wealth management business. When we first started looking at data across the UserIQ platform, we essentially amalgamated, or group aggregated all the segments. And in our investor portfolio we had a basic view of how many people were checking their accounts daily, and looking at account balances of the total value of their marketable securities, the cash they had available, etc.
What we noticed is on days when the market was down, it was down. The volume, looking at those balances, spiked. Then, we went and said, “Well, gosh, what’s happening here?” And, we have clients of all different types of demographic segments, etc. What we noticed was that retirees who have a lot of time on their hands, they were looking at their account balances three, four, five times a day, particularly when the market was going down. But, then entrepreneurial clients that we had that were busy, they’re building their businesses, they weren’t checking at all.
What it has enabled us to do is empower a customer success workflow that we learned that on days when the market is down we probably need a TLC, or a customer care call to our retirees because they sweat out the ebbs and flows of the market more than the entrepreneurs who may not have even noticed that the market was up and down. That has allowed us to create a greater level of happiness and comfort amongst our investing clients within that business. Those are the types of things that we’ve leveraged the data to understand our customers better, but then build service, and customer success workflows that really augment our value prop, remind them that investing is a long term proposition, etc.
Stay tuned for more interviews in our ‘View From the Top’ Series to hear why other organizations are investing in customer success.
If you want to hear the full audio recording of Mark’s interview, you can listen to it here. Have questions about retention? Head over to our Success Masters Community to chat with like-minded C-Suite leaders.