Customer Success Management and the Critical Path to SaaS Renewals
Poor user adoption and the lack of perceived value by customers is the greatest challenge faced by SaaS vendors. Quite simply, a customer that is not using your software and not realizing measurable business value from their IT investment will not be your customer for long.
Editor’s note: This is the first post in a three-part guest series by customer success management & IT user adoption expert Jason Whitehead, CEO of Tri Tuns.
SaaS vendors, recognizing that customer retention is critical for growth and profitability, are investing heavily in Customer Success Management (CSM) programs. These CSM programs are charged with the ambiguous goal of “making customers successful” so that customers renew their contracts and (hopefully) buy more. The challenge is most SaaS vendors don’t know what they need to do to drive customer success or where to even begin building an effective CSM capability.
In truth, Customer Success Management has as much or more to do with the people, processes, and organizational development of your customer as it does with the actual system you are selling. In this three-part series I hope to take a broader, more strategic look at customer success and shed some light on how you can focus your efforts to deliver the results you and your customers require.
Success is from the customers’ perspective.
There is a lot of conversation in the CSM community about where to start building a CSM team. The tendency is to spend a lot of time talking about who should lead the CSM team, whether the CSM team should have renewal goals or not, and whether it should be part of the sales or service departments. The discussion also often centers around how to measure the performance of the CSM team and how to compensate CSM staff. In short, most of the conversation seems to be more about how to make the CSM team successful than how to make customers successful.
Setting out to build a CSM team based primarily on an internal focus and internal parameters is as pointless as trying to Feng Shui the deck of the Titanic. Sure, you can do it, but it probably won’t solve your problem. A far better starting point is seeking to understand how and when your customers determine if they are successful.
Initial purchase decisions are based on hope. Renewal decisions are based on experience.
When your customer makes their initial purchase decision, they are buying your software based on their hopes and expectations that in the near future they will realize tangible business benefits from its use. All of the evidence they consider – marketing information, product demos, references from previous customers, reviews on social media – all contribute to their expectations for the future.
This is very different from how customers make renewal decisions. The decision to renew is based on customers’ actual experience working directly with your product in their organization. If the customers’ experience is positive and the value they have received from using your software matched their expectations, customers renew quickly and easily. If it doesn’t, well, you know what happens.
Map the critical path to customer success: first for your customer, then for your company.
When do your customers succeed or fail? How and when do they know they are successful? What does it take for them to achieve success?
One of the first things I do when working clients that are implementing SaaS solutions is help the client executives map out the critical path from the time they decide to invest in technology all the way to the point at which they will declare their program a success. This exercise typically reveals that the client had initially defined success as “deploying on-time and on-budget”.
But when I ask them what constitutes success 5 to 10 years after go-live, the answer shifts quite substantially. Now the answer is typically some version of, “our employees have fully adopted the system and we are getting measurable business value from using the system.”
This shift in what constitutes success reveals two critical path items where customers struggle and where your CSM program needs to focus:
- The need to focus on driving effective, consistent user adoption.
- The need to help your customer realize (and measure) clear business value from their investment in your system.
Customers have transferred a portion of their user adoption risk to SaaS vendors.
One of the biggest problems organizations face is getting their staff to adopt technology and incorporate its use into their daily work activities. A system that sits unused is not delivering any value to the customer’s organization. This user adoption risk — the potential that staff will not adopt systems and business processes as they are designed — is perhaps the greatest threat to customer success.
Since customers will not renew a system that is sitting idle, and since you (the software vendor) need customer renewals in order to grow, you now share a portion of your customers’ user adoption risk. In many ways, customers’ user adoption risk translates into your renewal risk.
Develop a CSM capability that moves customers along the critical path to success.
When you go to build your CSM team, you need to have a clear view of your customers’ entire critical path to success. Map out what it would take for your customers to drive and sustain full user adoption of your system over the next 10 years. What you will find is that there are a large number of technology, people, process, culture, and organizational dynamics that all impact customers’ adoption of your system.
Once you understand the critical path to success, you need to figure out where customers are getting stuck and why they struggle to move forward. You will find that a large number of these issues have nothing directly to do with your system. Yet you need to figure out how to get customers to resolve these issues.
You may think it is not your responsibility to help your customers resolve their internal user adoption issues, and in many ways you are right. But remember, while that may not be your responsibility, it is most definitely your problem.
In the next article in this series I will offer insights into how you can build a CSM team that helps customers minimize user adoption risk and maximize customer success. See that post here: How to Develop a Cohesive Customer Success Management Strategy.
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The importance of customer lifetime value (CLV) can’t be overstated. If you want to increase your CLV, then you should start by investing in customer success.