If we had a company genie, one of the things we'd wish for is an extra month between the end of our current fiscal year and the start of the next. It feels like every year we go from the stress of closing strong to the new stress of starting from zero again. Many of us stare at the $0 bookings amount on the first day of the new fiscal year and say, “How the heck are we going to make our numbers?”
It's easy to feel nostalgic for the “old days” before SaaS. Making the number was still hard then (and dramatic) but the playbook was pretty simple:
All jokes aside, as bizarre as the licensed software world was in some respects, the model was well-understood and translated from company to company. Even though we're now 20 years into the SaaS/cloud transition, most companies still run sales with an on-premises/license software mindset. Every bookings goal is about more “rep capacity.” But companies will miss their sales targets if they only use the old playbook.
The new playbook for sales is in fact Customer Success, in the sense that the SaaS/cloud businesses that grow quickly do so on the back of a business process that drives consistent and strong outcomes for clients. The four principal reasons for this are as follows:
Remember when you could start a company that sold to everyone? Build a database. Sell CRM. Create HR software. Nowadays, starting a company is so easy to the point that every big market is carved up into focused markets—verticalized, regionalized, segmentized. You can no longer build a growth model that is based solely upon hiring more reps—there aren't enough clients to sell to.
But hope isn't lost. With these smaller, fractured markets, you can have above-average economics by leveraging a sales force that is ten times your size and more than ten times less expensive—namely your clients. Why hire ten reps when you can “hire” 10,000 happy customers to sell for you? And in focused markets, everyone knows everyone. So make a client happy and when they switch jobs, they bring you along. Screw something up and they will kill ten new deals for you.
Advocacy isn't merely nice to have, it's essential, and it can be operationalized through:
and the biggest one:
Every CEO and CFO have that moment at some point. They look at the next year's financial model, they look at each other, then back to the model and say, “Wow. Our renewal number is bigger than our new number.” Unfortunately, too many companies try to make a diving save on Customer Success at that point. It's usually too late. It's funny, because that moment is eminently predictable. New sales don't grow forever, and at some point, customers > prospects. If you don't have Customer Success dialed in at that critical moment, you will miss your renewal number and have no hope of hitting your plan.
The SaaS financial model is fundamentally brutal. You incur costs upfront and get paid over time. It's the opposite of the license model, where customers paid you upfront whether or not they used your stuff. Ah—the good ole' days!
Every SaaS business eventually has to grow up and become profitable. Mathematically, it's almost impossible to do it solely through new customer acquisition. You need a high renewal rate to be profitable, but you also need to have cheap growth in the form of expansion. It's no surprise that nearly every highly valued public SaaS company has net retention of 110%, 120%, or more.
If you don't have Customer Success dialed in, good luck asking those clients for more money. Our recommendation: As we've been saying throughout this book, you should get started now and take it very, very seriously. This is your company's success we're talking about. People's livelihoods are at stake.
Now that we've discussed how the entire framing of Sales needs to change, let's discuss what Sales stands to gain from this. We've already discussed the impact of Customer Success on the growth drivers of a business—renewals, expansion, and advocacy that propels new logos—in Chapter 5. But there's more. The actual program of Customer Success can help you sell.
One simple test of whether you are establishing Customer Success as a differentiator is this: If Customer Success is not a slide in your Sales deck, you're not doing it well enough. In an ideal world, Sales is asking for this, not waiting for it.
During Sue Barsamian's 37-year career as an enterprise software and hardware executive and board director at companies such as legendary technology maker Hewlett Packard Enterprise, security software company Symantec, and cloud content management provider Box, she watched the tech industry's focus on Customer Success sharpen. After implementing Customer Success programs in two firms and working in conjunction with CS teams as a sales exec for several other companies, she's passionate about the need for strong Customer Success departments and believes in the measurable results they bring.
In particular, Sue sees the value of having a Customer Success program that's distinctive. Earlier in this book, we talked about the fact that it's much easier to build a product than it used to be, which means that your competitors can more easily catch up with your supposedly distinctive roadmap changes. That means that companies can't differentiate themselves based on their products alone; rather, they have to differentiate based on the success they're able to generate for clients.
But it's not differentiated enough to simply staff up a Customer Success team. “The simplest way is to dedicate your teams to the phones day in and out. Their priority is the customer—ensuring they get onboarded and optimizing their engagement and utilization level. That is table stakes,” says Barsamian. “There are countless ‘templates’ to spin up a Customer Success organization. So you often see a team dropped into place without customizing a playbook that truly suits the company, its values, and its customers.” That reluctance to dig deeper, to personalize your Customer Success program, means you'll be less differentiated in your market, and it will inevitably hurt sales, even if not immediately. To meet its bookings targets, the Sales team needs a differentiated Customer Success program.
So what does that differentiated program look like?
Tying Barsamian's point of view back to the language we used in Chapter 6, a distinctive CS program leverages a thoughtful methodology and ensures that all functions are working together within that framework to help the client achieve their outcomes over time.
That's great for the client, great for net retention and advocacy, and—more relevant to this section of the book—great for actually selling the prospect on working with you in the first place.
The game of selling totally changes, because you're presenting your company as a strategic partner to the client in driving their business outcomes. You're not just selling a product.
Being able to pitch a differentiated customer journey to your prospects sounds great to a sales rep. But the worry that this journey can help resolve—“Will I be able to win this prospect?”—can easily be replaced by a new concern—“Will I have control over this account post-sale?” As we discussed during the previous chapter on Marketing, the process of defining that journey and the many functions that are involved can create headaches about who owns what. Specifically, “Who owns the customer?”
When Allison thinks of this question, she thinks of a spat that she had with her younger brother when they were little kids: “I had a security blanket that I was very fond of. When my brother reached the age of two, and I was five, he would sometimes try to take my blankie. I would pull it back and say ‘This is mine!’ Andy interpreted that to mean that the word for blanket was ‘mine.’ So we'd have conversations that went like this: ‘Give me back my mine!’ ‘No, it's my mine!’ It's cute when toddlers have squabbles like this, but it's absurd when businesspeople do.”
Allison believes that the way some sales and Customer Success teams talk about “who owns the customer” resembles two toddlers having a territorial fit. In modern businesses, no one owns the customer. If anything, the company owns the customer—but we're sure the customer doesn't see it that way. Better questions are:
Both Sales and Customer Success need to engage with the customer. The question is, What's the division of labor for renewals and upsell?, a topic to which we've dedicated an entire chapter later in this book.
(As a side note, Allison and her brother made up after their fight and are on good terms now. He also has no recollection of their argument.)
Customer ownership becomes even more complex when you're selling indirectly through partners. Throughout this chapter, we've equated selling with a Sales team. But Customer Success isn't just for companies that have a direct selling model. It can be revolutionary for companies that sell through a channel as well. How can you share responsibilities with your partners to deliver success for your clients?
The key to rolling out Customer Success with channel partners is alignment—specifically, alignment on the customer's intended outcomes, on the touchpoints along the customer journey, and on incentives for the customer, vendor, and partner. When alignment happens, everyone wins. Customers get up to full speed more quickly, vendors earn more because they're not spending so much time hand-holding customers, and partners increase their margins and retention rates, home in on additional selling opportunities, and boost their competitiveness.
We're noticing a major paradigm shift in vendor–partner relationships, which leads directly to an ecosystem aligned around the customer's success. A world is unfolding where vendors and partners have:
Let's reflect on that for a moment. The entire fabric of the vendor–partner relationship is changing as a result of the Customer Success movement. Going forward, vendors will include their channel partners alongside internal functional stakeholders (support, sales, marketing, product, CSMs, etc.) as another primary contributor in the journey toward Customer Success. In addition, vendors will be expecting their channel to contribute to customer outcomes.
This direction is a radical shift. It's not happening overnight. We know that many partners simply cannot invest in proactive, nurture-oriented team members without seeing proof of reward. So it has become the vendor's responsibility to prove the value of the new paradigm with a few progressive partners and then extend it broadly.
Based on what we've seen from successful initiatives in the industry, here's our recommended six-step playbook for working with partners to drive Customer Success, which we designed together with Chris Doell, head of Global Customer Success, Cloud Security at Cisco.
As vendors encourage their partners to roll out CS programs, they must prioritize their time effectively across their partner ecosystem. Start with a small group of two to four people. Prioritize your partners based on these considerations:
Once you've got your small group, start a pilot. See what works well and what doesn't. Then expand your list.
Work with your prioritized partners to help them demonstrate that expanding their CS program is worth it. Most partners won't do this on their own. It's your job as the vendor to show the ROI. To that end, get a handful of partners to actually demonstrate ROI from rolling out a CS program. Help establish a small set of “early adopters” among partners to showcase the value to everyone else.
There are four sources of ROI to a partner: (1) growth in product revenue, (2) growth in services revenue, (3) new revenue from CS as a service, and (4) point of differentiation in attracting new customers.
If you're like most vendors, you're going digital by building 360-degree views of your clients, across usage data, Net Promoter Score data, support ticket data, community portal data, and other types. It's time to expose that data to your partners. Information-sharing should be a two-way street. Vendors are eager to hear partners' insights into their customers and can create systems to share that information. Vendors also want to hear their partners' feedback on the playbooks above and on the product itself.
Besides receiving enablement in the form of ROI models and customer health data, partners need three additional types of support from you (the vendor): training on playbooks, certification, and partner success managers. Some partners in particular need to raise their game because their paid adoption services may not be as robust as the free CS that the vendor offers. This can result in channel conflict, with customers abandoning the partner.
Be thoughtful in rolling out these enablement programs. Make sure that partners perceive them as a source of empowerment (bolstering the partner's ownership of the client relationship) rather than an intrusion.
Partners can extend your reach among smaller customers. When a vendor forms a CS program, they'll typically start by assigning CSMs to their enterprise clients. They often also assign CSMs to the midmarket segment, but may not have the budget to assign CSMs to the SMB segment. For many businesses, however, partners play within every tier of the customer pyramid.
Regardless of where vendor or partner resources are applied, it's always important to understand who is doing what. For each segment, what do you expect your team to do? What do you expect partners to do? Be specific! The key here is to protect your brand across the lifecycle. Make sure your partners use messaging that's consistent with and leaves a positive imprint on your brand.
Vendors want to hold partners accountable. They want visibility into their partners' compliance with the recommended playbooks. They also want to see partners generate real value for customers. In fact, many vendors plan to pay partners based on their success in driving outcomes and growth in the installed base. Some vendors start simple, by paying partners based on renewals—not just new logos. Others are more advanced, paying their partners based on leading indicators of renewal and expansion, such as license utilization, active users, or client health score. The proof is in the pudding. Whatever metrics you use, the effectiveness of the CS investment must be measured.
This evolved payment model makes Step #3 (sharing customer data) even more important. Vendors and partners need a common system that's a source of truth for the data that informs payments. Furthermore, these KPIs should be mutually agreed upon in advance, reviewed together at regular intervals, and objectively measured and documented. Write everything down! While these steps require some effort and investment in a shared toolset, they're critical to aligning the vendor, partner, and positive customer outcomes.
We've spoken in this chapter about how a differentiated Customer Success program can be useful to Sales. But we also know that Sales has a new role to play in helping Customer Success generate outcomes for clients.
Karthik Chakkarapani knows a thing or two about digital transformations. At Salesforce.com, Karthik helped customers with their CX reinventions. And as VP, head of CX Digital Transformation and Technology Strategy at technology giant Cisco, Karthik is helping the company reimagine its customer experience. Karthik sees Sales as having a big role in Customer Success and Experience.
At a tactical level, CSMs need a lot from their sales counterparts. “We want the sales team to capture the use cases and business priorities the customer is looking for as outcomes. In addition, we need them to track the contacts at a use case level so we know with whom we are working.” If the CSM doesn't know who bought and why, they don't know where to start.
From a strategic lens, CS is a lot more than just CSMs; actually, it includes Sales. “Everyone at Cisco is in Customer Experience—sales, support, delivery. That's the vision.”
Customer success is becoming more of a revenue driver than ever before, and that trend shows no sign of stopping. If you don't have a strong Customer Success program, you'll struggle to stand out, to get new customers, and to keep the ones you have. We laid out a plan for increasing your upsell and detailed why collaborating with your partners can (and should) drive your revenue upwards.
In Chapter 12, we'll examine why you'll be more successful as you focus on customer outcomes as a critical parameter for your CS team.