In a SaaS startup, customer success has grown immensely in the past decade. It is considered equally important as the product, engineering, marketing and sales functions. It is understandable that when the startups are in their beginning stage, they mostly focus on product development. Once that is done their focus expands to marketing and sales teams.
It is only after they acquire a substantial number of customers and see a few cycles of churn within months or a year do they start thinking about customer success. The biggest objective they have in mind while implementing customer success is to retain customers.
After they have made their product to the best of their capacity, have applied all marketing strategies to acquire new customers and when they are still looking for avenues to expand their revenue. It is then that a SaaS startup starts considering to build a customer success team. The logic is simple – they want to increase their customer lifetime value (CLV) by retaining them for long-term.
The benefits of customer retention are two-fold. First, the customer acquisition cost has to be recovered completely. Second, the opportunities for business expansion with existing customers have to be tapped fully. According to research, it is five times more expensive to acquire a new customer than to retain an existing one.
Why to implement customer success after the 10th customer?
Most of the SaaS businesses make a common mistake by not learning from the mistakes of others. During the initial growing phase their focus is completely on acquiring new customers. What they don’t realize is they must have an impeccable servicing team as well for retaining those customers. Otherwise their acquisition cost will not be fully recovered before the customers discontinue the service. Let alone tapping the opportunities for further business.
A customer doesn’t just decide to terminate their relationship overnight. It happens through a series of bad experiences while interacting with your organization. A typical churn funnel may look something like in the below exhibit.
So, if your focus is not on improving the internal servicing team and building relationships with your customers then there would be an inevitable leakage in your revenue stream.
Only after reaching a certain level of maturity can you start identifying further areas to improve in your business. For example, with 10 customers onboard, you can easily start to identify the common problems they are facing. You must have a model to engage with them regularly in a fruitful manner that adds value to their business.
How to implement Customer Success
Now that you have known the best time to implement Customer Success, basically in the beginning phase to act as a preventive measure rather than fire-fighting. Let’s have a look at what measures you can take to implement it in your SaaS startup.
Build your team and give training
Depending upon the size of your organization, you must hire Customer Success Managers, CS leaders or even Chief Success Officer. Although Customer Success is a growing business function in modern companies, it is more of a philosophy as well.
Once you have established your team, you must ensure that this philosophy is imparted to every other team as well. Everyone from other teams must think from the perspective of a long-term customer. E.g. Your sales team should be told not to make over-promises to customers just to reach their sales target. Likewise, the product team can design the UI keeping the early adoption of the product as an objective.
Create an engagement model
Based on the number of customers you are catering to, you should create a high-touch or low-touch engagement model. It also depends on the complexity of your product. If your client needs regular interaction with you, especially during the initial phase, then you must maintain high-touchpoints with them.
You need to attend their day-to-day queries in order to resolve their specific issues with your products. A growing SaaS startup should usually maintain a high-touch engagement with their clients to nurture a strong relationship. As a business owner you must ensure that you recover the cost of maintaining high-touch engagement from the revenue generated by the customer.
Implement retention strategies
This is where you need a long-term strategy in place to build a positive work relationship with your customer. You have to be patient enough to add your contribution from time to time to your customer. Your efforts must be directed towards making them realize the value out of your product.
Apart from maintaining the relationship, you must also take help of the useful metrics to quantify the results. Are the customers engaging regularly with your product? Is the spread of features they are using is evenly distributed? How much time they are spending actively on your app? These are few of the metrics you can draw from their real-time usage data.
And according to these data you must proactively reach out to them for driving further engagement. A fully engaged customer who is driving great value from your product is less likely to churn.
At a SaaS startup, an early recognition of an at-risk customer is always wiser than a last minute surprise. In fact, a research by Esteban Kolsky reveals that customers do not often raise their voice when dissatisfied with your service. Only 1 out of every 26 customers gets vocal about their dissatisfaction.
If you will ask me what is the one thing that differentiates customer success from traditional processes then I would say it is the proactiveness rather than a reaction-based approach. Since this philosophy works on taking preventive measures for customer retention, the best time to implement itself should also be right from the beginning.
The moment you have crossed your 10th customer, you should identify that there is a community that is growing along. Hence, the need of having a great framework to serve your customers becomes indispensable.
A SaaS startup can only be working at its highest potential if it has a strong CS team in place. The strategy you implement for building long-term relationships should be patient and consistently value-driven. Only then can you ensure that your firm is on the right path towards long-term progress.