How Startups Develop a Customer Success Strategy
Are you working hard to make your customers successful?
Do your customers love your product or do they tolerate it? To answer that question, you may need to ask another question:
How much work do you do to make your customers successful?
You can never have too much customer success, and you can never put too much effort into creating it. But to elevate your product from tolerate to love — or from “nice-to-have” to “must-have” — that takes more than just goodwill, friendly service, and timely support.
Customer Success is the newish name for a company’s collection of customer onboarding, retention, and upsell strategies. It’s probably the most critical factor for growth at any stage, and it’s one of the more misunderstood and overlooked concepts in business.
In 20-plus years of creating successful products, I’ve spent my fair share of time creating successful customers. Here’s what I’ve learned about developing an effective Customer Success strategy, whether your company is just getting started or you’ve already got a ton of customers in “like” with your product.
What is Customer Success and how do you get it?
Like I said, Customer Success is a collection of strategies to bring customers in, keep them in, and sell them more.
If you’re coming in cold to Customer Success, here’s a piece I wrote recently to explain it all in about five minutes. Customer Success is not a sales initiative, it’s not a support initiative, but it basically closes the loop between those two areas. It falls under product, and it touches almost every area of the company.
There is no single best Customer Success strategy for your company. There’s the best strategy for you, and there’s the best strategy for everyone else. How you establish Customer Success within your organization will depend on what your company is ready for and how your customers interface with your company.
So while there is no magic bullet, there are guidelines, and those guidelines start with goals.
What are the goals of Customer Success?
As it relates to company growth, the goals of Customer Success are:
- Get customers to experience value more quickly.
- Get customers to keep being customers for a longer time.
- Sell existing customers more product.
This ultimately results in getting more revenue out of your customers for less cost to you. That’s the key to scale, which is the fuel for growth.
Traditionally, these goals are tackled on the fly by either the sales team or the support team or both. If Customer Success has one overarching goal, it’s to take the above goals and make them repeatable, faster, and less expensive.
How does Customer Success achieve these goals?
There are two well-known metrics to measure progress towards growth goals: Cost to Acquire a Customer (CAC) and customer Lifetime Value (LTV).
Growth = LTV — CAC.
To get scale, you want CAC to go down and LTV to go up.
When you integrate customer retention into your growth equation, there’s an additional cost: Cost to Retain the Customer (CRC). Now your growth equation looks like this:
Growth = LTV — (CAC + CRC)
When you add CRC to your costs, every dollar spent on CRC has to produce more than a dollar in LTV. Or conversely, every dollar spent on CRC has to save more than a dollar on CAC.
So Customer Success develops strategies and tactics to reduce CAC and CRC, and other strategies and tactics to increase LTV. Sometimes a single strategy or tactic can do both, and that’s awesome.
How do you build Customer Success into your organization?
Customer Success should act in two ways: reactively and proactively.
Customer success should be reactionary in the sense that it analyzes what information comes in from support, sources weaknesses, and presents those weaknesses to product or development to solve or strengthen. So while customer support reacts to a negative experience, Customer Success should prevent those negative experiences.
A lot of early startups will stop at this reactionary phase, and build their Customer Success team out of customer support, because those folks are on the front lines and are the first responders on the weakness/solve side.
But that’s only half the battle. At some point Customer Success strategy needs to evolve into something more than “prevent customers from leaving,” because that’s not a growth story, that’s a survival story.
This is where sales should become part of the strategy, because they’re on the front lines of where customers are finding, accessing, and paying for value. This is where Customer Success can explore opportunities proactively, prioritize them, test them, and expose them, leading to more revenue and higher LTV.
That should give you in idea of an overarching strategy, and should give you clues about the team.
How does Customer Success fit into the organization?
In my experience, the Customer Success team is part of the product team, but has a dotted line to — or can even own — both sales support and customer support.
The Customer Success team needs to be able to onboard customers, train customers, support customers, and upsell customers. They should have some data or technical background in the science of your particular product, so they can produce realistic blueprints for solutions to weaknesses or use cases for opportunities.
To use a sports metaphor, the Customer Success team are your “glue guys” (or “glue girls” or “glue persons” — sports isn’t great about gender neutrality). What this means is that they also need to be able to interface with the people designing and building the product, acting as the voice of the customer as new features and new versions are planned.
The Customer Success team also works with operations, to make sure the structure of the company and company resources are best aligned to hit those growth goals.
What kind of data does Customer Success need?
In order for Customer Success to be effective, they need to be tracking the changes in Key Performance Indicators (KPIs) for the company. This means revenue, CAC, CRC, LTV, churn, support issue volume, time to delivery, time to value, and so on.
Thus, Customer Success should have access to all the data related to both sales and support. This data should include dates and dollar values whenever possible, so those deltas can be attacked — CAC and CRC can be reduced and LTV can be increased.
As your Customer Success strategy progresses, you’ll establish a more data-oriented approach to everything they do, and they should be integrating with Salesforce or Hubspot or whatever makes sense for your business. Eventually, you’ll want automate the capture of that data.
But don’t feel like your data approach has to be perfect out of the gate. You’ll refine it over time.
Ultimately, your Customer Success strategy depends on what your organization is ready for. There’s no need to delay getting started, as long as you know where you’re going. So start with the goals bringing more customers in, keeping them around longer, and selling them more, then evolve your strategy from there.
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