Apr 28, 2016

Read Time 6 min

Avoiding the ‘where did we go wrong’ moment, Millennial Customers and the Customer Success Tipping Point


As professionals who deal with customers every day, we have all, at some point, faced a situation which made us wonder: where did this relationship go so wrong? And this is usually followed quickly by: can this relationship even be saved?

Correcting and avoiding customer success failures starts with remembering a lesson we learn as children: put yourself in the other person’s shoes. It’s important to reply conversations from your customer’s perspective, actively looking for things you missed before; this practice can help you avoid easy-to-miss customer success blunders like these:

  • Misspelling/mispronouncing customer’s name: Nobody likes being called the wrong name, especially a customer who has already provided their correct personal details. Not only is this tiny detail insulting, but it will be a clear indication of how little you care about the details for your customer.
  • Declining help with no context: Customers expect their customer success manager to be a strategic partner that unlocks value from their product and if you don’t help when a customer needs it, the whole purpose of having a customer success team is lost. You might have good reasons – company policy, terms and conditions, manufacturer’s responsibility – for being unable to support them, but if you simply decline to help without any context it reflects poorly on your brand.
  • Shifting the blame: If a customer has made a complaint regarding a product or service failure, shifting the blame back to the customer is one of the worst things you could do. Never use phrases such as ‘you should have….’, even if the customer was at fault. You can’t expect all customers to be fast learners; some may have forgotten how to use your product or – for all you know – they were just having a bad day.
  • Broadcasting, rather than engaging: Customers, both new and old, are bound to face problems. If you don’t engage with them regularly, you will never get to know that they were unhappy and before you know it, they would have switched to your competitor. How do you stop this? Regularly engage with your customers, see if they need any help or are unhappy with your product/service. A lot of companies seem to focus more on automation, FAQ pages, product handbooks, and complicated support pages. But in reality, they make customers feel frustrated, because most of the time they sound as if they were written for a machine. Combined with a human touch, these resources can be used far more effectively.
  • Having a one-channel customer success strategy: Consider this situation – an unhappy customer tweets to your company account about an issue they are having. Marketing or support forward the issue and you decide to schedule a call. In that time, the customer has already emailed and called customer support. Ignoring where your customer communicates is an easy way to rest assured that this particular customer will switch to your competitor at the first chance he gets. You must bring customer success to where your customers communicate. And it is very important that you empower your frontline teams to solve problems quickly, and possibly at the first touch point.
  • Questing a customer’s perception of your product: This is a serious offense – it is almost like you are insulting the customer’s intelligence. As a CSM, you are a partner, not a boss. Questioning customers intentions and offering them unsolicited advice can easily make them annoyed or confused. For example – If a customer wants something to be done in a particular way, which might not seem logical or productive to you, learn about what they actually want to do and find a way to guide them to the right path. Do not offer general advice or warnings. The more involved and detailed your guidance, the more your customers will respond.
  • Not acting on customer feedback: Customer feedback is a great way to understand where your business lacks, and how it can be improved; or where you are strong, and how to sustain it. But if you don’t take it seriously, most customers will take it as an insult because they took their time and effort to convey that to you. You must guide and embed customer success into the product/development strategy so that you can continuously incorporate feedback — even if not immediately.

Hiring early + measuring constantly = a successful CSM team

If Customer Success is new to your company, setting your new team up for success is undoubtedly a top priority. While there’s certainly lots lots of advice out there about kick-starting a CSM team – including this great list of your first five To Dos – much of the advice about this uber-critical role can be boiled down to two key points: hire early and measure constantly.

When it comes to hiring CSMs, you’ll find that most SaaS companies use a rough metric of one Customer Success Manager for every $2m in ARR.  But a super critical piece of advice: don’t wait until you hit $2m in ARR to hire your first! Hire your first CSM as early as you can afford to, as soon as you have even one large customer or even a handful of medium-sized customers.  You can hack it until then with customer support, sales and yourself.  But your bigger customers are going to need more help than that and more proactive (vs. reactive) help.  So hire your first as soon as you can.

Once you have the beginnings of a team, it becomes all about measuring results. There are two key metrics to watch:

  • Renewal Rates: The first metric you want to watch is renewal rates – and you should be shooting to increase these rates on a rolling basis over every quarter. While optimal renewal rates will vary a bit by customer size, on average most SaaS companies see renewal rates on base revenue and base customer numbers of 80-90%. So first you should measure your rates and establish a baseline – then you should work to improve that baseline.
  • Net Churn: Net Churn is the total revenue from the customers under management by your CSM team. To calculate it, track all the revenue from your existing base, subtract the lost revenue from churn and add in the new revenue from your existing customers. Net Churn can be a bit confusing though, as it should be negative for SaaS apps selling to SMEs and larger. It can be simpler just to measure the total revenue growth from your customer base. A typical target is 110-120% net annual revenue growth rate from your base, including both churn and upsells. It may be more or less for you, but baseline it and try to grow it.

Make sure you are also promote the results of both these metrics across the entire company, just like you do new sales.  Also be sure to tie bonuses and comp to success on both metrics. In the end, what you are doing is promoting Attitudinal, rather than just Behavioral, loyalty.

The year of the Millennial Customer

For the past few years there has been a lingering, misguided perception that Millennial Customers aren’t customers worth pursuing. In reality, it’s becoming increasingly important for businesses to move beyond this out-of-date view; Millennial Customers are an enormous commercial force to be reckoned with, commanding both trendsetting power and tremendous spending power as well. And this millennial spending power encompasses both their own personal spending as well as business spending as millennials move into positions in industries with significant spending power.

Harnessed with this knowledge, Micah Solomon of Forbes offer some fascinating insights into millennials as customers that all Customer Success teams should seriously consider as they design their customer experiences. Here are three that hit home hardest for us to get you started but the entire list is certainly worth a read.

  • Millennials demand self-service, algorithmically, and crowdsourced customer service options: Building the right experience for this new generation of customers requires you to think hard about an uncomfortable subject: where human employees are helpful to customers and where they just get in the way. Younger customers, through years of experience with online and self-service solutions, have grown used to the way technology can reduce the need for human gatekeepers to ensure accuracy and manage data. So the last thing they want is for your employees to gum up the works without adding value.
  • Paradoxically, millennial customers also crave a true, authentic, personalized experience as customers: Millennial customers crave the joys of adventure and discovery, whether epic or everyday. Millennials often view commerce and even obligatory business travel as opportunities rather than burdens, due to the adventures that can be had along the way. For example, when millennials dine out, they’re often in search of something exotic, adventuresome, memorable or new to explore during their dining experience. This has helped transform cuisine searches (“tastespotting”) into an adventure—and food truck-following (a concept sure to evoke fears of stomachache in some of their elders) into its own culture.
  • They care about your values as a company – Millennials integrate their beliefs and causes into their choice of companies to support, their purchases and their day-to-day interactions. More than 50% of millennials make an effort to buy products from companies that support the causes they care about, according to research from Barkley, an independent advertising agency. When you consider how money-strapped many millennials remain, their willingness to put a premium on such issues is striking. And millennials are concerned with more than political and ethical issues. They also care about what’s genuine and authentic. This interest falls somewhere between a purely aesthetic preference and a search for honesty, for truth. And it’s a powerful force for motivating millennial customers.

Intrigued? You can learn even more about attracting and retaining Millennial Customers in Solomon’s Forbes Signature Series book, Your Customer Is The Star: How To Make Boomers, Millennials, And Everyone Else Love Your Business.

Word to the Wise

This week’s wisdom comes from the brilliant Malcolm Gladwell, author of the best selling book “The Tipping Point: How Little Things Can Make a Big Difference” (if you’ve never read this book, stop everything you’re doing a go find a copy!).

Gladwell takes the stage in this interesting video lecture and offers fascinating stories that provide a glimpse into the developing world of customer success and – you guessed it – the tipping point for customer success. Bringing in various historical examples, he discusses the power of directing your company’s focus on the customer and leaving it there: “You’ve got to transition from a transaction model to a relationship model and it’s very easy to talk about but it’s really hard to do.”

If you do nothing else with your Friday, take 30 minutes to watch this video. It can definitely benefit every customer success manager out there no matter how experienced or inexperienced.


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