Churn is a fact of life for any business. It contributes to a lower topline/bottomline and valuations, and can cost many a job. In the SaaS world, where customer lifetime values are realized over the course of several contract terms, this can be especially debilitating. But what if you could take this universally reviled term, and turn it into a positive? What if you could go from “Churn” to “Negative Churn?”
Negative Churn is when the revenue decrease due to lost customers is more than offset by the revenue expansion in the remaining accounts. The impact it can have on your business is truly fascinating, and the transformation it can bring about is incredibly powerful. But what can companies do to attain Negative Churn?
An Evolving Approach to Account Expansion
Over the last few decades, there has been an evolution in Sales strategies to grow accounts. In the early days, sales was built around dedicated account management, where the account manager was responsible for the initial sale, and for future expansion/upsell/cross-sell. This worked in the early days of enterprise deals when software was primarily on premise and deal sizes were in the high-six and seven figure territories.
The emergence of SaaS coupled with a shift to a subscription model, meant that deal sizes were significantly smaller and that the value of the sale was realized over multiple terms. This necessitated a change in the Sales strategies. As companies realized that it required a different approach to grow an existing account, they started forming specialized teams comprising “hunters” who focused on new account acquisition and “farmers” who focused on expansion.
Account expansions happen in one of three ways:
- License expansion: Focus on selling more seats. Most SaaS vendors use this strategy to expand their accounts.
- Higher utilization: Some vendors charge based on utilization – think Dropbox, AWS, Evernote, etc. Typically, these vendors create “packages” that combine utilization with seats and strive to push their customers on to more lucrative packages.
- Cross-sell: Most vendors offer modules that are optional but add significant value to their core product offering. Sometimes, these are adjacent product suites (often acquired), that are engineered to work well, if not seamlessly, with each other. Think Salesforce and the growing number of clouds they offer.
Vendors need to carefully time their efforts to grow accounts. They need to make sure the customer is amenable to a pitch, and willing and able to engage in a conversation about expansion. In the early days, this was often a shot in the dark, and depended very heavily on the intuition of the account manager, or on generous incentives, leading to an erosion of margin.
Profitable Account Expansion: A Focus on Customer Service
In many ways, the emergence of SaaS has lowered the barriers to exit, and the increasing array of options has increased the propensity to exit. This has led to a growing recognition that a great product alone cannot ensure success unless it is accompanied by great service, and that customer satisfaction is critical to profitable account expansion.
As a result, companies have changed their approach to customer service. Successful companies realize that they need to become “trusted advisors” to their customers, and that this cannot be achieved by a commissions-driven sales team. They realize that customer success goes beyond a quick resolution of support issues. Applied right, this philosophy significantly simplifies the conversation about expansion, and can often lead to the product selling itself. It goes without saying that healthy, and often growing, margins happen automatically when the customer is highly satisfied.
As companies endeavor to become these trusted advisors, we are seeing the emergence of a new “Customer Success” function at most companies. Even though the exact definition of this role varies, the core philosophy is built around delivering a superior experience to ensure customer success, which in turn, translates into superior business results. It reflects the realization that customer success is a critical leading indicator of account growth, and requires a sustained engagement with the customer.
A New Approach to Customer Success Automation
Regardless of the definition of their role, customer success professionals need a robust set of tools that give them a well rounded view of the customer throughout the customer lifecycle. They need access to best practices, libraries and playbooks that help them adopt a systematic approach to customer management. In addition to providing a better customer experience, these tools should enable them to expand their accounts faster, turning the power of Negative Churn into a positive growth story. This is where a Customer Success Automation (CSA) platform comes into the picture.
Get Negative Churn. Get Success.
A CSA solution starts with a robust, standards-based integration engine, with several typical integrations pre-built, which enables it to bring in data from disparate internal and external systems and present a well rounded view into the customer as a whole, across the customer lifecycle. A sophisticated product usage tracker rounds out the relevant data about the customer. A powerful data science engine that uses advanced techniques such a cohort analysis, clustering analysis, propensity analysis and sentiment analysis delivers real-time service personalization based on behavioral analytics and product utilization.
The solution should feature an extensive library of best practices and playbooks developed over the years helping companies interact with customers and prospects around the world. These best practices and playbooks guide users to optimal actions at critical moments of truth to fully unleash the potential of the relationships with their customer.
The solutions should enable every employee of the vendor to have a unified view of the customer, albeit with robust controls built in to protect sensitive data. This enables companies to deliver a consistent and coherent experience across the customer lifecycle, throughout the entire organization, and across every single touchpoint with the customer.
This is a 50,000 foot overview of an emerging area that is going to revolutionize the way companies interact with their customers. In the coming weeks, we will be taking a closer look at the customer success function, and how we are going to revolutionize it.
Welcome to the age of customer success!