Managing Customer Success to Reduce Churn




The health of a SaaS business is directly tied to its ability to retain its customers and prevent churn. To do this, they have to ensure that their customers are happy. That means making sure they get the promised business benefits they signed up for. This blog post discusses how to measure customer happiness, and how to actively manage your business to achieve it. It also looks at the newly emerging Customer Success function.

Many of the ideas in this post came out of a meeting that we held for Customer Success executives in Matrix Partners portfolio companies. I would like to thank the participants in that meeting for their contributions to this post as well as Guy Nirpaz at Totango, and Nick Mehta at Gainsight.

Quick Re-Cap: Why Churn is SO important

In this blog post I discuss “Why Churn is SO critical to success in SaaS”. Here is a short summary:

To borrow a slide from Guy Nirpaz, the CEO of Totango: if you are in a recurring revenue business, most of your revenue comes after the initial sale:


Replacing churn with new bookings becomes harder and harder as you scale

In the diagram below, I have shown an example SaaS company in its third year with $10m of recurring revenue to renew, and then the same company in its sixth year when it has $100m to renew. I have shown a 2.5% monthly revenue churn rate, which amounts to a loss of 30% annually.

As you can see from the left hand chart, when the business is small, the amount of money lost due to churn is only $3m. This is not so serious, and can be fairly easily be replaced with new bookings. However, as you see in the right hand pie chart, when the company gets larger, the amount being lost to churn becomes huge. Finding an additional $30m in bookings just to stay at the same revenue level as the previous year is a huge problem.



There are two solutions to this problem:

  1. Reduce Customer Churn
  2. Achieve Negative Revenue Churn

Negative Revenue Churn comes when the expansion or upsell/cross sell revenue from the customers that don’t churn exceeds the revenue lost from the customers that do churn.

For more details on what it takes to get to negative revenue churn, you may want to read this post: Why Churn is SO critical to success in SaaS.

And, for information on how to calculate LTV when you achieve negative churn, I have written an article here: What’s your TRUE customer lifetime value (LTV)? – DCF provides the answer.

Public company investors have become very savvy about the importance of churn, and will pay a premium for stocks where the revenue churn rate is negative or zero.

To Stop Churn: Make Your Customers Happy

This much is obvious: if you want to stop your customers from churning, you will need to make them happy with your product/service. However what is less well understood is what makes a happy customer? Many SaaS companies believe this comes from engagement and usage of the product. However I believe they are on the wrong track, and I’d like to move the conversation to a higher plane. Customers bought your product to get a clear business benefit. To make them happy, I believe that you need to make sure they are getting the business benefits they hoped for.

This presents an interesting change in thinking for many startups. Because most startups are created by passionate product people, they tend to fall in love with their product and its features. Often this means that they lose touch with the simple messaging around business benefits. For example, let’s take one of my better known portfolio companies: HubSpot. HubSpot provides many interesting product features such as SEO, blogging tools, social media tools, a contact database, lead nurturing tools, email tools, etc. It’s easy to get carried away with making sure that the customer is using each of these tools. But in doing so we are losing sight of the key reason that the customer bought the product in the first place. I believe that HubSpot’s business value can be quantified in two simple sentences:

  • Get More Leads
  • Convert more of your leads into buying customers

If you were to ask any CEO if they want these benefits, I believe over 99% of them would say yes. But if you were to ask that same CEO if they were happy that their marketing person had spent five hours using a bunch of different features, they would likely ask why they were spending so much time, and they would want to know if there was a return on investment for all that time.

So a great starting point for making your customers happy is to make sure they are getting the business benefits that caused them to sign up in the first place. For some startups, this will mean taking the time to figure out a really simple way to express the key business outcomes that their product will deliver. That message should resonate with the CEO of your buyer if you had one minute to describe it to them in an elevator.

Quantify the Business Outcomes

Once you have identified the key benefits, ask the question of whether these can be quantified. Then ask the question: what numeric value would constitute success. i.e would 5% more leads be a good outcome, or would it take 50% more leads to make the customer happy?

Other Elements of Customer Happiness

There may also be other elements that make for customer happiness:

  • There is a clear return on their time and money invested in using the product
  • The product does not frustrate them with bugs, data loss, slow performance, irritating user interface, etc.
  • There are no key missing features, or integrations with other products that they use
  • They get good customer service when they call in to get help
  • Other – (I would be interested in readers’ comments on other key items)

Happy Customers bring one other key benefit

Happy customers refer other customers, which are your best leads. Again to borrow a slide from Guy Nirpaz at Totango:



Measure Customer Happiness/Health

“If you cannot measure it, you cannot improve it” – Lord Kelvin

HubSpot may have been the first company to introduce the notion of a measurement to predict churn with their CHI score (Customer Happiness Index). The CHI score measured which parts of the product each customer was using, and awarded a higher score for features that were thought to be more sticky.

They had quickly realized that SEO was not particularly sticky, as the customer would do a lot of work in the early days, but after setting their site up correctly, they would have gained most of the benefits. Many churned at that point. However if the customer had hosted their blog with HubSpot, or was using HubSpot’s Contact Database to track customer details and behaviors, those were sticky features, and would make it harder for the customer to churn.

Recency and and frequency of activity would also help provide a good indicator of customer engagement.

However HubSpot soon found that although useful, CHI was not a great predictor of churn. Just because someone was using the product, they were not necessarily happy with the product.

But they were still on the right track: we need to find a way to measure customer happiness to be able to find unhappy customers and take corrective action before it is too late.

A possible solution: Quantify Business Outcomes

The following has not been proven, but I believe that a big part of measuring Customer Happiness is not to measure feature usage, but to measure business outcomes. For example, it’s not really relevant to see how long someone spent in the SEO module, but it is relevant to see whether they have increased their web site traffic and leads.

In an ideal world, we would measure the exact number of additional leads HubSpot was generating, and also the improvement in conversion rate. Then we would have the ability to show a clear return on investment for the time consumed and money spent.

These quantified business outcomes would enable HubSpot to measure the ROI their product was delivering to the customer. Sometimes using a product takes hard work and lots of time in addition to the money spent. e.g. the time and effort spent to create a good blog post is not  trivial.  Knowing you are getting a good ROI makes it far easier to sell the customer on why continuing to do that work is worthwhile.

This quantified ROI also makes for a perfect monthly or quarterly email to the business owner to keep them aware of how your product is delivering results, thereby pre-empting the question: “Why are way paying so much money for this service, and do we really need it?”.

The complete Customer Happiness Score

In addition to measuring the business outcomes, the complete Customer Happiness Score would also likely need to take into consideration the other items we mentioned above:

  • The product does not frustrate them with bugs, data loss, slow performance, irritating user interface, etc.
  • There are no key missing features, or integrations with other products that they use
  • They get good customer service when they call in to get help

It is also perhaps worth stating that what we are really looking for is a Churn Prediction score, not just a Customer Happiness score. There are some other indicators that can be useful  if you are trying to predict churn:

  • Are they paying their bills on time? This is also an indicator of the customers’s financial health.
  • Is their contract coming up for renewal?
  • Who is the key user and key sponsor and have their roles changed? Having your power user or your sponsor leave is a big problem, tracking that relationship and their role or position at the company can be a key indicator.
  • Are they engaged in your customer community? Are they coming to your user conference? Are they subscribed to your emails?
  • Are they referring other customers?

Managing Customer Success: a company wide effort.

Now that we have a way to measure Customer Happiness/Health (or likelihood of churning), we can start to look at ways to manage and improve this.

Let me start by saying that managing churn and customer happiness is not a simple function that can be handed off to one department of your company.

Managing Churn & Customer Happiness is not a simple function that can be handed over to one department.

Customer happiness is impacted by nearly all departments in the business:

The obvious contributors

  • Customer Support
  • Customer on-boarding, consultants
  • Renewals sales team

Less obvious contributors

  • Pricing – needs to reflect the value received by the customer
  • Product Management: not just the right features, but also coming up with pricing axes, and up-sell options to get to negative churn
  • UI and UX designers
  • Product Development
  • Quality assurance
  • Training & Documentation
  • Operations – responsible for uptime and application performance
  • Sales – can damage customer happiness by over-promising
  • Marketing – can also set the wrong customer expectations

Given all of the above, how do we go about managing Churn and Customer Happiness?

The Holistic and Specific Approaches

Given the holistic nature of the problem, we clearly need a holistic approach that makes sure each department understands their role, and how they contribute. This starts at the very top of the company, and needs the CEO to articulate the importance of Churn and Customer Happiness to the entire company. This should go a step further, by having the CEO provide each department a clear indication of how they contribute, and asking for this to be measured, with quantifiable targets for each quarter.

Some, like product management, may be hard to quantify. But here it may be useful to go back to the key business benefits, and have them answer the question of why the features they are recommending will lead to clear, highly valued, business benefits. i.e. in the HubSpot case, will the customer get more leads, or better conversion rates? Or is there some new valuable business benefit? This will help prioritize competing features.

In addition to this holistic approach, there is also room for another important tactic: dedicate specific resources to the Customer Success function. This takes the view that unless there are dedicated people thinking about customer success all the time, it will not happen. Someone has to beat the drum and have it be their top priority.

Building a Customer Success Organization

Even though customer happiness is a company-wide initiative, there are two obvious starting places where we can help ensure lower churn:

  1. Dedicate individuals to focus solely on getting customers to the promised business outcomes by through better on-boarding, training, consulting, etc.
  2. Dedicate individuals to the job of ensuring that renewal sales happen.

These are the key starting functions to incorporate into your Customer Success Management (CSM) group.

As Nick Mehta, the CEO of Gainsight described at the Matrix portfolio company event, there are five ways that they have seen this structured organizationally:




Single Member Model: Firefighter CSM


The first model that we often see in smaller companies is a customer success management team, maybe one person initially. They might report into services, or they could report directly to the COO or even to the CEO. That team, that person in some cases, does everything from on-boarding to training, support, renewal, upsell, reference management, etc. That’s great, because in the early days, that person is your eyes and ears. If you’re the CEO, you should be meeting with them every week and listening to what you’re hearing from the customers, what’s working and what’s not. That team is a really good starting point to drive customer success.

The challenge is that it’s hard to scale. It’s hard to have one person that can do on-boarding training, up sales, renewals all together. It’s a great place to start, but probably not a great place to end up over time.

Sales Oriented Model


Another model is a sales oriented model where customer success is part of the sales function. People might call it customer success management, or renewals, or account management. It might report into a head of sales who runs both new business sales and existing customer revenue.

That works really well in businesses where you’re selling to smaller customers and the product is lower touch, where there’s less customization, less deployment. It’s less tied into a services function, and it’s more about a commercial renewal or an upsell. We’re seeing a lot of companies do this, especially if they sell to small to medium-sized businesses.

Service Oriented Model


You can also have customer success management as a function in services. Typically services has professional services that might do the on-boarding. You’ve also got training and support. Customer success management is a peer to all of those. We see this a lot in higher touch businesses where the product is more complicated, maybe the deals are bigger. Customer success management is like the eyes and ears into the customer, and like a traffic cop to bring in all the other functions as needed.

Sometimes there’s confusion for a customer of who to go to when. When do you go to the support team, when do you go to the training team? The customer success management person ends up solving that by being the traffic cop to direct you to the right place.

Integrated Model


In the integrated model you actually have a Chief Customer Officer who owns revenue for existing customers. Underneath them, they might have a customer success management team that’s very customer focused, and then a renewals team that’s responsible for actually getting the renewal. The customer success management team is all about adoption, and make sure customers are getting value. The renewal team is specifically focused on getting the renewal order.

The positive with this structure is that the CSM team is the customer’s friend and the renewal team is the sales rep. The customer still feels like the CSM is on their side, but there’s somebody that’s focused on getting the order that knows how to sell, and who is accountable for a quota. The two groups obviously have to work very tightly together. The Chief Customer Officer, at the end of the day, owns revenue totally from existing customers. And your Head of Sales ends up being totally focused on new business sales. That kind of focus is usually a good thing.

Split Model


The last model we see sometimes in typically the most mature companies is a renewal team that reports into sales that’s responsible for existing customer revenue, and a CSM team that reports to services. Despite the different bosses, they’re tied together at the hip and work side by side. They collaborate. There’s a little bit of an issue around who does what, as well as duplicate work in some cases. But this seems to work really well in more mature or larger companies.


Standardize the interventions when your customers aren’t doing well.

Now that we have a Customer Happiness/Health Score, we have a way to understand who is not doing well, and to take action.

There are different ways to think about doing this depending on the size/value of the customer. We recommend segmenting your customer base, and developing different tactics for each segment:

  • In the high-end accounts, consider a very consultative and high touch personal approach. This can still be highly data driven, to make sure you are only spending time with the customers that need it.
  • In your medium-sized accounts, consider an approach where you intervene just in time. i.e. just when the data starts to show that they’re going off the railroad tracks.
  • In your small accounts consider using as much automation as possible. i.e. use a system like HubSpot or Marketo to automate the outreach to your customers. These communications can be triggered by the data you are collecting to create your Customer Happiness score.

For the automated approach, look at triggering in app messaging based on usage patterns. For example if a customer has used part of your product, but not yet moved on to the place where they will derive the really powerful business benefits, then you may want to message them in the application itself, or by email, along the following lines:

“We see you have not yet tried the XYZ feature. By using that feature, we can deliver you the following business benefits. If you are interested in learning more, here is a video that shows you how it works.”

Totango have a slide that I like, shown below, that encourages the design of specific processes at each stage of the customer’s lifecycle:


Customer Success Management works for Free Trials as well

As the diagram above points out, the customer journey often starts with a free trial. At this point, even though they have not yet become a customer, many of the same concepts apply to making sure their trial is successful. In particular, it is important to figure out what a successful trial looks like, and to track the customer’s journey to make sure they get to the point where they have seen clear proof that the product works. The same tools we use to track product usage can be applied to provide that data.

Customers that are not succeeding may warrant calls or emails, and those that are succeeding are clear prospects for a call from the sales organization to close an order.

The Role of Marketing

One of readers was kind enough to point out something that I had left out of the original version of this post: the important role that marketing plays in Customer Success. Most think of marketing’s role as helping with customer acquisition, and the thought processes for how to do that are well evolved. However marketing can play a key role in helping make customers more successful, automating processes that are being done in a one-to-one human way by the customer success management team. Consider making this a new priority within marketing, with potentially dedicated resources.

The “Crown Jewels” Data Repository

As soon as you start to collect data about your customers happiness from a variety of sources, you will start to realize that you need somewhere to put all of this information. For some time now, I have been talking about the importance of building a database that contains the following two tables:



The Buyer Attributes table includes all the factual information such as Company name, revenue, vertical industry, etc.

The Behaviors table collects all the information that we know about their digital actions: which pages on our web site have they visited, how recent and how often, which emails have they opened, what features of our product have they used, have they submitted any support tickets, what orders have they placed, etc.

This data allows you to create customer segments, such as all large customers that have started a trial, and used this feature, but not that feature. That can trigger an automated message inside of the application, or an email.

It can also be used to look for predictive patterns. For example:

  • What customer attributes are correlated with high levels of churn?
  • What are the best indicators that a customer is a good candidate for an upsell to an additional product module?

Today these two tables exist inside of Marketing Automation products like HubSpot and Marketo, and additional data can be fed into them. Parts of them also exist in Customer Success products (see below). As a SaaS company, you will face an important decision: which of these will become your master for this data? As you progress further in your lifecycle, this data will become more and more valuable, and you should protect yourself from the potential for lock-in that could exist with the vendor that holds that data.

Customer Success Products

There are several startups that are focused on providing software to help manage customer success. I first wrote about these two years ago here: “SaaS CEOs: Measure Customer Engagement – Increase Conversions & Lower Churn”. Today the field includes:

And possibly others that I am not aware of. We are considering doing an updated review of these products in a future blog post. If the idea of this appeals to you, please leave a comment to let me know.


To summarize, here are the key points:

  • Churn is extremely important for success in SaaS
  • There are two ways to deal with churn:
  • Actively Manage Churn with focused efforts
    • A holistic company-wide awareness of the importance of churn, led by the CEO
      • Quantified departmental objectives for all important departments
    • A dedicated Customer Success organization
  • For the structure of the Customer Success organization, refer to the diagram below, and the article above to choose which is most appropriate for your company



  • To identify customers at risk, measure Customer Happiness/Health
    • Focus on key business outcomes the deliver the benefits that caused the customer to sign up, not feature usage
  • Use that score together with knowledge of when contracts are up for renewal to pro-actively ensure that customers are happy
  • Implement standardized responses to turn around customers who are not healthy/happy
  • Use many of the same Customer Success Management tools to improve the conversion rates on your Free Trials

Additional Resources: Customer Success Association and Success-con

The Customer Success Association presents Success-con, a series of events that explores the current state of the profession and offers a vision for what it might become in the future.  I’ve presented at their events in the past and think highly of the resources they offer. For more information about the conferences, visit  To learn about the resources of The Customer Success Association,

For more discussion on SaaS metrics and benchmarks, click here: Demystifying Churn: Measuring and Benchmarking this Metric.


I would like to thank:

  • Karen Rubin, an EIR at Matrix Partners, formerly a product manager at HubSpot. Karen helped organize the Customer Success event for Matrix Partners portfolio companies that led to this blog post. She also helped co-author this post.
  • The folks at HubSpot where I have learned most of my SaaS lessons
  • Nick Mehta, the CEO of Gainsight, who contributed most of the material in the section on Customer Success organizational structures, including the graphics.
  • Guy Nirpaz, the Founder and CEO of Totango
  • Mike Krupka, who has consistently reinforced the importance of focusing on business outcomes at a shared portfolio company
  • Other Matrix portfolio company customer success people who participated in the event.
About the Author

David Skok

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  • Laurence OToole

    Thanks David for another very insightful article – It’s a shame you’re not presenting at London SuccessCon! (That would have sold me a ticket).

    We focus our SaaS business around five key areas:

    Awareness – Inbound Marketing to generate brand awareness and to drive leads

    Acquisition – Conversion rate optimization to convert as many website leads to trials or paying customers.

    Adoption – Making the initial experience great, as well as the daily ongoing experience great (our internal metric is how fast can we get them to say “Wow!’).
    In fact right now we are planning a complete UI overhaul to get this right. Giving on-boarding support and training to the right high-value prospects and directing lower-value customers to webinars, videos, user manuals and our support forums. We’re also testing charging for packages of initial training and ongoing regular training services to assess the impact on retention and LTV (so far, so good). This team is also responsible for customer support (since a lot of queries are about how to do this, or feature requests) – they can then use this to produce resources that answers these queries for as many customers as possible to try and pre-empt more support cases.

    Conversion – Using skilled sales resource to convert customers that are adopting the platform to paying customers, to up-sell training and to right-size the package so they get the right level of package (without being oversold).

    Retention & Upsell – Again using specialist sales resources to manage this process.

    We are trying to get the stage where we have one owner for each area with a small set of focus KPIs. Of course where this becomes difficult is when you expand internationally and you have less resource available – this is exacerbated when you enter a market where they have a different language. At the moment we have 1 person focusing on all these areas in France…..that’s a lot of ground to cover!

  • Hi David,

    Another very clearly laid out post.

    I would hope that this would be obvious to heavy touch startups that are engaging with their clients at senior level.

    However, I can imagine how through treating clients as numbers the point can be lost.

    I think the biggest opportunity to capture the consumer happiness index (YUK) is at the point of signing – its good practice to elicit contacts, so a good question might be.

    Of all the things we promise (and we intend to deliver on them all), which would make you turn cartwheels of happiness if we deliver our side of the bargain. And – who would that enable you to recommend us to ?

  • SaaS Guy

    David, great article. My first company (starting in 2001) was SaaS Marketing Automation and I ran sales & Customer Success. I employed the firefighting model for CSM. I now run Biz Dev and CSM, and employ the same model. My goal is to find a way to make that model scale no matter how big we get (I think our deal sizes and the less complex nature of our implementations allow for this). In my opinion, there is something to be said about 1 person owning the relationship with the customer. Proactive service and support throughout their contract term is key to retention, and I believe the person responsible for providing this fanatical ongoing support over the long haul needs to have a financial incentive to do so. The Customer Service function rarely has true financial skin in the game …. this changes that. Therefore, my CSM’s get paid a % when the trial converts, and get paid big bonuses based on retention. To make this scale, I’ll likely need to hire junior CSM’s that end up supporting senior CSM’s with the backend work, yet the senior CSM retains the relationship and all communication.

    I also find that many customers don’t want to have multiple contacts, and the last thing I want is to have a rep come swooping in at the end to for a renewal (like the girl that only hears from the guy every few months when he wants a date). I have yet to prove this can scale to a large organization, but am hopeful.

    And on hiring …. It is harder to hire for this … you are right.

  • David – great article!

    For the benefit of the readers – here are some visuals that are mentioned in this article.

    Guy Nirpaz – Totango

  • That’s one heck of an article. Thanks.

  • Steve is an up and comer. Stay tuned for their official launch.

  • Nico Roddz

    David, this article is pure gold.


  • Ed Miller

    Excellent article … hard to go wrong if you’re establishing metrics to measure success with the client. Great way to marginalize relationship-based churn.

  • Mark

    Great blog as always David. Another factor that appears to contribute to retention is consistent product innovation / news. At Offerpop, we’re finding that this helps during renewal conversations.

  • Ed Powers

    Great article, David. However, I believe there’s a lot more to loyalty than satisfaction with features or providing business benefits. The Kano Model shares helpful insights about product and service attributes and the effect on satisfaction and loyalty–basics (“musts”), performance (“more is better”), and excitement (“delighters”). Assuming basics and performance attributes are there, the BIG WIN for loyalty (96%-98%) is in the “delighters;” offering the completely unexpected, thereby making customers raving, loyal fans. Some “Easter egg” features may fit in this category, but superb service is typically the stickiest loyalty factor. Why? Studies have shown that people repurchase from people they know, like, and trust EVEN IF THEIR PRODUCT IS INFERIOR. I think the challenge for the CSM role is to create three great customer moments systematically and in scale: “moments of connection,” “moments of truth,” and “moments of WOW!” Connection is really knowing someone–their business, their application, their personal preferences. Moments of truth are service recovery incidents, rising from adverse situations to regain satisfaction and build trust. Moments of WOW are doing something totally unexpected and over-the-top, demonstrating how important the customer is to the company. Do these things well (as I have in my previous subscription businesses) and SaaS companies can take loyalty to world-class levels.

  • Good point Mark. Thanks for adding.

  • Ed, great point. I love the notion of Delighters. I’ve personally experienced this, and it’s had exactly the effect you describe. Interesting to think about how to do that systematically. Thanks for adding this to the conversation.

  • Another great article. At Halogen Software our customer success team is part of sales, but we also have a marketing manager who is dedicated to marketing to existing customers. That’s not a structure that you’ve mentioned, but one that we’ve found works very well for us.

  • setxebarria

    great article! thank you

  • Mike – that is a very good point that I should have mentioned: the role of marketing. It was also one of the important changes that HubSpot made: getting marketing to focus on customer success/health in addition to winning new customers. I may add this to the post. Thanks!

  • Great article David.

    I specifically like the points about Marketing assisting post-sale towards the customer’s success.

    Many companies are using content marketing–and specifically content that informs their customer as opposed to content about their own product–to acquire new customers.

    We’ve seen a great best practice in customers using this content post-sale, to continue to educate them and help them be successful, again, around their business objective, not the product.

    This is a great way for Marketing to assist with Customer Success.

  • Thanks for the validation Tony.

  • Laurence, thank you for sharing your experiences. I know other readers will appreciate this.

  • Rachel English

    Love the article, especially the discussion around quantifying and measuring the value customers gain from utilizing an application. I agree that it’s a shift in thinking for many companies, and believe that is in part because customer ROI is complicated to measure well. It requires layering together multiple data inputs that are all too often siloed in most businesses.

    Ultimately, you can’t get to the ROI without including both the I and the R in the analysis. You need to know what your customers are investing, in terms of both money and time, as well as a quantitative measure of what they are achieving that they were not able to achieve without utilizing your product. This means that you need to have subscription data (MRR, plan level, etc.), product usage data (frequency, duration, features, etc.), resource usage data (support, training, knowledge base, community, etc.) and product metrics (record counts, event counts, etc.), all with historic information for trending purposes. And you need to be able to analyze all of these data inputs, along with the outcomes of interest to your business (ex. churn, upsell, etc.), in a single place for the analysis to be both meaningful and scalable. It’s a complex and exciting challenge to tackle! And if done well, this type of deep ROI analysis can serve as the critical core of a true Churn Prediction Score, along with the other factors you mention: billing events, lifecycle timeline, user role/job changes, community engagement, and referenceability.

  • justinmares

    Love this comment. Ed, do you mind sharing a bit about how you did this well in your previous companies? Was there anything you did to systematically deliver “WOW” moments to your customers?

  • justinmares

    Great post David. 2 notes:

    1. We’ve found very useful as an easy tool to get users to engage with different aspects of the product from within the app. For example, if someone hasn’t logged in for a few days, we give them a popup notification next time they log in (whether trigged by a lifecycle email or on their own) that gives them a suggestion of a next step to take. It also creates a really useful feedback loop between our CSM employees and the customer.

    2. Another complication that may be interesting to cover is onboarding new users in existing accounts (e.g. the 10th user at an account we’ve had for several months). We’ve struggled a bit to find a balance between doing standard New Account onboarding vs letting them email us with questions. The standard proactive approach can get annoying (so we’ve heard), as the new user doesn’t necessarily need to engage with every aspect of the product – they may only need to get value from one aspect of it. Have you seen this issue in any of your portfolio companies?

  • Tom Krackeler

    Terrific summary of the rationale and concepts behind SaaS Customer Success initiatives. One specific thought– to the question of what are the key elements of customer happiness, I’d add one more: feeling listened to by the vendor. Even for high volume/low price products, customers not only want an avenue to provide feedback, but want evidence that its been heard and considered (even if its not acted on every time).

    You don’t have to address every product feature request or respond 1:1 to every survey response, but I’ve found that creating an overall customer experience where there is a recurring theme of “we are listening; here is what you are telling us; here is what we are doing (or not doing) about it” is an effective way to increase customer happiness.

  • Steve Cardillo

    David – great post as always!

    I was wondering if you or anyone on here had thoughts or suggested resources related to the best way to think about compensation structures for customer success-focused resources. As a SaaS-based remote monitoring and management platform serving managed service providers, our customers grow significantly over time as they add end clients but require an active ongoing account management / customer success function (and losing a mature MSP could equal 10-50 new MSPs). We’re probably closest to the Partnership CSM described above. A simple way could be to tie part of their variable comp directly to revenue churn (either gross loss or net loss) but I’d love to understand what other companies are doing in this regard at whatever level of specificity that can be provided. Thanks!

  • Steve that is a great question, and one that we did discuss in our portfolio review of how people were doing this. Sadly I didn’t take notes but I do remember that most had a variable part of the compensation that was tied to renewals. I do agree with you that Revenue Churn would be a good metric to use if they are also able to drive upsells, cross-sells and expansion. Perhaps other readers will chime in with more specific numeric data.

  • Great observation. My own experience in this area strongly confirms what you are saying. When we had severe problem customers, I used to personally take the time as CEO to email them daily on how we were handling their issues. That turned them into strong advocates once we had solve the problems. Thanks Tom.

  • Hi Justin, thanks for the input. I have added to the list, and agree with you that it is a very interesting platform.
    Re 2., One of my portfolio companies, TribeHR would likely have run into that problem as they had three modules, and users would likely only want to learn to use one at specific moments in time. So what you say makes sense.

  • What you are describing is the data that needs to get fed into the “Crown Jewels” data repository. Thanks for the added insight here.

  • “Because most startups are created by passionate product people, they
    tend to fall in love with their product and its features. Often this
    means that they lose touch with the simple messaging around business

    Great point. Startups are run by passionate, brilliant, and deeply committed people. But sometimes they are deeply committed to something that just isn’t working. This doesn’t mean the whole company is wrong, but certain aspects have to change if you want to move forward and really grow. If you’re product/service doesn’t deliver as promised you’re going to lose plenty of customers and then word will get out, hindering your chances of getting new clients.

  • As I read your article, I began to hear my voice in my head. Please don’t misunderstand, but I’ve always felt that customers that churn, did so because they felt unloved and/or became ‘un-sold’ (i.e. forgot the business solution that they bought and that both could be avoided if their salesperson or their representative ‘touched them’ often enough. The push back that I’ve gotten is that it takes a lot of time to ‘touch’ customers and keeps them from chasing new customers, but what I’ve found, like you, is that if you turn your existing customers into evangelists, they’ll help you chase. Thank you. By the way, I shared a few anecdotal ideas about this on my blog last April.

  • Rick – I think that’s a good insight. If they are high value customers, the article recommends doing the personal touch. Having a system that helps identify a smaller subset that need the call makes this cheaper.
    For low value customers, the question is be can you make them feel loved if they are getting nice personalized emails that are system generated?

  • Cool! Thanks for the reply. System-generated? No. But, I’d be willing to bet that a good rep could leave 10 “Thought of you, today” voice mails and send 10 “missed you, but…” emails in 10 minutes, off hours. That may be all the love and/or reminder that a small customer needs to call back to upgrade, refer, renew, etc.

  • As usual, excellent article! The one thing I would add or even disagree with you about is the idea that customer happiness is the primary driver of churn. Certainly all else being equal, happier customers make for lower churn. But I think there are a lot of other factors that determine churn, including the customer profile (the size of the company and the industry they are in), the competitive dynamics (is there a lot of competition and is there differentiation among them) and the degree of lock-in (how hard is it to move to another provider).

    For instance, in the CRM market today, Salesforce has very low churn. But I think that is because there is not much differentiation among different solutions (so why bother moving to another CRM) and there is a high degree of lock-in (it is very difficult to move to a new CRM). In my informal surveys of my peers, none of them love Salesforce, but most of them use it and almost none of them plan on churning. (Interestingly, I am starting to see that when people start a new company, they are looking at or even implementing CRM systems besides Salesforce, since there is no lock-in.)

  • Thanks Mike. You are right – the article didn’t do a good job pointing out these, and they’re important considerations. The thrust of the first part of the article was to see if there was a way to create a predictive indicator for churn. If not happiness, it would be great to find other elements to use in the score. That score helps target limited resources on the highest risk customers. Lock-in is one of the factors you mention, and usage of certain product features can achieve that, even if the customer isn’t happy.
    Thanks for pointing this out.

    And I agree, There are several legacy vendors, such as Salesforce and Omniture, where customers aren’t in love with the product, but haven’t yet seen anything compelling enough to get them to switch.

  • Leonardo Maia

    Hi David,

    I’ve been working for a SaaS business for over three years now and been following and reading your blogs. What struck me about your article was how companies structure their CSMs groups. Interesting concepts presented – In particular, I identified our company with the Service Oriented CSMs model.

    With regards to elements that relate to customer happiness, I’d add onsite consultation and training, which reduce customer churn and contribute highly to customer happiness.

    Btw, we use Hubspot and Evergage.

    Keep the good work!

  • Thanks Leonardo. Good feedback!

  • Earle Gregory

    Fully agree here. For enterprise SaaS products (and most others) I very much subscribe to Christensen’s focus on “jobs to be done” and you nailed it- the customer’s job is to deliver business results and the product used is just a tool to help achieve those results.

    Also very much agree with the comment “Happy customers refer other customers, which are your best leads.” This applies to both new organizations that become customers and expansion within an existing customer (land and expand). In fact, the larger the CAC (high dollar value and/or high product complexity, etc), the more important this positive feedback loop becomes.

    If there is a high focus on this loop, what is your suggestion for the CSM structure? (To be clear, I’m talking about focusing on the new business referral loop, not just renewals.)

    As always, thanks for the excellent posts!

  • Gil Heiman

    Great piece David! Particularly I can relate to our experience at Clarizen that customers may come initially for particular functionality however eventually stick around for other functionality altogether. We use #Totango and realize the benefits of tracking usage metrics for Customer Success, Sales, Marketing and other departments.

  • Michael Bian

    Thank you for sharing this informative article..

  • Santiago

    David, I ran a SaaS company whose customers are really small retailers, most of them having less than 5 employees, or sometimes no employees at all. Considering this is a very low-ticket, high volume business, which Customer Success organization would you recommend? Most of our sales is done by combined efforts between marketing and customer care agents. We do not have a specialized sales organization, nor renewals. Would you recommend creating a renewal organization? Would you share how CS organizations look when working with micro-entrepreneurs and small companies (and not the mid or large market)?

  • Because of the low value of each customer, you will need to avoid spending a lot of human touch to maintain customer happiness and get renewals. I would suggest using an automated system using a combination of customer success software (Totango, Gainsight, Evergage, etc.) together with Marketing Automation software (HubSpot, Marketo) to figure out which customers need what kind of help, and then try to provide that help via email.
    The moment you have to use people on the phone your costs will go up significantly. However in the early days, I would suggest using people, as this is the only way to find out what needs to be fixed in your software, on-boarding processes, instruction manuals, help systems, training, etc. Then as you get these systems fixed, try to automate the steps the people were doing.

  • Santiago

    Thanks a lot for your opinion David, I really appreciate it 🙂

  • Scott Cardais

    David: This is a terrific article. Thank you for sharing your knowledge and experience.

    Do you have any suggestions regarding how to define the difference between the Customer Success and Customer Support functions?

    Isn’t there a lot of overlap and does that cause internal friction – especially in companies with an established Customer Support team but considering the addition of the Customer Success function?

    Regardless of which of the 5 Org Models mentioned in the article, some set of guidelines are needed to avoid redundancy and internal confusion. Since reading your article, I’ve been unable to find anything about this.

    Is there an article or site you might recommend that discusses this issue? e.g. Roles and Responsibilities of Customer Success vs Customer Support for SaaS companies?

    Thanks again for a great, well-organized article.

  • L.A.

    Customer Success Products: “We are considering doing an updated review of these products in a future blog post. If the idea of this appeals to you, please leave a comment to let me know.” Yes please!

  • Thanks for the input. Unfortunately not yet enough Yes’s to suggest that there is enough demand.

  • Great post and very thorough write up David!

    Just to weigh in on the vendor front: at we’re 100% focussed on Customer Success and are a great option for companies who don’t want to drop the big price tags of other platforms or would prefer a to use software that doesn’t feel like it was made for scientists!

  • sv

    hi, i was wondering what would be the best way to structuure the CSM role in a company, which offers saas products across domains- say crm,hr, financials etc but there is no critical mass of customers yet to have specialist or domain specific csms

  • Are there multiple products involved? If so, how many?

  • sv

    yes there are .. it would be 3. each of the 3 would have a different user profile.. eg: sales, finance ,manufacturing, hr folks etc

  • It is hard for me to know if this is correct with so little knowledge, but it would seem that initially while you have very low manpower, you might have to have one customer success rep covering multiple apps. That’s not desirable given the need to really learn the customer’s business, and become a business consultant to them, as well as a product support person. So as soon as possible, I would move to either a dedicated group per product, or a dedicated group per customer department. But please use your own common sense here, and override this advice if needed. You are far closer to the situation than I am.

  • sv

    thanks David. Makes a lot of sense.

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