This post was originally published on Medium by Shivi Maheshwari.
Product-led growth (PLG) is one trend I’m most excited about in the coming year. Many leading companies today are product-led because it’s an efficient way to align incentives between companies and their customers. Want to become a successful product-led organization? First, your company needs the best available go-to-market (GTM) tools.
One of the biggest GTM developments is the shift in revenue and value generated during the customer lifecycle. Traditionally, in a top-down sales approach, sales teams strive for the highest dollar value and attempt to secure large contracts from the starting line. On the other hand, in a product-led growth setting, the dollar value of an initial “sale” is far less than the long-term opportunity, especially with the rise of freemium and free trials, as many companies are utilizing a self-serving freemium trial or offering a low-cost version of their product. Additionally, most top-line growth is driven by revenue expansion, which can be from an increase in product usage with a customer or by expanding into other areas of that customer’s organization.
Note this GTM development isn’t just crucial for product-led growth companies to understand. GTM developments, like the ones mentioned, are essential for all SaaS and subscription revenue businesses. Expansion opportunities and net retention are critical drivers of overall company growth.
Customer Success (CS) teams are responsible for retention and expansion numbers. So it’s no surprise that CS is the 6th fastest growing job with the rise of SaaS being a software delivery model.
Regarding CS tools, such tools will make your CS Managers work smarter as they’re up to date with accurate readings of their customer’s health. Customer Success Management is a proactive approach sparked by the need of B2B SaaS companies to reduce customer churn and increase upselling. All in all, CS teams and CS software share these common objectives:
- Accurate reading of customer health scores.
- Reducing customer churn.
- Retaining Customer base.
- Increasing upselling opportunities.
- Improving cross-selling & renewals.
- Supporting onboarding processes.
A Customer Success Manager (CSM) without CS software is far more manual and restricted. Without a dedicated tool, CSMs most likely take their note taking in a Google Doc or Apple note, have to sift through multiple windows to pinpoint the data they need, rely heavily on the engineering team for usage reports, and request marketing to deliver product or company updates via email to the customer base. However, a CS platform can automate most of the tasks mentioned, and customer and product data can be easily accessible with CS software, putting time and control back in the hands of a CSM.
The Wave of CS Software
We owe homage to the first-gen CS platform players, like Gainsight and Totango, who were the companies who educated the market on the importance of customer success, building a CSM community, and how transformative software can be for this industry. However, the times have changed, and these initial products are built on a top-down sales approach and are heavy on the services regarding integration. New players on the market have introduced plug-and-play styled integration, shortened onboarding by 1-2 weeks, automated everyday CS workflows, and paved the way for greater efficiency and productivity levels for CS teams.
Where CS Platforms Help Customer Success Managers Most
There are many benefits to implementing a CS platform for CSMs to use, but below are some top of mind reasons:
- Tracking of product usage & adoption rate of all users.
- Creating customer health scores based on metrics from product usage data, support tickets, NPS survey results, invoice history, email or slack communication, and even marketing engagement.
- Helping create a bird's eye view of the entire customer lifecycle.
- Allowing CSMs to make data-driven decisions to fight a customer's potential churn or implement an upsell strategy.
- Automating workflow and implementing alerts for users.
Why There is a Growing Need for Customer Success in SaaS
Below are several reasons why I think there is a growing need for building out or growing Customer Success orgs in the SaaS industry:
- The industry shifted from an ownership economy to a subscription-based economy, appealing to customers with the 'cancel at any time' messaging.
- Big-ticket customers are top of mind as more companies consider the LTV:CAC ratio (Customer Lifetime Value: Customer Acquisition Cost).
- Increasing accessibility to customer data and product usage data.
- Startup companies are adopting 'Land & Expand' and 'PLG' GTM strategies.
- CSMs have an increased number of managed accounts.
- Customer Acquisition Cost (CAC) now ranges from 5x to 25x more expensive than retaining new customers.
- The probability of selling to an existing customer is 14x greater than selling to a brand-new customer.
Projected Growth of the SaaS Market
The SaaS market is projected to grow exponentially in the years ahead, proving how critical the Customer Success industry is to the SaaS world and how CS will continue to lead in the race of fastest growing markets.
Target Market for Customer Success Software & Tools
When it comes to large and mid-sized enterprises in B2B SaaS, these companies with a minimum of 1 year of mature data have approximately 10+ CSMs on a CS team. Note the ratio of CSMs to customers varies due to company size. Additionally, the budget of large enterprise CS Teams is less than 10% of annual recurring revenue (ARR). On the other hand, CS teams as medium-sized enterprises budget around 10–20% of their company's ARR. This is just to give you an idea of how valued CS teams are in terms of budget and the average size of CS teams based on company size.
So given this information, it's not the easiest of tasks for enterprises to find a CS tool that fits the budget and addresses all of their enterprise-sized needs. Often enterprise customers feel they can save money going the building route. This route allows for customizations that may not be possible from the platforms available to purchase or subscribe to.
On a different note, when it comes to small-sized or startup organizations, they may need to be at a certain level of maturity that makes a CS tool justifiable. Some of those reasons may be:
- There are fewer accounts to manage; therefore, a CSM can effectively manage their accounts without a tool.
- Having a tech stack consisting of, for example, Slack, Zendesk, and Google, can work for a small-scale CS org. It can be a chance to save money at the start.
- Smaller organizations may need more sophisticated data for a CS tool to identify churn ahead of time. This may not be the case for all CS tools, but questions on data requirements are essential to ask Customer Success Platform vendors when shopping around.
Emerging Themes of CS Software
As the needs of the CS industry continue to change, CS software evolves alongside it. Below are a few themes I suspect will emerge in the coming year.
Theme 1: Business Outcomes
You can showcase accurate ROI to the customer by quantifying the product's value. Also, KPIs correctly measure customer outcomes, so I suspect more companies will utilize them.
Theme 2: Machine Learning (ML)
Using machine learning to signal CSMs which customers are predicted to churn and which customers are in good shape to expand with the product. As the most funded theme in this list, ML will surely expand within the CS industry.
Theme 3: Artificial Intelligence (AI)
More uses of AI and ML to automate post-sales work may be seen. Adopting AI in post-sales processes will help scale product adoption and growth for companies.
Theme 4: Emotional Intelligence
Utilizing CSM sentiment scores and other sentiment analyses based on customer interactions. These scores can help companies understand how their team works with customers and take action based on the results to improve it further.
Theme 5: Virtual Customer Success Manager
The last theme is about the virtual customer success manager and how CS may be outsourced as a function. As more roles become virtual, CS roles may head in that direction, too.
Some of these themes have been put into action at some startup organizations; however, more prominent companies have the potential to take advantage of some of these themes in the new year. Though smaller organizations don't have the luxury of enterprise-level budgets for CS tools, they can still achieve new levels of success by implementing a theme or two, which have already proven successful for a handful of startups I am aware of. There are also CS platforms, like Vitally, that have affordable packages of their CS platform available to companies starting at the startup level and up. So there are options! Just take the time to figure out what works best for your Customer Success Manager and the CS organization at your company.
This blog was written and contributed by Shivi Maheshwari. Vitally is proud to distribute thought leadership content to the Customer Success community, so if you know of an article or author with some Customer Success knowledge and wisdom worthy of endorsement, we would love to expand its reach. Reach out to email@example.com with all the details, plus visit our blog to read more Customer Success content worthy of your time.