Can Customer Churn Be Good for a B2B SaaS Business? Sometimes...
Customer churn tends to be viewed negatively by SaaS companies, and for good reason. However, in specific scenarios, it can actually be, dare we say, a positive.
Key metrics such as retention and growth of ARR is not a skill or quality the CSM has, but the result of many intangible qualities that are a big differentiator between an average CSM and an extremely talented CSM. One that will bring the best results to your team and drive growth.
About the Author: Enrique is a passionate advocate of the Customer Success practice. He has more than 7 years in the SaaS industry and has been part of leading companies such as AppsFlyer, Appsee (acquired by ServiceNow), and Yotpo. He has worked with all types of clients, ranging from SMBs all the way to Fortune 500 companies. Enrique's expertise in CS has helped him lead customer retention and growth by focusing on one thing—constantly delivering value to the customer. He enjoys traveling, scuba diving, skiing, playing/watching sports, reading books, and learning new things.
When looking to hire CSM candidates and we look at their CVs, we will always look for data points that are measurable and give us an indication of how strong the candidate is, for example: years of work experience, size of portfolios the CSM managed, accounts the CSM worked with in the past, retention and growth of net ARR, size and type of accounts the CSM has worked with, among other things.
However, key metrics such as retention and growth of ARR is not a skill or quality the CSM has, but the result of many intangible qualities that are a big differentiator between an average CSM and an extremely talented CSM. One that will bring the best results to your team and drive growth.
Before diving into the qualities we should look for, we first have to understand the roles and responsibilities of a CSM and the value they bring to B2B SaaS companies.
With technology leading today’s global economy, the SaaS industry is projected to amount at an astonishing $307B at an 11.7% compound annual growth rate (CAGR). When the SaaS model initially formed, companies realized that having a good product that sells wasn’t enough to grow the business. They soon realized that in order to grow their business they would need to retain their existing clients, and with time, they understood that by retaining their clients they wouldn’t only be able to maintain a constant cash flow, but drive growth through expansion revenue.
The person sitting in the driver’s seat when it comes to customer retention and growth is the Customer Success Manager. In B2B SaaS, the CSM is in charge of:
Clearly, the CSM is accountable and responsible for many things that are highly important for the company.
At a high-level, when I’m looking to hire a CSM, I make sure that the most important (and more obvious) points are covered such as customer onboarding, strategic advising, renewals, showcasing value to customers, relationship building, high EQ, success plans, etc.
However, I also like to mention the responsibilities that are not necessarily only related to the customer but are critical to achieve business growth such as communication between the product team and the customer, collaborating with the marketing team to build content, collaborating with sales to achieve value-based account growth, ability to use internal resources (support, product, R&D) to push things forward, among others.
Most hiring managers look for CSM candidates that will be capable of building successful relationships with their customers and drive value-based retention and growth. There are two ways you can determine if a CSM candidate has these qualities, you can look at their CV to read more about the type of customers they’ve worked with, how big was the account portfolio, did they achieve any growth, what companies did they work at (are the companies industry leaders/growing companies)—in short, measurable qualities that can be easily identified.
The other set of qualities are harder to pick up on, and more qualitative than quantitative in nature. Without these qualities, CSMs are missing a big part of the equation that leads to the most important result for CS organizations, customer renewals, and ultimately, growth.
In no particular order, these are some of the most underrated, yet most important, qualities that hiring managers should look for in CSMs:
These qualities are a “must-have” for me that are not usually mentioned within the job description, or are missed because hiring managers may be too focused on the output, without paying attention to the inputs that ultimately lead to the successful results.
So the candidate has passed the screening stage, now it’s time to identify if they have any of those critical skills mentioned in this article. Here are some questions that can help you, the hiring manager, identify those qualities:
Ask the candidate to share their experience with a difficult situation that led to a learning experience. Here’s what to look for:
This one is easier to identify. Ask questions along the lines of how involved he/she was with team projects, mentoring team members, sharing knowledge, experiences, etc.
Pay attention to the personality of the candidate. Do they seem candid? Are they excited about questions asked during the interview? Is the candidate making the atmosphere tense or do you feel an easy-going vibe? When talking about a difficult situation, does the candidate show empathy or interest for the other side’s position? Here are some examples:
Ask them about their life experience. What are their hobbies outside of work? Have they had the opportunity to work with customers that were outside their region? If so, how did they manage to narrow down the cultural bridge?
This one is one of my favourites. I typically ask candidates to tell me about their most challenging accounts and how they managed to retain and grow them. Moving forward, I would give them a home assignment that would require them to build a strategy to reach the best possible outcome, such as, how would you approach the renewal of a customer that is not fully convinced, or a customer whose champion has recently changed? The goal is to understand their reasoning and ability to connect the dots to overcome any situation that is presented to them.
Some hiring managers like to ask specific technical questions about their product. However, this is missing the point, seeing as what you actually want to identify is if they know the added value of your product within the industry, not how a specific feature works. Asking the candidates they would recommend your product to customers and what added value can they gain from it will give you a clear picture of their understanding of the technology your product offers and how impactful it is to the industry ecosystem.
When hiring CSMs, we always want to hire the ones that have achieved great results when it comes to customer retention and growth, but remember, it’s not the destination that matters most, but what led them to achieve those results.
High-performance CSMs are not always equipped with these qualities, but CSMs that do have these qualities will definitely become high-performers and make everyone on your team (including yourself) improve as a whole.
In Vitally's latest video series, 17 Questions on the Future of Customer Success, we've chatted with some of the best Customer Success Managers out there on how they think about Customer Success and its evolving role, what makes their CS org world-class, and a whole lot more. You can check out those interviews here:
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