Why Customer Retention is the True Measure of SaaS Success
In SaaS (Software as a Service), like in most businesses, sales is king. Sales gets the glory, and while I’d like to say this has never bothered me as a big champion of the sales world (I ended up marrying my sales counterpart from earlier in my career!) you’ll be hard pressed to find any Customer Success leader that hasn’t had that moment of “what about us?”
No amount of sales can sustain a business if you’re losing customers because you have no customer success experience.
Sure, you can keep pouring into the sales bucket over and over again, but if there are holes in that bucket, none of that will matter and your dreams of SaaS success will disappear faster than the good flavored water from the engineering fridge. That’s where I come in, or rather where my team, my people, my tribe come in – Customer Success.
In fact, years ago when my friend and former boss, one of the best leaders I’ve had the privilege of working alongside, told me he was identifying ways to ensure the success of the existing client base at the company that would eventually become my second home, I told him that while there were a lot of things we could talk about – at the end of the day – retention was what really mattered.
It’s About More than Hitting Your Numbers
I’ve built my career on creating best-in-class Customer Success organizations and have had the privilege of working with some of the best leaders across different functions. When asked how you measure the true success of any company, most companies likely begin with revenue and quarterly/annual performance against goals. Yet, if you want to keep the VC funding or the potential acquiring companies interested, hitting those numbers isn’t going to be enough. They want to know of all the people who bought your product/solution/software, how many kept buying it?
In the past, people who hear about ‘Customer Success’ think of call centers filled with transactional conversations between customers with scripted responses on how to handle complaints. Sure, that’s a part of it, but in recent years many SaaS organizations heard the call and have made efforts to grow and scale Customer Success to points where, in many cases, that team is even larger than Sales.
And why? Your sales team tells the story and sells the dream – they bring the brand to light for prospective customers and hit home why your product or solution is essential to the success of their business. But, who is responsible for ensuring that it actually meets, nay exceeds those expectations?
The Essence of Customer Success
That is the essence of Customer Success. Take the dream surfaced by sales and make it a reality. Get to know the customers after the ink is dry and make sure they get their money’s worth in purchasing from your company. They are your insurance policy and they hold the key to your company’s success because they are essential to why your customers keep coming back.
So that brings me to the part that all of you are actually interested in – you get it, retention is crucial, but how do you ensure your business has healthy retention? Let’s start there.
Measure the Customer Success Experience
To start, make sure you’re measuring it. Do you know what your company’s retention rate is? And before you jump into Net Retention, let me stop you. Yes, you can look at net dollars and if one client spends more, in theory they could make up for a client lost. That said, to truly understand the health of your business, I recommend starting with a straightforward way of looking at retention, aka “did the client keep buying the thing they originally bought?” Place your customers into a cohort and measure the performance of that group over time. If you started with 30 clients, did you end with 30 clients? Once you know what your retention rate is, next you want to understand how it measures up.
The best and most successful companies in the world have retention rates of >90%. If you’re already there – fantastic! That doesn’t mean the conversation is over, it just means that somewhere in your company, someone (or many “someones”) is doing something right today. So, make sure to thank your Head of Product and Head of Service immediately. That’s right, do it now.
Next, ensure you have a strategy in place to KEEP it. Do you know why your customers keep buying? What is it about your solution that keeps them hanging on? If you don’t know, find out. There are a ton of great ways to do that, but how about starting with the simplest: Call and ask them. Pick out a handful of your longest running customers and go make a friend. They’ll appreciate your attention and you’ll get just as much out of it, if not more, I can assure you.
If you’re not seeing those 90%+ retention numbers, there’s no need to panic…yet. Now is the time to find out why. Identify the largest and most recent client cancellations and dig in. What worked? What didn’t work? Start with talking to the people that worked on the account and then move on to the next simplest step in the process – call your former customers! Who knows, maybe you’d even get commitment from them to try again. Clients are typically pretty open to collaboration and pretty forgiving on missteps if you’re willing to pivot in order to retain them or win them back.
I’ve spent plenty of time over my career talking to customers, both happy and unhappy, most of the time they just want to be heard and want to know that you’re working to fix whatever went wrong. One of my favorite clients once told me, “I don’t expect perfection, the world is an imperfect place. I do, however, expect that you’re going to hear me and work with me to ensure this gets resolved.” Never once did I feel those conversations weren’t worthy of my time.
Last but not least… Scale the Customer Success Experience
In the retention game, like in most things, knowledge is power. Once you know why a client keeps buying from you, make sure you programmatically institute a way to replicate that over and over and over again. It cannot simply live in the mind and efforts of one kickass service person, brilliant engineer or savvy seller. To keep this thing going, it needs to be operationalized, repeatable and scalable within your organization. That means that if you don’t have someone in place whose job it is to make that happen, go hire them immediately.
Once you know why clients are cancelling, whether your retention rate is 50% or 95%, dig in with your people. Is the service model right? Is the product intuitive enough? Did we set the right expectations out of the gate? Did we fully understand what the client wanted to get out of our solution and, if so, were we able to deliver? Once you know these things, you can move forward with Step 2, which is setting up your customers for success from Day 1.
Callie Reynolds serves as the Vice President of Account Management for Moat measurement solutions within the Oracle Data Cloud, following the acquisition of Moat in 2017. With extensive experience in SaaS, and coupled with deep digital marketing expertise, Callie has built teams focused on driving the success of brand marketers, digital platforms, large-scale publishers and media companies all over the world. In addition to her time helping clients maximize their potential in digital, Callie is also a mom to 6-month old twins, a lover of doughnuts, a dancing enthusiast, and avid appreciator of cinematic adventures.
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