3 Ways Customer Success Can Reduce the Cost of Customer Retention

Author Avatar Amaan nathoo wrote this on Sep 1, 2017

In my last post, I discussed in detail how teams can create a frictionless handoff process between Sales and Customer Success . In part II of our look at the Sales/CS relationship, we’re going to flip the equation and discuss how to ultimately reduce the cost of keeping customers. If you want to familarise yourself with my first blog on this subject, you can read it here.

First let’s walk through a common customer acquisition process for a typical SaaS company.

Marketing (or Sales Development) brings in leads. Sales qualifies those leads, converts them into opportunities and eventually closes them as new customers. CS onboards those customers, provides support, and eventually identifies growth opportunities for upselling. Product Management learns from CS what features customers need, and then provides this to Dev to roadmap and build new product features which in turn provides ammo for new bringing in new leads.

In reverse, here is how the system flows:

Dev -> Product Management -> Customer Success -> Sales -> Marketing

For the purpose of this post we’re going to focus on the latter half of this process, from CS down to Marketing. Let’s split this into two segments and have a look at how the relationships flow, starting with Sales and Marketing.

Sales -> Marketing: Good leads vs Bad leads

Typically, Marketing wants more leads and sales needs more closes. Those closes come from leads, so it’s very common for both teams to work together to optimize the lead funnel.

Lead -> MQL (Marketing Qualified Lead) -> SQL (Sales Qualified Lead) -> Closed Won

It’s simple. Get more leads, close more deals, right?

A larger quantity of leads may seem like the simple solution to more closes, and it can be. But unfortunately increasing leads is easier said than done and inbound leads can be a volatile currency.

The other approach is to find higher quality leads rather than focusing on quantity. In this situation, each lead requires less work to qualify and less time to close thereby making the overall cost of closing a deal much cheaper.

Marketing and Sales need to be on the same page to create a higher quality top end funnel. Sales has conversations with customers about real pain points, and in turn can provide feedback to Marketing on what customers actually need. Marketing can then constantly refine their campaigns with the tighter messaging that aligns closer with those needs which helps them find better leads.

Customer Success -> Sales: Good customers vs. Bad customers

If this process of feedback back down the funnel works so well for Sales and Marketing, it should also work wonders for CS and Sales.

Understanding good leads vs. bad leads is incredibly valuable, so let’s go a step further to identify good customers vs. bad customers. Just as a higher quality top end funnel yields cheaper cost of acquisition, a higher quality customer yields cheaper cost of retention as it requires less time and work to keep them. As an added bonus, the insight of a good customer also trickles down to the marketing team who can further refine the definition of a good lead.

But what is a good customer?

This differs for every organisation as there are many variables that contribute to being an ideal customer (industry vertical, revenue, team size, etc). More importantly, pain points, success factors, growth opportunities, culture fit, etc. are areas that can differentiate between a customer who churns vs one who wouldn’t leave you if they were paid by a competitor. By the time a customer is onboarded, the CS team often has a strong understanding of the strength of a customer’s fit while the sales team knows next to nothing about this insight. This needs to change.

Just as sales often turns back to marketing to say “Hey, we need better leads”, Customer Success needs to consistently turn back to Sales to say,“Hey these customers are not good for us, here’s why”.

This can be tricky as sales people (myself included) do not always take the feedback as well as we should. Since churn is not a metric that Sales is held accountable for, it’s not at the top of the list of things to worry about when closing a deal. But for the overall health of the company, this attitude needs to be re-evaluated.

How Customer Success Can Reduce the Cost of Customer Retention

1. Reverse the Sales to CS knowledge transfer process

In my last post, I provided a detailed checklist for knowledge transfer between Sales and CS once a deal is closed.

Let’s take that same template, and flip it in reverse. It can be used as a way for each CSM to review a customer post-onboarding, and compare the accuracy of certain fields vs. what was originally transferred from the sales executive post close.

As a post-onboarding exercise, review the accuracy of the following items:

  • Pain points
  • Current process
  • Growth Potential
  • What does success mean for customer?

If 2 of the 4 fields differ significantly from the details that were provided by the sales executive at handoff, there may be an opportunity for CS to provide feedback on how this particular close could be better.

There’s no need to hold a post on-boarding follow up for every deal - limit them to situations that have a coaching opportunity.

2. Track your most common churn reasons

My last post also discussed the importance of setting up regular meetings between Customer Success and Sales. These meetings, ideally held every two weeks or monthly, should be used as a place for CS to give their feedback on new customers.

Some areas of focus in these meetings should be:

1. Closes

2. Churns

3. Failed onboards

Identifying the deals that fit each of these is step one, but more importantly identify the WHY factor.

1. Why did the customer close?

2. Why did the customer churn?

3. Why did the customer fail to onboard?

Track the frequency of churn reasons in the same way you would track feature requests*. You can simply create a spreadsheet to track, but beware as those can get messy and hard to manage. There are tools out there that can help manage this process - one that we found recently is Treefort which helps you create rooms with topics which can be upvoted. Create a room, throw some churn reasons in and upvote them as more churns occur to get visual and quantitative proof of top reasons.

*PS - if you’re looking to track feature requests like a pro, we are big fans of Receptive.io.

3. Physically sit next to your sales team

I was at a CS meetup last month where an interesting question was asked:

“Where should CS sit within an organization?”

The intention of this question was to generally understand where Customer Success fits into an organization (in terms of Marketing/Sales/Product) and who should ultimately run the team (CEO, COO, or another executive).

However, my immediate thought was to answer with a more literal response.

Where should Customer Success sit within an organization? Physically next to the sales team!

There is a TON of value in getting exposure to real conversation between Sales and customers, but CSM’s can’t sit in on every demo or join every call. By situating themselves right next to Sales everyday, they can overhear real conversations and get real insights into how the sales team works.

It also enables Sales to overhear CS conversations and understand some of the successes and challenges they face when onboarding and supporting “good” and “bad” customers. Passive context can help each team make small adjustments right at the source and potentially help avoid larger problems down the road.

It may take some time for the feedback to flow down from CS to Sales, but if you can nail this process you’ll not only be helping reduce churn, but you’ll also make it cheaper to retain customers. In addition, you’ll be helping the sales and marketing teams get more efficient in their relationship and improve the lead funnel from the top down. Everybody wins.

I’d love to hear your thoughts on how the sales/ CS relationship can be made even smoother. Feel free to reach out to me directly via email at amaan@bonjoro.com or on Twitter @amaannathoo.

Receive monthly tips on how to convert more customers, tackle churn, and spark a little #CustomerDelight