Retention Requires a Customer Success Model

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Dan Steinman, Gainsight
Dan Steinman, Gainsight

Marketing today is all about retention. The subscription economy has made certain of that. In “The New Bottom Line: Customer Success,” I outlined the steps to building a customer success practice that can help marketers improve their retention efforts. The three steps are:

1. Create and enforce a customer-focused philosophy for the whole company.

2. Retention accountability must reside with one person.

3. Build it.

Today we'll focus on Step 3, digging into the details of what it takes to build a world-class practice. There are several fundamental elements in this process:

Understand churn. In the world of customer success, churn is “he who shall not be named,” yet you can't run from it when it does happen. In fact, churn can be your best teacher. Embrace it and learn everything you can from it. At a minimum, start tracking churn reasons. That's that field in your CRM system that most likely says “other.” In addition, start understanding your churn across the variables of your business: industry, contract value, company size, sales rep, how long you had the customer, which of your products/services they bought, how many renewals they did, etc. You will intuitively know which of these are the most important, so start there.

Stratify your customer base. Customers are not all created equal, so you don't want to treat them all the same. Figuring this out starts with segmenting your customers.  Think about your customers in a pyramid with the highest value customers at the top (a select few) and the lowest value customers at the bottom. The simplest way to do this is to simply rank them by contract value. Regardless of how complex your model is this will be a heavily weighted factor. Another possible factor is evaluating the opportunity you have with each customer for growth. You may also want to consider brand value, industry, geography, etc. Your model will be unique to you. It will be a living, breathing thing but you can't change it too dramatically or too often, because you will build your customer-touch model from it and it's tricky to move customers down the pyramid.

Construct a “customer touch” plan for each segment. This is a critical part of your process because it will not only define how you will treat each customer, but also will be the basis for building your headcount model, as well as helping determine the kind of individuals you need to fill your team. Back to the pyramid we discussed earlier, your touch model will be specific to each of the segments of the pyramid, but it might look something like this:

○     High value, high touch – These are your strategic customers and your typical retention goal for this segment will be exactly 100%. Your touch model for this segment will often be frequent and proactive. You'll likely want to have scheduled events such as monthly calls, quarterly business reviews, and annual onsite visits. To both you and these customers, this will feel very much like the old enterprise software account management model. Your customer-to-client manager ratio in this segment could be as low as one-to-one depending on your business. More typical would be in the 20-to-1 to 30-to-1 range.

○     Medium value, low touch – These are customers you'd go to great lengths to save if/when you find out they need help, but you will not proactively touch them as often as your top segment. You may or may not assign account managers to each of these customers; they could be handled in a pooled model. In any case, you're likely to exercise more of a just-in-time customer success model where you analytically determine which customers are in need of your assistance and prioritize accordingly. In this segment, you will likely have much less proactive outreach, or at least much less frequent.  If you do assign account managers to all of these customers, your ratio might be 100-to-1 or even 150-to-1.

○     Low value, low touch – It never feels right to call any customer “low value,” but you know exactly what I mean. Someone has to end up on the bottom of your value rankings. These are often customers who just don't pay you enough money to justify any kind of one-to-one touch. In the customer support world, we'd call these self-service. You can still build a model that shows them love, just not one-on-one. Webinars, email campaigns, and newsletters are some of the key tools in keeping these customers loyal.  It's unlikely that customers from this group would be assigned an account manager.

Outline the customer lifecycle. It's important to define the value your customers are getting out of your products and track where they are in that lifecycle. A typical lifecycle will have four to five stages starting with something like “Actively Using,” moving all the way up to “Transformational.” You can name them what you like, but you will definitely want to track where your customers are in this lifecycle. It will often correspond to loyalty—a customer transforming its business because of your product(s) is highly unlikely to churn—while one who stays in the first stage for too long is going to be at risk sooner rather than later. Don't be fooled about the satisfaction or needs of customers as they move up your lifecycle. Those in the final two stages may very well be more demanding, and seemingly less satisfied, than those who settled into an unhealthy comfort zone in the first stage.

Create a scorecard. Customer success nirvana is having an account health score for every customer, allowing you to quickly see which customers truly are Red, Yellow, or Green on an objective basis. I call this nirvana because it is basically unattainable. However, you should still be trying to get there. There are parts of customer health that can be mathematically calculated (usage, survey scores, how many products they own, number of of renewals they've done), but there will always be some that are going to be subjective, such as executive relationship, quality of your champion, and others. You should calculate those items you can calculate and apply subjectively those that can't be calculated. Come up with a model, create a scorecard of all customers from your model, and then constantly reevaluate and morph your model. This effort will pay significant dividends.

There's no rocket science anywhere in this process. It's both hard and rewarding. To do all of the above really well may take several months (and will never really be complete), but a journey of a thousand miles starts with a single step, so start stepping. Most likely you've done some of these already and have been thinking about the others. Don't let the tyranny of the urgent stop you from spending time doing what's really important.

Dan Steinman is chief customer officer at Gainsight.

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