You Mon Tsang is the CEO and founder of ChurnZero.
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As the downturn starts to bite and every dollar becomes more important, many CEOs are asking the same question. How should I manage a limited business budget to survive 2023?
For subscription companies, the focus is clear: retaining customers. Older research from Fred Reichheld of Bain & Company showed that in the financial services industry, “a 5% increase in customer retention yields more than a 25% increase in profit.” When times are challenging and the sales pipeline slows down, the difference between the cost of acquiring and retaining customers widens.
Who takes care of retention? It’s a company-wide goal, but the team in the spotlight is customer success (CS). Since your sales team is busy influencing prospects to buy, the customer success team influences customers to stay and needs to understand why your accounts are spinning, renewing and growing.
In a growing market, your sales team takes the lead in winning new sales. I believe the client’s success this year is the team that will make the difference. But, unlike sales, customer success is an evolving function, and the organizational charter varies from company to company. The tech stack is new. The teams are often under-funded, under-equipped and under-operational.
According to new research from my companyHowever, things are changing – and not a moment too soon. As the CEO and co-founder of a customer success software platform, I believe the SaaS and subscription companies that have activated the transformative power of customer success, and the amplifying effect of net revenue retention (NRR), may now be best placed to weather the 2023 downturn and come out stronger on the other side.
It’s not too late to catch up, but time is of the essence. Based on the above facts and data from my company’s survey, the following recommendations are broadly applicable.
Contents
1. Don’t let your customer success team enter 2023 with substandard tools.
You wouldn’t expect your sales team to sell without their CRM or your marketers to generate leads at scale without marketing automation. Yet less than half of the customer success teams we surveyed have a purpose-built platform to manage the work of driving onboarding, adoption, retention, and expansion.
If your team is still working from spreadsheets and fragmenting their operations, 2023 could be the year to equip them with more effective technology. Train them to use platform analytics so they can spot customers at risk of leaving. By leveraging automation, repeatable plays and codified best practices, their workflows can be streamlined, scaled and improved.
When choosing your platform, think beyond your customer success team. Customer insights can improve your entire business, so look for a platform that integrates seamlessly with your existing tech stack. Also, look for a platform that non-CS folks can use to meet their specific needs.
2. Operationalize your customer success team.
Does your CS team already have a dedicated operational role? I believe this role is essential to maximizing the efficiency, actionable customer insight and ROI of your CS platform. CS operations can also give you agility, or the ability to quickly make small, well-informed moves based on current data from your customer base.
Navigating a downturn is like driving on ice: oversteering has consequences. Instead of ducking at the first sign of customer churn, you anticipate which customers are most at risk, understand in real time how they are impacted, and then proactively help them, a strategy I’ve written about before. In fact, according to Deloitte research, “Only 25% of customers today consider solution providers their trusted advisors… CS teams that conduct regular business reviews with customers and help them track value are twice as likely to be trusted and customers to their advocates.” You may need to recalibrate your health scores or build new plays to help an ever-evolving cohort of risky accounts.
A good CS employee will keep you on the road. When taking on the role, look for strong organizational and prioritization skills, adaptability and dynamism, excellent communication skills and the ability to apply data in a meaningful way. Crucially, they need to understand not only individual data points, but also what multiple data points in combination suggest, and be able to follow up quickly and effectively.
3. Drive customer success to defend your customers within your company.
No other team understands your customers as well as your customer success team. If you’re striving to become a more customer-centric company—not just now, but in the long run—your CS team should collaborate more with other departments.
While 83.1% of the customer success teams we surveyed regularly collaborate with product teams, such as bringing customer voices and perspectives to product roadmaps, only 44.9% collaborate with finance teams. That’s worrying because CFOs hate surprises at the best of times.
When CS teams work together across departments, departments that would otherwise lose sight of your customers and their challenges start investing more in what customers value. Ultimately, one of the best ways to ensure the voice of your customers permeates your entire organization is to bring customer success to your C-suite.
Invest in a long-term competitive advantage.
Every recession is different, but the need to know and understand your customers is constant. If you haven’t started yet, make 2023 your year of customer success.
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