Customer Success Management (CSM): Your Critical Path to Customer Renewals
Most companies have a process for closing the initial sales
What was clear is that they have invested lots of time and money in creating a sales organization that knows what it is doing and can close deals. That is, they could close new deals.
But they don't have a plan for what happens next
And they lose a lot of customers at renewals
The problem is this: the customer has a different renewal process.
Including Customer Success Management activities after go-live is critical to renewals
Do You Have a Customer Success Management (CSM) Program? You should.
If you are like most SaaS vendors, you have a great product that is developed, implemented and supported by a team of gifted professionals. You can win new sales. Everything looks rosy.
But you have a problem. You keep losing customers at renewal time. And this is costing you big-time!
Customer Retention is Key to SaaS Vendor Success
The SaaS business model, with its low upfront costs and low, regularly scheduled payments means that SaaS companies need to keep customers longer in order to profit. Every customer that cancels their subscription – or even reduces the number of licenses under contract – has a dramatic impact on your bottom line.
The simple truth is you cannot have a successful SaaS business if you have high churn.
The impact of customer churn is cumulative and drastically underestimated
According to the resources developed by SaaS Capital, customer churn has a cumulative impact on the vendor. Not only does it decrease revenues in the period during which the customer cancels their subscription, it also reduces all future revenues.
For example, in their webinar, “No Churn: Keep Customers & Improve Your SaaS Company Valuation”, showed a comparison of two companies, one with a 95% customer retention rate and the other with an 80% retention rate. After 5 years, the company with a 95% retention rate had revenue that is 40% greater and a growth that is 50% higher. By year 10, revenue is 80% higher and growth rate is 2.5 times faster.
Recurring revenue is critical component of SaaS company valuation
With customer churn having such an impact on revenues and growth, investors are now looking very closely at customer retention when calculating SaaS company valuations. According to SaaS Capital, business are traded on a multiple of revenue (not EBITDA) and, “recurring revenue is a better proxy for future cash-flows than current income.”
Customer Success Management programs reduce churn, increase revenues
Given the importance of reducing customer churn, it is not surprising that you’re focusing efforts in this area. Effective CSM programs can help you reduce churn. And if your customers are getting more value from your systems, they are more likely to increase the number of licenses they purchase. All of this adds up to increased revenue for you.
Now the problem… how do SaaS vendors deliver the elusive customer success?
Sounds great, right? There is just one hitch. How do you create and deliver effective Customer Success Management programs?
This opens up a lot of questions.
- What tools, methods, skills, and resources do you need to facilitate customer success across your entire customer base?
- How will you build this new capability?
- How will you integrate this new service into your existing business model?
Resources to help with your Customer Success Management efforts
Once you realize that you need a Customer Success Management program, you then need to figure out what this looks like and how to build this capability in a quick affordable manner. If you are not sure where to get started, check out these resources:
- Tri Tuns Customer Success Management service can help you quickly assess your CSM needs and develop a strategy for moving forward. We can also partner with you to execute your strategy.
- Sign-up for our Customer Success Management email tips and insights.
- Check out The Hotline Magazine by Mikael Blaisdell. Mikael is a widely recognized thought leader in the Customer Success Management space and his events and writings reach a large global audience.
Jacklighting Executives – The question that always stumps them!
Here is a fun game to play – I call it “jacklighting executives”. The way it works is you ask an executive (the more senior the better) a question (often an obvious one) to which they have no answer and see how long they stare into space. You get 1 point for every second they are stymied.
My record score is 4 years, 8 weeks, 14 days, and approximately 11 hours.
Just kidding. (Sort of.)
The question that gets me this result is simple. I ask, “Who owns CRM user adoption in your organization?”
Immediate supervisors are the biggest drivers of CRM user adoption
Many organizations spend millions of dollars on CRM implementations without having thought about what it takes to ensure success and whose job it is to make it happen. This, as history has shown, is a great recipe for disaster.
If you want to improve effective CRM adoption within your organization, don’t just look at the end users. Look at their immediate supervisors. Managers and direct supervisors have the biggest impact on making sure CRM systems are used consistently and effectively. If the manager insists that their team use the system, it gets used. If they don’t, well, I think you know what happens.
Manage your managers for improved CRM adoption
When I work with clients, I often ask them, "what role do you expect your managers to play in driving CRM adoption?" Often times the answer is, “we hadn’t thought of that”.
It turns out that direct managers, those who are the most influential in driving CRM success, are typically not even asked to make sure their team uses the system. Managers typically don’t have this as one of their official job responsibilities. And they are often not given the tools and support they need to ensure their team adopts the CRM system.
Managers need to be held accountable for CRM use within their team
If you want to maximize CRM adoption in your organization, don’t just focus on the end-users. Target some of your efforts on their managers. Let managers know that this is an important part of their jobs. Set them specific targets, measure results, and hold the managers accountable for ensuring their team consistently and effectively uses the CRM system.
If you do this, you will be amazed at the results you get.
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Should I Fire People Who Don’t Use My CRM?
Whenever I speak to a new client, at some point the conversation drifts around to what they should do if/when/now that their employees are not using their CRM system.
Some of them wonder aloud if they should include firing as an option, but if they don’t bring it up I will ask them what they are prepared to do if employees don’t use their system.
Rarely the answer is, “Yes, I would fire them.” Sadly, this is exactly what the answer should be. But probably not for the reasons you think.
Deploying a CRM system changes people's jobs, it doesn’t just make their jobs better
Many people make the false assumption that implementing a new CRM system will make their employees' current jobs easier. In reality, it fundamentally changes their jobs. And some people will not like their new jobs.
Changing CRM systems alters the processes people need to follow. It also changes the social contract within an organization for how and when information is shared, who should be able to see the information, and who should be able to act on it. And it changes the rules for how much control and autonomy sales professionals have in how they do their job.
For example, sales reps often tell me that they (not their employer) “own the relationship” with contacts. They may complain about the time and hassle of entering the information in the system, but more often than not, the issue is they don’t want to share the information with others.
Assuming you have defined appropriate system use policies, implementing a new CRM system changes the rules about how, when, and with what degree of control people do their jobs. Effectively, this changes their job descriptions and, therefore, the jobs themselves.
User adoption is a performance management issue, not a communication issue
Many people make the mistake of assuming all they need to do is to “tell” people how the system will make their lives easier and “sell” them on the benefits. This approach doesn’t work.
Telling and selling people on the benefits of a CRM system is like trying to feng shui the deck of the Titanic
Instead, a better approach is to let people clearly and specifically that their jobs have changed. They need to understand that how they did their jobs yesterday (often, quite successfully) is no longer OK and it will not make them successful today.
If people are not using the new CRM system in a timely, effective manner, they are not doing their jobs. I suggest handling it like you would any other performance-related problem, using your organization’s management guidelines and processes for resolving sustained performance problems. These often include things such as putting employees on a 90-day performance improvement plan or other tools, which may include dismissal. I think you see where I am going here.
Set clear and measurable goals for CRM use
One of the things that is key to managing employee performance – including driving adoption of your CRM system – is to set clear and measurable goals for how and when people should use the system. Without these, your employees have a very legitimate case that they were never told exactly what performance standards they need to meet.
For example, very few CRM projects set weekly system-use goals. Simple things like asking employees to enter 5 accounts each week, to add 10 activities, and to update 5 activities by noon on Friday helps both management and employees understand what is needed. And often times, once an employee is in the system they will do more than just the bare minimum.
Enable effective user adoption
One important thing to remember that many times there are barriers – legitimate issues that fall outside the employees’ control – that prevent them from using the system. This can include such things as inappropriate system access rights, information not being entered by other employees, or no time due to competing organizational priorities.
Before you can hold people accountable for not using your CRM system, make sure that you have identified and removed all barriers to adoption, AND make sure that you have provided all of the tools, support, information, and guidance that people need to use the systems.
The best way to do this is to make sure you have a comprehensive user adoption strategy and ongoing user adoption program. That way the organization, managers and downstream employees are all using the same roadmap to take the company in the same (profitable) direction.
And then, hold people accountable
If you have done all of this and your people are still not using your CRM system, you need to ask yourself if they are really the right person for the new job role. Employees who are not using the system cost you a lot of time, effort, and money.
And the way you deal with an employee who does not use the system sends a clear message to all other employees as to whether or not they will be held accountable for performing their jobs. Be careful here.
So, should you fire an employee who does not use your system? You bet you should!
10 Simple Steps: How One Fortune 100 Company Rapidly Increased CRM User Adoption
CRM ebook: a resource for your success