This famous clip from the movie Office Space is a quick reminder of one of the most commonly overlooked issues when implementing IT systems – motivating people to work. And sure, Initech is a fictional company, but it actually resembles a lot of organizations with which I have worked over the years.
In this scene, the employee Peter Gibbons tells the efficiency consultants how his organization approaches motivation and the impact it has on his work efforts. Does this sound like your organization?
Watch video here.
How do you motivate people to use your IT system?
Whenever you implement an IT system, look at all things affecting employee motivation. Sometimes there are issues with compensation and incentives. Other times the management may actually be demotivating employees.
As Peter says, “I have 8 different bosses right now…so that means when I make a mistake I have 8 different people coming by to tell me about it. That’s my only motivation – not to be hassled.”
Would WIIFM motivate this employee?
Convention wisdom (which is high on convention, and low on wisdom) often says that when implementing an IT system you should try to “sell people on what’s in it for me”.
Do you think trying to sell Peter on WIIFM would work in this case? Of course not. There are bigger issues that need to be fixed here. And unless these other items are fixed, WIIFM will not work.
So, what will you do to make sure you have motivated people to use your system? Please share your thoughts and experiences with us on the Customer Success Practitioners group on LInkedIn.
Do you remember this Saturday Night Live advertisement skit with Lily Tomlin as a phone company employee?
Customer choice means vendors need to care
Now, just a few years (ok, decades) later, these same phone companies are struggling to reduce customer churn. They are (finally?) realizing that things have changed and the customer now has more power in the relationship. And customers are not afraid to use it.
SaaS vendors need to focus on keeping customers...
Like phone companies, SaaS vendors – or any vendor selling on a subscription basis – realize that reducing churn and keeping customers for as long as possible is essential to their success. Unlike the phone companies of yesteryear, they can’t hold customers hostage and just expect the money to keep rolling in.
…but what do they need to do to reduce churn?
Many organizations recognize the need to retain customers, but they are not sure how.
The secret is simple. If you want to retain customers, make sure they:
1. Are getting value from your product or service, and
2. They enjoy their experience with your organization
If you can do that, you will keep them. As soon as these two things fall short, your customer will leave.
Focus on customer success to reduce churn
Many companies have invested in improving the customer experience and increasing customer satisfaction ratings. Now they to focus on making sure customers are getting full value / benefits realization.
For many organizations, this means creating a Customer Success Management program. Customer success is not account management or even customer service. It is all about helping the customer achieve the measured benefits and ROI that is meaningful to them. It requires different methods, tools, and activities than before.
Do you have a Customer Success Management program? If not, why not? If so, how has it affected your customer churn?
Please share your thoughts and experiences on the Customer Success Practitioners group on LinkedIn.
Increasingly, investors and SaaS leaders are recognizing that customer retention is essential for their success. As a result, they are rushing to build Customer Success Management (CSM) programs that will help their customers maximize IT adoption and ROI from their systems.
However, they are facing significant challenges because Customer Success Management is new to most organizations and they are not sure exactly how to get started or what to do first. They don’t always know that right question to ask, how to allocate scarce resources, or how to prioritize their efforts to get the best results.
Investing in a CSM strategy will save you time & effort
The first place to start is to create a CSM strategy and road map. Your CSM strategy should identify exactly what you are trying to achieve, define how you will achieve it, specify who will make it happen, and provide a clear road map moving forward. Your CSM strategy will help develop a shared understanding and vision for what you are trying to achieve. It will also enable you to move forward with confidence while allowing you to avoid costly pitfalls and mistakes that can threat your CSM program before it even gets going.
So, how do you create an effective Customer Success Management strategy? Here are 5 things to help you get started. Keep in mind that this is often an iterative process, and decisions you make later on may require that you revisit some of your earlier decisions.
1. Define your goals
Not surprisingly, the first step is to figure out exactly what you want your CSM team to do and the results they need to achieve. This will set the goalpost from which you will determine the specific staffing, services, tools and methods you will need in your CSM team. It will also help you identify the budget you will need to allocate for building and maintaining your CSM capabilities.
2. Define roles, responsibilities and org structure
One of the first questions people ask is what exactly should the CSMs do and where do they fit within the organization? Should the CSMs be responsible for sales and renewals, or just for driving customer IT adoption and satisfaction? Do they report to sales? Do they report to customer service? Sales? And what authority do they have when it comes to working with other departments internally (like sales, product management, professional services, customer support)?
3. Develop CSM methodology, tool and processes
Once you have figured out what you are trying to achieve and how you will work internally, identify the specific tools and processes you will need to make it happen. This may involve internal-focused tools, such as having a way to identify and report on actual customer-use of your system, and externally-focused tools, such as creating a CSM consulting methodology / toolbox that you use when working directly with your customers. You may require a combination of tools such as IT systems (like the one offered by Apptegic), spreadsheets, presentation slides, email templates, report templates, and other such things that enable your CSM team to deliver a consistent, effective, high-quality CSM service.
When building your CSM strategy you only need to identify and prioritize the methodology and tool development requirements. You don’t actually create all the tools until after the strategy is finalized since it may go through a few iterations before you have final agreement on how to move forward.
4. Recruit and develop exceptional staff
Identify how you will recruit and develop exceptional staff. This may include identifying a high-level profile of the types of temperament, skills and required experience levels you will want for your CSM team. And, it should outline how you plan to quickly on-board the CSM staff, train them, and ensure they are able to get up to speed quickly.
Just a quick word of caution: at its core, CSM is about driving IT adoption of systems. In order to be effective, CSMs need to understand the root cause of IT adoption problems and have a firm grasp of the proactive steps you can take to increase adoption. This is knowledge and skill that, generally, are in short supply. You may need to provide additional training and development to help your CSM staff learn the skills they need to be fully effective in this role.
5. Manage the roll-out (internally & externally)
Introducing your CSM capabilities requires changes both internally to your organization and externally with how you interact with customers. Both can be major transitions and you will want to map out in advance how you will manage these changes.
For your internal roll--out, consider how introducing CSMs will change the way existing staff perform their jobs. Have you changed the job responsibilities of sales and service staff? Will having the CSM team impact revenue and renewal targets for sales professionals? How will you go about informing people about the new service? Introducing the CSM function will kick off a domino effect of changes to all other parts of your organization.
For your external (customer) roll-out, be careful how you introduce the CSM function to both new and existing customers. Take care to ensure you set accurate expectations about what the CSM team will – and will not – deliver to customers. Also, you may want to consider if you want to pilot the CSM effort with select customers before rolling it out to everyone.
Be part of the conversation. Join the Customer Success Practitioners group on LinkedIn
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.
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.
Be part of the conversation. Join the Customer Success Practitioners group on LinkedIn