Predicting Customer Health: Look for Asymmetries

If you’re looking to measure customer health, start with understanding how important you are to each other.  Where there’s asymmetry in the relationship, you’re likely facing future risk.

Consider this matrix that describes the criticality of your customer relationships. How critical is a customer to you? How critical are you to them?

relationnship-criticality

What does “critical” mean anyway?

Your customer probably defines “critical” as being highly dependent on you in order to perform an important business process or function.  For example, customer support teams don’t get very far without a support ticketing system.  Finance people are challenged to perform their functions without general ledger software.

You probably define a customer as being critical to you when they represent a big percentage of your revenue or a major expansion opportunity.  Any customer that exceeds 2-5% of your revenue probably feels “critical” to retain and expand.

1: Critical to each other

When your relationship is critical to each other, then you need a high degree of customer intimacy to ensure that you are delivering successfully on your product’s capabilities.  Focus on the ways that your customer’s business processes depend on you to understand what their success looks like.

Presumably, such a mutually beneficial relationship denotes a high-revenue customer.  If so,  then managing this relationship closely with an assigned Customer Success Manager makes economic sense.

An aside: If you have a customer who sees you as critical but they’re not a high revenue customer, maybe it’s time to revisit your pricing model to charge them more.

2: The customer is critical to you, but you’re not critical to them

This scenario often corresponds to when you are working with a large corporation.  Even a simple product sold to a large company can yield big revenue initially or over time.  As such, you’re keenly interested in their success.

Ask yourself how you can make yourself more important to that customer.  Can you maximize adoption? Increase your customers’ switching costs by integrating your system to something else?

Also ask yourself how to make it easier to adopt your product.  Unlike business critical software, in this scenario you want the benefits of your product to be easy to achieve. Consider product usability and helpful content as ways to ensure and promote adoption.

3: You’re critical to a customer, but they’re not critical to you

Imagine your product is absolutely required for a customer to get their job done.  But the customer is a small business and isn’t paying you much money.

In this case, you run the risk of a “needy” customer that you’re not motivated to service.

Consider questions that can help your company learn from and adapt to this segment:

  • Was this a previously valuable segment that you’ve outgrown?
  • Can you gracefully exit these relationships?  Change your sales and marketing targeting?
  • Can you charge more for your product with these customers?
  • Can you create a self-service environment for these customers?

4: Neither is critical to the other

There can be lots of reasons for this situation.  There’s probably not a lot of money at stake here and the account probably doesn’t represent a big expansion opportunity.   Therefore, this customer segment isn’t worth servicing with your Customer Success personnel.  

Rather, consider questions that can help your company learn from this segment:

  • Why did we sell them in the first place? Did we target the wrong types of companies in our sales & marketing programs?
  • Is there something we could improve in our product to make it more appealing to this segment?
  • Can you leverage automation to service these customers and nurture them into larger ones?

Understanding the relationship dynamics will help you in many ways; you can anticipate future risk, align your resources, and ask the hard questions about which customer segments you’re best able to delight.  

As a practical exercise, take some customer accounts and map them to this matrix.  I’ll bet you will be surprised at who goes into which quadrant.  Perhaps in some cases you don’t know know where a customer should go.  Getting those answers could be valuable in its own right!

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