Compensation planning leads to customer success

TLDR: It’s the start of the year, when companies review their annual goals and compensation plans. Typically, customer retention and growth is a top priority.  

Do you have the right incentives in place to meet your customer retention goals?  There are two approaches to answering this question: bottoms-up and top-down

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Leading and lagging indicators of customer success

There was a recent discussion over on the Customer Success LinkedIn group about defining leading and lagging indicators for customer success.

Here’s my take on which is which, through the prism of churn risk.

Indicators or outcome measures?

Before we get to indicators, let’s start with defining the outcome measures.  These are the standard business metrics that are used to measure success. They sometimes get confused with leading indicators.

Some examples:

  • Logo and revenue renewal rates
  • Churn rate
  • Period-over-period revenue growth per customer
  • Lifetime value

Therefore, indicators aren’t financial metrics so much as they are operational measures.  And the best indicators are the ones you can link to the outcomes you care about.

For example, take your churn events: can you unpack your churn outcomes to spot the leading and lagging indicators in retrospect?

Lagging indicators

If we’re looking for churn indicators, think of lagging indicators as the evidence of customer risk that could turn into a bad outcome in the near term.

Some examples:

  • Account escalation
  • Low license utilization
  • Negative feedback / surveys near a renewal date
  • Refund requests / discount requests
  • Account downsell

Leading indicators

Think of leading indicators as the earliest signs of a customer struggling to achieve value and success.

It’s easiest to conceive of early indicators when the customer relationship itself is early:

  • Slow time to first value
  • Slow initial adoption
  • Negative feedback and/or low survey scores
  • High volumes of support tickets (depending on what’s in them)

Others indicators can be signs of churn risk even when the relationship is otherwise stable:

  • Declining adoption
  • Negative feedback and surveys
  • Lack of engagement

Focus

There are plenty of indicators you can pay attention to; too many, in fact.  So the goal is to focus on a subset.  

Start with just one outcome that matters most.  For example, “flat or reduced renewals”.

Unpack that outcome to spot the indicators.  Get good at monitoring them, and responding to them reliably.

Once you’ve established some focus, you face a choice. Stay the course or introduce additional outcome measures with their indicators? Regardless, start simple.

7 uncomfortable questions about user adoption

TLDR: If you’re like many folks in Customer Success, you spend most of your days working with key stakeholders at your customer accounts.  People like business sponsors, department leaders, admins and projects managers.

Suddenly, the week is over and you haven’t spent a minute with the actual users of your product.  

If you believe – as I do – that product adoption is the most important driver of customer retention and growth, then it’s important to confront this reality.

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Get efficient or get fired? 3 strategies to streamline your customer success team

TLDR: “If you’re not getting more efficient every month, you should be fired!” said a Customer Success leader at a recent networking dinner.  He went on to assert that a Customer Success team should not grow in proportion to your customer base or revenue. Should we be following his advice? Continue reading

Driving Net Promoter® in your company: 3 must do’s

I recently read a great article from Bain about the motives and barriers to the Net Promoter System℠ adoption across the enterprise, regarding the so-called “inner loop” and “outer loop”.

As they described it, the “inner loop” relates to a person or team who initiates Net Promoter Score surveys for their own use. In other words, to gather customer feedback that they themselves have the ability to address and resolve.

The “outer loop” pertains to enterprise-wide adoption of NPS, including all of the departments that might be called upon to make improvements in response to Net Promoter Scores and customer feedback. I’d equate the “outer loop” to enterprise-wide adoption.

The challenge is that enterprise-wide adoption of the Net Promoter System is both the source of the biggest gains and the biggest challenges.

What does it take to reach enterprise-wide adoption? Consider three things.

Leadership commitment

Much has been written about this already, but it bears repeating: Leadership must embrace Net Promoter and mean it.

First, executive commitment to the Net Promoter System does not mean a commitment to sending customer feedback surveys. Rather, it means a commitment to respond to the feedback with operational improvements. No matter where or why they originate.

Second, it means a long-term commitment. Truly meaningful changes to drive improved Net Promoter Scores require many operational improvements delivered over a period of time. It’s a marathon not a sprint.

Third, it means avoiding Net Promoter Score infatuation – the mistake of executives using NPS as a single metric by which to run the business. Many other metrics are relevant, especially financial ones such as Lifetime Value, Customer Acquisition Cost, Retention Rate, Churn Rate, etc.

Departmental buy-in and alignment

The beauty of NPS is that it’s capable of surfacing opportunities to improve across many areas of your business; including sales, support, product and account management / customer success.

However, this is where most NPS programs get bogged down. One team is enthusiastic about measuring Net Promoter Scores, but another seems uninterested, uninvested or even uncooperative.

Why is this?

Anytime I encounter resistance from another team, I start by asking questions about their incentives. What are they being asked to do that takes higher priority? What are the measures of that team’s success? How are their goals set and accordingly compensated?

When there is misalignment with the NPS program, then the executive team needs to decide if they are going to change the goals and incentives of the team that’s not cooperating, or live with the mis-alignment. In some respects, ensuring goal alignment is a test of executive commitment to the Net Promoter initiate itself.

Customer follow through

Engagement with survey respondents is critical. It’s the start of a conversation, not the end.

For example, knowing that somebody is a proponent isn’t enough. A customer like this is a tremendous asset. You want to know why they are happy, and other ways they might help your business grow. For example, a proponent might:

  • buy more from you
  • serve as a customer reference
  • join your advocacy program
  • refer friends to you
  • tell you why they’re a promoter in the first place

However, a promoter won’t do any of these things – until you ask. So, it’s your response that matters most.

Passives are another interesting audience. What would it take for them to become proponents? The answers to that question can surprise you, and sometimes it’s trivial things to do on your part. Again, the follow-up to the survey response is how you discover and address those needs.

Last, we tend to focus on detractors, and for obvious reasons. Getting to the root cause of what made somebody so unhappy is important. People have a greater propensity to complain than praise, so negative word-of-mouth is a real business risk. 

One of the most interesting insights that comes from engaging detractors is spotting product mismatch. In other words, customers with needs that your product wasn’t designed to fulfill.