Beringea Scale-Up Academy: Building Exceptional Customer Success in SaaS
By: Henry Philipson
Tags: Entrepreneurship, SaaS, Beringea Insights, Customer Success, Venture Capital

We continued our recent series of roundtables for our SaaS portfolio in the U.K. and the U.S. to examine the secrets of building an exceptional customer success function. The discussion was led by Dave Jackson, CEO of TheCustomer.Co and the interim Chief Customer Officer of DeepCrawl, a Beringea portfolio company.

In recent articles from the Beringea Scale-Up Academy, we’ve taken a looking at building great products, developing an effective sales pipeline, and creating an impactful pricing strategy — but we are yet to consider a cornerstone of SaaS: customer success (CS).

To help us navigate this problem, we brought together our SaaS portfolio to hear from Dave Jackson, a self-confessed CS heretic who focuses upon embedding CS throughout the companies he works with.

Dave kindly shared his perspectives on a few of the key questions discussed in our recent event to help you think about how to create exceptional customer experiences that drive value and growth.

When does an early-stage company need to start thinking about building a customer success function?

I think the first mistake many CEOs make is to think of customer success as a function. In the best companies, it’s much more than that. Most B2B SaaS companies are started when founders find a new way to solve a problem with a product. They were focused on a customer’s pain/gain points and how they could resolve it. That’s delivering value to your chosen customer — or in other words: customer success! Many then lose sight of that as they build out their organisations.

I define the work of delivering customer success as “Everything an organisation does to profitably win, satisfy, retain and grow its chosen customers better than the competition.”

For me, customer success is about the problems you choose to solve for the individuals within the organisations you choose to serve. It’s about product-market fit; how you communicate the value you provide through sales and marketing, how you build a product to deliver that value and the services (paid and included) that enable customers to achieve their goals.

In other words, value to customers — or customer success — is the red thread that runs right through your business. You might have specialists doing specific parts of that task, but they are in marketing, sales enablement, product management just as much as they are in CS.

Start by thinking about the capabilities you need to communicate and deliver value before thinking about building a department. Tien Tzuo, the founder of Zuora, noted that many companies approach new problems by simply saying: “When in doubt, build another silo”. Do that without creating a coherent framework and your customers will get an all-too common problem — a fragmented experience.

So, the simple answer is first to think about what capabilities you need to profitably win, satisfy, retain and grow your chosen customers and then — and only then — think about who does what.

How should a company begin structuring the processes and objectives for a customer success team?

First, I refer you to my answer above: It’s not just about one team.

I think CS should have a single objective: grow Net Retention. This metric is critical for your valuation, and it’s the surest route to you and your shareholders getting a high valuation exit. In fact, I believe — after cash — it should be the one number everyone should obsess about.

NRR growth is achieved through an intense focus on what value means to the key roles in the companies you choose to do business with. By focusing on making them successful, you earn the right to the renewal and expansion revenues that form NRR.

I think there are three key, interlinked processes you have to master.

Value delivery. How, through your product (first and foremost) and your CS and professional services teams, you deliver measurable value to the key individuals in your target companies. Note the importance on individuals, not some faceless thing called ‘a customer’.

How, through your product (first and foremost) and your CS and professional services teams, you deliver measurable value to the key individuals in your target companies. Note the importance on individuals, not some faceless thing called ‘a customer’. Revenue management. How you convert value into three sources of revenue:

Renewals will be biggest source of revenue, and the case for renewal should focus on how you delivered on and continue to solve for the reason they initially bought. Upsell is about identifying ways of solving additional pain/gain points that your existing buyers may have. This may be additional products, features or, if you have really cracked packaging, increases in a value metric that drives incremental pricing. Cross-sells are opportunities that involve a new buying unit, either within the wider existing company or a referral to a completely new company. This secondary revenue is a sign of successful customer success capabilities: people don’t recommend unless they are sure as it their reputation on the line, not just yours.

Relationship building. To be effective, you must build relationships that are viewed as valuable by all the key players in the customers you serve. A single point of contact is a single point of failure. Building rich many-to-many relationships doesn’t happen by chance. Processes like relationship mapping and health underpin great customer success.

In all cases there is one thing to remember: processes should be designed from the outside-in — in other words, starting with the customer. If there is one thing that frustrates customers most, it is having to navigate your silos. Don’t put them in that position unless you want to increase the likelihood of them churning. The best processes are seamless to the customer.

How do you measure CS performance in real-time?

I am not sure you need true, real-time metrics for many aspects of customer success. That said, when thinking about measurement, I use a simple equation:

ACTIVITY x QUALITY = OUTCOMES

Start by understanding what outcomes you want to achieve. From there, figure out what activities, when done well, will deliver them. You might not get it right first time, and the thought process will have to be revised periodically as the needs of your customers and your ability to deliver on them will change.

Think about applying this formula in two major areas.

First, your customers. What does success for them (the individual, not the company) look like and what do we need to do to help them achieve it? That forms the basis of your value delivery process.

Second, your company: same questions. By the way, if the extent to which you deliver measurable value to customers is not part of your company’s measures then you cannot claim to be concerned about customer success. Unfortunately most so-called CS metrics are all about the company’s success, not the customers’.

Mastering activity and quality measurement will lead you on the path to predictive success but it won’t happen immediately, and it will periodically need tweaking. The world — especially customers — has a nasty habit of constantly changing and you need to stay relevant.

How do you successfully manage the relationship between customer success, sales, and marketing?

I see too many questions on LinkedIn and other forums asking about relationships between different departments. I have concluded that this quest for alignment is in fact the failure of a CEO in one of their most important jobs — purposeful organisation design.

Building a company-wide approach to customer success starts with four basic frameworks which should be developed collaboratively by all involved in the customer lifecycle:

The first is a high-level, end-to-end customer lifecycle, written from the outside-in, as I outlined earlier in this article.

The second is creating rich Ideal Customer Profiles, with an emphasis on profiling the roles of the individuals you seek to serve.

The third is a common view of how your company communicates and delivers value to these individuals: what I call a Value Framework.

The final part is agreement on a couple of measures that everyone is measured by. In my book, the leading candidates are NRR and CLTV-CAC.

Once these four have been agreed (not imposed) they become the focus of collaboration. How do we iron out the kinks in the lifecycle? How do we develop marketing and sales messages that communicate value in the same way to the same targets? How do we ensure that the value communicated in the sale is delivered in the product and the services provided?

What are the most common pitfalls that you’ve identified in early-stage CS teams?

This brings us round full circle. The main problem is not with the team; it is with thinking that a CS team is the answer to CS. A team will try its best to deliver on what the CEO asks of it, so the problem often lies there.

That said, there is one failure that is commonplace: to think that CS is about being a trusted advisor, which is apparently incompatible with selling. CS is a commercial activity — period! CS is rooted in delivering value to individuals in the organisations you serve, and that should define your company. For example, the purpose of CS at Deepcrawl is: “Deliver value to customers that converts to revenue for Deepcrawl.”

If there is one problem that I see CS leaders making, then it is thinking that their primary purpose is to look after and grow a team. It’s the same mistake that leaders of other functions make. I always tell people that when they go to that executive table, their first duty is to do what is right for the business, not their team. Sometimes, you won’t get what you want because the business has other needs that can deliver greater benefit. Being a leader is about taking that step.