Any metric that’s not acted on is a vanity metric, right? Sure, but that doesn’t cover every situation.

Sometimes we measure things because we’re “supposed to” but honestly don’t know what to do once we have the result (add that to the list of things that are true but few people will admit publicly). It’s only a vanity metric because all we can do is look at it. We sure would like to act.

And then there are times where the metrics that we’re measuring are done with a purpose, we want to – and maybe even have an idea on how we will – act on them; but the metrics are just wrong. And acting on them will be either impossible or fail to have the impact you hope it will.

Which brings me to this question I got from Phil at Corvus Coffee, a subscription coffee company based out of Denver, CO:

“I’m wondering if you have an opinion on what a churn rate should be while marketing a free trial heavily to grow a new online business compared to when we have a more established subscriber base.”

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I’m frequently asked about SaaS Free Trial Conversion Rate Benchmarks; after being asked for the 97th time – this week – I decided to publish this post.

First, a bit of a disclaimer. Benchmarks are neat… it’s cool to see how you stack up against other companies. Benchmarks are how some executives make decisions and some investors decide if it’s worth the risk. And there are analyst firms that make a ton of money catering to that desire to know how you rate against other companies.

I’m not an analyst… my knowledge comes from my experience working with SaaS companies, those I advise, and through my various connections with VCs and friends in the biz.

And in my experience, I say…

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Também disponível em Português por Mathias Luz

Churn is when customers cancel their account, don’t renew their contract, or remain your customer but pay you less; the latter is referred to as “revenue churn” and includes discounts, down sells, etc.

Now, many companies find out about Customer Success when searching for ways to reduce customer or revenue churn, and in the past this was the primary driver for companies to invest in Customer Success; at least initially.

But once churn is taken care of, is that it? Not at all! In fact, once churn is under control, that’s when the possibilities of Customer Success really start to get good.

Unfortunately, many companies never get past that point; they have churn today, they’ll have it tomorrow, and that’s going to be the focus for the foreseeable future.

It doesn’t have to be that way!

If churn is a major issue in your business today – or if you are trying to keep that from being the case – it’s critical to view churn for what it is: a symptom of a deeper, underlying disease.

And that disease is a failure to ensure your customers achieve their Desired Outcome; either because you’re failing to Orchestrate, Operationalize, and Instrument properly once they become a customer… or because you’re acquiring customers without Success Potential in the first place.

Either way, let’s dig into this a bit.

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I’ve been saying for years that Customer Success is transformative; driving exponential value for both the vendor, as well as the customer. In fact, it’s that value growth for the customer that truly drives the value growth for the vendor. What goes around, comes around.

And while the following is something I’ve shared with clients, workshop attendees, portfolio companies of Venture Capital and Private Equity funds Storm Ventures and Accel-KKR in the United States, NDRC in Ireland, e.Bricks Ventures and Redpoint eventures in Brazil, as well as covering this in my Keynote at the 2016 TSIA Technology Services World event…

… I’ve never really put this out there for public consumption.

Until now.

But first, what do I mean when I say “drives value” for the vendor? How does Customer Success truly affect the company that adopts it as it’s purpose such that it impacts everything they do?

Customer Success drives up the value of your company. How’s that for impact?

In fact, let’s look at 7 ways Customer Success drives the Value of your Company.

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Fairy Tales have happy endings.

That’s why they’re so popular; even if they include scary moments with monsters and evil blended family members, everything is pulled together nicely at the end when the naive protagonist is magically okay.

In business, the same types of fairy tale exist, with one being that customers cancel their subscription or don’t renew their contract but somehow, magically, those customers are brought back from past the brink and, in the end, their cancellation was reversed, they’re happy, and maybe they even took an upsell on the way back in.

The reality is, that’s not generally how things work; and if you’ve heard about the opportunity in cancellations others may have experienced it, I can guarantee their experience was unique and rare.

Regardless of your humility, transparency, and noble intentions, customers that cancel – and didn’t get acquired or go out of business; the only slightly acceptable reasons for churn – do so because they did not achieve their Desired Outcome through their interactions with your company.

Customers achieving their Desired Outcome through their interactions with your company tend to not churn; that’s why focusing on Customer Success is so important.

Ultimately, this means swooping in after your former customer made a decision to stop doing business with you, – because you didn’t enable them to achieve their Desired Outcome while they were paying you – probably isn’t going to work, and might even irritate ’em on the way out… a little insult to injury for the road.

In this article, I’ll introduce two things that will help reduce cancellations (if you forgot to focus on Customer Success): Cancel Flows and Cancel Intent.

But I’m getting ahead of myself; let me take a step back and start from the beginning…
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Churn is the antithesis of growth.

When you lose a customer, in order to grow by one customer, you have to first replace that customer you lost, and then add a new customer.

And when a customer leaves, they take the revenue they were paying you with them (often to a competitor!); but they also take other things, like negative sentiment, your employee’s morale, ammunition for the competition to use against you in future deals, and much more.

You know churn is bad, I don’t have to convince you of that. (Right?)

What’s even worse than having churn is not knowing why your customers churned. That’s why I say you need to know why each customer churned so you ensure no customer ever churns again for those reasons.

But I want to be clear that, whatever reason your customer gives you for why they churned, the details uncovered by your internal tracking, or (ideally) both, it all fits into one of two categories.

Let’s dig in…

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What’s a reasonable conversion rate from free trial to a paid customer?

I get some form of this question from time to time and I’ve answered it several times over the years.

Well, I got it again so it’s time to revisit this very simple question.

As with most “simple questions” the question is easy to ask; the answer, however, is anything but easy to give.

But I tried and here’s my response that I thought you’d benefit from, too.

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What drives a company to focus on Customer Success is changing. In the past, churn (or retention, depending upon how you look at things) was generally the catalyst.

Once churn is under control, the catalyst changes to expansion; driving use, consumption, and revenue within existing accounts.

And these days, startups are building Customer Success into their DNA from the ground up, understanding that an acquire-any-customer-at-all-costs-until-churn-is-a-major-problem go-to-market strategy is the wrong way to do things and are avoiding that unnecessary step in the startup lifecycle.

That said, churn is still a problem for some companies, so when I answered this email about different churn rates across customer segments, I thought I’d share the answer with you, too, so we can all benefit.

Here’s the email…

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I’ve talked before about holding customers accountable and how customer success isn’t about making customers happy.

Sometimes you have to push customers out of their comfort zone and – if you’ll allow me to channel my inner Tony Robbins -progress is rarely made within our comfort zone

That means moving toward success – whether for us or for our customers – is not always comfortable.

In fact, success is often quite uncomfortable.

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Picture it, São Paulo, Brazil, October 2015.

After one of the sales and customer success workshops I did, a few of us went out for a snack – fried polenta sticks – and to talk shop… and the idea of Success Gaps came up.

In particular, we talked about prospects that experienced Success Gaps with your competitor’s product because “it didn’t do what they needed it to do” and are interested in your product, but your product is – if you’re honest – fairly similar to the other guys.

So is it awesome that they want to switch and you should celebrate that you’re stealing your competitor’s customers… or is it a huge red flag?

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Personally, I’ve always found it difficult to ask for testimonials. It just doesn’t come naturally to me.

In fact, one of the reasons I like doing calls on Clarity is that the platform closes the loop with the client for me, asking for a star rating and optional comments; to me, that part alone is worth 15% of the revenue from those calls. It’s operationalized and I don’t have to think about it.

But that’s just for Clarity calls; outside of that system, I’m back to square one… asking for a testimonial.

And of course, my clients are pretty much in that same boat, too. Some people are better at it than others, but asking for a testimonial is not always the easiest thing to do. It’s especially difficult when you just do it in a haphazard way… which results in doing it even less often and then,… not at all.

That’s why you should operationalize the process. But I’ll be honest, even if you have a strong system in place, if there’s still a human involved – on either end – the process becomes a bit bumpy.

I suppose you could just wait and hope testimonials roll in organically, but that seems like a bad idea.

Luckily I’ve got a foolproof way of getting testimonials.

In fact, the other day I was talking to some folks at a well-known search optimization software vendor about Customer Success at a high level when this very tactical question came up; how to get testimonials.

We were talking about how Customer Success leads to increased customer advocacy – and we know social proof is extremely valuable (if you do it right) – but these high-level discussions get derailed when you’ve run into low-level tactical issues in the past.

Well, like I said I’ve got this great way to get testimonials, but I assumed what I knew about this was what everyone else knew… but I was wrong.

Once I told them how to get testimonials without asking for them, I could sense that perhaps I knew something they didn’t. Perhaps this technique I use all the time with super-awesome results wasn’t as widespread as I thought.

So I decided I would share it with you… but pay close attention; there’s no TL;DR version of this and all the details matter. RT;WT (Read The: Whole Thing).

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I talk about Success Milestones all the time, not just in the context of Customer Success, but in the context of the overall success of my SaaS clients and the companies I work with.

The concept of Success Milestones is a relatively simple one to grasp, but the power and the value of this way of thinking are often overlooked or misunderstood. Let’s fix that.

Since I’ve never really defined Success Milestones, what better time to do that than right now.

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A little while ago I introduced the concept of the Success Gap and how customers can use your product to the fullest and still not achieve their Desired Outcome.

And as the vendor you can either ignore the phenomenon and let customers fend for themselves and maybe not achieve the desired outcome – at which point they’ll blame you – or you can take the initiative to try to help them with a bridge for that success gap.

You can do that by bringing in experts, providing content, giving discounts on third-party courses, or building those bridges into the product.

But at some point you also need to let the customers know that they are accountable for some portion of the results.

In fact, one of the things we have to do as part of an operationalized Customer Success initiative is to tell the customer what they need to hear – not what they want to hear – so they do the right thing.

Which means we have to be realistic with our customers about what is on their plate – and what is on our plate – and who’s ultimately responsible for the success of the customer.

This is called Customer Accountability and it’s the missing piece in your Customer Success strategy.

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Também disponível em Português por Mathias Luz

Can the customers you’re actively going after actually achieve success with your product or through their interactions with your company as things are today? If not, that’s a problem.

The reasons they might not achieve success range from their readiness (they don’t have the necessary data or internal processes to support our tool internally), technology requirements (we’re built on top of Salesforce and they don’t use Salesforce), or it could be that your product simply doesn’t have everything the customer would need to be successful.

This came up recently when I was talking with the founder and CEO of a SaaS startup on Clarity about their customer acquisition strategy and he said “agencies are our Ideal Customer.”

Then he told me that they currently lack the ability for an agency to do roll-up reporting across all their customer accounts, which, as he put it, is “a critical piece of functionality for agencies.”

I almost passed out at this point… but I gained my composure – and some oxygen – and was able to help him. The following is based on that conversation and I know it will help you, too…

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Ugh… isn’t dealing with customers that don’t get it and having to hold their hand along the way or check-in with them to make sure they’re okay, annoying? It’s so nice when you can hand ’em off to someone else, right?

I hear that all the time from clients, on Clarity calls, and from companies I work with to bring Customer Success into their organizations.

Mostly I hear things like that from people in companies with high customer churn, super-low Free Trial conversion rates, and an overall negative NRR (Net Revenue Retention), meaning there’s little or no revenue expansion happening within the existing customer base.

The latter isn’t a surprise once I hear the way the company talks about their customers, but it is avoidable.

In order for Customer Success to really work, it has to be part of the DNA; brought in by executives and adopted in every area of the company.

But the things we say can derail that.

You can operationalize around your customer’s lifecycle, create a professional CSM org, implement a state-of-the-art CSM software solution… but if you talk about you customers in a negative way, you’re probably not going to achieve the level of success you’d like. It’s that simple.

Words are powerful and to a certain extent drive our actions. If we talk smack about our customers behind the scenes, some – or maybe all – of that will come out in how you interact with them, it will influence the tools you create for them, or otherwise, impact how you operationalize around their success.

So here are 5 terms to avoid in Customer Success… and no, this isn’t just semantics.

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For SaaS vendors, the Purpose of a Free Trial is to create a customer. Period.

If you don’t agree with that statement then you really won’t like pretty much everything else I’m going to say in this article.

Free Trials are not for tire-kicking freeloaders – and if that’s what you’re getting in your free trial, you may want to think about identifying your Ideal Customer Profile and getting them into your trial – because a Free Trial of a Premium product is not Freemium. It’s not a giveaway. It’s not a gift.

Those people who sign-up for your Free Trial are what we call Prospects (prospect is short for Prospective Customer) and you need to treat them that way. There is a lot of potential value stored in the prospects that signup for your Free Trial… and designed correctly, your Free Trial Strategy can unleash that value in several ways.

Let’s dive into those, shall we?

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Também disponível em Português por Mathias Luz

One of the most powerful concepts I’ve ever come across in business is the idea of the customer’s Desired Outcome.

And if you’re thinking “one of the most powerful concepts in business” seems like a pretty hefty charge, you’re right; this concept has transformational properties.

When I first introduced Desired Outcome, I explained that this idea came about as a simple replacement for “what does Success mean to your customer?”

But it’s SO MUCH MORE than that… let’s dig in.

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“The Seeds of Churn are Planted Early” is a phrase I came up with in early 2013, published shortly thereafter, and have said and used many times since.

I wanted to go on record with that – BTW, if you see the term’s use outside of my work or that of Gainsight’s, maybe send them this link – but I also wanted to give the origin story of this powerful Customer Success concept.

It was late December 2012 when the CEO of a startup that had a major churn problem contacted me.

They were losing far more customers than they were bringing in – and they were bringing in a lot of customers – and he knew this was clearly not sustainable; I could tell he was worried.

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The mantra of “grow at all costs” – that seems to include acquiring wrong-fit customers (those who aren’t your Ideal Customers), churn be damned – has popped up several times lately and my reaction to it is two-fold.

First, I immediately thought how stupid this is and how it flies in the face of everything that has to do with customer success and what I’ve been preaching for the last few years, but also goes against the core fundamentals of building a high-growth business (of which not losing more customers than you bring in is kind of important).

But then I thought maybe this could be a fun thought experiment where we can explore five situations where having high churn is actually just fine… in fact, it’s totally acceptable.

Cool, let’s do this.

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The common refrain by SaaS experts that think business is just a math problem is that if a customer stays long enough to pay back the cost to acquire them (the metric is called Customer Acquisition Cost or CAC), they became a “profitable” customer (“unit economics” don’tcha know) and everything is great.

Just do more of that and you’ll be a unicorn.

But the fact that your customers churned out – even after becoming “profitable” – likely means you didn’t get all the value you could from them and they definitely didn’t get all the value they should have from their relationship with you (you didn’t help them achieve their Desired Outcome).

Those customers you paid to acquire – that your company put time, energy, resources, and money into acquiring – are leaving, and there’s a cost that comes along with that that you might not have considered.

Let’s explore this, shall we?

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How do you define success for your SaaS customers?

While it sounds simple, it’s not.

Success is only achieved when your customers reach their Desired Outcome by their interactions with your company.

But first, you have to understand what it is that your customers want to achieve — and that can take some work.

I was recently a guest on the business analytics podcast, Ramp Podcast, and I spoke with host Cara Hogan about how SaaS companies can begin to define and invest in customer success, from identifying an Ideal Customer Profile to reducing churn.

If you want happy, engaged customers who rave about your product, you should take a listen.

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Micky from Kahuna Accounting sent me an email to share that they grew their B2B business from 0 customers/0 revenue to 180 customers and $40k/month ($480k Annually) in just over a year, and a major part of that was their use of the Ideal Customer Profile framework.

So Micky wanted me to share with other startups and entrepreneurs what worked so well for him, so he invited me to be a guest on his podcast to discuss the Ideal Customer Profile framework… and I know I talked about some stuff that I’ve never discussed publicly.

Below is Micky’s email… note that the first ideal customer they narrowed down on didn’t work… the beauty of using a framework like this!

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