# Sixteen Ventures - Complete Article Archive > All articles by Lincoln Murphy on Customer Success, SaaS growth, > retention, expansion revenue, and maximizing customer lifetime value. --- # It Doesn't Have to Be Resolved on This Call *August 24, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/it-doesnt-have-to-be-resolved-on-this-call/ I wrote recently about [calling people up rather than calling them out](/active-listening-is-a-filter/), using a meeting where I got it wrong. Same observation either way, different structure: name the behavior, separate it from the person, point at the outcome they've already said they want. That's correct and it's incomplete, and the missing part is the part you need. ## You can only call somebody up if you know what's being defended Calling up isn't a tone. It's a move that requires material, and the material is knowing what the objection is actually protecting. Without that, you're guessing. And a guess aimed at the wrong thing lands exactly like calling out, because you've just told somebody in confident language that you understand their motive and been wrong about it. That's worse than the blunt version. The blunt version is at least honest about being a challenge. So the softer phrasing isn't a fallback you can reach for when you don't have the context. It doesn't work without it. Which leaves a shorter list of options than people think. ## The list - Call up, if you know what's being defended.- Say nothing, if you don't. Debating the merits is not on that list. That's the part that will feel wrong, because debating the merits is what everybody does and it feels like the responsible thing. Somebody says the change is too hard. You have a response to that. The response is good. You say it. Now you're arguing about capacity, which was never the subject, and every minute you spend there makes it harder to get to what is. **"That's interesting, let's come back to it" is a complete move.** Not a stall, not weakness. A complete move. ## Almost nothing has to be resolved on this call Here's where the failure actually comes from, and it isn't temperament. It's the belief that the thing has to be settled before the hour ends. That belief is what makes you reach for a response you don't have the material for. It's why you argue the merits, why you push one more time, and why you say the sharp version in front of people you shouldn't have said it in front of. Look at what's actually on the line if you leave it open. You have another conversation. That's it. That's the entire cost. Whereas the cost of forcing it is that somebody gets fused to a position in public, and now they have to defend it, and the next conversation is harder than the one you just had. ## How you get the context Since the whole thing depends on knowing what's being defended, the useful question is how you find out. The cleanest signal is a contradiction, and it's audible in real time. **When somebody's objection works against an outcome they have themselves said they want, the objection isn't the real thing.** They told you it was a priority. They're now defending a position that leaves it unfixed. Both can't be true. That's not a subtle read, it's arithmetic, and you can hear it happen. What it tells you is narrow but it's the thing you need: you have stopped talking about the topic and started talking about something else. It doesn't tell you what the something else is. For that you have to ask, and asking usually can't happen in the room where you noticed. Which is another reason the second option on the list is real. Say nothing now, find out later, come back with the material. ## And the cost in front of their team is not what you think One more thing about the room. When you call somebody out in front of their own people, the damage doesn't land where you'd expect. It doesn't primarily land on them. It lands on their team's confidence in them. You can degrade somebody's standing with their own reports while sincerely believing you were solving a process problem. That's worth being blunt about because of what happens next, which is nothing. They will not tell you that you did it. You'll find out indirectly, months later, or you won't find out. ## This is a practice, not a principle The reason it's worth writing down is that knowing it doesn't protect you. I know all of this. I've known it for years. I did it wrong anyway, recently, because I was distracted and the moment came and calling somebody out is the path of least resistance. It's faster. It feels like candor. It's the default, and defaults are what you get when you stop paying attention. Slipping is normal. Noticing you slipped is the whole skill, and noticing takes about a minute if you're looking and doesn't happen at all if you aren't. --- # Active Listening Is a Filter, Not a Posture *August 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/active-listening-is-a-filter/ I got this wrong in a client meeting recently and it's worth showing the whole thing, because the failure is more useful than the principle. Someone I've worked with for a while pushed back on a set of changes. Too hard. Won't work operationally. We'd have to change too much. I listened to all of it, and then I said something close to: it sounds like you're trying to do as little as possible here. He didn't have an answer. I was right about the behavior and wrong about everything else, and I knew it within about a minute of the call ending. ## What I actually did I took the objection at face value. That's the whole error. Not rudeness, not impatience. I heard "that won't work operationally" and processed it as a claim about operations, which is what the words say and almost never what the words mean. What it meant was: the things you want changed are things I built, and I committed to them in front of my team, and agreeing with you costs me something you're not counting. I know that. I've written it down. I teach it. And in the moment I didn't apply it, which is the part worth examining, because I wasn't distracted in the way that word usually means. I was on the call. I was paying attention. I could have repeated back everything he said. ## Being present is not the same as listening Here's the distinction I'd been fuzzy about. Active listening gets described as a posture. You're engaged. You're not planning your reply while they talk. You mirror, you paraphrase, you reflect it back so they know they were heard. All of that is real and all of it has its place. None of it is the thing. **Actively listening means passing what's being said through a framework.** It's an act, not a state. You have filters running, and the filters are what let you hear the difference between what someone is saying and what they're conveying. Without them you're a very attentive recording device. Said: that won't work operationally. Conveyed: I'd have to change something I made, in front of the people I made it for. Mirroring gets you an accurate copy of the first one. Only a filter gets you the second. ## The filter that would have caught it There are several worth running. This is the one I should have had loaded and didn't. **Listen for objections that work against the person's own stated goal.** Somebody tells you what they want. You tell them what getting there requires. They hand you a list of reasons it won't work. Stop there, because those two things can't both be true. If the objections are counter to the outcome they told you they need, something else is driving them, and continuing to debate the objections on their merits is a way of not finding out what. It's a cheap filter. It fires on a contradiction you can hear in real time, and it doesn't require you to be clever, only to be checking. The reason it's worth naming specifically is that face-value objections are *plausible*. Capacity really is finite. Operational difficulty is real. Nothing about "we don't have the bandwidth" sounds like evasion, which is exactly why it works as one. ## Why I lost it Two reasons, and neither is interesting, which is the point. **I was stressed and distracted in general**, and I brought that into a call where I thought presence would be enough. It wasn't. Presence without a framework is just attendance. **And I'd mistaken the relationship.** Everything with this person had been good for months. What I hadn't noticed is that nothing had tested it. We'd been agreeing about things that cost him nothing. The moment I proposed changes that touched what he'd built, the relationship got tested for the first time, and I read the resistance as a change in him rather than a change in what I was asking. That matters if you carry accounts. A relationship that's never been tested isn't strong. It's untested, and those look identical right up until they don't. ## The fix is preparation, not talent You need a buffer before a meeting. Five to fifteen minutes, and not for the thing everyone uses it for. Reviewing notes and action items is preparing for the content of the call. That's necessary and it is not this. **You also have to prepare to be present**, which means loading the frameworks you intend to listen through, so they're running when something arrives that needs them rather than arriving as a realization on the drive home. I skipped that. I did the notes and I thought that was preparation. ## And when you do catch it, call up One more thing, because I got this wrong in the same sentence. When I told him it sounded like they were trying to do as little as possible, I called him out. In front of a member of his team, which made it worse. The behavior did need naming. But you **call out the behavior and call the person up.** Something closer to: I understand where this is coming from, and I think we need to move past it, because I know how much you want this to work and you're going to be the one living in whether it does. Same observation. Completely different thing to be on the receiving end of. One of them makes agreeing with me an admission, and the other makes it the obvious next move. Separating the person from their process is the same discipline as [separating them from the thing they built](https://ltvmax.com/posts/they-built-the-thing-youre-asking-them-to-change), and I'd argue it's the whole job once you're past the easy part of a relationship. One caveat I left out, and it turns out to be the part that decides whether any of this works: calling somebody up requires knowing what is being defended, and if you do not have that, [the correct move is silence rather than a gentler version of the same question](/it-doesnt-have-to-be-resolved-on-this-call/). ## The part that's genuinely good news More resistance has surfaced with this client the longer we've worked together, and my first read was that things were going badly. They're going deeper. Early on I was proposing things that cost nobody anything. Now I'm proposing things that touch what people built and committed to, and that's where the actual value is. Resistance showing up late isn't a relationship degrading. It's usually the first evidence you've stopped working on the surface. Frustrating in the moment. But if you're never meeting resistance, it's worth asking whether you're proposing anything that matters. --- # Automating The First Touch Is A Category Error *August 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/automating-the-first-touch/ A customer signs. Real money, a real commitment, the start of something you want to last years. The first thing the company does is work out how to send them a message without a person involved. Not whether the automation is good, whether the timing is right, whether the copy is warm enough. Look at the shape of the problem as it got framed. Somebody decided this was a throughput question. I should say where I'm standing, because this reads like an anti-automation argument and it isn't one. I build agentic workflows for clients and for my own business, and I don't remember how I worked before them. That's precisely why I know what this particular one costs. You have to know what a machine can do before you can see clearly where putting one changes the thing itself. ## The question you're actually answering There are two, and teams answer the second one while believing they answered the first. *How fast can this go out* is a throughput question. It has good answers. Same day, automatically, triggered on the closed-won flag, no human required. *What is this moment for* is a different question, and it decides whether the first one matters. If the answer is that you're starting a relationship, automation is a tool and a perfectly good one. If the answer is that you're discharging an obligation, then automation is the whole plan, and the relationship never actually starts. It just gets marked as having started. The tell is what happens when speed and quality conflict. If the reflex is to protect the speed, you were answering the throughput question the entire time. ## The guardrail Automate something that's done right. Don't automate it for speed. Speed is a property of a good process, not a reason for one. When it becomes the reason, you get systems that reliably do a thing nobody would have chosen to do by hand. That's the actual risk, and it isn't new. Automating a broken motion doesn't fix the motion. It runs it more often, at less cost, with nobody in a position to notice. It's the same argument I made about [three AI traps in customer experience](/slow-down-to-speed-up/): slowing down at the point where a person would have exercised judgment is what lets you go faster everywhere else. ## What this doesn't mean It doesn't mean send it slower. There's no virtue in a customer waiting three days for a welcome. It doesn't mean write every message yourself. If a hundred customers a week need the same first email, and it's a good email, send it a hundred times. The claim is narrower and harder to wriggle out of. Decide what the moment is for before you decide how it gets delivered. Design it as though a person were doing it well, then automate the version that survives. The first message after somebody pays you is the cheapest, highest-leverage thing you will ever send. Almost nobody treats it as a design problem, because it arrives on a list of things to operationalize rather than a list of things to get right. --- # The Uncertain Yes *August 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-uncertain-yes/ You finish walking someone through what they need to do. You ask if that makes sense. They say yes. Three weeks later they haven't done it, and when you ask what happened they're vague. You think back to the call and remember them saying yes. They did say yes. You heard it. They were never confident. They just weren't going to say so in front of six colleagues with four minutes left in the meeting. That's the uncertain yes, and it's the quietest way a customer relationship goes wrong. Nothing looks broken. There's no complaint, no escalation, no bad survey. There's a person who agreed to something they didn't understand, and a vendor who wrote it down as understood and moved on. ## Why people give it Two reasons, and both are ordinary. Nobody wants to look like the one who didn't follow. That gets worse with an audience, and training sessions almost always have an audience. And a question costs time. If the meeting is nearly over, asking means keeping everyone late so you can admit you're lost. Most people take the yes and plan to figure it out later. Later doesn't come. You've done this. I've done it inside the last month. ## The instrument The fix isn't asking harder. It's asking something that can't be answered with a yes. **Don't ask a yes or no question.** Instead of does that make sense, ask this: > Of the things I just laid out, what do you have concerns about? That forces a sentence. There's no version of that question you can nod through. **When they say no concerns, close the escape hatch.** Most people will still say they're fine. Take it seriously and then make it expensive: > Just to be absolutely clear, when you say you're good, that means you're fully confident in your team's ability to execute on the things we just talked about. Watch what happens. A real yes stays a yes. An uncertain one usually cracks right here, and what comes out is specific. I don't know how we'd do this on a daily basis. That's the thing you needed. **If they hold, accept it and hand it back.** You can't interrogate someone into confidence they don't have, and after two honest passes you have to take the answer: > Alright, I'm going to hold you to that. But if it changes, you've got to let me know. Say it with a smile. It does two things at once. It puts a small weight on the commitment, and it gives them a door to come back through later without admitting they were wrong on the call. ## On confidence scores, and when not to ask Scoring confidence one to ten is a good instrument used at the wrong moment constantly. If you've just demonstrated something, the customer hasn't touched it. They watched you do it. Asking how confident they are is asking them to rate a thing they haven't attempted, and the honest answer is that they don't know yet. You'll get a number, and the number will mean nothing. So delay the ask. Show them, let them have contact with it, then score it on the next conversation when there's something real to rate. After that the score is worth having, because you're watching it move. A seven that becomes a nine is information. A seven collected before they logged in is noise. And some days you shouldn't ask at all. If the session went sideways for reasons that have nothing to do with them, you already know what the number is, and collecting it teaches the customer that the question is a formality. Build for rules. Expect exceptions. When you hit one, say you hit one and say why, rather than running the play because it's on the sheet. ## Why this matters more than the data The score was never the point. The point is that you never want a customer able to ask you why did you let me say yes to that. Nobody says it in those words. What they do instead is disengage, quietly, from something they never understood, and you find out a quarter later when the usage report is flat. They agreed. You proceeded. Both of you were being polite, and being polite cost them the outcome they paid for. Asking one uncomfortable question at the end of a call is cheap. Finding out in month four is not. The uncertain yes is one instance of a wider habit, which is taking what somebody says at face value when the words and the meaning have come apart. That's [a listening problem before it's a question problem](/active-listening-is-a-filter/), and the fix is the same in both directions: run what you hear through a filter rather than recording it accurately. --- # Why You're Stuck Downstream *August 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/why-youre-stuck-downstream/ Every piece of advice about churn says the same thing. Stop working saves. Move upstream. Fix the thing that produced the cancellation instead of arguing with the customer who reached it. I've been giving that advice for years. It's correct. And teams keep not doing it. The usual explanation is that they're firefighting, or badly prioritized, or too thin to work anything that isn't on fire this week. Sometimes that's true. Mostly it isn't, and I've been satisfied with it for too long. Here's the actual reason. The upstream problem is almost never a customer success problem. Walk it back from the cancellation. The customer left because the product didn't do the thing. Or the service was late, or wrong, or delivered by somebody who didn't know their business. Or what they bought was never going to produce what they were sold. Now ask which of those a CSM can fix. None of them. Not the account manager, not the onboarding specialist, not the trainer, not the person who owns the number. They can report it. They can escalate it. They cannot fix it, because it isn't theirs. So the team does the only thing in reach. They work the save. That's not a discipline failure. It's the rational response to owning a number you don't control the inputs to. ## The save is a low-percentage play and everyone running it knows A customer who tells you they're canceling has already decided. Nobody wakes up and cancels on a whim. They arrived at it, usually over months, usually after deciding that raising it again wasn't worth the effort. By the time it reaches you, you're not participating in the decision. You're being informed of it. You can sometimes buy time. If the cause was service delivery, the time you buy gets spent delivering the same service, and the second cancellation is quieter and more certain than the first. You didn't save anything. You moved it a quarter. ## What this actually changes Three things. **Stop scoring customer success on something it can't cause.** If retention is failing because delivery is failing, a retention target for the CS team is a target on the wrong department. It produces save plays, discounting, and eventually people who are good at managing disappointment rather than good at producing value. **Escalate delivery failure as delivery failure.** Not as churn risk. Churn risk gets triaged into the save queue, which is where it dies. The product is not doing the thing is a different sentence than this account is at risk, and only one of them lands anywhere useful. **Say it plainly when nothing can be done.** Sometimes the honest read is that the customer is right, the thing didn't work, and there's no play here. That's more useful than a fourth save attempt. It frees the hours, and it stops the team learning that their job is persuading people to tolerate something. ## The part nobody wants to say out loud Customer success sits on top of service delivery. It doesn't substitute for it. You can orchestrate expansion, you can engineer behavior, you can run the cleanest onboarding anyone has seen. All of it multiplies something. If the thing underneath is broken, you're multiplying by zero and calling the result a retention problem. Move upstream where upstream is yours. Where it isn't, name the owner out loud, and stop absorbing a failure that belongs to someone else. --- # You Have Never Been Your Own Customer *August 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/you-have-never-been-your-own-customer/ Two things happened to me as a customer this month, and both of them were the kind of problem the company causing it will never find out about. ## The form that frightened me I'm selling a house. My realtor sent me a link to fill out the seller's disclosure form, which is a standard state form. The link goes to a commercial service that wraps the form and sells an insurance product alongside it. From the first screen, the entire experience is fear. You will be sued. People like you get sued constantly. Here is testimony from people who were sued. Fill this out wrong and what happens next is your fault. And then, at the bottom, coverage: pay now, or pay more out of the proceeds at closing, or decline and formally acknowledge that you understood the risk you're taking with your family's future. It worked. I was frightened. Which is the problem, because a frightened person filling out a legal disclosure does not go faster. I told my realtor the experience was off-putting. She was, reasonably, trying to keep the paperwork moving, and said I was overthinking it. My answer was that if the tool made me feel this way, she should be overthinking the tool. Here's the part that matters. **The delay was manufactured by the vendor and charged to her.** Her transaction is slower because a company she doesn't control decided fear converts. ## The appointment I didn't attend I needed an eye exam. I got the annual reminder, and I booked online, which I did specifically so I wouldn't have to talk to anybody. A couple of days before, an email arrived saying they couldn't confirm my booking and I needed to call within a window or lose the slot. As far as I could tell that window had already closed by the time I read it. So I didn't go. Then they called to ask where I was. Look at the shape of it. I used their preferred channel. Their system then required the exact interaction the channel exists to avoid, on a deadline that had passed, and the outcome was a no-show they experienced as my failure. ## What both of these have in common Nobody at either company has been through it. That's the whole thing. Not incompetence and not indifference. In both cases there's a system running in the company's name, doing something to customers, that no one inside has personally experienced end to end since it was turned on. And in both cases the company is a step removed from it, which is exactly what makes it invisible. **A vendor's software with your logo on it is you.** The scheduling system was skinned in the optometrist's branding. As far as I'm concerned, they sent that email. The disclosure service is the realtor's process as far as any seller can tell. The customer doesn't hold a mental org chart. They experience one company and it's yours. **And the vendor is not optimizing for your customer.** This is the part worth internalizing, because it isn't a bug in the tools. The disclosure service is optimized to sell insurance, and fear sells insurance. The confirmation flow is optimized to reduce the vendor's no-show liability by forcing an explicit reconfirmation. Both are working correctly. They're just working toward somebody else's goal, using your customer's patience as the raw material. ## The story companies tell instead Ask an office manager why no-shows are high and you'll get an answer about people. They don't show up. They don't respond. They don't read anything. You have to chase them. Some of that is true. Most of it, in my experience, is a system producing an outcome and a company narrating it as a character flaw in the customer. That story is comfortable, and it's expensive, because it's unfalsifiable from the inside. Once the explanation is that customers are unreliable, nobody checks the confirmation email, and the confirmation email keeps doing what it's doing. There's a related version of this in why the disclosure tool exists at all. Realtors used to help clients fill out that form, and some of them got sued, plausibly because they'd pressured clients not to disclose things. So the industry moved to a third-party service. That's a rational response to real risk. But notice what it optimizes. It protects the realtor. It does nothing for the client except frighten them, and it slows down the transaction both parties want. **Protecting yourself and serving the customer are usually a tradeoff, and it's a legitimate one.** What you don't want is the version where you pay the experience cost and don't even get the protection benefit, which happens whenever nobody checks what the protective thing actually does to the person on the other end. ## This isn't only about third parties The external stuff is the easy example. The bigger version is closer to home. How many automated messages does your company currently send that nobody has read in two years? Not reviewed at a high level. Read, in the inbox, in order, in the sequence a real customer receives them. Somebody wrote them. That person may have left. The product they describe has changed. A step got added, a step got removed, and the message still refers to both. There's a reminder firing on a schedule that made sense when the process was different, and a nudge for a feature that was renamed. None of this fails loudly. It just quietly makes you look like a company that isn't paying attention, one message at a time. ## Go be your own customer Not a review. Not a workshop where you diagram the flow on a whiteboard and everyone agrees it looks fine. Sign up. Book the appointment. Fill out the form. Use the real thing, with a real address, at the real speed, and let every automated message arrive in an inbox you actually read. Go through the third-party pieces too, especially the ones with your logo on them. It takes an afternoon and it's the highest-yield afternoon available to most companies, because what you find isn't a list of improvements. It's a list of things you'd have stopped immediately if you'd known, which have been running for years. The customers who hit those things mostly don't complain. They just quietly decide what kind of company you are, and some of them don't come back, and you get to call that a no-show problem. --- # Your Welcome Email Is A Requisition Form *August 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/your-welcome-email-is-a-requisition-form/ Read the last one you sent. Count what you asked for before you gave anything. Most of them go like this. Congratulations, welcome aboard, we're excited to work with you. Then: we'll need your prior documentation, access to the system, a completed questionnaire, the name of your internal owner, and a signed form. Reply when you've got all five. That's not a welcome. It's a requisition, with a greeting on top. ## What it costs The customer opens it about twenty minutes after deciding to trust you. They're at the top of the good part, and what arrives is homework from someone they've never met. So they stall. Not out of annoyance, usually. They stall because five things is a project, the project needs a free afternoon, and there isn't a free afternoon. It goes in the pile. Then it becomes the most expensive item in the whole first year. In a lot of businesses the single largest source of onboarding delay is one document nobody sent back, and the vendor ends up asking three separate times over several weeks. Every one of those asks costs somebody an hour, and each one makes the relationship a little more about compliance. Meanwhile nothing is happening. The customer paid, and their experience so far is being chased. ## Nobody designed this That's the part worth understanding, because it decides how you fix it. There was a welcome email once. Then someone noticed the analyst couldn't start without the prior documentation, so that got added. Then the system needed access, so that got added. Then a form. Every addition was individually correct, made by someone solving a real problem, and nobody ever read the result as one message from the customer's side. It got optimized for completeness of the ask. And the ask is the part the customer experiences. ## What to do instead Split the two jobs, because they were never one job. **The first message gives.** It confirms who you are, what happens next, and when. Nobody expects you to solve their problems twenty minutes after they sign. They expect to be welcomed and told what's coming. It doesn't depend on anything, so it could go out within minutes. Be careful with that. A warm personal note arriving forty seconds after signature tells the customer a machine sent it, and [the speed itself is the tell](/automate-the-work-keep-the-pace-human/) even when every word is right. Let the machine do the work and let the pace stay human. **And it should not be the person the customer is about to work with, introducing themselves.** That's the expensive mistake hiding inside a good welcome email. At the moment somebody signs, the only person at your company they trust is the one who sold to them. Everyone else starts from zero. So the introduction comes *from the salesperson*, who has the trust to hand over, and it says why this person specifically is right for them. That's a [trust transfer](https://ltvmax.com/posts/trust-transfer-is-the-handoff), and it takes about two sentences. Someone introducing themselves cold has to establish their own credibility from a standing start, in an email, to somebody who has no reason to read it carefully. Same information, a fraction of the effect. **The second message asks**, and it arrives with context and a reason. We need these two documents, and this one is what unblocks your kickoff. It can come from a different person, and often should. It can come the same day. What it can't do is be the first thing. If you want one message rather than two, then say the ask is coming rather than making it. You'll get a note from Priya tomorrow asking for a couple of things so we can get started, so keep an eye out for it. That costs you nothing. It converts a surprise into an expectation, which is most of the work. ## The test Read your welcome email and ask what a stranger would conclude about your company from it alone. If the answer is that you're organized and they're in good hands, keep it. If it's that you need a lot from them before anything happens, you already know what it's doing to your start dates. --- # Where Your Customer Context Actually Lives *August 20, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/where-your-customer-context-actually-lives/ Everyone says the sales conversation holds context Customer Success never gets. That's true, and it's the beginning of the question rather than the answer. Because "the sales conversation" isn't one thing, and the parts of it live in different places, with wildly different odds of anyone ever finding them again. Here's the survey. It's worth doing for your own business, because the answer varies more than people expect. ## Calls The richest source by a distance, and usually the best captured, because meetings are recordings and recordings are transcripts. This is where things get decided. Where the buyer says what they're actually trying to do, what they're measured on, what went wrong the last time they bought something like this, who internally is going to be difficult. Almost none of that has a CRM field, which is exactly why it evaporates. ## Email Usually attached to the record already, and less valuable as raw material than people assume. Email mostly clarifies, confirms and recaps. The decisions happened on the call; the email says what somebody thought the decision was. So it rarely adds facts. But it's uniquely good for something else: it tells you what the customer *understood*. Their summary of a call is the clearest available signal about the gap between what you said and what they took away, and that gap is where most delivery problems start. The exception is worth naming. In some markets and some deal sizes, real negotiation happens over email, and then it's as rich as the calls. Check rather than assume. ## Phone Captured if the calls run through a system, invisible if they run through somebody's cell. The split is that binary, and most companies have both without knowing the ratio. If your team dials through an integrated system you generally get recordings and often SMS along with them. If your best rep builds relationships on their personal phone, that relationship is undocumented, and it's typically your most important one. ## Text and Messaging Apps Almost never attached to anything automatically, and whether that matters depends entirely on where you sell. In plenty of markets this is genuinely trivial. In others it's the whole sales process. There are markets where a full cycle runs through a messaging app, including voice memos, and the calls you do have are the formal veneer over the actual conversation. If that's your market and you're building your customer picture from recorded meetings, you're reading the minutes and missing the meeting. Nobody can tell you which one you are. You have to go look. ## In Person Captured by nothing, and the density is high. Trade shows, site visits, dinners, the corridor after the presentation. People say things in person they don't say on a recorded call, which is the point and also the problem. ## What to Do About the Gaps Two things, and both are boringly practical. **Ask to record, transparently, in the moment.** Not covertly, and not as a policy nobody reads. Out loud: *I want to record this, because you're about to tell me things I can use to help you and I'm a human who'll forget half of it.* It's awkward for about seven seconds. I've never had anyone say no, and I've had several people become noticeably more useful afterward, because being recorded signals that what they say matters. **Where recording wasn't possible, record yourself instead.** Whoever had the conversation does a voice memo immediately after and attaches it to the record. Not a summary typed later, when the specifics are gone and only the impression remains. A brain dump, in the car, within ten minutes. It's worse than a transcript and enormously better than the current alternative, which is that the conversation existed and then didn't. ## Why Bother Because of what having it enables, and it's bigger than convenience. In a relationship-driven business the customer's reasonable expectation is that the person who sold to them briefs whoever takes over. That conversation is supposed to happen. It rarely does, and when it does it's five minutes in a hallway and most of it doesn't survive. If you have the calls, you don't need it. Whoever takes the account over was effectively in the room. That isn't a substitute for the briefing, it's better than the briefing, and it eliminates the single most corrosive thing about a bad handoff: the customer having to explain themselves again to somebody new. They already told you. The only question is whether anybody kept it. --- # Automate the Work, Keep the Pace Human *August 20, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/automate-the-work-keep-the-pace-human/ You can now build a workflow that reads the sales call, drafts the welcome email, personalizes it properly, and has it in the customer's inbox seventeen seconds after they sign. Don't. Not because it'd be inaccurate. Because of what the speed itself says. I want to be clear that this isn't a new observation, including from me. I wrote about it in 2014, when the trend was a "personal" welcome email from the founder and everybody started doing it badly: > Aside from the fact that the CEO would send a personal email at 1AM her time, the sheer speed with which she reached out was often a dead giveaway that this was automated. What's changed since then is worth the update, because it cuts the other way from what people assume. ## Two Different Reasons to Slow Down, and Only One Gets Discussed The first one is about information, and most teams get there on their own. If the welcome email fires the moment the deal is marked won, it's built from whatever the rep typed into the CRM in the two minutes after a good call. That's frequently thin and occasionally wrong. Trigger it after the call analysis instead and it's built from what the customer actually said. Same email, hours later, materially better. That's a data-quality argument and it's correct. The second one has nothing to do with quality. ## A Message Can Arrive Too Fast to Be Believed Say you've solved the information problem. The transcripts are analyzed as they accumulate, the draft exists before the deal closes, everything is accurate and specific and genuinely good. It can go out instantly now. And if it does, it stops working. Because a personal note that arrives faster than a human could've written one isn't read as a personal note. Nobody consciously thinks "that was too fast to be real." They just register that something is slightly off, and what's off is precisely the thing the message existed to establish. > The speed is the tell. You spent the whole email demonstrating that a person paid attention, and then delivered it at a pace that proves nobody did. ## And the Second Failure, Which Is Worse There's a reading I missed for years and it's the more damaging one. Instant response doesn't only look automated. It looks desperate. If a founder replies within seconds of a signup, at any hour, the implication is that they were sitting there watching the dashboard waiting for somebody to appear. That's not the impression a personal note is meant to create, and it's the impression it creates most reliably at small scale, where it's actually plausible. So it either fails as a person or succeeds as a person who has nothing else happening. Both are worse than a plain acknowledgement. ## Why Delay Alone Doesn't Fix It The obvious response is to add a wait. Seventeen minutes, an hour, a day. Better, and not sufficient, because it leaves the other half untouched: **what time of day is it where you are.** A warm personal note timestamped 3AM your time is a bot, regardless of how long it waited. Your customer is in London and you're not, and everyone can read a header. Think of it as realistic response hours rather than business hours, and let the answer follow your positioning. Some companies run to 9PM on weekdays and Saturday afternoons. Some are strictly weekdays, nine to five, no exceptions. Either is fine. What isn't fine is a message from a human going out in the middle of that human's night. Most lifecycle messaging tools still don't do this natively, which is a strange gap given how long it's been a known problem. ## The Better Answer Is to Stop Hiding the Bot Here's the move I landed on years ago and still prefer, because it keeps the speed instead of paying for authenticity with it. Have the system alert *you* when something happens, and forward that alert to the customer. *Yikes, my little alert bot told me you visited the cancel page. Just wanted to check in.* Now everything reconciles. The speed is explained, because a bot noticed. The specificity is explained, because the bot said so. And the human is genuinely present, because a person read it and decided to reach out. You're not pretending a person was watching. A person was, one step removed, which is the truth and a better story than the one you were faking. One addition that matters: say what the bot can't see. *It only tells me about high-level actions, not details.* Explaining the limits of the surveillance is what keeps it from reading as surveillance. ## What Actually Changed In 2014 the content was the weak point. Templated, obviously merged, personal only in the salutation. Speed was one tell among several. Now the content can be genuinely specific. It can reference what they said, what they're trying to do, the thing they were worried about on the second call. Every tell has been closed except one. **Which makes pacing more important than it was, not less.** It's the last signal a reader has, so it carries all the weight the other signals used to share. ## Where Else This Bites Anywhere a message is signed by a human and generated by a system. A renewal note referencing last week's call, sent at 4:58am. A follow-up that arrives while the meeting invite is still open. A check-in landing the instant a usage threshold trips, which tells the customer precisely what triggered it. That last one is the same failure wearing different clothes. Anything arriving at the exact moment of an event announces that an event was detected, and the customer learns they're being watched by something. Which is fine, if you say so. It's only corrosive when you're pretending otherwise. ## The Rule Automate the work. Keep the pace human, or admit the machine. Those are the two honest options, and either beats the third one, where a system impersonates a person badly enough that the customer notices and well enough that you thought it wouldn't. And leave the send in a human's hands. Generate the draft, put it where sending is one click, let somebody read it before it goes. You get the delay you wanted as a side effect, plus a second pair of eyes on the message that starts the relationship. The machine should do the work. The human should do the part the message is actually claiming. There is a prior question worth asking before any of this, which is what the first touch is for at all. Treating it as a throughput problem is [a category error](/automating-the-first-touch/), and it usually shows up first in [a welcome email that asks for five things before it gives anything](/your-welcome-email-is-a-requisition-form/). --- # Exposing Uncertainty Beats Finishing Onboarding *August 19, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/exposing-uncertainty-beats-finishing-onboarding/ Customers hate three things: unknowns, surprises, and repeating themselves. Onboarding can produce all three in a single call, and the most common way it happens is that somebody agrees to something they aren't sure about, nobody challenges it, and the call ends on schedule. I've written before about [the Confidence Question](/the-confidence-question/), which asks how confident a customer is that you'll help them get what they came for. This is its twin, and it points the other way: at what *they* have to do. ## Two Questions, One Trigger The moment is specific. Immediately after you've laid out what the customer is responsible for, before you move on to anything else. First, the discovery question: > Of the things I just laid out that are your responsibility, which do you have questions or concerns about? Then stop talking. The pause is doing the work. If they raise something, that's the good outcome, and I'll come back to what it costs. If they say they're fine, you don't move on yet. You lock it in: > So just to be clear, you're 100% confident in you or your team's ability to execute on those things we just laid out? The second question exists because the first one is easy to wave off. "Any questions?" invites a no. Asking someone to affirm total confidence in their own team's ability to execute is a different request, and people hesitate before answering it in a way they don't hesitate before saying no thanks. If they say yes, hold them to it out loud, and make it light: > I'm going to hold you to that. Seriously, if that confidence ever drops below 100%, you have to tell me. You'll do that, right? Now you have a customer who has agreed to report their own drop. That's worth more than any health score, because it comes from the only person who actually knows. ## What You're Trying to Catch The uncertain affirmation. A yes with nothing behind it. They aren't lying to you. They're being agreeable, or they don't want to look like they weren't following, or they genuinely don't know what they don't know yet. And nobody challenges it, because it was a yes and a yes is what everybody wanted. So it stands. Then it compounds. Uncertainty turns into poor execution, poor execution into poor results, poor results into frustration, and frustration into blame. > When a customer comes back angry at the end, it's almost always an uncertain affirmation that nobody challenged at the beginning. ## The Part Most Teams Won't Do Here's the instruction that makes this real, and it's the one that gets quietly ignored. **If surfacing their uncertainty means you don't finish onboarding today, that's fine.** Not tolerable. Fine. Correct. Preferable. A completed onboarding with hidden uncertainty inside it is worse than an unfinished one, because now the uncertainty is load-bearing and invisible. Everything downstream is built on a yes that wasn't real, and nobody will find out until the results don't arrive and somebody goes looking for who to blame. This is hard to hold because onboarding completion is usually a tracked metric and confidence is not. So the incentive says finish the call, and the incentive is wrong. If you're going to run this, whoever owns the number has to say out loud that a paused onboarding is an acceptable outcome, or your team will keep collecting yeses. ## When They Say They're Not Sure That's the win, so treat it like one. Normalize it first: > That's completely normal. A lot of customers are new to this, and you don't know what you don't know. That's exactly why we're doing this. Then break it down rather than solving it in the abstract. Walk each item and find where they're stuck. You don't have to fix everything on the call: gather the unclear items, send specific resources for the ones that are just information, and book a focused call for the ones that aren't. ## When They Say They're Confident and You Don't Believe Them Trust that instinct. It's usually reading something real. What works is going first, so the admission costs them nothing: > A lot of the companies I work with started exactly where you are, feeling a little uncertain. The ones who did well were the ones who spoke up early and got help. I'm sensing you might not be at 100%. If I'm wrong, tell me and we'll move on. But if you're not fully confident, you've got to tell me, because if I know, I can actually help. If they admit it, stop and support. If they double down, document it and move forward, and watch their early execution closely, because you now have a specific prediction to check. ## Making Room for It The objection is always that onboarding calls are already full. That's true, and the fix isn't a longer call. Most onboarding calls spend their time explaining things the customer can't use yet. Deep tooling comparisons before anyone has configured anything. Full lifecycle walkthroughs in month zero. Re-explaining what was covered fifteen minutes earlier. Defer all of it. Tell them what's coming and when you'll cover it properly. That buys back more time than these two questions cost, and it removes material that was generating uncertainty rather than resolving it. ## Why This Is Worth a Process Because it's the cheapest intervention available and it targets the most expensive failure mode there is. Two questions. Maybe ninety seconds if nothing comes up. And what it prevents is the account that goes quiet, underperforms for two quarters, and arrives at renewal with a grievance nobody can trace, because the moment it started was a nod in an onboarding call that everyone experienced as a success. Prevent uncertainty early, or fight it later. You don't get a third option. The hardest version of this is the uncertainty a customer will not admit to. They say they understand, you write it down as understood, and nothing happens for a month. That is [the uncertain yes](/the-uncertain-yes/), and it needs a different question. --- # When Your Delivery Gets Good Enough to Make CS Look Optional *August 19, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/good-delivery-makes-cs-look-optional/ There are two ways a company can undervalue Customer Success, and only one of them gets discussed. The familiar one is the company with bad service delivery. CS exists there to bridge a gap between what was sold and what the product does, and the gap is too wide to bridge. The team fails, visibly and constantly, because they were set up to. Leadership watches people fail and concludes the function is a drain. It isn't a drain. It's a fire brigade being blamed for the fire. The other one is the company that delivers beautifully. ## The Compliment That Removes the Budget Somewhere in a company with genuinely good delivery, someone says a version of this: our product is excellent, our onboarding works, customers get to value without much help. Do we really need all these CSMs? It sounds like praise for the product and it works as an argument against the function. What usually happens next is a move to something lighter. Self-service. Tech-touch. Digital CS. Pooled coverage. The reasoning is the human was compensating for product friction, the friction is gone, so the human is overhead. That reasoning has a hole in it, and the hole is what Customer Success was always actually for. ## The Relationship Was Part of What They Bought Desired Outcome is the Required Outcome plus the Appropriate Experience. Two customers can need the identical result and need completely different experiences to get there, and the experience isn't packaging around the outcome. It's half of what they bought. For a large number of B2B customers, a person who knows their account is part of the Appropriate Experience. Not because they can't run the software. Because they want somebody who understands their situation, who they can ask a question that isn't a support ticket, who notices things on their behalf. Take that away and you haven't removed overhead, you've changed the product. The customer bought a version of your service with a person in it, they're now getting a different one at the same price, and nobody told them. > The customer will rarely say "I miss my CSM." They will say the value isn't what it used to be, or they'll just get quieter, and neither of those points at the thing you actually changed. ## Why the Damage Doesn't Show Up in Retention This is the part that makes the mistake so easy to keep making. Renewal survives on inertia. Staying is the absence of a decision, and plenty of accounts renew while nobody involved feels much of anything. Strip the relationship out of a well-delivered service and most of those customers will renew anyway, at least for a while. The dashboard reports success, and the cost saving is immediate and legible on a spreadsheet. What goes missing is everything that needed somebody paying attention. Nobody notices the customer who has outgrown their current setup. Nobody hears the offhand comment about a new initiative starting next quarter. Nobody catches that the champion left. Nobody's there to say "given what you just told me, there's a thing you should know about." Those conversations were never on anyone's dashboard, so their absence isn't either. The number that moves is expansion, and it moves slowly enough that by the time anyone notices, the decision that caused it is two years old and nobody connects them. ## The Honest Version of the Question None of this says every account needs a named human. Plenty don't. Some customers genuinely prefer to be left alone, and forcing a quarterly call on them is worse than useless. So ask it properly, because the sloppy version gives you the wrong answer. The sloppy version is: is our product good enough that customers don't need help? For a well-run company that's often yes, and it's the wrong question. The right one is: what does this segment need to keep getting more valuable to us over time, and does that need somebody who knows them? Those are different questions, and the second one's answer changes by segment, by contract size, and by how much of the outcome depends on the customer's own capability. A customer whose success mostly depends on your software behaving can often be served well at a distance. One whose success depends on their own team changing how they work can't, however good your product is, because the hard part was never the software. ## What to Do Instead of Cutting If delivery really has improved, the right response isn't to remove the humans. It's to change what they're for. A CSM whose week was consumed by firefighting and hand-holding has just been freed. That capacity should be redirected at the thing nobody was doing while the fires were burning: knowing where each customer is going, noticing when they arrive somewhere new, and being ready with what comes next. That work has a measurable output, which the firefighting never did. It's also the only version of the function that survives a CFO asking what it returns, because the answer stops being "fewer disasters" and becomes a number that grew. Good delivery doesn't make Customer Success unnecessary. It makes it possible for the first time. The inverse is worth knowing too. When delivery is the thing that's failing, no amount of customer success work repairs it, which is [why so many teams end up stuck downstream](/why-youre-stuck-downstream/) working saves they were never going to win. --- # They're Not Disengaged. They're Embarrassed. *August 7, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/theyre-not-disengaged/ There's a customer who won't engage. They don't show up to the sessions. They don't log in much. They don't answer the check-in email, and when they do it's two words. Nobody on your side thinks this account is going well, and the working theory is that it just isn't a priority for them. Sometimes that's true. More often something else is going on, and it's the thing almost nobody diagnoses because it doesn't look like what it is. They don't understand it. ## Not Understanding Is Uncomfortable in a Specific Way People would generally like to care about the thing they bought. They picked it. Somebody signed off on it. There's a version of the future where it works and they look good. But caring about something you don't understand means sitting inside a particular feeling. I should know this. Everyone here seems to know this. I nodded when they explained it. That's not a comfortable place to stay, and there's a cheap way out of it. > Decide it doesn't matter. If the thing isn't important, then not understanding it isn't a failure. It's just triage. So they disengage. Not out of indifference, out of self-protection. And from your side that's indistinguishable from a customer who never cared, which is why it gets filed that way. ## This Isn't the Same as Overwhelm It's close enough to be worth separating, because the two get treated identically and shouldn't be. [Overwhelm looks like resistance](overwhelm-looks-like-resistance). The customer agrees with everything, commits to all of it, and does none of it, and the cause is load rather than character. The fix is to take things off the pile. This is different. The load might be perfectly reasonable. What's happened is that somewhere early, the customer was given more than they could follow, didn't say so, and has been quietly behind ever since. The fix isn't less to do. It's going back to the thing they never got. Same symptom, different cause, and the wrong fix makes it worse. ## Why More Training Makes It Worse Which explains why the first fix anyone reaches for reliably backfires. Engagement is down, so somebody schedules more training. Another session, more thorough this time, covering everything. Put yourself on the other side of that. You already feel behind. You already suspect you should have understood this the first time. Now there's a longer session covering more ground, delivered by someone who assumes you followed the last one. You don't come out of that understanding more. You come out of it more certain that you're the problem, and the same escape is still available. Training that was designed to demonstrate the product rather than get one specific person competent will do this every time. The tell is that it's the same session for everybody, and nobody in it is ever asked what they didn't follow. ## The Actual Tell You can catch this earlier than most people do, and it isn't usage data. It's that they stop asking questions. A customer who's genuinely fine asks occasional questions. A customer who's struggling and comfortable asks a lot of them. A customer who's struggling and embarrassed asks none, because every question is a small public admission that they don't know something they feel they should. Silence reads as satisfaction on almost every dashboard ever built. It's frequently the opposite. ## What This Produces It also explains where a lot of hollow agreement comes from. Ask someone who's quietly lost whether they're clear on their responsibilities and they will say yes. Not to deceive you. Because saying no means announcing the thing they've been managing around for weeks, to the person who explained it the first time. That's an [uncertain affirmation](the-confidence-question), and it's the beginning of most of the anger that arrives at the end of a relationship. Nobody challenged it, because it was a yes and a yes was what everyone wanted. ## Exposing Uncertainty Beats Finishing the Checklist Which leads somewhere that takes actual nerve. If asking the right question surfaces a customer who's lost, you're probably not finishing onboarding today. Do it anyway. A completed onboarding with hidden uncertainty inside it is worse than an unfinished one. The uncertainty doesn't go anywhere. It just becomes load-bearing and invisible, and it comes back in a quarter as poor execution, then poor results, then frustration, then blame that lands on you. > You cannot complete your way past a customer who didn't follow step three. So build the room for it. Ask what they have questions about, specifically, and then stop talking. Normalize it out loud, because most people are new to this and don't know what they don't know yet. Offer to go back rather than forward. And if the honest outcome is that you spend the session on one thing they never got, that was the session. The checklist will still be there. ## The Reframe Almost every disengagement post-mortem I've seen concludes that the customer wasn't invested. Try the other explanation first. They wanted this to work, they lost the thread early, nobody noticed, and not caring was the only dignified exit available to them. That version is fixable. The other one isn't, which is probably why it's the one people reach for. --- # Your Retention Number Might Be Measuring Your Calendar *August 6, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/retention-number-measuring-your-calendar/ I've looked at companies where two people can each pull a defensible retention number out of the same data and arrive at opposite conclusions. One version puts them in the top decile of anything. The other puts them on fire. Both calculations were correct. Neither was true. That gap is where a lot of companies live, and it isn't a spreadsheet problem. It's what happens when you take metrics built for [one revenue model](https://ltvmax.com/posts/expansion-is-not-only-subscription-revenue) and apply them to a different one, then compare the output to benchmarks built for the first model. ## The shape of the problem Some businesses have revenue that moves on a cycle the customer controls, not one you control. The periodic major service. The certification that comes due on a multi-year cycle. The comprehensive version that gets done once and then updated cheaply until it's time to do it properly again. Often there's a subscription underneath it, doing the work of holding the relationship between the big events. Now run annual retention math across that. A customer who did the expensive thing last year and the cheap thing this year shows up as a [70 to 80% contraction](https://ltvmax.com/posts/contraction-delayed-invoice). They didn't contract. They did exactly what they're supposed to do, on exactly the schedule the service is designed around. The number says something went wrong. Nothing went wrong. Run it the other direction and it's just as bad. In a year where a lot of customers hit their expensive cycle, revenue expansion looks spectacular. Nobody sold anything. The calendar came due. So you get panic and celebration on alternating years, both unearned, and the people looking at the dashboard slowly learn that the dashboard doesn't mean anything. ## The second problem is quieter and worse Cohort windows. Most retention calculations compare a base period to a current period. Fine, as long as everyone in the cohort was present for the whole base period. They usually aren't. A customer who first showed up two months before the base window closed has two months of base revenue being compared against twelve months of current revenue. That's not expansion. That's the calendar again, wearing a different costume. In the cases I've looked at, the majority of measured expansion came from customers in exactly that position. Strip them out, hold the cohort to customers present for the full base year, and the number falls far enough to put every segment below 100%. And watch what happens to your best-performing segment: often it turns out to be one nearly-dead account that got re-sold into a much larger deal, single-handedly carrying the number. The report wasn't lying. It was answering a different question than the one everyone thought it was answering. ## Why benchmarks make it worse A number you can't compare to anything gets interrogated. A number you can compare gets filed. Tell a founder their gross retention is a little under the benchmark and they'll decide they're slightly behind and move on. Tell them their [net revenue retention](https://ltvmax.com/posts/how-to-increase-net-revenue-retention) is well above it and they'll feel great and stop looking. In both cases the benchmark converted a question into a conclusion, and the conclusion was wrong because the number underneath it was measuring the wrong thing. This is why "what's good?" is usually the wrong first question. The right one is "what is this number actually made of?" ## What to do instead **Separate the revenue types before you measure anything.** If you have a genuinely recurring product and a periodic service, they are two different measurement problems living in one QuickBooks export. Blending them produces a number that describes neither. Measure the recurring thing with recurring math. It's legitimate there, and whatever it says is real. **Measure the cyclical thing against its own cadence.** Not annual retention. Of the customers who were due this period, how many came back? How long after due? At what level? That's the honest question, and it has nothing to do with a calendar year. **Turn the alarm condition into a queue, not a rate.** If the failure mode is a customer not doing the thing when they're supposed to, then the metric is a count of who is past due and by how long. That's a list of names. Teams can work a list of names. Nobody has ever worked a percentage. **Check your cohort windows before you believe your expansion number.** This one takes an afternoon and it's the highest-return afternoon on this list. Find out how much of your reported growth comes from customers who weren't there for the full base period. **Benchmark against yourself.** Your own history is the only comparison that shares your business model. Industry benchmarks are useful for orientation and dangerous for conclusions, and the further your model sits from the one the benchmark assumes, the more dangerous they get. ## The part that isn't about metrics Underneath all of this is a simpler thing: knowing how your customers actually operate. If your customer's buying behavior runs on a multi-year cycle, then your revenue runs on a multi-year cycle, and any measurement that assumes otherwise will generate false alarms and false victories forever. You cannot fix that with a better formula. You fix it by understanding the rhythm of the thing you sell and building the measurement around it. The useful side effect is that once you know the rhythm, you know something much more valuable than a retention rate. You know when each customer is due. You know who's overdue. You know which customers are sitting in the long quiet stretch between the visible events, which is exactly when they start to wonder what they're paying for, and exactly when a subscription that was supposed to hold the relationship stops holding it. That's not a dashboard. That's a work queue, a revenue forecast, and a churn early-warning system, and it usually comes out of data the company already has. ## The test Take your headline retention number and ask two questions. What's in the numerator that isn't the same kind of revenue as what's in the denominator? And how many customers in this cohort weren't around for the whole base period? If either answer is uncomfortable, you don't have a retention problem yet. You have a measurement problem, and you can't tell whether you have a retention problem until you fix it. --- # You Can't Qualify Against a Role That Doesn't Exist *August 6, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/qualify-against-a-role-that-doesnt-exist/ Most companies hiring their first Customer Success person produce an offer letter that gives the whole thing away. A name pasted at the top. A scope lifted out of a board deck. A bonus sized to be affordable rather than to change anyone's behavior. Read one of these carefully and you can reconstruct exactly how the decision got made, because every choice in the document was made from the company's side of the table and none of it was shaped by anything they learned about the person they're hiring. That last part is the whole problem. Not the salary. Not the bonus math. The fact that the process ran in an order that made qualification impossible. Worth saying early, because most of what follows reads like a post-mortem and it isn't one: almost none of this is locked in by the signature. Scope, metrics, comp mechanics, and what the person explicitly doesn't touch in week one all stay open right up until the first morning. That's the cheapest window you'll ever get, and it closes on day one. ## The sequence runs backwards Here's how it usually goes. The company raises, or has a good quarter, and a headcount line gets earmarked for Customer Success. The budget exists first. Then someone writes a job description to fit the number, which is why these documents read like three jobs stapled together: build the function, own the portfolio, stand up the reporting, define the metrics, coordinate across four teams. Then a search runs against that description, and a candidate is found who is willing to accept the number. Notice what never happened. Nobody defined what good looks like at month six. Nobody wrote down which specific outcomes this person is accountable for producing. Nobody decided who the customer actually is when there are three different stakeholders with three different definitions of value. Which means there was no bar to screen against. And when there's no bar, willingness is the only thing left that's measurable. So willingness becomes the criterion by default, and nobody notices, because a signed offer letter feels like a decision that got made well. ## Acceptance isn't evidence If the offer was designed to be accepted, acceptance tells you the document worked. It doesn't tell you the hire is right. Those are different claims and companies routinely treat the first as proof of the second. It's worse than uninformative, because it selects adversely. Ask who says yes to a base well under market for the scope described, three jobs' worth of accountability, and a bonus small enough to be rounding error with a clause reserving the right to cancel it. Someone with no better options. Someone who didn't read the document closely. Someone who needs the title badly enough to eat the rest. There are honest reasons a strong person signs that, including wanting into the industry from the operator side, or escaping something worse. But the experienced operator with real leverage doesn't sign it. So the offer functions as a filter that structurally excludes the profile the company said it wanted. Then the signature closes the question. They accepted, so it must have been reasonable, and nobody revisits the design. Acceptance launders it. ## Why this matters more for the first one For the first year, the first functional hire *is* the function. Whatever they're strong at becomes what Customer Success means in that company. Whatever they can't do doesn't get done, and probably doesn't get noticed as missing. That's an argument for writing the scope after you meet the candidates, not before. You aren't filling a slot in an existing machine. You're deciding what the machine will be, and the single largest input to that decision is who you actually hired. Aspirational scope written in advance, then handed to whoever accepted it, gets you a function shaped by budget constraints rather than by capability. It also means the most important thing to know is the one thing most of these processes never establish. Does this person come out of your customers' world, or out of a generic version of your motion? That answer changes everything downstream. Domain fluency means they can speak to your customers with confidence in their language on day one and you teach them the discipline. The reverse means they know the discipline and spend their first two quarters earning the right to be listened to. Both can work. They aren't the same job, they don't cost the same, and they need entirely different support around them. ## The failure mode is quiet People expect a bad first hire to blow up. It almost never does. What happens instead is they get pulled toward whatever is screaming loudest, because that's the only signal available in the absence of defined outcomes. They become another support resource. The function calcifies as reactive ticket handling. Retention doesn't move. Eighteen months later the founder concludes that Customer Success didn't work here, rather than that it was never designed. No crisis, just a conclusion, and the conclusion is wrong in a way that's expensive for years. There's a second-order version that's worse. Without a defined bar, there's no way to determine at month six whether the person is underperforming or the role is. That ambiguity doesn't resolve neutrally. It resolves against the person, every time, because the person is visible and the design isn't. So a structural failure gets recorded as a hiring failure, and the structure survives to break the next hire. ## A strong hire makes it harder to see This is the part that catches good founders. If the person you hired is weak, the design flaw surfaces fast and gets fixed. If they're strong, they absorb the dysfunction. They work around the missing authority, patch the gaps between teams, make the thing function through effort, and nobody ever learns it was broken. Then they leave, because they're strong and someone pays them properly, and the function collapses in a way that looks sudden and isn't. Related: whoever you hire first becomes the template. The second CS hire gets specced to look like the first, because the first is the only reference point that exists. An unqualified selection sets the shape, and then the shape justifies itself. ## Accountability without authority Almost every one of these job descriptions makes the person accountable for outcomes owned by other teams. Retention depends on what Sales promised, what Product shipped, how long implementation took, and whether delivery executed. The expansion version of this is the same shape and I have made that case at length elsewhere: the levers sit at an altitude above whoever is carrying the number, so no amount of capability in the role fixes it. What's specific to the first hire is the reporting line, which matters more than founders think. Reporting to the CEO looks like a signal of importance and usually functions as the opposite, because a CEO at a small company can't run a weekly cadence with an individual contributor. No cadence means no coaching, no early correction, and no air cover when they need to pull engineering time. It also means termination isn't a backstop, it's an ambush, because nothing led up to it. Founders reach for variable compensation to solve this. It feels like accountability that runs itself. It's a manager you don't have to be, and it doesn't work, for reasons I've treated separately. ## What to do instead Before any of it, check whether the hire is the lever at all. If there's a long gap between when a customer signs and when they can actually use what they bought, that gap is where your retention problem lives, and no CS hire will out-run it. Fix the value perception in that window first. Then hire someone into a role that has a chance. Assuming the hire is right, run the sequence in the right order. It isn't complicated, it's just rarely done. Decide what they own before you decide what to pay. Not "Customer Success," but the specific outcomes they're accountable for producing, stated so plainly that you could tell in ninety days whether they happened. Most CS hires spend their first quarter reverse-engineering the job because nobody wrote it down. That quarter is the expensive one and it's entirely avoidable. Decide what you measure and when. Be careful with churn early. It's a lagging indicator of decisions made months before this person arrived, many of them during the sale. Measuring a new hire on it in month two tells you nothing about them and teaches them to be defensive about things that predate them. Decide who the customer actually is. If you have multiple stakeholders with different definitions of value, and most B2B companies do, someone has to map the desired outcome for each of them and the experience each needs in order to feel like they're getting it. Until that exists, every renewal conversation is a surprise. Then price the scope at market, screen against the bar you just wrote, and let the offer reflect what you learned about the person in front of you. ## The window doesn't close at signature Here's the part that makes this worth writing rather than just complaining about. Almost everything above is recoverable right up until the first day, and a surprising number of founders will fix it if someone puts the structure in front of them. Not the salary, usually. The salary is set. But the scope, the metrics, the comp mechanics, and above all the question of what this person owns in week one and what they explicitly don't touch yet. The offer being signed doesn't mean the role is designed. Those are still two different things, and the gap between the signature and the start date is the cheapest window you'll ever have to close it. After day one it costs a renegotiation. Before day one it costs a conversation. What that conversation has to produce is narrower than founders expect. Take the metrics the person can't influence out of their comp. Cut the scope to what one human can actually carry in a quarter. And decide, out loud and in writing, what they aren't taking on yet, because that decision doesn't survive contact with a new employee's first morning. Every founder intends to ramp someone deliberately. Then the person is in the building, there's a fire, and they're the newest set of hands. The failure mode isn't a founder who refuses to fix it. It's a founder who plans to fix it once the person starts, and then never has a quiet hour again. ## The question that finds it fast If you want to know whether your own process was sound, ask one question. What did we learn about this person during interviews, and where does the offer reflect it? If the answer is nowhere, you didn't run a hiring process. You ran a search, found someone willing, and called it a decision. That question still works after the offer is signed. It just has a shorter fuse. --- # The Confidence Question™ *August 6, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-confidence-question/ Almost everything we measure about a customer is a report on the past. How they felt about the last interaction. Whether last quarter went well. What they did in the product last month. Churn isn't in the past. Churn is a decision about the future, and customers make it based on what they believe is going to happen next. Which means the most useful thing you can know about a customer is what they believe about next quarter, and almost nobody asks. ## The Question > How confident are you that [we / our product] will help you [the specific thing we promised you] over the next [time frame]? That's The Confidence Question™. It's as simple as it looks, and I think the simplicity is what puts people off. The simplicity is the point. Three things make it work. It's forward-looking, so it's a leading indicator rather than a lagging one. It's about them rather than about you, which is why response rates are so much better than anything else I've put in front of customers. And anyone can answer it. An end user and a CFO will both have a view, and their answers mean different things, which is a feature rather than a problem. A no from an end user is usually friction. A no from an executive is usually outcomes. It also fits next to whatever you're already running. If you like your satisfaction survey, keep it and add this. If you'd rather this replace it, that works too. I don't much care, and the question doesn't need the argument. ## What It's Built to Catch The failure this question exists to surface has a specific shape, and it's worth naming. A customer says yes when they aren't sure. They're not lying. They're being agreeable, or they don't want to look like they weren't paying attention, or they genuinely don't know what they don't know yet. Call it an uncertain affirmation. A yes with nothing behind it. Nobody challenges it, because it was a yes and a yes was what you wanted. So it stands. And then it compounds. Uncertainty turns into poor execution, poor execution turns into poor results, poor results turn into frustration, and frustration turns into blame. > When a customer comes back angry at the end, it's almost always an uncertain affirmation that nobody challenged at the beginning. Asking about confidence directly makes the uncertain affirmation expensive to give. It's much harder to say "yes, completely confident" than it is to nod along. And when someone does say they're fully confident, hold them to it out loud. Ask them to tell you the moment that stops being true. Most people will, and now you have a customer who reports their own drop instead of one who quietly goes dark. ## Anything Less Than 100% Is a Red Flag The scale exists for the customer's benefit. It gives them room and it feels like a normal thing to be asked. Behind the scenes there are only two buckets. Fully confident, and not. The first is fine. The second needs intervention, because a customer who isn't fully confident you'll help them get what they came for is telling you something is wrong. And they're telling you now, rather than at renewal. Watch for the deflection. Someone will say they never give a perfect score. Don't let it go. Try this instead: I'm glad you're confident, but a 10 means you're fully confident we can help you do what you need to do, the way you need to do it. What's keeping you from a 10? Nine is not a rounding error. Nine is a customer telling you about something they haven't said out loud yet. ## You Can't Diagnose From the Number The number triggers the intervention. It doesn't tell you what the intervention is. A seven might be entirely your fault. A three might be something happening in their world that has nothing to do with you and will still sink them as a customer. Scores don't sort by cause. So don't design your response off the score, design it off the conversation the score earns you. Two questions do most of the work once you're in that conversation. What's the reason for the gap, and is it on our side or theirs? And what needs to happen to close it, on our side or theirs? ## Keep It at the Account Level Average it across your whole base and you've built yourself a vanity metric. It'll trend, it'll look reasonable on a slide, and it will tell nobody what to do on Monday. The value is per account, where it's actionable. One name, one number, one intervention. On benchmarking, I'm the wrong person to ask. I'm not interested in the average, because the companies worth learning from are usually the outliers those reports strip out to keep the curve clean. And in this model a fat middle isn't a healthy distribution, it's a queue of customers who aren't sure about you. ## What Confidence Is Actually Measuring Confidence is a reading on [whether the customer can see the value yet](https://ltvmax.com/posts/velocity-of-value-recognition), which is a different thing from whether the value is being delivered. That distinction matters most in businesses where delivery is slow or invisible. Long implementations. Compliance work. Anything whose payoff is a disaster that doesn't happen. In those, there's no realized value to be satisfied about for a long time, so backward-looking measures have nothing to work with. Confidence has plenty. It also gets at the thing [customers actually fear](what-customers-fear-is-certainty). They hate unknowns, surprises, and repeating themselves. An uncertain affirmation is all three waiting to happen. ## Start Asking It There is a companion to this one, asked once rather than continuously, about what the *customer* is responsible for: [exposing uncertainty beats finishing onboarding](/exposing-uncertainty-beats-finishing-onboarding/). Put it in a QBR. Send it in an email. Ask it on a call. Put it in the product. Add it alongside whatever you already send. Don't overthink it. You're asking a customer whether they believe you'll help them get what they came for. If the answer is anything short of yes, you just found the work. --- # AI Gave Everyone a Tool. Nobody Built a System. *August 4, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/a-tool-for-everything-a-system-for-nothing/ I would rather hand a customer a working tool than teach them a process. That has always been true, and until recently it was expensive enough that it rarely happened. It's close to free now. A CSM who can't write code can build something genuinely useful in an afternoon, and hand it to a customer who is stuck. That's a real improvement in what customer success can deliver, and I don't want to talk anyone out of it. But watch what happens next. ## Three People, Same Logic, Three Places One CSM builds a tool in a no-code app to solve a recurring customer problem. Another CSM, working a different book, builds the same thing as a chat artifact. Someone in ops builds a proper agentic workflow that does the same job. Same underlying logic, three interfaces, three places it can be changed. A tool for everything, and a system for nothing. And now three things go wrong at once. **It drifts.** Each version gets improved independently. Six months later nobody can say which one reflects current thinking, so some of your customers are running last quarter's logic and nobody knows which ones. **It duplicates effort.** Three people maintaining three versions of one thing. The tooling built to save time is now consuming it. **It walks out the door.** The tool lives in a personal account. When that person leaves, and they will, their customers keep using something you can't reach, can't update, and can't switch off. You have a customer-facing dependency you don't control and possibly can't see. This is shadow IT, except the shadow is pointed at your customers. ## The Fix Is Ownership, Not Permission The obvious response is to centralise: nobody builds anything without approval, everything goes through a queue. That kills the thing that made it valuable. The reason a CSM can solve a customer problem on Tuesday is that they didn't have to ask. Put a gate in front of it and you're back to filing tickets and waiting, which is the situation this replaced. So separate the two questions. Who is allowed to build, and who owns what gets built. Building stays distributed. Ownership doesn't. Anything customer-facing lives in organizational accounts, is cataloged somewhere a new hire could find it, and has one version marked current. If two people have built the same thing, that's a merge, not a coexistence. None of that slows anybody down on Tuesday. It just means Tuesday's work still exists in a year. ## This Is the Argument for CS Ops Customer success organizations have historically justified an ops function through reporting and tooling administration, which is a thin case and usually loses. This is a better one. Your team is now producing customer-facing software. Not documents, not decks. Software, in the hands of customers, built by people whose job isn't building software and who will eventually work somewhere else. Somebody has to own that. Not to gatekeep it, and not to build it all themselves, but to make sure what gets built belongs to the company and stays current. That's an operational function, and the cost of not having it doesn't show up until the day it shows up all at once. The wider version of this argument, including the two related traps, is in [the talk](/slow-down-to-speed-up/). There's also [a short audit](/ai-cx-audit/) if you want to know how exposed you already are. --- # When the AI Is Wrong and You Can't Stop It *August 4, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/bring-proof-not-feelings/ Most of what gets written about fixing customer experience is addressed to people who can change it. Heads of, VPs of, founders. This one is for everyone else. You can see a customer receiving something that's going to damage the relationship, and you don't have the authority to stop it. You may genuinely have to run the process as defined. That's real and I'm not going to pretend otherwise. But there's a difference between not being able to say no and not being able to say anything, and the second one is usually a choice. ## Why Concerns Don't Travel The version that fails sounds like this. *I think this is going to upset customers. It feels wrong. I don't think we should be sending this.* All of that may be correct. None of it moves. It doesn't move because of how it arrives. Delivered as a feeling, it can be received as a feeling, and a feeling can be acknowledged without anything changing. Thanks for flagging it. Good instinct. We'll keep an eye on that. It also puts your judgment against theirs, and in that contest the person with more authority wins by default, regardless of who is right. ## What Proof Looks Like The version that moves has four parts, and it isn't longer than the version that fails. **A named account.** Not customers, not people. This customer. **The mechanism.** Specifically what happened, in sequence. We produced their deliverable from an intake form they told us they hadn't completed. We held a kickoff call. Nothing from that call reached the work. **The consequence, in their words.** What the customer actually said, quoted. Not your summary of the mood. **A number.** What that account is worth, and how many other accounts are in the same position. A concern is your opinion against theirs. A number is a fact on the table that belongs to neither of you. ## Why the Number Does the Work The number isn't there to be dramatic. It converts your judgment into the unit the decision actually gets made in. Someone weighing whether to change a process is weighing it against the cost of changing it. Without a figure on the other side of that comparison, there's nothing to weigh, so the default holds. Put a figure there and the comparison becomes possible, which is all you were ever asking for. It also changes who owns the risk. Before you said it, an unexamined process was quietly costing money. After you said it, with evidence, somebody has made a decision. They may still decide to proceed. But they decided. ## When It Still Doesn't Land Sometimes you do all of this and nothing happens. That's worth knowing, because it tells you something. An organization that won't act on a named account, a specific mechanism and a dollar figure isn't suffering from missing information. And you have a record. Not to be used against anyone, but because the same conversation in three months, with the churn that followed attached to it, is a very different conversation. Being the person who raised it early and specifically is a durable position to hold. The pattern this usually comes out of is [scaling something nobody would have signed](/slow-down-to-speed-up/). If you wouldn't put your name on the output, more of it isn't the answer, and saying so with proof is the version of that sentence that gets heard. --- # Your Agentic Workflow Learns. Only From Itself. *August 4, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/fast-garbage-is-still-garbage/ Agentic workflows learn. That's the entire point of them, and they're good at it. The question is what yours is learning from, because a multiplier multiplies whatever you feed it. That sentence is doing more work than it appears to, because everything we build now is a multiplier. The entire promise of agentic workflows is that a thing which used to happen once now happens continuously, at volume, without anyone starting it. Which is excellent, provided the thing being multiplied is any good. ## The Closed Loop Here's the shape it takes in practice. A workflow reviews the results of the last cycle of work. It builds a plan from that review. It executes the plan. Next cycle, it reviews those results and builds the next plan. Clean. Self-improving on paper. And completely sealed off from everything that happened outside it. Because in the meantime, the customer got on a strategy call and said the output wasn't converting. Support has a pattern nobody has aggregated. Somebody on the sales side heard why they're frustrated. A quarterly review produced twenty minutes of the most direct feedback anyone has given you all year. None of it reaches the review. So the review reads the numbers, finds them acceptable, and optimizes toward more of the same thing the customer already told you isn't working. A closed loop can't learn. It can only become more consistent. ## Why It Feels Rigorous This is the trap inside the trap. Closed loops look like discipline. They're measurable. They're repeatable. They produce a clean narrative where every decision traces back to data. Everything about them reads as more rigorous than the messy alternative of a human reading a transcript and forming a view. But internal consistency isn't accuracy. A system can be perfectly rigorous about a partial picture, and the rigor makes the partial picture harder to challenge, because now there's a process behind it. And trace the inputs back far enough and you often find something uncomfortable: the whole loop is running on whatever was captured at the very beginning, in the first intake, before you knew anything. Every cycle since has been an elaboration of that one thin document. ## Opening the Loop The correction isn't sophisticated, which is why it's annoying that so few operations do it. Name the sources. Everywhere a customer tells you something: calls, tickets, email threads, review notes, the CRM field somebody actually fills in. If you're recording your calls, and you should be, that's a large body of unstructured truth sitting unused. Then require them. Not available to the workflow. Required by it. Every cycle pulls current intel from every source before it decides anything, and a cycle that runs without them is a cycle that should fail loudly rather than proceed quietly. One question is usually enough to find out where you stand: *what has this customer told us in the last ninety days that our automated process has never seen?* If the answer is anything other than nothing, you have a closed loop, and it's confidently getting more efficient at the wrong thing. ## What It Costs The cost isn't the wasted cycles, though those are real. The cost is that the customer told you. They took the time, they were specific, and then they watched the next deliverable arrive as though the conversation had never happened. That's a much more expensive message than a mediocre output, because it isn't about competence. It's about whether anyone is listening. Which is the same failure as [delivering before you listened](/slow-down-to-speed-up/), arriving later in the relationship and repeating on a schedule. [Two minutes](/ai-cx-audit/) will tell you whether your loops are open or closed. --- # "This Looks Like AI" Is a Context Problem *August 4, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/looks-like-ai-is-a-context-problem/ A customer looks at something your team produced and says it reads like AI wrote it. The instinct is to go fix the tells. Strip the em dashes. Kill the stock phrases. Add guardrails so the model stops sounding like a model. Do all of that. It's worth doing, and it takes an afternoon. Then understand that it won't solve the problem the customer is describing. ## They Aren't Reacting to the Formatting When people say something reads like AI, formatting is the evidence they reach for, because it's the part they can name. What actually triggered the reaction is that the work reads *generic*. It could have gone to anyone. Generic isn't a model failure. It's what any writer produces, human or otherwise, when they don't know enough about the specific situation in front of them. Hand a talented person one half-answered form about a company they have never spoken to and ask for a strategy document, and you'll get something that reads exactly like AI wrote it, because the constraint was never the writer. The AI didn't fail you. The missing context did. ## What Context Actually Means Here Context doesn't mean a longer prompt. It means knowledge of this customer that wouldn't be true of any other customer. Which is worth being concrete about, because there's a hierarchy and most operations only touch the top of it. **What they told you when you asked.** The intake form, the questionnaire, the onboarding survey. The thinnest layer, because people edit themselves when they write, and because a form only collects what you already knew to ask. **What they told you in conversation.** The kickoff, the sales call, the strategy review. Richer, because you could follow up, and because the things people say out loud are less curated than the things they type into a box. **What they told you without being asked.** The offhand remark forty minutes into a call. The support ticket that reveals what they actually use the product for. The thing they complained about once and never repeated. This is the most valuable layer and almost nobody feeds it into anything. ## The Test Before something goes to a customer, ask one question about it. Could this have been sent to a different customer with the names swapped out? If yes, that's exactly what they're going to react to, and no amount of tone adjustment will fix it. If no, if there are three or four specifics in there that only make sense for this account, then nobody is going to accuse it of being machine-written, whether or not a machine wrote it. ## The Uncomfortable Version This is the part people deflect. If a customer says your work looks like AI, the finding isn't that you used AI badly. The finding is that you didn't know enough about them to produce anything else. That gap existed before you automated. Automation didn't create it. It industrialised it and then showed it to the customer at speed, which is why it feels new. Fix the input and the output stops reading generic, because it stops being generic. That isn't a prompt problem and it isn't a model problem. It's a [listening problem with a delivery schedule attached](/slow-down-to-speed-up/). If you want to find out where your own operation is producing work faster than it's gathering context, [the audit](/ai-cx-audit/) takes about two minutes. --- # Slow Down to Speed Up: Three AI Traps in Customer Experience *August 4, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/slow-down-to-speed-up/ I use AI and agentic workflows in every part of how I operate. I genuinely don't remember how I worked before them, and I'm not interested in a conversation about slowing them down. Which is exactly why this needs saying: the fastest way to lose a customer is now available to everybody, at scale, on a schedule. If the player above hasn't loaded yet, the talk is [here on YouTube](https://youtu.be/tvFtqlnRixE). That is the talk I gave at CSX Week 2026. The argument is written out below, so you don't have to watch it to use it. ## The Mechanism Customer success is when your customers reach their [Desired Outcome](/desired-outcome/) through their relationship with your company. Desired Outcome is two things, not one: the goal they need to hit, and the Appropriate Experience for them specifically. Most people hear that and weight the goal. The experience half does more work than it gets credit for. Deliver the right experience without the result and they will stay a while longer, and give you more chances to get there. Deliver the result through an experience that's wrong for them and they will leave anyway, holding the outcome they wanted, because getting it cost them something they weren't willing to keep paying. AI changes the scale of this in both directions. It can deliver the appropriate experience to more customers than any team could reach before. It can deliver the wrong one at exactly the same speed. With AI you can build a machine that proves to your customers you never understood them, and you can run that machine at scale. ## Trap One: You Delivered Before You Listened A company I work with runs a done-for-you service that only became possible because of agentic workflows. It starts with an intake form. Thirteen questions. Everyone there already knew the form was a problem. Customers often skip it. When they do fill it in, they fill it in thinly, because people edit themselves when they write. The kickoff call was where the gaps actually closed, and where things nobody thought to put in a form surfaced. Then they automated. Time to first value went from three weeks to before the kickoff call had even happened, which sounds like an unambiguous win until you see what the customer receives: work built on a form they know they answered badly. The reactions write themselves. Why are we having this call if the work is done. Why did we have the call if you weren't going to listen to me. Why did you let me fill that out so carelessly if you were going to build on it. The fix wasn't to slow down to three weeks. It was to wait a few days. Take the intake form, the sales call, and the kickoff conversation, combine them, then produce. Three weeks to a couple of days is still an enormous improvement, and now the work reflects something the customer actually said. ### Why "this looks like AI" is usually not about the AI A related thing happens when customers see automated output and call it AI slop. They're rarely pointing at em dashes or formatting. Those are fixable, and you should fix them. What they're reacting to is that the work reads generic, and generic is what thin context produces. Strip every tell you like; if the input was one half-answered form, the output will still read like it was written by someone who has never met them. The AI didn't fail you. The missing context did. ## Trap Two: A Tool for Everything, a System for Nothing I would rather hand a customer a tool than teach them a process, and building tools is close to free now. That is genuinely good, and it's where the second trap lives. One CSM builds something in a no-code app. Another builds an artifact in Claude. Someone in ops builds a proper agentic workflow. Same underlying logic, three interfaces, three places it can change. Then it drifts. Nobody can say which version is current, so some customers are running last quarter's logic. Then someone leaves, and the tool their customers depend on is still sitting in a personal account you can't reach, update, or switch off. The thing built for efficiency is now consuming time, and it has become a dependency you don't control. This is the concrete argument for a customer success organization having an ops function: not to slow building down, but to make sure what gets built belongs to the company. ## Trap Three: Automating on Top of Garbage A multiplier multiplies whatever you feed it. Take a workflow that audits a campaign, builds a plan from the audit, and executes the plan automatically. Clean loop, real efficiency. And it never ingests anything that happened outside itself. Meanwhile the customer said something on a strategy call about the leads not qualifying. Support has a pattern. Sales heard something on an expansion conversation. None of it reaches the audit, so the audit reads the campaign metrics, decides things went fine, and optimizes toward more of the same. Trace it back far enough and the whole loop is running on the intake form nobody filled in properly. Fast garbage is still garbage. It just arrives more often. The correction isn't complicated. If you record your calls, and you should, that intel is available. Email, support threads, QBR notes, the strategy conversation from three weeks ago. Feed the audit everything the customer has told you, not just what your own system produced last time. ## Two Things to Take Into Work **If you wouldn't sign it, don't scale it.** If you have reservations about what a workflow is producing, scale is the wrong response to those reservations. It doesn't improve the output. It delivers the same output to more people, faster. **If you can't say no, you can always say something.** Plenty of people reading this can't halt a process. Fine. You can still escalate, and escalation works when it carries proof instead of a feeling. Not "I think this customer is having a bad experience." Instead: this customer is threatening to cancel because we built their deliverable from a form they told us they didn't complete, we ignored everything from the kickoff call, and here's what the account is worth. Put a number on what the inappropriate experience costs and the conversation changes. ## The Actual Risk None of this is an argument against AI. Go use it. Scale your delivery of the appropriate experience as far as it will go. Just be clear about what's now possible in both directions. We have never before been able to prove to a customer that we don't understand them this efficiently, this consistently, or to this many of them at once. So slow down to speed up. A few days instead of zero days. One conversation before the deliverable. One person who owns the tools. One workflow that reads everything the customer has told you. ## Going Deeper on Each Each of these has more in it than a keynote allows for, so they're written out separately. - ["This looks like AI" is a context problem](/looks-like-ai-is-a-context-problem/), including the one test to run before anything reaches a customer. - [AI gave everyone a tool and nobody built a system](/a-tool-for-everything-a-system-for-nothing/), and why the fix is ownership rather than permission. - [Why your agentic workflow is learning only from itself](/fast-garbage-is-still-garbage/), and how to open the loop. - [What to do when the AI is wrong and you can't stop it](/bring-proof-not-feelings/), for anyone who can see the problem and lacks the authority to halt it. If you want to find out where your own operation is exposed, I built [a seven-question audit](/ai-cx-audit/) of exactly these failure points. Under two minutes, no email. --- # You Didn't Run a Test. You Sent Four Emails. *July 31, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/you-didnt-run-a-test/ **A note on the examples.** In the particular is contained the universal. That's Joyce, and it's my defense for the fact that everything below happens to be about email. Email is where I have watched this most clearly and where the arithmetic is easiest to show.The mechanism has nothing to do with email. It runs anywhere a team produces options that no outcome will act on, at a volume that could never have separated them: pricing experiments, onboarding sequences, landing pages, feature flags, pilot programs, agency creative. If your version isn't email, substitute it. Nothing in the argument changes. I have watched teams build four variants of an email, label them carefully, send them, and never once look at the results. Not out of laziness. The variants got built, which is the expensive part. Somebody wrote them, somebody reviewed them, somebody set up the split. Then the campaign went out and nobody came back to read what happened, and the next campaign got built the same way. That isn't testing. It's the costume of testing. Let's be precise about what's missing. ## A test needs a decision attached to it The thing that makes a test real isn't the split. It isn't the labels, and it isn't the language about letting the data decide. It's that something you would otherwise do changes based on the outcome. If no possible result would alter what you do next, you didn't run a test. You sent four emails. The split added cost and produced nothing, because there was never a decision waiting on the other end of it. Write down, before you send, what you'll do differently if A wins and if B wins. If those two sentences are the same sentence, cancel the test and send your best one. That question takes about a minute and it kills most of the tests people are running. ## At low volume the readout is noise anyway Here's the part that makes it worse rather than merely wasteful. Split a few hundred sends across four arms, on a channel where a good outcome is a handful of responses, and the gap between the variant that got 2 and the variant that got 0 is a coin flip. It isn't a small effect. It isn't a weak signal. It's nothing, and no amount of staring at it will make it into something. You would need thousands of sends per arm before those numbers separate from chance, and most campaigns will never have that. Which means nobody reading the results was almost a mercy. A diligent reader would have found a difference, believed it, and changed the next campaign based on a number that was randomness with a label on it. The ritual was harmless only because it was ignored. Start taking it seriously without fixing the volume problem and it becomes actively dangerous. ## The format destroys the signal you could have had This is the part I hadn't thought through carefully enough until recently, and it's the real cost. I have argued that [convergence validates, not volume](/statistical-significance-is-a-stalling-technique/). If twenty people tell you the same thing, unprompted, in their own words, that's validated at twenty. Now look at what a four-way split actually collects. People can click or not click. Open or not open. Reply or not reply. There's no mechanism in that data for anyone to say the same thing as anyone else, because nobody is saying anything. Scripted variants can't converge. The format has no channel for agreement to appear in. So at low volume you have chosen the one data type your sample is too small to read, and given up the one data type it's large enough to read. Five replies is a useless sample for split-test arithmetic and a rich one for reading. What did they respond to. What did they push back on. What words did they use for the problem, which are almost never the words on your website. That's exactly the open-ended, in-their-own-words input that convergence can actually process, and it's sitting in the inbox while everyone is looking at a rate. ## Sequential, not parallel The model that fits small volume isn't four things at once. It's one thing, then the next thing. One best shot. Full send. Read every reply, including the annoyed ones, especially the annoyed ones. Then change the whole approach based on what came back and send again. Most teams operating at small scale are already doing this informally. The campaign flops, somebody reads the silence, the angle gets rewritten, it goes out again. That loop is the actual methodology. The variants were decoration sitting on top of it, and the loop was doing all the work the whole time. At that volume the channel isn't a conversion machine. It's a customer development instrument that occasionally produces revenue, and it's a very good one, because strangers with no stake in your feelings will tell you things your customers have gotten too polite to say. ## Either wire it or kill it If you have accounts with genuine volume, wire a decision rule to the split before it goes out. Name the metric, name the threshold, name the change you'll make. Then the test is real and worth its cost. Everywhere else, stop producing variants. That work isn't free. Someone is spending hours a week generating options that no result will ever act on, and those hours could go into reading replies, which is where the only readable signal at that scale actually lives. What you can't do is leave it as it is, because the current state has a cost and no benefit, and it's protected by how good it sounds. We tested it ends conversations. Nobody asks whether the test could have changed anything. That's the same move as [waiting for significance](/statistical-significance-is-a-stalling-technique/), arriving from the opposite direction. One postpones the decision until a threshold that never comes. The other performs the decision so thoroughly that nobody notices it was never made. Both are judgment deferred to a tribunal that doesn't convene, and both are more comfortable than saying the honest thing out loud. Which is usually some version of: I think this one is stronger, I'm not certain, and we're going to find out by sending it. --- # Overwhelm Looks Like Resistance *July 31, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/overwhelm-looks-like-resistance/ About 28 years ago I was an early web programmer going through certification to teach ColdFusion. Part of the evaluation was standing up and actually teaching it. In ColdFusion the pound sign was a special character, so writing a hex color like #FFFFFF meant escaping the pound sign with another pound sign. I taught that. The evaluator stopped me. You're introducing the concept of ColdFusion. You don't need to go that deep. Everything I had said was true and useful. It was also correct information delivered at the wrong altitude at the wrong moment, and for a beginner that isn't education. It's noise, and it costs them the thread on the thing they came to learn. It took me a lot longer than it should have to understand where else that applies. ## The Blocker Years later I was working with an enterprise account. One stakeholder wasn't moving on anything. My read at the time was that he was a blocker. He wasn't a blocker. He was buried. I had been handing him more to do than any person with an actual job could absorb, and the volume itself was the obstacle. That's the entire post, right there. From inside your own head the volume always feels appropriate. You know every piece is necessary. You know why each one matters. You sequenced it in the order that makes sense given everything you already know. So when it doesn't land, the pacing explanation isn't available to you. What's available is an explanation about them. Resistant. Not technical enough. Not bought in. A blocker. Once you have labeled the person, you stop adjusting the delivery. Which guarantees it keeps failing. Which confirms the label. ## They Look the Same and They Need Opposite Responses Overwhelm presents as resistance. From the outside the two are nearly identical, and almost everything you would do about one is wrong for the other. A resistant person argues. They have a competing priority and they will usually name it if you ask directly. There's friction, and the friction has content in it. An overwhelmed person agrees with everything and does none of it. Yes, sounds good, makes sense. Then nothing. They go quiet, because saying this is too much for me means admitting they can't keep up, and almost nobody will say that out loud to a vendor. The strongest tell is a change in slope. Someone who was engaged early and went flat later isn't a character problem. Character doesn't change in 6 weeks. Load does. And the wrong response to silence is more. More follow-up, more resources, another deck, a recap document. That's how you finish burying someone who was already under. ## How This Gets Built Into the Program Onboarding gets built by people who know everything, for people who know nothing, and it gets organized around the builder’s mental model instead of the customer’s sequence of problems. Feature tour. Module by module. Everything covered, in the order the product happens to be architected. Comprehensiveness feels like generosity. It functions as an obstacle. And it's unusually hard to kill, because we gave them everything they need is technically true. The failure is also invisible in the reporting. Completion rates look fine. People attend the sessions. People finish the modules. Completion isn't absorption, and nothing in the funnel distinguishes between them. The signature of it is a survey response that reads something like: I finished the training and I still don't know how to use this. When you see that, the instinct is to add content. Better documentation. Another webinar. A longer academy. Every one of those makes the actual problem worse. ## What to Do Instead Something taught before it's needed isn't learned. It's only heard. So the sequence has to follow the customer’s order of problems rather than the product’s order of features. The unit isn't the feature. It's the moment they need it. One thing per interaction, tied to a problem they have this week and not one they will have in month 4. One small action before the next touch, small enough that it actually happens. Then check absorption instead of completion. Ask them to show you, or to explain it back to you. It takes 90 seconds and it's the only honest signal in the entire process. Drip against [milestones](/success-milestones/) rather than against a calendar. Calendar-based drip is still organized around your convenience. It's just spread out. And then the hard part. Withholding feels like under-delivering. Everything in you says the responsible thing is to give them all of it, right now, because you have it and they're paying for it. It isn't. ## Restraint Isn't Doing Less There's an apparent contradiction in that, and resolving it's the whole point. The operating question in customer success should always be what's the most we can do for our customers, not the least. More recently I have been asking a sharper version of it: [what complexity can we absorb on their behalf](/the-question-customer-success-never-asked/) that we used to push back onto them. Giving someone everything at once isn't doing the most for them. It's transferring complexity. You have moved the work of sorting, sequencing and prioritizing onto the person least equipped to do it, and then called it thoroughness. Restraint in delivery isn't doing less. It's absorbing the sequencing work yourself so the customer never has to. That's the most you can do for them. It just happens to look like giving them less. One consequence worth counting, because nobody does. A customer who never absorbed the first thing never reaches the point where the second thing becomes obvious to them. They don't argue with you about it. They agree, and they stall, and the account quietly produces nothing beyond what it started with. Buried customers don't expand, and the reporting will tell you they completed onboarding. --- # The Customers Who Left Are Not the Customers Who Stayed *July 30, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/customers-who-left-are-not-customers-who-stayed/ Here's a sentence I have heard in some form from a lot of capable operators lately. “Our customers are under real pressure right now. You saw what happened to our base this year. This isn't the moment to go back and ask them for more money.” It sounds like realism. It is delivered with the weight of someone who has looked hard at their own numbers and drawn a sober conclusion. And it's built entirely out of the people who are gone. ## Churn Data Describes Churners When a wave of cancellations comes through, a company learns a great deal. Exit conversations happen. Reasons get logged. Patterns emerge. Leadership ends up with a genuinely accurate account of why those customers left. Then that account quietly becomes the company’s belief about its customers. All of them. Including the ones still paying. I wrote years ago that [the reason a customer gives you for leaving is rarely the real reason](/churn-reason-analysis/). Here's the part I didn't write then. Even when you get the real reason, it describes one population: the people who left. It is silent on the people who didn't. Those aren't the same group. They were separated by an event, and the separation wasn't random. ## Attrition Ran an Experiment Nobody Designed A bad wave sorts your base into two kinds of customers. There are customers who were buying the output. Whatever the deliverable was, they wanted it, and when something cheaper or faster or included-elsewhere could produce a near-enough version, the decision was arithmetic. They went. And there are customers who were buying everything around the output. The judgment. The fact that it fits how they actually operate. The person who picks up. The accumulated context that makes the thing work in their environment specifically. The first group leaves in a shock. The second group doesn't. Attrition ran a segmentation study you would never have gotten budget for, and the results are sitting in your billing system. What remains is the highest-conviction cohort the company has ever had. And it identified itself during the exact window when leaving was easiest to justify. ## Renewal in a Bad Year Is a Loud Signal Nobody renews out of inertia in a period when everyone around them is canceling and finance is asking hard questions about every line item. A renewal under those conditions is a customer saying, in the most expensive language available to them, that this is worth keeping when keeping things is unpopular. Most companies receive that signal and file it as risk. The cohort gets flagged for retention attention. Check-ins increase. Nobody asks them for anything, because the year has been hard and it feels indecent to ask. So the strongest buy signal in the business gets processed as a threat. ## Before You Believe Any of This There's a condition on everything above, and it isn't optional. This only holds if the thing that drove people out wasn't you. [Churn is three different things](/the-churn-doctrine-revised/). If your wave was delivery failure, if you promised an outcome and didn't produce it, then the people still on the invoice aren't a proven cohort. Some of them are simply customers who haven't finished looking yet. Expanding into that base is worse than pointless. You would be asking for more money on the strength of results you haven't delivered, which is how a manageable problem becomes a reputational one. So answer this first, and answer it honestly, because the whole argument turns on it: did they leave because of something you did, or because of something that happened? If it was something you did, none of this applies. The work is delivery, and it's the only work. If it was something that happened to the category, a shift in what the market pays for, a change in what's now included elsewhere, then the filter did what a filter does, and the people it left behind mean something. ## What the Belief Costs Left alone, that opening sentence turns the entire post-sale function defensive. Every conversation is aimed at keeping. Nobody asks the base for anything. The base, predictably, produces no incremental revenue. And at the end of the year the company concludes that its customers don't buy more. That conclusion was never tested. It was inherited from the people who left, and then confirmed by a year of not asking. Meanwhile the same company will spend heavily to acquire customers who have demonstrated nothing, while holding back from the ones who just demonstrated everything. ## The Filter Isn't Permanent One honest counterweight, because the argument isn't that these customers are loyal and you can relax. They survived one wave. Not five. Conviction proven this year isn't conviction forever, and if the pressure on your category is structural rather than temporary, the population keeps eroding underneath you. Which is the reason to move now rather than a reason to feel comfortable. You have a proven cohort and a clock. Most companies in this position correctly identify the clock and then spend the time defending instead of asking. ## What to Do This Quarter Three things, in order. **Split the decline.** Separate the shortfall into new logos you didn't win and revenue you lost inside the existing base. Most companies have never pulled those apart, and the answer redirects everything. A new-logo problem and a base problem call for opposite responses, and the combined number hides which one you have. **Ask the survivors why they stayed.** Not a satisfaction score. The actual reason, in their words, from a real conversation. Companies run exit interviews as a matter of course and almost never run the opposite one, which means the most useful segmentation data they own is the data they never collect. What comes back is usually a description of value they aren't currently being sold more of. **Then find out what else they would buy.** Not a campaign. An inventory, a price against each item, and an honest read on which customers could genuinely use which thing. That last step has a structure, and it's [six questions long](https://ltvmax.com/posts/the-six-questions). None of this requires believing your customers are fine. It requires noticing that you have been describing them using data collected from people who are no longer them. --- # The Ceiling Was Never Real *July 28, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-ceiling-was-never-real/ The most flattering churn story a company tells itself is that the customer outgrew them. It sounds like a compliment on the way out. They got so big, so sophisticated, so far along, that we simply couldn't serve them anymore.Then you audit it. And most of the time there was no wall.## Look for the actual limitPull the last handful of customers who left this way and ask one narrow question: what specifically could they not do with you?Sometimes there's a real answer. A genuine capability you don't have and were never going to build. That's a real ceiling and it's fine; not every customer is yours forever.But usually the answer is thinner than that. They needed something adjacent, and you either had it, could have configured it, could have delivered it as a service, or could have brought a partner to it. There was no hard gate. Nothing in the product or the contract or the model actually stopped them.Which is often a decision made years earlier, when nobody [architected for what came after the first thing](https://ltvmax.com/posts/product-led-growth-without-the-growth). The ceiling wasn't built on purpose. It was left in place by default.> The ceiling was never in your product. It was in what they believed your product could do.## Somebody told them what was possibleHere's what actually happened in most of these accounts.The customer succeeded with what they bought. Their needs sharpened. They started wondering what came next. And somewhere in that window, someone got in their ear about what was possible, and that someone wasn't you. A vendor, a peer at a conference, a new hire who used a different tool at their last company.That person described a future. You didn't. So the customer built their picture of the ceiling out of the only information available, which was your silence, and then acted on it. By the time they told you, the decision was already made and [decisions like that don't reverse](/churned-customers-are-not-money-in-the-bank/).They weren't being disloyal. They were being reasonable. [Nobody showed them the aisle](https://ltvmax.com/posts/the-demand-already-in-your-building), so they concluded the store didn't carry it.## Perception is a maintenance problemWhich reframes this as something you can actually work on, because perception, unlike capability, is cheap to change.A customer's sense of what you can do for them is set early, usually during the sale, and then it decays. It decays because their business changes and your description of yourself doesn't. Left alone for two years, the picture in their head is a portrait of the company you were when they bought, applied to a company they no longer are.Nothing corrects that by accident. It corrects when somebody puts the future in front of them on purpose: this is what you have achieved, this is what it makes possible next, this is what we do when you get there. That's [the retention side effect](/the-retention-side-effect/) of orchestration, and it's why milestones on display do more for lifetimes than any save motion does.## Where this leaves the moneyEvery artificially ceilinged customer is a double loss, which is what makes them worth counting. You lost the revenue they went and spent somewhere else, and you lost the customer who was, by their own account, succeeding with you.That's the most expensive kind of churn there is, and [the cheapest to prevent](/the-churn-doctrine-revised/), because the fix isn't a product roadmap. It's telling customers what's possible before somebody else does.Go find the ceiling in your own base. Ask what your best customers believe you can't do for them. The gap between that answer and the truth is a number, and it's sitting in your accounts right now: [the Latent Revenue Test](https://ltvmax.com/latent-revenue-test) is six questions and ninety seconds. --- # Statistical Significance Is a Stalling Technique *July 28, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/statistical-significance-is-a-stalling-technique/ There's a sentence that gets said in a lot of rooms, and it always sounds like rigor. *We can't act on that yet. We don't have statistical significance.*Sometimes that's true. Most of the time, in my experience, it's a stalling technique wearing a lab coat.## The tell is the numberNotice where the threshold always lands. You need a hundred customers before we can map this. You need six months of data. You need the campaign to be forty percent complete.It's always more than you currently have. Every time.Which is the tell, because if the number were real, someone would eventually have it, and then the work would have to start. A threshold that stays permanently just out of reach isn't a measurement standard. It's a deferral mechanism, and it's doing exactly the job it was built to do.> If you already had the number, they would have to actually help you.I'm not accusing anyone of dishonesty. The people who say it usually believe it, because it's what they were taught to say when they aren't yet sure what to do. The honest version of the sentence is *I don't know what to recommend yet*, and that sentence is fine. Nobody gets fired for it. But it's harder to say than the one about significance, so the one about significance is the one that gets said.## What actually validates somethingConvergence, not volume.If twenty customers tell you the same thing, unprompted, in their own words, that's validated at twenty. Not provisionally. Validated. You may learn something new at fifty that changes your mind, and you should stay open to that, but the signal at twenty was real and acting on it was correct.The reverse is also true and less comfortable. If two hundred customers tell you eleven different things, you don't have significance either. You have volume and no pattern, and no amount of additional volume will manufacture one. Volume isn't the variable that determines whether you know something. Agreement is.So the question is never *do I have enough customers*. It's *are they saying the same thing*. That question you can answer this afternoon, at whatever count you're at.## The bar moves with reversibility, not with n There's a real exception here and it deserves naming, because leaving it out is what lets people dismiss the whole argument. Most decisions are revisable. You run the wrong angle for a quarter, you find out, you change it. You were wrong in public and it cost you a quarter. That's the ordinary case, and for the ordinary case convergence at twenty is plenty. Some decisions spend something that doesn't come back. A first impression on a person you only get one shot at. A price you announced. A conversation with a customer who won't give you a second one. The next fifty can't correct those, because the thing you spent is already gone. So the threshold should scale with reversibility, not with sample size. Ask what happens if you're wrong, not how many data points you have. When the answer is a wasted quarter, go now on what you already know. When the answer is a burned relationship, slow down, and understand that what you need isn't more volume. It's either better judgment or a smaller first move that puts the decision back into the revisable column, which is almost always available and almost never considered. Notice what happens to the stalling argument once you separate the two. Most of the caution in most companies is borrowed from the irreversible case and applied to decisions that are entirely correctable. That's the sleight of hand. Naming the distinction doesn't grant the excuse. It takes it away, because now the question is which kind of decision this is, and that question has an answer. ## What waiting actually costsHere's what makes this expensive rather than merely annoying. The delay isn't neutral. While you wait for a threshold that recedes as you approach it, every one of those customers keeps buying, not buying, staying, or leaving on the current model, and every quarter of that's a quarter you didn't spend acting on what you already knew.This shows up everywhere, but it shows up hardest in [expansion](https://ltvmax.com/posts/latent-revenue), because expansion is the discipline most easily postponed. Nothing goes red when you skip it. Nobody misses a target that was never set. So *we need more data first* is the easiest sentence in the world to say about it, and the most expensive one to believe.You don't need a hundred customers to write down what your customers could buy from you. You don't need statistical significance to notice that the last four who left had all achieved something first. You need to look at what you have and be willing to be wrong in public later.Take the data you have to the strongest conclusion it honestly supports, act on it, and let the next fifty customers correct you. That isn't recklessness. That's the only version of this that ever produces anything, and the money it produces starts arriving during the quarters you would otherwise have spent waiting. --- # The Win-Back Trap *July 25, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-win-back-trap/ Channeling my inner Tony Robbins for a second: where the focus goes, the energy flows. It's a cheesy line. It's also, in a revenue organization, mechanically true, because focus is the one budget that gets spent whether you allocate it or not.So look at where yours is going. If your team's calendar is filling with save calls and your marketing calendar with win-back campaigns, you haven't just chosen some activities. You've chosen an identity: an organization whose energy lives at the end of customer lifecycles, where the money is already walking out the door.## What end-of-life focus does to a teamEnergy follows the calendar, and skill follows the energy. Spend enough quarters on saves and win-backs and your best people become experts in goodbye. They get genuinely good at discount structures, retention offers, the delicate choreography of the exit interview. The organization compounds its skills in exactly the wrong direction: better and better at negotiating departures, no better at all at preventing the conditions that produce them.And the whole time, everyone is circling the same drain. Pulling individual customers back up while the current that put them there keeps running. The heroic save feels like winning. It's treading water in a whirlpool, and it recruits the whole team into treading with you.## The save is a symptom that bills like a solutionHere's the mechanism that makes the trap self-sustaining. Every save call is the downstream symptom of an upstream failure that is still running: the milestone conversation that never happened, [the renewal moment nobody managed](/good-work-doesnt-renew-itself/), the future that was never put on display. Save the customer and the failure that produced the crisis is untouched. It's already manufacturing the next one, which lands on next week's calendar, which is how the focus budget gets spent again without anyone deciding anything.Win-backs are the same trap one step later, and I've [written about why that pile isn't money in the bank](/churned-customers-are-not-money-in-the-bank/): the decision is an event horizon, and in my experience even the wins rarely stay won. A decision postponed under pressure is not a decision reversed.## The reallocationThe alternative isn't caring less about the customers at the edge. It's noticing that the same hours, moved upstream, touch the same problem while the money is still in the building. The mid-lifecycle milestone conversation with a customer who's quietly wondering what comes next. The results named while they're landing, not audited at renewal from memory. The future [put on display](/the-retention-side-effect/) while staying is still the easy choice.Upstream hours prevent the crises that downstream hours can only triage. That's the whole trade, and it's not close: an hour of orchestration reaches customers who haven't decided anything yet, while the save call reaches one who already has, at the worst possible moment, with the least possible leverage.> Focus is a budget. End-of-life work spends it where the money has already decided.Audit one week of your team's calendar and count the end-of-life hours: saves, win-backs, escalation calls about customers halfway gone. Price each one at what it would have earned as a mid-lifecycle milestone hour instead. That number is what the trap actually costs, and it never appears on any dashboard, because focus misallocation doesn't churn. It just quietly buys the wrong future. One clarification so this lands as allocation and not dogma: if a former customer comes back on their own, as a side effect of the machine working, take the win and count it. The rule was never that returned revenue doesn't count. It's that no orchestration energy points at end-of-life, because every hour there's a mid-lifecycle hour it displaced.The diagnostic version of the upstream work is live: [the Latent Revenue Test](https://ltvmax.com/latent-revenue-test). Six questions, ninety seconds, no email required. --- # Churned Customers Are Not Money in the Bank *July 25, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/churned-customers-are-not-money-in-the-bank/ Somewhere in your CRM is a list of churned customers, and somewhere in your planning there's a quiet belief about that list: it's an asset. A win-back pool. Money in the bank, waiting for the right campaign.It isn't. Reading the churned list as an asset is a ledger error, like reading your credit card statement as a savings account because the numbers are big and they have dollar signs. Both documents are records of money. Only one direction.> That's not a bank account. That's what you owe.## Solvable and recoverable are different propertiesThere's an apparent paradox in my own doctrine here, and it's worth resolving carefully. [I've written](/the-churn-doctrine-revised/) that outgrew-you churn is the best prospect signal alive, the purest latent revenue there is. And now I'm telling you those same customers are unrecoverable. Both are true, and the resolution is time.Solvable is a property of the base. The failure that produces outgrew-you churn is informational: the customer succeeded past what they could see, and nobody showed them the next thing existed. That failure is fully in your control and fixable for every current customer, starting tomorrow, with a milestone conversation.Recoverable is a property of the customer leaving, and it's roughly zero, because the decision is the event horizon. Decisions made on incomplete information don't reverse when the information completes. The customer who left has re-solved their problem somewhere else, paid the switching costs, and defended the choice out loud to their own team; un-deciding now means repaying all of that plus the politics of admitting the move was premature. The door holds shut from their side. And the customer who leaves clean, the one who left you a good review on the way out, is exactly as gone as the furious one. They just exit smiling.Solvable for everyone still here. Recoverable for no one already gone.## The only save that works isn't a saveThere's a window, and it's earlier than any save motion reaches. Right now some of your customers are quietly wondering whether they've outgrown you. The decision hasn't happened; the wondering has. What works in that window isn't rescue energy, it's orchestration arriving barely in time: the milestone conversation they were owed months ago, late but not too late. That's mid-lifecycle work extended, never end-of-life work invented, and the difference in posture is the difference between a next chapter and a hostage negotiation.## They did ask. Just not in words.None of the blame in this lands on the customer, and here's why. The outgrowing customer asks constantly: usage patterns that plateau, feature questions at the edge of what they own, adoption curves that bend. Those are asks in behavior, and [a company without milestone instrumentation is deaf to every ask that isn't a sentence](https://ltvmax.com/posts/customers-approaching-milestones). They told you they were ready. You didn't have ears built yet.## Why this churn stings mostHere's the inversion that makes the outgrew-you pile so painful: this churn hurts most precisely because the failure was smallest. Delivery-failure churn at least bills you for a real crime. Outgrew-you churn bills the price of an entire customer for a single informational failure, one unsaid sentence about what came next. And the parting gifts, the kind review, the referral, sometimes even a case study, are not consolation. They're the receipts of the failure: proof they loved you all the way out a door you never showed them didn't exist.## Where the energy goesSo run the allocation honestly. Win-back campaigns and save motions are low-percentage activities, and low-percentage activities don't just underperform, they bill in displacement: every hour spent at the end of a lifecycle is an hour not spent at the middle of one, where the same effort moves customers who haven't decided anything yet. In my experience, even the saves that land rarely stay landed; a decision postponed under pressure is not a decision reversed. The full version of the energy argument is in [The Win-Back Trap](/the-win-back-trap/).The customers who left are the receipt. The ones who stayed are the revenue. Read the churned list once, carefully, as the debt ledger it is: every name on it says the same sentence about what the base needed and didn't get. Then close it, and go spend the answer on the customers who are still here to collect it. [Six questions tell you where to start](https://ltvmax.com/latent-revenue-test). --- # Good Work Doesn't Renew Itself *July 25, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/good-work-doesnt-renew-itself/ There's a belief that sits under a lot of churn, and it sounds so reasonable that nobody ever says it out loud to check it: if the work is good, the renewal takes care of itself.It doesn't. I've watched genuinely good work, real results, delivered on time, churn anyway, and churn ugly. Not because the value wasn't there. Because the renewal was treated as an invoice event instead of what it actually is: an orchestrated moment.## What actually happens at an unmanaged renewalStrip out the delivery failures and look only at the churns where the work was good, and a pattern shows up. The results were real but nobody had retold the story recently, so the buyer was repricing from memory. Expectations had quietly drifted; what was promised and what was delivered matched, but what was assumed had grown past both. The contract had ambiguities everyone ignored while things were fine, which became leverage the moment finance asked questions. And the renewal conversation itself arrived cold: first contact in months, and it's about money.None of that's a delivery problem. All of it is an orchestration problem, and every piece of it was manageable months earlier, cheaply, by someone paying attention to the moment coming.## The renewal is an earned story, retold at the right timeA managed renewal doesn't start at the renewal. It starts when the results happen, with the results being named as they land: this is what you achieved, this is what it took, this is what it sets up next. By the time the date arrives, the buyer isn't auditing from memory; they're extending a story they've been told all year, and [the next chapter is already visible](/the-retention-side-effect/).That's also why this piece isn't a retention pitch. The machinery that manages the renewal moment is the same machinery that runs expansion: milestones observed, progress named, the next thing presented when it's earned. Point it at the next purchase and the renewal comes along as the side effect. Point at nothing, and even your best work walks into its renewal as a stranger.Delivery earns the renewal. Orchestration collects it. If your churn list includes customers who got real results, the work wasn't the problem, and working harder won't fix it. The moment was unmanaged. In a base of any size, that's not a tragedy. It's a to-do list, and the diagnostic is six questions long: [the Latent Revenue Test](https://ltvmax.com/latent-revenue-test). --- # The Top-Performer Exemption *July 25, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-top-performer-exemption/ Here's a test that predicts more about a revenue org than any metric on the dashboard: what happens when the data contradicts the top performer?Not an average rep. The number one. The name at the top of the leaderboard, the one whose deals get toasted. The data says some of those deals are bad: wrong-fit customers, terms that bill later, a book that costs more downstream than it earned upfront. Now watch what the organization does.## The exemption mechanismIn most orgs, what happens is nothing, and the nothing has a structure. Leaderboard status buys immunity from instrumentation. The questions that would be asked of anyone else get waved for the top name, because the number is big and the number is the point, and who are you to argue with the number.The exemption never stays contained to one person. The organization watches, and it learns the actual rule: data applies below a certain attainment, and above it, numbers are negotiable. Once that lesson is taught, every discipline you try to install afterward inherits the exception. Fit criteria bend for the deals that clear quota. Expansion orchestration yields to whoever says my accounts, my way. Comp redesign dies in the meeting where the top earner frowns. You don't have standards anymore. You have standards for the middle of the leaderboard.> Data that loses to the leaderboard isn't data. It's decoration.## What the exemption actually costsThe defense is always the same: the top performer pays for themselves. But that math only works if you stop counting at the commission line, and [stopping the count at the close is the whole problem with how revenue gets measured](https://ltvmax.com/posts/the-rac-formula). Count the exempted book all the way through: the wrong-fit customers who churn on schedule, the disputes and make-goods, the delivery hours poured into accounts that were never going to work, the [delivery-failure churn](/the-churn-doctrine-revised/) that forecloses expansion in every account it touches. In my experience, an exempted book billed at full cost is one of the most expensive assets in the building, and the exemption is why the bill never gets read.And there's the quieter cost: [nobody can own a number](https://ltvmax.com/posts/who-owns-expansion-revenue) that a leaderboard can veto. Every system that depends on the data being real, which is every system, gets built on sand.## The test, stated plainlyThe next time your data contradicts your top performer, you're not deciding about one person's deals. You're setting the price of data in your organization, publicly, for everyone watching. Enforce the standard and every discipline you install afterward gets cheaper, because the org believes numbers now. Grant the exemption, and understand what you bought: one more quarter of the big number, paid for with every system you'll ever try to build on top of it.The revenue disciplines worth having, fit, orchestration, honest comp, all fail the same way: not loudly, but by exception. The exemption is expensive. The exempted book's churn and disputes cost more than the commissions ever earned. Read the whole bill before you renew it. --- # Why Your CSM Can't Fix Expansion (And It's Not Their Fault) *July 25, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/why-your-csm-cant-fix-expansion/ There's a meeting that happens at a lot of companies. Leadership decides expansion matters this year, and the decision rolls downhill until it lands on the CS team as a training initiative. Commercial skills for CSMs. How to spot opportunities. How to have the conversation.Six months later expansion hasn't moved, and the quiet conclusion is that the CS team wasn't commercial enough.Wrong diagnosis. The initiative failed the day it was scoped, because it started below the altitude where expansion actually gets decided.## The altitude problemLook at what a CSM actually controls, and what expansion actually requires.Expansion requires an inventory of what customers can buy next. CSMs don't decide what gets built, bundled, or held back. It requires pricing that rewards the earned moment. CSMs don't set pricing. It requires compensation that pays someone to collect the cheapest revenue in the business, and [the comp plan is usually running backwards](https://ltvmax.com/posts/the-rac-formula): the biggest commissions on the most expensive revenue, and often no expansion number in CS comp at all. CSMs don't design comp. And it requires [a named owner of the expansion number](https://ltvmax.com/posts/who-owns-expansion-revenue), which is an org-design decision that belongs to exactly one altitude: the one where the CEO, CRO, and RevOps sit.Every one of those levers lives above the people who got the training. So the initiative asked the CS team to drive a car while the steering wheel, pedals, and keys stayed on another floor.## No training fixes an org-design problemThis is why the commercial-skills push keeps failing in the same way everywhere. The skills aren't useless; plenty of CSMs are genuinely great in the expansion conversation once the moment exists. But training changes what people can do, not what the organization decided. If nobody owns the number, if the offers were all stuffed into the initial sale, if comp pays for renewals and new logos but not the next purchase, then a better-trained CSM just watches the same machinery not exist with sharper eyes.The people it's hardest on are the CSMs themselves, who get handed a goal without a mechanism and then wear the miss. [Nobody did this wrong](https://ltvmax.com/posts/you-didnt-do-it-wrong); there was no playbook for the altitude question. But there's now, and it starts with putting the decision where the levers are.## If you're reading this because someone sent it to youThen you're probably the person with the levers, and the person who sent it is telling you something they can't fix from where they sit. Here's the short version of what they're asking for: a named owner of expansion revenue, an inventory decision about what customers can buy next, and comp that pays someone to collect it. Those three decisions cost a meeting. The absence of them is currently costing the gap between what your base produces and what it should.The diagnostic takes ninety seconds and no email: [the Latent Revenue Test](https://ltvmax.com/latent-revenue-test). If the answers come back thin, the problem was never the CS team. It was the altitude, and the fix has always been yours to make. --- # Customers Hate Three Things. What They Fear Is a Fourth. *July 24, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/what-customers-fear-is-certainty/ **Updated August 2026.** New section added on the certainty that's already in place before the reply arrives, which is the part the original argument left out. For years I've said customers hate three things: [surprises, unknowns, and repeating themselves](/customers-hate-three-things/).I still believe that. Build your customer experience to eliminate those three and you'll be ahead of most of your market. But I recently ran into something that doesn't fit that model, first in customers I was working with, and then, uncomfortably, in myself. And it forced an update.Sometimes what customers fear most isn't uncertainty.It's certainty.## The email I couldn't openI'd been waiting on a reply from someone about an opportunity I cared about. Call him Johnny. For days, nothing. I was frustrated, checking the inbox, doing the whole dance. And then the reply landed.And I couldn't open it.The email sat there, bold and unread, and I didn't want to touch it. Because I knew what was inside: an answer. Yes, no, or somewhere in between. Certainty was sitting in that envelope, and at least one of the possible certainties was one I didn't want. As long as the email stayed unread, the version of reality where Johnny says yes was still alive. Opening it could kill that version.This should bother you. By the time that email arrived, I had already worked through the psychology of this exact behavior. I understood the mechanism completely. I could have given a lecture on it.I still didn't open the email.Understanding the pattern did nothing to stop the pattern. Hold that thought, because it's the most important sentence in this article.(When I finally opened it, Johnny suggested we talk Tuesday. All that dread, and the terrifying certainty turned out to be a calendar slot.)## Where I first saw this: the leads-are-shit conversationA company I worked with generates cold outbound pipeline for customers. Cold email, cold calling. And there's a conversation every lead generation company on earth knows by heart. The customer says: your leads are shit.Here's what makes it interesting. They hear it most often not when campaigns are failing, but when they're working. When the campaigns are generating positive replies, real prospects raising their hands and saying “tell me more.” That's when the frustration spikes.That sounds backwards until you understand what a positive reply actually is to the person receiving it.While a campaign isn't producing, the customer is frustrated, but comfortably so. The problem belongs to the vendor. Hope is fully intact: once the leads start flowing, I'll close them. Complaining costs nothing and claims nothing.The moment a positive reply lands in their inbox, everything flips. Now there's something real that can be blown, and whatever happens next is on them. The reply isn't just an opportunity. It's a pending verdict.## Why the verdict feels so dangerousMost business owners built their businesses on referrals. And referral selling is a specific skill that almost nobody names honestly, so I will: when a trusted friend sends someone your way, that person arrives pre-qualified, pre-timed, and pre-trusted. The referrer did the selling before the call ever happened. Your job is to not screw up a sure thing.That's a real skill. A business built on referrals is a good business. But it produces a wildly inflated sense of close rate, because the 80 or 90 percent these founders quote isn't their close rate. It's the referrer's.So when this person finally gets what they've always asked for, a pipeline of leads, they're not receiving opportunities. They're receiving tests. Every cold-sourced positive reply asks a question no referral ever asked: can you actually sell to someone who doesn't already know, like, and trust you?And at low volumes, each reply carries even more than that. It's three referendums in one email: Did I waste the company's money on this service? Do I still have standing with my partners and my team? Am I actually the closer I've always claimed to be?Nobody performs well taking three judgments per at-bat.So the mind does what minds do under threat. It avoids the test: the hot reply sits unanswered for two days, the follow-up goes soft, the lead quietly dies of neglect. Or it files the appeal in advance: these leads are shit, declared before a single call happens. That's not analysis. That's self-protection.I'm not describing broken people. I'm describing the exact thing I did with Johnny's email, with full knowledge of the mechanism, the same week I wrote it down.## The certainty that was already there It happened again recently. A proposal went out, the reply came back, and it sat unopened while I did something else with my afternoon. Same pattern, same full knowledge of the pattern, which is either funny or the whole point. But this time I noticed something the first version of this argument missed. I had been framing it as uncertainty against certainty. Unopened means the good version is still alive; opened means a verdict. That framing is wrong, or at least incomplete, because it treats the current moment as neutral. It isn't neutral. There's already a certainty in place, and it isn't a good one. Right now, they aren't a client. There's no revenue. There's no expansion later, no relationship that compounds, no [latent revenue](https://ltvmax.com/posts/latent-revenue) to go find in year two. That isn't a waiting state. It's a settled fact I'm already living in. So what can the reply actually do? If it's a no, the certainty I already have is maintained. They weren't a client this morning and they aren't a client this afternoon. Nothing moved. If it's a yes, or a counter, or a let us talk Tuesday, then the certainty of not having them gets replaced by something better: probably having them, terms to be worked out. There's no branch where it gets worse. The downside you're bracing for is the one you're already living in. Which makes the dread a category error. You're protecting yourself from a loss that already happened, on a day you weren't paying attention, quietly, before the email was ever sent. One honest caveat, because this can be said too glibly. If the numbers are tight and you genuinely need this specific deal to land, then nothing gets worse is objectively true and emotionally useless. Being told the floor can't drop doesn't help much when you're already standing on it. That's real, and I'm not going to argue somebody out of it. But it's worth noticing what the arithmetic actually says, because it says the same thing about the customer sitting on an unanswered positive reply. Right now, that prospect isn't their customer. A no keeps it that way. There's no version of opening that email where they end up behind where they started, and the thing they're protecting isn't a position. It's a feeling about themselves. Which produces the genuinely strange part. The uncertainty is the safe place. Certainty is what carries the charge, and it carries the charge in both directions, which is why the same envelope can produce dread and anticipation from the same person in the same minute. Some people are afraid it won't work out. Some are afraid it will. That second one is a longer conversation than this piece. ## The update to the frameworkSo here's the amendment. Customers hate surprises, unknowns, and repeating themselves. All still true. But those are all process complaints, about things happening to them.> What customers fear is certainty about themselves.They hate not knowing what's happening. They dread finding out what it means about them. Uncertainty about your product, your timeline, your process? Eliminate it ruthlessly. But understand that some of the friction you're seeing isn't about missing information at all. It's about information your customer doesn't want, because it might resolve a question about their own competence that they'd rather leave open.The unread email. The unopened dashboard. The report that sits in the inbox. The positive reply nobody responds to. These aren't disorganization. They're a person protecting the version of reality where they're still fine.## What actually works (hint: not explaining this to them)Remember the important sentence: understanding the pattern did nothing to stop the pattern. If insight fixed this, I'd have opened Johnny's email immediately. So the fix isn't education. It's structure. Three things, all installed before the first lead ever arrives.First, a base rate. “Out of ten positive replies, expect around three meetings and one closed deal, over multiple conversations.” Once a denominator exists, a single dead lead is a statistic instead of a referendum. The referral seller's real problem is that every lead in their old world converted, so every lead that doesn't feels diagnostic. Give them a denominator and you take the verdict out of the individual at-bat.Second, a procedure. The dread lives in the gap between seeing the reply and deciding what to do. Close the gap: when a positive reply arrives, send this response, with this booking link, within this window. A checklist doesn't test anyone's talent, so there's nothing to avoid. This is the honest half of why speed-to-lead rules work. Yes, leads decay. But mostly, the rule doesn't leave a human alone with the email long enough for avoidance to win.And there's a bonus hiding in the procedure: hesitation isn't always psychological. Plenty of people freeze on their first cold-sourced lead for the simplest reason imaginable. They have never done this before and don't know what to do. From the outside, not-knowing and avoiding look identical. The reply sits either way. The procedure cures the first group instantly and disarms the second, and you never have to diagnose which one you were dealing with.Third, name the feeling before it happens. Tell them at kickoff: “When the first replies land, you may notice you don't want to open them. Everyone feels that. Here's what you do instead.” A predicted feeling loses most of its power, and the customer who feels it anyway concludes they're normal instead of concluding the leads are bad.And when their cursor is hovering over that unread bold, give them the one truth that actually helps in the moment: cold pipeline doesn't deal in verdicts. It deals in increments. Almost no reply contains the judgment you're bracing for. It contains a question, a maybe, a next step. A Tuesday.The fear is of a sentence that mostly never gets pronounced.## The takeawayIf you sell a service where your success hands your customer a test, and lead generation, coaching, consulting, and most of SaaS all qualify, then delivering results isn't the finish line. Delivered results that your customer can't act on don't create ROI. They create exposure, and exposed customers don't blame themselves. They blame you, and they leave.Your customer's [Desired Outcome](/desired-outcome/) has never been the deliverable. It's what the deliverable makes possible. Which means the work between your output and their outcome, the part everyone assumes is the customer's job, is where your retention actually lives.Eliminate surprises, unknowns, and repeating themselves. Absolutely. But watch for the moments where your customer goes quiet precisely when things start working. That's not ingratitude. That's a person alone with an unread email, afraid of a verdict that was never in the envelope.Open the email. It's probably a Tuesday. --- # The Churn Doctrine, Revised *July 23, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-churn-doctrine-revised/ For years I gave companies the same advice about churn and expansion: churn doesn't preclude expansion. Work both problems at once. Grow the accounts you keep while you fix the leak.I'm retiring that advice. Not adjusting it. Retiring it.## What I used to sayThe old doctrine made intuitive sense. Churn and expansion live in different parts of the customer base. The customers leaving aren't the customers buying more. So why would one block the other? Fix retention over here, drive expansion over there, and let net revenue retention sort out the math.The closest I came to the truth was in 2016, when I wrote that [you can't offset churn with upsells](/offset-churn-upsells/). The instinct was right. I just hadn't followed it far enough, because I was still treating churn as one thing.## What I've learnedI've run churn root cause analysis at hundreds of companies. The pattern that finally broke the old doctrine is this: churn isn't one thing. It's three things, and they have opposite implications for expansion.**Delivery-failure churn.** Customers leave because they didn't get what they bought. This churn absolutely precludes expansion. You cannot outrun failed delivery with expansion revenue; the math never works. And it's worse than the math, because the customers who stay in a delivery-failure business aren't your fans. They're hostages. They stay because switching is painful, not because they're getting value. Hostages don't buy more.**Natural-attrition churn.** Real market turnover. Customers go out of business, get acquired, change strategy, age out of the problem you solve. Every market has a churn floor, and yours should be benchmarked against your actual market, not against “SaaS averages” pulled from a blog post. If your churn sits at your market's natural floor, you don't have a churn problem. You have a market.**Outgrew-you churn.** Customers leave because they succeeded so much they needed the next thing, and you didn't have it. Or you had it and they never knew. This is the best prospect signal alive.## The revised doctrineDelivery-failure churn precludes expansion. Full stop. Fix delivery first. The expansion-side version of this gate, including the second condition that blocks just as hard and the reason a churn rate is the wrong thing to look at, is [here](https://ltvmax.com/posts/but-we-have-a-lot-of-churn). Everything I teach about growing the customer base assumes delivery is real, and if it isn't, no expansion motion built on top of it will save you.Natural attrition precludes nothing. It's the cost of being in a market. Benchmark it honestly and stop apologizing for it.And outgrew-you churn was never really churn at all. It's the purest [latent revenue](https://ltvmax.com/posts/latent-expansion) there is.> They didn't outgrow you. They didn't know you offered the next thing.A customer who leaves from too much success is a customer who was ready to buy more and couldn't find it. Somewhere between their success and your catalog, the next offer either didn't exist or was never presented. That's not attrition. That's a sale nobody showed up to make.## How to categorize your own churn honestly Before the categories, there's an older sorting that still does work the categories cannot. [Expected against unexpected, avoidable against unavoidable.](/classify-churn/) That pair answers two operational questions: whether you saw it coming, which measures your engagement rather than the customer, and whether you could have stopped it. The three categories below sit on top of that and answer a different question, which is what a given loss means for everything you do next. Worth mapping them explicitly, because one of them gets sorted wrong almost every time. Delivery failure is avoidable. Natural attrition is the genuinely unavoidable one, and it is a smaller bucket than most companies claim. And outgrew-you churn is *avoidable*, which is exactly why filing it under unavoidable throws away the lesson.Pull your last twenty churned customers. Put each one in a bucket: didn't get what they bought, market took them, or succeeded past what you showed them.Two warnings from doing this exercise with a lot of companies.First, delivery-failure churn loves to wear a natural-attrition costume. “Budget cut” is what a customer says when the value didn't justify defending the line item. If the value had been undeniable, the budget conversation goes differently. Be brutal about which bucket those go in.Second, outgrew-you churn hides inside your win column. It shows up in exit interviews sounding like a compliment. “You got us to the point where we needed more than you offer.” Companies file that under graceful, inevitable, even flattering. It's actually a list of customers who told you exactly what they wanted to buy next, right before they bought it from someone else.## Where this leaves the moneyThe old doctrine let companies run expansion motions on top of broken delivery and then point to the results as proof that expansion doesn't work. The revised doctrine is a sequence, not a menu.Fix delivery-failure churn first, because until you do, expansion is off the table and your retention spend is hostage management. Accept natural attrition and benchmark it against your real market. And treat every outgrew-you departure as what it is: revenue that announced itself on the way out the door.Churn analysis doesn't just tell you why customers leave. It tells you whether you've earned the right to expansion, and for companies with real delivery, it does one thing more. Part of your churn list isn't a graveyard. It's a buyer list nobody read.The diagnostic version of this argument is live: [the Latent Revenue Test](https://ltvmax.com/latent-revenue-test). Six questions, ninety seconds, no email required. --- # One Argument, Sixteen Years: The Lineage *July 23, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-lineage/ This site goes back to 2008, and for most of that time I've been making one argument in different clothes: the money is in the customers you already have, and almost nobody builds the machinery to collect it.This page is the paper trail. Not because the history is interesting on its own, but because the argument's age is part of the argument. Frameworks that arrive fully formed should make you suspicious. This one has receipts.## The receipts, in order**2010.** [SaaS Pricing Model: Value Metrics Are Key](/pricing-value-metrics/). Price on what the customer actually values, not on what's convenient to meter. Everything about value-per-item pricing starts here.**2013.** [SaaS Churn Rate: Go Negative with Expansion Revenue](/negative-saas-churn-rate/). Expansion revenue as a growth lever big enough to outweigh churn. The first version of the claim that your base is an engine, not a bucket with a leak.**2015.** [Customer Success and Logical Account Expansion](/logical-expansion/). Expansion orchestrated logically around success milestones. That phrase, eleven years early, is the machinery I now teach: milestones, attached offerings, orchestration.**2015.** [Desired Outcome is a Transformative Concept](/desired-outcome/). The customer's desired outcome as the basis of success and of revenue. The foundation both engines sit on.**2016.** [Why You Can't Offset Churn with Upsells](/offset-churn-upsells/). Churn and expansion share a root. The instinct was right and incomplete, and it became this year's [churn doctrine revision](/the-churn-doctrine-revised/).**2018.** [Upselling Hurts Trust (When You Do It Wrong)](/upselling-trust/). Expansion done wrong damages the relationship. The sharpened 2026 version: bad timing, not the ask, is what does the damage.**2023.** [The Art of Selling to Existing Customers](/sell-to-existing-customers/). The untapped potential of the existing customer base, one naming pass away from its current form.## Where the argument lives nowThe current vocabulary consolidates all of it. [Latent revenue](https://ltvmax.com/posts/latent-revenue) names the number: the money already sitting in the base, unmeasured and uncollected. [Six questions](https://ltvmax.com/posts/the-six-questions) diagnose why it's invisible. Orchestration collects it, and [retention arrives as its side effect](/the-retention-side-effect/), which means LTV compounds twice off the same machinery.This year also brought the honest revisions: the [structural failures of Customer Success](/the-three-structural-failures-of-customer-success/) and the [retirement of my own churn advice](/the-churn-doctrine-revised/). A living argument gets corrected in public. That's how you know it's still alive.## Why the age mattersIf you're evaluating this thinking for your own company, the receipts answer the question you should be asking: is this a framework or a rebrand? Sixteen years of the same argument, tested against real companies, revised in public when it was wrong, converging on machinery specific enough to build. The vocabulary is new. The money it points at has been sitting in customer bases the entire time, and it's still there, waiting on the first company in your market to instrument it. --- # The Retention Side Effect *July 23, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-retention-side-effect/ Expansion orchestration gets priced by the expansion it produces. Milestone-triggered offers, presented to ready customers, converting at rates the batch blast never touches. That's the machine, and it's worth building for that alone.But the machine has a second output, and almost nobody talks about it. Orchestration extends customer lifetimes. Not as a program. As exhaust.## The future on displayHere's what actually changes when expansion is orchestrated around milestones: the customer can see the path.Most customers experience a vendor as a flat surface. What they bought, plus a renewal date. Nothing ahead of them but more of the same, which means the relationship is always one bad quarter away from a procurement review. When milestones are defined and the next offering is attached to each one, the relationship acquires a direction. There's somewhere to get to. The customer knows that reaching the next milestone earns access to the next thing, and knows what that thing does for them.Staying stops being inertia and becomes aspiration.> Nobody stays for a renewal reminder. People stay for what they're about to reach.## The outgrew-you story, from the other sideI wrote recently about [outgrew-you churn](/the-churn-doctrine-revised/): customers who leave from too much success, the best prospect signal alive. From the expansion side, that churn is latent revenue. From the retention side, it's something even simpler. It's a ceiling the customer hit that you never showed them past.They didn't outgrow what you offered. They outgrew what they could see. When the future is on display, the ceiling moves before the customer arrives at it, because the next thing is visible before the current thing runs out. The graceful-graduation story dies, and it deserves to, because there was never anything natural about it. It was a visibility failure wearing a growth costume.## LTV compounds twiceThis is why the retention side effect matters commercially and not just narratively. Customer lifetime value is lifetime times spend, which means orchestration grows it through two engines at once. Engine one: milestone-triggered offers mean more bought per customer. Engine two: the visible future means longer lifetimes, and every additional month is another month of the expanded relationship, not the original one.More bought per customer, across more months per customer, off the same machinery. Companies that build orchestration for the expansion alone are underpricing their own machine.## This isn't a retention programNow the caution, because this piece is easy to misread. Retention isn't the machine. Retention is the side effect.If you set out to buy retention directly, you get defense: health scores, save motions, QBRs, the whole apparatus of keeping customers from leaving. Necessary, table stakes, and structurally incapable of producing the effect described here, because defense puts nothing on display. A customer being retained can feel it. A customer being shown their future doesn't need retaining.The machine is expansion. Point the machinery at the next purchase, make the path visible, and lifetimes extend as a consequence you didn't have to buy separately.## Where this leaves the moneyYou can spend money defending lifetimes, or you can build the machine that sells the future and collect longer lifetimes as its exhaust. One of those is a cost center. The other is a second engine on revenue you were already collecting, and it pays out in the only currency that compounds: more bought, over more time, per customer you already have.The machinery view of this argument, with the compounding math, is on LTV:Max: [The Second Engine](https://ltvmax.com/posts/the-second-engine).The diagnostic version of this argument is live: [the Latent Revenue Test](https://ltvmax.com/latent-revenue-test). Six questions, ninety seconds, no email required. --- # Retention, Expansion, and Advocacy Are Not Behaviors *April 10, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/retention-expansion-advocacy-are-not-behaviors/ Here's a question most CS teams can't answer cleanly.What behavior, specifically, drives your retention rate?Not "engagement." Not "health score." Not "relationship quality." A specific, observable action that a specific customer either took or didn't take.If you can't name it, you can't engineer it. And if you can't engineer it, you're hoping.Retention, expansion, and advocacy are outcomes. They're what happens downstream when customers do certain things consistently. But the things themselves — the actual behaviors — are almost never named, tracked, or designed for. We measure the outcomes and then wonder why they're hard to move.A behavior is observable. It either happened or it didn't. "They're engaged" is not a behavior. "They logged in four times this week and responded to our last two emails within 24 hours" is a behavior. "They're a good customer" is not a behavior. "They've referred two colleagues and agreed to a case study" is a behavior. "They're at risk" is not a behavior. "They missed their last check-in, haven't opened a campaign in 30 days, and asked about their contract end date" is a behavior.The distinction matters because you can't trigger what you can't see.So what are the behaviors that actually drive your outcomes?Retention lives on: consistent logins, completing onboarding steps, responding to outreach, showing up to calls, using the product in ways that produce results, asking questions that signal they're building something.Expansion lives on: asking about features they don't have yet, hitting usage limits, referring a colleague, engaging with content about advanced use cases, saying things like "when we scale this up" instead of "if this works."Advocacy lives on: sending an unprompted referral, agreeing to a case study, defending you in a conversation you weren't part of, introducing you to someone in their network without being asked.None of those are feelings. None of them are scores. They're things people do.The reason this matters operationally is that behaviors are triggerable. Once you've named the behavior you want, you can work backwards to the trigger that makes it more likely to happen. Once you've named the behavior you're worried about, you can design an early warning system that catches it before it becomes a trend.You cannot design a trigger for "engagement." You can design a trigger for "hasn't logged in in 14 days." You cannot monitor "satisfaction." You can monitor "hasn't responded to the last two outreach attempts." You cannot engineer "loyalty." You can engineer the sequence of actions that makes loyalty the natural outcome.This is the shift. From measuring outcomes to designing the behaviors that produce them.Name the behaviors. Then figure out how to make them happen. --- # Health Scores Are Destroying Your Signal *April 9, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/health-scores-are-destroying-your-signal/ The aggregate health score was one of the big ideas of the CS software era. Roll up all your signals — product usage, support tickets, NPS, engagement, login frequency, whatever else you're tracking — into a single number that tells you how healthy each account is. Green, yellow, red. Glanceable. Scalable. A dashboard your VP can screenshot for the board deck.It also might be the thing most quietly destroying your ability to actually understand your customers.Here's the problem with aggregate health scores. They average out the signal.A customer who logs in every day but never gets past the same three features looks healthy. A customer who had one breakthrough month and has been declining ever since looks healthy if you're averaging across their lifetime. A customer who is using the product in completely the wrong way — technically active, headed toward churn — looks healthy until the cancellation email arrives.The score tells you a number. It doesn't tell you what's happening.Worse, it creates a false sense of coverage. If every account has a health score, the implicit assumption is that every account is being understood. But a score derived from activity metrics is not understanding. It's a proxy for understanding, and a lossy one. The things that actually determine whether a customer succeeds — whether they're using the product in ways that produce their specific desired outcome, whether the right people are engaged, whether they've hit the milestones that predict expansion and advocacy — those things almost never show up cleanly in an aggregate score.The CS software era created this artifact for a reason. When you have hundreds or thousands of accounts and a small team, you need some way to prioritize. The health score was the answer the tooling gave us. And it works well enough that most CS teams never questioned whether it was the right answer.It's not.The right move is to back into it from the other direction. Start with the outcome. What does a successful customer actually look like at month three, month six, month twelve? What did they do? What did they adopt? What results did they see? What milestones did they hit?Then measure whether your current customers are on that path. Not whether they're active. Not whether they opened your last email. Whether they're doing the specific things that your successful customers did at this stage of their journey.That's a very different signal. It's harder to build. It requires you to actually know what success looks like for your customers, which turns out to be a harder question than most CS teams have sat with honestly.But it's the signal that means something. A customer on the success path who hits a usage dip is a different situation than a customer who was never on the path and has been declining for two months. The aggregate score treats them the same. The outcome-based signal treats them completely differently — because they are completely different.The health score isn't going away. It's useful as a rough triage layer. But if it's the primary way your team understands account health, you're flying on instruments that weren't built for the terrain you're navigating.Back into the usage path that produces successful outcomes for your specific customers. Define what meaningful progress looks like at each stage. Measure that. Build your early warning system around deviation from the success path, not deviation from average activity.The score tells you something went wrong after it already went wrong.The signal tells you it's about to. --- # The Tools Have Boxed Us In: Structural Failure #3 in Customer Success *April 8, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-tools-have-boxed-us-in/ Every CS team has had this conversation at least once."Can the tool do this?""No. But what we recommend is..."And then someone explains, very professionally, why the way you work with your customers is wrong, why their way is right, and why adapting your entire operating model to fit their product is actually called implementing best practices.You call it every week.This is structural failure number three in customer success, and it's the one that makes the first two worse. We built a profession on a broken premise. We staffed it with exceptional people and gave them the wrong work. And then we handed them a tech stack that locked them into doing both of those things the way the software wanted them done.The tools aren't the problem in isolation. Some CS platforms are genuinely good at what they do. The problem is the assumption baked into all of them: that customer success is standard enough to fit inside someone else's schema.It is not.The way you onboard your specific customers. The signals that matter in your specific context. The moments that make or break a relationship in your specific market. The irreplaceable way your team delivers value to your specific ICP. None of that fits cleanly into a workflow engine a product team designed for the average CS org.So you adapt. You compromise. You figure out the workaround. You build your operation inside the box the software gave you and call the constraints "best practices." Over time you stop seeing the box. It just becomes how things work.The compound effect is that you're now optimizing a broken premise with the wrong people doing the wrong work inside a system that can't flex to match how you actually operate. Every structural failure amplifies the others. The tool lock-in is the last layer, but it seals everything underneath it in place.What would it look like without the box?That's not a rhetorical question. It's the one worth sitting with. If the tools bent to your operation instead of the other way around, what would you build? What complexity would you absorb for the customer that you currently hand back because the software can't handle it? What signals would you monitor that you currently miss because nobody built a detector for the thing that matters in your specific context?For most CS teams, the honest answer is: a lot. The box has been there long enough that the imagination has conformed to it.The infrastructure that breaks this constraint exists now. Agentic workflows built around your specific operation, your specific customers, your specific signals. Not a platform you configure — a system you design.But the first step isn't technical. It's recognizing that the box was always optional.*This is the third in a three-part series on the structural failures of Customer Success. [Part 1: The Broken Premise](/the-broken-premise/) | [Part 2: The Best People Are Doing the Wrong Work](/the-best-people-are-doing-the-wrong-work/)* --- # The Best People Are Doing the Wrong Work: Structural Failure #2 in Customer Success *April 7, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-best-people-are-doing-the-wrong-work/ If you want to understand why customer success is harder than it needs to be, spend a day shadowing a CSM.Not reading their health scores. Not reviewing their QBR decks. Actually watching what they do with their time.What you'll find is that the most relationship-driven, empathetic, strategically capable people in your company are spending a significant portion of their day on work that has nothing to do with relationships, empathy, or strategy.Data entry. CRM updates that should update themselves. Building decks for calls that are about to happen. Writing follow-up emails that look almost identical to the ones from three weeks ago. Chasing responses. Pulling reports. Piecing together account context from four different systems before a call that starts in twenty minutes.This is what the job actually looks like for most CSMs. Not the job description. The actual job.And here's what makes it painful: these aren't bad people in wrong roles. They're exceptional people in roles that have been buried under administrative weight that was never part of the value proposition. The thing you hired them for — building genuine trust with customers, thinking strategically about their success, showing up to difficult conversations fully present and prepared — gets squeezed out by the operational overhead that accumulates around every customer relationship.The cost of this is easy to underestimate because it doesn't show up cleanly in any metric.You don't see it in churn rate. You see it in the renewal that almost didn't happen because the CSM was too stretched to catch the early signal. You don't see it in NRR. You see it in the expansion conversation that never got had because nobody had time to prepare for it. You don't see it in customer satisfaction scores. You see it in the relationship that stayed transactional when it should have gone deep.The wrong work crowds out the right work quietly. And the right work — the human work, the irreplaceable work — is exactly what determines whether a customer stays, grows, and tells others.This is structural failure number two in customer success. We put the wrong work on the best people. Not out of malice, and not because anyone made a deliberate decision to waste talent. It happened because the infrastructure was never built to absorb the operational weight. The CSM became the default solution to every problem the system couldn't handle automatically.Can't get the data from three systems into one place? The CSM does it manually. Can't auto-detect a customer going quiet? The CSM is supposed to notice. Can't generate a pre-call brief from the account history? The CSM writes it from scratch before every call.It compounds. And the CSMs who are good enough to do all of this — who are driven and dedicated enough to stay on top of the administrative load and still show up for the relationship work — are the ones most at risk of burning out.The fix isn't hiring more CSMs. The fix is taking the work that doesn't require a human and making it stop requiring a human.Pre-call briefs that write themselves from the account history. CRM fields that update from call transcripts. Early warning signals that surface automatically instead of requiring someone to notice. Follow-up emails drafted and waiting for a two-minute review instead of thirty minutes to write.When that groundwork gets automated, the CSM's day changes. Not because they have less to do — because what they have to do is actually the job. The relationship work. The strategic work. The human work that only they can do and that determines every downstream outcome CS is supposed to drive.More time is good. More quality time is the real unlock. There's a difference.The goal isn't a CSM who manages more accounts. It's a CSM who is fully present with the accounts they have.*This is the second in a three-part series on the structural failures of Customer Success. [Part 1: The Broken Premise](/the-broken-premise/) | [Part 3: The Tools Have Boxed Us In](/the-tools-have-boxed-us-in/)* --- # The Broken Premise: Structural Failure #1 in Customer Success *April 6, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-broken-premise/ Customer success exists for a clear reason. Get customers to stay longer, buy more, and advocate for us. If that happens, [net revenue retention](https://ltvmax.com/posts/how-to-increase-net-revenue-retention) goes up, customer lifetime value compounds, and customer acquisition costs get more efficient. The business case is airtight.The premise it's built on is not.## What we actually builtHere's what we actually built: a profession, an org structure, a set of workflows, playbooks, and SOPs all organized around one core activity. Getting customers to do the things they need to do to be successful.Things they don't want to do.Things they can't do well.Things they have no desire to do, no time to do, and no particular skill in doing.And then, even the customers who actually try — who follow the guidance, complete the onboarding, engage with the CSM, do the work — they're probably not going to do it as well as they need to in order to get the outcome they came for. Because they're not experts in your product. They're experts in their business, which is why they bought yours.We built an entire profession around getting non-experts to do expert-level work. Then we measured ourselves on whether they did it. Then we were surprised when some of them didn't.I've run churn root cause analysis at hundreds of companies. In 90% of the cases where service delivery was good and the product was functional, the primary cause of churn was the customer failing to execute well enough to achieve the results they assumed they'd get when they signed up.## The failure is in the design, not the peopleThis is structural failure number one. Not because the people in CS are bad at their jobs. The opposite. The most driven, caring, relationship-oriented people in any company are usually in customer success. The failure is in the design. We pointed brilliant people at a fundamentally flawed premise and asked them to make it work through sheer effort and personal skill.Some of them do. The best CSMs in the world have figured out how to coach, coax, guide, and cajole customers through complexity they never should have had to face. They've built personal relationships strong enough to compensate for a broken process. They've carried the weight of a structural problem on their backs and called it their job.That's not a scalable model. It's not a fair ask. And it's not what customer success should be.## The wrong question, and the right oneThe right question isn't "how do we get customers to do what they need to do?" The right question is "what complexity are we forcing onto the customer that we should be absorbing ourselves?"Those are very different questions. The first one accepts the premise and tries to optimize within it. The second one challenges the premise entirely.When you start asking the second question, the answers get uncomfortable fast. Because it turns out a lot of what we ask customers to do — configure, implement, learn, adopt, maintain, optimize — is stuff we could do for them, or at least do with them in a way that actually produces results.> The customer signed up for an outcome. Not for a curriculum.## Where everything else startsThis is the foundation everything else in CS is built on. Get it wrong here and you're optimizing a broken system. The next two structural failures make it worse. But this is where it starts.*This is the first in a three-part series on the structural failures of Customer Success. [Part 2: The Best People Are Doing the Wrong Work](/the-best-people-are-doing-the-wrong-work/) | [Part 3: The Tools Have Boxed Us In](/the-tools-have-boxed-us-in/)* --- # The Three Structural Failures of Customer Success *March 25, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-three-structural-failures-of-customer-success/ Customer Success is harder than it needs to be. Not because of bad people. Not because of bad intentions. Because the profession was built on three structural failures that nobody talks about — and they've been compounding against every CS team since the beginning.I've been in this space since before Customer Success had capital letters. I've trained tens of thousands of CSMs, worked with thousands of companies, and spent fifteen years evangelizing what CS can do for a business when it's done right.And the whole time, these three failures have been working against us.## Structural Failure 1: The Broken PremiseCustomer Success management is built around getting customers to do things they don't want to do, can't do, and even if they do them, probably won't do well enough to get the outcome they need.Read that again.We have built an entire profession — the operations, the org structures, the workflows, the playbooks, the QBRs, the health scores — all of it oriented around trying to get customers to take actions they have no real desire to take.Train them. Guide them. Beg them. And then when they finally do the thing, hope they do it well enough to actually get the result they came for.That's the broken premise. That's the foundation Customer Success is built on.It's kind of wild when you say it out loud.## Structural Failure 2: Wrong Work With the Best PeopleThe people I've met in Customer Success are some of the most driven, dedicated professionals I've ever encountered. Smart, empathetic, commercially aware. The kind of people any company would be lucky to have in any role.And we have them doing administrative work.Updating CRM fields. Preparing for calls. Writing follow-up emails. Building decks nobody reads. Documenting things that should document themselves. Pulling data from three different systems to answer a question the system should already know the answer to.Humans are best at one thing in CS: building the relationship. Understanding what a customer actually needs. Reading between the lines. Being the trusted advisor who makes a call instead of sending an email when they sense something is wrong.We're asking our best people to do everything except that.## Structural Failure 3: The Tools Have Boxed Us InCS teams have been constrained by their tools since the beginning. Not because the tools are bad — most of them are genuinely good at what they do. The problem is the assumption baked into all of them.Every CS platform comes with a worldview. A schema. A set of data structures, workflows, and operating assumptions about how CS should work. And to use the tool, you conform to that worldview.They call it implementing best practices.Here's the thing: every CS tool has their own set of best practices. And they're all different. Which means best practices isn't a standard. It's just their standard. And you've been bending your operation to meet it for years.## The Compounding ProblemThese three failures don't exist in isolation. They compound.The broken premise means your CSMs are spending their energy trying to get customers to do things those customers don't want to do. That's exhausting, inefficient work. The wrong work failure takes those same CSMs and piles administrative tasks on top of that already-inefficient motion. And the tool lock-in constrains both — the CSM can't even do the work the way it should be done because the tool doesn't support it.Every week the loop runs again. The CSM is busy, constrained, and fighting against a premise that was never quite right to begin with.## Why Agentic Workflows Change EverythingAgentic workflows break all three failures at once.The broken premise — that we need customers to do things they don't want to do — gets addressed when agents can eat that complexity. Instead of training customers to complete a technical setup step, you build an agent that does it for them. Instead of begging customers to fill out a survey before an onboarding call, you build an agent that pulls the information you need from the sources you already have.The wrong work problem gets addressed when agents handle the administrative layer. The CRM updates itself. The call prep happens automatically. The follow-up drafts itself. Your CSMs show up to the relationship, not to the paperwork.And the tool lock-in gets addressed because the agentic layer sits above all of your tools, not inside any of them. Your CS platform, your CRM, your product data, your call recordings — they all become nodes in a workflow you control instead of a schema you conform to.For the first time in fifteen years of doing this, the tools fit us. Not the other way around.That's what makes this moment different. And that's why I'm more excited about Customer Success right now than I've been in a very long time. --- # Best Practices Isn't a Standard — It's Just Their Standard *March 24, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/best-practices-isnt-a-standard/ Every CS tool will tell you they want to help you implement best practices.They'll send you implementation guides. They'll assign you a customer success manager — yes, your CS vendor has a CS team — who will walk you through the recommended workflows. They'll host webinars about how leading CS organizations use their platform. They'll have a certification program. A community. A conference.All of it designed to get you operating the way they need you to operate in order to use their product.And they call it best practices.Here's the thing that should make every CS leader pause.Every CS platform has its own set of best practices. And they're all different.Gainsight's best practices are not Totango's best practices. ChurnZero's recommended workflows don't look like Catalyst's. The way one platform thinks about health scores is fundamentally different from how another one does it. The data model that drives one tool's playbooks is built on different assumptions than the one driving its competitor.If best practices were actually best practices — if they were derived from some universal truth about how Customer Success should work — they would converge. They don't. They diverge. Because they're not derived from universal truths about Customer Success. They're derived from the specific architecture of each product.Best practices is what vendors call the changes they need you to make to your operation so their product works.## The Compromise You've Been MakingWhen a vendor tells you to implement their best practices, what they're really telling you is: modify your operation to conform to our product.And because the framing is "best practices" rather than "product constraints," you've been doing it. Not because you were naive. Because it seemed reasonable. Because everyone else was doing it. Because the alternative — building your own tooling from scratch — wasn't viable.So you compromised. You adapted your onboarding motion to fit their onboarding module. You restructured your health scoring to match their available data points. You ran QBRs the way their QBR template was designed, not the way your customers actually needed them to run.And when it didn't quite work, someone from the vendor's CS team explained, very professionally, that you just needed to lean into the best practices a little more.## The Best Practices TestHere's a simple test. Take any CS best practice your vendor has recommended to you. Then ask: does this make my customers more successful, or does this make me a better user of this product?Most of the time, the honest answer is the second one.That's not a criticism of the vendors. They're building products for a broad market. Their tools have to work for thousands of different CS operations. To do that, they need you to operate within their schema. Of course they're going to call that schema best practices. What else would they call it?But you don't have to pretend the compromise isn't happening.## What Actual Best Practices Look LikeReal best practices in Customer Success start with the customer's desired outcome and the appropriate experience required to achieve it. They're derived from what works for your specific customers, in your specific market, with your specific product.They look different for every company. That's not a bug. That's the point.Your onboarding motion should be built around what your customers need to achieve value, not around what your CS platform's onboarding module can accommodate. Your health signals should reflect what actually predicts churn and expansion in your book, not what your platform can measure natively. Your playbooks should capture how your best CSMs actually work, not how a product team at a CS vendor imagined CSMs should work.Agentic workflows make this possible for the first time. Because the workflow is built around your operation, not around someone else's schema. The tool fits you. Not the other way around.That's not a best practice. That's just a practice. Yours. --- # The Handoff Is Where CS Goes to Die *March 23, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-handoff-is-where-cs-goes-to-die/ I've done root cause analysis on churn at hundreds of companies. Different industries, different sizes, different products. And one thing comes up more consistently than almost anything else.The relationship was damaged before Customer Success ever touched it.Not because of a bad product. Not because of a pricing problem. Not because the CSM dropped the ball. The relationship was already in trouble by the time CS got involved — and the damage happened at the handoff.## The Three Things Customers HateCustomers hate three things: surprises, uncertainty, and repeating themselves.A poor handoff delivers all three before the customer has their first call with CS.**Surprises** aren't the fun kind. They're "here's a list of things you need to do before we can get started" — work the customer never knew they were signing up for, dropped on them after the contract is signed. They thought they bought a solution. They find out they bought a project.**Uncertainty** is that, plus no idea what the next 30, 60, or 90 days actually look like. This is a new and fragile relationship. The customer has just burned political and social capital inside their company to champion this purchase. Their reputation is on the line. And they have no idea what's coming.**Repeating themselves** is the one that makes them check out. They told the AE everything, and [somebody has a recording of them saying it](/where-your-customer-context-actually-lives/) — their goals, their situation, their concerns, their timeline. Now they're telling the implementation person. Then the onboarding specialist. Then the CSM. By the third retelling, they're not engaged anymore. They're going through the motions. And they're starting to wonder if anyone at this company actually talks to each other.## What a Bad Handoff Actually CostsA poor handoff doesn't just create friction. It plants the seeds of churn before CS ever gets a chance to do its job.By the time the customer has their first call with their CSM, they've already formed an impression of the company based on the post-sale experience. If that experience was confusing, demanding, and disconnected, the customer arrives at the CSM relationship already skeptical. Already a little disappointed. Already less enthusiastic than they were when they signed.The CSM now has to overcome that impression before they can do any of the actual work of Customer Success. Every interaction for the next several months is carrying that weight.And the really insidious thing is that it doesn't show up in your data as a handoff problem. It shows up as "customer never fully engaged" or "adoption was slow" or "renewal was at risk from early on." You do a root cause analysis and find a bunch of contributing factors but miss the original sin.## What a Good Handoff DoesA good handoff does the opposite of all of this.The customer arrives knowing exactly what was promised — because the CSM was in the loop before the deal closed. They know what the first 30 days look like — because someone mapped it out and communicated it clearly before the ink was dry. They don't have to repeat themselves — because the context traveled with the deal.They show up to the first CS call with momentum instead of skepticism. With enthusiasm instead of wariness. The CSM gets to start from trust instead of having to earn it back.That's a completely different starting position. And it compounds across the entire customer lifecycle.## Building the Handoff AgentThe Invisible Handoff is one of the five agents in the Agentic CS Sprint repo for a reason. It's the one that, when it works, changes everything downstream.The agent takes a closed-won deal — everything in the CRM, the call recordings from the sales process, the notes, the contract — and turns it into a complete CSM handoff brief. The CSM shows up to the first call knowing what was promised, what the customer cares about, what concerns came up during the sales process, and what success looks like for this specific customer.No surprises. No uncertainty. No repeating themselves.That's not a luxury. That's the baseline. And it's finally achievable without asking a sales rep to write a four-paragraph email before they move on to the next deal. --- # Talking About Agentic AI Is the Most Customer Success Thing I've Ever Done *March 22, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/agentic-cs-is-customer-success/ Some people want me to just “focus on CS.” Cool. Let's talk about CS.Customer Success exists to get customers to stay longer, buy more, and advocate for you. That's what drives higher NRR, LTV, and more efficient CAC.Customer Success Management ensures customers achieve their goal through their Appropriate Experience (AX). Get the AX right and customers do the things CS exists to deliver. Get it wrong and no amount of health scores or check-in calls saves you.If you think talking about AI, automation, and agentic workflows is somehow at odds with that, you're getting in your own way. And I say that with love.Because here's what I see in most CS operations:CSMs who know something is wrong but can't surface it fast enough because the signal is buried in three different systems. Onboarding that should be bespoke but gets templated because there's no other way to scale it. Renewal conversations that should be about value but become about justifying a license count because that's what the platform tracks.That's not an AI problem. That's a Customer Success problem. It has always been a Customer Success problem.If you think agentic workflows are just tech touch 2.0, next-gen Digital CS, chatbots at scale — you're not seeing the big picture.Unless your customer's AX has shifted, throwing a bot in front of someone who needs a human conversation is a perfect way to send them packing. That's not agentic CS. That's just bad CS with a better tech stack.Agentic workflows close the gap between what your team knows needs to happen for a customer and their ability to make it happen. The agent executes. The CSM owns. The customer gets the AX they need.That's not AI for AI's sake. That's Customer Success finally getting the infrastructure it always deserved.This is the first time in fifteen years I've seen something that actually closes the gap. --- # Stop Waiting for Customers to Ask for More *March 21, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/orchestrated-expansion/ Most CS teams approach expansion the same way.They watch for signals. They have a rough sense of which accounts might be ready to buy more. They make a note to bring it up at the next QBR. And then, more often than not, they find out the customer was ready to expand three months ago — when the customer brings it up themselves, or when the customer goes somewhere else to get the capability they needed.This is reactive expansion. And it's leaving significant revenue on the table.## The Achievement Conversation vs. The Sales ConversationThe best expansion conversations aren't sales conversations. They're achievement conversations.When a customer hits a meaningful milestone — when they've achieved something real with your product, when the value is visible and measurable — they're in a state of momentum. They feel good about the decision they made. They're engaged. They're thinking about what's next.That's the moment to talk about expansion. Not because you've decided it's time to have the upsell conversation. Because they've just accomplished something that makes the next level of value feel natural and earned.If you've designed your ascension path correctly, the expansion offer doesn't feel like a sales pitch. It feels like the obvious next step. "You've achieved X. Here's what becomes possible when you add Y." The customer doesn't feel sold to. They feel ready.That's orchestrated expansion. And it requires three things most CS orgs don't have: a defined ascension path, clear milestone markers, and a system that knows when a customer has hit one.## The Ascension PathAn ascension path is the deliberate design of your customer's journey from initial purchase through maximum value realization — with expansion opportunities attached to specific achievement milestones along the way.It's not a pricing page. It's not a list of add-ons. It's a map of your customer's growth, with the commercial dimension built in.When a customer achieves breadth adoption — when their users are in the product — that might be a trigger for a conversation about adding capacity. When they achieve depth adoption — when they're getting real value from the core use case they bought for — that might be the moment to introduce the adjacent capability that extends that value. When they hit a specific outcome milestone — when the ROI is visible and measurable — that's when you have the expansion conversation that feels like a celebration rather than a pitch.Each milestone is an achievement. Each expansion is tied to that achievement. The customer experiences it as "I've earned this next step" rather than "my vendor is trying to sell me something."## Why Most CS Teams Miss ThisThe reason most CS teams don't do this is the same reason most CS teams struggle with a lot of things: the tools don't support it.Your CS platform tracks what it tracks. It fires playbooks based on the triggers it can detect. None of that is designed around your ascension path, your milestone definitions, or your expansion triggers. It's designed around the platform's data model.So expansion becomes reactive because there's no proactive infrastructure around it. The CSM knows the customer is probably ready but doesn't have a system telling them when, based on what, and with what to say.## Building the Expansion Signal DetectorThe Expansion Signal Detector — one of the five agents in the Agentic CS Sprint — pulls from call notes, transcripts, usage data, and CRM activity to identify when a customer is showing the signals of expansion readiness. Not based on a generic playbook. Based on the signals that actually predict expansion in your specific book.The CSM gets an alert: this account just hit the milestone you've defined as expansion-ready. Here's the evidence. Here's the conversation to have.That's the infrastructure most CS teams have never had. And it's what turns expansion from a reactive revenue event into an orchestrated achievement moment. --- # Customer Success Was Built on a Broken Assumption *March 20, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-built-on-broken-assumption/ I want to tell you something that took me 15 years to say out loud.Customer Success, as a discipline, was built on a broken assumption. Not a flawed one. Not one that needs iteration. A fundamentally broken one.We built entire organizations around getting customers to do things they didn't want to do, couldn't do, or were structurally never going to do. And when they couldn't do it, we called it a churn problem.At a company I worked with, we pulled the recordings and actually measured where the time went. 60% of every customer interaction was spent re-managing expectations. Not delivering value. Not solving problems. Re-managing expectations.In some cases it took 15 minutes to just do the work for the customer. We were spending 45 minutes trying to get them to do it themselves. Then they churned anyway.This is not a problem unique to us. Pull your own recordings. Measure your own time. You will find a version of the same number.We didn't have a customer problem. We had a model problem. And we spent 15 years building more sophisticated systems to prop up a model that was never going to work.AI didn't create this problem. It just made it impossible to ignore. --- # The Customer Was Never the Problem *March 19, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-customer-was-never-the-problem/ Here's the reframe that changes everything.The customer was not the problem. The customer was the bottleneck. Those are not the same thing.A problem is something wrong. A bottleneck is something in the way. And when you understand the difference, 15 years of Customer Success history looks completely different.Health scores. QBR frameworks. Engagement metrics. Renewal plays. Success plans. All of it built on the same silent assumption: if we could just get the customer to do the work, everything would be fine.We were trying to solve a resource problem with a training solution. And it was never going to work.The customer wasn't failing to engage because they were bad customers. They were failing to engage because we designed a model that required them to develop deep expertise they were never going to develop, sustain effort they were never going to sustain, and do work they hired us to help them with in the first place.That's a design failure. Not a customer failure.The bottleneck moves when you stop handing the complexity back and start absorbing it instead. When you do that, the relationship changes. They stop being managed. They start being served.That's the whole shift. Everything else follows from it. --- # Your CS Tools Were Built for Someone Else's Company *March 18, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/your-cs-tools-were-built-for-someone-elses-company/ Welcome back to another week of not being able to do what you actually need to do.The tool doesn't support that workflow. The workaround takes longer than just doing it manually. The vendor says it's on the roadmap. Your CSMs have seventeen browser tabs open and a QBR in twenty minutes.Same as last week. Same as the week before.At some point every CS team has this conversation.“Can the tool do this?”“No. But what we recommend is...”And then someone explains, very professionally, why the way you work with your customers is wrong. Why their way is right. Why changing your entire operating model to fit their product is actually a good thing.They call it implementing best practices. You call it every week.Every tool you bought made the same silent demand: adapt to us. Your operating model bent to fit the product. The product never bent to fit you. And because every tool was built for the median CS org, you ended up running the median CS operation — regardless of how differentiated your actual delivery was.For 30 years that was just the cost of doing business.Agentic workflows are the first real alternative. You define how you work. The workflow is built around that. Your CRM is a node. Your CS platform is a node. Your call recordings, your support tickets, your product data — all nodes. The agentic layer connects them according to your operating model, not someone else's.For the first time, the tool fits you. --- # You Can Vibe-Code a CS Workflow. You Can't Vibe-Code the Judgment Behind It. *March 17, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/you-cant-vibe-code-the-judgment/ Everyone is rushing to build agentic CS workflows right now. Most of them are going to build something useless faster than they've ever built anything before.Here's why.You can vibe-code anything right now. The tools are real and remarkable. An afternoon and some good prompts and you can ship something that looks like a CS workflow. But looking like a CS workflow and being one are very different things.The technology executes your understanding. It doesn't replace it.If you don't know what makes your customers feel seen versus dismissed, what your CSMs need to walk into a call and be fully present, where trust actually gets built and where it quietly erodes — you will automate your way straight past all of that.I've been doing this for 15 years. I've been on the calls. I know what happens in the room when a champion goes quiet. I know what a customer sounds like three weeks before they churn versus three weeks before they expand. I know what a CSM needs to hear before a renewal conversation with a skeptical buyer.That knowledge doesn't come from prompting. It comes from doing CS.In jiu-jitsu, technique without feel is just movement. You can drill a perfect armbar a thousand times and still get tapped by someone who understands pressure, timing, and how bodies actually resist. The mechanic is the easy part. The feel is what takes years.Agentic AI is the mechanic. Your knowledge of how humans work — your customers, your CSMs, your specific and irreplaceable way of delivering value — that's the feel.Build the feel first. Then build the workflow around it. --- # Your Humanity Is the Moat *March 16, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/your-humanity-is-the-moat/ Here's the mistake companies are already making with agentic AI.They're treating it as a replacement strategy. Replace the CSM with a bot. Replace the onboarding call with an automated sequence. Replace the human relationship with a workflow that's cleaner and cheaper and never has a bad day.And the metrics look great right up until the moment the customer realizes something is missing.Below a certain threshold, customers don't feel like they're dealing with an efficient vendor. They feel like they're dealing with a vendor who doesn't actually care about them. And they start looking for someone who does.Your humanity is your moat. Not your platform. Not your playbooks. The fact that your CSM can sit with a customer in a difficult renewal conversation and make them feel genuinely understood — that's what drives GRR and NRR. That has always been what drives GRR and NRR.The problem is most CSMs arrive at that moment exhausted and under-prepared. They've spent the last two hours piecing together context from four different systems, writing up notes from the last call, updating CRM fields that should update themselves, and drafting a follow-up email that looks almost identical to the one from three weeks ago.That's time stolen from the human work.Agentic workflows don't replace the human moment. They clear the runway so the human moment can actually land. The pre-call brief is ready before they open their laptop. The CRM updated itself after the last call. The follow-up is drafted and waiting for a two-minute review.Same team. Same humans. But now they spend their time doing the thing only humans can do.Not 10% more efficient. 10x more present. --- # The Question Customer Success Has Never Been Able to Ask Before *March 15, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/the-question-customer-success-never-asked/ For 15 years, Customer Success has been organized around one question.*How do we get customers to do what they need to do?*Everything we built was an answer to that question. The health scores, the playbooks, the check-in cadences, the success plans, the QBR frameworks, the renewal plays. All of it designed to move customers through a process they were resistant to, incapable of, or just too busy to prioritize.That question is gone.When you absorb the complexity instead of handing it back — when agentic workflows do the hard work your customers were never going to do consistently — the question changes. And the new question is one Customer Success has never been able to ask before.*What is the most we could possibly do for our customers?*Not faster versions of the same things. Not cheaper delivery of the same model. Things that were structurally impossible before because they required more context, more consistency, more simultaneous attention than any human team could sustain.The companies that get this right aren't going to look like efficient CS orgs. They're going to look like something that didn't exist before. Teams where the humans spend the majority of their time doing the things only humans can do. Where every customer gets a level of preparation, presence, and follow-through that used to be reserved for your top three accounts.The same inflection point that happened in 2012 — when Customer Success went from an instinct to a discipline — is happening again right now. The teams that figure this out first will define what this function looks like for the next decade.We've been at a beginning like this before. I wrote the book on the last one. This one's bigger. --- # Yes, I Talk About AI a Lot. Here's Why. *March 14, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/yes-i-talk-about-ai-heres-why/ I get it. My feed is full of AI content too. It's exhausting. So let me answer the question directly: is AI the only thing going on in Customer Success right now?No. And also yes. But not for the reason you think.Real Customer Success has always been about one thing. Getting customers to the outcomes they signed up for, in a way that makes them want to stay, buy more, and tell other people. That requires relationships. Trust. A human being who actually gives a damn about what happens to this customer's business.None of that has changed.What has changed is everything that was getting in the way of it. Because here's what most CSMs actually spend their time doing: piecing together context from four different systems before a call. Writing up what was said after the call. Updating fields that should update themselves. Drafting follow-ups that look almost identical to the one from two weeks ago. Re-explaining things the customer should already know. Managing expectations about what was already agreed three months ago.None of that is CS. That's administration wearing a CS title.And when humans spend their time doing what machines should be doing, the things that actually require a human — presence, judgment, trust, making someone feel genuinely understood in a difficult conversation — those things suffer. Not because the CSM doesn't care. Because they're exhausted and under-prepared and already behind before the call starts.So the first reason I talk about AI is simple. It gives us back the work that was always ours. The human work. The work that actually moves the number.But there's a second reason. And this one is harder to explain but it's the one that actually keeps me up at night.If all you do is use AI to make your CSMs more efficient — to free up time so they can be more present — that's good. That's genuinely good. Most CS orgs would be transformed by that alone. But it's not the ceiling. It's the floor.The real question isn't how do we free up our CSMs to do more of what they've always done. The real question is what becomes possible when you stop making customers do the hard work altogether. When you absorb the complexity instead of handing it back. When you ask not “how do we get customers to do what they need to do” but “what is the most we could possibly do for our customers.”That question has never been askable before. Not because CS leaders weren't smart enough to think of it. Because the infrastructure to act on it didn't exist. Doing the work for customers — really doing it, consistently, at scale, without adding headcount — was structurally impossible. It isn't anymore.So yeah. I talk about AI a lot. Not because AI is the point. Because for the first time in 15 years of Customer Success, we get to operate without limits. No compromise. No “I wish we could do that for the customer but we just can't.” We can.That's not the future. That's right now. And I'd be doing you a disservice if I didn't talk about it constantly until every CS leader understood what that actually means. --- # You Can't Ask for Active Listening and Then Bury Your CSMs in Busywork *March 13, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/cant-ask-for-active-listening-and-bury-csms-in-busywork/ Active listening is the single most important skill a CSM can bring to a customer conversation. Not product knowledge. Not process expertise. The ability to be fully present, hear what the customer is actually saying, and respond to what is real rather than what is on the agenda. Most CS leaders know this. Most CS leaders also have no idea how thoroughly their operating model destroys the conditions that make it possible. ## The Environment We're Asking CSMs to Operate In Think about what a CSM's day actually looks like in 2026. Back-to-back Zoom calls. Slack notifications firing between every sentence. A book of 50 accounts, each with its own context, history, and open items. CRM updates to log. QBRs to prep. Renewal forecasts to pull. Follow-up emails to send before the next call starts. And somewhere in the middle of all that, we hand them a customer call and ask them to be fully present. That is not a people problem. That is a conditions problem. And we keep trying to solve it by asking our humans to be better, more focused, more disciplined, when the environment itself is designed to fragment attention. The distractions CSMs face today would have been unimaginable 40 years ago. We are asking people to operate flawlessly in conditions that make flawlessness impossible. Then we are surprised when signals get missed. ## What Active Listening Actually Requires Active listening is not a skill you can just turn on. It requires mental bandwidth. It requires showing up to a conversation without your head full of everything else. It requires the ability to hear not just what the customer is saying but what they are not saying, what they are hinting at, what they mention in passing that turns out to matter most. Your CSM cannot do that when they are mentally rehearsing the follow-up email while the customer is still talking. They cannot do it when they spent the last 20 minutes scrambling to remember the context of this account before the call started. They cannot do it when they are carrying the cognitive weight of 49 other relationships into this conversation. You can train active listening all day. But if you do not fix the conditions, you are training a skill that your team cannot actually use. ## Job One: Fix the Conditions This is where agentic workflows earn their place. Not by replacing the human in the conversation, but by clearing everything that prevents the human from showing up fully to it. The pre-call brief that used to take 20 minutes of CRM archaeology gets handled automatically. The signal monitoring that requires holding a dozen data points in your head at once gets offloaded to a workflow that surfaces what matters. The follow-up actions that used to get lost between the call and the next meeting get captured and queued without the CSM having to carry them. The result is a CSM who walks into the customer conversation with nothing to do but be present. No scrambling. No mental overhead. No half-attention split between the call and everything waiting on the other side of it. That is not a small thing. That is the difference between a CSM who is technically on a call and one who is actually there. ## Job Two: Augment What's Left Here is the part that even fully present humans cannot solve on their own: they still miss things. Not because they are bad at their jobs. Because they are human. A customer makes an offhand comment about new leadership. The CSM heard it, noted it mentally, and then three more things happened in the next five minutes and it never made it into the action items. Or it did make it into the notes but nobody flagged it as a risk signal. Or the CSM caught it perfectly but had no system to connect it to the three similar comments from other customers in the same cohort. Agentic workflows catch what slips through even on your best day. They surface the signal the human heard but could not fully process in real time. They connect dots across accounts that no individual CSM could hold in their head. This is not replacing active listening. It is completing the loop that active listening opens. The human hears it. The system makes sure something happens because of it. The customer feels like what they said actually mattered. ## What This Looks Like in Practice A CSM in this model is not doing less. They are doing more of what they are actually good at. More presence. More depth. More real engagement with more customers than the old model allowed. The busywork is gone. The context-gathering is handled. The signal monitoring is running in the background. And the CSM shows up to every conversation with the one thing that no AI can replicate: genuine human attention. That is what scaling humanity actually looks like. Not removing the human. Building everything around them so they can finally do their job the way it was always supposed to be done. --- # Agentic Workflows Aren't Tech Touch 2.0 *March 12, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/agentic-workflows-arent-tech-touch/ Every time I talk about AI and agentic workflows in Customer Success, someone says some version of the same thing."Isn't this just tech touch with a better interface?""Are you saying we should replace CSMs with chatbots?""We tried digital CS. Our customers hated it."I understand why people go there. The narrative around AI in business has been dominated by automation, efficiency, headcount reduction. Every vendor is selling some version of "do more with less." Every think piece is about the jobs AI will replace.And in CS specifically, there's a painful history with tech touch. Sending automated email sequences to customers who needed a human. Routing complex issues to a help center when what the customer needed was a call. Scaling the wrong thing at the wrong time and watching NRR crater.So I get the skepticism. But agentic workflows are not that. And confusing the two is going to cost CS leaders who make that mistake.## What Tech Touch Actually IsTech touch is a coverage model. It's the decision to serve a segment of your customer base primarily through automated and digital touchpoints rather than human ones. It's a capacity decision, not a capability decision. You don't have enough CSMs to give everyone high-touch service, so you decide which customers get humans and which ones get sequences.Done well, tech touch works fine for the right customers — low ACV, low complexity, self-serve oriented buyers who don't want a human CSM anyway.Done badly, it's what happens when you throw a chatbot in front of a customer who needs a trusted advisor and call it Customer Success.The failure mode of bad tech touch is specific: you replaced a human interaction that the customer's Appropriate Experience required with an automated one that didn't meet that need. The customer felt underserved. Trust eroded. Churn followed.## What Agentic Workflows Actually AreAgentic workflows operate at a completely different layer.They're not replacing the customer-facing human interaction. They're handling everything that happens away from the customer — the prep, the analysis, the documentation, the data synthesis, the signal detection, the administrative work that eats your CSM's day before they ever get to the relationship.When a CSM gets an alert that an account is at risk — generated by an agent that pulled together CRM data, usage signals, call transcripts, and support tickets — the CSM still makes the call. The human still shows up. The relationship is still human.The agent did the work that used to take the CSM two hours and often didn't get done at all because there were thirty other accounts demanding attention.That's the distinction that matters. Agentic workflows don't replace the human touchpoint. They protect it. They make it possible. They give your CSMs the capacity to be present with the customers who need them by handling everything that was previously competing for that same capacity.## The Appropriate Experience TestHere's the test I use. What is the Appropriate Experience for this customer at this moment?If the customer is in early onboarding and needs human guidance to get through a complex setup step — that's a human interaction. Build an agent that handles the technical complexity on the backend so the CSM can focus entirely on the relationship. But don't replace the CSM with a bot.If the customer is a stable, healthy, self-sufficient user who needs a quarterly check-in email and an alert if their usage drops — that's a moment where automation is completely appropriate and the customer probably prefers it.If the customer is showing distress signals and needs a trusted advisor to get on a call and understand what's happening — that's the moment you need your best CSM, armed with everything the agents have synthesized, fully present and focused.The question is never "human or automation." It's "what does this customer need right now, and how do we make sure they get it?"Agentic workflows are what make it possible to answer that question correctly for every customer in your book, at scale, without asking your CSMs to be superhuman.## Your People Are Still the PointThe companies that will win with AI in Customer Success are not the ones that replace the most humans with agents. They're the ones that use agents to make their humans better.Better prepared. Better informed. More present. More focused on the work that actually moves the needle — the relationship, the judgment call, the trusted advisor moment that no agent can replicate.Your CSMs are not a cost to optimize. They're the moat. Build the agents that protect them. --- # Your People Are Your Moat *March 11, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/your-people-are-your-moat/ There's a conversation happening in boardrooms and leadership offsites right now that goes something like this.“AI is going to commoditize software. If someone can vibe-code a replacement for our product over a weekend, what's actually defensible about our business?”It's a fair question. And most of the answers being offered are wrong.More proprietary data. Network effects. Switching costs. These are real things, but they're thinner defenses than they used to be. The pace of AI development is compressing timelines in ways that make traditional moats less durable.Here's the answer I keep coming back to. The one that gets stronger, not weaker, as AI gets better.Your people. The relationships they've built. The expertise they carry. The trust they've earned.In Customer Success specifically, this is not a soft answer. It's a commercial argument.## The Commoditization ParadoxAs AI makes technology easier to build, replicate, and deploy, the technology itself becomes less differentiated. The product features that took your engineering team eighteen months to ship can be approximated by a well-prompted agent in a fraction of the time.That sounds terrifying. But there's a paradox in it.As technology gets commoditized, the human elements of the customer relationship become more valuable, not less. The CSM who genuinely understands a customer's business. Who knows what they're trying to accomplish this quarter and why it matters to their CEO. Who can read a room on a video call and know whether to push or to back off. Who has built enough trust that the customer calls them before they call the competitor.None of that is replicable by AI. Not because AI isn't capable — but because the value of it is the human connection itself. A customer who trusts your CSM trusts them because they're a person who has shown up for them. That's not transferable to an agent.## Customer Success as Competitive AdvantageThis is why I get frustrated when CS is framed as a cost center or a retention function. Done right, Customer Success is your competitive advantage.The NRR. The LTV. The CAC efficiency. Those aren't just metrics. They're the direct commercial output of your customers' trust in your people. Every customer who renews at a higher rate than they contracted, who expands before you expected them to, who refers a peer and accelerates your pipeline — they do those things because someone on your team earned it.That compounds. A CS team that consistently creates this kind of customer experience doesn't just retain revenue. It creates a business that's fundamentally harder to compete with. Because the relationships your people have built are not in your product. They're not in your pricing. They're not in your roadmap.They're in the history between your CSM and your customer. And that's yours.## What Agentic Workflows Have to Do With ThisHere's where it connects.Right now, your CSMs are spending a significant portion of their time on work that has nothing to do with the relationship. Administrative tasks. Data entry. Call prep. Report generation. Following up on things that should follow themselves up.Every hour a CSM spends on that work is an hour they're not spending on the thing that actually builds the moat. The relationship. The trust. The expertise that makes them irreplaceable.Agentic workflows reclaim that time. Not to do more work with fewer people. To do better work with the people you have. To give your CSMs the capacity to be fully present with the customers who need them, armed with everything they need to know, freed from the administrative layer that was previously eating their day.The agent handles the work. The CSM builds the moat.That's the shift. And the CS organizations that make it first are going to have a durable competitive advantage that compounds with every relationship their team builds.Your technology can be copied. Your people can't.Build the agents that protect them. --- # AI Does Not Remove the Humanity from Customer Success. It Is How We Scale It. *March 9, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/ai-does-not-remove-humanity-from-customer-success/ There is a version of this argument I hear a lot. AI cannot replace the moments that only happen because a real relationship exists. The offhand remark a customer makes in passing. The comment about new leadership coming in. The thing they tell you because they trust you and you were actually listening. That argument is right. And it is also, without meaning to be, an argument for staying stuck. ## The Assumption Hidden in That Argument When someone says those signals can only be caught by a human in a real relationship, what they are actually saying is: rely on your CSM to catch it. Every time. Across every account. No matter how stretched, distracted, or heads-down they are in that moment. That is not a strategy. That is a hope. CSMs are human. They juggle 50 accounts. They have good days and bad days. They catch things and they miss things. Sometimes an offhand remark makes it into the action items. Sometimes it gets lost between the call and the follow-up email and nothing happens. The customer said something important. The relationship was there. The trust was there. And still, nothing happened. Because humans miss things. That is not a criticism. That is just the reality of asking people to hold everything in their heads across dozens of relationships at once. ## What AI Actually Does Here AI does not replace the relationship that made the customer say the thing. It makes sure the thing actually gets heard, acted on, and the customer feels it. That is a completely different role than replacing your CSMs. It is the difference between removing humans from the equation and making humans more capable within it. When a customer mentions something in passing that signals risk, or opportunity, or a shift in their situation, agentic workflows surface that signal so your CSM can act on it. The human still has to be there. The relationship still has to exist. AI just makes sure nothing falls through the cracks when your CSM is moving fast across a full book of business. The customer feels seen, heard, and like the thing they said actually mattered. That is not less human. That is more human than most CS teams can deliver today without the help. ## The Real Moat Here is what becomes true when technology is commoditized and anyone can vibe-code a replacement for your product over a weekend: your humans are the moat. The relationships your CSMs build. The trust they earn. The depth of engagement that makes a customer feel like a partner rather than a user. That is what cannot be replicated. That is what keeps customers. Agentic workflows do not threaten that. They scale it. Your CSMs show up to every conversation with more context than they could have gathered manually. More bandwidth because the administrative and analytical work is handled. More capacity to go deeper with each customer and wider across more of them. Not at the cost of the relationship. Because of the support underneath it. ## Done Right, It Looks Like This Not a chatbot in front of your customers. Not automation that replaces engagement with a ticket queue. It looks like a CSM who walks into every call already knowing what matters to that customer. Who catches the passing comment about vendor consolidation and follows up before the customer even expected it. Who can work with more customers than ever before and give each of them more genuine attention than the old model allowed. The teams building this way are not just more efficient. They are doing things that were simply not possible before. For their customers and for their business. That is what it means to scale humanity. Not to replace it. --- # Customer Success Is at a Crossroads. Again. *March 3, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/cs-is-at-a-crossroads-again/ Economy slows down. Cut CS. AI arrives. Replace CS with agents. Board wants efficiency. Reduce CS headcount. It is always something, and it is not only the struggling companies: [a company whose delivery has genuinely gotten good](/good-delivery-makes-cs-look-optional/) reaches the same conclusion by a completely different route. And the response is always the same: defend, justify, prove your worth. Write the business case. Show the NRR numbers. Explain why you need the headcount. This cycle is exhausting. And it never really ends. Not because CS teams are failing, but because CS has always been positioned as a cost center waiting to be challenged rather than a growth engine that changes the math entirely. That framing is the problem. And right now, for the first time, there is a real way out of it. ## Why CS Is Always on the Chopping Block The pattern goes back to the beginning of the discipline. When economic pressure hits a company, leadership looks for places to reduce cost. CS is visible, headcount-heavy, and notoriously difficult to tie directly to revenue. Preventing churn is real work, but it is hard to prove a negative. You cannot point to the renewals that happened because of what your team did. You can only point to the ones that did not. That is why I have always argued that CS needs to be commercial. Not just focused on retention, but actively driving expansion, revenue, and growth. When CS contributes to NRR in a way that leadership can see, the conversation changes. You are no longer defending your existence. You are pointing to numbers. But even that is not enough anymore. Because now the question is not just whether CS is worth the cost. The question is whether CS needs humans at all. ## What AI Actually Changes Here is what is getting lost in all the noise: AI agents are not here to replace your CS team. They are not a cheaper version of your CSMs. The companies treating them that way are going to find out the hard way that what they built is a very efficient failure. Customers expect an appropriate experience. That means human contact, real relationships, and genuine attention. No chatbot in front of your customers is going to replicate that. And if your version of AI in CS is throwing automation between your team and your customers, you are solving the wrong problem. The right question is not how do we do the same things with fewer people. It is what could we do for our customers that we simply could not do before. That is a completely different question. And the answer to it is what makes CS genuinely untouchable. ## What Becomes Possible When you stop asking CS to be leaner and start asking it to be more capable, the math changes completely. Agentic workflows can absorb complexity that used to land on the customer. Worth saying that speed is not automatically the win here, because [a message can arrive too fast to be believed](/automate-the-work-keep-the-pace-human/). Instead of spending hours trying to get customers to do things they do not want to do, cannot do, or are unlikely to do well, your team does it for them. The customer gets the outcome. Your CSM gets their time back. And that time goes toward deeper, more valuable engagement with more customers. Your team is not spread thinner. It is working at a level it could never reach before. That is not efficiency. That is capability. And capability is what changes the conversation about what CS is worth to the company. ## The Better Response CS is at a crossroads again. In March 2026, we have got economic pressure, AI hype, and leadership asking hard questions all at once. The old response is to defend, justify, and prove your worth. The better response is to use this moment to build something that was never possible before and make sure leadership sees it. That is what agentic workflows make possible. Not just doing the same things faster. Doing things that could not be done. For more customers. At a level of depth and quality that redefines what CS actually is. The teams that figure that out are not going to be on the chopping block. They are going to be the ones everyone else is trying to catch up to. --- # AI isn't the threat *February 17, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/ai-isnt-the-threat/ While SaaS stocks got hammered because of the perceived threat of AI, we were spinning up AI agents at a company I worked with that made the team 5x more productive. Not in theory. Not in a pitch deck. In production, doing real work, every day. ## AI as a Force Multiplier, Not a Replacement The narrative right now is that AI is coming for SaaS. That customers will just build their own tools. That entire categories will be wiped out. And some of that is true. If all you do is store data and display it in a dashboard, yeah, you should be worried. But if you actually **do work** for your customers? AI is the biggest unlock you've ever had. At that company, we built Agentic workflows that literally do work our customers can't and don't want to do themselves. Things like campaign optimization, script analysis, and deliverability management that used to require a human expert spending hours per account. Now AI handles the heavy lifting, and our team focuses on the strategic layer. That didn't replace revenue. It **opened up an entirely new revenue stream.** ## The Infrastructure Pivot That Changed Everything We also pivoted our underlying infrastructure to optimize for AI. Not as a feature checkbox, but as a fundamental architectural decision. That unlocked customer-facing product enhancements we couldn't have shipped before - things that would have taken months of engineering time that we simply didn't have. The result? Our customers are getting better results. They're staying longer. They're buying more. ARR and LTV are growing. ## The Real Question AI is an opportunity, not a threat. **But in ways you might not have considered yet.** Most SaaS companies are asking "how do we defend against AI?" when they should be asking "how do we use AI to become irreplaceable?" The companies that treat AI as a feature to bolt on will get disrupted. The companies that rebuild their value delivery around AI will be the ones doing the disrupting. Which side of that are you on? --- # I'll just vibe code it myself this weekend *February 13, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/ill-just-vibe-code-it-myself-this-weekend/ Right now, one of your customers is looking at what they pay you every month, looking at what they actually use, and thinking: "I could just vibe code this on Lovable this weekend." But here's the thing. Most of them don't actually want to. They don't want the headache. They don't want to maintain it. They don't want to be the person who ripped out a working tool and replaced it with something they duct-taped together in Claude over a weekend. They just want you to know **they could.** *"Nice product you got there. Sure would be a shame if someone vibe coded a replacement. But hey... give me a discount and this whole idea goes away."* That's the energy now. It's not a competitive threat. It's a shakedown. Your customers aren't comparing you to another vendor. They're waving around the fact that AI makes building software nearly free, and they're using that as leverage to squeeze your price, reduce their seats, or both. They don't need to actually build it. They just need you to believe they might. And right now? That belief is extremely credible. Because a 200-line markdown file from a product manager at Anthropic did the same work an entire category of legal tech companies charge thousands a month for. **Thomson Reuters dropped 16% in a day.** People who aren't engineers are shipping working tools in hours. Your customer used 10% of your features and paid full price for all of them. The 90% they never touch isn't a moat. It's overhead. And they just realized that the part they actually use? **That's a weekend project now.** So they don't need to leave. They just need to lean across the table and let you know they could. And that's enough for you to change your price, your margin, and your entire renewal conversation. The protection racket is real. The shakedown is happening. And it works whether the customer ever actually builds anything or not. The question isn't whether this is coming to your renewals. It's whether you've built enough **real, irreplaceable value into the relationship** that when your customer leans across the table with that look on their face, you can smile and hold your price. If you haven't? Enjoy your weekend. Someone's spending theirs figuring out **how much leverage they have over you.** **Updated July 2026.** I left that closing question open on purpose and then spent five months answering it. The worked-out version, including what that pressure actually is and the sentence to say back when a customer leans across the table, is [here](https://ltvmax.com/posts/did-you-lose-to-ai-or-to-your-positioning). --- # "We'll just use Claude, bro." *February 11, 2026 · by Lincoln Murphy* Source: https://sixteenventures.com/well-just-use-claude-bro/ That sentence should terrify every SaaS company on the planet right now. And the stock market just proved it. ## The $300 Billion Wake-Up Call $300 billion in value got wiped from software stocks in two days. Figma. Salesforce. ServiceNow. Adobe. LegalZoom. All hammered. This wasn't from a bad earnings report. Revenue at most of these companies is still strong. The market didn't punish their performance. It punished their **future value.** It looked at what AI can do right now, today, and said: we don't believe these businesses will matter the same way in five years. And your customers are already thinking that, too. ## The Replacement Narrative Is Already Here That legal research tool you sell? "We'll just use Gemini." That analytics dashboard? "We'll just use ChatGPT." That workflow automation platform? "We'll just use an open-source agent." That content tool? That reporting layer? That entire category of software you've built your company around? **"We'll just use Claude, bro."** They might be wrong. For now. But that's not the point. The point is **they're already saying it.** And once a customer believes they can replace you with a general-purpose AI tool, your renewal conversation just changed completely. You're no longer proving value. You're defending your existence. ## What This Means for CS, CX, and SaaS Leaders This is not a hypothetical threat on some analyst's slide deck. This is a fight that just landed on your desk. Whether you wanted it or not. The companies that survive this shift will be the ones that **make themselves irreplaceable** - not through lock-in or switching costs, but through deeply embedded value that no general-purpose AI can replicate. That means your Customer Success motion needs to evolve. Fast. You can't just show customers a usage dashboard and call it value delivery. You need to demonstrate outcomes that are **specific, measurable, and impossible to achieve** by prompting an AI chatbot. If your product's value can be summarized as "it does the thing" - you're in trouble. Because AI does the thing now, too. Your value has to be in **how** you do the thing, the data you sit on, the workflows you're embedded in, and the results you uniquely enable. The clock is ticking. Your customers are already Googling alternatives. The question is whether you'll give them a reason to stop. --- # We've all optimized for the craziest thing *October 15, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/weve-all-optimized-for-the-craziest-thing/ Trying to get customers to execute perfectly when they don't have experience, expertise, or **even the desire to do so.** Yet, we've designed our entire operation and organization to try to make this work. We've created a profession and discipline around this. **That's insane if you think about it.** I remember way back in 2012 when I was working with email marketing platforms. Customers would churn from one provider to another looking for better results. But the problem wasn't the platform. It was that they couldn't write a good subject line or email that converted. We'd spend hours teaching them. Creating guides. Running webinars. All trying to get them to do something they fundamentally weren't equipped to do - **and didn't want to do.** Back then, we couldn't write the email for them. So we built elaborate systems to try to get them to do it themselves. **I came up with Joint Accountability** to ensure they wouldn't blame us if they failed to get the results they thought they hired us to deliver. But now, thanks to AI, we can actually write the email for them. And not just write it; write it better than they ever could, validated against millions of data points, in seconds instead of days. **That changes everything.** Not just "oh cool, efficiency gains." It changes what **CS is responsible for**. What your org structure looks like. How you measure success. What competitive advantage actually means. Your competitors are still making customers figure it out. While they're doing that, you could be delivering results and watching retention, expansion, and advocacy spike. --- # Q2 churn will hit HARD. Unless... *March 31, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/q2-churn-will-hit-hard-unless/ I got this message from a CS leader recently: > *"Lincoln, I'm freaking out. With everything going on - economic uncertainty, customers tightening budgets, chaos everywhere - churn is gonna hit us HARD in Q2."* They're not alone. I've heard similar messages from several CS leaders already. And they're right to be worried. Q2 is when budget cuts from Q1 planning actually hit. Renewals that were "pending approval" quietly disappear. Customers who were "evaluating" suddenly have their answer. The dominos start falling. But here's the thing: **Q2 churn isn't inevitable.** Most of it is preventable - if you move now, not after the cancellation request lands in your inbox. ## Why Q2 Churn Hits Different Q1 is when companies make budget decisions. Q2 is when those decisions become cancellations. The lag is what kills you - by the time you see the churn, the decision was made weeks or months ago. Add economic uncertainty to the mix and you get customers who aren't just tightening budgets. They're **looking for reasons to cut.** Your product isn't being evaluated on value anymore. It's being evaluated on whether it's essential enough to survive the next round of cuts. That's a very different conversation. ## Five Ways to Fight Back Right Now Whether you're running a PLG/self-service motion or an enterprise/high-touch model, the fundamentals are the same. You need to move fast and be strategic about it. **1. Slow down impulsive cancellations.** Most cancellation flows are designed to make it easy to leave. That's fine in normal times. In a downturn, you need friction - not to trap people, but to create a moment where they actually think about what they're giving up. A well-designed offboarding experience that surfaces their usage data, their results, and the cost of switching can save 10-20% of cancellations on the spot. **2. Accelerate renewals and win-backs.** Don't wait for the renewal date. If a customer is up for renewal in Q2 and you haven't already had the value conversation, you're behind. Get ahead of it. And for customers who already churned in Q1? Now is the time to reach back out. Their replacement isn't working as well as they thought it would. **3. Use psychology to drive decisions.** Loss aversion is real. Customers will fight harder to keep something they have than to gain something new. Frame your renewal conversations around what they lose by leaving - not what they get by staying. Show them the gap. Make the cost of switching tangible. **4. Prioritize customers strategically.** Not every at-risk customer deserves the same level of effort. You need a triage framework: who do you engage deeply, who do you escalate, and who do you deprioritize? Spending equal time on every account is how you lose the ones that actually matter. **5. Retain revenue without discounts.** The moment you offer a discount to save a customer, you've set a precedent. Next renewal, they'll expect it again. Instead, restructure. Change the plan. Adjust the scope. Find a way to keep the revenue relationship intact without training your customers to threaten churn for a better price. ## The Window Is Now The CS leaders who are panicking right now? They're the ones who didn't do this work in Q1. Don't be them in Q3. Q2 churn is coming whether you're ready or not. The difference between the companies that get crushed and the companies that hold the line isn't luck - it's whether they moved **before** the cancellation requests started piling up. Churn isn't waiting. Neither should you. --- # Get 10x revenue from the same feature *March 27, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/get-10x-revenue-from-the-same-feature/ ***Updated July 2026.** This 2025 piece is where the 10x timing argument started. Strategic Unbundling now has a definitive playbook: [what to pull out of the initial sale, the market-complete test, and why unbundling fails without orchestration](https://ltvmax.com/posts/strategic-unbundling). Original text below.*## You're Giving Away Too Much, Too Soon Most SaaS companies **give too much, too soon.** They bundle everything into the initial sale - even features the customer isn't ready for and can't use yet. Why? **To make the deal look "valuable."** But giving away the **right** feature at the **wrong** time? That's value dilution - and it kills expansion before it even starts. ## Same Feature, 10x the Revenue That feature you're giving away today in a $50/mo bundle? If you wait and offer it at the **right moment**, you can charge $500/mo **just for it.** **Same product. Same feature. 10x more revenue.** Just by timing it right. This sounds counterintuitive. Shouldn't you give customers everything up front so they see maximum value? No. Because customers don't perceive value based on what they *have access to*. They perceive value based on what they're *actually using* to solve a problem they care about *right now*. ## What Is Strategic Unbundling? I call this **Strategic Unbundling**. It's the practice of deliberately holding back features from the initial sale - not to be stingy, but to create natural expansion moments throughout the customer lifecycle. Here's how it works: - You sell the customer what they need **today** to achieve their immediate Desired Outcome - As they progress and mature, new needs emerge naturally - When those needs appear, you offer the feature that solves that specific next-stage problem - The customer now values that feature at a premium because they understand **exactly** why they need it The difference between a $50/mo bundled feature and a $500/mo standalone feature isn't the feature itself. It's the **context** in which the customer encounters it. ## Why Most Companies Get This Wrong Sales teams want to close deals. So they stack every feature into the pitch to make the offer feel irresistible. But this front-loads all your value into the initial transaction and leaves nothing for expansion. You end up in a situation where the only way to grow revenue from existing customers is to build entirely new features. That's expensive and slow. Strategic Unbundling means you **already have** what you need to drive expansion. You just need to stop giving it away before the customer is ready to pay for it. **Timing creates value.** And value, delivered at the right moment, commands a premium. --- # Like Vibe Coding - But for Revenue *March 24, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/like-vibe-codingbut-for-revenue/ Most companies still treat expansion like a job for Sales. **Campaigns. Funnels. Quotas. Pitches. Pressure.** But here's the truth: **you don't need a salesperson to drive expansion** - just like you don't need to be a developer to build apps anymore. ## What Vibe Coding Teaches Us About Revenue AI made software creation accessible to anyone with an idea. That's called **vibe coding** - describe what you want, and the system builds it. It's fast, frictionless, and doesn't require traditional expertise. **Expansion should feel the same.** Instead of relying on a rep to identify the opportunity, craft the pitch, handle objections, and close the deal, you should have a system that does most of the heavy lifting automatically. We call that **orchestration** - a system that turns customer progress into revenue. No chasing. No pushing. Just the next obvious step, delivered at the right time. ## How Orchestration Actually Works This isn't theory. The fastest-growing companies have a customer-growth machine that ensures: - **CSMs engage at the right time** based on customer progress, not arbitrary check-in schedules - **Product usage triggers expansion signals** for specific add-ons, so you know which customers need what and when - **Buyer intent data surfaces expansion opportunities** before the customer even asks All of this unlocks revenue from existing customers. **No sales pitch required.** ## The Old Way Is Broken If you're still treating upsells like a smaller version of net-new sales, you're doing it wrong. Existing customers don't need to be sold. They need to be guided to the next level of value. The difference matters. Selling creates friction. Orchestration removes it. Selling requires a rep's time and attention. Orchestration runs on signals and systems. When you build an orchestration layer, expansion stops being something your team has to push for. It becomes something that **naturally happens** as customers progress. If you don't have a system for expansion - and still treat upsells like a sales motion - **you're leaving massive revenue on the table.** Build the system. Let it run. Watch expansion become inevitable instead of accidental. --- # Fear and growth can't coexist *March 19, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/fear-and-growth-cant-coexist/ I can tell you're scared **by how you talk about customers, how you run the relationship after the sale, and - most of all - by your numbers.** If everything is about "saving" customers, I already know you have a **scarcity mindset.** And that mindset is killing your growth. ## The Scarcity Trap When fear drives what happens after the sale, everything becomes defensive. You're not building anything. You're just trying not to lose what you have. Any growth you get is from **brute force net-new sales to offset churn and contraction.** That's not a growth strategy. That's a treadmill. Any expansion that happens? **It's in spite of your efforts, not because of them.** Your customers are growing on their own and you're just along for the ride, hoping nobody notices you aren't driving. The language gives it away every time. "Save" meetings. "Rescue" plans. "Retention" campaigns. All of it screams: **we expect to lose people and we're just trying to slow the bleeding.** ## What Growth-Oriented Companies Do Differently Companies that actually grow don't obsess over saving. They obsess over **ascending.** **From Day 1, customers are on an ascension path.** Not a retention path. Not a "keep them happy enough to renew" path. An actual trajectory toward more value, more usage, more investment. **Customers are there to get value, to make progress** - not just to be "retained." Retention is an outcome of doing everything else right. It's never the goal itself. **Growth-focused companies aren't afraid of losing customers.** They focus on growing them. They know that when you put energy into expansion and ascension, retention takes care of itself. ## Scared Money Don't Make Money I've talked to way too many leaders who are scared. Not because of the economy. Not because of geopolitics. Just because **that's how they run their business.** They've been in survival mode so long they don't know how to operate any other way. Every conversation is about risk. Every meeting is about what might go wrong. Every strategy is built around preventing the worst case instead of pursuing the best one. **Growth isn't for the fearful.** If you have customers and things to sell them, you're sitting on a goldmine. The question is whether you're going to mine it or just stand at the entrance, terrified the whole thing might collapse. Stop saving. Start growing. --- # Anti-shrink isn't growth *March 17, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/antishrink-isnt-growth/ ## Chasing Shiny GTM Motions While Sitting on Gold I watched a company exec get **hyped** about the latest shiny GTM motion. New channels. New campaigns. New acquisition plays. And I'm just like... **you realize you're sitting on massive new ARR from your existing customers, right?** Your revenue isn't scaling because **you're ONLY trying to grow by bringing in new customers.** And after you paid to bring them in, you just **"manage churn."** ## The Anti-Shrink Trap If expansion isn't part of your GTM, you don't have a growth strategy. **You have an anti-shrink strategy.** Here's what the anti-shrink model looks like: - Spend heavily to acquire new customers - Onboard them and hope they stick around - Assign a CSM to "manage" the relationship - Scramble when renewal comes up and the customer is on the fence - Repeat At no point in that cycle are you **growing revenue** from the customers you already have. You're just trying not to lose them. That's not growth. That's treading water. ## Why Would You Ignore Your Easiest Revenue? Expansion revenue from existing customers is the **easiest, most predictable revenue in your business.** These are people who already trust you. They already use your product. They've already gone through procurement. The sales cycle is shorter. The CAC is near zero. The close rate is dramatically higher than new business. Ignoring that makes **zero sense.** And yet, most SaaS companies treat their existing customer base as a retention problem instead of a growth engine. They pour resources into acquisition while leaving expansion revenue completely on the table. ## Expansion Is Your GTM Strategy The shift is simple but fundamental. Stop treating post-sale as a defensive operation. Start treating it as your **primary growth lever.** That means building expansion into your customer lifecycle from day one. It means designing your pricing, packaging, and CSM motion around helping customers grow - not just preventing them from leaving. When you do this, something remarkable happens. Your NRR climbs above 100%. Your growth compounds. And you stop being dependent on an ever-increasing flow of new logos just to stay flat. **Anti-shrink isn't growth.** Expansion is growth. The sooner you make that distinction, the sooner your revenue starts compounding instead of just surviving. --- # Are you acquiring customers - or revenue? *March 12, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/are-you-acquiring-customersor-revenue/ Every SaaS company **celebrates a closed deal.** They ring the bell. They update the leaderboard. They high-five and move on to the next new logo. But the **best SaaS companies celebrate revenue acquisition, not just customer acquisition.** ## The Deal Is the Starting Point They don't see **closing a deal as the finish line.** They see it as the starting point. This isn't just a mindset difference. It's an operational one. Companies that treat acquisition as the end of the revenue motion are structurally set up to plateau. They pour resources into net-new logos and then hand off customers to a team that's measured on retention, not growth. They understand that if you don't systematically grow the value of every customer, **you're just managing decline.** ## The Churn Trap And that's how companies **fall into the churn trap.** Here's how it plays out. You acquire customers at a given contract value. Some churn. You replace them with new logos. Your ARR looks flat or grows slowly. Leadership says "we need more pipeline" and throws more money at acquisition. Meanwhile, your existing customer base - the customers you already won, already onboarded, already have relationships with - sits there with massive untapped potential. Nobody's systematically growing those accounts because the whole company is oriented around new logos. That's not a growth strategy. That's a treadmill. ## Expansion Done Right Expansion has to be done right - because **if you do it the way you always have, it'll fail like it always has.** What does "done right" look like? - **Expansion is a system, not a sales motion.** It's built into the customer journey from day one, not bolted on as an afterthought. - **CSMs are equipped to identify and act on expansion signals.** Not as salespeople, but as trusted advisors who can connect customer progress to the next level of value. - **The entire revenue org is aligned around LTV, not just initial deal size.** Compensation, metrics, and processes all reflect this. ## Revenue Acquisition vs. Customer Acquisition Stop celebrating the close like it's the win. The close is just the entry ticket. The real win is when that customer grows with you - when their initial contract is just a fraction of their lifetime value. When expansion isn't something you push for but something that happens inevitably because you built the system for it. **Are you acquiring customers, or are you acquiring revenue?** If you can't answer that confidently, it's time to rethink how your revenue motion works post-sale. --- # A hidden revenue leak costing you millions *March 10, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/a-hidden-revenue-leak-costing-you-millions/ Every SaaS company tracks **churn like a hawk.** But the smartest, fastest-growing SaaS companies track something even more important: **The revenue they should be making - but aren't.** ## The Problem Nobody Talks About I bet in your company right now: - **If a customer cancels, it's a crisis.** Everyone reacts. There are meetings. There are post-mortems. There's finger-pointing. - **If a customer never expands, no one even notices.** They just sit there at the same contract value forever, and everyone thinks that's fine. It's not fine. That's **Invisible Revenue Churn.** Revenue that should be in your bank account and factored into your company's valuation - but isn't. It doesn't show up in your churn reports. It doesn't trigger any alerts. It just quietly bleeds out, quarter after quarter. ## This Is Not Just Missed Upsells Let me be clear. This is not about "oh, we could have upsold that account." That framing makes it sound optional. Invisible Revenue Churn is a **hidden loss bleeding millions from your ARR.** It's the gap between what your customer base should be worth based on their growth, usage, and needs - and what you're actually collecting. Think about it this way. If a customer's business grew 40% last year and they're still on the same plan they signed two years ago, that's not a neutral outcome. **That's a loss you haven't recognized yet.** ## Why Most Companies Miss This The reason most companies don't track Invisible Revenue Churn is simple: they don't have a system for expansion. They have a system for acquisition. They have a system for retention. But expansion? That's treated as an ad hoc, opportunistic activity that happens when a rep gets lucky or a customer asks for more. **If you're not tracking this, you're flying blind while revenue leaks away.** The fix isn't complicated. You need to define what each customer should be worth based on their profile and progress. Then measure the gap between that potential and reality. That gap is your Invisible Revenue Churn. ## What To Do About It Start by mapping your customer base against their expansion potential. Look at usage growth, team size changes, feature adoption, and business outcomes. Then ask the hard question: **why hasn't this account expanded?** In most cases, the answer isn't that the customer doesn't need more. It's that nobody asked. Nobody orchestrated the expansion. Nobody even noticed the opportunity. The best SaaS companies are already fixing this. The rest are hemorrhaging revenue and calling it "stable retention." --- # “Lincoln, this is either total BS… or genius.” *March 7, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/lincoln-this-is-either-total-bs-or-genius/ ## The Reaction That Tells You Everything A SaaS CEO sent me this after reading about a $1.6M ARR expansion case study: > *"Lincoln, I've followed you for years, and I respect what you do. But this is either the **biggest load of BS** I've ever seen, or it's **genius**. Your reputation is stellar, and you've never steered us wrong. But to say I'm skeptical is an understatement."* I get it. Completely. We've been conditioned to believe **expansion is slow, incremental, and unpredictable.** **It's not.** ## Why Skepticism Is the Default Most SaaS companies treat expansion revenue as a nice-to-have. Something that happens organically if your product is good enough. Maybe a CSM notices an upsell opportunity. Maybe a customer asks about a higher tier. That's not a strategy. That's luck. And because most companies rely on luck for expansion, they assume **rapid expansion results are impossible.** When someone shows them what engineered expansion looks like, their brain rejects it. It doesn't fit the mental model. ## Engineered Expansion Is a Different Game When expansion is **engineered correctly**, it drives immediate and long-term exponential growth. Not through pressure. Not through aggressive sales tactics on existing customers. Through alignment. You identify where customers are in their lifecycle. You understand what they need next. And you put the right offer in front of them at the exact moment they're ready for it. That's not magic. That's just good strategy most companies never execute. ## The Gap Between Belief and Execution The CEO who sent me that message? His skepticism wasn't about whether expansion revenue matters. Everyone knows it matters. His skepticism was about **the speed.** Because in his experience, growth from existing customers is a slow grind. But that's only true when you don't have a system. When you're relying on individual CSMs to spot opportunities. When your pricing and packaging weren't designed for expansion from day one. **Fix the system, and the speed changes dramatically.** The companies that figure this out don't just grow faster. They grow more predictably. And predictable growth from your existing customer base is the most valuable kind of growth you can have. The question isn't whether this works. It's whether you've built the machine to make it work. --- # How to Increase Customer Lifetime Value (LTV) *February 10, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-increase-customer-lifetime-value/ Most companies approach growth as a simple equation: acquire more customers, keep them happy, and hope they stay. But companies that truly scale don’t just retain customers - they grow them. Customer Lifetime Value (LTV) is the total revenue a customer generates while they remain your customer. If you want to increase LTV, you have two levers: - **Get customers to stay longer** - ensuring they continue seeing value over time. - **Get them to buy more, more often** - helping them recognize and act on opportunities to deepen their relationship with your business. This isn’t just about keeping customers - it’s about making each customer relationship as valuable as possible. And it doesn’t happen by accident. Companies that maximize LTV do it by design, systematically driving expansion across the customer lifecycle. Let’s walk through key principles from the *LTV:Max Framework* that make this possible. ## **1. Retention is Just the Launchpad - Not the Goal** Retention is necessary, but it’s not enough. Too many companies treat retention as the ultimate success metric, assuming that if customers don’t leave, everything is fine. The truth? Retention without progress is just delayed churn. Successful companies don’t just keep customers - they ensure customers continue making progress. Every renewal should be a natural next step, not a last-minute scramble to justify value. ### What to do: - Align retention efforts with **progress milestones**. Customers who achieve meaningful progress are naturally more likely to stay. - Stop treating renewals as a **contract conversation**. Instead, frame it as a **moment of progress**: “Here’s what we’ve achieved so far - let’s talk about where we go next.” - Use **leading indicators of retention**, like Value Velocity (how quickly a customer realizes value), rather than lagging indicators like churn rates. ## **2. Fix Acquisition - Because LTV Starts Before Someone Becomes a Customer** Most businesses think about retention and expansion only after a customer signs a contract. But **LTV starts at acquisition**. If you bring in the wrong customers - those who won’t get long-term value from your product - nothing you do later will change that. When sales teams push for big, bloated deals that over-promise and under-deliver, you set yourself up for failed adoption, weak retention, and zero expansion. ### What to do: - **Sell to progress milestones, not revenue ceilings**. Instead of forcing the biggest deal upfront, structure the sale around an initial success milestone that naturally leads to expansion. - **Qualify based on expansion potential, not just likelihood to close**. The best customers aren’t the ones who just buy - they’re the ones who will grow with you. - **Align sales incentives with long-term LTV**, not just new business revenue. Reward reps for closing the right customers, not just any customers. ## **3. Drive Adoption Like It’s a Revenue Motion** Adoption isn’t about feature usage - it’s about ensuring customers reach first value fast, setting them up for ongoing progress. If adoption stalls, expansion never happens. ### What to do: - **Separate Breadth and Depth adoption**. Breadth ensures all users get engaged, while Depth ensures they reach key milestones that unlock future expansion. - **Track Time-to-First-Value (TTFV)**. The faster customers experience value, the more likely they are to expand. - **Use Value Velocity to measure adoption success**, rather than simple usage metrics. It’s not about how often they log in - it’s about how quickly they move forward. ## **4. Orchestrate Expansion - Don’t Just Hope It Happens** Expansion is the key to increasing LTV. Yet most companies treat it as an afterthought, something that only happens when the customer asks for more. That’s a missed opportunity. Expansion should be a **designed, repeatable motion**, not an occasional win. ### What to do: - **Use progress milestones to trigger expansion plays**. If a customer has achieved X, they’re ready for Y. - **Bake expansion into the customer journey from day one**. Set expectations early that they will grow with your solution. - **Move beyond reactive QBR-driven upsells**. Expansion should be ongoing, not tied to renewal cycles. ## **5. Align the Business Around Value Delivery** LTV doesn’t grow when teams operate in silos. Too often, Sales is focused on closing, Success is focused on retention, and Product is focused on shipping features - none of which directly drive expansion. Companies that maximize LTV break down these silos and unify teams around **customer progress**. ### What to do: - **Treat expansion as a shared company objective**, not just a CS or Sales goal. - **Align incentives across teams**. If everyone wins when LTV grows, expansion becomes a natural part of how you operate. - **Measure NRR and Expansion ARR as primary growth metrics** - not just new sales bookings. ### **The Bottom Line: Growth is Designed** Maximizing Customer Lifetime Value doesn’t happen by accident. It’s not about luck, and it’s definitely not about just getting better at retention. It’s about **orchestrating customer progress** at every stage - from acquisition to expansion. Companies that get this right don’t just keep customers longer - they turn them into ongoing revenue engines. Want to go deeper on this and get a full framework for maximizing LTV in your business? **[Grab my book, *Maximizing Lifetime Value: A Proven Framework for Scalable Revenue Growth*](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access)**. --- # Discounts don't save customers *January 15, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/discounts-dont-save-customers/ If a customer is on the verge of churning because they are not getting value, a discount will not change their mind. In fact, it might make things worse. The customer thinks: *"Wait, I have ALSO been overpaying this whole time?"* Congratulations. You just added insult to injury. ## Why Discounts and Downgrades Backfire The same problem applies to downgrades or "right-sizing" offers. Instead of fixing the core issue, **they highlight the mismatch** between what the customer is paying for and what they are actually using. That is a fast way to erode trust even further. You are essentially confirming the customer's suspicion that they were not getting a fair deal. And now they are questioning everything else about the relationship, too. Discounts also create a dangerous precedent. Once a customer knows they can get a lower price by threatening to leave, **guess what they will do at every renewal?** You have not saved a customer. You have trained them to hold you hostage. ## What Actually Works: Value-Driven Concessions Instead of reducing the price, **increase the value.** Address the root cause of the dissatisfaction with concessions that solve a pressing problem or add immediate value: - **Free upgrades** to features that directly address their pain points - **Training sessions** to help them use what they are already paying for - **Extra services** like dedicated support or implementation help - **Exclusive access** to new features, beta programs, or advisory groups - **Curated content** that helps them achieve their specific goals These are not random perks. They directly tackle the customer's frustrations while **preserving your revenue.** ## The Psychology Behind Concessions There is a reason value-driven concessions work better than discounts. A discount says "we will charge you less for the same thing you are unhappy with." A concession says "we are investing more in your success." One communicates desperation. The other communicates commitment. The customer's emotional state matters here. When someone is considering churning, they are looking for a reason to believe things will be different. **A lower price is not a reason. A plan to fix the problem is.** The next time a customer threatens to leave, resist the urge to slash the price. Instead, ask what outcome they were hoping for and did not get. Then build your concession around delivering that outcome. That is how you save customers. Not with discounts. With value. --- # Psychology Hack Instantly Stops Churn *January 13, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/psychology-hack-instantly-stops-churn/ When churn is threatening your job - or even your business - and every account feels like it's slipping away, you need tools that deliver **instant results.** This is where Behavioral Engineering comes into play. ## The Psychology Behind Customer Decisions By tapping into core human psychology - biases like **loss aversion, urgency,** and the **sunk cost fallacy** - you can drive decisions that protect revenue at the exact moment it matters most. For example, framing a renewal conversation around **what the customer stands to lose** - instead of what they'll gain - can flip hesitation into immediate action. Humans are wired to avoid loss more than they seek gain. That's not a theory. That's decades of behavioral research. The sunk cost angle works similarly. When a customer has invested time, data, and workflows into your platform, reminding them of that investment changes the equation. Walking away doesn't just mean finding a new tool. It means **losing everything they've already built.** ## This Isn't Manipulation It's not manipulation; it's about understanding what drives your customer to act now, not later, and **actively tapping into that motivation.** Every decision your customer makes is already filtered through these biases. They're happening whether you acknowledge them or not. The question is whether you're going to **be intentional** about how you frame conversations or leave it to chance. Urgency, for instance, isn't about creating fake deadlines. It's about helping the customer see that **delay has a real cost.** Every day they don't re-engage with your product is a day they're falling further behind their own goals. ## The Catch: Context Is Everything Here's the catch: these tactics only work when tailored to the specific dynamics of the customer relationship. Use the wrong psychological lever - or apply it at the wrong time - and **it can backfire in ways that cost more than the churn itself.** Loss aversion works great when the customer has real value to lose. If they never got value in the first place, reminding them of what they stand to lose just highlights how little your product did for them. Urgency works when there's a genuine time-sensitive opportunity. Manufactured urgency with a customer who's already skeptical of you? That's a fast track to losing all trust. The key is matching the right psychological lever to the right customer situation. When you get that match right, you can **trigger immediate action** and protect revenue while actually maintaining - and even strengthening - the relationship. When you get it wrong, you accelerate exactly what you were trying to prevent. --- # Stop Churn using Tactical Timing *January 10, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/stop-churn-using-tactical-timing/ ## Time Scarcity as a Churn Prevention Tool Tactical timing is an incredibly effective tool for **keeping customers from canceling**. Time scarcity is one of the most powerful ways to stop churn - **just not in the way you might think.** Used carefully, renewal deadlines and contract terms can **create urgency**, making renewing far easier than canceling. When applied effectively, time-based pressure turns external deadlines into decisive action. ## Why This Tactic Is Complicated This tactic is so effective - and so easy to misuse - that it became a turning point in my career. **I once quit a job** because the way tactical timing was being used didn't align with the values I believed in for Customer Success. The line between creating healthy urgency and manipulating customers is real. When you use timing to help a customer make a decision that's genuinely in their interest, that's good business. When you use it to trap someone who wants to leave, that's a different thing entirely. The difference matters. ## When Tactical Timing Makes Sense My perspective has evolved over the years. The reality is, **when churn is an immediate threat**, tactical timing can act like superglue to seal the wound. It's not elegant, but it works. Here's where it's most effective: - **Renewal windows** - structuring the renewal process so that canceling requires more effort and lead time than renewing - **Contract alignment** - timing contract terms to coincide with the customer's budget cycles and planning periods - **Migration friction** - ensuring customers understand the real cost (time, data, retraining) of switching before they make a snap decision - **Value milestones** - tying renewal conversations to moments when the customer has just experienced a clear win ## The Right Way to Use It Tactical timing should **buy you time to deliver value**, not substitute for it. If the only reason a customer stays is because leaving is too inconvenient, you've delayed churn - not prevented it. The best application combines timing with genuine re-engagement. Use the urgency window to have a real conversation about what's not working. Surface problems. Fix them. Show the customer a path forward that makes renewal the obvious choice. Timing gets you the conversation. **Value keeps them.** Used ethically and strategically, tactical timing is one of the most practical tools in your churn prevention toolkit. Just make sure you're using the time it buys you to actually solve the customer's problem. --- # When to engage; when to ghost 'em *January 9, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/when-to-engage-when-to-ghost-em/ Sometimes, the best way to engage at-risk customers is **not to.** I hate that. But here we are. ## When Silence Is the Strategy Remember, this is **NOT** about Customer Success or long-term customer-centric growth. This is about tactical retention when you're in a tough spot. Overhauling engagement frequency doesn't always mean increasing touchpoints - in some cases, **it means going silent.** Reaching out to at-risk, inactive, or "zombie" customers **might inadvertently prompt churn** instead of preventing it. At this very precarious time, you don't want to remind them that they're paying you but not using or getting value from your service. Think about it. That customer who hasn't logged in for three months? They forgot about you. They're still paying. And the moment you send a "Hey, we noticed you haven't been active" email, you just reminded them to cancel. ## The Age-Old Question This is an age-old question: **do you remind inactive users they're paying you and risk churn?** From a customer-centric perspective, where engagement focuses on long-term success and growth to maximize LTV, the answer is yes - you engage. Always. You owe it to the customer to help them get value. But when you've failed to engage up to this point, and the stakes are this high, the calculus changes. Sometimes, saving the customer and protecting the revenue means **stepping back and staying silent.** ## Knowing When to Double Down vs. Pull Back The key is understanding which situation you're in. **Double down** when the customer is actively engaged but showing signs of dissatisfaction. They're in the product. They're talking to you. They're just not happy. That's a solvable problem. **Pull back** when the customer has gone dark and reaching out would only surface the fact that they're not getting value. Especially if you can't quickly deliver a win that changes their perception. This isn't about being lazy or avoiding hard conversations. It's about being **strategically honest** about what engagement will actually accomplish in each situation. If you're going to reach out, you'd better have something valuable to offer - a new feature that solves their problem, a success story from a similar customer, a concrete plan to get them back on track. "Just checking in" emails to at-risk, inactive customers are churn accelerants disguised as customer care. Know the difference. Act accordingly. --- # Save the Right Customers, Ignore Others *January 8, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/save-the-right-customers-ignore-others/ You have to go beyond simply identifying at-risk customers. **You already know who those are** anyway. Now it's a matter of what to do with that information. ## The Case for Tactical Prioritization The key here is **tactical prioritization.** You don't have unlimited time, and not all customers are worth the effort - and some may even warrant being **ignored or ghosted** altogether. This step is about identifying where your efforts will have the most impact and taking **deliberate, focused action** to save the ones that matter. Most CS teams treat every at-risk account the same. Red flag goes up, CSM reaches out, everyone scrambles. That's not a strategy. That's whack-a-mole. ## Understanding the Why Behind the Risk It's not just about who's at risk - it's about understanding **why.** Some customers may be salvageable with immediate intervention, while others are **lost causes disguised as opportunities.** Knowing the difference can be the line between wasting time and protecting revenue. A customer who's at risk because of a fixable onboarding gap is very different from one who was a bad fit from Day 1. A customer whose champion just left is different from one who never had a champion to begin with. The intervention should match the cause. And sometimes, the right intervention is **no intervention at all.** ## Align Risk with Your Retention Objective Here's the catch: it's not just about their fit as a customer, but **how their risk aligns with your broader retention objective.** This is where prioritization truly becomes transformative. A high-value account with a solvable problem? That's where you go all-in. A low-value account with deep structural issues? That's where you let go. The hard part isn't identifying who's at risk. The hard part is being disciplined enough to **ignore the ones you can't save** and pour your energy into the ones you can. When you start prioritizing at-risk customers based on fit, value, and the nature of their risk - instead of just treating every red flag as an emergency - you stop playing defense and start **protecting revenue strategically.** That's not cold. That's smart. And it's the only way to scale a retention motion that actually works. --- # Urgent but Unspoken Save Tactics *January 7, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/urgent-but-unspoken-save-tactics/ **Drastic times call for drastic measures.** There are save tactics that most Customer Success leaders will never talk about publicly. Not because they do not exist. Because they are uncomfortable. They challenge the "customer-centric" narrative that dominates CS conversations. But when your company's survival is on the line, you need to know they exist. ## Emergency Tactics That Stop Churn in Its Tracks These are immediate-action measures designed for dire situations. The kind where if you do not save customers, **you lose your job, the org gets dissolved, or your company goes out of business.** They include approaches like the **Deflect, Distract, Delay** method, friction-based cancel flows, and leveraging timing gaps in regulatory enforcement. Let me be clear: **these are not customer-centric.** They are survival tactics. They exist on a spectrum from mildly aggressive to ethically questionable. And that is exactly why you need to understand them. ## Why You Need to Know the Limits These tactics **demand precision** and an understanding of the psychology behind human decision-making. Used recklessly, they will backfire. They will cause long-term damage to trust, brand reputation, and your relationship with customers. The point is not to deploy them blindly. The point is to understand: - **When** they are appropriate - only in genuine emergencies, not as standard operating procedure - **How** to mitigate the risks they carry - **Why** they work - the behavioral psychology behind customer decision-making under pressure - **Where** the line is between aggressive retention and something that will destroy your brand ## This Is Not Your Long-Term Strategy Let me be absolutely clear about something. If you are relying on these tactics regularly, you have a much bigger problem. A product problem. A fit problem. A value delivery problem. Emergency tactics buy you time. That is it. **They are the tourniquet, not the surgery.** Use the time they buy you to fix the underlying issues. Improve onboarding. Sharpen your ICP. Deliver real value faster. Build the kind of customer experience where these tactics become unnecessary. But when the building is on fire, you do not stop to critique the fire extinguisher. You use it. --- # 7 Ways to Take Control of Churn in Q1 *January 6, 2025 · by Lincoln Murphy* Source: https://sixteenventures.com/7-ways-to-take-control-of-churn-in-q1/ Churn is coming, and it is going to be bad. You do not lack urgency. **You feel it already.** The challenge is knowing what to do. Churn feels like it is controlling you, but it does not have to. Let's flip the script and **put you in control of churn**. ## The Problem with Reacting to Churn Most CS teams treat churn like a fire to put out. A customer signals they want to leave, and everyone scrambles. Discounts get thrown around. Meetings get scheduled. Promises get made. None of it works because **you are already too late.** The key to controlling churn is not better reactions. It is better positioning. You need a framework for action, not just a list of save tactics. ## Seven Actions to Regain Control Here are seven specific steps you can take right now to stabilize Q1 and protect your revenue: - **Urgent but Unspoken Save Tactics** - Emergency measures for dire situations. Not customer-centric, but sometimes survival demands bold action. - **Save the Right Customers; Ignore Others** - Not every customer is worth saving. Triage ruthlessly based on Success Potential and fit. - **Decide When to Contact, If at All** - Timing matters more than most people think. Sometimes the best move is strategic silence. - **Use Time Scarcity to Stop Churn** - Leverage urgency and deadlines to create momentum toward renewal instead of away from it. - **Short-Term Behavioral Engineering** - Small, targeted interventions that shift customer behavior just enough to buy you time and build value. - **Run Effective Save Meetings** - Most save meetings are terrible. Learn how to structure them so they actually change the outcome. - **Offer Concessions, Not Just Discounts** - Discounts erode revenue and trust. Concessions add value while preserving both. ## Control Starts with a Framework Each of these steps is a practical, implementable action. Not theory. Not platitudes. **Things you can do this week.** The difference between CS teams that lose 20% of their revenue in Q1 and those that hold the line is not luck. It is not having better customers. It is having a plan and executing on it before churn takes control. Stop waiting. **Start acting.** --- # The True Cost of Meetings in Customer Success Management *November 3, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/true-cost-of-meetings/ Meetings are the most expensive activity in Customer Success Management, yet we often overlook their true cost. If we fully understood the financial and strategic impact of meetings, we would likely conduct far fewer unproductive ones. There are three key types of costs associated with meetings: Direct Cost, Opportunity Cost, and Prioritization Cost. Understanding these costs can help you make more informed decisions about when and how to schedule meetings, ultimately leading to more productive and impactful engagements with your customers. #### **1. Direct Cost** The most obvious cost is the **Direct Cost** - the actual expense of your CSMs’ and other contributors’ time spent on the call. This includes not just the duration of the meeting itself, but also the time required for preparation and follow-up. While many Customer Success organizations don’t calculate this, imagine if every meeting cost $200 (or more). Knowing this, you would undoubtedly ensure each meeting was as productive as possible. It’s important to remember that these costs also exist for your customers. When they decline, cancel, or no-show, it’s often because they don’t perceive the meeting as valuable enough to justify the Direct Cost of attending. #### **2. Opportunity Cost** The second, often hidden, cost is **Opportunity Cost**. Every minute spent in a 1:1 meeting with a customer is time that cannot be spent with other customers, engaging customers asynchronously, creating self-service content, or focusing on higher-impact activities. This cost might not be easily quantifiable, but it is very real. Again, this cost exists for your customers as well. They weigh the value of the meeting against other activities they could be doing, and if the perceived value doesn’t outweigh the Opportunity Cost, they may choose not to attend. #### **3. Prioritization Cost** The third cost, and perhaps the most insidious, is **Prioritization Cost**. Often, we spend significant time trying to save at-risk or bad-fit customers, while neglecting our good-fit and ideal customers who appear to be “doing fine.” This can lead to unexpected contraction and churn among those valuable customers - the very ones we should have been engaging more actively. Meanwhile, the bad-fit customers, who were likely to churn anyway, absorb our time and resources without yielding positive results. Just as with the other costs, customers also experience Prioritization Costs. When they decline a meeting, it’s often because they don’t believe it’s worth diverting their focus from more pressing issues or strategic initiatives. ### **Conclusion** Understanding the true cost of meetings is essential for optimizing your Customer Success Management strategy. By being mindful of the Direct, Opportunity, and Prioritization Costs, you can make more informed decisions about when to hold meetings, whom to prioritize, and how to ensure that every meeting delivers maximum value for both you and your customers. When you go to schedule your next meeting, keep these costs in mind. This awareness can help you minimize unproductive meetings and focus on creating more powerful, impactful engagements that drive meaningful outcomes for your customers. --- # Meetings as a Customer Success Metric: The Misguided Path *November 3, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/meetings-as-a-metric/ **Meetings as a Value Metric:******Too often, we mistakenly equate the number of meetings with the value we’re providing to the customer. The assumption is that more meetings equal more engagement, and thus more value. However, this approach is fundamentally flawed. Value isn’t derived from the frequency of meetings; it’s derived from the outcomes those meetings drive. When we focus on meetings as a value metric, we risk losing sight of the true goal: making the customer successful. **Meetings as an Operational Metric:******Operationally, meetings are often tracked to gauge the efficiency and productivity of the Customer Success team. But using meetings as an operational metric can lead us astray, driving behavior that prioritizes quantity over quality. The goal should not be to fill the calendar with meetings, but to ensure that every customer interaction - whether it’s a meeting, an async communication, or a self-service engagement - is purposeful and moves the customer closer to their Desired Outcome. **Meetings as a Performance Metric:******When meetings become a performance metric for Customer Success Managers, the risk is that CSMs may prioritize meeting targets over customer outcomes. This can create a false sense of productivity, where success is measured by the number of meetings held rather than the progress made toward the customer’s goals. Performance should be measured by the impact on the customer’s success, not by the sheer number of touchpoints. ### **The Right Path: Focus on the Outcome** Meetings are just one tool in the Customer Success toolkit. They are a means to an end, not the end itself. The real focus should be on the outcome - the customer’s success. Achieving that outcome often requires a mix of meetings, asynchronous communications, and self-service deflection, tailored to the customer’s Appropriate Experience (AX). Your job isn’t to meet with the customer; your job is to make the customer successful. Depending on the customer’s AX, the role of meetings in that journey will vary. Some customers may require more frequent, in-depth meetings, while others may benefit from fewer meetings supplemented by strong async communication and self-service options. But when meetings are necessary, they must be as efficient, effective, and powerful as possible. This means having a clear purpose, staying focused on strategic outcomes, and ensuring that every meeting drives the customer closer to their Desired Outcome. ### **Conclusion** The key takeaway is this: Don’t get lost in the numbers. Don’t measure your success - or your customer’s - by the number of meetings you have. Measure it by the progress you make toward the end goal. Focus on the outcomes, and use meetings as one of many tools to achieve those outcomes, ensuring they are always purposeful and impactful. --- # No Goals, No Customer Success: Unlocking the Power of the Goal Discovery Framework *September 12, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/no-goals-no-customer-success/ *Why Understanding Customer Goals Is the Key to Real Customer Success* They don’t like it when I say this. To paraphrase my wife’s yoga shirt about peace: **No Goals, No Customer Success.Know Goals, Know Customer Success.** It’s time to get real. But let’s revisit something first - the definition of Customer Success. **Customer Success is when our customer achieves their Desired Outcome through their relationship with us, ensuring they stay longer, buy more, and advocate for us.** - **Desired Outcome = Goal + Appropriate Experience (AX)** - **Goal = Objective + Timeframe** So based on that simple breakdown, if you don’t know your customer’s goal, it’s simply not possible to do real Customer Success. Look, I know you’re doing something. You’re working hard. You’re creating processes, workflows, and playbooks. But you’re just not doing Customer Success. 😬 Kind of harsh, right? No - because now you know. Maybe you didn’t realize. Maybe you didn’t understand why your results aren’t what you think they should be. Maybe you couldn’t figure out why churn and contraction are higher than they should be or why expansion is so much lower than you’d like. **Now you know.** **Solve for the customer’s goal in an appropriate way, and baby, you got a stew going.** ### Introducing the Goal Discovery Framework for Customer Success Management In the realm of Customer Success, understanding customer goals is the cornerstone of building meaningful relationships and driving long-term value. Traditional customer interactions often involve direct communication, allowing for immediate clarification of needs. But in today’s asynchronous and self-service customer landscape, we need a more strategic approach. **Enter the Goal Discovery Framework** - a comprehensive method tailored specifically for these environments. It utilizes the classic “5 Ws and 1 H” to provide a clear roadmap for uncovering customer goals: #### **What** Identify the specific, actionable goals the customer aims to achieve. - **Examples:** Increase sales by 20%; Improve customer satisfaction score by 5 points. #### **When** Define the desired timeframe for achieving the goal. - Understanding urgency helps prioritize support and measure progress. - **Examples:** Within Q3; By the end of the year. #### **Why** Delve deeper than the “what” and explore the reasoning behind the goal. - **This is where the magic happens - understanding the “why” fuels your ability to tailor solutions and demonstrate the specific value your product or service offers.** #### **Who** Identify the key stakeholders and individuals involved in achieving the goal. - This could include internal teams (marketing, sales) or external collaborators. - Understanding who’s on board helps provide the most relevant support and ensure alignment. #### **Where** Establish the customer’s starting point. - Are they using a competitor’s product? Do they have prior experience with similar solutions? - Knowing their baseline helps you tailor your approach and bridge the gap between their current state and their desired outcome. #### **How** Outline the steps the customer needs to take to achieve their goals. - **Go a step further by detailing both the customer’s actions and the support you can offer to help them succeed.** ### Benefits of Utilizing the Goal Discovery Framework **Deeper Customer Understanding** By uncovering the “why” behind the “what,” you gain a profound understanding of the customer’s motivations and desired outcomes. This allows you to tailor your communication, support, and product recommendations to their specific needs. **Improved Customer Engagement** Taking the time to understand customer goals fosters a collaborative environment and demonstrates your genuine interest in their success. This leads to stronger relationships and increased engagement. **Measurable Impact** When goals are clearly defined with timeframes, it becomes easier to track progress and measure the impact of your efforts. This data-driven approach allows you to continuously refine your strategies and optimize customer success initiatives. ### Implementing the Framework in Asynchronous & Self-Service Models While traditional face-to-face interactions allow for on-the-spot goal discovery, asynchronous and self-service models demand a more intentional approach. Here are some strategies to leverage the Goal Discovery Framework in these environments: **Conversational Engagement** Design your communication channels (chat, email) to facilitate a multi-part goal discovery process. Provide context reminders and follow-up steps to keep users engaged without feeling overwhelmed. **Data & Analytics** Leverage user data and common customer challenges to pre-populate goal suggestions. Continuously refine these suggestions based on user interactions and success patterns. **Interactive Content & Assessments** Develop quizzes or interactive guides that help users identify their specific goals through a series of questions and choices. **In-App Guidance & Nudges** Offer relevant goal suggestions based on user activity within the product, and provide progress updates and gentle reminders to keep them on track. ### Conclusion By adopting the Goal Discovery Framework and tailoring it to your customer interactions, you can unlock the power of understanding customer goals. This deeper understanding forms the foundation for building strong relationships, delivering exceptional customer experiences, and driving long-term success. Remember: **No Goals, No Customer Success.Know Goals, Know Customer Success.** It’s time to get real about Customer Success. Start integrating the Goal Discovery Framework into your processes, and watch as your churn decreases and your expansion opportunities grow. **Solve for the customer’s goal in an appropriate way, and baby, you got a stew going.** --- # Outcomes > Meetings (calendar chaos) *August 26, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/outcomes-meetings-calendar-chaos/ I'm on a flight to San Francisco and the person to my left is talking to their colleague trying to find a time for both of them to meet with a customer. I glanced over and saw their calendar and... it was chaos. Back to back to back meetings, all day, every day. Completely full. Unsustainable. Even worse, it really seemed to be a **source of pride** for them. ## The Meeting Trap I don't know the nature of their business, but their calendar looked just like a typical CSM's. And that's the problem. For **way** too many CSMs - because of misguided leadership, not the CSM's fault - customer meetings are the Value Metric. They're **the** Operational Metric. They're often the Performance Metric. "How many customer meetings did you have this week?" is treated as a proxy for "how much value did you drive?" But those are not the same thing. Not even close. ## Meetings Are a Means, Not an End Meetings are just a means to an end. They're one tool in the engagement toolkit. And frankly, they're often the most expensive, least efficient tool available. Every meeting has a cost. Your time. The customer's time. The prep work. The follow-up. The opportunity cost of everything else you could have been doing instead. **Too many meetings just aren't necessary.** And the ones that are necessary are generally executed poorly. No clear agenda. No defined outcomes. No accountability for follow-through. The result? CSMs spend their entire week in meetings and still don't move the needle on customer outcomes. They're busy. They're exhausted. But they're not effective. ## What to Measure Instead The fix starts with leadership. Stop measuring meetings. Start measuring **outcomes.** - Did the customer hit their milestone this quarter? - Did adoption increase in the segments that matter? - Did the customer achieve the outcome they bought your product for? - Did the engagement drive progress toward expansion or renewal? Some of those outcomes require meetings. Many don't. An async Loom video, a well-crafted email, a product walkthrough doc, or an in-app prompt might accomplish the same goal in a fraction of the time. ## Fewer Meetings, Better Outcomes The best CSMs don't have the fullest calendars. They have the **clearest outcomes.** They're strategic about when a meeting is the right tool and when something else would serve the customer better. If your calendar is packed wall to wall and you're wearing that as a badge of honor, step back and ask: **what outcomes did all those meetings actually produce?** If you can't answer that clearly, the meetings aren't working. You're just busy. --- # The True Cost of Every Customer Meeting *August 19, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/the-true-cost-of-meetings-part-1-of-3/ Meetings are the most expensive activity in Customer Success Management. Yet most CS orgs never calculate what they actually cost. If they did, **they'd have far fewer unproductive meetings.** There are three types of costs associated with every customer meeting. And here's the thing most people miss: **these costs exist for your customers, too.** When they decline, cancel, or no-show, it's because they don't think the meeting will be valuable enough to offset the cost of attending. ## 1. Direct Cost This is the actual cost of your CSMs' and other contributors' time on the call. Most CS orgs don't calculate this, but they should. Take a 30-minute meeting. Add 15 minutes of prep. Add 15 minutes of follow-up and notes. That's an hour of a CSM's time. Now add whoever else is on the call - a Solutions Engineer, a manager, maybe someone from Product. Multiply by loaded hourly rates. A single "quick check-in" can easily cost $200-400 in internal time. If you knew every meeting cost that much, you'd make sure it was productive. **Right?** ## 2. Opportunity Cost Every minute spent on a call with one customer is time you can't spend with other customers. You can't engage customers asynchronously. You can't create self-service content. You can't focus on higher-impact activities. This cost isn't always easy to quantify, but it's very real. A CSM with 40 accounts who spends 60% of their week in meetings is leaving 24 accounts functionally unmanaged. Those accounts don't get proactive outreach. They don't get strategic guidance. They get reactive firefighting - if they're lucky. The opportunity cost of one meeting isn't just the meeting itself. **It's everything that didn't happen because of it.** ## 3. Cognitive Cost This is the one nobody talks about. Every meeting carries a cognitive tax - the mental energy of context-switching, preparing talking points, managing the conversation, and processing what was discussed afterward. A CSM with six meetings in a day isn't just losing six hours. They're losing the ability to think strategically about anything between those meetings. The 30-minute gap between calls isn't productive time. It's recovery time. This is why your best CSMs burn out. It's not the workload. **It's the cognitive load.** ## Now Flip It to the Customer's Side Your customers feel all three of these costs too. Their time has a direct cost. They have their own opportunity costs. And they have cognitive load from their own packed calendars. When a customer no-shows your QBR, they're not being disrespectful. They're making a rational calculation: this meeting won't deliver enough value to justify what it costs them to attend. The fix isn't better calendar invites or more reminder emails. The fix is making every meeting so valuable that attending is obviously worth it - and replacing every meeting that isn't with something asynchronous. **Stop defaulting to meetings. Start earning them.** --- # Meetings... can be SO much better *August 15, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/meetings-can-be-so-much-better/ **Meetings are the most expensive thing we do in Customer Success** - both in actual cost and opportunity cost. Yet most of them are a complete waste of those resources. Think about it. Every meeting requires preparation time, attendance time, and follow-up time. Multiply that by the number of attendees. Now multiply that by the number of meetings your team runs per week. The number is staggering. And most of that time is not producing outcomes. ## The Real Problem with CS Meetings Most Customer Success meetings fail for predictable reasons: - **No-shows and cancellations** - your customer does not see enough value in attending - **No agenda or a weak agenda** - the meeting has no structure, so it wanders - **No follow-up** - whatever was discussed evaporates the moment the call ends - **It should have been an email** - but nobody stopped to ask that question before scheduling These are not minor annoyances. They are systemic failures that eat into your team's capacity and your customers' patience. ## What Great Meetings Look Like The best CS teams treat meetings as a strategic tool, not a default activity. They have mastered several key practices: **Getting attendees interested before the meeting.** If your customer does not care about attending, the meeting is already dead. The invitation itself needs to communicate value. **Setting real agendas.** Not a list of topics. A clear set of outcomes the meeting is designed to produce. If you cannot articulate the outcome, cancel the meeting. **Using async carve-outs.** Not everything needs to be discussed live. The best teams identify what can be handled asynchronously and only use meeting time for things that genuinely require real-time conversation. **Self-service deflection.** Some meetings exist because the customer does not know where else to get the answer. Build better self-service resources and you eliminate entire categories of meetings. **Ensuring proper follow-up.** A meeting without documented next steps and clear ownership is a meeting that never happened. ## The Efficiency Opportunity If you are frustrated by no-shows, cancellations, or feeling like meetings are eating up time better spent elsewhere, you are not alone. But the fix is not fewer meetings. **The fix is better meetings.** Audit your team's meeting load this week. Ask how many of those meetings produced a measurable outcome. The gap between "meetings held" and "meetings that mattered" is where your efficiency gains are hiding. --- # Revenue Roadblocks: How We’re Sabotaging Our Own Growth *August 7, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/revenue-roadblocks/ *It’s Time to Get Out of Our Customers’ Way* Ever tried to give someone your money, only to find yourself jumping through hoops to make it happen? Frustrating, isn’t it? Now flip the script: What if your customers are experiencing that same frustration with your company? What if, despite their willingness - even eagerness - to invest more in your products or services, you’re unintentionally putting up barriers that make it difficult or unappealing for them to do so? I’ve seen this scenario play out in countless companies, and it’s what I call **revenue roadblocks**. These are self-imposed obstacles that hinder customers from buying more from you, buying more efficiently, or sometimes buying at all. They’re not just minor speed bumps; they’re significant barriers that can delay revenue, reduce customer satisfaction, and ultimately stunt your business growth. Let’s dive into how these revenue roadblocks manifest, why they’re detrimental to both you and your customers, and what we can do to remove them. ### The Hidden Barriers to More Revenue Imagine you’re a customer who needs to add more seats or licenses to your account - perhaps your team is growing, or you need additional functionality. You log into your account, ready to make the purchase, only to discover that you can’t do it yourself. Instead, you’re prompted to contact the sales team. Here’s where the roadblock appears. **Why is this a problem?** - **Avoidance of Sales Conversations**: Many customers dread talking to sales reps because they anticipate upselling or pressure to purchase more than they need. - **Delays and Inconvenience**: Requiring a conversation adds time and friction to the process. The customer needs more seats now, not after scheduling a call. - **Workarounds Begin**: To avoid the hassle, customers start manipulating their existing licenses - sharing logins, rotating users, or removing less active users to free up seats. This isn’t just hypothetical. I’ve witnessed it firsthand numerous times. Customers will go to great lengths to avoid unnecessary interactions, even if it means compromising their own efficiency and your revenue. ### The Cost of Revenue Roadblocks These barriers don’t just delay a single transaction; they have ripple effects that impact both your business and your customer relationships. #### **Delayed Revenue** - **Lost Time Equals Lost Money**: If a customer needs additional seats today but doesn’t purchase them until six months later, that’s six months of revenue you’ve missed out on. - **Reduced Purchase Amounts**: The hassle might lead customers to buy fewer seats than they actually need, limiting your revenue potential. #### **Decreased Customer Satisfaction** - **Inefficient Workarounds**: Customers juggling licenses or sharing logins aren’t getting the optimal experience with your product. - **Frustration Builds**: Obstacles can erode trust and satisfaction, making customers more susceptible to looking for alternatives. #### **Increased Churn Risk** - **Short-Term Fixes Become Long-Term Problems**: Persistent frustration can lead customers to reevaluate their relationship with you. - **Competitors Look More Attractive**: If a competitor offers a smoother, more user-friendly purchasing process, customers might jump ship. ### Challenging the Assumptions You might be thinking, “If customers need more licenses, they’ll just contact sales. That’s how it’s always been done.” But let’s be honest - are we convincing ourselves of that because it’s convenient for us? The data and customer behaviors suggest otherwise. Customers prefer convenience and autonomy. Forcing them into unnecessary interactions is more about our comfort than their needs. ### Removing the Roadblocks So, what’s the solution? It’s straightforward: **Make it easy for customers to give you more money when they want to.** #### **Implement Self-Service Options** - **In-App Purchases**: Allow customers to add seats or licenses directly within the application with just a few clicks. - **E-commerce Integration**: Use online purchasing systems that are seamless and user-friendly. #### **Empower Customer Success Teams** - **Quick Adjustments**: Enable Customer Success Managers (CSMs) to add seats or make account changes on behalf of the customer without bureaucratic delays. - **Proactive Support**: Train your team to identify when customers might need more resources and offer assistance before they encounter roadblocks. #### **Streamline Logistics** - **Simplify Contracts**: Adjust contractual terms to allow for easy scalability without renegotiation every time. - **Automate Processes**: Use automation to handle administrative tasks, freeing up time and reducing errors. ### The Benefits of Clearing the Path By removing these revenue roadblocks, you create a win-win situation. #### **For Your Business** - **Accelerated Revenue Growth**: Immediate purchases mean immediate revenue. - **Higher Lifetime Value**: Satisfied customers are more likely to continue expanding their use of your products over time. - **Competitive Advantage**: A smooth purchasing process can set you apart from competitors. #### **For Your Customers** - **Enhanced Experience**: Easy access to the resources they need when they need them. - **Increased Productivity**: No need to waste time on administrative hurdles or inefficient workarounds. - **Stronger Relationship**: Feeling valued and heard strengthens their connection to your brand. ### It’s Time to Get Out of the Way We need to shift our mindset from controlling the sales process to facilitating the buying process. Our role should be to make it as effortless as possible for customers to succeed with our products - and that includes making additional purchases simple and straightforward. By acknowledging and eliminating these revenue roadblocks, we not only unlock immediate financial benefits but also build a foundation for long-term customer loyalty and advocacy. **Final Thoughts** Let’s stop putting unnecessary obstacles between our customers and the solutions they need. Evaluate your processes critically: Are there points where you’re forcing customers to jump through hoops? Are there outdated policies that serve your company’s convenience more than your customers’ success? Remember, every roadblock you remove isn’t just a barrier lifted - it’s an opportunity gained. For your customers, for your revenue, and for your growth. *Let’s pave the way for smoother journeys and stronger partnerships. After all, when our customers thrive, so do we.* --- # Good Fit vs. Bad Fit vs. Ideal Customers: The Key to Unlocking Sustainable Growth *July 7, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/bad-fit-vs-good-fit-customers/ Maybe you need to not acquire those customers. I know - that might sound counterintuitive in a world where we’re often told that more customers equal more success. But the reality is, chasing every potential customer can be a costly mistake that hinders your growth, drains your resources, and even damages your brand reputation. Think about it: Have you ever onboarded a customer who seemed more trouble than they were worth? Maybe they constantly demanded features you didn’t offer, required excessive support, or churned quickly, leaving negative feedback in their wake. These are the **bad fit customers**, and they can do more harm than good. Understanding the difference between good fit and bad fit customers isn’t just a nice-to-have - it’s critical for driving customer success and sustainable growth. It’s about being intentional with who you serve, ensuring that every customer has the potential to succeed with your product or service. Let’s break down the distinctions between bad fit customers, good fit customers, and your Ideal Customer Profile (ICP), and explore how this clarity can transform your business. ### Bad Fit Customers: When Saying “No” Is the Best Option Let’s start with the worst-case scenario: **bad fit customers**. Bad fit customers lack **success potential** with your product or service. Simply put, they can’t achieve their desired outcomes using what you offer. Maybe you don’t have the functionality they need, or perhaps you can’t provide the appropriate support or experience they require. Bringing on bad fit customers is a lose-lose situation: - **They won’t derive value** from your product. - **They’ll likely churn** before you can recoup the cost of acquiring them. - **They might leave negative reviews**, deterring other potential customers. So how do you identify bad fit customers before it’s too late? #### Create a Success Potential Checklist Evaluate potential customers based on these six critical fits: - **Technical Fit**: Do we have the technical capabilities they need? - **Functional Fit**: Does our product fulfill their functional requirements? - **Competence Fit**: Do they have the necessary skills to use our product effectively? - **Experience Fit**: Have they used similar products before? - **Cultural Fit**: Are our cultures compatible? - **Resource Fit**: Do they have the resources (time, money, personnel) to succeed with our product? If a potential customer doesn’t meet these criteria, it’s a red flag. Politely steering them away can save both parties time, money, and frustration. ### Good Fit Customers: The Middle Ground Next up are the **good fit customers**. Good fit customers meet your success potential criteria - they have the potential to succeed with your product - but success isn’t guaranteed. This is where your Customer Success Management efforts come into play to unlock that potential. While it’s great to have good fit customers, consider this: - **Don’t actively pursue them**: Resources are finite, and investing heavily in acquiring customers who are merely a good fit might not yield the best return on investment. - **Serve them well if they come to you**: Provide excellent service, but focus your proactive efforts elsewhere. Good fit customers will benefit from your product, but they might not have the highest lifetime value or become your biggest advocates. ### Ideal Customer Profile (ICP): The Gold Standard Finally, let’s talk about your **Ideal Customer Profile (ICP)**. Your ICP represents customers who are not only a good fit but who, once their potential is unlocked: - **Stay longer** - **Buy more** - **Advocate for your brand** These customers offer the highest lifetime value and contribute significantly to your sustainable growth. #### Defining Your ICP Consider the following when identifying your ICP: - **Readiness**: They recognize the problem your product solves and are ready to take action. - **Willingness**: They’re prepared to invest time, money, and effort to achieve their goals. - **Ability**: They have the necessary resources and authority to make decisions and implement your solution. - **Acquisition Efficiency**: The cost of acquiring them is justified by their potential lifetime value. - **Ascension Potential**: There’s room for upselling or cross-selling additional products or services. - **Advocacy Potential**: They’re likely to become promoters of your brand, referring others and providing testimonials. By focusing your acquisition efforts on your ICP, you’re investing resources where they’ll have the greatest impact. #### Why Your ICP Matters Having a clear definition of your Ideal Customer is one of the most important things you can do for your business: - **Product Development**: Tailor features and functionality to meet the needs of your ICP. - **Marketing and Messaging**: Use language and emotion that resonates with them. - **Resource Allocation**: Invest in channels and strategies that effectively reach them. Remember, you get to **choose your customers**. If you don’t proactively decide who you want to do business with, your customers will choose you - and they might not be the ones who can succeed with your product. ### The Power of Choice: Aligning Efforts for Maximum Impact Understanding these distinctions allows you to: - **Avoid Bad Fit Customers**: Politely decline and, if possible, guide them toward a better solution. - **Welcome Good Fit Customers**: Serve them effectively if they come your way but allocate minimal acquisition resources. - **Focus on Your ICP**: Invest in marketing, sales, and customer success efforts that target and serve your ideal customers. This strategic approach ensures that your efforts and investments yield the best possible returns. ### Conclusion: Choosing Wisely for Sustainable Growth Identifying and focusing on your ideal customers isn’t about being exclusive - it’s about being smart. - **Reduce Churn**: Serving customers who can succeed reduces the likelihood they’ll leave. - **Enhance Reputation**: Satisfied customers become advocates, enhancing your brand. - **Drive Growth**: Ideal customers contribute more revenue over time through renewals, upgrades, and referrals. So take the time to define your ICP. Be clear about who you’re targeting and why. Align your product development, marketing, and customer success strategies around serving these customers exceptionally well. Not all customers are created equal - and that’s a good thing. By choosing your customers wisely, you’re setting the stage for sustainable growth and long-term success. --- # Upsell Myth #1: Wait until Churn < 10% *July 1, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/upsell-myth-1-wait-until-churn-10/ ## The Myth That Holds You Back "Don't worry about upsells until churn is below 10%." I hear this constantly. And every time, my response is the same: **this mindset limits growth and stifles potential.** Unless your environment is overtly customer-negative and you have massive churn across your *entire* customer base, you don't need to hit some mythical churn threshold before pursuing expansion. ## Churn and Expansion Are Not Sequential The biggest mistake SaaS leaders make is treating churn reduction and expansion as sequential steps. Fix churn first, *then* worry about upsells. That's not how it works. They run in parallel. Yes, address churn where it's an issue. Absolutely. But also recognize that **some customers are progressing and ready for expansion right now.** These are different cohorts with different needs. One group is struggling to get value from your product. Another group has already achieved their initial Desired Outcome and is ready for the next level. Why would you make the second group wait because the first group hasn't figured things out yet? ## What Happens When You Wait Here's the truth most people miss: - Even with higher churn in some cohorts, you have other customers ready, willing, and able to buy more - Waiting to upsell those customers means **not meeting their needs when they need it** - and missing out on LTV growth and reducing NRR in the process - Those ready customers may start looking elsewhere for the capabilities you already have but haven't offered them Waiting doesn't just cost you revenue. It costs you **customers** - the good ones who are growing and need more from you. ## Use Expansion to Offset Churn By upselling to your ready customers, you can offset churn and achieve **NRR over 100%**. That sustains and even grows your business while keeping valuations high. This is basic math that too many companies ignore. If you're losing 8% to churn but generating 15% in expansion, your NRR is 107%. You're growing from your existing base even while some customers leave. It's not about waiting for perfect conditions. **Perfect conditions don't exist.** It's about recognizing and seizing opportunities for your customers to expand where they need to - while simultaneously working to fix the problems causing churn in other cohorts. Both things. At the same time. That's how you grow. --- # How to make CSMs less busy *June 12, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-make-csms-less-busy/ In this context, "busy" is a feeling, one that leads CSMs to feel overwhelmed and eventually burnout. Busy isn't about the performance of activities, per se. You can have two CSMs, both spending 75% of their time on customer-facing activities, but the one performing efficiently won't just **NOT** feel "busy" but will feel productive and satisfied with their job, while the CSM operating inefficiently is suffering and looking for a way out. Here are a few ideas for you to make your CSMs feel less "busy" and actually be more productive: **Control the Controllables** - The things that are in your control can probably be done more efficiently, so that the things you don't have control over don't overwhelm or bog your CSMs down (think doing the job of other teams, being the glue for a broken product, etc.). The reality of being a CSM is that you're probably doing things that aren't "your job" so make sure the things that ARE your job are done as efficiently as possible. **Everything can be More Efficient** - You just have to know what to look for AND be willing to look (and make changes). Meetings are the most expensive thing we do with customers (cost of the CSM's time, opportunity cost of dedicating time to one customer, etc.), and yet meetings - and CSM calendars - are often highly inefficient, if not downright ineffective. Fix this and "busy" doesn't work here any more. **Focus on High-percentage Activities** - CSMs often spend a lot of time and effort on activities that produce limited results. In our Retention training that starts on Monday 17-June, for example, we talk about spending less time trying to save customers who are trying to churn (low-percentage) and more time upstream trying to make them successful so they don't want to churn in the first place (high-percentage). Obviously, right? You'd think, but FAR too many companies have CSMs spinning their wheels on very low-percentage activities, having poor results, hurting morale, and leading to turnover. I hope those ideas help. --- # Opt-In vs. Opt-Out Trials: The Hidden Impact on Customer Retention and Success *June 11, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/opt-in-vs-opt-out-trials/ You’ve spent countless hours perfecting your product, confident that it will make a significant difference for your customers. You’ve set up trials to let potential users experience its value firsthand. But here’s a critical question: Could your trial strategy be unintentionally driving customers away? Picture this: A potential customer signs up for your trial, excited to see how your solution can solve their problems. They explore the features, start integrating it into their workflow, and things are looking promising. Then, without warning, an unexpected charge appears on their credit card - they’ve been billed because they forgot to cancel before the trial ended. Feeling blindsided and frustrated, they not only cancel immediately but also share their negative experience with others. This isn’t a rare occurrence. Many companies fall into the trap of implementing opt-out trials, enticed by the prospect of automatic conversions. But while this strategy might boost short-term numbers, it can severely damage customer trust and long-term retention. In this post, we’ll dive deep into the crucial differences between opt-in and opt-out trials. We’ll explore how each approach affects customer perception, retention rates, and your bottom line. If you’re aiming to maximize customer satisfaction and lifetime value, understanding the nuances of trial strategies isn’t just helpful - it’s essential. ### Understanding Opt-In Trials **Opt-in trials** are all about lowering barriers and building trust from the outset. They invite anyone interested to experience your product without any immediate financial commitment. #### How Opt-In Trials Work: - **Simple Sign-Up:** Users provide basic information - often just an email address - to start the trial. - **Defined Trial Period:** They gain full access to your product for a specific duration, such as 14 or 30 days. - **Active Conversion Required:** At the end of the trial, users must proactively choose to continue by entering their payment details. #### Benefits of Opt-In Trials: - **Builds Trust and Goodwill:** By not asking for payment information upfront, you show confidence in your product and respect for the customer’s choice. - **Encourages Full Engagement:** Users are more likely to dive deep into your product without the fear of unexpected charges looming over them. - **Attracts Genuine Customers:** Those who decide to opt-in are truly interested, leading to higher-quality customer relationships. #### Strategies to Enhance Opt-In Trials: - **Engaging Onboarding:** Provide helpful resources and guidance to ensure users get the most out of their trial. - **Timely Check-Ins:** Reach out during the trial to address any questions or obstacles they might be facing. - **Early Conversion Incentives:** Offer discounts or added features to encourage users to become paying customers before the trial ends. **Example:** A software company offers a 14-day free trial without requiring credit card information. Throughout the trial, they send personalized tips based on the user’s activity. Midway through, they offer a 20% discount for early subscription, incentivizing those who are already finding value to commit sooner. ### Exploring Opt-Out Trials **Opt-out trials** take a different approach by requiring users to provide payment information upfront, with the understanding that they’ll be automatically charged unless they cancel before the trial ends. #### How Opt-Out Trials Work: - **Upfront Commitment:** Users must enter their credit card details at the start, sometimes even paying a small initiation fee. - **Automatic Billing:** If they don’t actively cancel before the trial period expires, they’re automatically enrolled as paying customers and charged accordingly. - **Clear Terms (Ideally):** The billing rate and terms are disclosed during sign-up, although not all companies make this as transparent as they should. #### Challenges with Opt-Out Trials: - **Erodes Trust:** Users may feel tricked if they’re charged unexpectedly, leading to frustration and resentment. - **Damages Reputation:** Negative experiences can result in bad reviews and word-of-mouth, harming your brand image. - **Increased Churn:** Customers who didn’t intend to continue will cancel immediately, often requesting refunds or initiating chargebacks. **Example:** An online service offers a 30-day trial that requires credit card information upfront. Many users forget to cancel and are surprised by the charge. Feeling deceived, they not only cancel but also leave negative feedback online, warning others about the “scam.” ### The Implications for Customer Classification Automatically converting trial users into paying customers through opt-out strategies can distort your understanding of customer retention and success. #### Rethinking Who Counts as a Customer: - **First Billing Isn’t Commitment:** Just because someone has been billed doesn’t mean they’re a loyal customer. - **Wait for Confirmation:** Observing customers over multiple billing cycles (ideally 90 days) helps determine if they’re staying intentionally. - **Avoid Misleading Metrics:** Counting accidental conversions as successes inflates your retention rates and masks underlying issues. ### What This Analysis Reveals Looking beyond initial conversions provides valuable insights into your business’s health. #### You’ll Discover: - **True Retention Rates:** Identifying how many customers stay after the initial billing cycles offers a clearer picture of loyalty. - **Cost Recovery Timing:** Understanding how long customers remain helps assess whether you’re recouping acquisition and onboarding costs. #### But It Doesn’t Show: - **Customer Success:** Retention data alone doesn’t indicate whether customers are achieving their goals with your product. - **Engagement Levels:** It doesn’t reveal how actively they’re using your product or which features they find most valuable. - **Future Churn Risks:** Early retention doesn’t guarantee long-term loyalty. ### Choosing the Right Trial Model for Your Business Your trial strategy should align with your overall goals for customer relationships and business growth. #### Opt-In Trials Are Ideal When: - **Trust Is a Priority:** You value building strong, trust-based relationships with your customers. - **Quality Over Quantity:** You’re focused on attracting users who are genuinely interested in your product. - **Long-Term Growth Matters:** You’re looking to foster loyal customers who will stick around and potentially advocate for your brand. #### Opt-Out Trials Might Be Considered When: - **Immediate Revenue Is Crucial:** Short-term cash flow is a higher priority than long-term customer relationships. - **Low Commitment Products:** Your product doesn’t require significant customer investment or ongoing engagement. - **High Volume Strategy:** You’re aiming for a large number of users, accepting that many will churn quickly. ### The Bigger Picture: Building Trust and Ensuring Success Your approach to trials sends a powerful message about how you view and value your customers. - **Transparency Is Key:** Clear communication about trial terms fosters trust and sets appropriate expectations. - **Customer Experience Over Quick Gains:** Prioritizing a positive experience encourages long-term loyalty more than short-term revenue spikes. - **Aligning with Customer Goals:** When customers feel respected and supported from the beginning, they’re more likely to engage deeply and succeed with your product. ### Conclusion Your trial strategy isn’t just a marketing tactic - it’s a reflection of your company’s values and approach to customer relationships. Opt-in trials build trust and attract customers who are genuinely interested, leading to stronger, more profitable relationships. Opt-out trials might boost your numbers temporarily but can damage trust and increase churn. If your goal is to cultivate a loyal customer base that finds real value in your product, it’s time to consider the long-term benefits of opt-in trials. By removing barriers and being transparent from the start, you create a foundation for lasting relationships that benefit both your customers and your business. --- # "My CSMs are too busy for Advocacy" (No!) *June 7, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/my-csms-are-too-busy-for-advocacy-no/ *"My CSMs are too busy to do Advocacy, Lincoln."* *"So pile even more onto my overworked CSMs? Umm, No."* I've heard the same for Expansion, Renewal, etc. And every time, it tells me more about the leader than the team. ## Too Busy for What Matters, Never Too Busy for What Doesn't Weird how their CSMs are too busy to do things like Advocacy or Expansion but not too busy to: - Do the work **for** the customer - Work escalated support tickets - Train individual users - Answer the same questions over and over - Have meetings when they're not necessary - Have super-inefficient meetings - And so much more nonsense See the pattern? CSMs aren't too busy. They're too busy doing **the wrong things.** Saying their CSMs are "too busy" to do Advocacy or Expansion is NOT the flex they think it is. ## What "Too Busy" Really Means When I hear this, it tells me a few things: **1. They think of Expansion and Advocacy as extra** - not part of the customer's journey. As if helping a customer expand their usage or become an advocate is some bolt-on activity rather than a natural progression of a healthy customer relationship. **2. They assume doing those things will be inefficient** and add a lot of overhead to their already overworked CSMs. Why? Because everything they are currently doing is inefficient and comes with a ton of overhead. They can't imagine it being any other way. ## The Real Failure The job of a Head of CS is to create an environment for everyone to thrive - their CSMs and their customers. A Head of CS that says their CSMs are too busy to do Expansion, Advocacy, etc. has **failed to create that environment.** And saying their CSMs are "too busy" without following that up with "and I'm actively working to remedy this" is a huge part of what's wrong with this profession we call Customer Success. If your CSMs are drowning in reactive work, the answer isn't to accept it. The answer is to **fix the system** so that high-value activities like Advocacy and Expansion aren't luxuries. They should be built into how your team operates every single day. Stop wearing "busy" as a badge of honor. Start building an operating model where the important stuff actually gets done. --- # Who owns Advocacy in the BEST companies? *June 5, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/who-owns-advocacy-in-the-best-companies/ In companies where Advocacy contributes significantly to CAC, LTV, and NRR - and is operationalized, orchestrated, and measured as such - **Customer Success owns it.** Not Marketing. Not Sales. Not a committee. CS. And there are very good reasons for that. ## Why Customer Success Should Own Advocacy The question of advocacy ownership comes up constantly. Marketing wants it because they see advocacy as content fuel. Sales wants it because they want references to close deals. But both of those are self-serving perspectives. **CS has the most comprehensive view of the customer journey.** They understand the milestones, the wins, the challenges, and the moments where a customer is genuinely thrilled with the outcome they achieved. That matters because advocacy asks need to be **well-timed and relevant.** You can't just ping a customer for a case study when they're mid-implementation or dealing with an escalation. CS knows when a customer just hit a major milestone. CS knows when they're in a great place. CS knows when the ask will land. Marketing and Sales can consume the output of advocacy. But CS should orchestrate it. ## Operationalizing the Advocacy Strategy Saying "CS owns advocacy" is not enough. You need a system. Here is how the best companies operationalize it: - **Determine Advocacy Needs from Departments** - What does Marketing need? What does Sales need? What does Product need? Gather the requirements first. - **Identify Logical Progress Milestones** - Map out the customer journey and find the moments where advocacy asks make sense naturally. - **Plan Graduated Advocacy Requests** - Start small. A quote. Then a review. Then a case study. Then a speaking opportunity. Don't ask for a keynote on day one. - **Identify Eligible Cohorts** - Not every customer is a candidate. Segment by success, sentiment, and relationship strength. - **Orchestrate Advocacy Asks** - Build the process so CSMs know exactly when and how to make the ask as part of their workflow. - **Track and Measure Impact** - Connect advocacy outputs back to pipeline influence, deal velocity, and retention metrics. If you can't measure it, you can't improve it. ## The Real Unlock When you centralize advocacy ownership within Customer Success and leverage the collaborative efforts of Marketing, Sales, and Ops, you create a structured, sustainable advocacy program that **actually drives growth.** The alternative is what most companies do: sporadic, random asks that annoy customers and produce mediocre results. Advocacy is too important to leave to chance. Give it a home. Give it to CS. --- # So... who owns Advocacy? (poll results) *May 31, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/so-who-owns-advocacy-poll-results/ I recently did an informal poll on LinkedIn and Instagram asking who owns Advocacy in your company. The result: a relatively even split between CS and Marketing, with a slight edge to Marketing on LinkedIn. But the comments and replies add much needed context. ## What the Data Actually Shows While one of those departments may "own" Advocacy, the reality is **most companies simply don't have a formal Advocacy program.** This is informal data, but it tracks with what I've seen in the wild. At best, Marketing will spin up a campaign to try to get reviews - generally to offset a swath of bad reviews - and enlist the help of CS. This generally fails to deliver the desired results. Or CS does the same thing, hoping to give Marketing and Sales some help or generate Social Proof to use to motivate action with existing customers. But again, it fails. ## Why These Efforts Keep Failing It fails because it's a one-off "campaign" or "project" and not something that's **strategic, operationalized, and orchestrated.** Like most things done on a whim or some urgent mandate to "fix" an issue like bad reviews, it's going to deliver subpar results at best. And then, because it didn't work, well; we're certainly not going to invest in creating a real Advocacy program. We tried that already and failed. Right. Except you didn't. You didn't try Advocacy. You tried a **rushed, under-resourced, one-time project** with no strategy behind it. That's not the same thing. Not even close. ## The Real Answer So the answer to who owns Advocacy is; **no one, really.** Most companies have no formal program. The ones that say they do are usually running sporadic campaigns. And the ones running sporadic campaigns are pointing to their failure as evidence that Advocacy doesn't work. It's a self-fulfilling prophecy. Don't invest in a real strategy, get bad results, use bad results to justify not investing. The question isn't who owns Advocacy today. The question is who **SHOULD** own it - and what it looks like when it's done right. --- # From Transactions to Relationships: Unleashing Customer Potential with AX *May 5, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/beyond-transactions/ Imagine securing a new client who seems like the perfect fit for your product or service. The contract is signed, the initial transaction is completed, and everything appears promising. But as weeks turn into months, the client’s engagement dwindles. They barely use the product, seldom reach out for support, and renewal seems unlikely. What went wrong? This all-too-common scenario underscores a fundamental mistake many companies make: viewing customer interactions as mere transactions rather than the beginning of a meaningful relationship. In a world where customer loyalty is hard-won and easily lost, transforming one-time sales into long-term partnerships is crucial for sustained success. Enter the concept of **Appropriate Experience (AX)**. Beyond the initial sale, AX is about delivering a personalized journey that aligns with each customer’s unique context, needs, and goals. It’s the difference between a customer who feels like just another number and one who sees your company as an indispensable partner in their success. In this blog post, we’ll explore how shifting from transactional thinking to relationship-building through AX can unlock your customers’ full potential. We’ll delve into what AX truly means, how customer expectations are influenced by their buying journey, and why aligning your engagement strategies with the customer’s broader context - not just their initial purchase size - is essential. Whether you’re a Customer Success Manager aiming to deepen client relationships or a business leader looking to drive growth, understanding and implementing AX could be the game-changer you’ve been searching for. ### Defining Appropriate Experience (AX) At its core, **Appropriate Experience (AX)** is about more than just providing value - it’s about delivering that value in a way that resonates with each customer’s unique circumstances. AX personalizes the customer journey, ensuring that every interaction aligns with their goals, preferences, and operational realities. AX is a crucial component of the **Desired Outcome**, which combines the customer’s **Goal** (their objective within a specific timeframe) and the **Appropriate Experience** (how they should be treated along the way). By focusing on AX, you ensure that customers feel supported, understood, and guided - not just in how they use your product, but in how they experience the journey toward their goals. **For example:** - A **5-user contract** acquired through a self-service onboarding process might require minimal direct engagement. These customers may prefer autonomy and have straightforward needs that don’t necessitate intensive support. - Conversely, a **50-user enterprise customer** with significant growth potential may need more strategic guidance, personalized support, and frequent check-ins to navigate complex challenges and maximize value from your product. By tailoring the experience to match each customer’s specific context, you enhance their satisfaction and increase the likelihood of long-term success and loyalty. ### The Influence of Customer Expectations Based on What They Pay One of the more nuanced aspects of AX is recognizing that while customers’ expectations are often influenced by what they pay and how they enter into a relationship with your business, appropriate experience shouldn’t be strictly tied to transactional value. #### Purchase Size Affects Expectations, But Not Necessarily Appropriate Experience Customers’ initial purchase sizes and buying journeys - whether through self-service platforms or direct interactions with sales teams - can shape their expectations: - **Self-Service Purchases:** A customer who buys a small number of licenses online may anticipate a hands-off relationship, valuing convenience and autonomy. - **Sales-Assisted Purchases:** A customer who engages with a salesperson for a larger purchase might expect a higher level of personalized support and ongoing engagement. However, these expectations don’t always align with what the customer actually needs to succeed. **Appropriate Experience** is about meeting those strategic needs, which may not correlate directly with the initial transaction size. #### Appropriate Experience Reflects Customer Context, Not Transactional Value Consider a company with a **25-person marketing team** that purchases **5 licenses** through a self-service model. Their initial spend is small, and they might expect minimal engagement. But their broader context suggests significant growth potential and strategic importance. Despite the modest initial transaction, the appropriate experience for this customer could involve: - **Deeper Engagement:** Understanding their long-term goals and how your product can scale with them. - **Strategic Guidance:** Offering insights and recommendations that align with their broader marketing objectives. - **Proactive Support:** Anticipating challenges they may face as they expand usage and providing solutions ahead of time. By focusing on their context rather than their initial purchase size, you position your company as a valuable partner invested in their success. ### AX-Based Segmentation: Aligning Engagement with Customer Needs Traditional customer segmentation often relies on arbitrary factors like company size, industry, or revenue. While these factors provide some insights, they don’t capture the full picture of what each customer needs to succeed. **AX-based segmentation** focuses on: - **Customer Journey Stage:** Where is the customer in their adoption lifecycle? New users may need onboarding support, while long-term users might benefit from optimization strategies. - **Goals and Objectives:** What are the customer’s specific goals, and how can you tailor your engagement to help achieve them? - **Product Usage:** How is the customer utilizing your product? Are there features they’re not leveraging that could provide additional value? By adapting your approach based on these factors, you ensure that engagement is both proactive and personalized. This fluid strategy allows you to evolve your support as the customer’s needs change, fostering a relationship built on trust and mutual success. ### Avoiding the Transactional Trap One of the biggest pitfalls in Customer Success is the **Transactional Trap** - assuming that the size of the initial purchase should dictate the level of engagement and support. **Why This Approach Falls Short:** - **Overlooks Potential:** Focusing solely on initial spend may cause you to miss opportunities for expansion with customers who have significant growth potential. - **Underserves Strategic Customers:** Small initial transactions don’t always equate to small needs. Some customers may start small to test the waters but require more comprehensive support to fully realize the value of your product. - **Damages Relationships:** Failing to provide the appropriate experience can lead to dissatisfaction, churn, and negative word-of-mouth. By avoiding the transactional trap and instead providing an experience aligned with the customer’s broader context, you enhance their likelihood of success and open doors for future growth. ### Balancing Customer Expectations and Appropriate Experience Understanding the difference between **Customer Expectations** and **Appropriate Experience** is key to delivering exceptional customer success. - **Customer Expectations** are influenced by their buying journey and initial transaction size. It’s important to acknowledge these expectations but not be confined by them. - **Appropriate Experience** is determined by the customer’s actual needs, goals, and potential within their broader business context. **Strategies to Align the Two:** - **Open Communication:** Engage in meaningful dialogues with your customers to understand their aspirations and clarify how you can support them beyond their initial expectations. - **Educate and Inform:** Help customers see the value of a more tailored experience by highlighting how it aligns with their strategic objectives. - **Flexible Engagement Models:** Develop scalable support options that can adapt to different customer contexts without being strictly tied to purchase size. By balancing expectations with appropriate experience, you not only meet customers where they are but also guide them toward where they want to be. ### Conclusion The journey from transactions to relationships is transformative - not just for your customers, but for your business as a whole. By embracing **Appropriate Experience (AX)**, you move beyond treating customers as mere buyers and start engaging with them as long-term partners. Focusing on AX means: - **Avoiding the transactional trap** and recognizing the full potential of every customer, regardless of their initial spend. - **Building stronger relationships** by aligning your support with what customers actually need to achieve success. - **Unlocking expansion opportunities** by positioning your company as a proactive partner invested in their long-term goals. In a competitive marketplace, the businesses that thrive are those that cultivate meaningful relationships with their customers. By shifting your focus from transactions to relationships through AX, you’re not just meeting customer expectations - you’re exceeding them, fostering loyalty, and driving sustained growth for both your customers and your business. --- # Renewal Psychology: From an Adversarial Process to a Celebration of Success *April 4, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/renewal-psychology/ Ever felt that knot in your stomach when it’s time to discuss contract renewals with a client? You’re not /alone. Renewals often carry an undeserved stigma - seen as adversarial negotiations rather than opportunities for mutual growth. But what if we could flip the script? What if renewals became a natural, even exciting, part of the customer journey? Welcome to **Renewal Psychology: From an Adversarial Process to a Celebration of Success**. ## 1. **Renewals Don’t Have to Be Adversarial** Let’s start by dispelling a common myth: renewals are not inherently confrontational. The tension arises when the process feels like a battleground over pricing or terms. But in reality, a renewal is just another step in the customer’s journey - a chance to reaffirm value and continue a successful partnership. Negotiation isn’t negative by default. It becomes adversarial only when misaligned with the customer’s needs or conducted in bad faith. When approached thoughtfully, renewals can transform from a source of stress into a celebration of ongoing collaboration. ## 2. **Tie Price Increases to Customer Value** Ever had a price hike justified by something as impersonal as “market conditions” or “inflation”? It’s not exactly compelling. Instead of anchoring price increases to external factors, link them directly to enhancements that benefit the customer. Perhaps you’ve upgraded your infrastructure, improved customer support, or rolled out new features. Highlight how these investments contribute to their success. When customers see that the extra cost translates into added value for them, the price adjustment feels justified - even beneficial. ## 3. **Leverage Their Wins to Transform the Renewal Experience** Before diving into renewal details, ask the customer about their biggest win over the past year using your platform. You might already know the answer, but hearing them articulate it reinforces the positive impact you’ve had on their business. This simple question shifts the tone from adversarial to collaborative. It primes them to view the renewal as a continuation of their success story, transforming the process into a celebration rather than a negotiation. ## 4. **Frame the Conversation Around Future Goals** After celebrating past victories, shift the focus to what’s next. Ask them about their goals for the coming year. This keeps the dialogue forward-thinking and aligns your services with their future objectives. Ensure the goals are specific, measurable, and time-bound. For example, “This year, you closed 1,000 deals through our system. What’s the target for next year?” By anchoring the conversation in concrete objectives, you set the stage for how your partnership will help achieve them. ## 5. **Introduce the Confidence Question** Here’s where it gets interesting. Once they’ve shared their future goals, ask: “How confident are you in hitting that target?” This question serves multiple purposes. It gauges their mindset, uncovers potential concerns, and reinforces their commitment. If they express high confidence, it’s a seamless transition to finalize the renewal - positioning it as a critical step in maintaining momentum. ## 6. **Present the Price Increase as Part of Their Success Journey** With their past successes and future goals clearly outlined, presenting the renewal - including any price adjustments - becomes much more straightforward. You might say, “To support your goal of closing 1,500 deals next year, we’re continuing our partnership with all the enhanced features and support you’ve come to rely on. There will be a nominal 10% increase to reflect the ongoing investments we’ve made in your success. Let’s get the renewal processed so you can keep the momentum going without missing a beat.” By framing it this way, the price increase isn’t an obstacle - it’s part of the solution that will help them achieve even greater success. ## 7. **Close the Loop** The key is crafting a narrative that connects their past achievements, future aspirations, and the role your partnership plays in that journey. The renewal isn’t a transactional necessity; it’s the bridge that ensures continued success. When customers see renewals in this light, the process transforms from an adversarial negotiation into a celebratory milestone. It becomes less about contracts and costs, and more about collaboration and growth. **In Summary** Renewals should never feel like a hard sell or a dreaded obligation. By tapping into psychological principles of consistency and commitment, we can reshape the experience into something positive and forward-looking. Remember: - **Transform the Tone:** Shift renewals from an adversarial process to a collaborative celebration. - **Celebrate Past Successes:** Let them voice their wins to reinforce the value you’ve provided. - **Align with Future Goals:** Position your services as essential to achieving their upcoming objectives. - **Present Value-Driven Adjustments:** Tie any changes directly to enhancements that benefit them. - **Foster Confidence and Commitment:** Use targeted questions to gauge and bolster their readiness to continue the partnership. By approaching renewals as a celebration of success rather than a battleground, we not only retain clients - we build stronger, more collaborative relationships. So next time that renewal date approaches, take a deep breath and embrace the opportunity. After all, it’s not just about renewing a contract; it’s about renewing commitment, trust, and shared success. --- # Pods in Customer Success vs. Sales: A Side-by-Side Comparison *March 18, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/pods-customer-success-sales/ Pods, a collaborative team structure, have been around for several years but have become increasingly popular in both Customer Success (CS) and Sales, especially as the former has become even more efficiency-focused in the past year. While Pods share some similarities between Sales and Customer Success, their core objectives and functionalities differ based on the stage of the customer journey they address. Here’s a breakdown comparing and contrasting Pods in CS and Sales: ## **Similarities of Pods in Customer Success vs. Sales** - **Cross-functional Teams:** Both CS and Sales Pods consist of members with complementary skill sets working towards a common goal. In CS, this might include CSMs, onboarding specialists, and technical experts. Sales Pods often include Sales Development Reps (SDRs), Account Executives (AEs), and Solution Architects. - **Improved Collaboration:** Pods foster better communication and collaboration within the team. This allows for a more holistic understanding of customer needs and facilitates a seamless handoff between stages (pre-sales to post-sales). - **Shared Knowledge and Expertise:** Team members within a Pod share knowledge and expertise, ensuring customers receive the best possible support or solution. ## **Differences between Customer Success and Sales Pods** **The Pod Objective:** - **CS Pods:** Focus on maximizing customer success and retention by ensuring customers achieve their Desired Outcome and derive ongoing value from the product. - **Sales Pods:** Focus on driving sales growth by acquiring new customers and upselling/cross-selling existing ones. **Customer Focus (or lack thereof)** - **CS Pods:** Typically dedicated to a specific set of accounts (Account-Based Pods) or customer segments (Skill-Based Pods) with established relationships. - **Sales Pods:** Can be structured geographically, by industry, or by product line, with a focus on acquiring new leads and nurturing them through the sales funnel. **Measures of Success** - **CS Pods:** Track metrics like customer satisfaction (CSAT), net promoter score (NPS), and customer lifetime value (CLTV) to measure success. - **Sales Pods:** Track metrics like conversion rates, average deal size, and quota attainment to measure success. **Customer Interaction Cadence:** - **CS Pods:** Engage with customers regularly, with the frequency depending on the customer segment’s AX (Appropriate Experience) needs. This may involve a mix of proactive and reactive interactions. - **Sales Pods:** Interact with potential customers during the sales cycle, with a focus on qualifying leads and closing deals. The cadence is typically more frequent during the initial stages of the sales cycle. **Overall Approach for Pods** - **CS Pods:** Take a long-term, relationship-oriented approach focused on building trust and advocacy. - **Sales Pods:** Take a shorter-term, results-oriented approach focused on efficiently qualifying leads and closing deals. ## **So are Sales and CS Pods different?** While both CS and Sales Pods leverage collaboration and shared expertise to achieve their goals, their core functions and success metrics differ based on the customer journey stage they address.  CS Pods focus on nurturing existing relationships and ensuring long-term customer success, while Sales Pods are laser-focused on acquiring new customers and driving revenue growth. --- # The Role of Pods in CSM Coverage Models: The Evolving Landscape *March 11, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/csm-pods/ The concept of “pods” in Customer Success Management (CSM) continues to evolve, offering a flexible approach to structuring CSM teams within an overall coverage model strategy. Here’s a breakdown of how pods can fit into your CSM coverage models: ## The Core Concept of Customer Success Pods At its core, a pod is a cross-functional team within a CSM organization. It typically consists of Customer Success Managers (CSMs), but may also include specialists from other departments such as: - Technical Account Managers (TAMs): Provide technical expertise and support. - Onboarding Specialists: Assist with customer onboarding and initial product adoption. - Solutions Architects: Offer solution design and implementation guidance. ## Pod Structures and Coverage Models Pods play a key role within your chosen Coverage Model, a framework that defines how resources are allocated to best serve customer segments based on their **Appropriate Experience (AX)**. There are two main pod structures that align with different coverage models: - **Account-Based Pods (AB Pods, or Task Force or Account Team) for High-value or Complex Segments:** Ideal for Coverage Models focused on **dedicated ownership**. Each pod is dedicated to a specific set of accounts, fostering deeper customer relationships and specialized knowledge. This aligns well with customer segments requiring a high-touch, relationship-focused AX. - **Skill-Based Pods (SBPs) for Scalable Segments:** Ideal for Coverage Models focused on **shared ownership**. Pods are formed based on specific skill sets, such as industry expertise or product specialization. This allows for efficient allocation of resources across a larger customer base and ensures customers receive the right expertise regardless of their specific account team. This aligns well with customer segments requiring a more scalable, self-service or async-heavy AX. ## Hybrid Pod Models for Flexibility Many organizations are adopting hybrid pod models that combine elements of both AB Pods and SBPs. This allows for greater flexibility and customization based on individual customer needs and team composition. For example, a Coverage Model might utilize: - AB Pods for high-value enterprise customers requiring dedicated CSM ownership and deep product expertise. - SBPs for mid-market customers with a mix of self-service needs and occasional high-touch interactions requiring industry or product specialization. ## Key Considerations for Pod Implementation - **Customer Needs:** Align pod structure with the specific AX requirements of your customer segments. - **Team Size and Skill Sets:** Ensure pods have the right mix of experience and expertise to support assigned customers. - **Communication and Collaboration:** Clear communication is crucial within pods, across pods, and with other departments. ## The Future of Pods in Customer Success Management As CSM practices evolve, we can expect further refinement of pods within coverage models: - **Dynamic Pod Composition:** Pods might adapt their composition based on real-time customer needs, leveraging technology and automation to optimize resource allocation. - **The Rise of AI:** AI-powered tools can assist pods by automating routine tasks, providing data-driven insights, and facilitating proactive customer engagement. - **Metrics-Driven Optimization:** Organizations will increasingly track pod performance using relevant metrics to continuously optimize pod structure and resource allocation within the chosen Coverage Model. By understanding the role of pods within CSM coverage models, you can design a structure that optimizes team effectiveness, delivers exceptional customer experiences, and caters to the specific AX requirements of your diverse customer segments. --- # Pooled CSMs: Benefits, Challenges, and Requirements for Success *March 11, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/csm-pool/ The concept of pooled CSMs, where a pool of CSMs manage a portfolio of customers without dedicated account ownership, has emerged as an alternative approach to CSM org design. Here’s a breakdown of the current thinking on pooled CSMs, including the key requirements for success. ## Potential Benefits of Pooled CSMs - **Scalability:** Pooled CSMs can effectively manage a larger customer base, making it efficient for companies with a high volume of lower-touch accounts. - **Standardized Support:** Customers receive consistent support practices and knowledge base expertise from any available CSM in the pool. - **Resource Optimization:** CSMs can focus on specific tasks within their skillset, potentially leading to increased efficiency. - **Workload Balancing:** Workload is evenly distributed among CSMs in the pool, reducing the risk of burnout. ## Potential Challenges of CSM Pools - **Relationship Building:** The lack of dedicated CSM ownership can make it challenging to build strong, long-term customer relationships. - **Context Switching:** CSMs may need to spend more time understanding customer context when interacting with new accounts, potentially impacting efficiency. - **Accountability:** Diffusion of ownership can make it difficult to pinpoint accountability for customer success or failure. - **Appropriate Experience (AX):** Some customers may prefer the stability and continuity of a dedicated CSM and not having that would violate their AX. ## Requirements for Success in a Pooled CSM Model - **Centralized Customer Data:** A single source of truth for all customer data (CRM, usage data, support tickets) is crucial for CSMs to quickly understand customer context and deliver consistent support. - **Queue Management System:** A system to efficiently distribute incoming customer requests (phone calls, emails, chat) to available CSMs in the pool ensures timely responses and minimizes wait times. - **Automation Tools:** Automating routine tasks (e.g., onboarding emails, password resets) frees up CSM time for higher-value interactions and personalized support. - **Knowledge Base & Playbooks:** A robust knowledge base with clear, concise articles and standardized playbooks equip CSMs with the necessary information to effectively support a variety of customer segments. - **Performance Tracking & Reporting:** Metrics that track key performance indicators (KPIs) such as customer satisfaction (CSAT), customer lifetime value (CLTV), and resolution times help identify areas for improvement within the pooled model. - **Collaboration Tools:** Real-time collaboration tools (e.g., internal chat, team notes) enable CSMs to share customer context, insights, and best practices within the pool, ensuring consistent and informed interactions. ## The Ideal Use Case for CSM Pools Pooled CSMs are best suited for organizations with a large number of low-complexity accounts with an AX heavily-weighted toward Async or Self-service.  These are typically customers with: - Standardized needs that can be addressed through well-defined processes and knowledge bases. - Limited interaction frequency requiring less in-depth customer understanding. *(note how what the customer pays is not a consideration here)* ## The Rise of Hybrid Engagement Models Similar to pod structures, many organizations are adopting hybrid models that combine aspects of both dedicated and pooled CSM approaches. This allows for: - **Tiered Support:** High-value or complex accounts can be assigned dedicated CSMs, while lower-touch accounts are managed by a pool. - **Phased Approach:** Customers may transition from pooled support to dedicated CSM ownership as their needs evolve. ## The Future of Pooled CSMs The future of pooled CSMs likely involves: - **Technology Integration:** Leveraging technology to streamline customer interactions (omnichannel support), knowledge sharing, and context capture within the pool. - **Performance Tracking:** Implementing advanced metrics to track the effectiveness of the pooled model and identify areas for improvement (e.g., sentiment analysis in support tickets). - **Customer Segmentation:** Refining customer segmentation based on factors like AX, industry, and product usage to ensure pooled CSMs are equipped with the necessary knowledge to support specific customer segments effectively. **In conclusion, pooled CSMs offer a viable CSM org design option for specific scenarios. By understanding the advantages and limitations, implementing the necessary requirements for success, and potentially adopting a hybrid approach, organizations can leverage pooled CSMs to achieve scalability and efficiency while mitigating potential challenges.** --- # Beyond Touch Levels: Scaling Customer Success through Appropriate Experience (AX) *March 9, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-touch-levels/ There’s no such thing as a ‘tech-touch’ or ‘high-touch’ customer. There are only customers and their Appropriate Experience (AX). This is the modern take on Customer Success Management that leaders of world-class CS organizations operationalize around. While traditional approaches often relied on **revenue-based customer segmentation**, leading to inconsistent experiences and inefficiencies, AX prioritizes **individual needs and goals, allowing for efficient scaling by logically segmenting – and allocating appropriate resources to – customers based on shared AX.** Here is a deep-dive on [AX-based Segmentation](https://sixteenventures.com/coverage-segments). ## **The Pitfalls of Revenue-Based Segmentation:** - **Ignoring Individual Needs:** Categorizing customers solely by what they pay disregards their unique **journey, preferences, and desired level of engagement**. A high-paying customer might thrive with what has historically been seen as a **tech-touch** experience, while another, regardless of their spending, might require consistent **high-touch** engagement to achieve success. - **Creating Entitlement and Churn:** The perception that high-paying customers “deserve” more, regardless of their AX, can foster entitlement and dissatisfaction if their expectations aren’t met. This leads to churn, contraction, and hinders long-term growth. - **Unsustainable Resource Allocation:** Focusing solely on revenue can lead to **overburdened CSMs** managing too many “low-touch” customers or **underutilized CSMs** with “high-touch” clients who don’t require constant engagement. ## **The Power of the Appropriate Experience (AX):** - **Individual-Centric Approach:** AX prioritizes understanding each customer’s **unique journey, needs, and preferences**. This involves actively listening, gathering feedback, and tailoring the experience accordingly. - **Focus on the Entire Journey:** AX goes beyond individual touchpoints and encompasses the **entire customer journey**. It considers pre-purchase interactions, the product itself, and all post-sale touchpoints across various channels. - **Dynamic and Data-Driven:** AX acknowledges that customer needs and expectations **evolve over time**. By leveraging data and feedback, we can constantly evaluate and refine the experience to meet their evolving needs at each stage. ## **Addressing Counterpoints:** - **Customers Paying Different Amounts:** While AX doesn’t directly consider payment, it acknowledges **customer expectations** based on their investment. If a customer expects a certain level of engagement due to their spending, incorporating that expectation into their AX can lead to a more satisfactory experience. - **Profitability and Customer Fit:** The concept of **[Success Potentia](https://sixteenventures.com/success-potential)l** identifies “Bad Fit” customers who don’t meet certain criteria, including having the resources or willingness to pay for the level of support they require. In such cases, it’s sometimes necessary to **avoid doing business** to ensure sustainable growth and avoid setting both customer and CSM up for failure. ## **Capacity Planning through AX:** By embracing AX, we unlock the potential for **improved capacity planning and resource allocation**. Here’s how: - **Matching Needs with Resources:** AX helps match the **level of engagement** with the **customer’s specific needs**, not just their revenue tier. This ensures CSMs aren’t overloaded with “low-touch” customers requiring minimal support or underutilized with “high-touch” clients. - **Identifying “Good Fit” Customers:** The **Success Potential** framework, informed by AX criteria, helps identify customers with the **ability and willingness** to receive the level of support needed. This allows for **proactive capacity planning** and avoids dedicating resources to customers unlikely to succeed. Here’s a deep-dive on Capacity Planning for Customer Success. ## **Conclusion:** Moving beyond “tech-touch” and “high-touch” labels and embracing the AX signifies a paradigm shift in CSM. By prioritizing the individual customer journey, setting realistic expectations, and focusing on **delivering value based on needs** regardless of spending, we can create **win-win situations for businesses and customers**. This not only fosters **long-term success and ethical growth** but also unlocks the potential for **improved capacity planning and efficient resource allocation**, leading to a more **sustainable and scalable CSM operation**. --- # The Goal Discovery Framework for Customer Success Management *March 9, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/goal-discovery-framework/ In the realm of Customer Success (CS), understanding customer goals is the cornerstone of building meaningful relationships and driving long-term value. Traditional customer interactions often involve direct communication, allowing for immediate clarification of needs.  As I’ say all the time: No Goals. No Customer Success. Know Goals. Know Customer Success. ## The Goal Discovery Framework for Customer Success The Customer Success **Goal Discovery Framework** offers a comprehensive approach specifically tailored for **asynchronous and self-service environments**. It utilizes the **“5 Ws and 1 H”** to provide a clear roadmap for uncovering customer goals: - **What:**This focuses on identifying the **specific, actionable goals** the customer aims to achieve. Examples could be “increase sales by 20%” or “improve customer satisfaction score by 5 points.” - **When:** Define the **desired timeframe** for achieving the goal. Understanding the customer’s urgency helps prioritize support and measure progress. Examples include “within Q3” or “by the end of the year.” - **Why:**This delves deeper than the “what” and explores the **reasoning behind the goal**. Uncover the **consequences** of not achieving the goal and the **desired outcomes** the customer hopes to achieve. This is where the magic happens – understanding the “why” fuels your ability to tailor solutions and demonstrate the specific value your product or service offers. - **Who:** Identify the key **stakeholders and individuals** involved in achieving the goal. This could include internal teams (marketing, sales) or external collaborators. Understanding who’s on board helps provide the most relevant support and ensure alignment. - **Where:** Establish the customer’s **starting point**. Are they using a competitor’s product? Do they have prior experience with similar solutions? Knowing their baseline helps you tailor your approach and bridge the gap between their current state and their desired outcome. - **How:** This outlines the **steps the customer needs to take** to achieve their goals. However, the preferred implantation of this Framework goes a step further, encouraging outlining **both** the customer’s actions **and** the support you can offer to help them succeed. ## **Benefits of Utilizing the Goal Discovery Framework:** - **Deeper Customer Understanding:** By uncovering the “why” behind the “what,” you gain a deeper understanding of the customer’s motivations and desired outcomes. This allows you to tailor your communication, support, and product recommendations to their specific needs. - **Improved Customer Engagement:** Taking the time to understand customer goals fosters a collaborative environment and demonstrates your genuine interest in their success. This leads to stronger customer relationships and increased engagement. - **Measurable Impact:** When goals are clearly defined with timeframes, it becomes easier to track progress and measure the impact of your efforts. This data-driven approach allows you to continuously refine your strategies and optimize customer success initiatives. ## **Implementing the Framework in Asynchronous & Self-Service Models:** While traditional face-to-face interactions allow for on-the-spot goal discovery, asynchronous and self-service models demand a more strategic approach. Here are some strategies to leverage the Goal Discovery Framework in these environments: - **Conversational Engagement:** Design your communication channels (chat, email) to facilitate a **multi-part goal discovery process**. Provide context reminders and follow-up steps to keep users engaged without feeling overwhelmed. - **Data & Analytics:** Leverage user data and common customer challenges to **pre-populate goal suggestions**. Continuously refine these suggestions based on user interaction and success patterns. - **Interactive Content & Assessments:** Develop quizzes or interactive guides that help users identify their specific goals through a series of questions and choices. - **In-App Guidance & Nudges:** Offer relevant goal suggestions based on user activity within the product, and provide progress updates and gentle reminders to keep them on track. ## **Conclusion:** By adopting the Goal Discovery Framework and tailoring it to your specific customer interactions, you can unlock the power of understanding customer goals. This deeper understanding forms the foundation for building strong relationships, delivering exceptional customer experiences, and driving long-term customer success in today’s asynchronous and self-service customer landscape. --- # Storytelling in Customer Success: Use the Power of Goal Discovery *March 9, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/storytelling-in-customer-success/ The Goal Discovery Framework is an invaluable tool for storytelling in customer success, enabling you to demonstrate value beyond the traditional focus on Return on Investment (ROI).  By combining data, storytelling, and this framework, Customer Success Managers (CSMs) can effectively showcase the true value proposition of their product or service. Here’s how to apply the Goal Discovery Framework for compelling storytelling: ## The Power of “Why” in Storytelling: While the [Goal Discovery Framework](https://sixteenventures.com/goal-discovery-framework) helps us identify the “What” (goals) and “When” (timeframes), understanding the “Why” (underlying motivations and challenges) is the key to crafting compelling narratives for customer success. Focusing solely on the “what” and “when” can lead to generic and uninspiring stories. However, by delving deeper into the customer’s motivations, aspirations, and unique challenges, we unlock the true power of storytelling. ## Unlocking the “Why” Drives Motivation: Understanding the “why” allows us to: - Personalize the narrative: By connecting with the customer’s underlying motivations, we can tailor the story to resonate with their specific needs and desires. - Evoke emotions: Highlighting the customer’s journey, struggles, and eventual success through your solution taps into their emotions, creating a stronger connection and fostering empathy. - Motivate action: By illustrating the positive outcomes achieved through your solution, we inspire potential customers to take action and realize the similar benefits for themselves. ## Leverage the Framework to Gather Compelling Data: Define the “Before” Scenario: Utilize the framework to understand the customer’s initial goals and challenges before they adopted your product or service. This paints a clear picture of the starting point and potential obstacles overcome. Quantify the Impact: Leverage data and metrics collected during the discovery process to quantify the positive impact your solution has had on the customer’s goals. Focus on metrics that directly relate to the initial goals identified, showcasing the improvements achieved. Identify “aha!” Moments: Capture and highlight key milestones or turning points in the customer journey. These moments demonstrate the tangible progress made and the positive shift the customer experienced through your solution. ## Craft a Narrative that Resonates: Tailor the Story to the Audience: Consider the specific audience you’re targeting for your story (potential customers, existing customers, internal stakeholders). Tailor the language, level of detail, and specific metrics to resonate with their needs and interests. Focus on the “Human Element:” While data and metrics are important, don’t neglect the human element of the story. Include quotes, testimonials, or anecdotes from the customer directly, showcasing their voice and perspective on the positive impact achieved. Clearly Articulate the “After” State: Effectively portray the positive outcome achieved by the customer after using your solution. This highlights the value delivered and demonstrates how it surpasses the initial ROI focus. ## The Impact of This Storytelling Approach: By leveraging the Goal Discovery Framework to gather data and craft compelling narratives, you can showcase value beyond ROI in a way that is: - Data-driven: Supported by relevant metrics and insights. - Human-centric: Connects with the audience on an emotional level. - Memorable: Creates a lasting impression of the positive impact your solution delivers. By prioritizing and effectively communicating the “why” alongside the “what” and “when”, you can create powerful narratives that resonate with your audience, demonstrate the true value beyond ROI, and ultimately drive motivation and engagement. This approach fosters stronger customer relationships and positions your product or service as a trusted partner in achieving their desired outcomes. --- # Customer Success Scaling: Capacity Planning and Resource Allocation *March 9, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-capacity-planning/ Customer success leaders constantly grapple with questions about **resource allocation**: “How many CSMs do we need?” “What happens with increased sales or customer upgrades?” While headcount is important, it’s crucial to go beyond just numbers and truly **understand customer needs**. ## **Beyond Sales Forecasting: The Challenge of Capacity Planning** Unlike sales forecasting, capacity planning in customer success considers the **time and resources** required to deliver the **Appropriate Experience (AX)** at each stage of the customer journey. This includes onboarding, expansion, and renewal phases. Here’s why it’s a different ball game: - **Customer Needs Matter Most:** Basing headcount solely on sales metrics can be misleading. We need to understand the **AX for each customer segment** – the level of engagement needed for their success. This can be influenced by factors like customer size, complexity, contractual obligations, and their self-sufficiency with the product. ## **A Holistic Approach: Lifecycle Capacity Planning** Effective capacity planning requires a **lifecycle perspective** that goes beyond static headcount calculations. Here are key pillars to consider: - **Lifecycle Stage Thresholds:** Define thresholds for the amount of CSM time dedicated to specific stages (onboarding, renewal, expansion). This helps identify areas where **dedicated resources** are needed. - **Time per Stage:** Determine the **average time** required per customer per stage to deliver the desired AX. Consider factors like complexity and required touchpoints at each stage. - **Customer Flow:** Account for **inflows and outflows** of customers at different stages to **forecast future needs**. This includes anticipating changes due to new customer acquisition, upgrades, and churn. ## **Developing Your Capacity Planning Strategy** While a pre-built calculator might seem convenient, a more comprehensive approach involves: - **Segmenting Calculations:** Analyze capacity needs for [**different customer segments** with varying AX requirements](https://sixteenventures.com/coverage-segments). This ensures resources are allocated based on individual segment needs. - **Forecasting Changes:** Factor in **projected changes** like new customers, upgrades, and churn to **proactively adapt resource allocation**. This enables you to anticipate future needs and avoid resource shortages. - **Data-driven Insights:** Leverage **customer data and feedback** to refine AX definitions and time estimations per stage. This ensures your planning is data-driven and adapts to evolving customer needs. ## **Building a Sustainable Model: Beyond the Numbers** The capacity planning process goes beyond calculations. Here are additional considerations for building a sustainable model: - **Alignment with Sales and Marketing:** Ensure alignment between customer success goals, sales forecasts, and marketing strategies. This avoids unrealistic expectations and creates a **cohesive customer experience** across the entire journey. - **Scalability and Efficiency:** Design a **scalable model** that adapts to growth while focusing on **optimizing existing resource utilization**. This ensures your resources can handle future expansion without sacrificing quality. - **Investing in CSM Development:** Continuously develop your CSMs through **training and coaching**. This enhances their effectiveness in delivering the AX and ensures they have the skills to support your evolving customer needs. ## **Conclusion:** By integrating the concept of AX and embracing a **lifecycle-focused approach** to capacity planning, customer success leaders can ensure **efficient resource allocation, maintain sustainable growth, and ultimately deliver an exceptional customer experience.** This ensures every customer receives the right level of support at the right time, fostering long-term success and loyalty. --- # Bridging the Engagement Gap: Keeping Customers Actively Invested *March 9, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/keeping-customers-engaged/ **Did you know that a significant portion of your customers, even those who seemingly appear satisfied, consider exploring alternatives before renewing their contracts?** This statistic highlights a crucial reality in today’s competitive SaaS landscape: **customer engagement is no longer a luxury, it’s a necessity for survival.**  While initial excitement can fuel product adoption, **failing to keep customers actively engaged throughout their journey** can lead to **increased churn, downsized contracts (where customers reduce their subscription level), and ultimately, lost revenue.** This is where **bridging the engagement gap** becomes critical. By fostering continued customer involvement, you can transform passive users into invested partners, driving long-term success and mutual benefit. ## **The Power of Goal Discovery:** Before diving into engagement strategies, let’s revisit the crucial role of **goal discovery**. As the text emphasizes, powerful conversations and successful relationships are built on a foundation of understanding the customer’s **goal**. The **[Goal Discovery Framework](https://sixteenventures.com/goal-discovery-framework)** provides a structured approach to uncovering this vital information through the “**5 Ws and 1 H**“: - **What:** Specific, actionable goals (e.g., “increase sales by $500k ARR”). - **When:** Defined timeframe for achieving the goal (e.g., “by Q1 end”). - **Why:** The reason the goal matters to the customer and the consequences of not achieving it (e.g., “funding round contingent on reaching $5M ARR”). - **Who:** Stakeholders and team members involved in achieving the goal (identified using a **RACI Matrix**). - **Where:** The customer’s starting point (e.g., using a competitor’s product or starting from scratch). - **How:** Steps to achieve the goal, encompassing: Customer’s actions inside and outside the product. - Your actions inside the product and behind the scenes (potential pro-active support). By employing this framework, you can effectively **co-create success plans** tailored to each customer’s unique needs and aspirations. This collaborative approach fosters trust, ownership, and a **shared vision of success**. ## **Strategies for Bridging the Engagement Gap:** Once you have a clear understanding of the customer’s goals, you can implement the following strategies to keep them actively engaged: - **Personalized Communication Channels:** Tailor your communication to their preferred channels (email, social media, etc.) and leverage customer data to ensure messages are relevant and timely. This not only keeps them informed but also shows you value their individual preferences. - **Value-Driven Gamification:** Implement **game mechanics** that **recognize and reward customers for taking steps towards their goals**. For example, awarding points for completing product tutorials or badges for achieving milestones can motivate customers and make the learning process more enjoyable. Remember, **testing and iterating** on these elements is crucial to ensure they are effective and aligned with customer needs. This approach not only increases engagement but also reinforces the value proposition of your product. - **Foster a Sense of Community:** Build online forums, user groups, or webinars to create a space for peer-to-peer learning and foster a sense of belonging. This can help address the “downsizing” issue as engaged customers are more likely to see the value in maintaining their current subscription level to stay connected and benefit from the community. - **Prioritize Value Delivery:** Regularly assess customer needs and proactively address challenges. Offer resources like educational content and personalized recommendations to maximize their product experience. This demonstrates ongoing value and helps customers achieve their goals, reducing the likelihood of them seeking alternatives. - **Solicit Feedback and Take Action:** Regularly seek customer feedback through surveys, interviews, or in-app tools. Demonstrate that their voices are heard and valued by incorporating valuable feedback into your roadmap and communication strategies. This not only shows you care about their experience but also allows you to identify areas for improvement that can prevent future churn and lost revenue. By implementing these strategies, you can move beyond the initial hype and foster sustained customer engagement, ultimately building stronger and more successful customer relationships. Remember, **engaged customers are not just users; they are active participants and invested partners in your journey to mutual success.** --- # Stop! Don't send that email yet. (Do this) *January 11, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/stop-dont-send-that-email-yet-do-this/ You know that meme that says your job is mostly sending emails? That's not a meme. That's actually your job. If you're going to send emails - and you are, a lot - make sure the emails you send actually **engage the recipient.** ## The One Check That Changes Everything Run this check on that email you're about to send. Or the next one if I didn't catch you in time. **Is it clear what's in it for them if they take the action you're asking them to take?** Think about the asks you make in emails every day: - Attend this meeting. - Go to this webinar. - Do this thing in the app. - Review this document. - Fill out this survey. Now ask yourself: what happens if they do that thing? **From their point of view, not yours.** ## WIIFT: The Framework That Matters What's in it for them? **WIIFT.** This isn't a nice-to-have. This is the difference between emails that get action and emails that get archived. Most CSM emails read like this: "Hi, just checking in. Can we schedule a call to review your usage?" That's a WIIFM email - What's In It For Me. You want the meeting because you need to hit your engagement metrics or prep for a QBR. A WIIFT email reads differently: "Your team's adoption of [feature] jumped 30% this month. I have two ideas that could help you get even more value from it. Worth a 15-minute call?" Same ask. Completely different framing. One centers you. The other centers them. ## The Cost of Getting This Wrong If you can't answer WIIFT clearly, **don't send the email.** Here's why this matters more than you think. Every email you send that doesn't clearly communicate value to the recipient trains them. It trains them to ignore you. It trains them to see your name in their inbox and think "I'll get to that later" - which means never. Once a customer learns to ignore your emails, you've lost one of your most important engagement channels. And you did it to yourself. **Rewrite that email until WIIFT is clear.** Every single time. No exceptions. Make it a habit and watch your response rates transform. Your customers will actually look forward to hearing from you because they know your emails deliver value, not busywork. --- # CSMs: Do these 3 things this week *January 2, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/csms-do-these-3-things-this-week/ Most CSMs start a new quarter the same way they ended the last one. Same habits. Same cadences. Same results. That is a problem. The landscape shifts constantly. Your executive team changes priorities. Your customers' needs evolve. If you are not recalibrating regularly, you are falling behind without realizing it. Here are three things you should do this week to get ahead. ## 1. Sync with Your Head of CS Your executive team has likely shifted their measure of success from **Growth to Efficiency**. That means your Head of CS is making that shift, too. You need to understand how they are going to measure your success as a CSM to fit this new reality. What metrics matter now? What does "good" look like this quarter versus last quarter? **Do not wait for your boss to come to you with this.** Be proactive. Schedule the meeting yourself. Ask the hard questions. The CSMs who thrive are the ones who understand how their work connects to what leadership actually cares about. ## 2. Evaluate Your Portfolio Get brutally clear on the state of every customer in your book of business. Segment them into four categories: - **Bad-fit customers** - those lacking Success Potential who will never get full value from your product - **At-risk customers** - showing signs of disengagement or dissatisfaction - **Expansion-ready customers** - on track to grow their usage and spend - **Advocate candidates** - your happiest, most successful customers Communicate this clearly to your Head of CS. They need to understand both the upside potential and the downside risk of the customers you have been assigned. This also protects you from being punished for outcomes that are outside of your control. ## 3. Identify Your Biggest Risk and Act on It Look at your portfolio and find the single biggest risk. The customer most likely to churn. The renewal that is coming up with no engagement. The account that has gone silent. Now do something about it. **Today.** Not next week. Not when it shows up on a report. Right now. The CSMs who consistently retain and grow their accounts are not the ones with the best customers. They are the ones who **act before problems become crises**. These three actions are simple. They are not glamorous. But they are the difference between starting the quarter in control and spending the next 90 days reacting to everything. --- # Heads of CS: Do these 3 things this week *January 2, 2024 · by Lincoln Murphy* Source: https://sixteenventures.com/heads-of-cs-do-these-3-things-this-week/ If you lead a Customer Success team, the start of a new quarter is not the time to coast. It is the time to recalibrate. Your executive team is shifting priorities. Your board is asking different questions. The metrics that mattered six months ago may not be the metrics that matter now. Here are three things you should do this week. ## 1. Sync with Your Executives and Your Team Your executive team has likely shifted their measure of success from **Growth to Efficiency**. As Head of CS, you need to make that shift, too. This means ensuring that how you measure the success of your CSMs and other contributors **aligns with, and rolls up to, the metrics your leadership team has shifted to.** Then sync with your team immediately. They need to understand how their success will be measured. If your CSMs are optimizing for metrics that no longer matter to the business, everyone loses. You. Them. Your customers. Do not let your team operate in the dark. **Clarity is a leadership obligation.** ## 2. Capacity Planning Regardless of your customer segmentation model - whether it is a legacy ARR-based approach or a more modern AX-based model - there are a number of person-hours required to ensure each customer is successful. Those hours vary across lifecycle stages. Get clear on this. **Map the actual capacity required against the capacity you have available.** Make sure you have the appropriate number of resources to deliver success for your current and projected customer base. If you do not, you need to know that now, not three months from now when churn starts spiking and your team is burned out. ## 3. Audit Your Segmentation Model When was the last time you questioned whether your segmentation model actually reflects reality? Most CS teams segment by ARR or company size. That tells you almost nothing about the effort required to make a customer successful. **A $50K ARR customer with a simple use case might need less attention than a $10K customer with a complex deployment.** If your segmentation does not account for this, your CSMs are spending time in the wrong places. Look at your segments. Ask whether they are driving the right behaviors and the right resource allocation. If not, fix them before the quarter gets away from you. Three actions. None of them are glamorous. All of them are the difference between leading your team and just managing a spreadsheet. --- # 'Tis the season to ignore your emails (right?) *December 22, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/tis-the-season-to-ignore-your-emails-right/ ## The Holiday Email Myth "Your customers are checked out for the rest of the year." "You just can't get their attention around Christmas and New Years." **Lies.** That's not true. If you're reading this right now, you're the proof. And I'm willing to bet you're reading this because the topic matters to you - not because you have nothing better to do. ## The Signal in the Noise Here's what most companies miss about holiday engagement. The people who open your emails, read your content, and engage with your product during the holidays aren't just random stragglers. They are your **most serious** audience. Think about it. Everyone who's casually interested has already checked out. The holiday noise has filtered them away. What you're left with is a concentrated group of people who care enough about the topic to engage during the most distraction-heavy time of year. That's not a problem. **That's a gift.** ## Why You Should Lean In, Not Pull Back Most companies go silent in late December. They assume nobody's paying attention, so they stop communicating. They pause campaigns. They hold content until January. This is exactly backwards. When your competitors go quiet, your signal gets louder. The inbox is less crowded. The people who are still engaged are **more receptive**, not less. If you think everyone's just out partying and checked out entirely, you'll miss the chance to engage with probably your most serious customers and prospects. ## Apply This Beyond the Holidays This principle extends way beyond December. Any time conventional wisdom says "people aren't paying attention" - summer slowdowns, long weekends, end of quarter - the same dynamic applies. The crowd thins out. But the people who remain are **disproportionately valuable.** Your job isn't to follow the crowd and go silent when everyone else does. Your job is to recognize that **lower volume often means higher intent.** The best time to reach your most engaged customers? When everyone else has decided it's not worth trying. Don't leave that opportunity on the table. --- # You Cannot Buy Advocacy *October 25, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/advocacy-flywheel-social-proof/ **Updated July 2026.** Consolidated from several shorter posts on advocacy into one piece, and it now includes the part that was missing from all of them. The question that started this: how do you get customers to see the value in being an advocate? What is in it for them? That question is doing more work than it appears to, because underneath it is the reason most Customer Success teams never touch advocacy at all. ## What Advocacy Actually Is Referrals. References. Reviews on third-party sites. Logos on your homepage. Testimonials, case studies, customer stories on video. Even the paid influencer, transparent as it usually is. All of it is one thing: [social proof](/social-proof/), generated by your customers, on your behalf. Cialdini did not invent the concept but he is the reason most of us can name it. The mechanism is that people decide what to do by looking at what people like them already did. Which is why advocacy is not only an acquisition asset. Social proof moves your existing customers too. A customer who sees a peer doing more with your product now knows more is possible. ## Why Customer Success Teams Avoid It Four objections, and they arrive in this order. **Is this even my job?** Marketing usually owns advocacy programs. But Customer Success talks to more customers, more often, at closer range. Marketing is frequently the furthest team from the person whose story you want. **It does not help us.** Advocacy gets filed as a new-logo activity, which makes it someone else's number. That is a misread, and the section above is why. **We tried it and it did not work.** Usually true. Usually because it was done in the way described below, which does not merely fail, it costs you something. **I do not want to bother my customer.** This is the real one. The other three are rationalizations stacked on top of it. And notice that the last objection is the question restated. If you do not know what the customer gets out of it, then asking feels like taking, so you do not ask. ## The Same Ask, Two Ways Here is the whole thing, and it is worth sitting with because the difference is almost entirely phrasing and timing. **Version one.** A customer hits the goal they came to you for. You go to them and say: I saw you hit the result you were after, congratulations. I remember when you were evaluating options you were reading reviews on that site. Now that you have actually gotten the outcome, would you consider leaving one? You are under no obligation. I just think it would genuinely help the people who are where you were a year ago. They leave it. Then you come back: I read your review, it was excellent, and the way you described it came up internally. We are putting a customer panel together at our event. Would you want to tell that story on stage? You now have a customer who will stand in front of a room of your prospects and talk about their own success. **Version two.** Same customer, same moment. You say: congratulations on hitting your goal. I would love to offer you a spot on stage at our event. If you could leave us a positive review first, I can open that spot up for you. You just took a customer who was successful and felt good about you, and turned the relationship into a transaction. Good luck with that. Everything that made version one work is gone. The ask is no longer about them, the outcome is no longer the reason, and you have priced something that was being offered freely. That is earned advocacy against incentivized advocacy, and in nearly every case the gap between them is not strategy. It is the sentence you chose and the moment you chose it. ## Earned Means the Outcome Comes First The timing in version one is not decorative. The ask lands after the customer achieved something, and it references the specific thing they achieved. Which means advocacy is downstream of [the customer actually succeeding](/success-milestones/). If they have not gotten a result, there is nothing to ask about, and any ask you make will feel exactly as extractive as you feared it would. The discomfort people have about bothering customers is well-calibrated. It is just aimed at the wrong step. ## It Is a Flywheel, Not a Campaign Most advocacy efforts are launched as a program with a start date, a target number of reviews, and an end. That framing guarantees the incentivized version, because a campaign with a quota needs volume by a deadline, and earned advocacy does not arrive on schedule. It arrives when customers hit outcomes. Run it as a loop instead. A customer succeeds, you notice, you ask, they advocate, that proof reaches someone who becomes a customer or an existing customer who now sees what is possible, and some of those succeed. Each turn makes the next easier, which is what a flywheel is and why it beats a funnel here. Funnels end. ## Who Owns It The ownership question gets answered as a campaign question, which is why it keeps getting handed to whoever has capacity. Owning a strategy is not the same as running a campaign. Someone has to own the outcome, meaning the flywheel exists, turns, and produces. That person needs visibility into which customers just succeeded, which is Customer Success whether or not Customer Success executes the asks. Marketing can produce the assets. Only the team watching milestones knows when to ask. ## A Note on the Promoter Question Advocacy conversations reach surveys quickly, so worth being precise. Net Promoter Score has promoter in the name and people skip past it. The question asks how likely someone is to tell a peer. It measures how they feel about the experience, which is closer to satisfaction than to achievement. A high score means somebody raised their hand. It does not tell you they got the outcome they came for. Use it as one input. A raised hand is a useful signal about willingness. It is not evidence of the success that makes the ask land. ## What to Do With This Stop running advocacy as a quarterly push. Watch for customers reaching outcomes, and treat each one as the moment the ask becomes available. Make the ask about them. Reference the specific result. Give them a genuine out. Never attach a condition to it. And if asking still feels like bothering them, check whether the customer has actually succeeded yet. If they have not, your instinct is correct and the problem is upstream of advocacy entirely. --- # From KPIs to Connection: Transforming Metrics Into Meaningful Relationships *October 12, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/metrics-to-meaning/ Customer Success isn’t a monolith; it’s a symphony of moving parts. Think of it as a well-oiled machine with gears both large and small. The larger gears - your customer-level KPIs - offer those broad-stroke indicators that often make you nod in satisfaction. “Yes, we’re on the right track,” they seem to say. Then there are the smaller, more delicate gears - your user-level KPIs. They may seem insignificant but are incredibly vital in ensuring everything runs as it should. Let’s explore this, shall we? ## The Larger Gears: Customer-Level KPIs These are your birds-eye-view indicators. They are what you show your executive team when they want a snapshot of how well your Customer Success function is performing. They tell you things like the overall customer health score or [Success Vector](https://sixteenventures.com/success-vector), Net Revenue Retention (NRR), etc. They give you the destination: are you heading toward a sustainable, growth-oriented future, or are you on the brink of customer churn? ## The Smaller Gears: User-Level KPIs But a grand destination is meaningless if the journey is flawed. That’s where your user-level KPIs come in. These metrics, like user engagement, feature adoption rates, and customer support ticket trends, provide the tactical steps needed to reach your strategic objectives. They are your on-the-ground truths, telling you what is happening at the coalface of your product or service. ## The Synchrony: Goal Discovery Here’s where [Goal Discovery](https://sixteenventures.com/goal-discovery) enters as the maestro of this symphonic interaction. Knowing your customer’s goals isn’t a luxury; it’s a necessity. And not just any goals - real, tangible, actionable and measurable objectives with specific time frames. Goal Discovery ties the larger gears to the smaller ones, offering context to the metrics you track. It helps you understand not just what is happening, but why it’s happening and what needs to change or continue to reach those customer-defined successes. ## Connecting KPIs to Human Behavior To make impactful decisions, you must look at both levels of KPIs in the context of your customer’s goals. When these gears turn in synchrony, informed by a well-executed Goal Discovery process, you can expect a level of harmony and efficiency that’s music to any Head of Customer Success’s ears. --- # 5 Outdated Email Tactics You Need to Abandon in 2024 *October 8, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/email-tactics/ Whether you’re a Customer Success Manager (CSM), Sales Development Rep (SDR), or anyone tasked with engaging prospects or customers via email, you know all too well that sinking feeling. You craft an email, inject it with what you think are carefully tailored insights, and hit “send” with high hopes, only to be met with silence. That dreaded, ghosting silence.  Your attempts to engage seem to evaporate into the digital ether, leaving you questioning the effectiveness of your strategy, and worse, your ability to meet your targets. ## Email Doesn’t Work in 2024(?) Maybe you’ve heard it said, “Email doesn’t work as well anymore.” But the truth is, it’s not that email doesn’t work, it’s the way we’re using email that hasn’t adapted to the ever-evolving consumption patterns of inbox users. As we step deeper into 2023, let’s reevaluate our tactics.  Let’s look beyond the superficial “personalizations” and unnecessary small talk that are failing to capture our prospects’ and customers’ attention.  It’s time to explore how we can revamp our email engagement strategies for the better. Here are 5 outdated email tactics you need to abandon in 2023 (and what to do instead): ## Email Tactic #1: Fake Personalization *What’s not working*: Just adding their name isn’t personalization. Email gurus still tell you that “[Fname].” is a great subject line. It is if you want your email ignored or marked as spam. Knowing their name takes zero effort and proves nothing to them. *What to do instead*: Truly personalize your emails. Tailor the content according to the customer’s interaction with your company. Referencing their last purchase or how they’ve used your service makes them feel understood and valued. ## Email Tactic #2: Interest Stalking *What’s not working*: The days of “oh, you like football, too. That’s crazy!” are over. Everyone knows how easy it is to find their interests and this does nothing but make you seem like you’re using outdated tactics. Email gurus still promote this, but the data doesn’t lie. *What to do instead*: Rather than focusing on their personal hobbies, concentrate on their professional interests and challenges. Offering valuable insights and solutions to their business problems will resonate more. ## Email Tactic #3: Unnecessary Small Talk *What’s not working*: Often based around “mutual interest” derived from the previous point, small talk is unnecessary and wastes the precious attention you somehow got. Get to the point! *What to do instead*: Start your email with a clear and concise statement about why you’re reaching out. Don’t beat around the bush – respect their time and get to the heart of your message quickly. ## Email Tactic #4: Using Tropes and Clichés *What’s not working*: I hope this email finds you well. No! The email does **NOT** find me well. All of those nonsense clichés and meme tropes are played out, look like spam, and waste the valuable attention you barely have. *What to do instead*: Use authentic, straightforward language that speaks to the reader’s needs. Avoid common email clichés and create a genuine human connection instead. ## Email Tactic #5: Ignoring Timing *What’s not working*: Inbox usage patterns have changed and the way people consume email is different than a few years ago. You have to be thoughtful about when your recipient might be in their email and will see your email. *What to do instead*: Use data to find out when your customers are most likely to read their emails. Send emails during those times to increase open rates and engagement. Use Inbox Placement triggers. ## Inbox Placement Triggers Activity-based – Action taken in-app, send them an emailOur Email-based – When your recipient engages with any other email from your companyDrop Email-based – When your recipient engages with an email sent to someone else’s listNetwork-based – When a recipient engages with an email sent from anyone in the network. If you’re interested in any of those things, [contact me](https://sixteenventures.com/lincoln-murphy-strategic-consultant) and we can set that up for you. ## Logical Next Step Now that we’ve exposed the five fundamental missteps in email engagement that are standing between you and your potential successes, it’s time to take decisive action. Sign up for the “[Email Engagement Formula: Driving Success at Every Stage of the Customer Journey](https://www.customergrowthlab.com/email-engagement-formula)” course today.  Let’s reimagine your email approach together and craft a strategy that resonates with your audience’s needs and preferences. It’s time to elevate your email game, get noticed, and drive meaningful connections at every stage of the customer journey.  Your next email could be the game-changer. Don’t miss out on the opportunity to make it count. --- # Nobody Asks How to Prove That Sales Matters *October 6, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/value-of-customer-success/ **Rewritten July 2026.** Expanded from a short answer, and the argument underneath it has sharpened considerably since. The question, as it gets asked: how do you show the importance of Customer Success to the wider team? Read it again and notice what it concedes. Nobody asks how to demonstrate importance unless they already suspect they are not seen as important. The question is a symptom before it is a question. So start with the version of it that never gets asked. ## Nobody Asks How to Prove Sales Matters You will not hear a VP of Sales ask how to make the company understand why Sales is important. Not because Sales is objectively more valuable. Because Sales carries a number, says so constantly, and behaves like an organization that owns an outcome. Now the part that stings. Sales is every bit as dependent on other teams as you are. Their close rate moves when Product ships or fails to ship. Their pipeline moves on Marketing's lead quality. Their win rate moves on pricing decisions they did not make. They do not respond to that by declining ownership. A head of Sales who sees Product blocking their number walks into Product and says fix this, it is costing us deals. Sees weak lead quality, walks into Marketing and says the same. They own the number and then advocate loudly for everything required to hit it. Customer Success says we cannot fully own net revenue retention, because we are at the mercy of Product and of the customers Sales brings in. Leadership hears that accurately, and concludes you do not own it. Both statements are true. Sales is at the mercy of other teams and owns their number anyway. That is the entire difference, and it is not a communication problem. ## The Belief Underneath Every Department's Version Before the department-by-department read, there is one misconception sitting under all of them: that Customer Success is a differently-shaped Support team. Assume that is what your colleagues believe, because it usually is. Nearly every specific objection below is a consequence of it, and I have sat in conversations where it went as far as questioning whether [Support and Customer Success](/customer-success-support/) were redundant and should be merged to cut headcount. ## Product Product often believes a good enough product does not need help. The engineering instinct: read the instructions, use the tool, what else would anyone need. Companies that self-describe as product-led hold this hardest, and it is worth knowing that the most successful ones run substantial Customer Success operations. Most of what gets labeled product-led growth is [a billing mechanism rather than a growth motion](https://ltvmax.com/posts/product-led-growth-without-the-growth). An upgrade button in account settings is not the product driving expansion. It is the product processing a decision somebody else caused. **What actually moves them.** Not a list of complaints. Lead with what they just shipped, because recency bias is real and last quarter's release is ancient history to the team that built it. Bring them use cases they have not seen: here are the customers using the new thing, and here are two ways they are using it that did not come up in the spec. Then say which of your accounts adopted it and which did not, and offer to explain why. That question is the hook. Once they want to know why the other hundred have not adopted it, you are no longer explaining Customer Success. You are demonstrating it. And put them on customer calls. Watching you work is faster than describing your work, and it kills the support assumption without a single argument. ## Finance Finance sees a cost center, and often that is not a perception failure. It is a reporting failure. They are looking at your fully loaded cost and finding no revenue line attached to it. Speak in the units they use. Two arguments land. **Forecasting.** If you can forecast retention from leading indicators rather than reporting it after the fact, you have become a planning input instead of an expense line. Finance cares about predictability more than almost anything. **Cost per dollar of revenue.** This is the strongest argument available and almost nobody makes it. Finance already knows what it costs to acquire a new customer. Ask what it costs to acquire *one dollar of revenue*, split by where the dollar came from. [A new-logo dollar typically runs 35 to 50 cents. An expansion dollar runs in the low teens. A renewal dollar runs single digits.](https://ltvmax.com/posts/the-rac-formula) Same dollar. A third of the cost or less, depending entirely on which team produced it. Once that comparison is on the table, the cost-center framing collapses without you having to defend it, because you are now the cheapest revenue in the building. ## Sales and Marketing Two versions here. The mild one is indifference: Customer Success has nothing to do with acquiring customers, so it is not relevant to us. The sharper one is that you are the team blocking deals by objecting to poor-fit customers. The reframe is arithmetic. A funnel needs hundreds at the top to produce a handful of new customers. Your existing base is [already qualified, already transacting, and already trusts you](https://ltvmax.com/posts/the-new-logo-reflex). Growth from that base does not compete with acquisition, it funds the selectivity that makes acquisition work better. Then the part that reframes the poor-fit argument entirely: [a customer who leaves because they outgrew you](/the-churn-doctrine-revised/) is a customer who told you exactly what they wanted to buy next, right before buying it somewhere else. That is not Customer Success being a buzzkill. That is Customer Success reading demand. ## Why This Persists Structurally One reason none of this self-corrects. Every other revenue motion has a loss attached. Sales has a stated quota, so missing it is a named variance. Churn is money you had and lost, and it turns something red. [Expansion has no loss in it at all.](https://ltvmax.com/posts/nobody-gets-fired-for-missing-expansion-revenue) No stated number, no variance, nothing visibly taken away. Every system reports normal. So the value of Customer Success stays invisible not because people are dense, but because nothing in the operating system is built to make it visible. You are asking to be recognized for preventing something that never announces itself and producing something nobody counted. ## Stop Explaining. Take a Number. Everything above helps. None of it settles the question, because the question is not settled by explanation. Take ownership of net revenue retention. Not shared ownership, not influence over, ownership. Then behave the way a head of Sales behaves about quota: state the number publicly, report against it, and when another team blocks it, go say so. That is uncomfortable precisely because you genuinely are dependent on Product, on Sales, on lead quality. So is Sales. They own it anyway, and it is the reason nobody asks whether they matter. And [a number needs a person](https://ltvmax.com/posts/who-owns-expansion-revenue), not a function. Customer Success owns it is not an answer, because a function cannot miss a target. Only a person can. The number underneath all of it is what your existing base should already be producing and is not. That is [latent revenue](https://ltvmax.com/posts/latent-revenue), and the day you can state yours out loud, this entire conversation ends. Not because you finally explained Customer Success well enough. Because you showed up with money. --- # Retention: Shifting from Reactive to Proactive to Stop Chasing and Start Leading *September 24, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/reactive-to-proactive-retention/ Let’s get real. You’re swamped, your team is overwhelmed, and you’re juggling the constant demands of retaining customers while chasing that elusive long-term success. You’re in firefighting mode - again. You know you need to shift from a reactive approach to a proactive one. Deep down, you feel the urgency, but the ‘how’ eludes you. It’s like being stuck in a loop. So, how do you break free? That’s what we’re diving into in this post. The inability to shift gears is more than just a tactical challenge; it’s a complex puzzle of resistance, skills gaps, and confidence that leaves even seasoned Customer Success Managers (CSMs) and Heads of Customer Success grappling for solutions. You’re not alone. So, let’s demystify the path from reaction to proactivity in customer retention. ## The Art of Deprioritization The first hurdle is to understand what’s truly essential and what’s not. Yes, every customer matters, but let’s face it: not every customer activity yields the same ROI. Deprioritization is not about neglecting your customers. It’s about auditing where your energy goes. Can you identify lower-impact activities that are eating up your time and move that focus to proactive efforts? A shift in focus frees up valuable resources, which allows you to delve into strategies that make a more significant impact in the long run. Think of it as judicious conservation of your team’s cognitive bandwidth. ## Establish Concrete Objectives Great, you’ve pruned the activities that were draining your team. Now what? Floating around aimlessly won’t do you any favors. You need concrete objectives. A common pitfall is setting vague or overly ambitious goals. Instead, specify what success looks like. It could be something like, “We aim for a 10% increase in proactive customer engagement by the end of Q2.” By defining your objective and the timeframe clearly, you’re no longer shooting in the dark - you’re laser-focused on a target that’s both tangible and achievable. ## Take High-Impact Actions Remember, proactivity for its own sake is a vanity metric. You’ve already deprioritized to make room for proactive efforts; now, make sure those efforts count. Every action should be mapped to customer outcomes - this is your guiding star. If the action doesn’t move the needle on customer success, it doesn’t belong in your proactive strategy. ## The Barrier of Resistance and Objective Confidence Change is never easy, and it’s always met with resistance. Couple that with the gaps in skills and confidence, and you’ve got a cocktail of challenges. What you need is a framework that serves as your team’s north star in times of change. That’s where a concept like “Objective Confidence” that I teach CS teams is so valuable. It empowers your team, fortifying their sense of belonging and competence. When your team feels confident, that feeling is communicated to the customers - a win-win for everyone involved. ## Celebrate Milestones, No Matter How Small If your team is used to getting that dopamine hit from the occasional saved customer, moving to a proactive approach might feel less gratifying in the short term. That’s why it’s crucial to celebrate progress milestones. It could be as small as transitioning a customer from one lifecycle stage to another. These victories matter; they accumulate and contribute to a broader success narrative. ## Data Visibility: The Unsung Hero Without visibility, your team’s efforts are akin to running in the dark. Data isn’t just numbers; it’s the story of your customer’s journey with your product. A powerful CSM platform can serve as your eyes, helping you track progress, monitor actions, and, most importantly, celebrate the wins that would otherwise go unnoticed. --- # Why High Usage Doesn’t Guarantee Customer Success *September 6, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/usage-customer-success/ **Updated July 2026.** The Success Gap definition below now matches the original 2015 treatment, and there is a new section at the end on why this surfaces in churn, contraction and expansion simultaneously. You’re feeling pretty good about your customer engagement metrics. The data shows that users are logging in daily, clicking around, and seemingly making the most of your platform. But hold on. Your churn numbers are still concerning. Contraction at renewal is creeping up. And expansion is way lower than it should be. Something doesn’t add up, right? You’re caught in what I call the “Usage Trap” - a deceptive metric that makes you think you’re doing great when you might be far from it. So why does high usage often translate to a false sense of security? Let’s break down this complex puzzle and guide you toward a more meaningful Customer Success strategy - one that actually impacts the bottom line. ## The Illusion of High Usage You might think that if a customer uses your platform a lot, they must be getting value from it. But here’s the kicker: usage does not equal value. We’ve seen instances where usage metrics were sky-high but led to customer burnout, feature fatigue, and, eventually, to churn. The reality is that usage can often be a vanity metric, seductive yet shallow in what it reveals about customer health. ## Success Gaps: The Silent Saboteurs Imagine a world where all your customers are using your product but not achieving their goals with it. What you have here is what we refer to as “Success Gaps.” The precise version, which I [defined back in 2015](/success-gap/): a Success Gap opens when your customer functionally completes the tasks your product requires, and still does not reach the outcome they came for. Not what you think success is against what they think it is. Task completion against actual result. It’s easy to think you’re doing a great job when users are active. Still, if their activity isn’t aligning with their ultimate goals, then you’re setting yourself up for a rude awakening. And believe me, that awakening usually comes in the form of churn or contraction. ## The Importance of Goal Alignment The key in this whole setup is understanding your customer’s goals. We’re not just talking about high-level, nonspecific objectives like “increase revenue by 20%” but more specific goals related to your product. Do they want to streamline their workflow? Enhance team collaboration? Save time on mundane tasks? And in what timeframe? Knowing this helps you create a contextual framework around those usage metrics. Essentially, without aligning with your customer’s goals, you’re sailing a ship without a compass. ## Intervening When Goals Aren’t Met Even with high usage, there’s a moment when you must intervene if you see that the goals aren’t being met. This is what separates World-class Customer Success teams from average ones. Don’t just look at the dashboard and think, “Hey, this customer is logging in every day; they must be happy.” Instead, think, “This customer is logging in every day, but are they achieving what they set out to achieve?” If they aren’t, it’s time to step in, see what’s going on, and course-correct where necessary. ## Updated July 2026: Why This Shows Up in Three Numbers at Once The original question behind this post was specific: usage is high, but churn, contraction and expansion are all going the wrong way. That combination is not three problems. It is one problem showing up in three places. A customer inside a Success Gap is completing tasks and not getting results. So there is nothing to renew enthusiastically, which is your churn number. There is no case for the seats or tiers they are carrying, which is your contraction number. And there is no reason on earth to buy more of something that has not yet produced the first outcome, which is your expansion number. This is also why usage is the wrong trigger for an expansion conversation. Activity is not readiness. The signal that a customer is ready for the next thing is a [milestone they have actually reached](https://ltvmax.com/posts/readiness-milestones), not a volume of clicks. Companies that run expansion off usage data end up making offers to people who are busy and stuck, which reads as tone-deaf and usually is. Worth pairing with the [churn quadrant](/classify-churn/) too. Success-Gap churn is avoidable, every time, and it very often arrives unexpected, because the dashboard was green the whole way down. That is the worst square on the grid, and high usage is what puts you there. ## Metrics Are Good, But Context Is King No metrics exist in a vacuum. Success is always multifactorial. It’s crucial to interpret usage within the broader context of customer goals and expectations. This doesn’t mean you should abandon tracking usage or other activities; they’re essential, but not sufficient on their own. Usage is like the pulse of your customer - important, yes, but it doesn’t give you the full health report. For that, you need context, dialogue, and the ability to connect the dots between different kinds of data. --- # Scaling Your Customer Success Team Without Losing Control *August 30, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/scaling-cs-team/ You’ve built your Customer Success team from the ground up, and you’re rightfully proud of it. You’ve always had your hands on the steering wheel, ensuring smooth rides for your clients. But now your team is growing. The very thought of scaling conjures up fears of losing that intimate control you’ve had - over your team and over customer experiences. You’re not alone; this is a fear that keeps many Heads of Customer Success awake at night. But guess what? Scaling doesn’t have to mean ceding control. In fact, scaling your CS team can be the pathway to even greater control and effectiveness. You just need the right blueprint. This post lays down the framework for you to scale without compromise. How? By taking a 360-degree approach that covers Leadership, Management, and Coaching. ## The Leadership Angle: Cultivating a Clear and Sustainable Culture In the cacophony of a scaling business, the loudest and most consistent voice has to be that of your company culture. If your culture is based on unsustainable hustle and grit, then guess what, your team will burn out, and the cracks will begin to show as you scale. Leadership here is about laying down clear, sustainable guidelines and operating modes that your team can effortlessly follow. Instead of constantly firefighting, turn your attention to preventative measures that are grounded in a robust culture. This isn’t just about grandiose mission statements. It’s about the daily rituals, routines, and behavioral norms that guide your CS team’s interactions with each other and with customers. ## Management: Metrics, Capacity, and Lifecycle Planning The greatest strategy in the world means nothing without proper execution. Read that again. But how do you ensure that everyone in your team is executing at their peak? This is where solid management comes into play. Start by developing an operational plan that focuses on metrics around customer lifecycle stages, capacity planning, and progress milestones. This isn’t about micromanagement; it’s about creating a system that effortlessly manages itself. The metrics will tell you where you stand and what you need to do next. Without such clear milestones, you’re just navigating through fog and hoping you don’t crash into an iceberg. ## Coaching: From Being the Player to Becoming the Coach At one point, you were likely wearing multiple hats, doing everything from onboarding clients to resolving complex issues. But as you scale, you can’t be the one filling those gaps - you’ll become the bottleneck. Here, your role morphs into that of a coach. Coaching is not merely about “fixing” your team’s weaknesses. It’s about helping them understand the playbook so deeply that they can improvise successfully in any situation. Identify the gaps in both confidence and competence among your team members, and invest in training, mentorship, or even restructuring to fill those gaps. ## Don’t Miss the Next Turn on This Roadmap The fears around scaling your CS team are valid, but they’re not insurmountable. You don’t need to choose between scale and control. By focusing on leadership, management, and coaching, you can guide your team to new heights while maintaining the quality of customer interaction that got you here in the first place. Don’t let your scaling fears keep you stuck in the same loop. Remember, what got you here won’t get you there. --- # How Often Should You Revisit Customer Goals? *August 23, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/goal-alignment/ **Updated July 2026.** Consolidated from two shorter posts into one. The question: I know goal discovery matters, but how often should I update goals with the customer? There is no universal cadence, and the reason there is not is useful rather than evasive. ## The Goal Tells You When A goal is [an objective plus a time frame](/goal-discovery/). The time frame is not paperwork. It is your schedule. A customer with a six-week objective should be having the next-goal conversation somewhere around week four. Not at week six, when the thing has already concluded and you are reacting. Not monthly because monthly is when you do check-ins. Around week four, because that is when there is still room to influence the outcome and enough visibility to know what comes after it. A twelve-month objective works the same way with different arithmetic. The cadence falls out of the customer's timeline, which is why it differs per account and why any fixed rhythm is wrong for most of your book. ## Assuming the Objective Is How You Get Replaced Here is what makes vagueness expensive rather than merely sloppy. You sell a CRM. A sales organization buys it. You can safely assume they want to grow revenue. Everybody wants that, and knowing it tells you nothing. Now consider two customers with that identical stated goal. One runs outbound. One is moving to inbound. Both need a CRM. Almost nothing about what they need from it is the same: different workflows, different reporting, different integrations, different definition of a good week. Take them both down the outbound path because you never asked, and the inbound customer eventually finds a vendor better suited to how they actually work. They do not churn over your product. They churn because somebody else asked a question you skipped. Increase sales is not a goal. It is a category. The goal is underneath it, and so is the reason they will stay or leave. ## Why Goals Change and Why You Miss It Goals move constantly. Budgets shift, the market moves, a competitor does something, the sponsor gets promoted or leaves and the replacement has different priorities. Most of this is invisible from where you sit, because customers do not send updates when their objectives change. They only mention it once the mismatch is bad enough to matter, which is usually at renewal, framed as a complaint about your product. The vague handoff makes it worse. Sales passes along something like they want to grow, nobody goes deeper, and every subsequent conversation is built on a foundation nobody verified. ## Make the Next Conversation Expected The move that makes this sustainable is telling the customer it is coming. You are four weeks from the end of a goal cycle. Say plainly: when we hit this, we should talk about what is next, because what you need from us will probably change. Nobody refuses that, and now the conversation is scheduled rather than intrusive. That also makes it joint. A goal you recorded is your document. A goal you both agreed to, with a named date to revisit, is a commitment with two signatures on it, and it is far harder for either side to quietly stop working on. ## What This Buys You Beyond retention, this is where expansion actually comes from. A customer who just achieved something is a customer whose next objective is forming right now. That is [the readiness signal](https://ltvmax.com/posts/readiness-milestones), and it is legible only if you are in the conversation at the moment it happens. Miss it and you find out at renewal what they decided to do without you. --- # A Goal Is an Objective Plus a Time Frame *August 16, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/goal-discovery/ **Updated July 2026.** Consolidated from two shorter posts into one. Two questions came in together. At what level should I be having goal conversations, user or executive sponsor? And how am I supposed to make time for this with forty-plus accounts? Both are worth answering. Neither can be answered before defining the word. ## Define the Word First A goal is an objective plus a time frame. That sounds pedantic until you notice how often the two get used interchangeably. The objective is the thing to accomplish. The time frame is when it has to happen by. Strip the time frame out and what remains is a wish. There is no scarcity in it, no urgency, and nothing to be behind on. An objective with no deadline is not a goal. It is a preference, and preferences do not get acted on. ## Nobody Buys Your Product to Use Your Product Take email marketing, which everyone understands whether they do it or not. As the vendor it is easy to believe customers signed up to send emails. That is what the product does. It is plainly why they bought. Except nobody wants to send emails. They want people at their event. They want purchases. They want signups. That is the objective. The event has a date, and there is the time frame. The goal is filling the room by the fourteenth, and email is the method they picked. Now watch what happens if you never learn that. You optimize for sends. You help them send more, faster, to bigger lists. You report rising usage. And the room is empty, because the list was purchased, the subject line was weak, and none of that was ever your metric. That is a [Success Gap](/success-gap/): the customer completes every task your product requires and still does not get what they came for. [High usage with bad retention numbers](/usage-customer-success/) is what it looks like on a dashboard. ## The Goal Exists Whether You Participate or Not This is the part that reframes the whole activity. Your customer has a goal right now. They had one when they signed. They will have a new one next quarter. Your involvement in discovering it changes nothing about whether it exists. It only changes whether you are useful to it. Which decides how you get treated. Participate in the goal and you are strategic. Skip it and optimize for product usage instead, and you are a tool with a person attached, priced accordingly at renewal. ## At What Level Both, and they will not match. The executive sponsor bought an outcome. The user was handed a task. Ask only the sponsor and you get an objective with no idea whether the work is achievable. Ask only the user and you get a task list with no idea what it is in service of. The gap between those two answers is frequently the whole problem, and it is [why the person doing the work looks resistant](/overwhelm-looks-like-resistance/) when they are actually buried and unclear. ## Forty Accounts and No Time The honest answer: goal discovery is not a separate activity you need to find time for. That framing is why it never happens. You are already talking to these customers. Kickoffs, check-ins, reviews, support escalations. The question is not whether you have a slot. It is what you spend the slot on. Most check-ins are status recitations that neither party would miss. Replace one of those with what are you trying to accomplish and by when, and you have not added a meeting. You are not adding work. You are changing what the existing work is for. And if you lead a team carrying forty accounts each, this one is yours. If your standing agenda is product status and open tickets, you built the calendar that has no room in it. Your team will not conduct different conversations than the ones you ask them to report on. ## Goals Move One caution. Whatever you learn is true today. The objective shifts, the deadline moves, the sponsor leaves and the new one wants something else. A goal captured once at onboarding and filed is a document about a company that no longer exists. Which raises the obvious next question, how often to revisit, and that has [its own answer](/goal-alignment/). --- # CS and Sales Are Siloed. How Tall Are the Walls? *August 9, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-sales-alignment-2/ **Updated July 2026.** Consolidated from two shorter posts into one. The question: we are very siloed between Customer Success and Sales, nobody's fault really, any tips on getting more aligned? Before tips, one clarifying question, because siloed covers two conditions that look similar and are not. ## Parallel or Adversarial In the first, the teams simply run alongside each other. No hostility, no shared context either. Everyone is busy and nobody thought about the handoff. That is a process problem and it is genuinely fixable with meetings and definitions. In the second there is an us-and-them. Sales thinks Customer Success blocks deals. Customer Success thinks Sales sells fiction and leaves them holding it. Same word, completely different problem, and no amount of shared documentation fixes it, because the issue is that the two teams are compensated for outcomes that feel opposed. Work out which one you have before choosing a remedy. Applying the process fix to the adversarial version produces a well-documented cold war. ## Speak in the Number Leadership Watches To get executive support you have to describe this in terms the CEO and CRO already care about, and that is net revenue retention. Misalignment surfaces in exactly three places, all of which roll up there. **Churn.** The obvious one, and the least interesting. **Contraction.** Customers stay and pay you less. **Absent expansion.** Customers renew flat. Nothing looks wrong anywhere. ## Bad Fit Is Not a Customer Success Problem Misalignment upstream produces customers without [success potential](/bad-fit-vs-good-fit-customers/), meaning you cannot check the boxes that would let them succeed with you no matter what happens next. That distinction matters enormously, because it is the one kind of churn no amount of Customer Success effort touches. Hours do not fix it. Better onboarding does not fix it. The customer was never going to get there, and the decision that produced them happened before anybody in Customer Success met them. Which means the fix has to move upstream to what Sales closes, and that only happens if both teams share a definition of who qualifies. Siloed teams do not have one, so it keeps happening, and it will keep happening until somebody makes it stop deliberately. Nothing about this corrects on its own. ## Contraction Is the One That Hides Contraction deserves separate attention because it conceals itself behind a healthy-looking renewal rate. Count logos and things look fine. Nearly everyone renewed. Count dollars and the base shrank, because accounts came back at lower tiers and fewer seats. [You can hold retention at one hundred percent and still lose revenue.](https://ltvmax.com/posts/zero-churn-still-lose-revenue) And the cause is frequently not bad fit at all. The customer had potential, but expectations were set loosely during the sale. They arrive unprepared, hear during onboarding what the work actually involves, and something quietly deflates. Onboarding does not fail. It underperforms, which nothing in your reporting is built to notice. That is [a purchase-time decision arriving late](https://ltvmax.com/posts/contraction-delayed-invoice), and it gets recorded as a renewal event months after the moment that caused it. ## What Actually Closes the Gap Shared definition of a qualified customer, written down, agreed by both teams, used in deal reviews. Not a persona document. A list of conditions that have to be true. A real handoff. What did the buyer say they wanted, in what time frame, and what did we promise. Vague inheritance is how [the wrong objective](/goal-alignment/) survives a year. Executive sponsorship, because two peer teams cannot arbitrate their own compensation conflict. Somebody above both has to say net revenue retention is the number and both of you are on it. And [one named person owning it](https://ltvmax.com/posts/who-owns-expansion-revenue). Not both teams jointly, which means nobody. A function cannot miss a target. Only a person can. --- # Why Won't They Just Do the Work? *August 2, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/why-wont-they-just-do-the-work-ugh/ **Updated July 2026.** Expanded from a short answer into the full one, including the part underneath it that I had left out. The question, more or less as it was sent to me: how do you drive adoption for something people know they need but would rather be hit in the head with a hammer than deal with, without being scary about it? Compliance software. Data hygiene. Security. Anything that solves a problem the customer genuinely has and genuinely does not want to think about. The work is not exciting. It is necessary. And they are dragging their feet. Before the tactics, the thing underneath the question. ## You Are Not Here to Make Your Customers Happy The reluctance to bring up consequences is almost never about tactics. It comes from a belief that the job is to keep the customer feeling good. When I say we are not here to make customers happy, people hear that I want customers unhappy. Not what I said. I said happiness is not the thing we can solve for. We solve for the customer achieving what they came to achieve, and sometimes getting there requires pushing someone to do a thing they would rather not do. That will occasionally leave them less than delighted with you on a Tuesday. That is acceptable. Hold that belief the other way around and you will avoid every conversation that carries any friction, which happens to be every conversation that matters. ## Naming the Downside Is Not a Scare Tactic Think about what the customer already knows. They bought compliance software. They understand there is a rule. They understand what happens if they are not compliant by the deadline. That understanding is the entire reason they are a customer. And we want to avoid mentioning it. Avoiding the reason someone became your customer is not sensitivity. It is a strange kind of self-sabotage. Saying plainly that a deadline exists and that missing it carries consequences is not manufacturing fear. It is describing the situation the customer bought you to resolve. A scare tactic is inventing a threat or inflating one. Restating the actual stakes is just accuracy. This is not only a compliance thing. Say a customer bought your platform to add a specific amount of new revenue this quarter, and you can see they are not on track because they are not doing what you jointly agreed they would do. If you notice that and choose not to say anything, you are not doing customer success. I am not saying you are not working hard. I am saying whatever that work is, it is something else. ## There Is No Such Thing as a Difficult Conversation Count how many times in a week you or someone on your team describes an upcoming customer conversation as difficult. Or challenging. Or tough. Now notice which conversations get that label. It is the one where you tell them they are off track. The one about the deadline they are going to miss. In other words, the most important conversations you will have all quarter, pre-labeled as unpleasant. A conversation you have framed as difficult is a conversation that slips. It gets scheduled late, or shortened, or quietly dropped. The label does the avoiding for you. There are no difficult conversations. There are conversations. Some carry news the customer would rather not hear, and having them promptly is most of the job. If you lead a team, this one is yours specifically. I have watched heads of Customer Success run a weekly standup asking who had a difficult conversation this week, treating it as a badge of honor. That is a culture being built on purpose, and what it builds is hesitation. Your team will not have those conversations faster than you make it normal to have them. ## The Person Doing the Work Did Not Buy Your Product Here is the structural piece, and it explains most foot-dragging that gets misread as attitude. An executive understood the requirement, evaluated options, and signed. Then the work was handed to someone else. That person did not attend the demo. They were not consulted. They found out they now own a new top priority, on top of the priorities they already could not finish. They are not resistant. They were [blindsided](/overwhelm-looks-like-resistance/), and the two look identical from where you are standing. Two things fix it, one upstream and one immediate. **Upstream:** get your sales team to bring the execution team into the buying process. Not to approve the purchase, just to be in the room, ask questions, and hear what the first ninety days look like. The pitch to the prospect is easy, because it is true: in our experience, having the people who will actually run this involved early makes the rollout go significantly better. It costs one meeting and it buys you ownership instead of ambush. **Immediate,** for every customer already past that point: when you meet the person doing the work, start by learning what else is on their plate. Then build the plan around that reality rather than around your onboarding template. Fifteen focused minutes a day, in this order, done by this date. Something a human with an existing job could actually do. ## There Is Peace in the Plan I heard an interview with a pediatric neurosurgeon that reframed this for me. When they deliver a diagnosis to parents, everything in the room becomes fear and chaos. The instinct is to let it settle before discussing what happens next. What they found is that it never settles. So they give the diagnosis and lay out the plan immediately. Here is what we do first, then this, then this, over this timeline. The plan does not make the situation less frightening. It makes it less unknown, and a great deal of the fear was the unknown. I am not comparing onboarding to brain surgery. The common factor is that both involve a human being handed something overwhelming. A person who has just been told they are behind and given no path forward will avoid you. The same person, handed a specific sequence with dates, has something to do on Monday. ## Three Things to Do Involve the execution team before the deal closes, so the people doing the work are never surprised by it. Build the plan for the person actually doing it, around the rest of their job, and say out loud that you know this landed on top of everything else. And stop calling them difficult conversations. They are conversations, they are the important ones, and the sooner you have them the smaller they get. --- # Customer Retention: Proactive, Reactive, and At-Risk Analysis *July 31, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-retention-analysis/ How often have you found yourself scrambling at the last minute to save an at-risk account, pouring time and resources into what could often be a losing battle? You’re not alone. Many Customer Success Managers (CSMs) fall into the trap of reactive retention. It feels like part of the job, right? The truth is, there’s a better way. The trick lies in shifting our focus from a reactive to a proactive retention strategy. It’s about spotting the risks and addressing them *before* they turn into problems. In the dynamic world of Customer Success, being proactive isn’t just a ‘nice-to-have’, it’s a necessity. The sheer speed at which customer expectations change can turn today’s satisfied customer into tomorrow’s at-risk account. But with a shift in mindset, a firm grasp of your customers’ goals, and a robust at-risk analysis process, you can turn the tides. Let’s explore how. ## Shifting from Reactive to Proactive Retention Reactive retention is firefighting. You wait until a problem has surfaced before you deal with it. But imagine if you could prevent that fire from ever starting? That’s proactive retention. Proactive retention involves understanding your customers so deeply that you can anticipate their needs and wants. You predict potential issues and address them before they become a problem. In practice, this could involve continuously improving your product based on customer feedback, or implementing training programs to help customers get the most from your product. ## **Understanding Desired Outcome** At the heart of proactive retention is the understanding of your customer’s Desired Outcome. Desired Outcome is a combination of their Goal (what they need to achieve) and their Appropriate Experience – AX – (how they need to achieve it). By understanding your customer’s Desired Outcome, you can align your offerings to meet their expectations. To understand Desired Outcome, communication is key. Engage your customers in discussions to understand their goals, their key performance indicators (KPIs), and their expectations. Keep this communication ongoing and dynamic, adjusting your offerings as their goals evolve. ## **Risk Analysis: Identifying the Signs Early** Proactive retention and understanding their Desired Outcome go hand in hand with at-risk analysis. At-risk analysis helps you spot the customers who might be veering off the path to success. It helps you identify signs of dissatisfaction or disengagement early, so you can step in and provide the support they need to get back on track. Risk signals could be quantitative, like low product usage, or qualitative, such as negative feedback. Create a robust process to track these signals and ensure timely interventions. Make risk analysis a regular part of your review meetings, and encourage a culture of learning and adapting from the feedback received. ## **Turning Risks into Opportunities** Risk signals aren’t just red flags; they are opportunities. Each risk signal is a chance for you to better understand your customer, provide value, and strengthen your relationship. When you spot a risk signal, don’t just react; take a step back, understand the root cause, and come up with a strategic solution. Show your customers that you’re not just there to put out fires, but you’re committed to their long-term success. --- # Navigating Partner Success in a Multi-Channel World *July 26, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/partner-success-strategy/ Customer Success Management (CSM) is challenging enough when you’re dealing with direct customer relationships. But when partners are brought into the picture, it adds a whole new layer of complexity to the process. As CSMs, how can we navigate the intricacies of partner success in a multi-channel landscape? That’s the question we will answer today, providing you with a comprehensive guide that will help you maximize your partner relationships, enhancing not only your partner’s success but also that of your end customer. Understanding and embracing the key differences and similarities between partner success and customer success will empower you to create a more strategic, results-oriented approach to your partner relationships. Let’s dive into the fascinating world of partner success, uncovering the hidden treasures that make it a unique aspect of customer success management. ## Understanding Partner Success Potential Just as we identify success potential in customers, we need to do the same for our partners. A Partner Success Potential Checklist is crucial in this process. This checklist helps us assess which partners are most likely to succeed and which ones may need more support or guidance. It helps us anticipate potential challenges and plan for them proactively. The checklist should include the partner’s strategic alignment with your business, their technical capacity, their dedication to training and development, and their commitment to customer success. Understanding these aspects will allow you to evaluate whether a partner is a good fit for your business and vice versa. ## Developing a Partner Success Plan Partners need a roadmap for success, similar to customers. Developing a Partner Success Plan allows you to lay out a clear path to success for each partner. This plan should outline the roles, responsibilities, and expectations for both parties. It should detail the necessary resources and support the partner will need to succeed. Remember, each partner is unique, so your success plans should be tailored to each partner’s specific needs and capabilities. Be flexible and ready to adjust the plan as your relationship with the partner evolves. ## Ensuring Alignment of Goals The third crucial aspect of partner success is ensuring the alignment of goals between you, your partner, and the end customer. Keep in mind that the success of your partner is inherently tied to the success of your end customers. Therefore, maintaining a clear line of communication and a mutual understanding of goals and objectives is paramount. By having regular check-ins, you can ensure that the partner’s goals are continually aligned with those of the end customer and your business. This ongoing conversation helps you to adjust to changes promptly and to always keep the end customer’s success at the forefront. ## Adapting to an Evolving Landscape Navigating partner success in a multi-channel landscape can be challenging, yet it’s undeniably rewarding. By understanding partner success potential, developing tailored success plans, ensuring alignment of goals, and adapting to an evolving landscape, you can create robust partner relationships that drive remarkable success for your end customers. This strategic approach to partner success isn’t just about improving business outcomes but building partnerships that create enduring value for everyone involved. But remember, the path to mastering partner success doesn’t stop here. We’re continually exploring fresh, innovative strategies in our Impact Weekly podcast. --- # Unlocking Potential: How to Allocate Customers to CSMs *July 20, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/csm-customer-allocation/ Any seasoned leader in Customer Success knows that balancing the right resources and setting the proper groundwork is crucial to effective customer management. As a newly appointed head of Customer Success, you might be asking yourself, “What should I consider when allocating customers to my CSMs?” While seemingly straightforward, there are many layers to this question and finding the right answer is pivotal for success. In this blog post, we’re delving deep into the critical aspects of customer allocation, on what to consider when allocating customers across your CSM team. ## The Power of (Customer) Ownership The first significant factor to consider is ownership. When your Customer Success Managers (CSMs) feel a sense of ownership towards their customers, they’re more likely to invest themselves in the customer’s success fully. That’s why it’s essential to provide a sense of individual customer ownership, establishing responsibility and fostering commitment. ## Capacity Planning: Preventing Burnout Capacity planning plays a pivotal role in successful customer allocation. It’s all about striking the right balance. Allocating too many customers to a single CSM can lead to burnout, decreased productivity, and overall lesser quality of service. Therefore, it’s crucial to assess the workload of your CSMs regularly and ensure an equitable distribution of customers. ## Segmenting Customers Based on Appropriate Experience (AX) Understanding the unique needs of your customers is vital. Not all customers require the same level and type of engagement, so it’s essential to segment them based on their Appropriate Experience (AX). [AX-Based customer segmentation](https://sixteenventures.com/coverage-segments) allows you to tailor your efforts, ensuring that each customer receives the right amount of attention and resources for their needs. ## Leveraging Technology for Enhanced Customer Allocation Leveraging technology can greatly streamline customer allocation. AI and machine learning algorithms can help in evaluating various parameters like the complexity of accounts, CSM expertise, workload, etc., leading to a more refined allocation process. Remember that customer allocation is not a one-time task. It is a continuous process that requires regular monitoring and adjustments. Successful customer allocation can significantly enhance the overall customer experience and consequently your company’s growth. --- # AX-Based Coverage Segments: Customer Success Evolved *July 17, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/coverage-segments/ The only universal truth in Customer Success is that it’s always evolving. If you’re using the strategies and tactics popular even 3 years ago, you’re being left behind. The more contact our ideas, frameworks, and methodologies have with customers, the more we learn, and the more things need to evolve. And over the past few years, that evolution has happened far more rapidly than anyone could have foreseen. ## **The world of Customer Success is Ripe for Disruption** Traditional approaches to Customer Success Management – often held tightly by those that have implemented them – have left companies still grappling with high churn, higher contraction, low expansion, their limited resources stretched thin, and burnout and turnover among Customer Success Managers (CSMs). But what if there was a fundamentally different way to think about your customers, a method so innovative that it could revolutionize how we approach Customer Success and capacity planning? Enter Appropriate Experience (AX)-based Coverage Segments, the future of Customer Success. ## **A Revolution in Customer Success Management** In the quest for balance and efficiency, I discovered a novel approach to address the most pressing challenges of Customer Success Management: delivering the customer’s AX at scale. Remember, Customer Success is when a customer achieves their Desired Outcome (Goal + AX) through their relationship with us, leading them to stay longer, buy more, and advocate for us. So by prioritizing the customer’s Appropriate Experience (AX) and segmenting customers accordingly, we have been able to reduce churn, massively and rapidly drive expansion, and increase customer satisfaction, while improving the teams’ wellbeing. While I’ve deployed this in many companies that are now World-class (>125% NRR), I’ll give examples of what this can do for struggling and average CS orgs below. But first, let’s dig into AX-based Coverage Segments in detail. ## **The Traditional Approach: Where We Missed the Mark** Revenue-based Customer Segmentation, the traditional and widely accepted practice in Customer Success, has long been used to dictate the level of service a customer receives. The bigger the contract, the more attention the customer receives (or deserves!) from the team, and, consequently, the smaller the contract, the less attention they get (or deserve). However, is this truly the best approach for the customer, your team, or the overall health of your business? More importantly, does it ensure reduced churn and improved expansion while keeping your CSMs from burning out? Unfortunately, the evidence suggests not. ## **The New Approach: AX-Based Coverage Segments** What if we told you there’s a radically different approach that effectively solves for all of the issues outlined above? There is and it’s called AX-based Coverage Segments, a method that groups your customer by their shared Appropriate Experience (AX), allowing you to deploy resources effectively and efficiently to ensure your customers achieve their Desired Outcome. This resource deployment is called a Coverage Model. It’s a bold shift from the traditional revenue-based customer segmentation model, focusing not on the size of the contract, but on the customer’s experience, needs, and goals. ## **The Magic of AX-based Coverage Segments** With AX-based coverage segments, your Customer Success operation becomes a finely tuned machine, delivering precisely what your customers need, when they need it. For this to work, you do need a solid Enablement and [Operations](https://sixteenventures.com/revops-evolved) layer. The following image shows common AX-Based Coverage Segments: Let’s explore the four most common types of AX-Based Coverage Segments in detail. - ***Inbound Coverage Segment:*** This segment is characterized by customers who engage with you on their terms. They don’t have a dedicated CSM but access a pool of highly skilled resources. By allowing customers to control their engagement, we enable them to attain their success in their way, fostering a better relationship, reducing the chance of churn, and setting them up for expansion, also on their terms. - ***Async Coverage Segment:*** These are customers who prefer asynchronous engagement – emails, chats, videos – rather than regular one-on-one or group meetings. This approach not only meets customers’ needs but also drastically reduces the risk of CSM burnout as it provides a more balanced and manageable workload. - ***Sync Coverage Segment:*** This segment is where one-on-one, real-time engagement occurs most. While it may seem traditional, it is balanced by async carve-outs that help provide scale and prevent overwhelming your CSMs. - ***Task Force Segment:*** For the most complex, high-value, or at-risk customers, a task force is assigned. Multiple contributors from your team work with the customer simultaneously, providing their appropriate experience while boosting customer satisfaction and advocacy. Those are just the four most common coverage segments and there’s so much more detail that’s beyond the scope of this introductory post, but that should give you an idea of how this works. You may employ all of those, some of those, none of those, or come up with others that make sense in your unique situation. Whatever works to provide your customers with their AX. ## Just a Different Take on the”Touch-level” Model? Isn’t Sync just “high-touch” and Inbound “tech-touch”? No. But if it helps you to make that connection, fine, but just understand that in something like “Sync” the Coverage Model is weighted more toward synchronous meetings, but asynchronous modalities are also employed for scale and, frankly, because not everything needs to be a meeting. But even if you can’t get past the “touch” level pyramid of ancient Customer Success, then just look at it this way: in this AX-Based Coverage Segmentation methodology, you will have customers that pay you a lot that would be in the “tech-touch” segment and customers that pay you very little that would need to be in “high-touch” since that would more align with their AX. To make it even more clear: You will have customers in the same AX-Based Coverage Segment that pay you radically different amounts. Coverage Segments do not take what the customer pays into consideration since that doesn’t figure into their AX. A customer that pays us a lot might have an AX that would dictate very little engagement across most lifecycle stages. Whereas a customer that pays us mid-range fees might require what would have been categorized in the past as “high-touch” engagement. ## **Real-World Impact: AX-Based Coverage Segments in Action** Coverage Segmentation is one of the “secrets” that World-class companies use to get to >125% NRR. But to truly appreciate the transformative power of AX-based coverage segments, let’s take a look at some real-world examples in companies that are on their way to World-class, but aren’t there yet: **NRR Boost with SMBs:** A USA-based CRM company was struggling with a [natural amount of unavoidable churn](https://sixteenventures.com/churn-classification) in their sizable SMB customer cohort. However, by understanding the AX of both their SMB and larger customers and shifting from traditional Revenue-based Customer Segments to Coverage Segments, they saw their NRR jump from 98% to 105%, even with that (large) 15% churn rate. This surge in NRR past 100% led to a significantly higher valuation in their next funding round, proving the tangible financial impact of using AX-based coverage segments. **Rebalanced Capacity, Reduced Burnout:** A Brazilian marketing company was stuck in the rut of old-school Revenue-based Customer Segmentation, creating a “low-touch” segment for low-paying customers and a “high-touch” segment for high-paying customers with dedicated CSMs for each of those segments. When we ran our capacity planning model, we found their CSMs working with “low-touch” customers were overloaded, juggling 3x more customers than they should if they were to actually deliver the customer’s AX (which they were not).This resulted in high burnout and turnover for low-touch CSMs. Meanwhile, their “high-touch” CSMs were severely underutilized; and could have effectively managed 4x as many customers with capacity to spare. The high-paying customers didn’t need as much synchronous engagement as expected, which meant some of the CSMs even had time for second jobs! By implementing AX-based coverage segments, we could rebalance the workload, reduce burnout, and boost efficiency. **Increased Profit Margins Through Efficient Resource Allocation:** An Israeli ERP company had used the pod approach for their Enterprise customers, dedicating a large amount of resources for each customer, only to discover this was far from the AX for a large cohort of customers. Around half of their Enterprise customers had the experience, internal expertise, and resources to manage on their own, with only occasional strategic guidance needed from the company. By moving these customers to an Inbound coverage segment, they freed up valuable resources, saw a 50x+ increase in profit margin for these customers, and still ensured the customers’ success. These examples highlight the potential of AX-based coverage segments in not just reducing churn and improving expansion, but also in creating an environment where CSMs can thrive. By focusing on the appropriate experience for each customer, we can ensure that both customers and CSMs can succeed. ## **Making the Shift: How to Apply AX-Based Coverage Segments** Transitioning from the traditional model to AX-based coverage segments might seem daunting, but the rewards far outweigh the effort. It’s not just about reducing churn or increasing revenue. It’s about providing a customer experience that meets their unique needs and objectives, fostering long-term relationships, and allowing your team to thrive in their roles. Remember, the goal of AX-based coverage segments isn’t to categorize your customers by their financial value to you, but to identify the level and type of engagement that best ensures their success. By doing this, you ensure not just the success of your customers but also the success and wellbeing of your team. --- # RevOps Evolved: The Key to Rapid, Exponential Revenue Growth (2024) *July 13, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/revops-evolved/ The essence of successful business lies in the ability to unlock consistent, efficient growth. But amidst the pressures of targets, competition, and shifting market dynamics, the struggle to optimize revenue operations and foster seamless alignment between Sales, Customer Success, and Marketing can feel like an uphill battle. If you’ve been juggling these challenges, feeling the weight of responsibilities and the frustration of unmet potentials, this article is for you. As you read on, you’ll find yourself nodding in agreement, recognizing your own pain points, and perhaps, even questioning long-held beliefs. ## RevOps: The Missing Link in Revenue Growth So, what’s the missing link? The answer is RevOps, but not in the way it’s often misunderstood and misapplied. Let’s set the record straight; this isn’t about fluffy, feel-good notions of “synergy” and “collaboration”. Instead, it’s about a strategic, customer-centric approach that goes beyond mere SalesOps to unlock exponential growth potentials. ## RevOps Defined: More Than Just SalesOps RevOps, short for Revenue Operations, is an operating framework for strategically aligning, operationalizing, and optimizing all revenue-generating activities. The operative word here is *all*. A common misconception is that RevOps is merely a fancier term for SalesOps, but it’s much more than that. It’s about bridging silos and integrating processes across Sales, Marketing, and Customer Success (CS) for holistic revenue growth. ## Land and Expand: A Dual Growth Mechanism At the heart of RevOps are two distinct growth mechanisms: ‘Land’ and ‘Expand’. Land focuses on new customer acquisition while Expand concerns itself with growth within the existing customer base. Each requires different strategies or ‘motions’, ranging from new business sales to product-led growth (PLG) for Land, and account development (AD) to customer success management (CSM) for Expand. The key is to choose the right mix of motions for your specific context. ## Mindset Shift: Decoupling Revenue from Sales One critical aspect of RevOps is understanding that not all revenue generation must flow through Sales. This requires a mindset shift from a sales-centric approach to a customer-centric one. In many organizations, CS and Marketing are relegated to supportive roles, often merely generating leads for Sales. But to fully leverage RevOps, it’s crucial to recognize that these teams can independently drive significant revenue. ## New Business Sales vs. Customer Success Management In the Land and Expand strategy, new business sales play a crucial role in bringing in net new customers, while Customer Success Management drives expansion revenue through the customer’s actual progress. These roles are most effective when strategically applied to their respective areas, with tactics and strategies differing significantly between them. Remember, the tactics that work for Sales do **NOT** work for CS, and vice versa. ## Operationalizing Revenue Across the Customer Lifecycle To drive sustainable, exponential growth, all revenue motions across the full customer lifecycle need to be operationalized. Quotas, which are necessary for new business sales due to the lack of customer context, may actually limit growth with existing customers. Instead, context should lead to massive growth, but quotas often distract from this. ## RevOps Pitfalls: Don’t Fall for the Hype While RevOps holds great potential, it’s important to be aware of the pitfalls. Too often, it’s misconstrued and misrepresented, becoming nothing more than glorified SalesOps, with Marketing and CS taking a secondary position. Other common mistakes include short-term thinking, which has long-term consequences, and failing to recognize that the customer journey doesn’t end when they become a customer – it’s only just starting. ## Unleash the Power of Evolved RevOps RevOps is a powerful concept, but like any other, it’s only as effective as its implementation. To truly thrive, we must shift our mindsets, rethink our strategies, and operationalize our processes. It’s time to rise above the noise and truly unlock the potential of RevOps. Are you ready to dive deeper into RevOps? Join the pre-launch waitlist for my upcoming course “[RevOps Evolved: Unleash the Power of Land and Expand](https://www.customergrowthlab.com/revops-evolved-unleash-the-power-of-land-and-expand)” and get notified when it goes live. This course will elevate your understanding, learn how to implement RevOps successfully in your organization, and take your revenue growth to the next level. Your future in exponential growth starts here. --- # Redefining Email Engagement: New Metrics for a New Era (2024) *July 13, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/engagement-rate/ Are you tired of sending emails that are lost in the void, never to be seen or acted upon? Emails meant to drive essential action from your customers or prospects – only to receive nothing but silence in return. You’re not alone. For Customer Success Managers (CSMs), Sales Development Reps (SDRs), and those in Enablement and Ops, this scenario is all too common – and deeply frustrating. Let’s dig into how to better understand email engagement, and how to improve it so you can hit your numbers. ## Email Doesn’t Work Anymore? It’s always “Email doesn’t work as well anymore” and never “Maybe the way I use email hasn’t changed to match the evolved consumption patterns of Inbox users.” As of 2023, email still reigns as the primary channel for prospect and customer engagement. Instead, the trouble lies with how we understand, measure, and enhance email engagement. If you’re ready to break through the silence and drive real action from your recipients, read on. You’re about to discover a new approach to email engagement that could change the game for you. ## Let’s define Engagement Engagement is when the recipient of your email takes the desired action; this starts with clicking a link or replying to start a conversation. These actions could include doing something in the app, joining a webinar, filling out a survey, or answering an open question. They signify an active interaction with your email beyond just opening it. ## What is Engagement Rate and Why Does It Matter? Engagement Rate is your North Star metric for email. It measures the successful completion of the desired action, not just the click or the conversation started. It’s calculated by dividing the number of Desired Actions Completed by the number of Emails Sent with that Call to Action (CTA). It’s not about how many people opened your email or clicked a link; it’s about how many people took the action you wanted them to take. You’ll see this as “goal completion” in systems like Intercom. ## Moving Beyond Open Rate and Click-through Rate Open Rate has become a useless metric for email due to inconsistent handling of tracking mechanisms by inbox providers. Some providers mark all emails as “read” (like Apple mail) and others won’t mark any emails as read by blocking images and other tracking pixels (GMail users can opt-into this, many “secure” inbox providers have this by default). Similarly, Click-through Rate, a marketing (blast)-derived metric, doesn’t take into consideration replies as a valid engagement modality and doesn’t factor in completion of desired action which are a major (primary?) interaction modality in Sales and Customer Success. ## Boosting Your Engagement Rate Here are three strategies you can use to improve your Engagement Rate: - Reputation: Ensure you’re not shadowbanned (or worse). Your email deliverability matters. - Timing: Understand and leverage modern inbox behaviors. When your recipient is likely to be in their inbox is crucial. - Content: Send better messages. The content of your email should be compelling enough to drive action. Email is a vital tool in the arsenal of CSMs, SDRs, and other professionals involved in customer and prospect engagement. However, the way we measure the success of our emails needs to evolve. Are you ready to adapt to these changes and use email engagement to its full potential? My course, “[Email Engagement Formula: Driving Success at Every Stage of the Customer Journey,](https://www.customergrowthlab.com/email-engagement-formula)” offers in-depth strategies, techniques, and insights on how to use email engagement effectively. Sign up today and take your email game to the next level. --- # Understand, Classify, and Effectively Analyze Churn *June 22, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/classify-churn/ **Updated July 2026.** This began as an answer to a reader question in 2023. The classification system at the center of it still stands. What is new is a second layer that sits on top of it, added at the end. The question was simple. I know I should be doing some kind of churn analysis, but I have no idea where to start. People stall on this because churn analysis sounds like it should be rigorous, and rigorous sounds like a project. So it gets scoped, then deferred, then never done. The analysis you never run is worth less than the rough one you run this week. ## Churn Is Not the Problem Churn is a symptom. It is the visible result of something that happened earlier, usually a customer who did not get where they were trying to go. Treating the symptom is why so much retention work feels like effort without movement. The point of analysis is never to reduce a number. It is to find the thing upstream producing the number. ## Low Churn Is Not a Reason to Skip This The most common objection is that churn is too small to bother with. So walk through what one churned customer actually cost. You spent money acquiring them. You spent your team's time serving them, which is time that did not go to customers who would have stayed. If they left before paying back their acquisition cost, that account was net negative for its entire life. If they left unhappy, they may have said so publicly, and now your sales and marketing spend has to overcome that too. And if your addressable market is finite, that logo is out of circulation for years. None of that appears in a churn rate. All of it is real. ## The Two Questions That Sort Everything Every churned customer answers two independent questions, and the pair is the whole system. **Was it expected or unexpected?** Did you see it coming. This one is not about the customer at all. It is a measurement of you: whether you were engaged, whether your signals work, whether anyone was close enough to the account to know. A customer who leaves and surprises you has told you something about your operation, separate from anything they told you about your product. **Was it avoidable or unavoidable?** Could you have changed the outcome. Avoidable means something you control produced the loss, usually service delivery. Fix that and they stay. Unavoidable means the cause sat genuinely outside your reach. Cross them and you get four boxes, and the two corners are the ones worth naming. **Unexpected and avoidable is the worst churn there is.** You could have kept them and you never saw it coming. That is two failures stacked: the delivery problem, and the blindness to it. **Expected and unavoidable is the best churn available.** The customer went out of business, and they told you it was coming. It still costs you everything above. It is still churn. But it is the one square where the answer is genuinely not your fault. Unavoidable is a much smaller bucket than almost anyone wants it to be. It is the box people reach for when they would rather not look at the other three. Be suspicious of your own sorting here. In practice you have some natural attrition, and it is less than you think. ## Updated for 2026: What the Loss Tells You The quadrant answers whether you could have stopped it and whether you saw it coming. Both are operational questions, and you need them. What the quadrant does not answer is what a given loss means for everything you do next. That is a second layer, and it is the [three-category doctrine](/the-churn-doctrine-revised/) I published in 2026. It maps onto the avoidable axis rather than replacing it. **Delivery-failure churn is avoidable.** They did not get what they bought. Beyond the loss itself, this one carries a consequence the quadrant cannot show you: it precludes expansion entirely. You cannot sell more to a base that is not getting what it already paid for. **Natural attrition is unavoidable.** This is the genuine floor, and it is the bucket that gets over-filled. Benchmark it against your own market rather than someone else's published average. **Outgrew-you churn is avoidable, and almost everyone files it as unavoidable.** This is the important correction. A customer who succeeded past what you offer is not a customer you could not have kept. Either the next thing did not exist, or it existed and they never knew. Both are yours. By the time you notice it may well be too little too late, but too late is not the same as unavoidable, and calling it unavoidable is how the lesson gets thrown away. That last one also happens to be the most valuable churn you have, because it is a customer telling you exactly what they wanted to buy next, right before they bought it somewhere else. ## Start Smaller Than You Think Take your last twenty departures. Put each in a box, then tag each with a category. That is the whole first pass. Twenty is enough because you are not looking for statistical significance, you are looking for [agreement](/statistical-significance-is-a-stalling-technique/). If twelve of twenty land in the same corner for the same reason, you have found something real, and no larger sample makes it more true. Do not build the elaborate version. The elaborate version is how this stays undone. ## The Analysis Nobody Runs One addition, having done this with a lot of companies since. Everyone runs some form of exit analysis. Almost nobody runs the opposite one. Nobody asks the customers who stayed why they stayed. That data is easier to collect, and it describes [a population still paying you](/customers-who-left-are-not-customers-who-stayed/). What comes back is usually a description of value those customers are not currently being sold more of. Churn analysis tells you what to stop losing. The other conversation tells you what to go get. --- # Customer Negotiation: Discounts, Retention, and Value *May 31, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-negotiations/ Are your customers frequently requesting discounts? Are you left wondering if reducing your prices is the only way to retain their business? If you’re a Customer Success Manager (CSM) or a Head of Customer Success, you’ve undoubtedly encountered these dilemmas. Fear not; there’s much more to customer negotiations than yielding to price reduction demands. We’ll unravel why customers ask for discounts, how to respond, and what tactics you should employ to ensure successful outcomes. ## Understanding Customer Motivations Firstly, it’s crucial to understand why customers ask for discounts. Customers don’t always demand price reductions due to budgetary constraints; sometimes, they are testing their value to your company or are influenced by discounts offered by competitors. When customers ask for a price cut, it’s an opportunity for you to dig deeper and understand their true motivations. Ask them to elaborate on their needs and don’t be afraid to confront silence – you might be surprised at what it reveals. ## The Power of Directness If a customer asks for something that goes against your company’s policies or rules, you should give a direct response. People-pleasing is counterproductive in negotiations; it’s better to explain your company’s standpoint clearly and firmly. For example, if a customer demands a discount you’re unable to offer, don’t dodge the question. Instead, respond with something like, “We appreciate your business and understand your concerns. However, our pricing policy doesn’t allow for further discounts on our core product.” ## Offering Alternatives After turning down a discount request, offer the customer something else. This keeps the negotiation going and maintains a positive relationship. For instance, you might be able to offer discounted or free professional services, integration, or training. This approach ensures the customer feels valued without impacting your recurring revenue negatively. ## Bringing in Specialists As a customer success professional, your role is wide-ranging. If you’re spending a significant portion of your time negotiating with customers, it may be time to delegate this task to a negotiation specialist or an account manager. This isn’t about trusting or damaging your relationship with the customer, but about managing your capacity and focusing on delivering high-quality customer success management. ## Negotiation Tactics Here are a couple of super-powerful tactics to consider. When a customer requests a discount, you can offer to set up a meeting with a salesperson or negotiation specialist. This often halts the request as many customers aren’t eager to enter a formal negotiation. Alternatively, if a customer mentions a competitor’s lower price, suggest that if budget is their only concern, they should consider the competitor’s offer. This can make the customer reconsider the importance of other factors such as service quality, switching costs, and the value your product provides. ## The Quid Pro Quo Approach Quid pro quo is a useful strategy in negotiations. If a customer asks for a discount, counter with an offer that benefits both parties. For example, you could propose a discount in return for a longer commitment or increased user numbers. This method ensures you don’t just give in to demands but negotiate to achieve a win-win situation. --- # The Art of Objection Handling in Customer Success *May 11, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/objection-handling/ Imagine this: You’re all set for a critical meeting with a customer, the agenda is clear, and you’re brimming with solutions. But the customer postpones. Or worse, they decline the meeting altogether. It’s not an uncommon scenario in the world of customer success. But what if we told you that this roadblock could be transformed into a stepping stone? Today, we’re exploring how to use ‘Objection Handling’ as a powerful tool to progress, maintain, and deepen customer relationships. This concept, usually associated with sales, is equally crucial for Customer Success Managers (CSMs). At its core, an objection is simply when a customer declines or resists an action or proposal. Addressing this directly, with empathy and strategic savvy, can open new pathways for collaboration and success. Now, let’s unpack how. ## Positioning is Critical Our journey begins with positioning – the perception of your value by the customer. An improperly positioned CSM might be seen as unnecessary or even an inconvenience. To turn the tables, you must present yourself as a strategic asset, someone they need to meet with. Achieving correct positioning requires understanding your customers, their needs, and their goals. This isn’t a quick fix for immediate issues, but a long-term strategy that pays dividends over time. ## Preparation is Key Next, we come to the critical aspect of preparation. Unprepared meetings might be why customers are skipping them in the first place. To build trust and engagement, it’s essential to demonstrate a well-prepared strategy that aligns with their objectives. In your prep-work, also anticipate objections and rehearse your responses. Being prepared to handle objections not only helps you retain control of the conversation but also projects a thoughtful, professional image. ## Introducing the Objection Breakthrough Formula Finally, let’s dive into our secret weapon – the Objection Breakthrough Formula. It’s a simple yet robust tool that hinges on three pivotal steps: Break, Disrupt, and Ask. ### Break The Break step serves to disrupt the emotional response typically triggered by an objection. By rehearsing and having pre-prepared responses, you can buy yourself time to shift from an emotional to a logical frame of mind. ### Disrupt The Disrupt step aims to respond unexpectedly, breaking the usual pattern. This piques the customer’s attention and causes them to focus more keenly on the discussion. Instead of simply agreeing or disagreeing with their objection, offer an alternative perspective. ### Ask Lastly, the Ask phase transitions from breaking their pattern to steering the conversation back to the initial objective. It provides an opportunity to highlight the value of the initially proposed action and elicit their agreement or compromise. Objection handling is a valuable skill – and it can be trained program – just like any other skill, that you must fine-tune with practice. Each customer interaction brings a new chance to implement these techniques, learn from your experiences, and become a more effective CSM. ## Embrace the Challenge Objection handling in customer success is an overlooked but indispensable skill. It’s a bridge that transforms a no into a yes, a roadblock into a gateway. Embrace it, practice it, and make it an integral part of your customer success toolkit. Remember, overcoming objections isn’t about winning an argument; it’s about navigating conversations towards a mutual goal – your customer’s success. \ So the next time you face an objection, don’t view it as a rejection, see it as an opportunity to reframe, redirect and redefine the narrative towards success. --- # Driving Exponential Growth: The Art of Selling to Existing Customers *May 4, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/sell-to-existing-customers/ ***Updated July 2026.** When I wrote this in 2023, I called it the untapped potential of your existing customer base. It has a name now: [latent revenue](https://ltvmax.com/posts/latent-revenue), and a diagnostic: [the six questions](https://ltvmax.com/posts/the-six-questions). Original text below.* In the rapidly evolving business world, the focus is often skewed towards acquiring new customers. However, the real magic happens when we tap into the potential of our existing customer base. Welcome to the realm of ‘Selling to Existing Customers,’ an arena that has the power to catapult your business towards exponential growth, if maneuvered correctly. This post explores that question. ## Understanding Customer Success-Driven Opportunities So, what exactly does selling to existing customers mean? It’s more than merely upselling or cross-selling. Instead, it’s about viewing the customer journey from the lens of customer success. By helping our customers move through various progress milestones and meeting their evolving needs, we enable them to derive more value from our product or service. This, in turn, creates organic opportunities for expansion. The key here is to avoid rushing the process or pressuring the customer into purchasing something they don’t need. Instead, it’s about helping the customer realize their progress and potential, subsequently leading them to the realization that they would benefit from expanding their investment with you. ## Cooperation Between Customer Success and Sales To make this approach successful, it’s critical to foster an environment of cooperation between your customer success and sales teams. See my post on RevOps Evolved for a deeper-dive into this [multi-pronged growth mechanism](https://sixteenventures.com/revops-evolved). The responsibility of nurturing customers through progress milestones and identifying expansion opportunities should ideally rest with the customer success team. The sales team then steps in to close the deal, ensuring the process doesn’t feel like a one-way street where customer success is merely a lead source for sales. This cooperation is crucial for both internal clarity and external communication with customers. A well-defined process with clear responsibilities minimizes confusion and enhances the customer experience, strengthening their trust in your organization. ## The Training Imperative for Effective Expansion Now, it’s important to understand that expansion is a huge growth opportunity, but it’s also vastly different from new business sales. If customer success is to drive expansion, the team needs to be adequately trained. This means equipping them with the skills and knowledge to cultivate customer relationships, identify opportunities for upselling or cross-selling, and communicate these opportunities effectively to customers. Make sure your CSMs are actually trained on how to do this. While expansion may seem daunting, with the right training, CSMs can become catalysts for exponential growth in your organization. ## Customer-Centric Expansion: The Game Changer Selling to existing customers, when done right, is a game-changer. It enhances customer relationships, opens doors for expansion, and leads to exponential business growth. But remember, the approach matters. By focusing on customer success, fostering cooperation between teams, and investing in proper training, you can unlock the true potential of your existing customer base. --- # NRR Panic: The Rollercoaster Ride You Never Saw Coming *April 26, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/nrr-panic-the-rollercoaster-ride-you-never-saw-coming/ NRR is tanking. The “North Star” is falling! Time to panic? Yes. Unless you understand what’s really going on. ## NRR Defined Net Revenue Retention – NRR – is the percentage of revenue retained from existing customers in a defined time period, including Expansion, Contraction, and Churn. Also called Net Dollar Retention or NDR. When NRR is going up, it’s a great metric that everyone wants to talk about. When it’s going down, it’s a lagging indicator that’s useles ## Shifting Sentiment toward NRR There’s been a significant shift in sentiment toward NRR in the last few quarters. 3Q22: (and for years before): “NRR is your North Star!” 4Q22: “NRR is a lagging indicator” 1Q23: “NRR doesn’t matter!” “NRR is a Vanity Metric” 2Q23: “NRR is tanking” “I’m SO over NRR” ## NRR is a Lagging Indicator Some people are derisively calling NRR a lagging indicator. As if they were shocked by this news and are now angry at this KPI. I suppose if you looked at NRR as anything other than what it is and always has been – a lagging indicator that reports on what’s happened in the past – then you would be shocked and angry when it all-of-the-sudden drops and you had no idea that was going to happen. ## NRR has Always been a Lagging Indicator NRR has always been a lagging indicator (as most composite, high-level KPIs are). Even the underlying metrics of Churn (customer leaves and takes all of their revenue with them), Contraction (customer stays but pays less), and Expansion (customer increases spend), are lagging indicators. ## Focus on Leading Indicators To affect change, you need to get clear on the leading indicators that influence Retention/Churn, Contraction, and Expansion. Here are a few things off the top of my head that you might want to start paying attention to. ### Leading indicators of Churn: When I say “churn” here, I’m talking about customer (logo) churn, where the customer leaves (or doesn’t renew) and takes 100% of their revenue with them. - Slowed or No Milestone Achievement - General platform disengagement - Ghosting Renewal specialist - Meeting No-shows/cancellations - Dramatic drop in support tickets - Downgrade inconsistent with their stated goals - Integrations are turned off - Record creation slows - Customer downloads their data - Customer announces restructuring plan/acquisition ### Leading indicators of Contraction:  BTW, in this current economic state, contraction seems to be the primary driver of falling NRR, not full churn. When a CS org is focused primarily on customer retention (vs. revenue retention), contraction either goes unnoticed or – upper case OR – that drive for customer retention leads to contraction (discounts, downsells, etc. to “save” the customer). Okay, so leading indicators of contraction are the same for churn, plus… - Unassigned Licenses never got assigned - Assigned licenses have been unassigned - Excessive unresolved support issues - Active users stop being active - Features of current plan/tier were never used - Premium features have stopped being used - Consumption drops significantly - Customer announces layoffs ### Leading indicators of Reduced Expansion:  While you may have churn and contraction in some customer segments, it’s totally possible to still have expansion in others. It’s a bad idea to assume since things are “bad out there” that all of your customers are hunkered down in survival mode. Some are thriving and are ready to buy more from you. But, some that might have been ready to buy more from you, that have a logical reason to do so, may have changed their minds. So, some leading indicators that customers may not expand (at least for now) include any of the indicators of churn or contraction, plus: - Their goals have shifted - Avoiding new long-term commitments - Personnel changes - Low C-Sat - Stated lack of confidence - Slowed growth on their end (headcount, revenue, market share, etc.) - Legitimate funding/budgetary constraints ## Prioritize and Engage Not all of those are going to apply to your unique situation, and there are many others in addition to those. But that’s a good list to get you started with. Identify which of those you have control/influence over and which are beyond your control and prioritize your engagement around the former. *If you need help with any of this, reach out… this is what I do.* ## NRR is a KPI. It’s not Bad or Good. NRR is a composite KPI that is by its very nature a lagging indicator. This isn’t good or bad. It just is. The metrics that roll-up to NRR – Retention / Churn, Contraction, and Expansion – though more actionable than the composite NRR, are also lagging indicators. If you want to positively affect those metrics, and ultimately NRR, you need to pay attention to the things that directly influence them. --- # Motivation vs. Discipline: How Knowing the Difference Skyrockets Customer Engagement *March 21, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/motivation-vs-discipline-how-knowing-the-difference-skyrockets-customer-engagement/ When you’re working with customers, whatever your role (CSM, Sales, Account Management, Consultant, etc.), you may find yourself acting as a coach. To be an effective coach, you need to strike the right balance between motivation and discipline. Which means we need to explore the differences between motivation and discipline, and how to apply them effectively to engage your human customers. ## So, You Don’t Need Motivation? It’s good to remember that the motivation for those saying, “you don’t need motivation, just discipline” is to position themselves a certain way: tough, independent, whatever. In other words, there’s **ALWAYS** internal motivation for whatever action you take; even if that motivation is to appear as if you don’t need motivation. Of course you see that repeated in business, too, especially around Entrepreneurship, Sales, and anything to do with hustle culture. No successful person was ever motivated to be successful; they were just disciplined. What a lovely-sounding bunch of garbage. In fact, it would be easy to just call BS on all of this and move on, but if we do that, we’re missing out on some powerful levers we can pull to make the customers we work with successful. ## Motivation vs. Discipline: The Basics Motivation is the driving force that compels human people to take action. Discipline is the consistent pattern of behavior designed to achieve a desired outcome. Going back to the fitness world for a second – again, a realm where motivation and discipline are often discussed and confused – motivation would be the desire to achieve a goal – to deadlift 200kg by May 1 – while discipline is the act of going to the gym consistently and following the program, regardless of how you feel on any given day. Understanding these concepts is essential when working with customers, especially in situations where you need them to take action that’s time-consuming, boring, technical, functional, or otherwise just not “what they signed-up to do.” When it comes to the customer’s success, the idea of discipline can be applied by laying out a clear plan with the customer and creating joint accountability to ensure they follow it. However, understanding their motivation is just as important; a well-structured plan will fall short if the customer lacks motivation. But since the customer never *actually* lacks motivation; the problem is that you’re likely looking for – or attempting to conjure-up for them – the wrong type. ## Internal vs. External Motivation Internal motivation comes from within (as the name implies), driving a person to reach their goals. But “internal” motivation could also be internal to their team or org, or the company they work for. External motivation, on the other hand, comes from outside sources that should add to one’s internal motivation, not replace it. External motivation is not enough. It’s never enough. Ever. In your customer-facing role, you may sometimes act as an external motivator for your customers, but this is exhausting and unsustainable in the long run if it is the sole source of motivation for them. To avoid burnout, you must understand your customer’s internal motivation – the **WHY** behind their goals – and get them to draw on that to fuel their disciplined approach to achieving their goals. Of course, you don’t have to be the sole source of external motivation. ## Social Proof as External Motivation In fact, if you can have customer stories lined up – social proof as we call it – you can rely on that to say, “hey, look what other customers that are in the exact same situation as you that have the same characteristics as you did and the results they got.” Social proof can be incredibly motivating. Of course, on its own it’s not enough. But if you can align that with their internal motivation, social proof becomes a multiplier, not just for the customer’s success, but your’s, too. By tapping into their internal motivation, you can better support them in their journey toward success… without destroying yourself in the process. ## Internal Motivation + Discipline + External Motivation = Success External motivation cannot overcome a lack of internal motivation. The good news is everybody has internal motivation; it’s always there, just not always known. Your job is to surface it for and with the customer. Once you get them to tap into their internal motivation, a disciplined approach to achieving their goals becomes so much easier to implement and stick to. Once those are in place, feel free to add on your external motivation. Cheer them on. Support their efforts. Advocate for them. [Elevate their status.](https://sixteenventures.com/customer-status-the-hidden-motivator-you-cant-ignore) --- # Why CSM Positioning is so Important (and How to Fix it) *March 19, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/why-csm-positioning-is-so-important-and-how-to-fix-it/ The customer’s perception of why the Customer Success Manager (CSM) exists in their world, and how the CSM is distinguished from other Individual Contributors (ICs) and Subject Matter Experts (SMEs) the customer will work with, is called Positioning. Think of it as the position the CSM holds in the customer’s mind. Positioning impacts whether the CSM is viewed as strategic (or not), how the customers treat the CSM, whether they listen to the CSM, and whether they’ll hold up their end of the Joint Accountability agreement. Ideally, you want to be seen by your customers as that proverbial strategic partner or “trusted advisor.” What that means, is you want them to see you as someone that can help them achieve their business goals. Let’s get involved in this… ## Positioning Matters CSM Positioning is one of my favorite topics we cover in all of our CSM training programs because it’s so fundamental to the success – or failure – of a CSM and their ability to help the customer be successful. It’s also something that the CSM can immediately start taking action on and quickly experience a positive change in the customer’s perception of them. But it’s also hard to hear stories of frustrated CSMs that have been positioned poorly – by their colleagues, the customers, or even themselves – and how it makes their job so much more difficult. ## You’re Positioned Whether you Know it or Not Your customer will come to the table with a position already set for you as the CSM. Everyone has biases they bring with them into new relationships – business or otherwise (whether we want to admit it or not) – and your customers are no different. This preconception might be based on previous experience working with other vendors or just based on some made-up idea of what a CSM should do. ## Sometimes Bad Positioning is an Inside Job This is why it’s so critical that the CSM’s team members that work with the customer before they get to the CSM must work to correctly position the CSM in the customer’s mind. Those responsible for positioning the CSM before the customer interacts with them might include the Salesperson, Sales Engineer, Technical Account Manager, and/or Onboarding. Of course, CS leadership is ultimately responsible, since they set the positioning of the CSM in the minds of the rest of the company and explain **why** that positioning is so important. That all said, the CSM cannot simply exist at the mercy of everyone else’s positioning (or lack thereof). ## Control your Narrative The CSM has an opportunity (and responsibility) to position themselves, either along with – or in spite of – the way other people position them with the customer. And the reality is, CSMs positioned incorrectly – regardless of why this happens or who is responsible – will be viewed as simply glorified support, product specialists, the customer’s assistant, etc. Once that bad positioning has been set, it’s difficult to change. It’s not impossible, it’s just difficult. It requires a deliberate focus and, ideally, a proven framework to leverage. ## How to Fix Bad Positioning If a customer sees you only as a product specialist, their assistant, a “problem solver,” or otherwise positions you inappropriately, and you want to change the way they view you and become more of a strategic partner, there is one sure-fire way to reposition yourself. Get the customer to talk about their goals. If they see you as simply a product specialist (which sounds fine until you’re stuck there), ask them about their higher-level goals so you can ensure they’re using the product in a way that will help them achieve those goals as efficiently as possible. If they see you as simply a problem solver – which again sounds nice until they disengage because they don’t have any problems right now – tell them once these problems are solved, you’ll need to sync on their business goals so you can ensure they’re using the product in a way that is going to help them achieve their goals as, you guessed it… efficiently as possible. Yes, there’s more to it. I spend a full week on this when I train CSMs. But, focusing on their goals is a great place to start repositioning yourself. --- # Customer Status: The Hidden Motivator You Can’t Ignore *March 19, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-status-the-hidden-motivator-you-cant-ignore/ In Customer Success we’re always concerned with the status of our customers. We keep track of their health score, their adoption velocity, usage, satisfaction, and other metrics that tell us whether or not they’re successful. And while all of that is obviously what we should be looking at in our Customer Success operation, there’s another type of customer status that we very often overlook. A type of status that is the key to going from simple retention to growth and advocacy. The status of the customer stakeholders: the actual human people that work at our customer’s company. Let’s explore, shall we? ## The Hidden Motivator I was reminded about this while revisiting the book [Expert Secrets](https://amzn.to/3ZN4AV7), wherein the author, Russell Brunson, talks about selling products or services that don’t make the customer faster, better, or smarter. Rather, he talks about selling a product that increases the customers’ status. In fact, he says most buying decisions boil down to the customer asking a form of this question: “Is this thing I’m considering going to increase my status or decrease it? Which further reminded me that in another book [The Status Game: On Human Life and How to Play It](https://amzn.to/42aXYBu), author Will Storr says,”status is what researchers call an ‘ultimate’ rather than a ‘proximate’ drive: it’s a kind of mother-motivation, a deep evolutionary cause of many other downstream beliefs and behaviours that’s been favoured by selection and is written into the design of our brains.” ## Everything is a Status Game Your customers – the humans that make up your customer company – want to hit certain goals, achieve specific metrics, perform certain tasks, finish a project, implement new software, etc. but those things all exist within the ever-present, but often hidden status-seeking motivator that’s actually driving their decisions. It’s like how science is discovering that at a physical level, humans are really just a vehicle for bacteria to do their thing; at a psychological level, humans are really just a vehicle for status to do its thing. ## Uncovering the Status-Seeking In really small companies, the individual contributors often have goals and desires that are tightly-coupled with the company’s goals and desires. This is generally the case because the individual contributor has much more of a direct impact on the results that the company achieves. What this means in practice is that the motivation for someone in that role may be more to avoid status loss than to gain status because inside the company they already have the amount of status that they could ever hope to achieve. Of course, if they are able to gain a level of status that then puts them in a position to go to work at a different or bigger company and move up the career ladder in the process, that’s something to keep in mind. But generally – read that again; generally, there are always exceptions – in a smaller company, fear of status loss is often the main driver (at least outside of Sales). But in a bigger company, since there is often more upside potential in their career path, and given the fact that the individual contributor often doesn’t have a lot of direct impact on the company’s overall metrics, it really does come down to just their perceived success in their role and their personal feeling of accomplishment. ## A Game of Status Twister Paradoxically, I often see CSMs that work with people at smaller companies spending time really getting to know those stakeholders better. The work to understand what drives them, even though what drives them is really just what drives the company. If the company is hitting their goals, the person you’re talking to is successful in their role. This is not to say that they shouldn’t be getting to know these people at the smaller company, but they should for sure be getting to know the stakeholders in larger companies. However, what I see all the time is that when a CSM talks to their counterpart at a larger company, they never talk about the individual person’s goals or desires in their role. They only talk about the task at hand, or the goal to be met, or the job to be done. They will only talk about the company’s goals and how that person “impacts” those goals. Of course, the sad punchline there is that the person who “impacts” those goals, actually doesn’t; at least not to the extent that they might say or that reality dictates. It’s often a team effort, and sometimes it only appears that way, with most team members completely detached from the outcome. Which is why it’s imperative to this person that they have the appearance of impacting those outcomes. They look good in the process. That they not just maintain, but elevate their status. ## Elevate their Status Customer Success organizations – and CSMs in particular – that understand how to discover the status requirements of the humans they work with, and then work to elevate their status, are the CS orgs that generate not only raving fans, loyal customers, and vocal advocate, but they hit and massively exceed their core CS KPIs like Net Revenue Retention (NRR). So think about ways you can elevate the status of the people you work with. Some ideas to elevate the status of the people in your customer companies are: - Exclusive access to content, experts, products, data. - Training and Certifications - Community and the ability to become a leader in it - Connect them with aspirational peers - Put them on stage at your events - Do case studies on them – not just their company Now it’s your turn. How can you raise the status of your customer stakeholders? --- # The Power of Curiosity in Customer Success *March 19, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/the-power-of-curiosity-in-customer-success/ As a Customer Success Manager (CSM), it’s easy to fall into the trap of just going through the motions with your customers. You have a list of tasks to complete, metrics to track, and goals to achieve. But what if I told you that being curious could transform your relationship with your customers and position you as a trusted advisor and strategic partner? Let’s dig in. ## Source of Inspiration I was reminded of the power of curiosity while I was listening to the episode of David McRaney’s [You are Not So Smart](https://youarenotsosmart.com/2023/03/06/yanss-254-how-to-have-productive-conversations-in-a-polarized-political-environment/) podcast with Mónica Guzmán, author of [I Never Thought of It That Way: How to Have Fearlessly Curious Conversations in Dangerously Divided Times](https://amzn.to/3TaO5zu). In that episode, Mónica and David dive deep into how curiosity, more than anything else, can be the bridge that brings two seemingly permanently divided sides together. So I thought it was wise to revisit the power of curiosity as it relates to Customer Success. ## Curiosity and Engagement Curiosity is a powerful tool in Customer Success because it allows you to engage with your customers in a deep, meaningful way. When you’re genuinely curious about your customers and their business, it shows that you care and that you’re invested in their success. This level of engagement can help you build rapport quickly and establish a foundation of trust. ## Uncovering Pain Points Curiosity can also help you uncover pain points that your customers may not even be aware of. By asking questions and digging deeper, you can identify areas where your product or service may be falling short and work to address those issues before they become bigger problems. This proactive approach can save your customers time, money, and frustration, and can position you as a valuable partner in their business. ## Unlocking Opportunities In addition to uncovering pain points, and something that positions you as more valuable in the customers’ mind, curiosity can also help you unlock new opportunities for your customers. By asking questions about their business goals (objective + time frame), you can identify areas where your product or service can help them achieve those goals. This can lead to upsell opportunities, increased adoption, and advocacy. ## Curiosity as a Competitive Advantage In the weird mix that is today’s competitive landscape and market conditions, curiosity can be a powerful differentiator. By being genuinely interested in your customers and their business, you can stand out from competitors who may be more focused on closing deals than building relationships. This can help you retain and grow customers over the long term. ## How 5 Minutes Changes Everything So how do you make curiosity a habit in your practice as a CSM, taking into consideration your limited “extra” time for having deeper conversations? Free-up 5-mins on a call by off-loading something to async that you would typically do live, on the call; Like having the customer review a report on their own, with the intent to discuss on the call. Now, use that “extra” 5 mins to ask open-ended questions that encourage your customers to share their thoughts and experiences. Listen actively and follow up with additional questions to dig deeper. And don’t be afraid to ask “why” or “how” to get to the root of an issue or opportunity. The async off-load also helps ensure the meeting is there to move us forward instead of looking back and is a way to generally make meetings more productive and add some level of “scale” to your operation. ## Stay Curious My Friends Curiosity is a powerful tool in Customer Success Management that can help you engage with your customers in a deep, meaningful way, uncover pain points, unlock new opportunities, and position yourself as a trusted advisor and strategic partner. By making curiosity a habit in your daily practice, you can transform your relationships with your customers and differentiate yourself in a competitive landscape. So next time you’re working with a customer, remember to be curious – it just might be the key to unlocking their full potential. --- # Creating Customer Success Playbooks with ChatGPT *March 3, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/creating-customer-success-playbooks-with-chatgpt/ Customer Success is always under pressure to optimize (and reduce the expense of) everything. Many people see ChatGPT as a way to streamline Customer Success processes like preparing for customer meetings or  literally creating those processes upon which their organizations run. One approach some Customer Success pros are taking is to use ChatGPT to generate Customer Success playbooks. ChatGPT, if you’re not aware, is a language model trained by OpenAI that can generate human-like text and help create high-quality content. Let’s dive deeper into how businesses are using ChatGPT to create Customer Success playbooks, examine the potential drawbacks of doing this, and provide tips on how to use ChatGPT effectively for this purpose. ## The Benefits of Using ChatGPT for Customer Success Playbooks One of the primary advantages of using ChatGPT to generate Customer Success playbooks is the time and effort it saves, and the expense of buying (and continuing to pay the high cost of trying to implement) generic “blueprints” from consultants. With ChatGPT, you can essentially avoid starting from scratch and generate what appear to be high-quality playbooks, quickly. However, there are some limitations to using ChatGPT that can seriously impact the quality of this output. ## The Drawbacks of Using ChatGPT for Customer Success Playbooks First, the underlying model of ChatGPT was trained up to mid-2021, and therefore does not include the latest industry updates and best practices. Customer Success is continuously evolving, but has evolved rapidly and drastically over the last couple of years. This is where  the [Bing Chat + ChatGPT strategy](https://sixteenventures.com/chatgpt-or-bing-customer-success) helps, because Bing will pull in live search results (where ChatGPT doesn’t have access to live web data). It’s also critical to remember that the vast majority of Customer Success content is written by people that do not understand Customer Success. This isn’t a dig on so-called “experts” in this field, but literally, staff writers and content teams do “research” and generate content on this subject – and many others – that rank well (I see you Hubspot), but don’t add anything new, or at worse, perpetuate outdated and disproven (or simply irrelevant) ideas. So much Customer Success content is simply derivative of a few original (and long-outdated) sources, or derivatives of derivatives, and so the same nonsense just keeps getting proliferated. This hasn’t changed, BTW, and with ChatGPT and other generative models, this is only going to get worse. I am fully aware. Anyway, that derivative, outdated, but authoritative content is made more authoritative as it’s the basis for content on lower-authority sites, and thus the vicious cycle continues. So when ChatGPT was “reading” the web, the connections it made in it’s model about what Customer Success is, how it works, etc. are skewed by all of that noise. Finally, and critically, the ChatGPT-generated content will lack context about your company, product, customers, Customer Success org, Coverage Models, and the unique relationship between all of those things. ## Examples of Using ChatGPT for Customer Success Playbooks To better understand how ChatGPT is being used to create Customer Success playbooks in practice, let’s examine a specific example. A SaaS company that wants to improve its onboarding process can use ChatGPT to generate an onboarding playbook. The great thing about ChatGPT is you could literally just ask it to do exactly that – generate an onboarding playbook – and it will. Like magic. But is it useful? Is it specific to your situation? Is it based on up-to-date information? In that case of this very simple prompt, no. Not useful at all. See, you can either look at ChatGPT as a magical machine that conjures content as if from a separate realm or you can understand how to use it as a serious business tool and get it to actually create useful output for you. The latter, by the way, takes an extra few minutes – max – if you know what you’re doing. And those who buy our [Prompt Engineering for Customer Success](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) course know what they’re doing. ## Training ChatGPT for Effective Customer Success Playbooks To ensure that ChatGPT-generated playbooks are accurate and effective, businesses need to train the model with specific information related to their unique situation. To get something usable in reality, you need to input relevant information and data related to each stage of the onboarding process, differences from one customer segment to another, the Coverage Model for each segment, etc. and then ChatGPT can generate a playbook closer to what you need. Then you can refine from there. This training process includes feeding the model with up-to-date information and current best practices, as well as using specific prompts that provide context on the customer, market, industry, and other relevant factors. That training should be followed by actually taking advantage of the chat aspect of ChatGPT to use refinement prompts to shape the content until you get what you’re looking for. We have an entire section in [Prompt Engineering for Customer Success](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) on how to effectively train ChatGPT. ## ChatGPT is a Powerful Tool (If you Use it Correctly) Using ChatGPT to create Customer Success playbooks is an innovative approach that can save time and effort while providing fresh insights into existing strategies. By training ChatGPT with specific information and using relevant prompts, Customer Success pros can create playbooks that are actually useful. Unlike tools of the past where “Garbage in, Garbage out” was the mantra, ChatGPT obfuscates the intake of garbage, and it’s magical generative powers make the output that might be garbage, seem amazing. The hype is real, but the usefulness is only there if you understand how to use it. --- # ChatGPT or Bing: Which AI Tool is Best for Customer Success *March 1, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/chatgpt-or-bing-customer-success/ Generative Artificial intelligence (AI) like ChatGPT – and now Bing Chat – is transforming the way we communicate and work, especially in Customer Success. These AI-powered tools offer unique benefits to Customer Success Managers (CSMs) and Enablement pros like: enhancing search, language generation, and productivity. I finally got access to Bing Chat and was able to test our prompts we developed in ChatGPT for our [Prompt Engineering for Customer Success](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) course in Bing, and I’d like to share my experience and insights on how they compare and contrast. Let’s dig in. ## ChatGPT: Creative Language Generation for Broad Tasks ChatGPT is an AI-powered tool from OpenAI that uses deep learning to generate strings of text in response to a user prompt. It was trained on web data up to mid-2021, so the benefit of Bing Chat over ChatGPT is access to the latest information. ChatGPT can have out-of-date information, so you need to be careful. That said, where ChatGPT really shines is content generation. Ask ChatGPT to write an email for you, generate a blog post on a topic, or summarize a research paper and it will. What I find impressive about ChatGPT is its ability to handle broad tasks that require creativity and knowledge. ### Content Generation For example, when I asked ChatGPT to generate a story about a Customer Success hero, it gave me a well-written and engaging narrative that had all the right elements of storytelling. Similarly, when I asked ChatGPT to summarize the transcript of a webinar I did on Customer Expansion, it gave me a concise and accurate summary that saved me a lot of time. However, ChatGPT’s outputs can be erratic and nonsensical at times, especially when the input is ambiguous or open-ended. This is where understanding the art of [Prompt Engineering](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) becomes critical. ChatGPT’s language generation is impressive, but it still has limitations in terms of creativity, coherence, and context. ## Bing Chat: AI Search Bing Chat is a new service from Microsoft that’s based on ChatGPT that lets you chat with Bing on your phone or desktop browser. It’s very slick and easy to use. The details are not publicly available, but some speculate that Bing Chat is a version of ChatGPT based on OpenAI’s GPT4 (vs. ChatGPT which is GPT3.5). Microsoft is the only licensee to get access to the lower-level language model vs. a more abstracted version other API users get), and that is due to – or was the reason for – their close ties with (and $10B investment in) OpenAI. ### Natural Language Search and Results What sets Bing Chat apart from other search engines like Google or old Bing is its natural language processing capabilities, which allow you to ask questions and get answers in a conversational tone. This is especially useful for scenarios where you don’t have a specific keyword or phrase in mind, but rather a general idea or context. Thus far I’ve found that our Brainstorming and Call Preparation prompts from our [Prompt Engineering](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) course to work well in Bing Chat. Not better than ChatGPT, necessarily, but different and well. ### Conversational Search Results The conversational aspect of Bing Chat also makes it more engaging and less robotic than other search engines and allows for refinement of results, which is amazing. A non-Customer Success example of this was asking for a recipe for vegan lasagna that would feed 6 people and take less than 1-hour total to prepare and cook. The recipe it shared called for vegan ricotta, which I knew I couldn’t get, so I asked Bing if it knew of an alternative and if so, how much would I use in this recipe. It suggested tofu and explained how to prepare that and what measurement to use as a replacement. That’s really cool. But, there are some pretty substantial limitations to Bing Chat that can really affect you in Customer Success, especially on the Enablement side. ### Content Generation in Bing Bing Chat seems to be overly cautious about generating content that could potentially infringe on copyrights. This is good. I don’t want to infringe on anyone’s copyrights. But, this means Bing Chat is simply unusable for direct content generation. This even includes the building blocks of content, too. When I asked Bing Chat to generate an outline for a blog post on a topic related to Customer Success, it said that it couldn’t do that because it would be violating the copyrights of other people. When I asked if it could write an email for me explaining how it wasn’t able to generate a blog post, it said it couldn’t, and that asking AI to write an email was unethical. Then, in what I took as somewhat passive-aggressive, it said, “I’m sure you have some great ideas and insights to share with your fellow customer success professionals.” When I asked if it could tell me what it’s limitations were – i.e. what it can and cannot do for us, Bing indicated it can’t talk about its flair. So Bing was a little mean to me, but apparently I got off easy. Some people have reported Bing threatening them and their families. Overall, Bing Chat does have a more negative vibe than ChatGPT. ## Use Both for Enhanced Productivity I don’t think Bing Chat and ChatGPT are an either/or situation. They both have different strengths and weaknesses, and I believe they can complement each other when used together. For example, you can use Bing Chat to gather information and research for a topic, and then use ChatGPT to generate a creative and well-written piece of content. You can also use Bing Chat to narrow down your search results for ChatGPT by asking more specific and targeted questions. For instance, when I asked Bing Chat to find me research on the topic of Net Revenue Retention (NRR) in SaaS companies, it gave me several options with abstracts and summaries. I could then use ChatGPT to summarize the papers or generate insights based on the content. However, it’s important to be aware of the limitations and potential pitfalls of each tool, and to use them responsibly. ### Accuracy and Factuality For example, you should always double-check the search results provided by Bing Chat to make sure they are accurate and relevant. You should also review the outputs generated by ChatGPT to ensure they make sense and are appropriate for your needs. And Bing Chat does give you links to the sources it pulls from, so you can give credit where it’s due. ChatGPT just ingested everything and attribution was not maintained. Copy from one source, it’s plagiarism… copy the entire Internet and it’s a Large Language Model. ### Improve Your Workflow Okay, so Bing Chat and ChatGPT are two AI-powered tools that offer unique benefits for enhancing search, language generation, and productivity. Bing Chat’s conversational search capabilities can help you find information in a natural and engaging way, while ChatGPT’s creative language generation can save you time and effort in creating content. By using both tools together, you can streamline your workflow and achieve better results in less time. However, it’s important to keep in mind that no tool is perfect, and that Bing Chat and ChatGPT have their own limitations and potential drawbacks. It’s up to you to evaluate the pros and cons of each tool based on your specific needs and preferences, and to use them responsibly and ethically. With the right mindset and approach, Bing Chat and ChatGPT can be powerful allies in your quest for productivity and innovation. --- # Customer Success Pros: Stay Ahead of the Game with ChatGPT *February 27, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-chatgpt/ As a Customer Success professional looking to stay relevant in your field and be the best at what you do, one emerging tool that you need to be aware of – and start using – is ChatGPT. ChatGTP is a powerful AI program that has the potential to revolutionize the way you work, but to make the most of it and other similar tools, you’ll need a new skill: Prompt Engineering. Don’t worry if you’ve never heard of prompt engineering before – it’s simply the practice of crafting clear and effective prompts to guide ChatGPT towards producing the outputs you need. ## ChatGPT in Customer Success And with the right prompts, ChatGPT can help you perform a range of essential tasks, from crafting super-engaging emails to performing NRR calculations to customer health score assessments, and so much more. So if you’re ready to take your Customer Success game to the next level, it’s time to learn about prompt engineering and start exploring the potential of ChatGPT. With this powerful combination of tools at your fingertips, there’s no limit to what you can achieve in your role. ## Customer Engagement at Scale As a CSM or Enablement professional, you know the value of ensuring your customers are engaged and successful. But with so many customers to manage, or so many customer segments to tailor content for, it can be challenging to simply do the bare minimum, let alone do what’s necessary to adequately prepare for meetings, personalize communications, or to spend time brainstorming potential objections a customer may have. This is where AI tools like ChatGPT come in. They have the power to assist you in ways that you might have never thought possible. But to unlock the full potential of these tools, you need to master the art of Prompt Engineering. ## Prompt Engineering is the Key With a well-crafted prompt, you can quickly extract useful insights that would be impossible to get from traditional data analysis methods, to better understand new customers in ways that would traditionally have taken far too long to do consistently, etc. And while this is great for generating a great knowledge base article or developing a compelling email subject line, the power of ChatGPT in Customer Success is far greater than that. The insights you gain from ChatGPT can have a real impact on your customer relationships and, in turn, Customer Success KPIs like NRR and ARR. But not all prompts are created equal. Just like how some AI-generated images are stunningly beautiful, while others are grotesque, the quality of your prompts will determine the quality of the insights you get. ## Garbage In, Garbage Out That’s why you need to learn the art of Prompt Engineering. With this skill, you can create prompts that extract insights that are not just visually pleasing, but are also actionable and can help you better serve your customers. And the best part? With ChatGPT, you don’t need to be a data scientist to get the insights you need. You just need to be able to create well-crafted prompts. We created our [Prompt Engineering for Customer Success](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) course for this reason. But it doesn’t matter how you learn this skill – our course or on your own through trial and error – just do it. ## Evolving Customer Success Job Market As a CSM or Enablement professional, you know that the landscape of your job is constantly changing. You need to stay ahead of the curve to keep up with your competition and provide the best service to your customers. And learning Prompt Engineering is one of the best ways to do that. So, if you want to stay ahead of the curve and ensure your future in the field, start learning Prompt Engineering today. The benefits are clear, and the potential to transform the way you work is limitless. ## Why Prompt Engineering Matters for CS Pros If you need a little more motivation, here are 5 reasons why Prompt Engineering is essential for the modern CSM or Enablement professional: - Without Prompt Engineering, you’re missing out on valuable insights that can help you better engage your customers and be the best CS pro you can be. Period. - Companies that over-hired during the pandemic are “right-sizing” by laying-off underperforming employees; Prompt Engineering will make you far more efficient and effective in your role, meaning in a performance-based environment, you’ll be seen as more valuable. - While AI tools have been around for a while, they’ve exploded in popularity thanks to ChatGPT. The massive hype will die down, but these tools are here to stay, so learning Prompt Engineering is a valuable skill that you will use for the foreseeable future. - When a Head of CS has to choose between a CSM or Enablement Pro that understands Prompt Engineering and one that doesn’t, all things being equal, the one that understands Prompt Engineering is going to get the job. - Your prompt library will be an asset you can carry with you and use to stand-out from the crowd; in much the same way designers have a portfolio to show off their work. So, what are you waiting for? Start [learning Prompt Engineering](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) today and unlock the full potential of AI tools like ChatGPT. Your boss and customers will thank you, and so will your future self. --- # ChatGPT in Customer Success: Generative Output to Desired Outcome *February 27, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/chatgpt-customer-success/ Generative AI, like ChatGPT, is a powerful technology that has revolutionized the way we approach various fields, including writing, coding, music composition, and even Customer Success. ChatGPT uses artificial intelligence to generate high-quality content based on prompts, enabling people to accomplish far more in much less time. For example, programmers can generate code that would have taken hours to write in a matter of minutes, while musicians can create entire pieces of music with the push of a button. Amazing. However, while the power of generative AI like ChatGPT is undeniable, it is important to understand that this technology has limitations. Despite its ability to generate content quickly and easily, you still need to know what to do with the output. I want to explore why understanding the limitations of ChatGPT is crucial and how it can help you make the most of this powerful technology. Especially when it comes to Customer Success. Let’s dig in. ## The Power of ChatGPT in Customer Success When ChatGPT first came out (in November 2022), it amazed people with its ability to write code. You could input a description of what you wanted to achieve, and ChatGPT would literally generate working snippets of Javascript, Python, or any other programming language code for you. This capability was seen as a game-changer (or massive threat, depending on your perspective) for developers, who could save time and effort in coding. But the power of generative AI doesn’t stop at coding. It can generate music, recipes, and even Customer Engagement content, like emails. ## The Limitations of ChatGPT in Customer Success Despite ChatGPT being a [game-changer in Customer Success](https://sixteenventures.com/chatgpt-is-a-customer-success-game-changer), generative AI has its limitations. Just because ChatGPT can generate code, write music, or pull together recipes, it doesn’t make the user a developer, musician, or chef. The AI may help you write faster and do repetitive heavy-lifting tasks, but it can’t replace the expertise and experience that comes with being a professional in your field. At least not yet. ## The Role of the Prompt Engineer in Customer Success The AI’s output is only as good as the prompt it receives. Period. So, the role of a prompt engineer is critical in generating content using AI. The prompt engineer needs to be knowledgeable about the topic, clearly understand not only how to generate the content but how it will be used, and then provide detailed, high-quality prompts to get the best results from the AI. If you’re in Customer Success, our [Prompt Engineering course](https://www.customergrowthlab.com/prompt-engineering-for-customer-success) can help you here. ## The Output to Outcome Flow is Critical The output of generative AI may seem like a ready-made solution, but the user still needs to know what to do with it. For instance, if ChatGPT generates a piece of Javascript code, the user needs to know where it fits in and how to integrate it with other code segments. Similarly, if the AI generated music or a recipe, the user still needs to be able to play or sing that song or be able to cook or bake according to that recipe. ## Expertise is Still Required While generative AI can assist in content creation, it cannot replace the importance of expertise. For instance, a software engineer’s knowledge goes beyond writing code. They must have a deep understanding of system architecture, design patterns, and software testing. Similarly, a chef’s expertise goes beyond following a recipe. They must know how to adjust the recipe based on the ingredients’ quality, temperature, and cooking time. Therefore, while generative AI can help users save time, it cannot replace the experience, knowledge, and expertise required for high-quality output. ## Building Blocks of Customer Success In Customer Success, I’m seeing consulting companies ramping up their free trial, onboarding, and engagement email services because ChatGPT allows their team to now crank out large amounts of content very quickly. But if they – or you – don’t understand how to fit each message together in an Engagement Process to move the customer from where they are to where they need to go, all of that content generated quickly at scale isn’t going to have the effect you’re looking for. The CSM and Head of CS training I run will help you here. ## We’re All Prompt Engineers Now ChatGPT has revolutionized the way we approach content creation, and it has been a game-changer in many fields. However, it comes with limitations. As a prompt engineer or a user, you need to know what to do with the output generated by the AI. It can’t replace the knowledge, experience, and expertise that comes with being a professional in your field. Therefore, the key to making the most of generative AI is to use it as a tool that assists in the creative process, rather than relying on it as a complete solution. --- # Stop Teaching Your Customers to Ignore You! A Guide to Effective Customer Engagement *February 21, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/stop-teaching-your-customers-to-ignore-you/ Customer Engagement still relies on email as the primary channel for most businesses. But what happens when the emails you send are ineffective, causing decreased opens and interactions, increased unsubscribes, and a tarnished sender reputation? These are clear signs that your customers may be ignoring you. In this post, we’ll explore why this might be happening and how you can ensure your emails are always effective. Let’s dig in. ## Analyze Customer Engagement Emails When we look at customer engagement, there are several key metrics we need to keep in mind. These include in-app engagement and email engagement, unsubscribes, spam score, domain setup, and reputation. Analyzing these metrics can help us identify areas of improvement and ensure that we’re not inadvertently causing customers to ignore us. For example, if you’re sending emails from multiple teams and systems at the same time, without clear objectives, or with too many CTAs, you may be causing confusion and frustration for your customers. Similarly, sending emails at the wrong time to the wrong people can be a major turnoff. All of these factors can contribute to decreased engagement and increased unsubscribes. ## The Importance of Clear Objectives One of the biggest culprits of ineffective email communication is a lack of clear objectives. When you send an email, you should always have a clear goal in mind. This might be to onboard a new customer, engage with an existing one, or promote a new product or service. When you don’t have a clear objective, your email may come across as vague or unimportant. Customers may not understand what you’re trying to achieve, and as a result, they may ignore or delete the message. To avoid this, always make sure you have a clear objective in mind before you hit send. No clear objective? Don’t send that email. ## Avoid the Sales Pitch Another common mistake businesses make when it comes to customer engagement is trying to sell something too early. If a customer is not ready to make a purchase, bombarding them with sales pitches is unlikely to be effective. In fact, it may be counterproductive, causing them to ignore or unsubscribe from your emails. Instead, focus on building a relationship with your customers. Provide them with valuable information, resources, and support that can help them achieve their goals. When they’re ready to make a purchase, they’ll come to you naturally. ## Show That You Care It’s important to show your customers that you care about them. This means listening to their needs and concerns, providing them with personalized support, and being transparent and honest in your communication. When customers feel valued and supported, they’re much more likely to engage with your business. Always ask yourself the question, “Are we teaching our customers to ignore us?” before you hit send on any email. By keeping this question in mind, you can ensure that your communication is always effective and customer-centric. Remember, it only takes one email to teach a customer to ignore you, so make every message count. ## The Importance of Timing In addition to having clear objectives and avoiding sales pitches, it’s also important to consider the timing of your emails. If you’re sending emails at the wrong time or frequency, your customers may become overwhelmed and ignore them. For example, sending too many emails in a short period of time can be a major turnoff. Similarly, sending emails at odd hours, such as in the middle of the night or on weekends, may not be the best strategy for engagement. Instead, consider sending emails during business hours and spacing them out over a reasonable time period. ## Personalization and Relevance Personalization and relevance are also key to effective customer engagement. When customers receive personalized messages that are relevant to their needs and interests, they’re much more likely to engage with your business. This might include providing personalized recommendations, customized offers, or tailored content. To achieve this level of personalization and relevance, you may need to collect data on your customers’ interests, behavior, and preferences. This can help you create more targeted and effective communication that resonates with your audience. BTW, personalization is **NOT** just using an FNAME variable or mentioning something they posted on social as if you know them to try to build a connection. ## The Answer Better be No Customer Engagement is critical to the success of any business. However, many businesses unknowingly teach their customers to ignore them through ineffective email communication. To avoid this, it’s important to have clear objectives, avoid sales pitches, consider the timing of your emails, and personalize your messages. By keeping these factors in mind, you can ensure that your emails are always effective and that your customers remain engaged and interested in your business. So, next time you hit send on an email, remember to ask yourself, “Are we teaching our customers to ignore us?” and make sure that the answer is a resounding “No”. --- # ChatGPT is a Customer Success Game-Changer *February 18, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/chatgpt-is-a-customer-success-game-changer/ Generative AI tools like ChatGPT are super-powerful, but how is it actually useful to you in Customer Success on a daily basis? When it comes to AI like ChatGPT, everything starts with understanding Prompt Engineering. I like to remind people that AI will not replace you. But if you don’t know how to leverage powerful AI tools – like ChatGPT – someone who does… definitely will. Let’s dig in. ## What is ChatGPT? ChatGPT (Chat Generative Pre-trained Transformer) is a chatbot developed by OpenAI and launched in November 2022. It is built on top of OpenAI’s GPT-3 family of large language models and is trained on diverse sources, including human speech patterns, business language, and slang. Previous to ChatGPT, the underlying language models were only available via API to programmers or via 3rd party apps that integrated with OpenAI. Now, anyone with a browser can access GPT directly via a very familiar chat interface. ## Prompts vs. Keyword Searches ChatGPT is not a search engine that finds and retrieves existing content that matches your query. Rather, ChatGPT is literally writing the result for you in response to your prompt in real time. But to do that, you must ask it to do something for you – give it a task or assignment – and you do that by providing it with a prompt. ## Enter Prompt Engineering In fact, because knowing how to write prompts is a skill you need to have to remain relevant in your career and effective in your role, we created a self-study course called [Prompt Engineering for Customer Success](https://www.customergrowthlab.com/prompt-engineering-for-customer-success). But whether you take that course or figure this stuff out on your own, there is so much untapped potential in ChatGPT for Customer Success, this is in no way an exhaustive list of how it adds value in CS, but below is a start. ## The Value of ChatGPT for Customer Success Managers (CSM) As a CSM, once you understand Prompt Engineering, ChatGPT will make your job easier. You’ll be able to do more, faster. You’ll be able to actually spend time preparing and brainstorming ahead of calls. In the CSM training I run, I push for doing that meeting prep work, but we know that the bandwidth isn’t always there. And even if you do have time, it’s sometimes hard to be creative in the way effective brainstorming takes. ChatGPT helps there. And overcoming blank-screen syndrome – for CSMs and Enablement – where you need to write an email or come up with great subject lines and because of bandwidth and distraction issues you just can’t get started. ChatGPT – used correctly – really shines here. ## The Value of ChatGPT for CS Enablement and Ops For Enablement, creating content that scales is challenging, and ChatGPT helps in multiple ways; eliminating blank-screen syndrome, understanding a customer segment better, knowing their potential objections, and so much more. And for Ops, taking prompts that work well and replacing specifics with variables that can be replaced by information from the customer record that are then passed to OpenAI via API, can automate a lot of that prep work the CSM would do on their own. From Zapier or Make to custom programming, the possibilities are endless. But it all starts with [Prompt Engineering](https://www.customergrowthlab.com/prompt-engineering-for-customer-success). --- # Growth Unlocked: The Key to Exponential Account Expansion *February 18, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/account-expansion/ Expansion – not simple renewal – is the ultimate indicator of a successful customer. There’s a way to handle expansion (upselling, cross-selling, land-and-expand, etc.) that results in limited, incremental growth in customer account value. And there’s a way to do it that results in consistent, exponential growth in customer account value.Interestingly, it doesn’t really matter who is driving the strategy for expansion. Let’s dig in. ## Incremental vs. Exponential Gains Whether it’s driven by one part of the company (i.e. Sales) or whether it’s a synergistic cross-functional collaborative effort between Sales and Customer Success, if the push for expansion is quota-based and not derived from the customer’s actual progress, it’s going to result in limited increases in the value of customers. However, if it’s based on the customers’ actual success, and the “expansion strategy” is built around giving the customer what they need, when they need it, then you will see revenue from customers 2x, 5x, 10x or more, leading to massive jumps in Annual Recurring Revenue (ARR) and Net Revenue Retention (NRR). ## Complex Account Expansion Strategies Aren’t Needed I’ll let you in on a little secret and you can tell your Sales leadership if you want: There’s just not a lot of ‘strategizing’ that has to take place to grow accounts like you have to do with prospects you don’t already have a relationship with. Customers are ready to buy more stuff at different times throughout their lifecycle with you. Probably more frequently than you realize, meaning you could be getting a customer to buy more, more often, if you just looked at things the right way.Instead, most of the time the customer’s readiness isn’t a deciding factor in whether they get approached to buy something. Remember, expansion comes from customers with whom we’re already doing business. That context changes everything about the way you should approach expansion sales. ## Customer Success IS the Expansion Strategy Any “strategizing” that needs to take place would come in the form of understanding what success means for the customer and the stakeholders therein, ensuring the customer is progressing toward that success, knowing where they’re at on that journey, and getting clear on where along the way to that evolving success expansion makes sense. And then orchestrating properly. It’s not like there isn’t work to do to ensure expansion happens, but the work is to ensure the customer is progressing to the points where expansion makes sense, and having managed expectations properly that once they hit that milestone, there’s an expansion opportunity waiting for them. So it’s not about strategizing how to sell to them. Rather, it’s about strategizing on how to make them successful and understanding what logical expansion opportunities exist for them along the way. ## How to Surface Expansion Opportunities When we talk about “Surfacing Opportunities” in Customer Success, we talk about surfacing them with the customer, and then connecting the customer to Sales or Growth or whomever needs to work with them to complete the deal. For less complex “deals,” if the Customer Success Manager (CSM) can just add something to the customer’s account, they do that. Easy. And if the customer can do it themselves, even better. Done correctly, as customers grow and evolve, their relationship with you should grow and evolve, too. ## The Ultimate Indicator of Customer Success Expansion – not simple renewal – is the ultimate indicator of a successful customer. In my years of experience, helping hundreds of companies around the world add Billions of Dollars in market value, the biggest constant among leaders of World-class companies is that they know Customer Success done right should be the biggest revenue driver in the company, far exceeding new business sales. --- # Customer Success: Defined (2024) *January 4, 2023 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-definition/ Customer Success is one of the most valuable concepts in business and is constantly evolving. The more contact the ideas and concepts underlying Customer Success have with customers, the more learning occurs and the more those things evolve. This real(enough)-time feedback loop of process development –> customer contact –> learn –> iterate is powerful at the tactical level and bubbles up to cause a constant reimagining of what Customer Success is at the conceptual level. Below is a list of the latest definitions of many of the core Customer Success concepts and terms, starting with higher-level ideas and moving down toward more actionable concepts. ## Customer Success Defined: Table of Contents - [Customer Success](#customersuccess) - [Customer Success Management](#customersuccessmanagement) - [Desired Outcome](#desiredoutcome) **Updated** - [Goal](#goal) - [Conditions](#conditions) **Added** - [Appropriate Experience (AX)](#appropriateexperience) **Updated** - [Coverage Model](#coveragemodel) **Added** - [Relationship](#relationship) - [Interactions](#interactions) - [Context](#context) - [Account Ownership](#accountownership) - [Progress Milestones](#successmilestones) **Updated** - [Orchestration](#orchestration) - [Joint Accountability](#jointaccountability) - [Success Gap](#successgap) ## Customer Success When our customer achieves their Desired Outcome through their Relationship with us, leading them to stay longer, buy more, and advocate for us. Think of this as your Operating Philosophy. It’s not a belief system. It’s a business function. But this definition is what you can create a culture around. To take this to an operational level, you’ll want to see [Customer Success Management](#customersuccessmanagement). *The primary update here is replacing “through their interactions with our company” with “through their Relationship with us.” See my definition for what a [Relationship](#relationship) is below.* ## Customer Success Management Operating within the context of our Relationship with the customer, these are the People, Processes, Workflows, Data, and Systems used to move the customer toward their ever-evolving Desired Outcome In contrast to the Operating Philosophy that is [Customer Success](#customersuccess), this is the Operating Model. Most of the time people are talking about Customer Success Management when they say Customer Success. *The main update here is the inclusion of Relationship and specifying the various components of Customer Success Management. The “ever-evolving Desired Outcome” is still the critical piece of this definition.* ## Desired Outcome – Updated Goal + Appropriate Experience *Note the game-changing addition of [Conditions](#conditions) to definition of a [Goal](#goal).* *Before that it was, “Required Outcome + AX” and over the last couple of years has morphed several times to end up with this very clean and easy to understand definition.* ## Goal Objective + [Conditions](#conditions) + Time Frame *I’ve never specifically defined what a Goal is before because – much like [Relationship](#relationship) below – it seems so obvious. Except it’s not. Most people equate Goal with Objective, and omit the time element, which is critical. Without a timeframe, a goal is just a wish.* *Remember, customers **ALWAYS** have a goal they’re trying to solve for. Even if you don’t have any more functional goals for them in-product, they still have goals – evolving, new, and stacked – so don’t lose sight of what really matters to them. It’s up to you to uncover those goals and help them achieve them. This requires a big shift in thinking, but it is transformative when you get there.* ## Conditions- Added Specific qualities of the Goal that are essential to the feeling of success. If these are not met, even though the Goal was achieved, the customer will still feel unsuccessful. *Example: You’re a CRM vendor and your customer tells you they want to increase sales by $250k by the end of the 4th quarter. That’s a specific Goal (Objective + Time Frame). However, you ask them what would cause them to still feel unsuccessful even if they reached that Goal, and you learn that they need those customers to have an average ARR of $12k. If they reached that goal with fewer $50k customers or a ton of $500 customers they wouldn’t feel successful. Dig into why that matters to them so you can provide better guidance.* ## Appropriate Experience (AX)- Updated Primarily the [Interaction](#interactions) Content, Channel(s), and Cadence that a customer segment requires to “feel” successful. The full AX includes everything the customer would need to experience to feel successful, but much is outside the scope of Customer Success’ control. *One thing to keep in mind with AX is the “Appropriate” part. There is no such thing as a “high-touch” or “tech-touch” customer. There is a customer for whom a certain experience – likely one that involves elements you’d see in both of those old-school “touch” level designations – is Appropriate. * ## Coverage Model – Added How your Resources are Organized, Operationalized, and Mobilized to deliver your Customer’s Desired Outcome. Resources include: Team, Playbooks, Tasks, Automation, Communication, Tech Stack, etc. ## Relationship Interactions + Context *Do we need to define what a Relationship is? Yes. Just like [Goal](#goal) above, it seems obvious, but it’s not.* *All relationships exist on a spectrum between interaction-only and context-only; customer relationships generally fall somewhere in the middle.* *Interaction-only Relationship Example: you and the bus driver. You see them every day, you say hello, but other than the bus, you have no real context to your relationship.* *Context-only Relationship Example: you and a distant relative you never see. Your interactions are minimal and infrequent, but your family context makes this relationship significant to you.* ## Interactions Interactions are,… just that. Interactions. To ensure interactions are effective and appropriate, consider: - Context-driven See the definition of “[Context](#context)” below - What appears to be the same interaction might actually be quite different based on Context - Direction Inbound – Reactive Customer contacts you because they need something. CSMs often spend too much time here; work to move beyond this. - Think of this as treading water. - Outbound – Reactive The CSM (or a different person or system) sees something – positive or negative – with the customer an initiates communication. CSMs should be spending much more time here than in Inbound-Reactive mode - Think of this as pushing the customer toward success - Outbound – Proactive World-class CSMs in high-performing organizations are able to actually get out in front of the customer, allowing for longer-term, strategic planning both with the customer but also at the account-level (expansion planning) - Think of this as pulling the customer to the success you’ve clearly laid out for them - Interaction Types (a few examples; not exhaustive) 1:1 Meeting - Async 1:1 or 1:Many Video - Broadcast or Recorded 1:Many Video - Email - Chat ## Context All of the data that we can use to determine whether a customer is on the path toward success. Examples include: - Progress – [Milestones](#successmilestones) - Activity – Joint Accountability - Usage – Product-centricity - Changes – Team, Company, etc. - Goals – Changes to current, pivot to new - Contract – Renewal, Up/Downgrade, etc. ## Account Ownership Maintaining Context *Another thing I’ve never defined before, but it comes up so much, generally in the, “who owns the account?” discussion. But what does it actually mean? Now you know.* ## Progress Milestones – Updated An action or event marking a significant change or stage in the customer’s journey toward their ever-evolving Desired Outcome Progress Milestones come in four flavors: - Functional – Actions taken in the product - Operational – Actions supported / enabled by the product - Tactical – Event supported by the Operational progress - Strategic – Their Goal *Progress Milestones used to be called Success Milestones.* ## Orchestration Properly managing expectations with customers that certain things are going to happen in the future and ensuring that when they do, they’re not just expected, but anticipated. *This is arguably the single most important thing on this list. Orchestration is critical to rapid, exponential expansion. It’s what my clients use to consistently get above 100% NRR (or NDR), but with CSMs that are not “salesy.” This is also what we use to build an Advocacy machine, operationalize Change Management, improve Adoption, and so much more.* ## Joint Accountability The shared obligation or willingness to accept responsibility for each party’s actions leading to an outcome, including the consequences of inaction or insufficient action There are four parts to Joint Accountability: - What they need to do on their own outside of our product Exists in every scenario but is almost always a total blindspot for CSMs (often considered “out of scope”) - What they need to do on their own inside of our product Most of what the customer does exists here - What we’ll do with them inside the product or with their users I caution on spending too much time here. If you want your CSMs to be looked at as strategically valuable peers and not “glorified support reps” push as much work back to the customer as possible and use meetings to check work and plan next steps. - World-class CS orgs position their CSMs better by shifting the value metric from “meetings” to progress - What we’ll do for them inside the product behind the scenes Generally reserved for Professional Services, but might be included in Onboarding/Implementation *I said above that [Orchestration](#orchestration) is the single most important thing on this list, but Joint Accountability is right below it. See my definition for [Customer Success](#customersuccess) above, but remember the second, secret goal of Customer Success: that if our customer’s don’t achieve their Desired Outcome, that they just don’t blame us.* *That sounds cynical, but it’s actually all about Customer Success. See, if they blame us, they can write us off. They can say our product or service is terrible and just leave. But if they blame themselves – they know they didn’t hold up their end of the bargain – then maybe they’ll give us another chance and we can actually make them successful this time.* ## Success Gap The gap that exists between your customer functionally completing the tasks necessary in your product to be “successful” from your point of view as the vendor and them actually achieving their Desired Outcome. *Success Gap Example: an email marketing platform product where the customer uploads a list, writes an email, and sends the email but fails to get people to attend their event. Functionally, they were “successful” – they did all the “right” things – but they didn’t actually achieve their objective.* My clients already know all of this. I also cover all of this – and of course so much more – in detail in my training programs. --- # Stop Confusing Free Trials and Onboarding (It’s Costing You Customers) *December 12, 2022 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trials-onboarding/ Prospective customers use Free Trials as an opportunity to see if your product is right for them before they buy. Customer Onboarding is the process a new customer goes through to get up and running with your product after they buy. If you confuse Free Trials and Customer Onboarding, you’ll try to engage prospects as if they’re already customers, resulting in poor engagement and lower conversion from free to paid. Let’s dig in. ## Understanding Customer Engagement In our Customer Engagement service we work with companies to improve, well, customer engagement. Contact us to learn more. Among other things, we analyze the performance of, and rewrite, email sequences. Many of our clients reached out because their Free Trial email sequences were not delivering the results they wanted (i.e. engaging the ‘trialists’ and converting them to customers). It was instantly obvious that every company having trouble engaging and converting prospects in their Free Trials were confusing Free Trials with Customer Onboarding. Specifically, they’re trying to engage Free Trial prospects as if they’re already customers who are now going through Onboarding. And that’s causing a lot of problems. So I wanted to make sure you’re not also making this mistake. It starts with an understanding that Free Trials and Onboarding are not the same. ## Free Trials vs. Customer Onboarding Remember, from the prospect’s perspective, Free Trials are a mechanism to see if your product is right for them BEFORE they make their buying decision. That’s why I make it a point to call them a prospect or prospective customer. Not a “trialist” or “free user.” Even in cases where the prospect is going through the Free Trial as a way to validate a decision they’ve already made, the fact is, they haven’t actually become your customer yet and that decision can be invalidated by a poor experience during the Trial. Customer Onboarding, on the other hand, is the process that new customers go through to get up and running and to start using your product. ## Customer Onboarding vs. User Onboarding Customer Onboarding and User Onboarding are often used interchangeably, but they can be different. For instance, you can onboard a new Customer and 10 users, and then later on after those users are fully adopted, onboard the next wave of 10 users within that same customer. But for our purposes here, we’re just saying Customer Onboarding as an umbrella term. ## The Source of the Confusion In a Free Trial, you want your prospect to do certain things to see the value potential in becoming your customer. Where the confusion comes from, is that those things you want the prospect to do in the Free Trial may closely (or sometimes exactly) map to what a customer would do in Onboarding. So what’s the rumpus? In a Free Trial, they aren’t your customer yet. So don’t try to engage them as such. ## The Psychology of Engaging Prospects vs. Customers If you try to engage a prospective customer as if they’re a fully-converted, paying customer, your less-than-stellar results will reflect that decision. It really comes down to the psychology associated with whether they’ve made that decision to buy yet or not. Once they sign-up and pay, as Robert Cialdini said in his amazing book [Influence: The Psychology of Persuasion](https://amzn.to/3JULIhi), they’ll want to take action consistent with the commitment they just made. The commitment they made with that buying decision is FAR stronger than the one they made to simply sign-up to try your product for free. ## Free Trial Engagement In a Free Trial, we need to build the prospect’s confidence in our product over a relatively short amount of time. We need them to see how our product will help them achieve their goals. Make them look good. Save them time. Or whatever they’re trying to accomplish. We need to get them to a point where becoming our customer – making that buying decision – is the most logical next step. This means Free Trials should be designed with this singular goal in mind. And the only measure of success is conversion rate. The entire Free Trial experience, from inside the product to the email sequence, should be designed with that goal in mind. If you have historical data to learn from, you can even design your Free Trial around Common Conversion Activities (CCA), a Free Trial metric I invented way back in 2012. But in a Free Trial, the way you engage is what matters. ## WIIFT? What’s In It for Them? So you want them to use a feature. Great. Why? What’s in it for them (WIIFT)? Why should they do it? What’s the benefit? It’s not easy to come up with that – I get it – which is why those tasked with creating the sequence – Marketing? Sales? Customer Success? Enablement? A mix of everyone? – constantly drop back to function- and feature-based language. It’s always easier to talk about our product than it is to understand and talk TO the prospect about stuff that matters to them. But during the Trial, when our relationship is fragile and they literally aren’t bought-in yet, we need to lead with WIIFT. Now, contrast all of that with… ## Customer Onboarding Engagement Ideally, you don’t want to be purely product-centric in your Onboarding messaging. While our relationship is slightly less fragile immediately after they’ve become a paying customer, and they are (in theory) excited and ready to get moving on this, we can’t just assume using our product will instantly become a priority for them. This assumption is the top reason brand new paying customers immediately ghost you. We know the principle of Consistency and Commitment is at play here, but we also know that it’s not magic. It doesn’t always work. At least not by itself. ## The Principle of Consistency and Commitment We need to work with human nature, not against it. So even in Onboarding, even after they’ve paid, you still want to map what you need them to do to the value they will receive as a way to motivate their action. Again, WIIFT? Now, and I hesitate to say this, while being customer-centric will generally yield (far) better results, the reality is, you can get away with a lot more product-centric and far less customer-centric language in your Onboarding messaging since they already made the buying decision. Again, Consistency and Commitment. In practice, however, if you want to ensure success for all involved in Onboarding, you cannot rely solely on that principle of Influence to work on its own. You need to augment it with WIIFT messaging. And in Free Trials, that’s even more true. ## Customers and Prospects are Different Confusing Free Trials and Customer Onboarding will result in poor engagement and lower conversion from free to paid. And what those not-so-great conversion metrics really mean is that the prospect wasn’t able to see the value potential in your product during their trial. Even though you have the best product out there. --- # The Importance of Consistency in Customer Success Management *August 14, 2022 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-consistency-2/ World-class Customer Success leaders understand the value of predictable results for their organization, so they evangelize, prioritize, and even incentivize Consistency with their team. They coach their CSMs and Managers to be consistent. They understand – and help those they manage understand – what has to happen across the quarter for each CSM and Team to reach their goals, and they map out progress milestones to ensure not only success at the end, but success along the way. And they intervene when progress milestones are at risk of being missed (not after it’s already been missed). ## Stop Glorifying Hustle and Scramble World-class Heads of Customer Success don’t hold hustle and scramble as badges of honor for their CSMs. In fact, they see this last-minute push to hit goals for what it is; failure to be consistent. So these actions aren’t rewarded. This is in stark contrast to less successful Heads of CS that often glamorize and reward this end-of-quarter hustle over consistent results. Yes, sometimes a CSM will want to hustle at the end to hit a stretch goal. Sometimes a CSM will decide to chase a spiff or bonus. That is NOT the same as having to constantly, without end, quarter after quarter, hustle and scramble just to hit their minimum requirements. World-class Heads of CS recognize that this last-minute scramble perpetuates the cycle of burnout many CSMs experience. ## Perpetuating the Cycle of CSM Burnout  The hectic push at the end of the quarter requires CSMs to start the next quarter by taking time off to recuperate and ramp back slowly, meaning they’re generally starting the next quarter already behind on their objectives, resulting in, you guessed it, more scramble and burnout. This burnout cycle – if left unbroken – eventually becomes bad enough that the CSM checks out, starts slow-rolling or full-on ghosting customers, etc., then either quits or gets fired. ## Consistency is the Key to CSM Success without Burnout World-class CSMs recognize that Consistency is the key to success without burnout and focus on this on their own, regardless of whether their boss gets it or not. Ideally, the Head of CS should be creating a culture of consistency, but if you, as a CSM, don’t work in that type of environment, take it upon yourself to focus on consistency in your work. And once you are outperforming everyone else on the team in your current role in spite of your boss, you can start looking for a place to work where the Head of CS gets it and is setting everyone up for success. --- # The Real Reason Your Company Invests in Customer Success *August 14, 2022 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-nrr/ Customer Success is there to make your customers happy, right? No. It’s actually not even to make customers successful. Let me explain. The people in charge of your company – the Executives, Board, and Investors – want to improve a metric called NRR (Net Revenue Retention or NDR, Net Dollar Retention, if you prefer) for one very simple reason: it plays a direct role in the value of the company. ## What is NRR? NRR is the percentage of revenue retained from existing customers in a defined time period, including Expansion, Contraction, and Churn. NRR is a relatively simple metric to understand, but actually quite complex to implement in practice. To keep it simple, you take the amount of revenue from your current customers at the beginning of a quarter (or whatever time period) and you subtract any revenue lost through customer churn (full cancellations / non-renewals) and contraction (discounts / downsells), and add any revenue from expansion sales that happens over that quarter, to end up with an updated dollar value to end the quarter. Then you mathematically calculate the difference between the revenue at the beginning of the quarter and the revenue at the end of the quarter to figure out how much revenue you retained, “net” of that expansion and contraction. If you added more than you lost, you will have “retained” greater than 100%. You want NRR to be over 100%, because that means – in theory – you could turn off new customer acquisition and the company wouldn’t just continue to generate revenue, but would actually grow. Talk about efficient growth! Thus the premium placed on NRR as a valuation metric. In this simplistic view, revenue from any new customers that come in that quarter wouldn’t be included in NRR for that quarter, but would be in the starting amount for next quarter. NRR is often referred to as the “North Star” metric for SaaS and Subscription companies as, simply put, higher NRR = higher company valuation. ## Four Ways to Improve NRR To improve NRR, you generally need to do these things: - **Improve Customer Retention.** That is, reduce “logo” churn or, put another way, keep customers from canceling or not renewing. NRR is reduced by whatever revenue customers take with them when they leave. They also take any future revenue – including potential increases – and whatever it cost to acquire and serve them to this point. While valuable to know, these are generally not figured into NRR. - **Decrease Contraction.** It’s one thing to keep customers from canceling, but if you do that through Discounts and Downsells, such that they end up paying less to remain a customer, your revenue is lowered even if your retention rate is protected. Contraction at Renewal is a massive drag on NRR that is often hidden by “great” customer retention rates or “below average” churn. - **Increase Expansion.** Getting customers to stay longer and not decrease spend is a good thing, but to really accelerate NRR growth, you need to get a large subset of those customers to also increase what they spend while they stay longer. World-class companies experience exponential expansion in account value across a large swath of customers, leading to NRR of 120% and higher, while companies with NRR hovering at or below 100% are generally only experiencing incremental expansion and usually from a smaller subset of customers, barely offsetting (if at all) the revenue lost through churn and contraction. - **Mobilize Advocates.** While customer advocacy doesn’t roll-up directly to NRR, the effects of it absolutely can and will. The Social Proof created by customer advocates can work to make new business sales more efficient, reducing Customer Acquisition Cost (CAC) for net new customers, but also for Expansion among existing customers. Additionally, Social Proof from customer stories, case studies, and the like can be used to drive both the breadth and depth of customer adoption, decreasing time to first Expansion and increasing the number of expansion opportunities across a customer lifetime, doubling, tripling, or more the customer’s lifetime value. ## Hacks and Tricks to Improve NRR There are many ways you can try to accomplish those four things. You can build cancel flows, run “switch to annual pricing” programs, raise prices, hire Retention specialists, create a Growth Team to chase upsells, hire Account Managers to periodically check in with customers to make sure they’re going to pay their bills and stick around, etc. ## Customer Success isn’t Hacks and Tricks In fact, it’s fairly common to see companies employing several of those tactics at the same time and calling it “Customer Success.” But let’s be clear; This is **NOT** Customer Success. And the resulting impact on NRR is generally not significant nor sustainable. Rather than being “Customer Success”, this is a haphazard blending of disparate tactics that produce uneven and generally less-than-ideal results. Any time I’ve heard someone say, “Customer Success doesn’t work,” this is what they did. **THIS** – whatever **THIS** is – didn’t work. They didn’t actually try and fail at real Customer Success. ## Customer Success is the Key to Consistent NRR Growth [The definition of Customer Success](https://sixteenventures.com/customer-success-definition#customersuccess) is when customers achieve their Desired Outcome through their relationship with our company. What’s been proven time and again to be the most efficient way to consistently improve NRR is ensuring customers achieve their Desired Outcome. That is, ensuring customers achieve their goals while having an [Appropriate Experience (AX)](https://sixteenventures.com/customer-success-definition#appropriateexperience) in doing so. The goal of lowering contraction, improving retention/reducing churn, achieving exponential expansion, and engaging a steady stream of customer advocates on a consistent basis is rarely going to be achieved in spite of your efforts. It must be a deliberate action. And this is where real, operationalized, modern [Customer Success Management](https://sixteenventures.com/customer-success-definition#customersuccessmanagement) comes in. ## Unsuccessful Customers don’t grow NRR You see, unsuccessful customers – those not achieving their Desired Outcome – tend to not stay as long and will generally not increase their spend with us. To get them to stay a little longer (it’s usually just prolonging the inevitable), discounts and downsells are used, leading to contraction. And unsuccessful customers generally won’t advocate for us either; often they’ll do the opposite by leaving bad reviews. So companies want to consistently improve NRR and the most efficient way to get that result is real Customer Success that is built around the customer achieving their ever-evolving Desired Outcome. ## Head of Customer Success and NRR So the purpose of Customer Success – from the perspective of your leadership, board, and investors – is to consistently improve NRR. Don’t get it twisted: This is why your company is investing in Customer Success and this is why you and your team are employed there. As Head of CS, it’s critical to not lose focus on this. If you start falling into the trap of, “we’re only here to make customers happy” or just to “serve customers” or “CSMs shouldn’t be commercial,” you’ll end-up misaligned with your leadership. Among many other things, this will hurt your ability to advocate for your team and secure the resources you need for your CSMs to thrive. Ultimately, misalignment with your leadership will cost you your job. ## Customer Success Managers and NRR As a CSM, while your day-to-day will be focused on making your customers successful by ensuring that they’re on track to reach their goals (customer happiness – beyond a smile and friendly banter – should NEVER be your focus), it’s always good to keep in mind WHY what you do matters to your company. Why your company is investing in what you do. Why they’re investing in you. Why you have the job you have. Remember, the purpose of Customer Success is to consistently improve NRR, and it does that by making sure customers achieve their ever-evolving Desired Outcome --- # Customers Hate These 3 Things (and How to Avoid Them) *April 19, 2022 · by Lincoln Murphy* Source: https://sixteenventures.com/customers-hate-three-things/ Disclaimer: The following assumes your customers are humans. Don’t get me wrong, customers dislike **A LOT** of things. But there are three things that elicit such a deep, visceral response that the only applicable word is hate. Strong word, but strong emotions. In my many years of helping companies grow through Customer Success, the thing I’ve always tried to do is understand why humans behave the way they do. What psychology is at play in various situations? What is going on in their minds at various points in their life cycle with us? How can I use psychology to get the customer to do what I need them to do to be successful? It’s through this lens that I’ve been able to discover these three things that customers absolutely hate and that – unfortunately – were present in every company that came to me for help. As you read about these things, I want you to think about whether your customer lifecycle invokes any of them, or all of them, and how you'd keep that from happening. ## Consequences of the Hated Trio If the fact that your customers hate these things isn’t enough of a reason to avoid them, remember that they have a direct, negative impact on the metrics that matter to you, to your executives, and to your board. The following is not an exhaustive list, but are some of the things that can happen: - Delayed or Incomplete onboarding - Lack of adoption breadth and depth - Poor engagement - Lack of Expansion (Upsells) - Contraction at Renewal - Churn - Negative Sentiment in the market - Lower Net Retention (NRR or NDR) Yep. Invoking these three things can literally lead to your company being valued less by investors or potential acquirers. ## Customers Hate These 3 Things The following is also not an exhaustive list of things customers don’t like: Those are many and varied and you’re likely invoking most of those, too. But, it’s these three things that can have incredibly negative results for both you and the customer so make sure you eliminate these from every aspect of the customer’s experience. **Customers hate:** - **Surprises** (like an unexpected power outage neither you nor the utility company expected) - **Unknowns** (like a power outage the utility company knew about but didn’t tell you was going to happen) - **Repeating** **Themselves** (when you have to tell each person at the utility company you get transferred to why you’re calling; the planned power outage they didn’t tell you about!) Let’s look at each of these in detail. ## Customers Hate: Surprises Everyone loves surprises, right? No. Maybe a child discovering what’s inside of a gift box on their birthday. But even then, situational awareness ensures that the surprise itself is contained and joyous. So, no. Nobody likes uncontained surprises. Ever. Especially in a business setting and from a software vendor. A surprise, as I gleaned from several different dictionaries, is an unanticipated event, fact, or thing and/or the feeling caused by something unexpected or unusual. You’ll know if something is a surprise to your customer because they might say something like: - WTF?!? - FFS! - AYFKM?!? - What just happened? - That was shocking - I didn’t expect that - Why did you let that happen? - Why did you let me do that? - Why is this happening? Things that trigger this might be: - Unexpected charges - Required upgrades - Uncommunicated Planned Outages - Reassigned CSMs / AMs - Sudden Handoffs - Product changes - Pricing changes As Michael Rousell says in his book, [The Power of Surprise: How Your Brain Secretly Changes Your Beliefs](https://www.amazon.com/Power-Surprise-Secretly-Changes-Beliefs-ebook/dp/B095BKJTPV?_encoding=UTF8&qid=&sr=&linkCode=ll1&tag=ilocom08-20&linkId=ae502c4ba0bd4f88135ca7a2170a915d&language=en_US&ref_=as_li_ss_tl), “Surprise requires Belief.” This means, generally, that if your customers are experience surprises, it’s because what they believed was going to – or should – happen, didn’t. So the best way to avoid surprising your customer is to communicate – clearly and directly – in a way that ensures they understand what they’re being told and properly manages their expectations. It might also be good to repeat the mantra, “surprises in a B2B setting are never a good thing.” ## Customers Hate: Unknowns To make a rash generalization, people working inside companies and dealing with software vendors, prefer to have some idea of what’s going to happen with said vendor and how it will affect their job and, to a lesser degree, the company they work for. Thus, the aforementioned surprises and their never being a good thing. But there’s another thing that keeps people from being able to plan ahead, budget appropriately, or otherwise secure resources, and those are: Unknowns. Unknowns – according to various dictionaries – are things that require discovery, identification, or clarification. The problem with that definition is: you may not even know it’s something you need to discover in the first place. If your customers experience Unknowns, it’s your fault. You don’t want your customer to have an “Aha!” moment because they just figured something out that you should have told them about. Save “Aha!” for when they get the result they want. Remember, gold miners shouted, “Eureka!” when they struck gold… not when they figured out how to use the equipment. You know when your customers experience Unknowns because they’ll say things like: - Why didn’t you tell me about this? - I wish I’d known about that - I don’t have the budget for that - I don’t have the resources for that - I don’t have approval for that - Nobody told me about this - How was I supposed to know? You gotta lay it out for them to play it out. Unknowns exist due to: - A total disregard for customer-side Change Management - Lack of Clarity on the real Customer Journey - Not Managing Expectations - Not invoking [Joint Accountability](https://sixteenventures.com/customer-success-definition#jointaccountability) - Failing to leverage proper [Orchestration](https://sixteenventures.com/customer-success-definition#orchestration) - No 30-60-90-day Plan at Onboarding Something to consider on a human level is this thing called Intolerance of Uncertainty, which is mostly associated with Generalized Anxiety Disorder (GAD), and literally manifests as a real, physical threat in some people. Google that for some light reading on the topic. Bottom line: Some of your customers won’t just hate Unknowns… they’ll literally have a negative physical reaction to them. So maybe try to eliminate Unknowns and avoid a **TON** of potential issues. ## Customers Hate: Repeating Themselves Handoffs aren’t good or bad. They just exist. It’s how you handle them that matters. And most of the time handoffs are handled poorly, inevitably requiring the customer to repeat themselves when they talk to the next person. Sales to Onboarding. Onboarding to CSM. CSM to TAM. TAM to CSM. Support to CSM. CSM to AM. AM to AE. That’s A LOT of repeating yourself. There’s this neat technology called a CRM – Customer Relationship Management – where everyone that engages with the customer can read and update the customer record. There’s also purpose-built CSM – Customer Success Management – software that allows you to store even more information about the customer, including their progress, satisfaction, [Success Vector](https://sixteenventures.com/success-vector), etc. so each individual contributor (IC) will have all the context necessary when engaging with the customer. Of course, no system is magic; ICs must update the system and other ICs need to consume what is there when they prepare to work with a customer. But that’s all time-consuming, so just ask the customer to tell you what they already told several other people before you. That’s fine. But you know it’s not fine. Customers don’t feel heard when they have to repeat themselves and that means, to them: - You don’t care about me as a customer - You’re not listening - You’re not synced internally - You don’t have your shit together - You’re wasting my time - I don’t trust you - I hate you Their words, not mine. In Software companies, it’s rare that it’s a lack of technological solutions that keep customers from having to repeat themselves; it’s that you just don’t care and it shows. The more the customer has to repeat themselves, the less they’ll want to engage. Less engagement means less adoption, expansion, advocacy, and renewal and more contraction, churn, and public complaints. Make customers repeat themselves… lower your company’s valuation. Everything impacts Net Retention. Every. Thing. ## Turn the List Into a Test A list of things to avoid is a list. What makes this one useful years later is that it converts into a gate you can run any design through, in about ten seconds: > Could what I'm designing produce a surprise, create uncertainty, or make somebody repeat themselves? If yes, redesign it. I called the middle one unknowns when I first wrote this. I say uncertainty now, because it's the more accurate word: the problem isn't that the customer lacks a fact, it's that they don't know where they stand. Run it against a welcome email. A handoff. A kickoff agenda. A form. The step where an account sits with another department for a week. Include the parts you did not build. A scheduling tool or a document service skinned with your logo is you as far as the customer is concerned, and it is optimizing for its own goals rather than yours. Most companies have never [gone through their own process end to end](/you-have-never-been-your-own-customer/), which is why these three survive in it. Most processes fail it somewhere, and the failure is almost never a decision anyone made. It accumulated. Somebody added a required field, somebody else moved a step, and now the customer explains their business twice because two teams collect the same thing into two systems. The reason to run it at design time rather than in a post-mortem is that these three aren't satisfaction problems, they're trust problems. A customer who is surprised, uncertain, and repeating themselves isn't scoring your process. They're deciding what kind of company you are, and that decision is expensive to revisit later. --- # The 5 Secrets of World-class Customer Success Managers *February 28, 2022 · by Lincoln Murphy* Source: https://sixteenventures.com/world-class-csm/ Having worked with hundreds of companies of different sizes, funding stages, and Customer Success maturity, around the world, I’ve boiled down what I believe are the five “secrets” of World-class CSMs. This is specifically about CSMs that are thriving, even if their environment is less-than-perfect.  It’s always best to have strong Customer Success leadership, buy-in from Executives, great processes, purpose-built CSM software, etc. But World-class CSMs can be found in environments that don’t have any of those things. And the best part; These “secrets” can be learned and applied. It turns out, they’re not secrets after all. ## Defining a World-class CSM Even if everyone agreed on what Customer Success is – they do not – and used the same methodologies for Customer Success Management – they also do not – and all CSMs did the same thing and were measured the same way – again, no – benchmarking in this field would be a challenge. As it stands, it’s a nightmare. But if I were cornered and required to blurt out a definition of a “World-class CSM” that works in any given situation, I would say it is a CSM that has exceeded 102% of their aggressively evolving goals, at least three consecutive quarters, whatever those goals might be; Expansion. Churn. Retention. Advocacy. I will not include C-Sat in there… that is too easily gamed and far too subjective. Do not get too caught up in how you define a World-class CSM – though I’ve opened that can of worms myself by invoking such a notion – and focus more on the “secrets” herein. Regardless of “World-class” status, what’s listed below will absolutely help you. ## 1. World class CSMs are Confident World-class CSMs are confident; but not in the way you might think. When we talk about confidence, we tend to think of what is categorized as Subjective Confidence. This is the confidence tied to attitude, mood, or ego. Subjective Confidence is fleeting for most and not based in reality for others. We all, unfortunately, know the latter and have all experienced the former. Subjective Confidence is not something World-class CSMs rely on. Of course, it’s great to feel confident emotionally, but the best CSMs realize they can’t rely on that type of confidence being there consistently. Rather, CSMs performing at the highest levels turn to a different type of confidence: Objective Confidence. Objective Confidence comes from being prepared, following processes, and being present with their customers. In fact, these three things make up my CSM Self-Confidence Framework that I share with my clients and students in my training programs. Using the CSM Self-Confidence Framework to raise Objective Confidence to a level that offsets a lack of Subjective Confidence – or just “not feeling it” today – allows the CSM to be truly Present in customer meetings, and – critically – to get past Imposter Syndrome and avoid People Pleasing. ## 2. World-class CSMs are Assertive There are essentially three types of behavior a CSM can possess: Passive, Aggressive, and Assertive. Unfortunately, too many CSMs fall into the Passive category, where they let the customer dictate meetings, their communication rarely drives the customer to take action, and overall, they’re at the mercy of their conditions.  Passive leads to People Pleasing, which is when you commit to something in the moment that hurts you as the CSM (generally agreeing to things that take more time, leading you to not be prepared for meetings, and then getting lost, and agreeing to more things, and… the cycle continues), hurts your team (you commit to things on their behalf that they can’t deliver), and hurts your customer (if you or your team fail to deliver, the customer fails, too). On the other hand, Aggressive behavior – think of this as telling others what to do but without empathy – is also bad. Luckily, I have only run into this a few times. But when I did encounter it, it was bad and required a lot of damage control. Don’t be aggressive. Have empathy. Be nice. The most successful CSMs are Assertive, not Aggressive (or Passive). But Aggressive and Assertive behavior are often confused, so let’s clarify. The biggest difference between them is that assertiveness includes respect for yourself and the other party, while aggressive communication quickly disrespects and often insults the other party, and depending upon your level of psychopathy, will leave you feeling bad, too. World-class CSMs are Assertive. They tell customers exactly what they need to do to achieve their Goals – and will intervene when the customer goes off course – but always take into consideration what’s going on in their customer’s world when giving those directives.  While they may push customers in ways that make them unhappy in the moment – progress is not always pleasant – it’s ultimately a positive experience with no lingering negative feelings; Especially since the customer has now achieved their goal, thanks to the CSMs Assertiveness. ## 3. World-class CSMs are Growth-Oriented On the surface, this seems less like a “secret” and more like a directive from management. You focus on what metrics you’re given. If churn is high and that’s the focus, then wouldn’t the CSM who’s ending the quarter with less churn than the previous quarter be performing well? But World-class CSMs – either intuitively or because they were trained early on to – understand that as customers reach their goals they evolve, and their relationship with the customer should evolve and grow, too. Customers that are successful will want to increase their investment with them. World-class CSMs realize that simply retaining customers at the same level (or with only a simple price increase) is a potential red flag vs. something to celebrate. And even if churn is too high and the focus for the team is to simply keep the customers longer, World-class CSMs know that’s only part of it. And they work to ensure that those customers who don’t need to be brought back from the brink of churn should be expanding. They recognize that success exists on a spectrum, but it’s all predicated on the customer achieving their [Desired Outcome](https://sixteenventures.com/customer-success-definition#desiredoutcome). Ultimately, World-class CSMs have Net Revenue Retention (NRR; also called Net Retention Rate or Net Dollar Retention – NDR) as their Key Performance Indicator (KPI). Their revenue under management is increasing through improved retention, yes, but also through rapid and exponential expansion in account value. Even though they’re growth-oriented, World-class CSMs would never be considered “salesly.” Rather, they achieve this massive growth in account value by truly understanding the customer’s Ascension Path and aligning “expansion opportunities” with the customer’s Success Milestones through [Orchestration](https://sixteenventures.com/customer-success-definition#orchestration). ## 4. World-class CSMs are Efficient World-Class CSMs don’t fall into the trap of letting 1:1 synchronous meetings be the customer’s primary value metric in their relationship. Rather, they’re able to more effectively leverage technology (broadcast video, async 1:1 video, self-service deflection, etc.) and [Joint Accountability](https://sixteenventures.com/customer-success-definition#jointaccountability) to position themselves as increasingly more valuable to the customers, while getting the customers to do more of the work themselves.  Even when the customer’s [Appropriate Experience (AX)](https://sixteenventures.com/customer-success-definition#appropriateexperience) is built around high-frequency 1:1 synchronous meetings, World-class CSMs find ways to make those meetings as efficient and effective as possible. Because of this focus on efficiency, World-class CSMs are able to take on a larger number of accounts with little impact to their workload while still delivering the customer’s AX. ## 5. World-class CSMs are Consistent In the daily life of World-class CSMs, hustle and scramble don’t exist. In the daily life of under-performing and, frankly, miserable, CSMs… hustle and scramble are the only things that exist. And poor management often sees that hustle and scramble as a badge of honor rather than an indication of their poor management. World-class CSMs strive for consistency across the entire quarter rather than ramping at the end. They plan their week and their days to ensure they’re in control and can hit the numbers they need to hit to reach their goals. World-class CSMs strive not only for consistency, but consistent excellence. Not perfection. Perfection doesn’t exist. But they prepare, plan, and execute consistently to ensure their customers achieve their goals within their AX, while the CSM hits the numbers they’ve laid out for themselves or have been given by management. Excellence. Consistently. ## World-class CSMs aren’t Born; They’re Made It’s easy to attribute the success some CSMs have simply to their personality. Their drive. Their… whatever. And while it’s true that some people have characteristics that create more favorable conditions from which to launch a successful career, CSMs with those same characteristics also fail to achieve, because while those characteristics might be an advantage at first, it’s not enough to sustain and grow your career. The 5 Secrets of World-class CSMs aren’t in-built characteristics that you’re either born with or you’re out of luck. Rather, they’re behaviors and skills that you can learn. They’re frameworks that you can apply. Anyone can do it. Any CSM can be World-class. And while World-class Customer Success leaders cultivate these behaviors and skills, CSMs can take charge of their own careers and thrive – even in less-than-hospitable environments – by focusing on these five areas. --- # Customer Onboarding: How to Design and Implement an Effective Onboarding Process *April 6, 2021 · by Lincoln Murphy* Source: https://sixteenventures.com/design-customer-onboarding-process/ The phase of the customer lifecycle that gets the most attention is Customer Onboarding, yet ironically (or tragically), most people fail to understand what onboarding really is, and few do it well.   And even though Onboarding is something people talk about all the time, experts abound with advice and blueprints and templates, and thought leaders drone on about “first impressions,” the fundamentals of effective customer Onboarding seem to be totally missing.   So I put together a list of things that will help you design an effective Customer Onboarding process that truly does set your customer up for long-term success.   Here we go… ## Designing an Effective Customer Onboarding Process As with everything I publish, this is just an article. It is necessarily incomplete and generic. I cannot tell you exactly what you should do and if someone who doesn’t know your business and your customers tells you exactly what your Onboarding – or any process – should be, run away. Far and fast. BTW, one of the main reasons companies bring me in – unfortunately – is to help clean up after they hired a “consultant” who took the easy way out and just applied one of their pre-written, generic BS blueprints to this unique business and, frankly, messed everything up. So take what I give you below and apply the knowledge you possess about your customers, your company, and the unique intersection thereof to make it actually useful. Now is not the time for copying, but rather for critical thinking. I hope what I share gives you direction in that thought process. ## Four Steps to Effective Customer Onboarding It’s just four simple steps, with a bunch of steps between those four steps, and a lot of work to do for each of those interim steps. But it’s just four steps. - Determine when a customer is “onboard” This definition of “onboard” is missing from roughly 102% of the onboarding processes I come across How can you have an onboarding process when you don’t have a clear definition of when a customer is onboard? - In fairness, companies often have a complete Customer Success Management process when they don’t even know their customers’ [Desired Outcome](https://sixteenventures.com/desired-outcome), so this shouldn’t be surprising - What milestone have they achieved to be considered “onboard?” You may want to get to know the concept of [Success Milestones](https://sixteenventures.com/success-milestones) - This milestone should be the first time the get value (for more simple products or services) or see the value potential in their relationship with us (for more complex products or services) - Is this definition of “onboarded” universal or will there be different definitions depending upon the type of customer? Hint: it’s probably the latter - A customer should **NOT** be considered “onboard” simply after a certain amount of time has passed In general, using how long a customer has been doing something as a marker for success – or even simple progress – is fraught with risk - What will it take to get them to that point of being onboarded? Meet them where they are and take them where they need to go Are all customers starting from the same place? - Are their different initial use cases, maturity levels, etc. that we need to consider? - Will all customers get the same plan or will we be meeting different types of customers in different places (their maturity as a company, maturity with the processes we help operationalize, the type of customers they have, their size, etc.)? - Once we understand where we need to meet them (Point A), what are the steps to get them onboard (Point B)? It’s probably a good idea to think about – and orchestrate – what comes after Point B, too. - Consider everything that has to happen: On their end In the software - Beyond the software where do they need to get data from, what systems do they need to interact with, who all needs to be involved, etc. - On our end What we do for them - What we do with them - What we need to get them to do - Who all needs to be involved - Once the steps are outlined we can begin working on the modalities of intervention to move them along the way (meetings, 1:many, self-service, emails, calls, etc.) This is a good time to check out the [Customer Engagement Communication Model](https://sixteenventures.com/communication-model) and the [BEAST Message Framework](https://sixteenventures.com/beast-message-framework) - Consider the different types of customers and what we think would be appropriate to them We know a lot about them, but this might be a good time to really think about: What are they used to from other vendors? - What do they love or hate about other vendors? - What do we think would be appropriate for them? Bigger more mature customers may not need much from us at all - Smaller customers may need a lot, but self-service and 1:many is what they expect - What is the next step after onboarding? This is the “post-Point B” I mentioned earlier  - After they reach the onboarded threshold, what do we need them to do next? - We can start orchestrating this early so the transition form onboarding is expected and understood - How long should it take to reach “onboarded?” [Time to First Value (TTFV)](https://sixteenventures.com/customer-onboarding-ttfv) is the KPI to pay attention to - But TTFV is just a goal, not a “they’ve been with us 30 days so they’re onboard” situation If they reach “onboarded” in less than the TTFV goal time, that’s great! - If it takes longer than the goal, that’s bad The sooner we can see that they’re not on track to hit the TTFV goal, then we need to intervene to see what the hold-up is - Is it on our side? Their side? What’s the plan to move this forward? - We can use [TTFV as a sales metric](https://sixteenventures.com/ttfv-sales-kpi), too! Each customer is associated with the sales rep - Sales rep is managed and/or compensated on the customer achieving TTFV - This helps ensure the handoff is handled properly and ensures the customer is a good fit and not oversold There you go… now, what goes into each of those things will totally, 100% depend on your unique situation. ## **Further Reading on Customer Onboarding** - [The Basics of Customer Onboarding](https://sixteenventures.com/customer-onboarding-basics) - [The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding) - [Customer Onboarding: AHA! or WTF?](https://sixteenventures.com/customer-onboarding-aha-wtf) - [Emotional Disconnect During Customer Onboarding](https://sixteenventures.com/emotional-disconnect-onboarding) - [Bad Sales Handoffs Cause Customers to Ghost During Onboarding](https://sixteenventures.com/ghosting-during-onboarding) --- # Eliminate Churn Forever in 5 Simple Steps *December 21, 2020 · by Lincoln Murphy* Source: https://sixteenventures.com/eliminate-churn/ Churn… ya boring. Yawn. Time to move on. I’m so over talking about churn and if you really understand [what Customer Success is all about](https://sixteenventures.com/customer-success-simple), you should be, too. Churn is so easy to get rid of… you just have to do five simple things. If churn is a problem for you, this post will change that (if you’ll let it) and then you can move onto bigger and better things. Once churn is a non-issue, you can focus on growth. ## Customer Success-driven Growth Customer Success is a growth driver. Revenue growth [from your existing customers](https://sixteenventures.com/logical-expansion). Growth in the value of your company. Real Customer Success is the future of business. It’s the future of high-growth business. Customer Success isn’t there to just stop shrinkage or lead to incremental growth. No… done correctly, [Customer Success leads to exponential growth](https://sixteenventures.com/customer-success-driven-growth)! I originally gravitated toward Customer Success because at the time this movement started to gain momentum (2011?), it really seemed to align nicely with what I was already focused on: growth from within the existing customer base. And then I instantly got bogged down with “churn busting.” After so many years, that stops now! And the first step is… ## Busting the Churn Busting Myth I’m tried of talking about churn and you should be, too. I’m also very tired of consultants, software vendors, hackers, and hustlers talking about the latest “churn busting” gimmick (and stealing my ideas and content, but that’s for another day). You don’t need gimmicks to eliminate churn. You can’t hack churn away. Solving churn – truly eliminating churn at the source – is so simple I’m going to lay out exactly what you need to do. And then I’m done talking about it… forever. It’s time to shift gears and exclusively focus on growth. So, below are my last words on churn forever. What I’m going to share with you is my “secret” formula for eliminating churn. If it doesn’t eliminate churn 100%, this formula basically renders churn a non-issue. Are you ready for this? The better question is… will you act on what I’m about to tell you? ## Why Churn Happens (and How to Eliminate it Forever) Churn happens for one of two reasons: - your customer dies (or goes out of business) or - they just don’t achieve their Desired Outcome. That’s it. Customers dying or going out of business you obviously have less control over, though I’ve seen some customers go out of business and remain customers, so some of you can take that excuse off the table, too. But the other reason – customers not achieving their [Desired Outcome](https://sixteenventures.com/desired-outcome) – you have **SO** much control over that it’s insane if you fail to recognize this amazing opportunity. But how do you take control over churn and make it a non-issue? First you have to realize that [churn is just a symptom of an underlying disease](https://sixteenventures.com/churn-symptom), and second you have to cure that underlying disease so the symptom of churn goes away. When it comes to churn, too many companies simply treat the symptom and not the root cause, which results in symptoms either continuing or, usually, getting worse. Sometimes much worse. If you want to solve Churn once and for all, fix these… ## Five Reasons Customers Don’t Achieve their Desired Outcome The underlying reasons customers don’t achieve their Desired Outcome are: ### 1. You have Bad-fit Customers Perhaps you have a lot of bad-fit customers, even more in the pipeline, and even more you’re currently paying to get in front of via SDRs or Marketing campaigns. As long as you keep bringing in customers that don’t have Success Potential, [your churn will reflect this poor business decision](https://sixteenventures.com/upstream-problems). To fix this, you need to first identify what a Bad-fit Customer is – what their characteristics are that would indicate they won’t be successful; [use my framework to create your own checklist](https://sixteenventures.com/success-potential) – and then communicate this to Sales and Marketing to stop the flow of customers without Success Potential. And keep communicating this as it evolves. Now, some people will take what I’m saying here as “sell to fewer customers” which is complete bullshit. They only hear what they want to hear. I’ve never said anything about acquiring fewer customers… and I wouldn’t say that. I’m all about growth. I want you to sell more. Sell all you can. Beat your quotas. Reach for the stars. Just do it by selling to good-fit customers that have Success Potential. Why is that so hard to understand? If the only way you can hit your numbers is to bring in customers that are a bad-fit, you have some serious problems with your business and I won’t help you. ### 2. You have a Broken or Incomplete Product or Service Dude, fix your product… WTF? Seriously. If your product development roadmap is emphasizing shiny new features over fixing or adding things that will make your existing customers – or those new customers you’re trying to attract with the shiny new features – successful, you’re doing it wrong. I don’t know what else to say on this. It’s **SO** obvious. But I encounter this **ALL THE TIME.** And most companies blame their customer for being stupid or asking too much of them. If asking for a product to not fail and not cause data corruption or not result in excessive downtime or to not keep the customer from doing their job is asking too much, then…. I won’t help you. You don’t deserve customers! ### 3. You are providing an Inappropriate Experience for your Customers Maybe your product is great. It doesn’t break and it has all the features your customers need. That’s great. You’ll be able to help your customer get the Result they need. But there’s another piece to the Desired Outcome puzzle besides Result and that is Appropriate Experience (AX). AX is how your customers [need to achieve that Result](https://sixteenventures.com/appropriate-experience-required) to feel successful, and this includes all interactions across the customer’s lifecycle, from the buying process to onboarding, and yes, from within the product, to support, training, Professional Services, and beyond. If you’re only thinking about the customer’s experience as a user in the product, you’re… doing it wrong. The lack of an AX is why customers that are otherwise functionally “successful” with a product churn out, stop renewing, or at least fail to increase their investment with your company. You have to look at the full Desired Outcome of the customer and solve for all of it – Result **AND** Appropriate Experience – if you want to make churn a non-issue. I can help you with this. BTW, this is one reason there’s often a lot of churn in low-revenue customer segments. Because these customers don’t pay very much, the vendor usually gives them a lesser experience, let’s say all self-service. But the experience that would be appropriate for them is maybe a higher-touch experience. But since they don’t pay very much they don’t “deserve” the higher-touch experience. And since the experience they’re given is inappropriate, they churn. And then the vendor says “there’s just a lot of churn in that segment.” It’s a vicious cycle. What the vendors should say is “since we can’t give those customers in that segment an AX in a way that’s economically feasible for us, that customer segment is a Bad-fit and we’re going to stop working them until we can give them the AX that will keep them from churning.” This is a more virtuous cycle. But they don’t do that… so churn continues and they continue to blame the customer, often further reducing the experience as punishment. ### 4. You have No Real Understanding of what “Success” is for your Customer I can’t tell you how many times I start working with a client or just ask this question to a group in a workshop – “what does success look like for your customer?” – and they simply can’t answer that. These are companies that often have full-blown [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) organizations or are themselves CSMs that are in my workshop. Umm… if you don’t know what success is for your customer and you have a Customer Success Management organization, WTF are you doing? What “success” are you managing? Clearly not your customer’s. If you don’t know what success is for your customer – what their Desired Outcome or some other measure of success for them if you don’t want to follow my stuff – and you’re doing anything around “Customer Success” or “Customer Experience” … you’re… in need of my help. ### 5. You Have No Process to Make Customers Successful Far too many companies don’t know what success for their customers actually looks like, as I talked about above. But for those that do know what success is for their customers, they very often lack a well-defined process for helping their customer actually achieve that success. When you acquire good-fit customers, all that means is you’re acquiring customers that have Success Potential. Potential is the key word there. Based on what we know about them, they can be successful as our customer. But that’s just potential… it’s not Success Guaranteed. We need to actually have a process in place to unlock that potential within the customer. While their Appropriate Experience will dictate to us what that process looks like – it could be 100% self-service or in-product, they do everything and we do nothing, or it could be operationalized, human-power heavy Customer Success Management (or some mix of the two), we need to be able to guide the customer from where they are to where they need to go. I can help you with this, too. ## Churn Isn’t Actually your Problem Fix those 5 things and churn goes away… it becomes a non-issue. Simple. Churn is 100% in your control. You can spend time trying to calculate churn rates, figuring out the difference between logo and revenue churn… like polishing the brass on the Titanic. That’s a nice-looking Spreadsheet, Captain. You can sign-up for “Churn Busting” courses. Ugh. You can engage Churn Reduction Consultants selling churn-busting snake oil. Double ugh. You can hire Retention Specialists to try to keep your customers from churning (generally creating a horribly negative experience and – at best – prolonging the inevitable. At least you got a couple months of extra revenue from them, right? Right??!?!?!?) Yet churn persists. Or you could actually fix your shit so you have a legit, strong business upon which to create a growth engine. Yes, I realize that everything I mentioned might take a lot of work to implement, but that doesn’t make it less accurate or powerful. Or any less freakin’ transformative. This is, by the way, where people will try to find hacks or shortcuts… gimmicks or tactics that they can use to bypass all this hard work I just laid out. That’s understandable, of course, but it doesn’t work. To get the results you desire, you have to put in the work. I didn’t say I was going to make less work for you, but if you fix those 5 things, you will get the results you’re looking for. ## Your “Customer Success Culture” is a LIE If (any of) those five things I listed are your current truth – and you’re not actively working on fixing those things for real – then you cannot say with any amount of credibility that you have a Customer Success culture. Customer Success is not in your DNA. Customer Success is **NOT** your operating philosophy. I realize that doesn’t sting as bad as I intended it to, but just know I was trying to be harsh with my words. I’ve seen companies do quite well – thrive even – with very little operationalized Customer Success Management, but with a culture dedicated to the philosophy that they, as a company, exist in their market simply to ensure customers achieve their Desired Outcome through all of their interactions with them. Conversely, I’ve seen companies with a very well-defined Customer Success Management operation – processes, systems (including expensive purpose-built CSM software), and talented, driven CSMs – fail miserably and even disband their CSM org entirely because Customer Success was **NOT** the company’s operating philosophy, there wasn’t buy-in at the highest levels, and the cross-functional cooperation required to make it work wasn’t there. Living this lie is… ## Investing in Failure If the product is broken or incomplete or if the customers are a Bad-fit, CSMs can help, right? Sometimes… but that “help” is often short-lived. In my experience working directly with hundreds of companies around the world (I’ve seen things you can’t even begin to fathom), if those five things I listed above aren’t fixed, your CSM team is setup for failure long-term. And let’s be clear… that “long-term” might be months. Or less. But short-term, even if they are able to bridge the gaps in your product or otherwise make customers “happy enough” to stay another month, they’re definitely set-up for a lot of stress and disappointment, ultimately affecting morale not just in the CSM org, but company-wide. This will probably result in high turnover in your CSM org – from leadership to front-line employees – because they cannot work magic to make customers without Success Potential successful or can’t continually keep customers from churning when the product or experience is fundamentally broken. Companies with a lot of customer churn very often have high employee churn. Ultimately, I want you to think about this: if your company is investing in Customer Success Management (hiring team members, buying software, creating processes, etc.) but you’re not fixing the five things I listed, then you are investing in an initiative that will absolutely fail to deliver the results you’re looking for. Whoever approved this investment should be fired because it’s bad business. But I digress. These are literally my last words on churn: the secret to eliminating churn once and for all is to fix the stuff that leads to churn in the first place. --- # Customer Success: The Lost Art of Churn Reason Analysis *September 10, 2020 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-reason-analysis/ It’s critical to understand why your customers churn, but if you’re relying solely on the reason the customer gives you for that churn, you’re definitely missing the actual reason. ‘Churn Reason’ analysis, like most things in Customer Success, is more complex and requires more deliberate effort to get right than it might seem on the surface. It’s easy to just ask a customer why they’re cancelling or not renewing and to leave it at that. It’s easy, but it’s not going to get you the answer you need to keep future churn from happening. This guide will help you analyze the “churn reasons” in a way that will get you much closer to the truth and help you take appropriate action to keep that churn from happening in the first place. Let’s go! *My (now) standard disclaimer: As with everything I publish, this is just an article. It is necessarily incomplete and generic. I cannot tell you exactly what you should do and if someone who doesn’t know your business and your customers tells you exactly what your processes should look like, run away. Run far and fast.* ## Churn: Syntax and Nomenclature *“Also, dude, churn is not the preferred nomenclature.”* – Walter Sobchak For the purposes of this guide, when I say “churn,” it simply means that a customer has stopped doing business with us because they: - actively cancel their subscription. - choose not to renew their contract. - buy one thing from us and never do so again. Churn is also a behind-the-scenes term that I would encourage you not to use with your customers. Be more specific with them: - “Why are you canceling your subscription?” - “Why did you choose not to renew your contract?” - Why did you only buy one thing from us and never come back?” With that out of the way, let’s get into this… ## ‘Churn Reason’ Analysis: Internal vs. External Churn Reasons Ideally, every former customer will have two churn reasons associated with their customer record: an internal reason – one derived from our understanding of why they churned (finance data, support tickets, pre-cancel usage data, etc.) – and an external reason that comes from the customer directly. This “external” information can be from a conversation with the customer, a survey, third-party interview, etc, We do need to be realistic that you’ll not always get a response from a churned customer – though you should always try – but you can at the very least posit a theory (your “internal” reason) of your own based on their behavior – in-app and beyond – as well as customer satisfaction surveys, financial data, support tickets, training consumption, etc. When your internal reasons do not align with the reasons given by the customer, you know your ability to predict churn is low because your signaling is off. However, if Internal and External churn reasons are aligned, you know you’re relying on the appropriate [Success Vector](https://sixteenventures.com/success-vector) inputs. But you can’t do that sort of comparative analysis unless you’re capturing and recording both internal and customer-sourced reasons for churn. So add two fields to your customer record and from now on, when a customer churns, make sure you have 100% coverage on internal reasons and as many customer-derived reasons as possible.  Whatever your coverage is on External reasons, make it part of your OKRs to drive that number up over time. And if you can, go back, at least, 30-days for self-service, month-to-month “contracts” or a quarter or two for annual contracts to get customer-derived reasons for churn.  Asking customers that churned further back than those time frames may not yield enough to warrant wasting cycles, but you could – and should – go back as far as you can (don’t worry about your early adopters, pre-pivot customers, etc.) to fill in the internal reason. When you ask your customers why they churned, ensure you ask about their experience and not “so you can help other customers better” or to help yourself. Keep it about them. Which brings us to… ## When to Ask for a Churn Reason Do you ask them why they’re churning during the cancellation process or do you wait until after it’s done? If you want a real, honest answer that will help you to prevent future churn, you’ll ask **AFTER** the cancellation process is complete. If you want rushed, path-of-least-resistance answers that will do little to help you down the road and will likely just add negativity to the customer’s experience, then ask **DURING** the cancellation process. The psychology is simple; people want out, they’ve already made their decision, and by asking them a question before they’re out, you’re putting up a barrier to that exit (or maybe even trying to save them!), so they’ll tell you whatever they think you need to hear to just let them out (and keep that save from happening). They’ll pick the first option on the list. They’ll tell you it’s them, not you. They’ll say, “I don’t have the budget,” and it’s hard to argue with that, so customers will choose this “reason” a lot.  If it really is a budget issue, that actually means they didn’t get value, but this is typically a decoy answer to just make you go away and let them leave. They’ll basically tell you anything to expedite this process. But if you let them cancel – or handle the cancellation / non-renewal for them – and then ask them, the psychology is totally different. They’re free! They got what they wanted. Sweet relief. And now, they’re open to giving you an honest answer. It’s wild what happens when you think about how humans operate. ## What about Saving Customers? The amount of energy and resources companies put into “saving” customers from canceling – often using exit surveys and interviews, and complex cancel flows to facilitate this process – would have a **FAR** greater return on that investment if it were spent making customers successful and keeping them from wanting to cancel in the first place. There are lots of gimmicks, hacks, apps, and just plain BS nonsense you can apply to “saving” customers, but the reality is that if they get to the point where they want out, that decision is hard to reverse, and the process of trying to do that just makes the overall experience of the customer that much worse. Anecdotally from my experience with companies that put in repeatable processes to “save” customers (before they engaged me to not let customers get to this point in the first place), I see an average save rate of about 12%. That means 88% of the customers looking to cancel didn’t get saved and were subjected to a poor experience on the way out. In several instances, we were able to find negative reviews left by customers that went through the “save” process but opted-out. Would they have left a negative review anyway? Maybe. But I am fairly confident this didn’t help. Especially when they mentioned it **IN THE REVIEW!**. Even better, of the 12% of customers that were “saved,” within 3 months, 80% of those customers are gone. And in several instances, just like above but so much worse, we were able to show that upwards of 50% of those also left a negative review. Ugh. So… is it worth “saving” customers?  Probably not, especially if you have finite resources to invest. Invest those resources in making the customer successful to begin with. But the negative market sentiment that comes with disgruntled customers leaving bad reviews and, among other things, how that will affect [Customer Acquisition Cost (CAC) efficiency](https://sixteenventures.com/saas-cac-efficiency), is just not worth the extra couple of months of revenue. Unless it is. Do your own math, but actually do it and don’t just assume it’s worth saving customers this way. I will say this. If you choose to “save” a customer when they exhibit cancel intent, just understand that you’ve simply kept them from canceling. They are **NOT** successful yet. They have realized **ZERO** additional value. They are very much still a churn threat. Your job now is to get them back (or for the first time) on a path to achieving their [Desired Outcome](https://sixteenventures.com/desired-outcome)… otherwise you’re just prolonging the inevitable, only when it happens, it’ll be that much worse (negative sentiment). Okay, I digress. Let’s get to the analysis, shall we? ## Applied ‘Churn Reason’ Analysis for Customer Success Okay, so now that we have a better understanding of what’s going on here and we have collected the data, it’s time to analyze it. Starting with our list of churned customers, we need to answer the following questions: ## Are they a Good- or Bad-fit Customers? I like to start by going through and tagging customers that churned as Good or Bad-fit. If you aren’t sure why this matters, check out my post on [Quantifying the Cost of Bad-fit Customers](https://sixteenventures.com/quantify-bad-fit-customers). If they’re a Bad-fit customer, no further analysis is required. You can always keep going and look for patterns to back-up why Bad-fit customers are bad for business, but ultimately, you can stop at this designation. If they’re a Good-fit customer and churned out, that’s a problem. ## Did they have Success Potential? When we say a customer is a Bad-fit, we’re saying that, based on their characteristics, they are not likely to be successful. But we can have customers that characteristically are a Good-fit, but for other reasons, they do not have [Success Potential](https://sixteenventures.com/success-potential). This “Churn Reason” analysis will focus on Good-fit customers that had Success Potential. If a customer was a Good-fit but lacked Success Potential, there are actions to be taken, such as looking at the lack of Success Potential to see if it’s tied to customer characteristics. If so, we probably need to adjust our Bad-fit Customer profile so we can ensure we’re only bringing-in customers that have the potential to be successful with us. It’s also important to recognize whether a customer came in with Success Potential but, due to some change on either their end or ours, the bit got flipped from “Has Success Potential” to “Doesn’t.” Ultimately, Good-fit customers with Success Potential shouldn’t have churned, so clearly something happened, either with them or with us. ## Different “Churn Reason” Sources We’ve already talked about Internal vs. External churn reasons, and this is where we put that to good use. But there is also a third churn reason data source that I liked to include. So you’ll want to look at three things when doing churn reason analysis: - The reason they gave (External churn reason) - The reason we think they canceled/didn’t renew (Internal churn reason) - The reason their comments and actions indicate (Context Clues) ## Context Clues and Critical Thinking In addition to the Internal and External churn reasons, we can look at what the customer actually says and does to figure out what’s really going on.  When they choose “Cost” as the reason for canceling or not renewing, but tell you that they weren’t getting value because the product is broken and they could never even get started on a project, this is clearly not a “cost” issue. It’s a value realization issue caused by product instability or something. Sure, they don’t want to keep paying for a product they’re not getting value from, but this is not truly a “cost” issue. So we might have a couple of reasons to apply to this loss that actually have nothing to do with “cost.” But they may have just said “Cost” to try to move the uncomfortable conversation along.  It’s so much easier to just tell you they can’t afford it than to tell you your product sucks, your service sucks, or you suck… and people like to avoid conversations like that, even if having that uncomfortable conversation would actually make you or your product or service suck less. If we just go with “Cost” as the reason, though, we can incorrectly write them off as a “bad-fit customer” who just didn’t want to pay our fee instead of seeing what’s really going on and perhaps fixing it. ## Performing the Analysis and Taking Action We now have a list of Good-fit customers that had Success Potential, the reason we thought they churned, the reason they told us, and the reason we were able to glean from their statements and behavior. Awesome. But what do we do with this information?  You can do a lot of different things, but what you’ll end up doing will entirely depend on what your data show. But here’s an incomplete list of 5 things to get your brain moving in the right direction: - By comparing Internal, External, and Context reasons, is our signaling (what we get from our customer data systems – CRM, our app, support, etc. – on point or are we missing things? If the latter, fix it. - Are there missing / broken features, workflows, or other UX issues that are causing the customer to not be able to realize value? If so, this could be used to reprioritize your product development roadmap. - Are there service issues – Customer Success, Support, Professional Services, Integrations, etc. – that are lacking or broken that are leading to churn? If so, this should be the catalyst to examine those services and fix whatever glitches are present. - Are there pricing, positioning, or other marketing things that are either leading to mismanaged expectations or simply attracting customers with misaligned Use Cases? This should be the catalyst for aligning Customer Success with Sales, Marketing, and Product to ensure this does not happen again. - Did something change that turned otherwise Good-fit customers with Success Potential into customers that were not able to realize value from their relationship with us? For things that happened on our side to cause the switch, this is an internal alignment issue where Customer Success and Product need to work together closer. For things that happened on the customer’s side, this may be a signaling or engagement process issue. Either way, both are fixable now that we know it’s happening. If you want to take this analysis to the next level, combine it with my [Churn Classification Framework.](https://sixteenventures.com/churn-classification) ## Additional Reading on Churn Analysis - [Eliminate Churn Forever in 5 Simple Steps](https://sixteenventures.com/eliminate-churn) - [Customer Success: How to Quantify the Impact of Bad-fit Customers](https://sixteenventures.com/quantify-bad-fit-customers) - [What is a good SaaS Churn Rate?](https://sixteenventures.com/saas-churn-rate) --- # Customer Success: How to Quantify the Impact of Bad-fit Customers *August 26, 2020 · by Lincoln Murphy* Source: https://sixteenventures.com/quantify-bad-fit-customers/ What’s the cost of working with Bad-fit Customers? Everything rolls-up to dollars… time and other resources – and even the negative sentiment in the market caused by churning-and-burning customers – all have an associated monetary value. For those who wrongly consider Customer Success an altruistic endeavor, rather than a profit-seeking business strategy, you will want to try to make Bad-fit Customers successful at any cost. You’ll want to, but you can’t. That’s why we call them Bad-fit Customers. I put this guide together for the rational person who knows intuitively that investing resources into Bad-fit customers (customers that lack Success Potential) is, well, bad for business. You get this. You understand this. But you don’t know how to prove it. Well, now you do. And by “now” I mean after you read this. Go. Read this. ## 7 Steps to Quantify the Impact of Bad-fit Customers *“In God we Trust. All others bring data.”* – W. E. Deming If you want to be taken seriously in your mission to prove that Bad-fit Customers are costing the company **MORE** than they are making the company (i.e. they are not profitable), you can’t just go to your executive leadership with a hunch or opinion. You must bring data, and those data (because ‘data’ is plural) should roll up to a monetary value, which is the language business executives speak. It’s all about money, like it or not. The idea here is to be able to go to your executive leadership with a compelling, logical, and quantifiable case that backs-up the need to stop acquiring Bad-fit customers. ***My standard disclaimer:**** As with everything I publish, this is just an article. It is necessarily incomplete and generic. I cannot tell you exactly what you should do and if someone who doesn’t know your business and your customers tells you exactly what your processes should look like, run away. Run far and fast.* - Create your [Success Potential](https://sixteenventures.com/success-potential) checklist A Bad-fit customer is one for whom we cannot check all the boxes on the Success Potential checklist - Remember, your Success Potential checklist will change as your market, customers, product, company, etc. changes. It’s never done; it’s a living, breathing document - When this changes, customers that were a Bad-fit might be a Good-fit - But customers that were a Good-fit might become a Bad-fit, depending upon the change - Go through customers that churned in the last 3-6 months (depending upon churn velocity, contract lengths, etc.) Tag those that match the current Bad-fit definition as, well, Bad-fit If you’re looking at churn back 6 months, but your Success Potential checklist changed 3 months ago, you’ll have to look at the previous 3 months using the Success Potential worksheet from that time frame rather than today’s definition - These changes are **FAR** more likely – and are likely more frequent – in the COVID era, so adjust accordingly - If some large amount – let’s say 75% for example – of the customers that churned are marked as Bad-fit, that’s a fairly strong piece of evidence that sales is closing the wrong customers The actual percentage doesn’t matter… but the higher it is, the worse it is There is no “good percentage” of Bad-fit customers so don’t ask - What are we looking for? How many of the customers that churned were Bad-fit (i.e. they churned because the didn’t have Success Potential in the first place) - How many of the customers that churned were Good-fit (this, plus Bad-fit should probably equal 100% or your math is off) - While we can’t know for sure, it is very likely that the Bad-fit customers kept us from focusing on the Good-fit customers and that’s what caused – at least some of – the Good-fit customers to churn - Were they profitable customers? Note how long they stayed - From the time they signed-up - To the time they canceled or failed to renew - Note how long they needed to stay to break even on Customer Acquisition Cost (CAC) - Did they stay long-enough to become profitable or did we lose money on them - Are they having a compounding negative effect on us? If and where possible, tie these churned customers to negative reviews on public review sites - Look through won/lost interviews to see if any of these Bad-fit Customers come up as reasons a prospect chose not to go with your company - Do the same for customers that reduced the value of their account Customer (logo) churn is easy to see / harder to hide - Contraction – customers staying on but paying us less for the privilege – is something that’s easier to miss/hide, but just as, or sometimes more, problematic than full-on customer churn - Do the same thing for customers that Expanded (Upsells, Cross-sells, etc.) Bad-fit customers tend to not expand their relationship with a vendor, for obvious reasons - If a company’s growth is dependent upon a land-and-expand strategy, and they are signing too many Bad-fit Customers, that strategy is going to fail - Go through your current sales pipeline and tag prospects as bad fit… and then watch their progress through the sales cycle and as a customer  Are Bad-fit customers closing at the same rate as Good-fit customers? - Are Bad-fit customers taking longer to close? If it takes longer to close Bad-fit customers (and it usually does because there’s more convincing required on your part and more of a leap of faith on their part) that’s something sales would definitely be interested in - You can do this historically, too…. Look at sales cycle length for Bad-fit customers historically vs. Good-fit customers. - This likely plays into CAC as well; longer sales cycles increase CAC and reduce [CAC Efficiency](https://sixteenventures.com/saas-cac-efficiency) - **BONUS:** If you want to get Sales leadership buy-in, show how sales cycles are longer for Bad-fit customers; the longer the sales cycle, the fewer sales. Show them the easy way to shorten that cycle and close more deals… you’re their best friend. - Go through your existing customers and tag those that are Bad-fit When tagging, consider…not using “Bad-fit” or even “BF” … make up something else, like “Process = mapped/unmapped” for fit/Bad-fit doesn’t matter… but we likely don’t want anyone knowing what we’re doing just yet - Now when a customer churns, doesn’t renew, or fails to expand, we know if that customer was a Bad-fit or not Can we 100% tie that churn to them being Bad-fit? Yes. [Learn why here.](https://sixteenventures.com/eliminate-churn) - Once we’ve mapped Bad-fit customers, we can say with confidence, this percentage of our customers will likely churn, not renew, or certainly won’t buy more or advocate for us - Using [Success Vector](https://sixteenventures.com/success-vector) along with this tagging, you can start to predict **WHEN** your customers will churn - Of course, this method will also allow you to easily predict Expansion revenue (or a lack thereof) from your customers, too. - Start tracking time spent with customers…  Nothing too detailed, just time spent - Be transparent about why you’re doing this with your CSMs so they’ll be onboard. Nobody likes to be micromanaged so they’ll resist this at first if you don’t explain why you’re doing this - No CSM actually wants to work with Bad-fit customers; they know it’s a waste of everyone’s time so they’ll dig this exercise if you explain it right - Do it for a week and then a month. Asking for a week at a time helps the medicine go down easier - Look at the time spent with Bad-fit vs. Good-fit customers Pretty much **ANY** time spent with Bad-fit customers is time **NOT** spent with Good-fit customers - If it is skewed too far in favor of Bad-fit, it becomes obvious that it’s taking away from Good-fit - But even if there’s more Good-fit than Bad (which hopefully there is), that’s still time taken away from Good-fit customers to work with Bad-fit - If you can show that you’re spending time with Bad-fit customers that churn out anyway, that’s bad - Create and present a presentation to your Executives Begin with the roll-up financial impact of Bad-fit customers - Have drill-down reports ready should they need to see proof, including: Pipeline Analysis Good vs. Bad-fit Customers - Churn (all kinds) Good vs. Bad-fit Customers - Negative Market Sentiment Good vs. Bad-fit Customers - Sales Cycle length / CAC Good vs. Bad-fit Customers - Profitable Percentage Good vs. Bad-fit Customers - Person Hours Invested Good vs. Bad-fit Customers - And whatever other data points you come up with - No, I don’t have a template for you… get to know your audience and understand what you should be presenting to them For some, a spreadsheet will suffice, for others, a well-designed slide deck – that is still focused on the financial impact – will be required I hope that helps you. But if that wasn’t enough, here is some…. ## Further Reading on Bad-fit Customers / Success Potential - [The Cost of Bad-Fit Customers: How a Simple Sales Mistake Wiped Out $1.2M in Revenue Overnight](https://sixteenventures.com/churn-bad-fit-customer) - [Customer Success Goals: Cohorts, Metrics, and Prioritization](https://sixteenventures.com/customer-success-goals) - [Success Potential: The Foundation of Customer Success](https://sixteenventures.com/success-potential) - [Churn Classification for Customer Success Management](https://sixteenventures.com/churn-classification) - [Customer Success: The Difference between Stretch and Bad-Fit Customers](https://sixteenventures.com/stretch-bad-fit-customer) - [Customer Success and Sales: Why the Latter determines the Former](https://sixteenventures.com/sales-customer-success) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Onboarding: How to Design and Implement an Effective Onboarding Process *August 18, 2020 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-onboarding-process/ The phase of the customer lifecycle that gets the most attention is Customer Onboarding, yet ironically (or tragically), most people fail to understand what onboarding really is, and few do it well.   And even though Onboarding is something people talk about all the time, experts abound with advice and blueprints and templates, and thought leaders drone on about “first impressions,” the fundamentals of effective customer Onboarding seem to be totally missing.   So I put together a list of things that will help you design an effective Customer Onboarding process that truly does set your customer up for long-term success.   Here we go… ## Designing an Effective Customer Onboarding Process As with everything I publish, this is just an article. It is necessarily incomplete and generic. I cannot tell you exactly what you should do and if someone who doesn’t know your business and your customers tells you exactly what your Onboarding – or any process – should be, run away. Far and fast. BTW, one of the main reasons companies bring me in – unfortunately – is to help clean up after they hired a “consultant” who took the easy way out and just applied one of their pre-written, generic BS blueprints to this unique business and, frankly, messed everything up. So take what I give you below and apply the knowledge you possess about your customers, your company, and the unique intersection thereof to make it actually useful. Now is not the time for copying, but rather for critical thinking. I hope what I share gives you direction in that thought process. ## Four Steps to Effective Customer Onboarding It’s just four simple steps, with a bunch of steps between those four steps, and a lot of work to do for each of those interim steps. But it’s just four steps. - Determine when a customer is “onboard” This definition of “onboard” is missing from roughly 102% of the onboarding processes I come across How can you have an onboarding process when you don’t have a clear definition of when a customer is onboard? - In fairness, companies often have a complete Customer Success Management process when they don’t even know their customers’ [Desired Outcome](https://sixteenventures.com/desired-outcome), so this shouldn’t be surprising - What milestone have they achieved to be considered “onboard?” You may want to get to know the concept of [Success Milestones](https://sixteenventures.com/success-milestones) - This milestone should be the first time the get value (for more simple products or services) or see the value potential in their relationship with us (for more complex products or services) - Is this definition of “onboarded” universal or will there be different definitions depending upon the type of customer? Hint: it’s probably the latter - A customer should **NOT** be considered “onboard” simply after a certain amount of time has passed In general, using how long a customer has been doing something as a marker for success – or even simple progress – is fraught with risk - What will it take to get them to that point of being onboarded? Meet them where they are and take them where they need to go Are all customers starting from the same place? - Are their different initial use cases, maturity levels, etc. that we need to consider? - Will all customers get the same plan or will we be meeting different types of customers in different places (their maturity as a company, maturity with the processes we help operationalize, the type of customers they have, their size, etc.)? - Once we understand where we need to meet them (Point A), what are the steps to get them onboard (Point B)? It’s probably a good idea to think about – and orchestrate – what comes after Point B, too. - Consider everything that has to happen: On their end In the software - Beyond the software where do they need to get data from, what systems do they need to interact with, who all needs to be involved, etc. - On our end What we do for them - What we do with them - What we need to get them to do - Who all needs to be involved - Once the steps are outlined we can begin working on the modalities of intervention to move them along the way (meetings, 1:many, self-service, emails, calls, etc.) This is a good time to check out the [Customer Engagement Communication Model](https://sixteenventures.com/communication-model) and the [BEAST Message Framework](https://sixteenventures.com/beast-message-framework) - Consider the different types of customers and what we think would be appropriate to them We know a lot about them, but this might be a good time to really think about: What are they used to from other vendors? - What do they love or hate about other vendors? - What do we think would be appropriate for them? Bigger more mature customers may not need much from us at all - Smaller customers may need a lot, but self-service and 1:many is what they expect - What is the next step after onboarding? This is the “post-Point B” I mentioned earlier  - After they reach the onboarded threshold, what do we need them to do next? - We can start orchestrating this early so the transition form onboarding is expected and understood - How long should it take to reach “onboarded?” [Time to First Value (TTFV)](https://sixteenventures.com/customer-onboarding-ttfv) is the KPI to pay attention to - But TTFV is just a goal, not a “they’ve been with us 30 days so they’re onboard” situation If they reach “onboarded” in less than the TTFV goal time, that’s great! - If it takes longer than the goal, that’s bad The sooner we can see that they’re not on track to hit the TTFV goal, then we need to intervene to see what the hold-up is - Is it on our side? Their side? What’s the plan to move this forward? - We can use [TTFV as a sales metric](https://sixteenventures.com/ttfv-sales-kpi), too! Each customer is associated with the sales rep - Sales rep is managed and/or compensated on the customer achieving TTFV - This helps ensure the handoff is handled properly and ensures the customer is a good fit and not oversold There you go… now, what goes into each of those things will totally, 100% depend on your unique situation. ## **Further Reading on Customer Onboarding** - [The Basics of Customer Onboarding](https://sixteenventures.com/customer-onboarding-basics) - [The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding) - [Customer Onboarding: AHA! or WTF?](https://sixteenventures.com/customer-onboarding-aha-wtf) - [Emotional Disconnect During Customer Onboarding](https://sixteenventures.com/emotional-disconnect-onboarding) - [Bad Sales Handoffs Cause Customers to Ghost During Onboarding](https://sixteenventures.com/ghosting-during-onboarding) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Designing a Sales-to-CSM Handoff that Actually Works *July 31, 2020 · by Lincoln Murphy* Source: https://sixteenventures.com/sales-to-csm-handoff/ The best place to set our relationship with the customer up for huge success – on both sides – is right at the beginning, and it doesn’t get much earlier than the Sales-to-CSM Handoff. Of course, the Sales-to-CSM Handoff is also where companies can (and often do) completely drop the ball and set the relationship with the customer up for massive failure right from the start. So what I’ve put together in this post is how to design a streamlined and repeatable Sales-to-CSM Handoff that sets everybody up for success and ensures your customers never “slip through the cracks” again. What I’ve shared below is obviously for a higher-engagement Sales & CSM environment; for self-service or lower-engagement environments you’ll have to make some adjustments.   But even in higher-engagement situations, you’ll still need to take  what I have shared below and transform it to make it your own.   This is not a template or blueprint to be applied without modification (doing that will not lead to good places)… this is just to get you thinking in the right direction.   Here you go… ## Example Sales-to-CSM Handoff Process *My (now) standard disclaimer: As with everything I publish, this is just an article. It is necessarily incomplete and generic. I cannot tell you exactly what you should do and if someone who doesn’t know your business and your customers tells you exactly what your processes should look like, run away. Run far and fast.* - Salesperson orchestrates during the sales process that they’ll be introducing them to the CSM once they sign-up Where it makes sense, a CSM might be introduced during the sales cycle - When or if a CSM should be introduced during the sales cycle is heavily dependent on a number of factors like the strategic value of the prospect, the complexity of the customer’s needs, etc. - This may only take place with a subset of your prospects - On the final call, customer agrees to buy Salesperson must allocate 5 mins at the end of the call to start the handoff process - Salesperson looks to see which CSM they should go to Can we be proactive here and show the salesperson who the next available CSM is? - If we go with a dedicated Onboarder (ONB), this part of the process is irrelevant - Unless you do a CSM intro first and then bring in the ONB (this is generally the preferred way when you have a dedicated ONB) - Salesperson tells the new member who their CSM will be “*All of our CSMs are fantastic, and [CSM name] is no exception, you’re going to love working with them.*” If we go with a dedicated ONB, we need to tweak this a bit - Salesperson reminds the customer that while they have a CSM that’s assigned to their account, said CSM is a human so they need to properly manage expectations around working with humans “*Of course, our CSMs are human so it’s possible you might work with one of our other amazing CSMs at some point.*” - Salesperson says, *“we need to get your kickoff call on the calendar ASAP… the longer we wait, the further out it’ll be and we want you up and running quickly, right?”* - Salesperson messages them the CSM’s Calendly (or whatever) link for kickoff calls If they can, send a message through Zoom or whatever they’re using - Otherwise email it to them - we have a 3-day built-in buffer for kickoff calls; the soonest they can get is 3 days out This feeds into the narrative that they need to keep this call scheduled because clearly there’s demand - It also gives them time to do any pre-work we need them to do (of course there will be pre-work before a kickoff call, right? Right.) - Customer locks down a call time right then and confirms it with Salesperson - Salesperson says, *“Awesome! We’re good to go. I’ll send you an email introducing you to your CSM and they’ll take it from there, okay?”* - Salesperson sends an email introducing the CSM and the Customer Canned Response in GMail - Should be short and include the kickoff call date/time - CSM responds to that email “*[Salesperson, thank you for the intro… I’m moving you to BCC*“ - “*Hi [Customer First Name], I’m excited to get you going. Our call is set for [date/time] and I’ll send you a couple of reminders ahead of that call.”* - and give them some pre-work or something simple to look at/watch before the call This could be a checklist of what they need to prepare and bring to the kickoff call - If possible/necessary, this could be tied to what they said their initial goal was This should be reiterated in the initial reply - do **NOT** give them the option to reschedule but say “*we only have 45-mins for this call and we need every one of those minutes. Sometimes Zoom needs to download something, so if you can, please arrive 2 mins early for the call.”* - Salesperson does appropriate discovery turnover with CSM Salesperson updates the customer record in the CRM - Salesperson shares discovery that doesn’t fit in the CRM with the CSM either on a Zoom call or just sends a quick ~3-min CloudApp or Loom video. This [extra-CRM discovery intel](https://ltvmax.com/posts/the-intel-that-never-leaves-the-sales-call) is the key to not losing the emotional connection between the goal and the customer that the salesperson created with the prospect during the sales cycle. - Kickoff call happens - The customer record is updated in the CRM to indicate the kickoff call has occurred The sale is now closed  - The salesperson can be paid their commission ## Sales-to-CSM Handoff: Potential Issues and Troubleshooting - Can they reschedule? Yes, of course… but we need to discourage this and remind them that they bought for a reason and make sure they’re not putting it off because they’re trying to avoid change. - What if they start ghosting us? Get the Salesperson back on them… which will be easier to do if the sale isn’t complete until this meeting happens. - Further ensuring they show up? Always ensuring we’re connecting actions to the goal they’re trying to achieve is the key to getting them to actually take those actions - We could gimmick this by throwing in “Accelerated Onboarding” – a $500 value – but only if they get started in a week or something. This creates a sense of loss should they decide to slow roll us. If you like this idea, let’s talk it out to make sure it only has positive results. ## **Ensuring Quality Sales-to-CSM Handoffs happen Consistently** - The sale is **NOT** complete for measurement / management / compensation purposes until the kickoff call happens - [Use TTFV – Time to First Value](https://sixteenventures.com/ttfv-sales-kpi) – as another measurement for the Salesperson, further driving the importance of this handoff process ## More to read on Sales-to-CSM Handoffs and Customer Onboarding - [Bad Sales Handoffs Cause Customers to Ghost During Onboarding](https://sixteenventures.com/ghosting-during-onboarding) - [Emotional Disconnect During Customer Onboarding](https://sixteenventures.com/emotional-disconnect-onboarding) - [The Basics of Customer Onboarding](https://sixteenventures.com/customer-onboarding-basics) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # What is a good SaaS Churn Rate? *July 17, 2020 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-churn-rate/ Is 5% a good monthly SaaS Churn Rate? Read on to learn the answer… As a consultant to SaaS and Cloud providers that are looking to grow, I get asked what an acceptable SaaS churn rate is all the time. This article was originally written in 2013 and has been updated several times over the years. The lessons are accurate even in 2020. As I stated in 2013, the answer to “What is a good SaaS Churn rate,” was, “you want a churn rate to be ‘as low as possible.'” In 2020 I just say, “let’s make churn a non-issue.” It will vary depending upon your market and your position therein. And it likely will never be zero. And that’s okay. Just make it a non-issue. So, before you continue reading this article, if you’re in a position where you’re trying to figure out what an acceptable SaaS churn rate, you may wish to detour to my “[Eliminate Churn Forever in 5 Simple Steps](https://sixteenventures.com/eliminate-churn)” post. Then come back and read this post… ## Acceptable SaaS Churn Rate In line with my experience, Bessemer Venture Partners says an “acceptable” SaaS churn rate is in the 5 – 7% range ***ANNUALLY***, depending upon whether you measure customers or revenue. And BVP’s assertion is [backed up by Pacific Crest](http://blog.tridentcap.com/2012/08/a-comparison-between-pacific-crests-2011-and-2012-saas-survey-results.html) in their [Private SaaS Company Survey Results](http://www.pacificcrest-news.com/saas/Pacific%20Crest%202011%20SaaS%20Workshop.pdf) that show roughly 70% of SaaS companies in their survey had annual churn in the < 10% range, with 75% of those at 5% or under. The way I read the results of Pacific Crest’s survey is that 30% of SaaS providers surveyed have an unacceptable level of churn. Now what about the SaaS providers that aren’t included in surveys like that one or who don’t appear in the logo list of the top investor portfolios and who are just trying to grow? Are they doing better or worse? In my experience, it’s quite often worse… and sometimes much worse (as you’ll see in a second). ***This holds in 2020, BTW.*** Honestly, for those companies, it isn’t a lack of customers in the front door that is stopping their growth; it’s the constant flow of customers out the back door that is killing their business! ## Monthly vs. Annual Churn Rates Now, just so we’re on the same page, 5% – 7% Annual churn – the good churn rate – translates to 0.42 – 0.58% monthly churn. This means companies with “acceptable” churn, lose only about 1 out of every 200 customers (or dollars) per month. Now that’s a solid platform you can really build a high-growth company on. On the flip side, a high churn rate is the reason you ended 2012 with a whole bunch of new customers… but had about the same amount of revenue. Churn is the reason that – though you acquired a lot of new logos in 2012 – you had no significant year over year growth from 2011. ## Is 5% Monthly Churn Good? To really hit this point home, here’s a story from a conversation I had last week. The CEO of a cloud provider who competes in an extremely crowded SaaS product category contacted me. His goal is to double his business over the next 12 months… to 2x their current revenue. To help reach that goal, he contacted me because he knew I could help with the things he thought were key to reaching his goal. He knew that I could help increase customer acquisition by improving the quality of traffic to their site, improving the number of prospects entering his free trial and, of course, improving the conversion rate to paying customers of those that enter the free trial. But as part of trying to get to the bottom of things, I asked him what his churn rate was. Since he didn’t contact me to talk about churn he wasn’t really interested in discussing this (this, by the way, is always a bad sign; as the CEO of a SaaS company you should be open to discussing ***ALL ASPECTS*** of your business when you’re looking to grow). He reluctantly told me he had a 5% churn rate but that it is “just fine.” I asked him if that was 5% per year or per month… one is great the other not so much. He confirmed it was 5% per month but reiterated that, “it’s fine.” ## No, 5% Monthly Churn is Bad! Now, just so you and I are on the same page… 5% monthly churn ***IS NOT FINE!*** It means that if you didn’t add any new customers (which is unlikely) or measured on a cohort basis (this is a very accurate way), you’d see that 5% per month leads to ~46% churn. Read on. Put this in a spreadsheet cell and hit enter: =(1-.05) ^ 12 The output is something like: 0.540360087662637 (see my over-simplification disclaimer at the end) Make it 54, subtract that – which is the retention rate – from 100 and you have the annual SaaS churn rate: 46. Turn that into a percentage, and the annual churn rate is: 46% A 5% monthly churn results in… a 46% annual churn rate! Let me add some flash… Having 5% monthly churn means if you started January with 100 customers you’d have 54 customers left at the end of December. If you started with $100 in Monthly Recurring Revenue (MRR) you’d end up with $54/MRR at the end of December. Think about it this way… over the course of the year where you start with 100 customers or $100/MRR but have 5% monthly churn, you’d need to acquire 46 customers (or $46/MRR) just to break even with the beginning of the year. To grow by just 1 customer you’d have to acquire 47 customers! To grow by just $1, you’d have to acquire $47 in new business! If you start the year off with 100 customers, and you add 100 customers per month (and depending upon where the 5% churn from; cohort or total), you’ll end up with 25-29% annual churn. If you add 1200 customers over a 12 month period and end up with a little more than 900 over that same period, that is probably not good. Of course there are several factors to consider here, but in B2B SaaS where we’re looking for customer lifetimes of at least 36 months (and likely spending more than in B2C to acquire customers), this is clearly working against our goals. Okay, so… ## Why Do SaaS CEOs Ignore Churn? Why this was not shocking to him I’ll never understand, though I can assume it was for at least one of these two reasons… - His company continues to acquire customers at a rate that is fast enough to break even or show some slight growth (which is why they think they just need to ramp this up) - He assumes a high churn rate is the norm; it’s expected and just fine. ## The SaaS Churn Vicious Cycle 2020 Update: What I’ve learned in the 7(ish) years since I first published this article is that churn, especially in “low value” or what I call “low revenue” customer segments, is that it’s a vicious cycle. Those customers come in, we fail to deliver their [Appropriate Experience (AX)](https://sixteenventures.com/appropriate-experience-required) because their AX would be unprofitable for us and – surprise, surprise – they churn. Then we get punitive; since there’s just a lot of churn in this market (segment), we’ll give them even LESS. So they continue to churn, often a HIGHER rate.  ## Going out of Business is Just Fine? What this really means is that with 5% ***MONTHLY*** churn, the CEO who said “it’s fine” is running a company with a 46% annual churn rate! It means his company, the one that is “just fine,” is losing 50% of their customers or revenue every year. At first I was happy to hear he has no Board of Directors to report to (so we could just get to work), but after hearing him say 5% monthly churn is “fine” I wish he did have someone to hold him accountable! Now, while it’s not impossible to double your business in a year with such a high churn rate (this isn’t unheard of in the B2C world), it is hard. And in our world, “hard” means expensive and time-consuming. It means running backwards on a treadmill blindfolded while lighting $100 bills on fire… eventually you might reach your goal weight, but you look like an idiot and waste a lot of money in the process. The reality for this SaaS CEO I was talking to – and anyone else with a high churn rate – is that this is not a solid foundation to build a business on. Rather than a solid foundation, you have a super-porous, extremely brittle wafer – like a piece of shredded wheat – that you’re going to try to build a business off of. Or a dry sea sponge. Or a structure made from dry angel hair pasta. You get the picture. ## Negative Churn and Expansion Revenue Yes, you might have “negative churn” or “expansion revenue” where you lose some customers, but the ones that stay pay you more over the course of the year. That’s awesome! Expansion revenue is the best. Unfortunately, in my experience, SaaS providers with high churn rates often don’t know how to effectively up-sell, cross-sell, or even down-sell so their churn rate is rarely offset by expansion revenue. Here’s a more recent post on the trend to [Offset Churn with Upsells](https://sixteenventures.com/offset-churn-upsells) (and why that generally fails). And the cost of acquiring more customers – especially when accurately figuring in all sales, marketing, on-boarding, and support costs – will frequently do more to offset what expansion revenue they have than the other way around. As well, their pricing models are usually such that they don’t effectively move customers to higher pricing tiers and, in fact, often have non-value differentiators (like storage) separating pricing tiers so that customers game the system to avoid paying more (a major churn threat, by the way). That said, assuming you’ve got up-sells and cross-sells that work and you have a pricing model that encourages customers to use more so they pay more to drive expansion revenue, how much better would it be if you could expand revenue over a larger customer-base by keeping more customers? Right… so even when arguing for expansion revenue, I’m also arguing for lower churn. ## Why Churn Happens (and How to Eliminate it Forever) Churn happens for one of two reasons: - your customer dies (or goes out of business) or - they just don’t achieve their Desired Outcome. That’s it. Customers dying or going out of business you obviously have less control over, though I’ve seen some customers go out of business and remain customers, so some of you can take that excuse off the table, too. But the other reason – customers not achieving their [Desired Outcome](https://sixteenventures.com/desired-outcome) – you have **SO** much control over that it’s insane if you fail to recognize this amazing opportunity. But how do you take control over churn and make it a non-issue? First you have to realize that [churn is just a symptom of an underlying disease](https://sixteenventures.com/churn-symptom), and second you have to cure that underlying disease so the symptom of churn goes away. When it comes to churn, too many companies simply treat the symptom and not the root cause, which results in symptoms either continuing or, usually, getting worse. Sometimes much worse. If you want to solve Churn once and for all, fix these [Five Reasons Customers Don’t Achieve their Desired Outcome](https://sixteenventures.com/eliminate-churn). ## A Complete Over-Simplification of Churn Let me be clear… I’ve way over-simplified how to calculate churn for this post because I want you to start thinking about how churn can affect you and not get caught up in the details or turned off by crazy math. The reality is that while churn is often seen as a linear function, customer retention is generally charted as a curve with actual losses – both customer and revenue – progressively decelerating. But rather than going into how to waterfall out monthly revenue from the declining customer base, using cohort analysis, determining estimated customer lifetime, measuring revenue vs. customer (logo) churn, etc., I just wanted to present the simplest of real life examples to get you thinking. What would you do today if you realized you had a churn rate that was too high? If you don’t know, that’s what I’m here for. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Achieve Exponential Growth by Focusing on CAC Efficiency *September 11, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/cac-efficiency/ Companies struggling with growth are the ones that try to figure out how to spend as little as possible to acquire customers. The companies growing like crazy have figured out it’s not about how much you spend, but the efficiency of that spend. They know that if you can outspend your competition to get in front of prospective customers, you’ll win. Let’s explore this in more detail. ## Outspend Your Competition If you can outspend your competition to get in front of prospective customers, you’ll win.  Like I said, companies that struggle with growth are the ones that try to figure out how to spend as little as possible to acquire customers. But the companies growing like crazy have figured out it isn’t about spending as little as possible, but increasing the efficiency of that spend to bring in more revenue, faster. ## CAC Efficiency Cranks So the best companies look for ways to improve the efficiency of that spend, like: - Decreasing Sales Cycle Length - Improving Conversion / Close Rate - Increasing Initial Contract Value - Expediting Time to First Value ([TTFV; aka Onboarded](https://sixteenventures.com/customer-onboarding-ttfv)) - Reducing time to [first Expansion](https://sixteenventures.com/expansion-grow-fast) - Accelerating Adoption Depth and Breadth - Rapidly Driving Customer Advocacy If you can convert more customers, faster, **AND** increase what they pay you initially, you’re on your way to much improved CAC efficiency ([something I originally wrote about years ago](https://sixteenventures.com/saas-cac-efficiency)). But you can skyrocket the efficiency of your CAC spend by getting the customer to a point of expansion faster. If you can dramatically increase account value (relatively) quickly after they sign-up, the payback period for the CAC shortens substantially, and you can reinvest that spend in acquiring more customers. ## CAC Efficiency Drives Company Value And remember, CAC Efficiency is one of the things (along with NRR, LTV, TAM, etc.) that investors look at to determine the [value of your company](https://sixteenventures.com/customer-success-drives-company-valuation). So not only can this CAC Efficiency worldview be a driver of exponential expansion in your revenue, it will most likely directly impact what that newly increased revenue is multiplied against to determine the value of your company. Powerful stuff. ## CAC Payback Period Misconceptions So what about that popular notion that a good benchmark for paying back CAC is 1/3 of the customer lifetime? That popular myth that if the average customer lifetime is 3 years, and we pay back our CAC in 1 year, we’re good… What’s up with that? Well, that’s nonsense that, if you pay attention to it, will probably cause you to go out of business.  You must pay back your Customer Acquisition Cost (CAC) as fast as you can (relative to many things, including cash flow), otherwise you might win at getting your prospect’s attention… but you might run out of money in the process. So back to that “CAC Payback period of 1/3 customer lifetime” thing… it was simply **MARKETING** put out by a Venture Capital (VC) firm to improve their deal flow of companies they could invest in **AT A DISCOUNT**. They knew they could come in, invest money and resources, and pull a few levers to accelerate CAC Efficiency, and take a company with poor unit economics and make it substantially more valuable. They said (paraphrasing), “if you pay back your CAC in 1/3 the average lifetime, come to us… we’d love to invest in your company” because they would be able to pay **LESS** for the equity in the company than if the company already had super-efficient CAC spend. Remember kids, if a VC says it publicly, it is marketing… either to improve/accelerate deal flow and/or improve/accelerate fundraising. Period. Get your CAC Efficiency in check and investors will pay **MORE** for the equity in your company.  [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # TTFV as a Sales KPI to Drive Engagement and Expansion *September 5, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/ttfv-sales-kpi/ Time to First Value (TTFV) is a commonly used Customer Engagement metric to measure the efficiency of the customer Onboarding process, but not generally a Sales KPI. But it should be. How can we hold Sales accountable for the customers they bring in – getting them Onboard and setup for long-term success (and expansion!) – without them owning the customer post-sale? And how can this accountability be used to change the behavior of Sales to accelerate the stream of Good-fit customers, and eliminate the Bad-fit customers, without telling them to “stop closing Bad-fit customers?” Enter, TTFV. As I said, TTVF is a commonly used Customer Engagement metric to measure the efficiency of the [customer Onboarding](https://sixteenventures.com/customer-onboarding-basics) process, but not generally a Sales KPI. But since [you can’t solve upstream problems downstream](https://sixteenventures.com/upstream-problems), we need a way to fix things upstream. Stop dumping toxic chemicals into the stream. Since TTFV is the amount of time between the close of the sale and when the customer is Onboard – [and is our goal timeframe for Onboarding customers](https://sixteenventures.com/customer-onboarding-ttfv) – we can use this as a Sales KPI to accelerate the stream of Good-fit customers (customers with [Success Potential](https://sixteenventures.com/success-potential)) and eliminate the Bad-fit customers. Here’s how. Each customer is associated with the sales rep. Obviously. The Sales rep is managed and/or compensated on the customer achieving TTFV: - Faster than the goal (> 2 days faster) – bigger bonus - On the goal (<> 2 days) – bonus - Slower than the goal First time: Intervention to see what’s going on, suggested fix if necessary. - Second time: Penalty (as well as intervention with customer) - Third time: Termination (plus intervention with customer) Why does this work? Because we understand how Sales works and instead of trying to totally change things, we just fit into how they already operate. With this strategy, now Sales has an incentive to bring in Good-fit customers (and reject Bad-fit customers), as well as properly manage (what I call “Orchestrate”) post-sale expectations, and [perform a proper Handoff](https://sixteenventures.com/ghosting-during-onboarding), and can quickly get the benefits of doing so. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Time to First Value (TTFV) is a Customer Onboarding Goal *September 5, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-onboarding-ttfv/ Time to First Value (TTFV) is a commonly used Customer Engagement metric to measure the efficiency of the customer Onboarding process. Unfortunately, the way this metric is used is almost always wrong. Time to First Value (TTFV) is the amount of time between the close of the sale and when the customer is Onboard. Your customers are considered “Onboard” once they get actual value from OR (in more complex scenarios) see the real value potential in – outside of the promises made by marketing and sales – their relationship with you. Let’s dig in… TTFV is a [Customer Onboarding](https://sixteenventures.com/customer-onboarding-basics) metric that is really just a goal. Every customer makes progress on their own cadence, on their own schedule, on their own timeline. But you have to set a goal for them. You would like [customers in this segment] to achieve [first value] in [some amount of time]. Again, they either get actual value from the relationship with you or, for the first time, see the real value potential in the product or in the relationship with you. Maybe you want them to achieve that milestone in 30 days. That’s just a number you made up that you’d like to hit. And as you learn more about your customers, improve your product and your processes, etc. you’ll readjust your TTFV goal. No matter, some are going to achieve that goal in three days. Some might take 45 days. For those that take longer than your goal, you need to intervene and just make sure that everything’s good. It might be fine, but it’s a goal, and you want to make sure that if things aren’t fine, you’re still keeping them on track. You would want to intervene before the 30 days is up if you see that they’re not on track. You can look at your overall TTFV to see how things are working at a macro level, but you can also look at how individual customers are progressing against the goal and take appropriate action. TTFV should also figure into Customer Engagement KPIs like [Success Vector](https://sixteenventures.com/success-vector). Just to be 100% clear… if your goal TTFV is 30-days and a customer hits 30-days… that doesn’t mean they got value and should be considered Onboard at that point. Their status should not change to Onboard until they actually get value. Obviously, right? If you think that then you’d be shocked at how many times I’ve seen companies flip the customer’s status to “Onboard” after some time frame is reached instead of being based on the customer’s actual progress. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Onboarding: AHA! or WTF? *September 4, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-onboarding-aha-wtf/ You think the AHA! Moment during Customer Onboarding is a positive thing. But it’s not. AHA! moments are only a positive thing if you’re searching for something… perhaps aliens or a missing sock. At the end of this journey you discover what you’re looking for and you say, “AHA!… I knew it was there all along.” That’s a great feeling because it validates your scientific hypothesis or completes the pair of socks. But as your new customer with an [emotional connection](https://sixteenventures.com/emotional-disconnect-onboarding) to their goals who sees – or **SAW** – your product or service as the catalyst to reach those goals, the Aha! moment comes at the end of a discovery journey…. only it’s **NOT** AHA! It’s WTF?!?! “Why did you let me poke around for so long not knowing what to do only to discover this on my own and waste a bunch of time in the process?” Your customer should **NEVER** have to ask, “why did you let me do that?“ Maybe you just want to make sure the customer sees all the cool stuff you have for them during [Onboarding](https://sixteenventures.com/customer-onboarding-basics), or is able to find whatever they need without you restricting their exploration. You’re just thinking of the customer, right? No,… you’re not. Here’s how I know. If you were thinking of the customer, you’d understand that you need to guide them to the things that will deliver value to **THEM**, both initially (and quickly), and as they grow and evolve over time. This is about the customer and helping them receive value as quickly as possible so that you’re setting them up for continued and evolving success. While you may think the AHA! moment is cool, it’s possible this is the first seed of churn (or at least non- or slowed-[expansion](https://sixteenventures.com/expansion-grow-fast)) being planted. And that’s definitely not cool. I hope you see that letting customers wander aimlessly until they discover what they **NEED** to get value from their relationship with you is a bad idea. Some companies intentionally make their Onboarding process seem like a “discovery” adventure where the customer may have what appears to be an Aha! moment after “poking around” for a while. But this only works if two things are true: 1) this is part of your customer’s [Appropriate Experience (AX)](https://sixteenventures.com/appropriate-experience-required) and 2) it’s still completely orchestrated so nothing is actually left to chance. Probably the coolest example of this for the longest time was Twilio (not sure if they still do this). You’d sign-up and immediately get “dumped” into what looked like a command line interface, and given some examples to recreate (sending text messages, making a voice call, etc.) right there by writing some code. The user was “poking around” and just trying stuff (perfect considering the person signing-up was almost 100% guaranteed to be an engineer), but it was actually a very controlled environment designed for them to quickly see how powerful this platform was. And if they didn’t take the action Twilio wanted them to take in-app, all [communication](https://sixteenventures.com/communication-model) from the system or team was designed to get them to take that action. They engineered the “AHA! moment” and the process to get the user there… but unless your business fits that model – and it probably **DOES NOT** – don’t play games like that with your new customers with whom you have a very fragile relationship. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Emotional Disconnect During Customer Onboarding *September 4, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/emotional-disconnect-onboarding/ Theres one major reason your Customer Onboarding sucks and it is something you can easily fix with little to no engineering or overhead. Fix the Emotional Disconnect that happens during Customer Onboarding. You see, Sales and Marketing create connections with prospects on an emotional level by focusing on the customer’s goals rather than on their product or service. We tell prospects, “If you do business with us, you will become a better version of yourself.” Prospects become customers because they emotionally buy into what this product or service is going to do for them. Even in B2B, customers buy emotionally and back that up with facts and data. Don’t lose sight of this. Oh wait… that’s the problem with your Onboarding… you **DID** lose sight of this. Your [Onboarding](https://sixteenventures.com/customer-onboarding-basics), for lack of a better word, sucks (takes too long, fails to set customers to get value from their relationship with you over the long-term, etc. ) because you failed to maintain the emotional connection between the customer and their goal. Prospects buy emotionally – and Sales builds and uses that emotional connection to move the prospect through the sales process to become a customer – and as soon as they become a customer, all of this emotional stuff goes away and you move directly into functional or technical onboarding, ignoring everything that got the customer to this point! If you want your customers to actually go through your onboarding process in a way that sets them up for future success (and [expansion](https://sixteenventures.com/expansion-grow-fast)!), your focus cannot simply be on getting them to use your product or consume your service. Instead, your focus should be on setting them up to – and guiding them along the way as they – achieve their goals, so that the emotional connection remains intact. Create an emotional connection between them and their goal with your product or service as the catalyst and you’ll get them to do what they need to do to get value from their relationship with you. Of course, the onboarding process necessarily requires new customers to take certain functional or technical actions, obviously, but these must be positioned in a way that aligns emotionally with why they bought if you want a higher percentage of customers to do the things they need to do in a timely manner to get value from this new business relationship. If you simply take over from the salesperson and jump right in to dry, unemotional functional or technical onboarding, you get customers [ghosting you](https://sixteenventures.com/why-customers-ghost), losing interest, making excuses, etc. You know exactly what I’m talking about. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Bad Sales Handoffs Cause Customers to Ghost During Onboarding *September 4, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/ghosting-during-onboarding/ Customers ghosting you during onboarding comes up from time to time… you’ve probably experienced it yourself. Someone said that when this happens they kick it back to Sales since they have the relationship with the customer. This is unfortunately a common solution… but it also underscores one of the big problems in so many customer Onboarding scenarios: Sales **STILL** holds the keys to the relationship with the customer! Let’s get into this, shall we? 100% of the time, customers [Ghosting](https://sixteenventures.com/why-customers-ghost) you during [Onboarding](https://sixteenventures.com/customer-onboarding-basics) is the result of a poorly designed (or, let’s be honest… a not-designed-at-all) Sales Handoff process, one that doesn’t include in a systematic way: - Actual discovery turnover - Properly managing expectations with the customer - Orchestration to overcome change management issues on their end - Management, Direction, and Incentives - Real introductions between the customer and whomever takes over after the sale (Customer Success, Account Management, etc.) What about situations where Sales must stay in the relationship for [expansion or upsells](https://sixteenventures.com/expansion-grow-fast)? Well, they – like many others across the customer’s lifetime – will cycle in and out. That does **NOT** change the need to properly setup the customer and those who’ll they’ll work with next to be successful. In fact, because the relationship with [Sales](https://sixteenventures.com/sales-customer-success) “continues,” it makes a properly orchestrated handoff even more critical. If you’ve failed in the Sales Handoff process, gimmicks and tricks to try to “un-ghost” a brand new customer with whom you’ve never really had a relationship aren’t going to work. Real talk. Your only option may be to “send it back to Sales” for them to track the customer down… but then what? Are they going to do a proper handoff this time? Do they even have a reason to do this (the sale already closed and commission paid)? In a high-touch sales process, the sales handoff makes or breaks Onboarding. And if you have a self-service buying process, the transition will obviously look very different from that of a high-touch sales process, but it’s **JUST** as critical to build a bridge from marketing promises to the realistic, in-app experience. BTW, none of what I’ve said is specific to any type of business / revenue / operating / engagement model. This applies across the board, just as it will to your unique situation, so you can properly Onboard customers and set everyone up to thrive. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How to Know if Customers are Actually Ghosting you *September 4, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-actually-ghosting/ When there is a legitimate reason for a customer to interact with you – based on helping them to get value from their relationship with you – but they are not… we say, in the parlance of our times, that [they’re ghosting you.](https://sixteenventures.com/why-customers-ghost) But… sometimes what you think is “ghosting” … well, it just isn’t. Let’s look at this in some detail, shall we? Perhaps the customer… - is on vacation - is in their busy time of year (or quarter or month) - has entered their off-season - had organization changes you didn’t know about - Or, they are engaged with your product and feel like that’s enough. This means that their [Appropriate Experience (AX)](https://sixteenventures.com/appropriate-experience-required) doesn’t include the type, quantity, and/or frequency of communication you’re shoveling on them. In other words, the customer may not be responding to you, but they aren’t actively ghosting you. But how can you know if they’re not really ghosting you. Well, you could: - Ask them to let you know about upcoming PTO for stakeholders - Pay attention to Out of Office messages - Get to know the industry of your customers - Make sure you know about org changes (ask them to tell you this, too)Actually figure out their AX to operationalize around There are about a million other ways, too, that all pretty much come down to (shocker) [communication](https://sixteenventures.com/communication-model) and knowing your customers better than they know themselves. But, if there truly is a logical reason for the customer to communicate with you, and they aren’t, then they really are ghosting you and you need to do something to restart communication with them. And if there really isn’t a logical reason for the customer to communicate with you, it may be less about gimmicks to jar them into action and more about acceptance of that lack of communication as simply the reality of their AX. You just feel like they should talk more, but they’re not the talkative type. Of course, you could get creative and come up with “reasons” for the customer to communicate or further engage with you, but that may require a reengineering (or engineering in the first place!) of the entire customer experience around this new engagement model. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Why Customers Ghost you *September 4, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/why-customers-ghost/ When there is a legitimate reason for a customer to interact with you – based on helping them to get value from their relationship with you – but they are not… we say, in the parlance of our times, that they’re ghosting you. You could say they are zombies, have gone dark, or anything else. I like ghosting. The term, at least. I don’t like it when customers ghost. Which is why un-ghosting customers is definitely my favorite tactical Customer Engagement topic because it generally requires some detective work and a lot of creativity. It can be legitimately fun… and the results of seeing customers come back from the dark when you thought it was a lost cause is so awesome. But before you can un-ghost your customers you have to know **WHY** your customers are ghosting you in the first place, so let’s dig in. The reasons customers will ghost you are many and varied, and they include the customer being: - Disappointed – you dropped the ball - Ashamed – they dropped the ball - Overwhelmed – you gave them way too many balls - Underwhelmed – it wasn’t the ball they thought they bought - Busy – they have too many other balls In some cases you’ll know the status of the customer as it pertains to these (or other) ghost reasons and can leverage that in your un-ghosting… or you’ll just have to make an educated guess and cohort customers accordingly. For instance, we can be pretty sure that customers that signed-up before our latest org changes got a bad [onboarding](https://sixteenventures.com/customer-onboarding-basics) experience, so it’s probably safe to assume that’s the reason for any ghosts in that cohort. To successfully un-ghost, you use that knowledge, coupled with an appropriate intervention modality and message and boom…. ghosts, busted. It’s totally possible to **NOT** leverage knowledge of their status to un-ghost them… but having that context and crafting a message that resonates is much, much more likely to have the result you’re looking for. This is especially true if the reason they’re ghosting you is that you [over- or mis-communicated](https://sixteenventures.com/communication-model) with them! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Basics of Customer Onboarding *July 8, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-onboarding-basics/ Onboarding is perhaps the most critical phase in the customer journey – if nothing else, it sets the tone for the relationship – and is too important to just slap together and hope it works. Please ensure you’re giving the Onboarding process – and your new customers with whom you currently have a very fragile relationship – the attention they deserve. So let’s start here. If you can’t answer these questions with confidence, that’s a problem: - What does “onboarded” mean in the context of your customers? - Is it the same for each customer segment? - At what point is your customer onboard? Let me help you answer those questions… I’ve covered the [process of Customer Onboarding](https://sixteenventures.com/customer-onboarding) before in great detail, but let’s get back to basics here. To design an effective onboarding process you must know what “onboarded” means or at what point a customer would be considered “onboard.” “Onboarding Complete” is the first [Success Milestone](https://sixteenventures.com/success-milestones) in the customer lifecycle, the time it takes to get there is TTFV (Time to First Value), and Onboarded is the customer’s new status as they move into the [next phase of the lifecycle](https://sixteenventures.com/customer-journey-maps). Your customers are considered “onboard” once they get actual value from OR (in more complex scenarios) see the real value potential in – outside of the promises made by marketing and sales – their relationship with you. What those things actually look like will be 100% dependent on your unique relationship with your customers, but just from that simple definition, it should be clear that “getting value” or “seeing the real value potential” won’t be the same for each [logical customer segment](https://sixteenventures.com/logical-customer-segmentation). What “onboarded” is, the steps required to get there, everything involved in moving through those steps, etc. will most likely be at least a little different across segments, as well. Oh, and  TTFV is a really interesting [KPI to track (as part of Success Vector)](https://sixteenventures.com/success-vector), but – like so much of this stuff – is often misunderstood and misapplied. TTFV is a goal you can use to measure the effectiveness and efficiency of your Onboarding process, help determine appropriate interventions if that goal is or isn’t being met, and will also likely be different for different segments. Oh, and TTFV can even be used as a metric for Sales, but that’s for another post on another day. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Success Potential: Real Customer Success Starts Here *February 7, 2019 · by Lincoln Murphy* Source: https://sixteenventures.com/success-potential-start/ Customer Success starts with acquiring customers that have Success Potential. Customers that have Success Potential are said to be good fit customers. This is the opposite of bad-fit customers that cannot get value from a relationship with us now or in the near future. If you knowingly allow bad-fit customers to be acquired, nothing else you do in Customer Success will have the result you’re hoping for as those customers – no matter what you do – will never achieve their Desired Outcome. [You can’t solve upstream problems downstream.](https://sixteenventures.com/upstream-problems) To help you better understand and implement the concept of Success Potential in your business, here are some resources I’ve published on the subject. ## Overview of Success Potential This quick Success Potential Overview video is just under 6-mins, but could completely change your business. ## Deep-dive on Success Potential This article on Success Potential has evolved over the last few years and is the most comprehensive resource on this subject anywhere. [](https://sixteenventures.com/success-potential) ## How to get Sales to Stop Closing Bad-Fit Customers How can you expect Sales to not close Bad-fit Customers in a repeatable, sustainable way if you’ve never communicated to them what a Bad-fit Customer looks like? This video tackles this very common, yet avoidable, problem. ## Salespeople: Work Less and Make More Money by Focusing on Good-fit Prospects I made a video for salespeople and leaders that says **WHY** working with Bad-fit Customers is making them work harder for less money. Watch it and tag your sales team so they see it: I hope these resources help you! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Account Expansion: How to Upsell Unsuccessful Customers *November 15, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/expansion-unsuccessful/ Getting your customers to buy more from you is awesome. Remember, you’re in business here and getting customers you’ve already spent money to acquire and serve to then expand their relationship with you – giving you more revenue – just seems like a super-efficient way to grow. And it is. But if you think for one minute you’re going to build a sustainable growth engine off the backs of unsuccessful customers, you couldn’t be more wrong. Stop trying to upsell unsuccessful customers. Unsuccessful customers don’t need – or want – to buy more of your stuff. Obviously, right? Maybe… let’s explore this together. Trying to upsell unsuccessful customers can have a lot of results, but none will involve you actually making the sale (without excessive concessions, undue pressure, and other things that don’t actually help the situation long-term). Rather, by trying to sell more stuff to an [unsuccessful customer](https://sixteenventures.com/success-vector), you’ll see results that range from simply pissing off the customer since you clearly don’t care about them, to causing them to ignore you in the future because you just don’t get it, or even [causing them to churn](https://sixteenventures.com/eliminate-churn) or not renew because you’re so out of touch with reality. No matter how you slice it, it’s a pretty big negative impact that’s 100% avoidable. All that negativity and you didn’t even get the upsell. Nice work! So take the [customers that are not successful](https://sixteenventures.com/customer-success-goals) out of the contact list for Expansion (until they’re successful again); you weren’t gonna get the sale anyway, and now the damage will be avoided. Now, if a customer is unsuccessful and you know it, don’t try to upsell them. Cool. Got it. But that doesn’t mean you should simply ignore them! Now you need to intervene to get them back on the path toward success. Remember, expansion is simply part of the customer’s journey toward success. The longer they stay, the more they evolve and grow, the more their relationship with you will grow and expand, too. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Growth: Why Lack Of Expansion Is A Really Bad Sign *November 9, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/no-expansion-bad-sign/ Customers buying more from you is awesome. I mean, you’re in business here and getting customers you’ve already acquired to expand their relationship with you just seems like a super-efficient way to grow. And it is. So when you have customers that don’t expand their relationship with you, it’s obvious that this is less-than-ideal revenue-wise. But it’s more than that. So much more than that. Let’s dig in, shall we? First, you must understand that expansion is part of the customer’s journey toward success. Think about this… what do you sell customers on initially? It’s most likely “do business with us, and you’ll become a better version of yourself.” We’ve all seen the Mario==>Super Mario meme. So your customers come in assuming, since they bought your product or service, that they’re going to make that transformation. But… most companies drop the ball right there. They don’t follow-through on that promise to make the customer a better version of themselves. So the company ends up with [high churn](https://sixteenventures.com/eliminate-churn) and within the customers that stay, very little to zero growth. Often there’s contraction! But if you actually follow-through on the promise made during the initial sales process, at some point down the road, your customer changes. They evolve. They grow. The customer’s [Desired Outcome](https://sixteenventures.com/desired-outcome) changes. This is by design (or should be!). That means you need to evolve and grow your relationship with them to meet this new Desired Outcome. In order to meet their new goals, they will likely need to consume more of your offering: add-ons, additional capacity, services, other products, bring in users from other parts of their company, etc. This isn’t really an “upsell” in the traditional sense as much as it is simply giving them what they need to continue their journey toward success. If customers aren’t buying more, it is a sign they aren’t truly successful. This means 100% retention at the same level isn’t actually something to celebrate. Sorry. Successful customers expand. Period. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Account Expansion: If You Want To Grow Fast, Do This… *November 8, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/expansion-grow-fast/ If you want to grow fast, don’t do what most companies do! When most companies want to eke out some quick incremental growth, they’ll often have their sales people turn to their existing customer base to make some sales. After all, you have a captive audience that you can sell to with little to no real effort, right? Yeah… and you’ll get little to no real results, too. Look, your existing customer base **IS** incredibly valuable… assuming you leverage that asset the right way. Most companies handle Account Expansion poorly and therefore experience very poor results. If you don’t want to be like most companies and to actually grow fast, leaving incremental growth for the other guys, and doing so in a customer-centric (and therefore sustainable!) way, continue reading. This post could change your business. Seriously. Okay, so you want to grow fast? Do this… Have one team dedicated to bringing in net new[ Good-fit customers](https://sixteenventures.com/success-potential) and a different, separate team dedicated to growing the relationship with those successful customers. Now you have a two-pronged growth engine! This customer growth team could be your CSMs (Customer Success Managers), CSMs + AMs (Account Managers) for more complex situations, or for really complex situations it could be CSMs + ADRs (Account Dev Reps) + AMs. If you don’t have sales or success teams and everything is self-service, cool… just think of new customer acquisition as something different from customer growth and operationalize, design, and develop each in their own appropriate way. If you have your “new business” salespeople also handle upsells in addition to bringing in new logos you can watch your business grow… slower than you’d like. If you only have one team doing both new business and expansion sales, at best it divides their focus, resulting in slower growth. But if that **ONLY** cut the time dedicated to both of those functions in half, while it would slow growth considerably (kinda the opposite of what we’re trying to do here), no further damage would be done and it wouldn’t be so bad. That’s just not reality, though. You see, one of the main reasons having “new business” salespeople handle expansion is bad is that it breeds laziness and teaches customers to ignore you. Instead of having to go out and prospect (that’s hard, you know), the salesperson can just turn to existing customers to hit their numbers, which is much easier. But the real problem, of course, is that your AEs treat them as if they’re prospects, not existing customers we already have an ongoing and oftentimes complex relationship with. I’m sure some amazing, rockstar AEs that do both new logo and expansion sales can code switch from cold prospects to existing customers and do no harm, but the reality is most people can’t. Or won’t. So you’ll end up with an existing customer being hit with overly-aggressive sales tactics, for offers that don’t resonate, all while not considering whether the customer is successful or not. And in far too many cases, the original AE isn’t the one that totally “owns” the customer, so other teams will probably be trying to sell them stuff, too. Now they’re over-communicated with in a negative way and just start to ignore all comms from you – not just sales and marketing, but those intended to help them move toward their goal – while cultivating hatred for your company in the process. Is this all the fault of the Salesperson? No. I mean, yes, they should know better as professionals (or even just grown adult humans), but most of the time it’s a leadership issue. Someone put a process in place that almost ensured your valuable customers would be treated in a very negative way in an effort to get more money from them. So yeah, leadership is to blame. Pow! If you want to grow **FAST**, focus one team on going after good-fit, net new customers, and have another team dedicated to growing the relationship with those successful customers. Pow! Pow! I always say, “If you want to stay a small company, have the original AE also handle Upsells” and it’s almost always met with frustration and push back. From sales. Why? For starters, it’s “easier” for the AE to tap into existing customers to hit their numbers like I said above. But it’s more than that. The way AEs are measured, managed, and compensated would be negatively impacted (and might actually be short-term; take this into consideration because it’s real) by the changes I’m talking about here. That doesn’t make what I’m saying less valid, it just means the knee-jerk reaction is to push back on it. Some leaders frankly don’t want to deal with that pushback even though they know it’s not what’s best for the business as a whole. Those aren’t actually leaders, by the way. So in order to make these changes – which often means changing org structures and process that are years- or decades-old – this takes leadership buy-in and a dedication to making it work. Sometimes you have to get messier to get out of a messy situation. But the exponential growth possible from doing Expansion the right way vs. the incremental growth that comes with the status quo should be enough. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Growth: Upselling Hurts Trust (When You Do It Wrong) *November 8, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/upselling-trust/ ***Updated July 2026.** In 2018 I argued that expansion done wrong damages trust. The 2026 sharpening of that argument: [bad timing, not the ask, is what hurts trust](https://ltvmax.com/posts/upselling-doesnt-hurt-trust), and [timing is a price](https://ltvmax.com/posts/expansion-value-per-item). Original text below.*When it comes to Customer Growth or Account Expansion (upselling & cross-selling), I assumed people knew that… …you don’t have to hurt the relationship with your customer to hit your numbers. …it doesn’t have to be a difficult slog that you struggle through to barely hit your numbers. …giving CSMs or other non-sales people a sales quota is fraught with danger (on so many levels). …expansion quotas – and, frankly, most expansion strategies – at best result in incremental growth, doing much damage in the process (which often offsets whatever “growth” they bring) I assumed… but I was wrong. I think it’s time to dive into why upselling hurts trust (when you do it wrong). First, remember that there’s a huge [difference between New Business Sales and Expansion](https://sixteenventures.com/customer-growth-expansion). If you don’t know, start there. Now, forcing products or services on customers when they don’t need, aren’t ready for, can’t be successful with, or otherwise don’t want them is a great way to hurt trust with your customers. This usually happens because someone came up with an Account Expansion goal the same way they come up with New Business (logo) sales goals – pull it out of thin air (or somewhere else) – and then trying to hit that number without giving any thought as to **HOW** you’ll hit it or if it’s even possible given the characteristics and [Success Vector](https://sixteenventures.com/success-vector) of your customers. So then quotas are created for whoever is responsible for expansion: “we need $500k in new Annual Recurring Revenue (ARR) from our existing customers in the next 6 months. There’s 5 of you, so that’s $100k/ARR each. Go.” FML! Now what? Blast. Spam. Pitch. Divert conversations to the (usually generic) offer. Spray and pray, baby. This method has many side effects, from teaching your customers to ignore your messages and stop showing up for meetings with you because everything is always a commercial pitch, to causing them to [full-on churn](https://sixteenventures.com/eliminate-churn) because they hate you now. Oh… and when they ignore your sales pitches, they also end-up ignoring your important messages or skipping meetings that would actually help them be succeed… leading to a failure to achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) and then… churn. There’s got to be a better way, right? There is. The way you avoid hurting trust with upsells is to remember this: as our customers evolve and grow, our relationship with them should evolve and grow, too. Expansion is simply a **PART** of the customer’s journey toward their ever-evolving Desired Outcome. Understand the customer’s evolution and growth and figure out a way to put the right product or service in front of them at the right time. Once you have that figured out, start planting the seeds for these Expansion opportunities with the customer early on so that the conversations that must take place to facilitate the expansion aren’t just expected… but anticipated! Now it’s not a sales conversation but simply a discussion about the next logical step in their journey to success. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Growth: The Difference between Sales and Expansion *August 8, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-growth-expansion/ If you missed it, I’m done talking about churn. If you have a churn problem, [read this post and follow my directions](https://sixteenventures.com/eliminate-churn). Churn won’t be an issue for you anymore. Now we can move onto **GROWTH**! And the first order of business is understanding the difference between Sales and Expansion and why knowing the difference is so important. I’ve said that [Sales is part of Customer Success before](https://sixteenventures.com/sales-customer-success), and by that I mean Sales – like every other part of the company – should be governed by Customer Success as a philosophy. But, when it comes to operationalizing account growth, where do you draw the line between sales and expansion? Good question, let’s dig in. In my experience, if you want to remain a small company, have your New Business Sales team also handle Expansion (Upsells, Cross-sells, etc.) sales. However, if you want to grow fast, sustainably, and predictably, you need to have people dedicated to bringing in new [Good-fit customers](https://sixteenventures.com/success-potential) and other, separate people dedicated to taking your successful, evolving customers and growing their relationship with your company. And if you don’t have people handling sales or expansion but everything is done self-serve, great…. same rules apply; you must approach these two business processes differently. There are many reasons for this, but the simplest is focus. Be deliberate in your growth. But there’s more to it. Those people dedicated to Expansion ([I’ve talked about this before](https://sixteenventures.com/customer-success-account-management)) must have a well-designed process created specifically for growing existing relationships. Companies that fail to realize this tend to stay small or when they grow, that growth is less than what it could be, slower than what it should be, and **FAR** more painful than it has to be. Think about it… New Business sales is all about the unknown and is driven by made-up stretch goals. Salespeople need to go out there and literally pull revenue out of thin air to reach those made-up goals. The things that are **REQUIRED** for New Business Sales to be successful – quotas, a pipeline with enough leads to hit your quota based on your close rate, aggressiveness, relentlessness, hustle, etc. – are the things that will absolutely **KILL** a real Expansion strategy. I’m not saying anything negative about New Business sales here, it’s just that those things aren’t required for expansion and are potentially very harmful to your existing customer relationships. In fact, putting a quota on Expansion often **LIMITS** growth potential while also **HURTING** the relationship with customers. Rather than analyzing the customer base and uncovering real opportunities for expansion therein ([I’ve talked about this before](https://sixteenventures.com/success-vector), but will elaborate in a future post), this quota-driven “New Business” approach to expansion almost always leads to mass email blasts and indiscriminate phone calls to all customers, or repurposing existing meetings already on the calendar to blindly pitch products they don’t need, when they don’t need them, and for some, when they’re not even successful as our customer! And because expansion in this way is such a painful process, once the quota is hit – if that even happens – it’s over. We’re done here. The reality is, we know so much about where our existing customers are on their journey with us, whether they’re successful or not, what their goals are, **AND** we have a relationship already, that expansion should be easy. If you’ll take advantage of this amazing position you have in your customer’s world and create an Expansion strategy that looks more like “Ascension” from their POV, it kind of is easy. As our customers evolve and grow, their relationship with us should evolve and grow, too! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Introducing the BEAST Message Framework for Customer Engagement *June 20, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/beast-message-framework/ Let’s talk about Customer Engagement, specifically one part of the Communication Model, which is my BEAST Message Framework for creating messages that actually engage customers. It’s really interesting that we communicate all day long – with our friends, with our peers, with our customers – but when was the last time you actually thought about what goes into communication? Most of the time, we simply never stop to consider what needs to go into communication… we just do it. If we do spend any time at all thinking about communication, we only focus on the message itself. But it’s truly important – imperative, actually – that we spend time thinking about all of the components of the Communication Model. Whenever we try to send an email, have a call with a customer, set up a meeting with a customer, etc., we need to be thinking about communication and what goes into it. Let’s dig in, shall we? ## Quick Communication Model Overview If you want an in-depth discussion of the Communication Model – and you should if you want to better engage your customers – [you should check out my Communication Model post](https://sixteenventures.com/communication-model). Briefly, the communication model is made up of six different pieces: Goal, Receiver, Method, Sender, Action, and Message. There’s the goal. Why are you communicating? There’s the receiver, who’s actually getting the communication – the message – from you. This is the person you’re setting up a meeting with or actually having a meeting with, or that individual you’re going to have a phone call with. There’s the method, which refers to how you’re communicating. Is it in a meeting? Is it through an email? Is it a phone call or an in-app message? The sender is the source of the message – who’s actually sending the message, setting up or hosting the meeting, etc. The action is what you want them to do because of the communication. So, you have a goal, but then you also have a specific action you actually want them to take. And then there is the message itself, a.k.a. the contents of the email, the content of the pop-up in the app, the actual content of the meeting or even the meeting request, what you’re going to talk about on the phone call, etc. Of the six different elements of the Communication Model, the one that we tend to think about the most is the message. We really honestly don’t think about those other things that much, but even then, when we think about the message, we don’t really think about it – at least not in the right way. That’s what I’m hopefully going to get you to do today – think about the message in the right way. ## Introducing the BEAST Message Framework I will talk about what I call the BEAST Message Framework, and it’s made up of five different things that start with letters that make up the word BEAST – like BEAST mode. These are brief, efficient, actionable, simple, and thoughtful. So, B-E-A-S-T. Okay, so let’s go into each one. ## BEAST Message Framework: Brief Be brief. Something I have a hard time with is being brief. But you do want to make sure that your message is short and to the point. That’s all relative, of course. The message doesn’t have to be one line, but you want to make sure that you’re being as brief as possible, which means we go back to what the communication framework is all about. What’s your goal, and what’s the action that you want them to take? If you know those two things, it’s very simple to create a message that is brief. However, if you don’t have a goal, and you don’t know what the action is that you want them to take, it’s very easy to go on rambling and/or just try to get them to do too many things. Don’t have too many calls to action because then, instead of having one very simple thing that you’re trying to get them to do, there’s a whole bunch of different things, and they’re not going to do any of it. How many times have you received an email or had a meeting with a whole bunch of takeaways but then nothing gets done? So don’t have too many calls to action. Keep it short and to the point. I always say, “Look, instead of trying to boil the ocean – which is what we’re doing when we’re trying to get people to do a whole bunch of stuff at one time – just make little cups of tea along the way. Boil little cups of water.” I’m not sure if that’s the best analogy, but I think it fits. Don’t try to boil the ocean; just make little cups of tea along the way. Be brief. ## BEAST Message Framework: Efficient Be efficient. Just because you can write a lot or just because you can talk for a whole hour doesn’t necessarily mean it’s a good thing, right? Just because you can doesn’t mean you should. Be very careful in the way that you choose what you’re going to talk about. Choose your words carefully. Edit. Always go back and say is this all necessary? In fact, one thing you could do right now is go audit your meetings – those you have scheduled those that you have to do that are part of your checklist – and your QBRs or Quarterly Business Reviews. Look at the emails you’re sending and the calls you’re going to make. How many of these don’t have a goal or a one clear call to action (CTA) associated with them? Maybe they don’t even need to happen, right? So efficiency is also just asking does this need to even happen? And if it does need to happen – if this message needs to be sent or if this meeting needs to happen – how can we make it as efficient as possible? So editing is a really big deal. ## BEAST Message Framework: Actionable Be actionable. Have your call to action in mind, and build everything around that. If you can’t do that because you don’t have a CTA, then why are you attempting to engage with the customer?Having customers read random, nonsensical emails from you is not engagement. Customer Engagement is all about getting the customer to take action. Customer Engagement is about moving them in the right direction. That’s it. So if you don’t have an action that’s associated with what you’re trying to do here, why are you even messaging them? Why are you even having a meeting? Why are you even having a call? Why are you popping something up in front of them in their app? It doesn’t make any sense. So if you don’t have a CTA for receiver, and you don’t know what the goal of this communication is, why are you even doing it? If you do know, then you want to build everything around getting them to take that action. Be actionable. ## BEAST Message Framework: Simple Be simple. Tell them exactly what to do. Don’t make them think. This is not about customers being stupid, as some of you might think. It’s not about that. It’s the fact that customers are busy. They’re distracted. You may not be the center of their universe like you think you are. It’s about just getting to the point. Be simple. Tell them exactly what you want them to do – what they need to do. Maybe justify it a little bit so they understand the reason why it’s happening. Get to the point, and get them to take action. This idea of being simple is very easy to follow if you do the first thing – be brief – which goes back to having a goal and understanding what the action is that you want them to take. ## BEAST Message Framework: Thoughtful Last, but certainly not least, be thoughtful. This applies to Customer Engagement. This applies to communication, not only with your customers, but with your peers, with your family, with your friends. Where do you fit into their world? Be honest about that. You may think you’re the center of their universe, but are you? Probably not – at least not initially, certainly, and maybe never. And that’s okay. Also, when you’re asking them to do something, you might be asking them to do something inside of the product, but is it really only that? Are there things outside the product, – outside of the scope of your engagement – that they need to do? So think about that. Be thoughtful. Be thoughtful with your words. Be thoughtful with your requests. Be thoughtful with their time. Be thoughtful in general. That’s it. That’s the BEAST Message Framework. I hope it helps you better engage with your customers. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Introducing the Customer Engagement Communication Model *June 20, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/communication-model/ Let’s talk about Customer Engagement, specifically the Communication Model. We communicate every day, all day. We communicate with friends, family, co-workers, industry peers, customers, vendors, celebrities, trolls, politicians, restaurants, airlines, etc., every day. We communicate more today than we ever had in the history of the world, and tomorrow, we’ll do it even more. Yet despite all this communication going on, we really know very little about how to communicate effectively. We think, since we do it all the time, we must be good at it, but as with most things, frequency should not be confused with proficiency. So let’s dive into this whole Communication Model thing and figure out how to more effectively engage our customers by simply communicating better. Join me, shall you? ## The History of the Communication Model Going back a long time – I think in the 1950s – there was the Shannon-Weaver model, created through the coming together of two different people. Over time, the model evolved. David Berlo expanded on the Shannon-Weaver concept in the 1960s. But since then, the Communication Model hasn’t really changed a whole lot. But communication – type, frequency, etc. – has changed in so many ways. I didn’t invent the Communication Model. Obviously, people before me had modeled this out. But what I’ve done is taken that and simplified it, made it easier to understand, and figured out a way to apply it to Customer Engagement. So the Customer Engagement Communication Model, if you will, has six different pieces. ## Communication Model: Goal First of all is the goal. What is the goal of the communication that you’re doing, the message that you’re sending, and the meeting that you’re setting up? If you don’t have a goal, then why are you initiating this communication? Every customer interaction should have an associated goal. I don’t care if it’s a pop-up inside the app. I don’t care if it’s an email that you send. I don’t care if it’s a meeting that you’re having in person, on site, with the client. It should have a goal. I will say that the more valuable this interaction would be from them investing their time in it, probably the more important it is to have a goal. But also, we want to have a goal for everything we do because we don’t want to teach our customers to ignore us. When you communicate without having a goal, you’re basically teaching your customers to just delete the message, send the email to spam, and just to ignore you. And that’s the opposite of what you’re going for here. So every customer interaction should have an associated goal. The question to ask yourself is, “What do I want out of this engagement,” or, “What do I want out of this interaction?” And if you can’t add value with this conversation – if you can’t add value with this piece of communication that you’re doing – then don’t do it. Right? And so you might, just as a way to start out, audit all of your communication with your customers, and take out the pieces that don’t have a goal. If you can’t state the goal, if you can’t figure out why we’re doing this, then don’t do it. So, how many of you have a QBR – a [Quarterly Business Review](https://sixteenventures.com/customer-success-qbr) – with a customer, and all it is, is a check-in, and you don’t really know why you’re even doing it? Maybe you shouldn’t be doing it. ## Communication Model: Receiver The receiver – the communication receiver – is the person – most likely a human person – who’s going to receive the communication from you. I mean, I suppose we could be talking app to app, but I’m not going to worry about that right now. We’re talking about humans. So this is the person who’s going to be receiving the communication from you. You have to take into consideration that there are probably different personas within your customer’s company, right? So who is actually the receiver? You have to make sure that the right message goes to the right receiver. That’s really important. And when you’re thinking about who’s going to be receiving this message or this piece of communication, or who you’re setting up the meeting with, you also have to think about who the message is coming from, because a receiver who is an executive may not – and whether or not this is a good thing isn’t the point – be moved to action by a message coming from somebody at a lower level at your company. If you want to get an executive’s attention, you might need to have another executive be the sender or the source of the message you are sending. So you have to think about how you match the sender and the receiver. The main thing is that you really have to take into consideration who is receiving the message: is it the end-user, a brand champion, a power user, an administrator, an account owner, or somebody in accounting? I don’t know. That’s what you have to think about. So for every message that goes out, you have to really think about who’s going to be receiving it. Who are you going to be setting up the meeting with? ## Communication Model: Method Then there’s the method – the communication method. This is the modality. This is the channel – whatever you want to call it – this is a meeting, this is an email, this is Slack, this is in-app messaging, this is whatever you use to communicate. It’s the method. If you think about what Customer Success is – and you know that Customer Success is when customers achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) through their interactions with your company – the Desired Outcome has two pieces: one is the Required Outcome, and the other is Appropriate Experience. Appropriate Experience is what is going to dictate the method of communication that you use. It’s going to dictate the modality, the channel, or the method. It’s also going to dictate the ratios of those different modalities that make up that Appropriate Experience. So sometimes, for one particular customer segment, it may be more high touch. It may be more human touch – phone calls, in-person meetings, that kind of thing – augmented, obviously, with technology. But for some customer segments, it may all be digital, right? It may be very little high-touch, very little synchronous communication. And when you think about that digital aspect of this, you usually go into some sort of automation, of being able to leverage systems to scale humans. And that’s awesome, but what you need to be thinking about is the fact that automation isn’t something that’s really anything special; it’s just what you would do by hand, manually, if you had an unlimited amount of time and resources. But because you don’t, you have to figure out ways to scale that. So the reason I say it like that is when you’re talking about automating messaging, it can be hard sometimes to sit down and say, “Okay, how do I write a blast email.” Well, the reality is you don’t. You’re just writing an email. You’re just creating some content that’s going to pop up in the app as if you were talking specifically to a very specific person about a very specific thing, right? So automation is just what you would do manually if you could, right? So, you need to take that mentality and figure out ways to scale that. And that’s where automation comes in. The other thing about method is that if you are having human interaction – if you are spending time in meetings or spending time on the phone with your customers, if that is the appropriate method, the appropriate modality, or the appropriate channel – then you want to make sure you’re not scripting that, and you only have an outline or a checklist of things that you need to cover, because if you script out what you’re going to say to a customer, that script goes out the window as soon as the customer gets on the phone with you or comes into a meeting with you, because customers have their own agenda. You need to have a checklist of the things that you need to get through, and you need to make sure that you always keep your customers on the right track during that meeting or during that phone call, but scripts don’t work. Flexibility is key. Think of it more as improv. So now, let’s talk about some things around the method. The method is going to be determined by what your customers want or need as part of their [Appropriate Experience](https://sixteenventures.com/appropriate-experience-required). And this is obviously a very important thing. What people tend to do – and the reason I say it this way is that it’s based on the customer’s Appropriate Experience – is that very often, people default to what’s comfortable for them. So you, for example, say you want to send an email. Your customer wants you to pick up the phone and call them. Which is the appropriate method? The appropriate method is whatever your customer wants, and if you don’t want to do that, too bad. You shouldn’t do business with that customer because you can’t give them the Appropriate Experience if you can’t pick up the phone and call them. And if you can’t do that at scale in an economically feasible way, then that means that this customer would be a not profitable customer, and you shouldn’t go with a different modality just because it would be economically feasible. You just shouldn’t be doing business with that customer. But that’s outside the scope of what we’re talking about here. However, that’s where Appropriate Experience comes in. ## Communication Model: Sender Now, let’s talk about the communication sender. I also refer to that as the source. But the sender is important to understand because when you send messages to our customers, when you request meetings with them, when you message them in app – when you do all of these things – you are hitting your customer with lots of different messages coming from different people. So maybe it’s the Customer Success Managers; maybe you have multiple CSMs on a particular account. Or maybe it’s the support system, maybe it’s the support team, maybe it’s the system itself, maybe your executives are sending them messages, maybe finance is sending them messages, sales is also coming in, maybe it’s your channel partners. Maybe. You have all these different senders that are hitting your customers – that are hitting the receivers. You have to make sure that the sender matches the receiver and that the receiver matches the sender so that the communication is working… so that it truly resonates. But you also have to take into consideration that you have all of these different senders communicating with you customers and that, at some point, this can get confusing, if not just outright frustrating. So you have to take into consideration all of these things and figure out a way to make it work. You also have to take into consideration – like I said earlier when we were talking about the receiver – that an appropriate sender needs to be the one who’s hitting the receiver. So if you want an executive to show up at a meeting – and again, whether this is fair or not doesn’t matter as this is just the reality – if a CSM emails the CEO or calls the CEO at a customer company, that might not go very far. However, if you want that CEO to show up at a meeting, two things. You might call the meeting, instead of a Quarterly Business Review, an Executive Business Review, so now the executive feels like it’s actually meant for them, and you might have somebody from your executive team reach out to them to invite them, right? So the sender matches the receiver. You have to think about that. It’s pretty critical, but it’s, again, something you don’t put a lot of thought into, but you should, when it comes to customer engagement and really when it comes to communication in general. ## Communication Model: Action Then there’s the action. We all know call to action. We all hear that from marketing, from sales, and a lot more, lately, in Customer Success. But when it comes to customer engagement, we want our customers to take a particular action. And if you don’t have an action in mind, especially if you don’t have a goal in mind – goal was the first thing we talked about – it’s going to be very difficult for you to come up with an action that you want your customer to take. But if you don’t have an action in mind, why are you communicating with your customer? Why are you setting up that meeting, why are you having that call, and why are you sending that email? If it’s not to move them in the right direction, should you be messaging them? Should you be sending that message? Should you be communicating with them? You want to have a call to action, and then you definitely want to be specific in that call to action. Believe it or not, people actually do want to be told what to do. The call to action should also match the source or the sender. In other words, if you are sending a message, if you’re a CSM, should you be asking an executive on the customer side to take a particular action? That might not work, right? You might have to have somebody else on your side – the source or the sender – that matches the receiver, and therefore, you can make the particular action request of them. So some calls to action must come from a different source; it must come from a different sender. And it should be very specific. So one of the things we’ll talk about is what the message should be like. You want to make sure that you have basically one call to action in your message or your meeting. There should be one very specific thing that you’re building towards. Otherwise, you’re just going to confuse people. How many of you have received – or probably actually even sent – an email with 17 different calls to action? How many of those 17 actions get done? What if you could boil it down to just one? And then send more frequently, right? Send more of those messages. Have more of those meetings – shorter meetings, smaller meetings, smaller messages, shorter messages – that all have one particular call to action. So, whatever it is, have a goal for that meeting, and then have an action that’s going to come from that meeting. ## Communication Model: Message Now, I want to at least plant the seed when it comes to the message. The message is the thing that people tend to focus on when it comes to communication, whether you’re setting up a meeting or preparing the agenda. When you’re sending an email, you spend time writing the email. But are you actually spending time thinking about the message, or are you just spending time making the message happen? You know what I mean? Are you actually thinking about it, or are you just doing it? Most of the time, frankly, you’re just doing it. And I’m guilty of this, too. I’m not preaching here. I’m saying these are things that we – including me – need to always keep top of mind. But when it comes to the message, I have this framework that I call BEAST. It’s B-E-A-S-T: Brief, Efficient, Actionable, Simple, and Thoughtful. [I cover the BEAST Message Framework in detail in another post](https://sixteenventures.com/beast-message-framework), but the main thing is, if you don’t have a goal and you don’t know what the action is going to be, how can you actually even craft a message that’s going to help do what you need it to do? And that goes back to understanding why are you even communicating, why are you even creating the message, and why are you setting up a meeting. So when it comes to the message, BEAST – BEAST mode: Brief, Efficient, Actionable, Simple, and Thoughtful. So, that’s it – the Communication Model in a quick nutshell. Think about it. Apply logic to the way that you communicate with your customers – the way that you communicate with everybody essentially – but especially customers if you want to engage them. Successful communicating. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Churn Classification Framework For Customer Success Management (2024 Update) *May 15, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-classification/ Customer Success is when your customers achieve their Desired Outcome through their relationship with your company, leading them to stay longer, buy more, and advocate for you. If you focus on Customer Success, churn will not be an issue. At least in theory. To take that from a simple theory to your Operating Model, you need to put systems in place, be able to monitor their effectiveness, and routinely perform root cause analysis when things go wrong (and also when things go well so you can replicate, right?). So while our goal is to live in a world where churn doesn’t happen, when it does occur, you need to understand it so you can avoid it in the future. To that end, I put together this Churn Classification system (or matrix or quadrant or whatever) to help you do that. ## All Churn is Bad All churn is bad, but some churn is worse than other churn. Customers leaving is bad. Period. Churn is a symptom of an underlying disease, and I’m not sure there’s ever a case for “good symptoms.” So even if you think it’s “good churn” (which doesn’t exist; see above), you still have to acquire one more customer to offset the loss of that customer, and two if you actually want to grow. And customers that leave on anything less than positive terms only cause more problems from there. If a customer is unprofitable or annoying, it might feel good to see them go (GTFO and don’t let the door hit’cha), but there is so much going on there that is the total antithesis of why you’re in business that your shortsighted glee at a “bad” customer leaving can have real, long-term ramifications. It’s at least the antithesis of Customer Success-driven Growth, which is kinda what I’ve dedicated my life to (for some unknown reason), and why I can’t accept your misguided argument that churn is somehow good. All that said, though, if we didn’t see that churn coming or if we failed to unlock the Success Potential in that customer and that’s why they churned, that’s really bad and we absolutely need to make sure that doesn’t happen in the future. We can’t do that if we aren’t clear on what’s going on. Which is why I created my… ## Churn Classification for Customer Success Management While I’ve talked about this stuff before, I’ve never actually shared my full classification system publicly until now. To date, only my clients have seen this. But now, for the first time ever, you get access to my Churn Classification system (or matrix, quadrant, etc.) and you should definitely apply this to your Customer Success Management operation. Green is good (but still bad; see above if you’re not clear why this is), and Red is really, really bad. ## Churn Classification Explained Essentially, customers leave for only two reasons: something happened to them or they didn’t achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome). But for us to really understand what’s going on and to either operationalize from the start or optimize our in-place systems, we need to add another dimension to our view of churn. And that’s where my Churn Classification system comes in. Okay, so first let’s define… ### Avoidable Churn Avoidable means the customer had [Success Potential](https://sixteenventures.com/success-potential) (was a Good Fit) and they’re still in business, out there paying other vendors. You lost them but shouldn’t have. ### Unavoidable Churn Unavoidable means the customer didn’t have Success Potential or they did but they went out of business or otherwise disappeared. A good rule of thumb is if the customer is still in business and paying other vendors, and they were a Good Fit (with Success Potential), that churn was definitely avoidable. That understanding should help eliminate many of the false-positive “unavoidable” declarations that people like to make. ### Expected Churn Expected simply means your signaling is right… you saw it coming. Be clear that “expected” doesn’t mean that you took action to try to stop the churn and get the customer back on track. It only means that you saw it coming. That said, if you’re at a point where you’re seeing the churn coming before it happens, you’re in a much better place than – IMHO – the vast majority of companies that are still shocked (shocked!) by every churn. ### Unexpected Churn Unexpected means just that… you never saw it coming no you didn’t. That’s a problem. Now, to put this into practice, let’s drill into each quadrant, shall we? ## Churn Classifications: Deep Dive ### Expected & Unavoidable If you knew the churn (based on [Success Vector](https://sixteenventures.com/success-vector), health score, or other methods) was going to happen – Expected – and you knew that there was nothing you could do (they were a Bad Fit, were going out of business, or even that they outgrew your solution) – Unavoidable – that’s the best case. But that’s the best case when it comes to churn, which means it still sucks. Look, if the customer left on positive terms (let’s say they outgrew your solution) after paying back acquisition costs and becoming profitable, they still took revenue with them, and that’s not good. If you’re fairly managing your Customer Success Managers (CSM), you shouldn’t count this against them because it was unavoidable. No action on their part would have saved the customer. However, you may count this against them if they saw it coming but didn’t report this to you before it happened. ### Expected & Avoidable If you knew it was going to happen (Expected) but didn’t act in time or in the right way to help the Good Fit customer unlock their Success Potential (Avoidable), apply this classification to that customer. While it’s great that we saw this coming – the instrumentation and monitoring is working well – this is really something that **should** be counted against the CSM because it was avoidable. From an optimization standpoint, I would want to look at how early we were able to mark this churn as “expected” and whether or not that was early enough to intervene and try to get the customer back on track to success. I don’t like trying to save customers that are at the point of churning out (it’s a low-percentage, low-impact activity)… but I’m all about recognizing something negative is happening, intervening, and ensuring we have a plan in place to get them back on the right path. That’s kind of the [definition of Customer Success Management](https://sixteenventures.com/customer-success-management), actually. ### Unexpected & Unavoidable If you didn’t see this churn coming (Unexpected), but it was truly Unavoidable and kind of happened out of the blue (like they went out of business or were acquired all of the sudden), apply this classification. That said, I always like to flag these for a deeper dive to make sure our signaling is actually working. Did we miss something that next time would give us a heads-up? Are there better questions we could ask? Are their external market or industry triggers that we could setup that would help avoid this in the future? Only after that analysis would we figure out whether this was on the CSM or not; if it is, going forward that would count against them, but it’s not fair to punish for something that no one understood (unless it was SO obvious they should have known; but that’s a different issue). ### Unexpected & Avoidable If a Good Fit customer (Avoidable) actively cancels or fails to renew – but they’re still in business – and we didn’t see it coming (Unexpected), that’s the absolute worst-case scenario for Customer Success Management. That’s a fail. It means our signaling is off **AND** we didn’t help unlock the Success Potential of our customer. This is on the CSM for sure, but it’s also on the entire CSM org, ops, management, etc. because this was a systemic failure. So we need to look objectively at every customer that churned, classify them appropriately, and then… ## Take Action to Reduce Churn Ultimately, this churn classification method is all about understanding why churn happens so we can avoid it in the future to the greatest extent possible. Classifying churn and not taking action on that makes no sense. Churn happens for just two reasons (and here’s how to [Eliminate Churn Forever in 5 Simple Steps](https://sixteenventures.com/eliminate-churn)), but why we allow it to happen – or why it happens in ways that seem to be out of our control – can be due to myriad reasons. This exercise helps us uncover those reasons. I’ve detailed how to take action on this in the past in my post on [Customer Success Goals: Cohorts, Metrics, and Prioritization,](https://sixteenventures.com/customer-success-goals) so I won’t repeat it here. I will repeat, however, that if you’re going to have your CSMs go back and classify past churned customers (from the trailing 3 or 6 months) to get a good idea on where things are in your CSM org, you should do it with 100% amnesty for your CSMs. This will ensure that everyone gives their true view of whether they saw it coming and if it was expected or not. Going forward, however, there will be no amnesty! Everyone is accountable from now on. Let’s work to make churn a non-issue, but while it is still an issue, let’s work to understand it so we can do that first thing I mentioned in this extra-long final sentence of this website blog post. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success and Sales: Why the Latter determines the Former *January 3, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/sales-customer-success/ Sales is part of Customer Success. Like it or not. No, I don’t mean the Sales organization should report to the Customer Success Management org. I mean that [Customer Success](https://sixteenventures.com/customer-success-simple) as an Operating Philosophy, as a way of doing business, includes sales. It includes marketing, product, support, etc, too. It’s critical to understand that Customer Success is not just about “post-sale.” Customer Success is when your customers achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) through their interactions with your company. Those interactions start early – from the first marketing touchpoint, at the start of the sales cycle, on the first cold outreach email by your SDR – and they continue throughout the entire lifecycle of the customer. Which means we need to be thinking about Customer Success when creating marketing campaigns, determining [Ideal Customers](https://sixteenventures.com/ideal-customer-profile), optimizing the sales cycle, etc. In fact, let’s talk about Sales. Sales is important. Sales is critical. But… ## Sales to Offset Churn In far too many companies, a huge portion of the short-term sales goals are set simply make up for the loss of revenue from churn. Think about that for a minute. We need to close $10M in new business this quarter… but $3M of that will simply replace what was lost last quarter, so we’ll only be up $7M on all that effort and expense. Yeah, we’re up some. But so much of that hustle. So much of that closer coffee. So much of it is there simply to offset churn. How is that gong-worthy? How? ## Growth is the Goal Look, I just had an AMAZING meeting with the SALES leader of a company… it was AMAZING. When possible, I work to engage the sales organization of a company. It’s not “us” vs. “them.” I’m not a “Customer Success” guy… I’m a Growth guy. I want us all working in the same direction. So I am not anti-sales by any stretch. I’m 100% pro-sales. ## Sell, Sell, Sell (One Caveat) Please sell more. Sell all you can. Beat your quota by a mile (or 1.6km if that’s how you roll). Reach for the stars. Whatever. Just do it by selling to good-fit customers. Sell to customers with [Success Potential](https://sixteenventures.com/success-potential). You can’t solve [upstream problems, down stream](https://sixteenventures.com/upstream-problems). It’s really very simple. ## Don’t Close Bad-fit Customers Now, if eliminating bad-fit customers from your territory, target customers, pipeline, or whatever will not leave you with enough leads to work… …then you need to rethink your business, prospecting, lead gen, ToFu strategy, etc., not try to close bad-fit customers. Real, professional salespeople building their careers and early-retirements in sales (vs.short-term, desperate, gotta-hit-my-bs-numbers-or-get-fired salespeople who float through sales between other jobs), go into each sale with a goal of 100% referencability. (why? think about it) You don’t get that by [closing bad-fit customers](https://sixteenventures.com/churn-bad-fit-customer). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Appropriate Experience is Required for Customer Success *January 2, 2018 · by Lincoln Murphy* Source: https://sixteenventures.com/appropriate-experience-required/ Customer Success is when your customers achieve their Desired Outcome through their interactions with your company. As I’ve said before, Customer Success as a concept is very simple. [Don’t overthink it.](https://sixteenventures.com/customer-success-simple) But I always have to unpack one piece of that definition and that’s Desired Outcome, or what your customers need to achieve (their Required Outcome) and the way they need to achieve it (their Appropriate Experience). Required Outcome + Appropriate Experience = [Desired Outcome](https://sixteenventures.com/desired-outcome) Desired Outcome is also a relatively simple concept. Unlike Customer Success, however, Desired Outcome isn’t something people tend to overthink… … it’s something they just tend to ignore. Well, if they don’t ignore the entire thing, they only focus on one part… the Required Outcome. Appropriate Experience either doesn’t matter to them or is just too hard to figure out (which makes them give up and say “it doesn’t matter”). I can’t help you if you don’t believe Appropriate Experience matters, but if you believe it matters but just can’t wrap your head around the concept, here’s something that might help you figure it out. ## You’ve Had an Inappropriate Experience Have you ever used a product or consumed a service where you got what you needed out of it – you achieved your Required Outcome – but something was… off? The product or service did what it said it would do… but it just didn’t feel right. You’ve been there. We all have. ## Quantifiable Feelings So you looked for a product or service vendor that would not just give you the Required Outcome, but would give you that outcome in a way that feels right. And even though I said “feels right,” it’s not just a feeling… it’s a quantifiable list of requirements around the experience that – when you can’t check all the boxes – makes you “feel” like something was off. So the vendor you started a new relationship with would help you achieve not just your Required Outcome, but give you that outcome in an appropriate way. ## Greener Pastures That new vendor provided you with an Appropriate Experience. And then you felt successful. Don’t overthink this concept, it’s very simple. But definitely think about it. Need incentive? Think about this. ## Get Real How many of your customers – right now – are achieving their Required Outcome in their relationship with you, but aren’t getting their Appropriate Experience and are looking for a vendor that can give them both? Those customers are a churn threat, even though you may see them as “healthy” or “successful” because you’re giving them their Required Outcome. Now you know why your “successful” customers churn, fail to renew, or otherwise stop doing business with you. ## Take Action Okay, now you get it (I hope)… but where do you go from here? Here’s a list of additional resources that will help you better understand the concept of Desired Outcome, your customer’s Appropriate Experience, and how to put that knowledge into action: - [Desired Outcome is a Transformative Concept](https://sixteenventures.com/desired-outcome) - [Those aren’t Problems. Those are Customers!](https://sixteenventures.com/customers-not-problems) - [The Process for Discovering your Customer’s Desired Outcome](https://sixteenventures.com/discover-desired-outcome) - [Logical Customer Segmentation: The Key to Scaling Customer Success](https://sixteenventures.com/logical-customer-segmentation) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # What Are The Best Customer Success KPIs? *December 29, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-kpi/ As you can probably imagine, I’m asked all the time what the best Customer Success KPIs are. What metrics should you use to know if your Customer Success initiative is working. Here’s the deal. I’m not an analyst… I’m a consultant. Companies hire me to help them rapidly acquire good-fit customers, keep those customers longer, get them to buy more over that extended lifetime, and get those customers to advocate for them, too. That’s called [Customer Success-driven Growth](https://sixteenventures.com/customer-success-driven-growth). The reality is, though, that every company is at a different stage as a company, with their Customer Success initiative, etc. so wha the “best” metric for one company at one point may not be the best metric for another company (or even the same company) at a different time. Let’s dig into this, but first I have to address something serious… ## Customer Success is NOT a Metric Recently I saw an article that referred to “Customer Success” as a metric. Umm… Customer Success is NOT a metric. For the person who wrote that,… wow… what a fantastic way to diminish the true value of Customer Success. Not sure what they’re trying to do, but that’s garbage. I really hope this new positioning doesn’t catch on, but it might; a lot of people seem to want to diminish the value of this incredibly important business function. But I digress. I look at [Customer Success](https://sixteenventures.com/customer-success-definition) first as an Operating Philosophy… and when operationalized through [Customer Success Management](https://sixteenventures.com/elements-customer-success-management), this philosophy becomes a powerful Growth Engine. If you want a way to ensure you acquire the best customers, keep them longer, have them buy more over that extended lifetime, and to bring in other customers through advocacy – aka Exponential Growth – you cannot look at Customer Success simply as a metric. Metrics are very important – as I’ll cover below –  but they are just the things you look at to ensure Customer Success – and your other valuable business initiatives – are working. So let’s talk about… ## Reality-based Key Performance Indicators You need to start by determining the Performance upon which you are looking for Key Indicators. When looking for KPIs to focus on, I take the company’s goals – sometimes even short-term goals, like cash flow or churn – and operationalize around those. I covered this in a TON of detail in my post on [Customer Success Goals: Cohorts, Metrics, and Prioritization](https://sixteenventures.com/customer-success-goals). The reality on the ground often precludes you from focusing on “best practices” and rather on what’s most important now. But when pressed for the most important Customer Success KPIs are, here’s what I say. ## Customer Success KPI Best Practices In a perfect world, there must be a financial metric, but to ensure we don’t fall into the Account Management trap, that metric should be sanity checked by a customer-centric metric. That customer-centric metric should be Health Score, [Success Vector](https://sixteenventures.com/success-vector), etc. The financial metric should be Net Revenue Retention or NRR (also called Net Dollar Retention or NDR for those with a Dollar-centric world-view I suppose). NRR is simple (in theory). If you start a month off at $1k in revenue from existing customers, end the month at $1.5k from those customers, you had an NRR of 150%. But it’s “net” of any revenue you lost in that month when customers left or stayed but paid less for the privilege (discounts, down-sells, etc.). And it’s “net” of any revenue you gained through up- or cross-sells. > 100% NRR and you could turn off new customer acquisition and not just continue to exist, but grow. In theory. < 100% NRR and your company is shrinking. In reality. The former is preferable. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # You Can’t Solve Upstream Problems Down Stream *December 28, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/upstream-problems/ When it comes to Customer Success, I’ve seen a lot of things. I’ve seen what works (and what works REALLY works… it’s amazing). Unfortunately, I’ve also seen what doesn’t work. A lot. In 2017 I heard “Customer Success doesn’t work” way more than I ever expected. The main reason I saw for Customer Success “not working” wasn’t org structure, comp plans, operations, wrong CSMs, etc. No, the main problem wasn’t a CSM Org problem at all. It actually starts further upstream. ## You Can’t Solve Upstream Problems Down Stream The biggest contributor to churn is the acquisition of bad-fit customers. The biggest drag on growth I see is trying to make bad-fit customers successful. A huge drag on per unit margin is investing resources in bad-fit customers. Bad-fit customers are those customers that lack Success Potential. But this is… ## Not a Customer Success Issue This is a company issue. This is a growth velocity issue. This is a Customer Lifetime Value issue. This is a CAC efficiency issue. This is [a company valuation issue](https://sixteenventures.com/customer-success-drives-company-valuation). This is a CRITICAL issue. This is all about.. ## Downstream Failure When a company knowingly acquires bad-fit customers – [customers without Success Potential](https://sixteenventures.com/success-potential) – they set up everyone downstream for failure. Yes, Customer Success Management is setup for failure. But let’s get real… nobody cares about that (yet). (un)Luckily, there’s more. Onboarding, training, pro services, support… anyone else that works directly with customers is also setup for failure. But so is product, marketing, and… sales. Bad-fit customers can wrongly influence direction (since what we’re doing “isn’t working”), but there’s something else. But it’s a cycle as… ## Downstream Failure Creates Upstream Problems Those customers that churn out (or otherwise stop doing business with you) create negative market sentiment and this makes it harder for the next sale to happen. So it actually hurts sales. Oh, and you’re setting your customers up for failure. Stop knowingly acquiring bad-fit customers. It won’t end well for ANYONE. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success is a Simple Concept (Don’t Overthink It) *December 28, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-simple/ Customer Success is a very simple concept that you’ll really want to overthink. Resist the urge. The beauty of this concept is in its simplicity. Implementation is another story, though. But the concept is simple. My definition of Customer Success has evolved as my understanding of Customer Success has evolved. The definition of Customer Success is very simple. And here it is… ## Customer Success Defined Customer Success is when your customer achieves their Desired Outcome through their interactions with your company. Two quick things to note: - [Desired Outcome](https://sixteenventures.com/desired-outcome) is their Required Outcome – or what they need to achieve – plus their Appropriate Experience – or how they need to achieve it. - I said “interactions” rather than “use of your product” because there’s more to your relationship with your customer than just their use of the product (even if it’s the primary interaction) That’s it. That’s all there is to the concept. To quote Nicolas Cage’s character Roy in Matchstick Men… ## Simple is Safe My definition is powerful (IMHO) because of it’s simplicity. It is this simplicity that has enabled it to be accepted by thousands of companies around the world. My definition doesn’t have anything to do with a specific business model, market, customer type, or technology. It’s not predicated on an impossible universal understanding of “success” for the Customer (like “ROI”), but rather a knowledge that “success” will be different across different customers, companies, markets, products, etc. It’s simple. It’s easy to wrap your brain around. It’s effective at communicating what we’re doing here. Unfortunately there are many… ## Misguided Definitions Any definition that is specific to any of the things I’ve mentioned isn’t a definition of Customer Success, but rather an individual’s interpretation of this concept – right or wrong – for their unique situation. Definitions of this incredibly powerful business concept that are specific to any one type of industry, operational model, etc. I feel do more damage to the Customer Success movement than help. Why? Because… ## Customer Success is Universally Transformative A narrow definition keeps this universally transformative concept tucked away in the niche wherein it was defined. As we exit 2017, how many companies outside of SaaS 1) know about Customer Success and 2) if they know about it believe it’s for them? Few. The answer is few. And that’s because so many people work really hard (even if inadvertent) to keep Customer Success associated with SaaS… to everyone’s detriment. If you feel the need to come up with your own definition of Customer Success, more power to you, just please think bigger than your own little corner of the world. It’s in everyone’s interest that Customer Success be recognized globally as something that any type of business in any region of the world can leverage to thrive. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success can’t fit into Existing Frameworks *December 18, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-frameworks/ I’ve been battling more and more misconceptions when it comes to Customer Success than the fewer that I expected. I assumed as [Customer Success](https://sixteenventures.com/customer-success-definition) became more well-received, moved more into the mainstream, and simply became more common that we’d all agree more on things… not less. I was wrong. I was **WAY** wrong. ## Your Customer Success Worldview The “Customer Success” universe has become more and more fragmented, not less and less. When you say “Customer Success” the frame that’s invoked may be one of Account Management, something that’s software-focused, a worldview based solely on customer delight, or it may fit with what I’ve defined Customer Success to be. Or it may be a mix of all of those things combined together in some Frankenstein way that works for you but no one else… or for everyone. Who knows. In my self-reflective quest to break out of this “fight” I took a step back and tried to examine the source of all of these different understandings of Customer Success. While I found many reasons for these varying views on Customer Success (not the least of which is that the leading voices on the subject are still software vendors trying to sell a product), one thing really stood out. In fact, this is one discovery may just completely change your Customer Success worldview. Are you ready for it? ## Stop Shoving Customer Success into Existing Frameworks The one thing that just kept coming up again and again was people trying to shove Customer Success into existing frameworks that they’re already familiar with. If you want to move your Customer Success initiative forward in a big way, you must stop trying to fit Customer Success into existing frameworks. To be blunt: you need to get out of your own way if you want to be successful… not just in Customer Success, but everything (life, too, probably). Trying to work within your existing biases or limited worldview will only get you so far. When people tell me – and more have recently than I **EVER** expected – “Customer Success  just doesn’t work,” inevitably this was at least part of the reason. To understand why that is, let’s level-set briefly… ## Just what IS Customer Success? Customer Success is when your customers achieve their Desired Outcome through their interactions with your company. Customer Success is an Operating Philosophy for your company. Customer Success Management is an Operating Model for your company. Customer Success is a Growth Engine if you operationalize accordingly. [Desired Outcome](https://sixteenventures.com/desired-outcome) is what your customer needs to achieve (Required Outcome, RO) and the way they need to achieve that (Appropriate Experience, or AX). But… so much of the confusion around Customer Success is people not actually trying to understand it, but rather trying to force it into a box created by their existing biases and/or agenda. This isn’t an argument against the… ## Use of Frameworks in Customer Success This is an argument against trying to shove Customer Success into existing frameworks (this should be clear by now). When it comes to existing frameworks and Customer Success, you can… - visualize responsibility using a matrix like [RACI, RAM, or LRC](https://en.wikipedia.org/wiki/Responsibility_assignment_matrix) - prioritize using [RICE – Reach, Impact, Confidence, Effort](https://blog.intercom.com/rice-simple-prioritization-for-product-managers/) - use BJ Fogg’s [Behavior Model](http://www.behaviormodel.org/) to discover AX ([or use mine, if you want](https://sixteenventures.com/discover-desired-outcome)) - use [JTBD or Jobs to be Done](https://www.christenseninstitute.org/key-concepts/jobs-to-be-done/) to discover the customer’s RO (just RO, not AX… be careful) - co-opt [Agile](https://en.wikipedia.org/wiki/Agile_software_development) and [Scrum](https://en.wikipedia.org/wiki/Scrum_(software_development)) methodologies to improve collaboration and flexibility - repurpose IT governance frameworks like [ITIL or COBIT](http://blog.nhlearningsolutions.com/blog/tabid/145/artmid/16483/articleid/1514/cobit-vs-itil) for process engineering - run a [SWOT – Strengths, Weaknesses, Opportunities, Threats – analysis](https://en.wikipedia.org/wiki/SWOT_analysis), [Red Team](https://en.wikipedia.org/wiki/Red_team), or other “Pen Test” methods to spot weakness - apply [Strategic Selling](https://www.amazon.com/New-Strategic-Selling-Successful-Companies-ebook/dp/B001J8PQX8/ref=as_li_ss_tl?ie=UTF8&linkCode=ll1&tag=ilocom08-20&linkId=cec41b67da96ec7c3321cae16b31018f), [Challenger Sale](https://www.amazon.com/dp/B0052REP7K/ref=as_li_ss_tl?_encoding=UTF8&btkr=1&linkCode=ll1&tag=ilocom08-20&linkId=9cc1be6111dba765a2757a545ab034f2), or [SPIN Selling](https://www.amazon.com/SPIN-Selling-Situation-Implication-Need-Payoff-ebook/dp/B06XB35VCH/ref=as_li_ss_tl?_encoding=UTF8&me=&linkCode=ll1&tag=ilocom08-20&linkId=24ca1f7a090cd941e2f57c1fb8ff57e1) to renewals and expansion (upsells, cross-sells, etc.) - leverage [AIDA – Attention, Interest, Desire, Action](https://en.wikipedia.org/wiki/AIDA_(marketing)) –  for writing better engagement copy - use [NPS – Net Promoter Score](https://en.wikipedia.org/wiki/Net_Promoter) – or C-Sat (Customer Satisfaction surveys) to figure out whether your customer is “satisfied” (that speaks to the AX, BTW) - analyze the state of the customer base using Customer Health Score or [Success Vector KPIs](https://sixteenventures.com/success-vector) I’m sure there are many, many other frameworks you can apply to Customer Success that I haven’t listed. And you absolutely can and should use existing frameworks and methodologies **WITH** Customer Success. But you can’t go the other way and try to shove this huge, business-changing concept into any existing framework. It doesn’t work like that. It won’t work like that. It literally can’t work like that. ## Customer Success is too Important Customer Success is too big of a concept, it permeates too much of the company, and it is far too important to try to fit into some existing framework. Remember this when you see people who are already fully-invested in existing frameworks (or who created said frameworks) jumping on the Customer Success bandwagon. Many of them have good intentions (but if we’re honest, some are just a bullshit money grab in the Customer Success gold rush), but their lack of broad vision when it comes to real Customer Success could cause you to go down the wrong path if you’re not careful. Maybe – just maybe – this can help you avoid some of the confusion around Customer Success and will help you make 2018 the best year ever!   [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Those aren’t Problems. Those are Customers! *October 30, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customers-not-problems/ I work with companies around the world as a Customer Success consultant, I speak at events, and I do workshops. I’m constantly teaching others about Customer Success. And even more, I’m constantly learning. My understanding of [Customer Success](https://sixteenventures.com/customer-success-definition) is constantly evolving. As I am exposed to what’s working – and what’s not – both at a conceptual or strategic level and the day-to-day tactical level, I am continually evaluating and refining my approach to this incredibly complex and valuable business function. But sometimes I learn something that doesn’t change anything but the way I talk about Customer Success and its core principles. Often it’s a change that exponentially improves my ability to get the point across. And that change usually comes directly from the people I’m working with. Here’s an example of one of those changes. ## We have a problem In my public workshops we usually have different groups of people from different companies sitting at their own tables (depending upon the configuration of the room). At a recent workshop in Brazil, there was this one company that called me over during our working session because they needed some help. The spokesperson for the group said: “Lincoln, we have some problems.” She said that they worked with real estate agents, and they were telling me that their real estate agents don’t care about technology, are very impatient, want everything done for them, etc.. I don’t remember exactly what all the specifics were, but they kept saying these things, and I said, “You’re not describing problems. You’re describing customer characteristics.” By the way, I’ve heard this for years from companies about their customers. Those customers include: - Lawyers - Oil & Gas Companies - Fitness Professionals - Startup Founders - Entrepreneurs - You (I’ve probably heard you – or a company like yours – described as a “problem”) At some point, especially if they haven’t been customer-centric in the past or haven’t been deliberate in their customer acquision and growth, people in most companies will start to describe customers as problems. Because they weren’t deliberate in their growth or because they lost focus on why they – as a company – exist in the market (it’s to make customers successful if you didn’t know), they become the victim of their customer. They start saying negative things about their customers and they start looking at the things that make their customers their customers as problems. ## No, You Have Customers What I said – “Those aren’t Problems. Those are Customers.” – was an interesting and different way of looking at it than they had been thinking about originally. It was, in fact, a somewhat profound mindset shift that occurred. One that is required if you want to actually do Customer Success and get the [well-documented benefits](https://sixteenventures.com/customer-success-drives-company-valuation). I want you take a step back and say, when you complain about your customers, when you bring up these issues or problems that you have, are they actually problems? Are they actually issues? Or are they just customer characteristics? ## Your Limited Options What I said to that group there in the workshop, and what I’ll say to you, is if they’re customer characteristics, you basically have two choices. One, find a different type of customer. Two, and this is where we’d normally talk about [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile), [Success Potential](https://sixteenventures.com/success-potential), [Bad Fit Customers](https://sixteenventures.com/churn-bad-fit-customer), and all that stuff. But, if they’re a good fit, and this is the type of customer you want to do business with, then the other option is to figure out how to work around their unique characteristics. That’s all. You only have two choices. ## A Third (Bad) Option Well, I guess you have a third choice, which is just continue complaining about it and try to force whatever experience you want – vs. their actual [Appropriate Experience (AX)](https://sixteenventures.com/desired-outcome) – on them, even though it doesn’t fit their known characteristics. That’s going to create a Cycle of Apathy as you deliver the wrong experience, your customers are not successful, you blame them, continuing the cycle. Ultimately – and probably sooner rather than later – this will end up being bad for everybody, You don’t have a problem, you have a customer. Hopefully that’s a mindset shift that helps a little bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Onboarding Success Secret: Don’t Overwhelm Customers *August 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-onboarding-overwhelm/ I’ve said this before, but it is worth repeating; Customer Success is not limited to one part of the customer lifecycle, and Customer Success Management is not limited to simply helping the customer get up and running at first or to save them from churning later. Rather, when a company has Customer Success as their operating model, they see every aspect of the customer lifecycle and every milestone of the customer journey as just as important as the rest. In this article I tackle one of the biggest problems I see in [Customer Onboarding](https://sixteenventures.com/customer-onboarding). It’s a problem that isn’t caused by neglecting the customer… in fact, it’s caused by the exact opposite: overwhelming the customer. Let’s explore this, shall we? Most of the time, you overwhelm our customers. You overwhelm your new users, but it’s not because you’re being negative or doing anything wrong. In fact, you’re probably trying to help. You’re probably saying, “I want to give my customer freedom. I want to let them do anything. I want to give them everything because I want to over deliver,” and none of that is coming from a place of being negative. But it ends up being a negative experience for the customer because they’re overwhelmed. They don’t know what to do. They don’t know how to get started. In such cases, you misunderstand where you exist in their world right from the beginning. When you first have a relationship with the customer or first have a relationship with a particular user, you’re not necessarily the center of their universe yet, and you need to be honest about that. You need to understand that; you need to be clear on that so that you can figure out how to become the center of their universe at some point. But if you don’t understand that, and you just assume from the very beginning that you are everything to them, you’re probably not going to become anything to them. That’s why I say [the seeds of churn are planted early](https://sixteenventures.com/seeds-of-churn), and that happens sometimes in the sales process and sometimes in marketing, but most of the time, it happens in the onboarding process. It’s easy to assume the seeds of churn are planted from neglect… but to extend that analogy, you can also kill plants by overwatering or overfeeding. So, you need to get really clear on what it’s going to take to get the customer to be successful. That’s why I say, figure out what onboarded means. Draw that line in the sand. That’s your first success milestone. Then, figure out what has to happen to get them there, and then, just operationalize that. Your only job is to get them to do the next thing, then the next thing, then the next thing, so that they get to the point where they have what is called first value delivered or first value achieved, and the time it takes to get them there is the metric called time to first value. Don’t overwhelm… don’t over deliver. Just deliver. [Appropriate Experience](https://sixteenventures.com/desired-outcome) is your new best friend. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # A QBR is NOT Required for Customer Success *August 6, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-qbr/ There’s a myth in Customer Success Management that you must conduct Quarterly Business Reviews (QBRs) or Executive Business Reviews (EBRs) with your customers. This myth is propagated by those who only work with high-touch customers, by software vendors who are trying to attract those who work with high-touch (and consequently high-revenue) customers, and of course… by those people who just copy what those people say. But like some myths, it has a basis in reality; it’s just likely that you don’t share that same reality. But if you understand that Customer Success is when our customers achieve their Desired Outcome through their interactions with your company, then a blanket statement of “yes, you must conduct QBRs” is obviously a statement you shouldn’t listen to. So while I say that QBRs are not required for Customer Success in general, that’s the same as saying they ARE required in general. And you shouldn’t listen to that, either. The real question you should be asking is: “Do our customers require QBRs as part of their Appropriate Experience?” Let’s dig in, shall we? Quickly, if you don’t know what a QBR is, it’s an in-person or at least virtual face-to-face meeting with your customer – call it an Executive Business Review if you want executives from either side to attend – where you go over, at a strategic level, the last 90-days and plan for the next 90. Okay, so I get asked all the time whether or not we need to do QBRs in Customer Success Management. This article was inspired by those frequent questions, but even more, this very common follow-on question: If QBRs are required, how do we do them for a tech-touch sector or segment? The problem with both of these questions is that they speak to a complete misunderstanding of what [Customer Success](https://sixteenventures.com/customer-success-definition) and Customer Success Management actually are. You won’t hear too many other people say this, but I will because its the truth: You don’t have to do QBRs. Period. QBRs are not required. QBRs are NOT an integral part of [Customer Success Management](https://sixteenventures.com/elements-customer-success-management). QBRs, in fact, come from a time when we didn’t know much about our customers. They come from a time of [Account Management](https://sixteenventures.com/customer-success-account-management) and check-ins, where we just want to make sure we’re good so that we can get that renewal. Generally, QBRs don’t actually add a ton of value to the customer. In fact, most companies – most people who do QBRs – do them wrong anyway, and they’re more of something they’re forcing on their customers rather than being something that the customers look forward to and that truly add value. So then we think “how do I force QBRs onto our lower-revenue customers? How do I force a QBR on to them in a tech-touch environment?” you can see how maybe those are the wrong questions to ask. You need to take a step back and understand that thing I talk about all the time. [Desired Outcome](https://sixteenventures.com/desired-outcome). Customer Success is when our customers achieve their Desired Outcome through their interactions with our company. Those interactions are just that – they’re interactions, and they occur across the entire customer life cycle. Those interactions are what drive our customers toward that Desired Outcome, but they’re also [dictated by the Desired Outcome](https://sixteenventures.com/discover-desired-outcome). The Desired Outcome has a Required Outcome, or the thing they need to achieve. But the other piece to Desired Outcome is Appropriate Experience, or what I call AX. AX is what’s going to determine how we should interact with our customers, how often we should interact with them, and all that comes with that. If we can interact with our customers in an appropriate way, that’s all that really matters. So the questions aren’t: Should I do QBRs? How do I do QBRs? What’s the proper QBR? How do I do this in a tech-touch environment? The question should be: Is a QBR part of the Appropriate Experience for your customers? Customers are often quite complex; maybe they are larger companies, or maybe they are in a particular industry or niche. There are some customers that really want to have that human interaction, right? It would be inappropriate for everything to be done through email or some other technology modality, but do they want a QBR? Do they need a QBR or Executive Business Review (EBR)? Is there some other interaction that might make more sense? Does a QBR even provide the Appropriate Experience for your customers? That’s the main thing, and I would say that probably, if you’re talking about doing a QBR in a low-touch environment, you’re probably asking the wrong question, and I’m going to leave it at that. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: The Importance of User or Customer Onboarding *August 1, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/importance-of-customer-onboarding/ Customer Success is not limited to one part of the customer lifecycle, and [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) is not limited to simply helping the customer get up and running at first or to save them from churning later. Rather, when a company has [Customer Success](https://sixteenventures.com/customer-success-definition) as their operating model, they see every aspect of the customer lifecycle and every milestone of the customer journey as just as important as the rest. That said, it is totally possible to plant the seeds of churn early, and that’s where an understanding of the process – and value behind – customer and user onboarding are so critical. Let’s dig in… ## The Difference between Customer and User Onboarding I’m often asked what onboarding means, how user and [customer onboarding](https://sixteenventures.com/customer-onboarding) differ (if at all), and what results a company can expect if they get this process right. Those are good questions that need to start by defining the different aspects of onboarding. First, I like to separate customer onboarding from user onboarding. Customer onboarding may include things that are outside the scope of individual users. This may have to do with getting the company set up in the accounting system and going through that entire process, but then, within a company, there’s going to be users. There are human beings who are actually going to be consuming your service or interacting with your product. Thus, you need to figure out a way to ensure that those customers and those individual users achieve some value as quickly as possible. Let’s talk about onboarding in general. What does it even mean? ## Onboarding as a Goal We talk about onboarding as if it’s a phase – as if it’s a process that has an endpoint. But a huge question that people have is: What is that endpoint? When should I consider a customer “onboard”? Some people will say, “Well, a customer or user that’s been with us or been in the system for 30 days will be considered on board.” To this, I say, “That doesn’t make any sense at all.” That has nothing to do with whether or not they’re getting value. It has nothing to do with their success. It simply has to do with an arbitrary timeframe that you decided on. It’s not about time in the system; it’s about something else. You have to figure out what that “something else” is. ## Onboarded as a Success Milestone The way that I define onboarded is this: The user or the customer, depending on what you’re measuring, is either getting value from their use of the product or the consumption of your service, or, for the first time outside of sales and marketing, they see the value potential in their relationship with you. What this means is that you have to identify the point where they first get value – where they first start to achieve their goals. This is the time they first start achieving the things that are going to make sure that they’re on the road to their [Desired Outcome](https://sixteenventures.com/desired-outcome). ## Onboarding for Complex Products or Services This is especially true if it’s a more complex product or if it’s going to take more time. Even if they start using your product, it’s going to take time before they really get value. There’s a point in which they’re going to start to see the real value potential in their relationship with you. This is maybe when they’re going through and they feel that they haven’t really gotten value, but they’re like, “Oh, I get it! This is cool.” At this point, your customers say, “They told me about this in the sale process. I read this in the marketing collateral, but for the first time, I see the real value potential here. It’s going to be several months before I’d get real value because of the complexities, but I get it.” You should figure that point when they’re getting value, they see the value potential. Once they hit that mark, we can say they’re on board. ## Engineering the Onboarding Process The onboarding process is meant to get them to that point. You figure out where they need to get to, and you reverse engineer the process to get there. What are the things that they have to do in order to get value or in order to get to a point where they see the value potential? What are the things they need to do with your product? What are the things they need to do outside of the product in their world? You figure out what that is. You build the process to get them there. That’s it – that’s onboarding. That’s so simple to say, but actually making it happen is a whole different story. ## The Seeds of Churn are Planted Early I always say that [the seeds of churn are planted early](https://sixteenventures.com/seeds-of-churn). What I mean by that is very often, customers that churn out or that don’t renew – whether they actively cancel or they just simply choose to not renew a contract – will often cite things that happen very early in the lifecycle. With this, I am referring to 80% to 90% of customers. In other words, [the reasons for churn](https://sixteenventures.com/churn-symptom) arise during the onboarding process, which means customers never really get up and running. They never really start to get value. They never get to the point where they see the real value potential in this thing, and from the very beginning, they have one foot out the door. The problem here is that this usually happens almost every single time; it’s the vendor’s fault. If you’re the vendor in this case, if you’re having onboarding issues, it’s your fault. You basically told the customer from the very beginning of the relationship that you don’t care about them. You don’t care if they’re successful. Then you say, “What do you mean by that?” ## Hope and Chance vs. a Designed Process Well, if you haven’t designed a process to get them up and running – to get them onboard – then you just dump a product on customers and hope that they figure it out. You let them fend for themselves rather than designing a process to get them to that point where they’re onboard. If you don’t do that, you’re basically telling them, “We don’t really care if you’re successful; we have your money. We have the contract. We’re good to go. Leave us alone. Do your thing.” I mean, if you’re honest, that could basically be what you’re doing. Whether that’s your intention or not, that’s the reality. ## Maintain Pre-sales Excitement after the Close What you need to do is design that process, such that as soon the customer signs-up, and as soon as you are done with the sales process, you have this excitement. Even in a B2B world, there’s excitement, and there’s energy – there’s something positive there. Carry that through. When the sale is done, that’s just the beginning. But a lot of companies, even today, still think that when the sale is done, then they’re done. In fact, that’s actually the beginning of the relationship. You can’t drop the ball right after you close the sale. You have to continue with it. You have to carry it through. You have to keep that excitement going, and get them to the point where they’re on board, such that they’re getting value, or they see the real value potential. ## Plant the Seeds of Massive Success If you would just to do that, those seeds of churn wouldn’t be planted early. Instead, you would be planting seeds of massive success. You would be setting your customers up to stay longer, buy more, and advocate for you. You want those three things. I’ve never run into any company that didn’t want those three things from their customers, but I often run into companies that aren’t doing anything to ensure that they get those things. That’s what’s really confusing. ## Results of Proper Onboarding What can you expect? Well, your churn is going to go down. You’re going to keep your customer longer. You’re going to set them up for success so that you can then sell more to them through [upsell, cross sell, and the land-and-expand](https://sixteenventures.com/logical-expansion) model. You can expect them to advocate for you. Of course, getting them to stay longer, getting them to buy more, and getting them to advocate for you don’t just happen magically. You have to do other things to make sure that these things happen by setting your customers up for success. You set them up in a way that those things can happen if you operationalize appropriately. What you can expect is a bigger, more valuable business for you, which is kind of important. Kind of. Just a little. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How to Define Roles in Customer Success Management *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-management-roles/ Most companies just getting into Customer Success start by defining roles (well, one… Customer Success Manager), then they try to figure out the size of the “book of business” the CSM should handle, etc. That’s wrong. But I won’t leave you hanging! Nope, I’ll tell you the correct way to define roles in a Customer Success Management organization. Hint… it all starts with proper Customer Segmentation For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## What’s the best way to define Customer Success Management (CSM) roles? So the question is about the best way to define roles for sales, account managers and CSMs in relation to the client. Should there be a defined handoff between sales and whoever takes over after the sale (account manager, CSM, etc.)? BTW, I still say CSM because I know a lot of people are expecting that, but I’ve tried – and I try to get my clients to do this, too –  to move away from CSM to Customer Success Practitioners (CSP). CSP is more inclusive of the wide array of professionals making up a Customer Success Management operation. In addition to Customer Success Managers (of which there is no one-size-fits-all type of CSM), we have Customer Success analysts, Ops, communication, customer marketing, etc. There are a lot of different people that can be involved in the [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) process and we need to acknowledge that. So when it comes to defining roles, there is no – and there cannot be a – universal way of defining roles. Actually, I’ll even say it like this. I get an email – or some other message – at least once a day from somebody asking, “Hey, Lincoln, we’re hiring a CSM. Do you know anybody good?” Yes, I know good CSMs and no I’m not gonna send them your way because you’re just thinking about the fact that you need to hire a CSM and aren’t looking at things the right way. You’re thinking all CSMs are exactly the same in every company. Right? But that’s not how it works! There’s no such thing as a one-size-fits-all CSM. You need to understand your customer segments. You need to understand what the [Appropriate Experiences](https://sixteenventures.com/desired-outcome) (AX) for each of those segments. And then you can start figuring out what the coverage levels look like. I’m not going to send anyone your way until you look things the right way… I’m not going to set the “good CSMs” I know up for failure. If you have some customers that need a higher touch interaction with a human, you would have a Customer Success practitioner that maybe looks more like a consultant. Right? Maybe they have domain expertise and they’re gonna spend a lot of time with the customer. Because that’s what the customer wants and needs as part of their Appropriate Experience. Let’s say we have a customer segment that is very… not very complex, doesn’t need a lot of human interaction. Maybe your coverage levels there are gonna be pooled resources of Customer Success Practitioners that look more like analysts. They’re gonna be able to figure out what’s going on with the customer and intervene, you know, through low or tech-touch means. That’s what’s appropriate for that customer segment. You have to understand what the segments require so that you can know the kind of human beings that we’re gonna need to bring in. You also need to know what is required so we know what kind of technology to use. And then you need to know for each customer segment what is the ratio of humans to technology? You need to think about this stuff just like you would ANY other part of the business. Which is to say, you need to figure out what is actually required. The simple answer you see a lot is you need X number of CSMs per X amount of revenue. [But that’s a bullshit answer (and here’s why if you’re interested).](https://sixteenventures.com/account-coverage-ratio) That idea of aa certain amount of revenue per CSM has never been appropriate. And it certainly isn’t appropriate today when we understand more about this stuff. And I hate the fact that that CSM per amount of revenue gets propagated over and over and over because some VC said it once. It’s garbage. It doesn’t matter. Doesn’t apply today. It never did. We have to think about our customers. There are appropriate segments, and what those appropriate coverage levels need to look like. From there, we can start to know exactly what’s gonna be required. Now, we have to work through the different phases of our customer life cycle or what I call [Success Milestones](https://sixteenventures.com/success-milestones). If we have an [onboarding](https://sixteenventures.com/customer-onboarding) process for a particular customer segment that’s gonna require somebody really working with them, doing some training, doing some implementation, doing some integrations or whatever, then that’s what’s required. Then those are the people that we’re gonna have to bring in. Right? Maybe there’s a dedicated onboarding team, maybe it’s just other sort of subject matter experts. But they’re gonna be brought in to work with that customer at various points in the life cycle. So, we need to think about our customers, the different segments, what’s appropriate, their life cycle, the different success milestones. And operationalize accordingly. People over complicate the concept of Customer Success and completely under appreciate what is required to make it actually happen. > People over-complicate the concept of Customer Success and way under-appreciate the required effort to make it actually work. - Lincoln Murphy (@lincolnmurphy) [June 20, 2017](https://twitter.com/lincolnmurphy/status/877216928884039680?ref_src=twsrc%5Etfw) So, Customer Success is actually pretty simple to understand as a concept. It’s a lot harder to actually make work. [But it’s so worth it.](https://sixteenventures.com/customer-success-drives-company-valuation) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: High/Low/No Touch Customer Segmentation *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-high-low-no-touch-segmentation/ The traditional Customer Success method of simply looking at what a customer pays us and giving them a particular level of ‘touch’ is old and outdated. It’s time to logically segment customers based on Appropriate Experience (AX). For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## How to implement High/Low/No-touch Segmentation? Do other companies segment their customers between high touch/low touch, and if so, what is their criteria? It’s funny when I talk to a company about their [Customer Success](https://sixteenventures.com/customer-success-definition), I can almost always tell where they learned about Customer Success. And it’s usually a software vendor that they’ve learned from. And you can tell based on the language they use which one it is. And a lot of its high/low. If its tech touch, I can probably figure out what software vendor you were talking to. Not that that’s a problem, except that it doesn’t, this high/low no touch doesn’t paint the right picture. It doesn’t really give us the accurate way of looking at our customers. You should be segmenting your customers based on their [Appropriate Experience](https://sixteenventures.com/desired-outcome). If you’re not basing, if you’re not doing that, you’re doing it wrong. Three or four years ago, maybe we would have said segment based on Annual Recurring Revenue (ARR) and ARR potential. But we were just kids back then. We didn’t know what we were doing. Things have evolved. Things have changed. Things have matured. We now know what we’re doing. And you need to be [segmenting your customers](https://sixteenventures.com/logical-customer-segmentation) based on their Appropriate Experience. That’s the only way that you accurately give them the Appropriate Experience. You can have the right coverage levels. And you can have the, you can know what the appropriate ratio between technology and human intervention is. Anything else is just it’s not going to work in the long term. It’s not gonna scale well. And it tends to normalize and experience across all of your customers which means, best case, you’re simply running at a lower margin than you could be. Worse case, it means you’re going to have an inappropriate experience for some customer segments which is going to be [bad enough that they churn](https://sixteenventures.com/churn-symptom). So that’s why this is so important. We can’t normalize an experience across all customers. That doesn’t work. And what we tend to do is normalize that experience and then add in some QBRs and call it high touch. And that just that’s ridiculous. We can’t think of customers success management as just this really simple thing that we just kind of throw together and make our customers happy. This is a very sophisticated business function. And we need to treat it that way. Because if we do, we’re gonna see it’s gonna pay dividends in terms of our, the revenue going up. The value of a customer going up. And that ultimately, the value of our company going up significantly. That’s what we’re trying to go for here. This is not simple stuff. It’s effective. It’s valuable. And we need to be treating it that way. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: Incorporating High/Low/No Touch into Onboarding *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-high-low-no-touch-onboarding/ Proper Customer Onboarding isn’t done to prevent churn; it’s done to ensure the customer achieves their Desired Outcome. Retention comes from that. But what is “proper” customer onboarding? Let’s find out. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## How to incorporate High/Low/No Touch into Onboarding? So the question is “How do we handle, or, how do we incorporate the high/low no touch model into onboarding? And make sure we’re onboarding our most important customer?” This is another example of sort of an antiquated view of [Customer Success](https://sixteenventures.com/customer-success-definition). Customer Success is something that all customers get. The way that we interact with them, what we provide them, is part of their [Appropriate Experience](https://sixteenventures.com/desired-outcome). If we have a customer segment. Let’s say we have several customer segments, they all share the same required outcome. They all have this business outcome that they’re trying to accomplish. And that’s why they started to do business with us. But they all have different Appropriate Experiences. Then we’re going to need to provide them the Appropriate Experience. So, you know, some companies, some customer segments are gonna be more complex. They’re going to need more dedicated human resources to help them with their [onboarding](https://sixteenventures.com/customer-onboarding). To get them to go through implementation. To go through maybe some consulting other professional services. Whatever that is. Then there’s going to be some customers that don’t need that, don’t want that. Their Appropriate Experience is that they bought from you and they should just be left alone. The thing is, we often, we’ll say high/low in no touch, but what we usually mean is high value, mid value and like low value. Or high revenue, middle revenue, and low revenue. When the reality is, the customers that need the high touch, maybe the low revenue customers, and the customers that would be just fine without you interfering in their lives. Maybe the customers that pay you a lot. But you don’t understand that so you’ve created an engagement model based on what they pay you. And it’s ultimately inappropriate for most of the customers. So you really need to understand your different customer segments and understand what the Appropriate Experience is for them. And if there is a low revenue segment, that you would like to be no touch. But they require a high-touch. You have a couple of options. One, you can say they don’t pay us very much. So they get the low touch option whether they like it or not. Which is a customer negative way to do business, and ultimately will come back to bite you. Or you can do the right thing and say, “The Appropriate Experience for this customer segment is high touch”. They don’t pay us very much. And I asked them if they would pay more and they said no. Which means I can’t give them the Appropriate Experience. Which means they’re a bad fit. So I’m not going to do business with that customer segment because I can’t make, I can’t give them the Appropriate Experience in an economically feasible way. So instead of punishing them for not paying us very much, is what a lot of companies do, we would say, “They’re a bad fit. I’m gonna not do business with that type of customer”. Ultimately you have to give your customers an Appropriate Experience. And if you don’t, those seeds of churn, especially in the onboarding process, the seeds of churn are going to be planted very very early. And that may lead to, that may be why customers churn out after, you know. Or they don’t renew their one-year contract with you. Or they churn out after a couple of months. Because you’re giving them an Appropriate Experience up front. So I would decouple what somebody pays us from what the experience we’re going to give them is, really look at that Appropriate Experience. And then go back and say, “Okay. This is the Appropriate Experience. This is what they pay us. Is that economically feasible for us?” If not, [they’re a bad fit](https://sixteenventures.com/churn-bad-fit-customer). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: How to help Salespeople with Customer Segmentation *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-sales-segmentation/ The age-old issue of Customer Success and Sales alignment, only this time focused on segmentation. This is my attempt to definitively address this eternal quandary. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## How do we help our salespeople with Customer Segmentation? So the question is how do we help our salespeople do segmentation? And the other is sort of how do we segment customers internally? And so we can take care of our most important customers. Okay. I don’t understand why there’s this need to segment customers differently in sales, in marketing, and in Customer Success. It’s customer segmentation. It’s not departmental segmentation. This is not an inwardly-focused exercise. It usually is, unfortunately, but it should be that we’re looking at our customers in a way that makes sense to segment them. So, you know, if I’m going after (to use a somewhat aggressive term) a particular segment of customers, why is that going to be different than once I get those customers I’m going to serve them? You see, a customer has a required outcome. A thing that they need to achieve. Their business outcome right? And they have a way that they need to achieve that [Appropriate Experience](https://sixteenventures.com/desired-outcome). That Appropriate Experience – AX as I call it – goes across the entire customer lifecycle. It doesn’t start when a customer becomes a customer. It starts when a prospect first interacts with us. It starts when the prospect first interacts with our marketing cycle. It starts when the prospect is first contacted by an SDR or an AE. Okay? It’s a life cycle thing. It starts early. How many of you heard me say, “[The seeds of churn are planted early](https://sixteenventures.com/seeds-of-churn)?” Well, that happens when we interact with a prospect early on, in an inappropriate way. Right? It means that we’re not giving them an Appropriate Experience, even before they become a customer. So we can’t do that. We need to have those aligned. I have, this is a struggle that I run into a lot. You know, how do I, how does sales and marketing and Customer Success, how do they get aligned on these things? Or how can I help my sales people, you know, figure out how to, how can I work with my sales people around their segmentation? It’s like, [this is customer segmentation](https://sixteenventures.com/logical-customer-segmentation). And you shouldn’t be going in different directions. I’m still waiting for a valid reason why sales and marketing and Customer Success should have different segments. Nobody’s been able to give me a valid reason. Most of the time the reason is that’s just the way we’ve been doing it. Right? Sales looks at customers a certain way. Marketing looks at customers a certain way. And we want Customer Success, we look at customers a certain way. That is probably not a valid reason to keep doing things that way. Right? Just because we’ve been doing it that way, is a bad reason to keep doing something. So, I don’t think there’s any reason they should be different. So, I don’t think that we should have to work with sales to figure out, you know, I don’t know. Someway of, sort of, getting close to matching. I will say this: there is the reality on the ground of, you know, sales often times drives our companies. There are these amazing magical beings that can do no wrong. And everybody else is sort of at their mercy. I don’t like that. I think that’s a terrible way to run a business. And that’s okay. We don’t have to get into that. But, when you go to sales and you go to marketing, but it’s certainly sales, and you want to try to convince them that your Customer Success-driven approach to customer segmentation is the right way to look at things, you need to go into those conversations, sort of, with everything that you want from them. And be ready to negotiate down to what is acceptable. I say this because Customer Success people – and this is a rash generalization, so take it for what it’s worth – Customer Success people aren’t in the daily habit at least of negotiating. Sales people are. And, if you go into a conversation with sales, sales leadership, and you’re trying to get, trying to convince them of something. You have to understand that you’re now sort of in their territory. This is what they do. So at least come in with “this is everything that we want; this is what we will accept.” And we can negotiate down to there. When I see Customer Success, managers certainly, and even Customer Success leaders doing, is going into those conversations with like here’s what we, basically starting where they need to be. And negotiating down from there. So, I don’t, I think actually all of that is ridiculous. We don’t need to do that negotiation. We need to actually look at this the right way. But that’s one little tip. Is just, be prepared to negotiate. Whatever that means. And whatever that means in your world. And start from where you, you know, start really high with high demands and negotiate down to where you want to be. Instead of starting where you want to be and negotiating from there. So that’s kind of my approach to sales, handling sales and that kind of thing. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: Determining Which Customers on which to Focus *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-focus/ From a Customer Success perspective, this is the wrong question to ask. You must “focus” on all customers since proper [Customer Onboarding](https://sixteenventures.com/customer-onboarding) is critical for all customers to achieve their Desired Outcome. The way you operationalize around all of your customers to ensure they’re all Onboarded in an Appropriate way will come down to [logical Customer Segmentation](https://sixteenventures.com/logical-customer-segmentation). For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## What users to focus on during Onboarding and Engagement? So the question is “When looking at data and focusing on super users and zero users, who leverage with adoption tactics. Do you find it’s best to pursue feedback from super users, zero users, or both?” I’m assuming when we say super users and zero users, that we’re talking about within one company. I would think … So, in that case we have one customer company that has sort of that, gradient or spectrum of use within their user base, just from that one account. In that case, yeah we would probably want to figure out what’s going on there. We probably need to recognize that instead of just looking at them as super users and zero users, I would look at them We probably need to recognize that instead of just looking at them as super users and zero users, I would look at them as, are there … Who are they? What are their titles? What are their roles? What’s actually going on in that company? And you may start to see some patterns that, it’s not just super users, it’s developers … They do this, but those closer to zero users, those are more the project managers, those are more of the designers and you start to see different personas. And now we have a better view of what’s going on, and we can’t freak out when those personas of different roles, those different roles or different personas, you now have a different use pattern, right? So we need to figure out what that is. That’s one thing that I would look at. But yeah, talk to your customers. If you see some really, this really crazy discrepancy there, we need to figure what’s going on. We also need to understand that the secondary onboarding, or the onboarding process that occurs when somebody that went through training, that was sort of an early user of your product, brings in others … You really need to think about that second wave of onboarding. That whole process needs to be just as streamlined as that initial cohort of users. Very often, they’re not. Very often, we have our initial [cohort of users](https://sixteenventures.com/customer-success-goals) that goes through training, that goes through this very specific process, and then we let everybody else in. So I don’t know what’s going with your customer, you need to figure that out. But those are a couple of ways that I would look at it, you know, is there an onboarding issue, and/or are there just different personas that are going to have different use patterns, and we shouldn’t freak out when certain personas aren’t using it on the daily, because that’s just fine. Right? So we need to figure out more about what’s going on there. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: Who Should Handle Upsells? *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-who-handles-upsells/ One of the great Customer Success questions – regardless of how many answers are given or by whom – that refuses to ever actually be answered is who should handle [upsells](https://sixteenventures.com/logical-expansion)… sales or Customer Success. This is my attempt to definitively answer this question. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Should Sales or Customer Success handle Upsells? I was pulled into a conversation on Twitter the other day. You can follow me on Twitter. I often rant there about Customer Success stuff. You can follow me [@lincolnmurphy](https://twitter.com/lincolnmurphy). Somebody posted a video and said, “This company has their salespeople handle upsells and Lincoln Murphy says that you shouldn’t have your salespeople handle upsells.” I went and watched the video and I’m like … I didn’t really want to comment on anything, but because they pulled me into it, I thought I would. The video made me sad, actually, made me feel bad for not only the person that was in the video, but the customers of the company this person works for. Because this person had a very, very antiquated view of [Customer Success](https://sixteenventures.com/customer-success-definition). They said things like, “We don’t want our Customer Success people handling upsells, because they shouldn’t be hounding our customers for dollars. That’s sales job”. And I’m like, “No, that’s not anybody’s job!” Nobody should be hounding your customers for money. That’s such a bad view. And the reason I say this is antiquated is, we get this idea of Customer Success having this trusted relationship with the customer and that if we ask the customer to buy more, taking upsell, that somehow that’s gonna hurt trustworthy customers. And, because of that, you know, let’s go ahead and let the sales organization do that. I don’t understand that. Sales shouldn’t be doing things that hurt trust with customers. Asking the customer to buy more shouldn’t be something that hurts trust with customers because you have to understand that expansion – which includes upsells as well as renewal is part of the customer’s ever-evolving journey towards their [Desired Outcome](https://sixteenventures.com/desired-outcome). Our customers are always changing. They’re always growing. In order for our customers to achieve that Desired Outcome: their required outcome, the business outcome that they’re looking for, plus the way that is appropriate for them. In order to do that, they’re probably going to have to buy more from us right? They’re gonna have to add capacity. They’re gonna have to take add-ons. They’re gonna have to buy services. Just to sort of stay with them as they grow. That’s Customer Success. And if you have Customer Success Managers (CSM) that don’t want to sell, that’s a way to get them to buy into this concept. Because it’s true. If you want to make your customers successful, they’re gonna have to renew. They’re going to have to buy more. That’s part of the journey towards the Desired Outcome. You know, we think of a one year contract, we think of a month to month contract, really. A month to month subscription agreement. We think of this as being somewhat meaningful to you know, between us and the customer. But the reality is, this is some arbitrary time box that we created. It’s just the financial relationship that says every year, you’re gonna pay us this much. And, you know, we’ll renew it and renegotiate the terms or whatever. Or every month we’re gonna charge your credit card this much. That has absolutely nothing to do with success, right? So we need to stop thinking about success as being tied to this arbitrary time box. We need to think about success as being something that occurs really with the customer on their own cadence. Right? Customers achieve success on their own cadence on their own timeframe. And, that may or may not fit within this nice little contract or this nice little subscription that we have of you. So, in order to get them to achieve their Desired Outcome, in order to achieve that required outcome that they have in the way they need to achieve it within their Appropriate Experience. They’re going to have to buy more over time. That’s just reality. So, that’s what makes our customers successful. And if you’re thinking about it in some way of like, “Well, I don’t want to hound our customers for money,” because you’re thinking about trying, that upsells are really us shoving product and services onto our customers that really don’t need it. Well, you shouldn’t be doing that. That’s not what expansion should be in a Customer Success-driven company. Okay? So I just kind of wanted to address that. Because they’re a lot of people out there that call themselves Customer Success leaders that have really old antiquated views of what Customer Success is. So, this discipline that they’re needing, they probably shouldn’t be until they can sort of change their understanding of Customer Success. And yeah, Customer Success being something that really, you know, is five or six years old in terms of maturity. But even that, if you’re looking at it as what you learn five or six or three years ago, things have evolved. Things are changing. You gotta stay current on this stuff. And that’s why I’m doing this today. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: How to Reset Mismanaged Expectations *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-reset-mismanaged-expectations/ Carefully. One of the biggest drains on Customer Success Management resources is customers that have not had their expectations properly managed and having to work around that. Avoid that where you can by doing things correctly from the outset, but if you’re there already, maybe this will help you. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## How do you reset customer expectations if they haven’t been managed correctly? Carefully, is the answer. That’s an awesome question because it’s applicable to most companies who have been in business for any amount of time. But we’re gonna have done things in the early days, that’s we realize we didn’t need to do. And again, a great example is we give free consulting to customers that really don’t pay us that much. What I say is, that early cohort of customers we can’t punish them for being there early with us and for us learning from them. And so what I would like to do is draw a line in the sand and say any customers that come in from now on, they’re gonna get this [Appropriate Experience](https://sixteenventures.com/desired-outcome). Right? Whatever that looks like. Those customers that were here before, we can be honest with them. What a concept. Hey, you know we’ve learned some things. And what I would say is there’s a really good chance that if you’re having a one-hour meeting with them every week, that they even may not need that. They might even think that’s inappropriate. But you’re offering it. You’re giving it to them. So talk to them. And say what would be a more appropriate interaction schedule. And you could even provide some self-service deflection options for them. Things that they could do on their own. You could provide, you can be more prescriptive and say what we’ve done with you is sort of have these weekly meetings. What we’ve learned since then is that these sort of self-guided courses and then a quarterly business review is actually working a lot better. That would give you back three or four hours of your time every month. If you kinda put it into their terms, and think about it from their point of view, actually it could really work wonders. But, you can’t punish them. You can’t punish them because you screwed up. And that’s what we have to understand. I talk about this passionately because I’ve been there. I’ve done that. That’s why I can share this stuff. Because I’ve seen it, I’ve been there, done that. And I’ve even done it wrong. I’ve actually gone back and punished customers when I shouldn’t have. And I’ve seen the backlash. I’ve seen the negative fallout from that. So we can’t do that. So we have our customers that brought us to the dance. We can’t, I don’t know what you do when someone brings you to the dance and you leave with somebody else, I guess. Whatever. We can’t punish them for being there for us. We can go back and try to reset expectations as long as it’s in their favor. And that’s the reality. But going forward, like from now on, for anyone new that comes in, we have to give them that Appropriate Experience which means if you haven’t thought of what the Appropriate Experience is, you need to do that right now. Because ultimately, and hopefully you can see through that idea of giving just too much to our customers. It’s gonna start to affect scalability. It’s gonna start to affect your margins, your operating margins. All this stuff is going to be really negatively impacted by this. And it’s going to cause at the very core of what you do. It might start to cause a customer negative environment. A cycle of apathy. This cycle of distrust. We hate our customers. We hate our customers because they take too much from us. That’s our fault. We gave it to them. So we need to get out of that cycle as quickly as possible. Stop doing what you’re doing right now with those customers. Figure out what the Appropriate Experience is going forward. And give new customers that, and then go back to, the other, the customers that have been there. The legacy customers. And try to figure out how to how to manage expectations with them. But again, making it about them and making it about their Appropriate Experience. Good luck with that. It is going to be a challenge. But it’s something you need to do sooner rather than later. Because it’s just gonna get worse. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: Customer Engagement Across the Entire Lifecycle *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-lifecycle-engagement/ Customer Success is when your customers achieve their Desired Outcome through their interactions with your company. Those interactions occur across the entire lifecycle. I define [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) as the process of moving customers toward their ever-evolving Desired Outcome. Again, across the entire lifecycle. You can’t have [Customer Success](https://sixteenventures.com/customer-success-definition) without engagement across the lifecycle. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## How to keep customers engaged post-training? He goes on to say: *We’re running into the issue of customers diving straight into our tool, post training. But then we have severe decline two to four weeks after that training. I have several ideas brewing to tackle the problem. But been reading a lot of your blogs and wanted get your take on staff in the health care industries.* *The customers sort of go through training, they dive into the tool, and then just a few weeks later they’re not using it. You know. So how do we fix that? I would say your training needs to be fixed probably. A lot of what happens is we overwhelm our customers. So there’s a really good chance that you’re giving your customers way too much. And that, by the time that they get back, they get in, a lot of that stuff either doesn’t apply immediately or they forget it.* So, that’s again without knowing exactly what your situation is. That’s something I see quite a bit of. We need to sort of scale back. It’s sort of counter intuitive. But we actually need to scale back in what we give our customers right at first. There’s a tendency to want to over deliver. Especially in the technology world. I find this to be incredibly true. We really want to over deliver with our customers. Almost wow them. That wow moment idea gets blown out of proportion. We want to like wow them up front with all this stuff. We want to give them everything. And the reality is, we tend to overwhelm. There’s this concept in back in the sort of what we would call internet marketing, that was even pre-internet marketing of this selling content, selling information. So info-marketing. What people would actually sell books and training manuals and stuff. There’s this concept called, “Thud Factor.” That as soon as you bought something, you know. Six to eight weeks later, the UPS person would show up and you would hear this “thud” when they dropped all of this material that you bought. Right, so you would feel really good that you just made three payments of 299 or something for this gigantic stack of material that you will never go through. Thud factor. We don’t need to do that these days. We don’t need to impress people with the amount of content, information we can give them. But what we need to do is give them an [Appropriate Experience](https://sixteenventures.com/desired-outcome) and get them to start getting value out of their relationship with us. And then keep them getting value in that relationship with us over time. So, don’t overwhelm. I think just with training we have a tendency to do that. The other thing is, we tend to let especially if we’ve trained them, we tend to then let customers just do whatever they want. And that sounds great. Let your customers do whatever they want. The reality is, our customers are gonna do whatever they want anyway. So, our job is to provide them some guidance. You know, when they come out of training, have a 30/60/90 day plan, that says this is what you’re gonna do. And if it’s a daily use kind of product, then this is what you’re gonna do on a daily routine. So have a very specific plan in mind. Be prescriptive. Tell them what they need to do. Joshua also provided a couple of examples of things that they were already trying. - Gamification - More tailored and specific end user communication pre and post training - Deeper project manager engagement - Expanding training with ongoing and refresher points Gamification is something people want to jump into but I think is generally not necessary. Some of the other suggestions there are things that Joshua was already thinking about, were, you know, kind of in line what I said. Giving more guidance. I would take it a step further and just say be very very specific. Give your customers, especially when they come out of training. Again, maybe go back and look at the training. Are we giving them too much? Could we pare it down into something that, maybe they do two or three times a year. But it’s smaller chunks. And it’s going to give them just what they need to start getting value over the next 30/60/90 days. And then we can do more training down the road. I think we have to think about this from our customer’s perspective. And that means getting out of our own way. Moving our ego aside. Stop thinking about all of the investment that we have in our amazing product. That can do so many amazing things. But if our customers are starting here and our product is here we’re trying to give them everything here. We’re missing out on taking them from where they are to where they need to be. And that’s the thing. We need to meet our customers where they are, and move them along the path. I think that’s the best way to look at this. Is don’t overwhelm. Be prescriptive. Be very clear with our customers. And when they come out of training, and that training should probably be pared back a little bit. They’re gonna have an exact plan on how to be successful. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: Working with Customers that don’t like Technology *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-non-tech/ Luckily this type of thing is rare, but with Customer Success as our operating philosophy, or Customer Success Management as our operating model, we need to work within the confines of our customer’s comfort zone… not ours. This is a thought-provoking question with, hopefully, an equally thought-provoking answer. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## What if our customers don’t like technology? I see this sometimes for sure. People will say, you know this customer segment something of farmers may fit into this. Again, generalization. Our customers don’t like or this market they don’t like technology. You know, they’re not very tech-forward. I did some work in the oil and gas, or with the companies in the oil and gas industry. It was sort of the same thing. And you kind of go back to these mechanical older industries. And it’s really easy to say well they don’t like technology. But if you look at it, and I said this to these that were in the oil and gas business, when they told me that. I said “how, I mean this doesn’t make any sense.” “You’re telling me they don’t like technology? Yet they use data to make all their decisions. They are some of the most technology forward people, in terms of the technology used to drill. Like they’ll take a drill bit that’s brand new, never been tested. They’ll put it in use. Just to try the, you know, eek out some more efficiencies in the process. And you’re telling me that they’re not into technology.” And then you start digging in you find out well what they’re not into is like IT stuff. Computer stuff. Right? They don’t like IT people. Right? Probably because somebody was a jerk to them at some point. So what you need to do is sort of change the way that you approach this. If you go to a non-tech customer and you try to sell them your software, your IT solution. Yeah, chances are they’re not going to want to hear from you. But if you go to them and talk about things in their language, using the way, things that resonate with them, well now we’re onto something. Right? So again, [Appropriate Experience](https://sixteenventures.com/desired-outcome). Understand your customers better than they understand themselves. And figure out what’s going on. What’s the conversation already taking place in their mind. And if you can enter that conversation that’s already taking place in their mind, things are gonna be a lot better. So those are just a few things around Customer Success-driven sales that weren’t part of that question but I think are incredibly important. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: How to Tell Customers What to Do *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-tell-what-to-do/ For many Customer Success Management teams, it’s easy to fall into the trap of ‘just let your customers figure it out.’ In fact, it’s easy to think that’s in their best interest. Leave them alone and they’ll discover what they need to on their own. But in most cases, that’s the exact opposite of what you need to do. For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Should we tell customers what to do? *Zoe had a similar problem as Joshua in the previous question, and she said that they called the customer and asked why their use declined. They found that the biggest issue was they didn’t know what to do next. She said they talked to customers, learned that, didn’t tell them what to do next, and went to product to get them to implement changes. This created a massive uptick in continued engagements.* I think that’s awesome. Talk to your customers. Don’t hide from your customers. But I would say the things that we would hear from our customers, if we called and asked questions, are probably things that we actually already know. So I’m not saying don’t talk to your customers. Absolutely talk to your customers. But if you really just took a second and thought about it, you could probably figure this stuff out on your own. It’s probably pretty obvious that we’re overwhelming them. That we’re not being specific. That we’re giving them all of the different things that they could possibly do, and they’re not doing those things. If you need to hear that from your customer in order to start doing that, cool. But chances are like I said, you don’t even have to talk to your customers. You know what you need to be doing. Now I would definitely talk to the customers. What kind of caught me off guard in what Zoe said was that she didn’t tell the customer what to do even though they said they weren’t sure what to do next. And they just went back and fixed the product. That’s cool. Fix the product, but to me, also tell your customer what to do. Our customers look to us for guidance. And if I’m talking to a customer and they tell me I don’t know what to do next, I’m not gonna say okay cool. I’m gonna go talk to my product person and we’ll get back to you as soon as that’s fixed. I’m gonna tell them what to do. Our customers want to know what to do. And maybe I have a low touch customer segment, but I’ve been talking to them. I’m still gonna tell those people what they should do next. So that’s my only, that kinda caught me off guard there. But I think that’s a great approach. Go talk to your customers and learn from them. And they might tell you I just have absolutely no idea what to do. But again, if you look at things objectively, if you take a step back, your ego out of the way, I bet you could probably see what the problem is. Here’s something to think about. When was the last time you signed up for your own product? When was the last time you saw what a new customer sees when they first signed up for your product? If you haven’t done that in awhile, you want to do it. Because there’s a really good chance it’s changed. It’s not the same experience that you once thought you knew. Or maybe you’re just wiser and you would go look at it and you would say: “Ah, okay.” When somebody signs up the first thing they see is this blank screen and no guidance. Or on the flip side, the first thing they see is that they can do all these different things, and there’s no guidance. So when was the last time you signed up for your own product? Go try that. See what happens. Take a screen shot. You don’t have to share it with anybody. But take a screen shot internally and get everybody to gather around and say this is the first thing our customer sees when they sign up. And this is a problem. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How to Get Customers to Help Define Engagement Models *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-engagement-models/ Don’t hide from your customers. Don’t pretend you know everything. Talk to your customers and figure out from that discovery process what your engagement model should look like. You can then extrapolate segment-based models or, for some customers, create unique engagement models just for them (if it makes sense). For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Is it appropriate to ask a customer how often they would like to meet? Some customer segments, possible the ones that may not pay us very much, if we ask them that question they might want to meet all the time. And here’s the thing. I see this actually, unfortunately, sort of frequently. How often do our … I run into situations where a customer is getting like an hour of consulting every week for free. Because we didn’t properly manage their expectations. We didn’t know what we were doing. And now the expectations of that customer are that they’re gonna get an hour of free consulting every week. So now we have to figure out how to throttle that back, because we kind of screwed up in the beginning. So there are times where we need to ask those questions. And there are times where we don’t need to ask those questions. Because we actually do know more about our customers than we think. And we also know what would be an Appropriate Experience. We tend to want to over deliver those so we start doing more. That’s why I say, don’t over deliver. Just deliver. Just deliver an [Appropriate Experience](https://sixteenventures.com/desired-outcome). Now if we’ve been over delivering and we realize that that was too much and we don’t need to do that going forward, we could still draw a line in the sand and say [those were an early cohort](https://sixteenventures.com/customer-success-goals). They still get that higher touch experience even though they’re not paying us very much. Their margins are gonna be lower. But going forward, this customer segment that they match, those new customers aren’t gonna have that higher touch experience. But yeah, it certainly in the earlier days when we have to talk to our customers more. Which is not a bad thing at all. But if we have a higher touch, or if we have a customer that’s paying us enough and we would think that they might want a higher touch experience, yes ask them. We may find that they don’t … And it of course at some point, we may find you know we have what we thought was just one segment that pays us a lot. Maybe multiple segments. One is they need a high touch. The other is they don’t. But if we have a segment that we think would want a higher touch experience, ask them. You may find out that they don’t want us to talk to them very often. Here’s the trick though. We can’t let customers go without any intervention. Okay. So we need to say at the very least, we’re going to reach out. I don’t want to check in with them. I always want to have a reason for this. But we’ll let them know. If we ever see something change we are gonna reach out. Maybe we will do quarterly business reviews or something with you. Or just other scheduled executive business reviews. Whatever that looks like. But don’t let them think that you’re never gonna talk to them. Okay. And that they shouldn’t talk to you. Kind of make sure that those channels of communication are open. Manage expectations properly. And also just be open with them I guess is the main thing. And have that open line of communication. We never want a customer to just completely go away. We want to make sure that we have some intervention. But we shouldn’t be shoving this really high touch experience on them if that’s inappropriate for them. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success-driven Marketing: Targeting Offline Customers *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-driven-marketing-offline/ Customer Success should drive everything your company does, including sales and marketing. When it comes to targeting customers that aren’t online, first, I’d push back on the assumption that your customers aren’t online. Second, I’d remind you that Customer Success-driven Marketing means understand the customer’s Desired Outcome so you can craft a message that gets their attention and then understanding where to put that message so they see it. Let’s dig in, shall we? For context, on Friday, May 19, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video is embedded below and below that is the transcript (edited for better readability) that answers the question. ## How do I target my customers when they’re not online? So this question – How do I target my customer other than cold call if they’re not online and/or prefer to know you in person, for example Farmers? – is not necessarily a Customer Success question. But certainly a Customer Success-driven Growth question. And I work with companies across the life cycle. I do a lot of, actually a fair amount of work in what I call Customer Success-driven sales. In fact we just had a podcast drop with Bowery Capital today, [talking about Customer Success-driven sales](http://www.bowerycap.com/blog/podcasts/customer-success-driven-sales/). And I’ll post that to all my different social media outlets. So you can listen to that. It’s, I think it’ll be very enlightening. So Customer Success-driven sales is, you know, again ensuring that we’re doing business with the, with customers that can be successful. That we’re reaching out to, that we’re interacting with and ultimately that we’re closing good fit customers… customers with [success potential](https://sixteenventures.com/success-potential). You can buy the best Customer Success software. You can go to the best Customer Success events. You can do all the best Customer Success tactics. But if you’re bringing in bad fit customers, none of that matters. If you’re bringing in customers that have no success potential, why invest in Customer Success? It doesn’t make sense. Obviously, there are lots of reasons why you should invest in Customer Success. So, you should also be making sure that you’re bringing in the right fit customers. So what I would say, is, so going to answer the question specifically, how do you get in front of customers that aren’t online or in front of customers that … What was the other part of the question? That aren’t online or? So how do you get in front of people that aren’t online? Chances are, people are online. You may just not be, you may need to get creative. I mean Facebook ads are a huge way to get in front of people. Like, I don’t remember how many, what massive percentage of the Earth’s population are on Facebook. So there’s a really good chance that you can actually get in front of them. But if not, good old fashioned direct mail works guys. I know a lot of people, I don’t want to say a lot. Actually, I know a handful of people who are just crushing it by sending out real live mail. Right? I was looking to see if I had a piece of mail to show you, in case you don’t remember what a piece of postal mail looks like. It’s like a piece of paper, it’s an envelope, there’s stuff in it. Maybe it’s a bigger envelope with like a book in it. That stuff is crushing it because, the reason I really wanted to say that I really don’t see a lot of people doing this. And I said a handful is because, not a lot of people are using direct mail. Which means there’s not a lot of noise. And yet I can get something of value directly to the person that I want to get it to. Whereas they’re getting 1000 emails a day from, you know, people reaching out cold. They’re not gonna get 1000 pieces of mail. They’re gonna get a couple. And if I can make mine stand out, if it’s enough of a high value client, I’m gonna do it Fedex. Or I’m gonna do it DHL. I’m gonna send it, like, I’m gonna make sure that this really really stands out. And then I’m gonna track it. And I’m gonna call them right when I see that it was delivered. Or give them a little bit of time. So that’s how I would, I mean, you can find that information. You can buy those lists or whatever. Easily. Right? And so, we want to figure out how to get in front of them. That’s what I would do. Is like, if they’re not online and I can’t figure out how to reach them on Facebook or LinkedIn or something like that. But I would always push back on that and be like you sure they’re not online? Which goes to the other part of the question. Just because they’re online, or just because you can reach them via FedEx or whatever. That doesn’t mean that you’re gonna be able to close them online. Or that you’re gonna be able to use that FedEx to give them a link to go and buy. That may be the thing that opens up the conversation with them, but they still might want to meet you. They may still want to buy from you in person. And this goes back to [Appropriate Experience](https://sixteenventures.com/desired-outcome). Appropriate Experience is what? It’s across the entire customer lifecycle. And starts with sales and marketing. And it goes all the way through the three, five, seven, ten years or more that they could be our customer. I had a, I did a workshop in Ireland last year sometime. And, I had a lot of people from Europe there. And we’re talking about the stuff and a guy came up to me and he said, “I have a problem doing business in Spain”. In Spain, and this was this guy’s experience, so again, rash generalization here, but he said in Spain, they like to take three-hour lunches. That’s how, you know, when you’re going through the buying process with a prospect, it’s all about relationship. They like to take a long lunch and just get to know you. And he said: “What I’m hearing is that’s just part of their Appropriate Experience, and I can’t really fight that.” And I said exactly. That’s a cultural thing. Like you’re probably not in a position to shape their culture yet. Maybe we’ll get there right? Maybe at some point you’ll be in a position. Do that. But right now, not gonna happen. So, if you want to do business (what I told him). If you want to do business in Spain, in this particular segment at least, you’re probably gonna have to have those three-hour lunches. And if you cannot do a three-hour lunch, you don’t have the resources, you don’t have the time. You can’t go to Spain ’cause maybe they’re not based there. You can’t get sort of in person with the customer. Then we would say, geographically, regionally, customers in Spain are a bad fit. Now if a customer in Spain comes to him, and says we want to buy from you. He could just straight up say that’s cool. I don’t come to Spain very often so we’re gonna have to do this over the phone. Or we’re gonna have to do this over the Web. He can manage those expectations because they’re coming to him. But if it’s a situation where they’re spending time and resources and money, trying to get in front of Spanish customers, then they either need to conform to the social and cultural norms in Spain or they’re not gonna be successful. And so, the thing was we’re not gonna target Spain anymore. Because we can’t sell the way they want to buy. It’s like, when you say, I really want to have a no touch, really like a no touch experience with our customers. I want to just have somebody be able to buy with a credit card. And I never have to talk to them. That’s what you want. That’s how you want to sell. Your customers, however, want to buy a certain way. And it may not be that credit card. May not be a low touch or no touch situation. You can choose to try to force your method on them. Or you can choose to do business the way they want. That’s Appropriate Experience. So that’s an example of Appropriate Experience just going across the entire customer lifecycle. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Lincoln Murphy Customer Success AMA Transcript and Video – May 19, 2017 *May 19, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/lincoln-murphy-customer-success-ama-transcript-and-video-may-19-2017/ On Friday May 19th, 2017, I did a [Customer Success](https://sixteenventures.com/customer-success-definition) Ask Me Anything (AMA) on Facebook live. It was awesome. The video is embedded below, along with the questions that were asked and my answers. Yep, if you don’t want to watch or listen, no problem! I got the entire AMA transcribed (and cleaned it up a bit for readability, added links, etc.) and posted that below. I answered 13 questions in great detail. [Follow me on Facebook](https://www.facebook.com/LincolnMurphyShares/) so you can find out the next time I do one. ## Table of Contents Here’s the list of questions I covered in this AMA: - [Should Sales or Customer Success handle Upsells?](https://sixteenventures.com/customer-success-who-handles-upsells) - [How do we help our salespeople with Customer Segmentation?](https://sixteenventures.com/customer-success-sales-segmentation) - [How to incorporate High/Low/No Touch into Onboarding?](https://sixteenventures.com/customer-success-high-low-no-touch-onboarding) - [How do I target my customers when they’re not online?](https://sixteenventures.com/customer-success-driven-marketing-offline) - [What if our customers don’t like technology?](https://sixteenventures.com/customer-success-non-tech) - [What’s the best way to define roles?](https://sixteenventures.com/customer-success-management-roles) - [How to keep customers engaged post-training?](https://sixteenventures.com/customer-success-lifecycle-engagement) - [Should we tell customers what to do?](https://sixteenventures.com/customer-success-tell-what-to-do) - [How to implement High/Low/No-touch Segmentation?](https://sixteenventures.com/customer-success-high-low-no-touch-segmentation) - [Is it appropriate to ask a customer how often they would like to meet?](https://sixteenventures.com/customer-success-engagement-models) - [How do you reset customer expectations if they haven’t been managed correctly? ](https://sixteenventures.com/customer-success-reset-mismanaged-expectations) - [What users to focus on during Onboarding and Engagement?](https://sixteenventures.com/customer-success-focus) - [How are your Portuguese lessons are going?](#13) ## How are your Portuguese lessons are going? Oi, Daniella! My Portuguese lessons are amazing. Actually, I’ll tell you, I actually had a really great experience with [Street Smart Brazil](https://streetsmartbrazil.com), is the company that I go through. And I’m learning Portuguese, it’s actually funny, I’m learning it, I can’t remember anything right now, but also it messes with my English. So I find myself when I’m speaking English now, I’m thinking about things in Portuguese and it’s messing me up. So I’m like, how do you say … Car, you know? I’m like oh. But Street Smart Brazil is really a very cool company. I signed up for the wrong course, when I first signed up, and Daniella, my instructor, when do Skype lessons … She lives in Florianopolis, in Brazil. Our first Skype session, she was talking to me in Portuguese and I thought: “Oh no! This is going to be one of those immersion things and I have to catch up.” And it turns out, I had signed up for a course, meant for people who were already fluent. It was a course for business-Portuguese. And, I said you know, I messed up, apparently I can’t even speak English, or I can’t even read English, which is right there on the sign up form. But I thought, I wanted to learn business-Portuguese. So we figured that out, and we had a few lessons. And then I got an email from the CEO of the company, saying: “Daniella says you are doing great, that’s awesome. You signed up for the wrong plan. You signed up for a more expensive plan. We’re gonna put you on the right plan, which is a few hundred dollars less.”, or whatever. And I thought: “Man, that’s awesome!”, and I told her: “You don’t know this, but I work in this world of Customer Success, and what you just did was a very customer-positive thing.” You took a short-term revenue hit, you know, they went from something that would cost a certain amount, to a little bit less. Like I said, a hundred dollars a month, or something like that. They took that short-term revenue hit. But what are the chances … Number one that I’m gonna tell everybody to go to Street Smart Brazil if you want to learn Portuguese. And number two, that … I’m gonna stay longer. That I’m gonna buy more. If new training comes along that I want to take on, other courses, other books or whatever, that I’m gonna do that. That I’m gonna tell people. So I’m gonna stay longer, I’m gonna buy more, and I’m gonna advocate for you. That’s what we all want. So she took a short-term revenue hit, to get probably a lot more value out of me as a customer. That’s a lesson in Customer Success. I didn’t even initiate that. I thought: “Well I screwed up.” And then I get this email because Daniella told her, that I had signed up for the wrong course, and then she did the right thing. Which is amazing. So Street Smart Brazil. That’s where I’m learning Portuguese. And really messing with all of my language skills. But it’s amazing, and hopefully when I get to Brazil next week, some things will start popping and I’ll be able to order pão de queijo properly. ***Update… Brazil was awesome and my Portuguese is getting better! I ate a lot of pão de queijo!*** [|Back to Table of Contents|](#toc) ## Join the next AMA [Follow me on Facebook](https://www.facebook.com/LincolnMurphyShares/) so you can find out the next time I do one. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Process for Discovering your Customer’s Desired Outcome *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/discover-desired-outcome/ Customer Success is when your customer achieves their Desired Outcome through their interactions with your company. [Desired Outcome](https://sixteenventures.com/desired-outcome) is Required Outcome + Appropriate Experience. Each customer segment will have its own Appropriate Experience (AX) – even if they share the same Required Outcome – and this will tell you the type and level of coverage (humans – required skills, characteristics, etc. – plus technology). But below I go into more detail about the process and why it’s critical for you to understand… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Discovering your Customer’s Desired Outcome *I don’t know about really easy, but how about from Mariestela, “How do you go about knowing the desired outcome of your client?”* Amazing that it took this long for that question to come up. How do you know what the desired outcome is for the customer? It’s [an 11-step process to understanding the customer’s desired outcome](https://sixteenventures.com/logical-customer-segmentation). Basically … It’s a great question. First of all, remember Desired Outcome is made up of two pieces. One is Required Outcome. That’s the business goal. That’s what they have to achieve. The other is their Appropriate Experience (AX). The first one is relatively easy to understand. It’s probably why we built the product. It’s something that is easy to grasp. It’s the Appropriate Experience – AX – part that most people have problems  with, not simply when they start doing this process, but often in simply wrapping their brains around the concept in the first place. What AX requires you to do is to really get to know the customer. When I say that, what I mean is there’s not going to be one question that you ask a customer and you will magically know what their Appropriate Experience is. You’re going to have to talk to them. Ask them questions. Don’t ask them what their Appropriate Experience is, but start talking to them about what they would expect in order to be successful. You’re going to have to take those questions and really make them your own for your situation, but it’s more than that, too. Start looking at adjacent products that are similar to yours in price, similar to yours in who buys and uses it inside of a company, but are not competitive necessarily. You could look at competitive products as well, I guess, but what we want to do is get an idea of what our customers would expect from a vendor similar to us. That’s going to give us some baseline. We can ask questions of our customers, “Are they happy with those vendors or not?” And then shut up and listen to their answer. Let them talk and listen for things – good and bad – that aren’t about the product but are about the overall experience. That will start a conversation, which is what you want. “This company that is similar to ours has a low touch experience, and our prospect or our customer is saying that that’s not appropriate.” Okay, cool. We can start to ascertain some things from that. It’s observing. Go spend some time with your customer actually onsite. When was the last time you shadowed – not just visited for a meeting – a customer? You actually saw them using your product or saw them doing their job. There’s a whole bunch of things that you can do. It’s a discovery process. It’s not a dictation process. In other words, you’re not telling your customers what their Desired Outcome is. It’s a discovery process. It takes some time. Let me put it a different way. It just takes some energy. You can do this relatively quickly. You probably also know a lot more about what your customer’s Desired Outcome is than you even think. Sit down, take a step back, think about it. I bet you’ll come up with some answers that you hadn’t even really considered. There’s a process to this, but hopefully that gives you some ideas. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: How to Close the Feedback Loop with… *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-feedback-loops/ Customer Success Management, Marketing, Sales, Product, and the Executive team all have unique information about the customer. This includes how the customers talk about what they do, how they talk about and use our product, how any of this aligns with our strategic direction (or not). So creating feedback looks among all of those parts of the company is part of [Customer Success Management](https://sixteenventures.com/elements-customer-success-management). For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Closing the Feedback Loop *From Scott, “What is your opinion on closing the feedback loop? An entire organization is in the loop on customer success. Should all touchpoints have a feedback mechanism?”* Scott asked about feedback loop inside of a company and really based around customer success and whether or not I think that should happen. Yeah, absolutely. Customer Success Management specifically has so much amazing content, just knowledge, intelligence around our customers that we should be feeding back to the rest of the organization. What’s working with our customers? What are some use cases that our customers have found successful? What are the types of customers that are really finding a lot of success? Be feeding that back to sales. Here’s the way that our customers talk about our product. Here’s the way that our customers are talking about what they do. Here are those use cases that are really working. Here are the characteristics of the customers that have grown really substantially over time, whatever. Same with marketing. By the way, lead with those positive things so that you gain their trust. If you in customer success can help sales, help a sales person close one extra deal because you gave them some intelligence about a customer, they will trust you. Now later on, you can come back and say, “Hey, by the way, here are the characteristics of a bad fit customer. Can you please not sign anymore of these?” If you start with that, if you lead with that, then they’re never going to listen to you because basically you’re saying, “Hey, don’t do your job. Don’t earn your commission. Don’t, don’t, don’t, don’t.” We want to start with something positive. With sales and marketing, those are some really easy wins that we can have, but product feedback. If the things on the product development roadmap do not directly translate or directly tie to things that are going to make our customer successful, I don’t really know why we’re billing those things. That’s a whole other discussion, but customer success can really feed back to product. Often times, product only hears when there’s a problem or if they do reach out. There are certain methodologies obviously they can use to get feedback, but customer success has a lot of additional context that can be used to feed back in the product and absolutely should be. That stuff should be operation wise. It should be happening at least on a weekly basis. Whatever the modality is, whether it’s an email, whether it’s a meeting, it doesn’t matter. Don’t get caught up in that. Let’s just make sure this stuff happens. That’s great. We have that customer intelligence that gets fed back to the rest of the company, but then we have something else. That is customer success needs to feed back certainly to the executives, but I would say to at least all other leadership, the value that they’re bringing. Very often, we say that a VP of customer success or the chief customer officer, or whoever it is … If you don’t have a big title, but you’re doing customer success and you are the customer success department in the company, this falls on you. It’s up to you to evangelize this concept internally, which means sharing all of the great things that are happening. I was sitting in a meeting in San Francisco a few months ago. We took a little break and there were two customer success leaders from two different business lines. One of them left, and then the other one was sitting there. She was looking at her computer. She kind of made a move and you could tell that something good had happened. I said, “Hey, what’s going on?” Because I was curious. She said, “Oh, well it looks like for the first time … These numbers for the first time we’ve brought in more revenue from existing customers than we did through new business scales, so in other words expansion revenue.” I said, “That’s amazing. That’s awesome. You should send that to the CEO.” She said, “I don’t want to bother him.” I’m like … First of all, I had just spent time with the CEO, so I knew that particular CEO would definitely want to hear that, but second of all, even if I didn’t know that CEO, that’s what a CEO wants to hear. Even if they don’t know they want to hear it, they definitely want to hear it. They wouldn’t tell you, “Make sure you tell me when this happens.” They might not even be thinking about that, but if you have that milestone, you need to tell. I would probably send it to the whole company and then ask for forgiveness later, “But that’s amazing that this happened.” It’s up to you to communicate this to the rest of the company. It’s up to you to evangelize this especially if customer success is new in your company and especially if you’re fighting an uphill battle like the culture was maybe more customer negative in the past and we’re making this big switch. It’s up to you to keep fighting the good fight to put those things out there. When you have those great milestones that happen in the company, you need to communicate that. It’s up to you. I hope that helps a little bit. We have time for one more question. Try to make it a simple question, a simple one-part, really easy question. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success and Upgrading Grandfathered Customers *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/upgrading-grandfathered-customers/ If you’ve been in business for any amount of time, you likely have customers that you’ve “Grandfathered” into old pricing tiers or feature sets that are obsolete now. How can you get Grandfathered customers to move to your current pricing model in a customer-positive way? I have some ideas for you… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Upgrading Grandfathered Customers *Tony sent in via email, “What is the best way to upgrade actual customers to our new pricing plans. We’ve been grandfathering them for a long time, but now it’s too costly to maintain those initial price points.”* One thing I just want to focus on is you can’t punish the customers that you signed. You signed that contract.You signed those customers with the [wrong pricing](https://sixteenventures.com/pricing-strategy). You signed those customers with low margins in an unprofitable way. You signed those customers. They trusted you. If you want to punish them because you made a mistake, just know that there may be negative ramifications. I just want to be really clear on that because very often, “We did what we had to do, man. Then we’ve got these customers. Now they’re a drain on our resources.” That’s your fault. If you [churn and burn](https://sixteenventures.com/churn-bad-fit-customer) those guys because you made a mistake, you could really run into some problems. There’s been a lot of … Luckily not a ton, but there have been some pretty high-profile cases over the years of backlash from companies that basically did that exact same thing. They grandfathered their customers and then they got tired of supporting them. Just be really careful there. That said, in that article that I wrote … Again, I can’t remember exactly where I put it … I basically detail exactly how you want to do this. There are several things. One, we have to go back to the customer, to their [Desired Outcome](https://sixteenventures.com/desired-outcome). What are they looking for? There’s a really, really good chance that a customer that’s been with us for several years has actually evolved and would be open to maybe some of your new features, some of your new services, some of your new training, but maybe we actually stopped communicating with them, which is something that happens. We grandfathered them. We just want them to go away, but maybe we could go back to them understanding logically where they’re at in their trajectory as a company or as a department or whatever they are. We could go back to them and say, “Hey, you’ve been a great customer. What we want to do is move you onto this new plan. It includes all this really great stuff. We’ll help you get there.” You give them a discount, a significant discount maybe on this higher up plan, but you move them to that new plan. They’re maybe paying more, but they’re getting a lot more and they’re on your new pricing structure. They say, “For being a great customer for all these years, we’ll give you this big plan, this really great thing for 50% discount for the next six months, for the next year or whatever. After that, it will be full price.” Start making offers like that that will actually entice them. This means you’re going to have to take a step back, get out of this mode of punishing your customers. I’m not saying Tony, that you want to punish your customers. I’m saying, in general, this is something that I hear a lot. Think about your customers. What can we do? What would those grandfathered customers, what would help them, what would make them want to actually move? If I said simply, “You’re not paying us enough, you’ve got to pay us more,” that’s ridiculous. Nobody is going to do that. Nobody wants to do that. Would you do that? No. Put yourself in your customers’ shoes. Think about them for a little bit. Try to figure out something that we can use to entice them. Set the goal, “I want zero grandfathered customers by the end of the year and start building campaigns like that and running that until you get to that goal.” We have to make it all about the customer. We can’t punish those customers that brought us to the dance. They were here early. We made a mistake. They didn’t. That’s just something you’ve got to get out of your mind. Think about what we can do to entice them. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success in Early-stage Startups *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-startups/ Early-stage startups think Customer Success isn’t for them. Wrong! Not only is [Customer Success](https://sixteenventures.com/customer-success-definition) for startups (along with established companies), it’s also your key to growth without the friction of churn and bad-fit customers distracting you from rapid expansion. Let’s talk about how to apply Customer Success in early-stage startups. For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Customer Success in early stage Startups *Susana asks, “What are the main points a small startup has to care about to build a strong customer success culture?”* I think you have to care about your customer. Start there. Understand what your customer … What is their [Desired Outcome](https://sixteenventures.com/desired-outcome)? Startups are an amazing thing. They’re also incredibly, incredibly frustrating because the sky is the limit. The possibilities are endless. Anybody could be our customer. We don’t have to worry about that stuff right now. Probably all of that is not true. We have certain customers that we built the product for. We have certain customers that can get value today. We have to get deliberate. We have to get specific. We need to understand who you’re actually trying to sell to or who your customers are. You have to understand the different segments within those customers. That’s based on the Appropriate Experience of those customers, what they need. Then we need to understand just overall their desired outcome, what is the business outcome that you need and what is that appropriate experience? Then we need to start to solve for that. None of that, by the way, takes technology. None of that takes any special skills. All of that takes a dedication to making sure that we’re here to solve for the customer success. Startups are all about what we don’t know. A lot of times we don’t know what we don’t know. A good sanity check is always, “Is this in the best interests of the customer?” Very often, we know some things. I just wrote a post a couple of weeks ago that got a lot of plays. It’s the [$1.2 million Churn and Burn To Learn Mistake](https://sixteenventures.com/churn-bad-fit-customer) or something like that. It’s really all about the high cost of bad fit customers. It specifically talks about a startup that knew full well that just three customers that they signed were a bad fit. They knew this because there wasn’t a technology fit there. Yet, they still signed them. I don’t want to spoil the whole thing, but basically, they lost $1.2 million in revenue, a couple of million dollars in company valuation and honestly could have gone out of business because investors started to lose trust. Go read that article. It’s very eye opening. The thing is in startups up, we like to just ignore facts and almost be anti-customer in some ways because we’re just trying to do things. I think that that’s a really big mistake. You could actually cause your business to fail. You could certainly cause a lot of friction to growth. No reason to churn over in customers right now. All of this goes back to having a just really dedicated focus on making sure that your customers are successful, which means really understanding what that means. What is the Desired Outcome of our customers? And solving for that. Hopefully that helps. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Drawing the Line between Customer Success and Support *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-support/ How do you draw the line between Customer Success and Customer Support? This seems like a logical question until you understand the reality behind operationalizing Customer Success Management. Let’s dig in… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Drawing the Line between Customer Success and Support *Nick has asked, “How does customer success overlap with support in regards to onboarding? How do you draw the line? Also, how do you effectively draw the line between sales and customer success?* When I’m drawing a line, I like to use a ruler. [Customer success is this overarching thing](https://sixteenventures.com/customer-success-definition). Customer Success Management is the operationalization of customer success. [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) needs to be proactive. Customer Success is not support! Support is a different thing. Support should be thought of as a part of customer success in some ways. We need to know whether or not our customers are being taken care of. We need to know that when they have questions and when they reach out to open support tickets that they’re being taken care of. How do we know if a customer is successful? One of the things is that they’re doing the things that are necessary to be successful. Probably that has a lot to do with using our product if we’re in the technology world. If they’re having issues with the use of the product, that is probably an indication that they’re NOT doing the things necessary to be successful. If they’re having problems and opening a lot of support tickets, but they’re resolving those quickly and in a positive way, that’s cool. That means they’re actually trying stuff. They’re pushing the envelope. They’re maybe trying things that the product can’t do or whatever. That’s okay. They’re pushing it. As long as those things are being resolved quickly, we’re good. If those things are not being resolved quickly or at all in a way that’s favorable for the customer, then we know that they’re not actually doing what’s necessary to be successful. They’re both very important – Customer Success and Customer Support / Service – they’re just two different things. The line is very simple. If you have a break-fix type of situation, “I can’t use the product, we’re having a technical issue,” then you contact support. If you have a “How do I do this kind of question?” that’s something that Customer Success should handle, ideally in a proactive way in the process of moving the customer toward their Desired Outcome. Maybe there’s a [Success Gap](https://sixteenventures.com/success-gap) there I can bridge for you … you’re not having any problem with the functional use of the product, you’re just having a problem with actually achieving your Desired Outcome. The [Required Outcome](https://sixteenventures.com/desired-outcome) of your use of my product, the goal that you have and not being able to achieve that, that’s going to be a problem. That’s a Customer Success thing. The idea is in Customer Success that we get ahead of that. We don’t let our customers get to a point where they’re asking, “How do I do this?” We’ve orchestrated a process to help them get along the [Success Milestones](https://sixteenventures.com/success-milestones) and make the progress that they need to make. If they’re doing that and we’re proactively guiding them, they run into something, a technical issue. Then they reach out to support. Right now, if you have a Customer Success Management organization or if you ARE the Customer Success organization and you are doing support as well, you need to stop right now and split that up. Even if it’s still you doing support, you need to get customers thinking about the fact that support is different than success. They’re both very important, but I’m going to do my customer success stuff and I’m going to move you proactively through your Success Milestones. When you have a support issue that you need to open a ticket or something, you go here. You go to this website. You send an email here, whatever it is. Again, behind the scenes, I may still be the person answering those, but we start separating those functionally within the company and then that starts setting everybody up for later on when we need to scale. If you call yourself a Customer Success Practitioner (CSP), but all you’re doing is answering support tickets and that’s how your customers think of you, then you’re never going to be able to get ahead of the customer to be able to get to that proactive stage. Separate that right now, dedicate some time during the day to answering support issues. Dedicate some time to being that proactive CSP. That’s going to be your best bet. In larger companies, this is usually already done, but what isn’t done is this orchestration of it, letting customers know from the very start, “This is who you go to when you have an issue. This is who you go to when you have this other kind of issue.” Separating this during [customer onboarding](https://sixteenventures.com/customer-onboarding) is actually even easier when you have a CSP that should run point or take over with the customer as soon as they become a customer. As soon as Sales closes the deal, we have a Customer Success Practitioner (or pooled resources) that should own the relationship with the customer. Then from there, they can bring in the various subject matter experts. One of those subject matter experts may be an onboarding person, but the onboarding person is really dedicated to that. The CSP is there to set up the relationship, to kick off the relationship with the customer, to let them know, “This is who you’re going to be working with or someone like me for the next few years. Within the next couple of weeks, we’re going to be talking to this person over in our onboarding department. They will take care of you. I, as your Customer Success Practitioner, I will monitor whether or not they’re doing what they need to do for you. If they aren’t, I will intervene on your behalf. Of course, if for whatever reason you ever run into an issue, you can always reach out to me and I’ll make sure that you’re good. Then once they’re done with onboarding, then they come back to the customer success manager or practitioner. Whether that is a one-to-one really high-touch relationship or whether that’s a full customer success resource doesn’t really matter. Don’t get caught up in the details on that. Let’s think about how to actually look at this the right way first. Then we can dig in. Drawing the line is relatively simple when you understand that they’re two different things. They’re both very important. We have to have support, but we also have to have Customer Success. They are two different things. Hopefully, that’s either clearer or a lot more confusing. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Best Customer Success Management (CSM) Software *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/best-customer-success-management-software/ What is the best Customer Success Management (CSM) Software on the market today? As you might imagine, that question comes up frequently for me. Below, I try to give you the best answer I can on this very important piece of your Customer Success strategy. ## The Best Customer Success Management Software There are about 25 purpose-built Customer Success Management software products on the market, with more coming online all the time (and some dropping off). These include products that manage the entire Customer Success lifecycle, products dedicated to Onboarding, those with a focus on communication, and those geared primarily toward Health Scores and Task Management. So there is probably a tool out there that will fit your situation. But you have to **know your situation**, first, or you will be fitting your situation into the tool you select. I don’t worry about the tools until I understand the strategy; until I know what we’re trying to actually solve for. You want to operationalize something? Great. What are you trying to operationalize? See, if we don’t understand our customers, our customer segments, [the logical segments](https://sixteenventures.com/logical-customer-segmentation), the intelligent segments, based on their [Appropriate Experience](https://sixteenventures.com/customer-success-definition), then we can’t know what type of coverage we’re going to have to give those customers. We can’t know what ratio of humans to technology we’re going to need. I can’t tell you blanket, “You’re doing Customer Success, cool, go use this specific product.” I can’t do that because 1) I don’t know your unique situation and 2) every single Customer Success Management tool or solution has a different focus and different strengths, or may do totally different things in different ways. You have to get clear on what it is you’re actually trying to solve for before selecting a tool for the job. And if you ask a group of 10 CS leaders what system they use, you’ll get 5-10 different answers and you won’t be any closer to an answer that works for you. It’s best to figure out what you need and then ask specific questions to your peers, ideally peers that have similar operating environments as you. By the way, this is no different than any other part of the business. If I said to a HR leader, “Just go use this HCM product,” but I don’t really understand what it is they’re trying to do – other than high-level “human resources” – that’s probably not going to be super helpful. If they listen to me, they might start trying to shape their operation to whatever the tool is that I suggested. So, what’s the best Customer Success Management software? I can’t give you that answer (no one can without understanding the operating details of your unique situation). I can tell you to look at all the different Customer Success Management solutions. I can tell you get demos from lots of different products to get an idea about what’s out there. But also look at standalone workflow tools. Look at some marketing automation products. Some of the sales outreach tools can also be used. Look at Async Video platforms. You have to figure out what you’re trying to solve for, though. That’s the first thing. Do that and then we can figure out what tools you actually need. I hope that’s clear. It may not be the answer you wanted to hear, but that’s the truth. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Why Aligning Sales and Customer Success is Critical *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/sales-and-customer-success-alignment/ The goal of Customer Success for your company is to get customers to stay longer, buy more, and advocate for you. So it’s critical to remember that [Customer Success](https://sixteenventures.com/customer-success-definition) begins at the first interaction with prospects by your sales team, continues across their entire lifecycle, and is required for scalable, repeatable Account Expansion. Which means it’s absolutely critical for Sales and [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) to be aligned. Let’s dig into this… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Sales & Customer Success Alignment *The next question is from Bob, “I was curious about your thoughts on the alignment of our customer success and enterprise pre-sales teams. My question is if it makes sense to have CSM, CS architects and pre-sales all reporting under one leader. We sell a big ticket, 500k, ACV **enterprise data management solution to large enterprises.”* I’ve covered [Sales and Customer Success Alignment](https://sixteenventures.com/sales-customer-success-alignment) in some detail before, but let me approach it from a slightly different angle here. The question is really about sales and customer success alignment. Whatever that needs to look like. Whatever that looks like in your situation … Bob has a specific situation, but we all have sales and we all have customer success hopefully. We all have those things and we want to make sure that they are aligned. Alignment from a strategic standpoint, alignment from understanding what the [Desired Outcome](https://sixteenventures.com/desired-outcome) is for the customer or making sure that sales is not selling something that we can’t deliver, that sales knows what a bad fit customer is and doesn’t acquire them, that sales is handing off to customer success. I don’t really like the term [handoff](https://sixteenventures.com/customer-success-terms-to-avoid), but it’s so ingrained I can’t even get away from it. We want to make sure that our customers … Whatever we get during the sales process, whatever we discover is really passed to whoever is going to take over once they become a customer so that we’re not having to ask them the same questions over and over. All of that is table stakes. We have to have that. What that ends up actually looking like is going to be very unique from company to company and probably even across your different customer segments. That’s really important to think about. In terms of a specific situation like we have a high contract value product. Maybe it’s more of a complex sale. We have more people involved on both sides, on the customer’s side as well as ours. How do we ensure that there’s that alignment? The main thing is we need to understand … Again, going back to appropriate experience, understanding that the appropriate experience for the customers, the way they buy … The way they buy is part of their Appropriate Experience. Appropriate Experience is something that goes across the entire customer lifecycle, goes across all of the different interactions. It may be completely appropriate for a sales person to involve a customer success manager, a customer success architect, whatever customer service practitioner you want to … However you want to refer to them or whoever it is. It may make total sense to include them in the sale process when a prospect is 50% of the way towards closing. On the other hand, it may make no sense. That would be completely unprecedented and it would completely inappropriate. In that case, you may want to have your customer success practitioners vet the pipeline, look at the customers behind the scenes, make sure that they fit our [success criteria](https://sixteenventures.com/success-potential), make sure that they’re a good fit in other ways, make sure that we know everything that needs to happen, make sure we understand what’s going on with the customer. Where we don’t know if the customer is going to be able to be successful, we can give the sales person the right questions to ask the prospect in there. Whether or not the customer service manager or customer success architect or whoever is actually involved with the customer in the pre-sales, again that depends on the appropriate experience for the customer. Note that I didn’t say that it necessarily has anything to do with … Although we’re talking about Bob’s example of the high ticket item, actually it doesn’t have anything to do with how much a customer is going to pay us. It has everything to do with how much a customer needs those people to be involved in the pre-sales process. That’s the main thing. You have to look at your situation, look at the customer, figure out whether or not we should actually involve a person with the customer, whether the CSP, the customer success practitioner, should be just behind the scenes. I can’t give you a definitive answer, but hopefully that gets you thinking about this the right way. That alignment has to be there between sales and customer success. It’s really the triangle of customer success, marketing and sales. We should all be aligned. Way too often, we’re not, and I just don’t understand that. There’s no reason for that. If we’re here to make our customer successful and we’re all working for the same company, we all have the same goals, we should all be aligned. That alignment should be there. Tactically how you make that happen is going to very much depend upon your situation and certainly depend upon your customers. I hope that helps a little bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success and Charging Setup Fees *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-setup-fees/ So, do Setup Fees jibe with [Customer Success](https://sixteenventures.com/customer-success-definition)? Are they mutually exclusive? Can they play well together? Is there a time or place where they’re more appropriate? The answer is, of course, yes. And no. Don’t worry… I unconfuse it all below. For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## What is your thought on setup fees? *The first question is from Tim, “What is your thought on setup fees? We charge a few hundred bucks to customers of a certain size, but realistically, we care far more about the recurring plan revenue than any upfront fees.”* Tim, thank you for your question. It’s interesting. Setup fees, there’s certainly some psychology to getting people to make a commitment early on, but a lot of times, it doesn’t do what we think it does. I’ve seen it a lot where customers will pay something and we think, “That’s going to lock them in.” Very often, we have an actual cost associated with setting up customers, and that’s cool. We have a cost so we need to cover it. Sometimes we think it’s going to be the thing that locks customers in. I think that’s where we need to get real. That doesn’t lock customers in. As long as we’re doing it as a way to cover our costs or because it’s what our customers expect, or even as a way to simply increase revenue… As long as it’s within the confines of an appropriate experience for the customer, I think we’re fine. It’s not going to cause people to stay. It’s not going to cause anybody to be successful. When you care more about your recurring revenue, what you should be focused on is making sure that your customers are successful. If what goes into the setup that you’re charging a fee for is going to set up your customers for success later on, then cool. If charging a fee is going to keep people from being successful, then that’s a problem. It isn’t good. It isn’t bad. It just is. The main thing is are you actually setting your customers up for success? If that’s the case, then I’m all for it. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Biggest Customer Success Mistake (and How to Avoid it) *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-biggest-mistake/ Spoiler Alert: The biggest mistake you can make in Customer Success is not putting the customer first – this is CUSTOMER Success. If what you’re doing isn’t designed around the customer’s Desired Outcome, I have no idea what you’re doing. You’re doing something, but it’s not [Customer Success](https://sixteenventures.com/elements-customer-success-management). But let’s talk about why this matters… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Number One Customer Success Mistake *Richard has a question. “What’s the number one mistake large/old tech companies make when shifting to customer success?”* Richard says, “What is the number one mistake old tech companies have … ? Just existing tech companies have when moving to customer success. It’s not just something shared by old tech companies. It’s something every single company that is either moving to customer success or bringing customer success in. That is not focusing on the customer’s desired outcome. I sound like a broken record or a YouTube video on loop, but the reality is that’s it. What I mean by that is if you focus only on churn … Say we have a churn problem and we need to get rid of that. Okay, cool. You can go try to fight the symptom that is churn, but understand that [churn is just a symptom of an underlying disease](https://sixteenventures.com/churn-symptom). That disease is that our customers are not achieving their Desired Outcome. We want to focus on expansion. We don’t have a lot of churn. We want to make sure our customers are buying more, that they’re staying longer, that they’re expanding their relationship with us, that they’re advocating for us. All those things that we want are all predicated on our customers achieving their [Desired Outcome](https://sixteenventures.com/desired-outcome). Without that, none of this matters. The first thing you have to do … Believe me, I have this … I don’t want to say it’s an argument, but I have this discussion with my clients all the time. They’re like, “Okay, we have this thing we want to do.” I’m like, “Okay, cool, what is the customer’s desired outcome?” Maybe we have to even start a little bit earlier, “Who is your customer? What is your ideal customer?” It all starts with the customer. They say, “No, no, no. We want to bust churn.” I’m like, “That’s not how this works. That’s not how any of this works. You have to figure out what the customer’s desired outcome is and go from there.” Everything we want to do in Customer Success comes from there. Everything we want to do in terms of how we operationalize, [the coverage levels](https://sixteenventures.com/customer-success-coverage-models), everything you need to know, the [software that we buy](https://sixteenventures.com/best-customer-success-management-software). All that is predicated on our customer’s Desired Outcome. We don’t know that … You can do stuff. Obviously, people are doing stuff, but I don’t understand what people are operationalizing around. I don’t understand what you’re doing in your customer success operations if you don’t understand the desired outcome of your customer. Obviously, you can do it, but I’m not sure what you’re doing. I think you probably don’t either. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Determining the Ideal Customer Success Organization Structure *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/ideal-customer-success-org-structure/ A persistent question in Customer Success Management is what the ideal organizational structure is. A great example of this is this question I received: In a large enterprise platform with a high-revenue customer base, do you see any pros or cons to having the [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) team and the pre-sales team working under the same leadership? Such a simple question… with a not-so-simple answer. Let’s dig in… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Customer Success Org Structure *Bob from email asked, “In a large enterprise platform with a large ACV SaaS environment, do you see any pros or cons to having the CS team and the pre-sales team working under the same leadership?”* The question is, assuming we’re doing a lot of things right, we’re selling to the right customers, does it make sense just from a org structure standpoint to have customer success? Should [Customer Success and Sales](https://sixteenventures.com/sales-and-customer-success-alignment) all roll up to the same leadership? I would much rather see customer success sit under a CRO, a Chief Revenue Officer, along with sales than to see Customer Success Management under Operations or something like that. In a company organization, you basically have two ways of looking at Customer Success. This is a little bit higher level than what Bob was asking, but we’ll get down to that. First, you have Customer Success that’s a cost center. It’s something that has to be done. It’s really there for churn mitigation. That’s it. That would be when you find it under operations or when you find it without leadership just “reporting” to the CEO. They’re just out there to “make our customers happy.” If you have a CRO situation, where you have Sales and Customer Success rolling up to them, that’s interesting because then you’re looking at Customer Success really as a profit center, as something that’s a part of growth. The problem with that is if you have a sales-focused organization – when I say it like that, I mean a “sales at all cost” organization – you may run into situations where your sales organization will sign customers regardless of their [Success Potential](https://sixteenventures.com/success-potential) because they’ve got to hit those short-term numbers. Generally, if they’re both under a CRO – in an equal way – the cool thing is you have a VP of sales and VP of customer success. They’re both represented there. That’s fantastic. You could also have a Chief Customer Officer where that position owns Customer Success, support, training, etc. Every customer type of function rolls up to the CCO. They sit there along with sales leadership and other executive leadership. That’s also a really good thing. Ultimately, it comes down to not so much org structure. It comes down to culture. What are we really trying to do? It doesn’t really matter where Customer Success sits. It doesn’t really matter where Customer Success reports. It doesn’t really matter if you have a Customer Success where their only job though is on the pre-sales function, like a customer success centric sales engineer. If you had them sitting in the sales organization literally reporting to sales, but they are representing Customer Success, that’s cool. I think more than anything, it’s, “Are we going to give Customer Success Management a voice in the company, really be able to have that influence over everything else we’re doing in the organization, or is it just something that sits over here and makes customers happy?” Culture comes first and then structure in my opinion. I don’t know if that really answers this. Again, some of these things are very specific to the different companies. I think a lot of you guys are searching for very specific answers. I would be very wary of any situation where somebody just puts a blanket statement out there as, “This is the right thing to do.” It’s so specific to your company and to your relationship with your customers. Just be careful out there. Blanket statements around those things are going to be difficult. I know that’s what we want. We want those answer. We want those specific answers. I can give you ways of looking at it, ways of thinking about it, and you can go from there. I have faith in you. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success in Two-sided Markets *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-two-sided-markets/ Customer Success Management is about ensuring customers achieve their ever-evolving Desired Outcome. Regardless of the model – two-sided market, partner model, direct-to-customer, etc. – every entity in the value chain has a Desired Outcome. It’s up to you to discover what that is and facilitate the achievement of that (ever-evolving) Desired Outcome, and it all starts with getting clear on [Success Potential](https://sixteenventures.com/success-potential) for each link in the value chain. Let’s explore this idea further… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Customer Success in Two-sided Markets *From Ahmed, “How should we work around the problem of products which need two customer types to succeed? A product is used by one party, but if the other party is not using the same product, then it is not a successful product. It’s a SaaS product by the way.”* From Ahmed, the question was in two-sided product, you have essentially a network effect that’s required. You only have one side using it. I’ve definitely worked in situations where … Whether it was a product that was sitting between one company and another or whether it was a product that was sitting between a manager and their team or whatever. There are lots of different situations. It’s up to you to figure out how to make that work. I know you’re asking me how to do that, so you’re already going in the right direction there, but a lot of times, we want to just leave it up to one party or the other to make it happen, to get the one that signed up for our product who … Maybe they already know they can trust us. They should be able to get the other people to use it. That’s not going to work. We have to enable them to be able to do that. We have to give them the tools necessary. We have to … Remember this. When one person, in a B2B scenario certainly, signs up for your product and it’s time for them to bring in other people … Again, whether it’s intra- or inter-company collaboration, they are investing not just the money that they’re going to pay you for this product, but they’re investing something else, something potentially more important and valuable. That is their political and social capital inside the company and certainly within their greater network. If you don’t get them to a point where they can really trust you, then that’s a nonstarter. We have to really build their trust. We have to get them to, again, to know, like and trust us so that they will be comfortable bringing in other people from their network. In a free trial situation, I like to have them invite people to help them test. Literally put that in the micro copy there. That lowers the barrier. They’re no longer thinking, “I don’t want to invite somebody to this product because I don’t actually know that I can trust it yet.” Instead, when you say invite … You could be very specific with the types of roles of the people that you’re inviting. “Invite these three people to help you test this.” That lowers the barrier. Understanding the political and social capital that people are investing in your product is really important. From there, we have to know the types of people that they are bringing into the product, the roles, the types of companies they work for. It’s not a valid excuse to be like, “I don’t know who they would be inviting so I don’t know what kind of resources to give them. I don’t know what kind of language to use or what copy to use when I’m sending the messages to get them to come in. I don’t know what to do in terms of training.” That’s not valid. You have to go out and find out with your customers. Who are they trying to collaborate with? Give them the tools necessary to make that happen. If you choose not to do that, then you choose to leave this whole thing up to hope and chance and that’s never going to get you where you need to go. We have to be prescriptive. We have to understand our customers. We have to understand who they’re trying to collaborate with. I’m going to go back to the other question. I think it was the question. There was a lot of stuff going on there, but one of the things that he mentioned about resources in a startup. One of the things that drives me insane is startups, especially those that have chosen not to raise money. Using this, “We have a lack of resources,” as some sort of excuse, some sort of … I don’t know. Like, “It’s okay that we don’t do certain things.” No, that doesn’t work. That’s not cool. You chose not to raise money. You chose to start a company. You chose to start a commercial venture here. Those things don’t fly. Tony Robbins once said, “It’s not your lack of resources that’s hurting you. It’s your lack of resourcefulness.” I love that. You may not like Tony Robbins. You may not want to hear that kind of stuff, but the reality is that that’s a fantastic quote and it’s so true. All the things that you do as a startup, there’s so many things that you do that are all about being resourceful. Yet, we get to [Customer Success](https://sixteenventures.com/customer-success-definition) and we think, “Oh, I can’t do that because we don’t have any money.” It’s true. Sometimes lack of funds can hurt us in certain ways, but get resourceful. Let’s get clear on what a customer, what their [Desired Outcome](https://sixteenventures.com/desired-outcome) is. Let’s get really clear on the [kind of customer that we should be doing business with](https://sixteenventures.com/ideal-customer-profile) maybe the highest margin customers. Let’s go after them. A lot of times we do these things that are not deliberate and then we end up with a bunch of customers that are not ideal. Some of them are costing us a lot of money. We could have actually … It happened because we didn’t have resources. We couldn’t be deliberate. We couldn’t do some of these things. We ended up in a bad place because we used a lack of resources as an excuse, so get deliberate. Most of the things that I’ve mentioned today have very little to do with technology, have very little to do with a need for massive infrastructure or a lot of people. A lot of this just has to do with getting deliberate, getting clear and defining processes. That’s one of the biggest problems is a lack of process, just doing everything in a ad hoc way. Even if you’ve got processes, normalizing an experience across all customers when in fact, if you really understood your customers, you would realize that you have maybe a large portion of customers that don’t need the high touch that you’re giving them. You assume they do maybe because they pay us a lot … At least a lot for us. We think, “I’ve got to give them a really high touch experience.” Now you have a bunch of customers that you’re giving a high-touch experience to. They’re low margin and now you’re going into the cycle of apathy where you don’t like your customers anymore because they’re costing you too much money. The reality is you’re giving them an inappropriate experience and it’s actually an experience that’s costing you more money. If you really understood them, you may not have to give them that high touch experience. We cite a lack of resources as an excuse for not doing the things necessary. Then we end up in a situation where we actually have a lack of resources and it’s a cycle. Get deliberate. The things I’m saying here, I’m not saying the stuff to hear myself talk. I’m saying it to help you and I’m saying it because it’s true. It’s not always the easiest thing to hear. It’s not always the easiest thing to do, but this stuff works. If you do it right, it’s amazing. If you are a [early stage startup](https://sixteenventures.com/customer-success-startups), you have the ability to do it right from the beginning. Don’t get to a situation where you’re just doing everything in a not deliberate way and you get one or two years down the road and you’re just suffering from all of this … You’re giving customers an inappropriate experience and you’ve normalized across all of them and you’re having a hard time scaling. Just don’t do that. Start doing things right. It’s not your lack of resources. It’s your lack of resourcefulness that’s hurting you. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: The Secret to Improving Customer Adoption *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/improve-adoption/ Customer Success Management is about ensuring customers achieve their ever-evolving Desired Outcome. It’s not about adoption. It’s not about the breadth and depth of use of your product. These are big ideas you need to move past if you want to be successful in your Customer Success initiative. Let’s explore this idea… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Improving Customer Adoption *From Rosalind, “How do you manage expectations of customers while simultaneously knowing where you need to allocate more resources to improve adoption?”* First of all, what is adoption? That’s a good question. If you’re asking a question about adoption and you don’t really know, you haven’t defined that, that’s something you need to work on. I know it sounds crazy. How could somebody ask a question about something they haven’t fully defined, but that’s, unfortunately, a reality. We need to get really clear on what adoption means. Is it a certain number? Is it a breadth and depth of use? Is it 100% of the licenses that they bought? Is it a depth of feature use? They bought all these features or bought all these add-ons and that’s it. Is it some mix of the two? Probably is. From there, what I would say is we have to set those goals with the customer. I might have internally a goal. Maybe it’s based on past historical data, where I can say, “[Customers that churned out](https://sixteenventures.com/churn-symptom) had an adoption rate of less than 50%. They only used 50% of the licenses or seats or whatever that they bought,” but at some point … It may not matter what I think or what I’m looking at internally. It really will come down to what the expectations are with the customer. First of all, we need to define what adoption is breadth and depth. By the way, if there is [expansion opportunity](https://sixteenventures.com/logical-expansion) within a customer, we should probably never get to 100% adoption, we should always be having upsell conversations at 80%, something like that. That should be a very comfortable conversation that we have orchestrated early in the process, letting them know, “We don’t ever want you to get to 100% adoption because when you hit that threshold, we may run into other issues with procurement or with legal or whatever. It’s going to take time to add more licenses, so we want to start this process early so that you never miss out on expanding.” Remember, customers actually want to expand their relationship with you as well. They may not say it like that. They probably won’t say it like that, but they want to because it means that they’re growing, that they’re expanding. They’re being successful. We need to figure out what adoption is and then to your point, we need to manage expectations along those lines. What that means is whether … Don’t get stuck on the modality here like, “Is this a high touch or a tech touch kind of situation?” What we need to think about is how do we manage those expectations with our customers? That usually comes down to negotiating a realistic adoption goal for them. If you bought 100 licenses, is it realistic to have a goal of 100% adoption, 100% of those licenses being used in a month, in six months, in a year? I don’t know. This is 100% dependent upon, at the very least, the [different customer segments](https://sixteenventures.com/logical-customer-segmentation). It may end up being something that’s dependent upon the actual customer, the bigger customers we might be able to actually spend some time with them and negotiate that. Whatever we end up doing there, it’s up to us to be realistic and to manage those expectations. One of the things that I see a lot … A lot is relative. There are certain things that are cited a lot more when it comes to reasons for churn, but there are times where it’s, “Well, we actually never got … We never used what we bought.” You’ll see that frequently. That’s a problem. That means that we didn’t manage expectations around adoption. It also means that we didn’t proactively manage that. Think about this. If we set a goal … If you bought 100 licenses and we set a goal to have 100 licenses being used by the end of the year and it was a calendar year and we’re coming up on June … We’re coming up on the middle of the year and you have only activated 10 licenses, you might want to check in on that and see what’s going on. That could be a red flag. We had a goal together that you would have 100% adoption, which again, you probably shouldn’t have that goal. You’re not there, so I would say we want to have an initial adoption goal, “In the first 30/60/90 days, this is what our goal is.” Then from there, we can start to have, “Maybe this happens in your quarterly business reviews or whatever,” but from there we want to have other goals. Set those goals and then figure out what it’s going to take for them to get there. If you set those goals with them and you give them the tools and the understanding and you really manage those expectations, they can figure out internally what it’s going to take to adopt your product. This is the thing that we don’t really think about. What has to happen outside of our product in order for a customer to be successful certainly, but even to start to adopt the product? There may be a lot of change management. There may be a lot of other things that have to happen that if we don’t take that into consideration, then we’re not going to be able to help them or again manage those expectations. They may be thinking they want to have 100% adoption, but if we’d simply asked, “What could possibly stand in the way of you being successful with this adoption rollout, not achieving your adoption goals?” They start listing off all these things, it’s like, “Okay, so having 100% adoption goal in the first 30 days is probably unrealistic.” We didn’t ask that so they had that goal and then guess what? We didn’t meet that goal. They didn’t have a great … Their experience was inappropriate and they’re going to churn out. That’s the thing. [Managing expectations](https://sixteenventures.com/customer-success-reset-mismanaged-expectations) is huge and being really clear on what adoption is is very important. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success in a B2B2C (Partner / Value Chain) Scenario *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/partner-success/ Customer Success is defined as our customers achieving their Desired Outcome through their interactions with our company. Think of that definition of Customer Success as your Operating Philosophy. That philosophy can be extended to the greater value chain or ecosystem you work within. Every entity in the partner/distribution value chain has a Desired Outcome. It’s up to you to discover what that is and facilitate the achievement of that (ever-evolving) Desired Outcome, and it all starts with getting clear on [Success Potential](https://sixteenventures.com/success-potential) for each link in the value chain. Let’s dig into this… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## The B2B2C Customer Success Value Chain *Nicholas sent in an email. Has a question on B2B2C. “What are some ideas on improving our client’s relationship with their clients to drive customer success?”* How do we help our customer’s customer be successful? Now we’re getting somewhere. Our customers have a [Desired Outcome](https://sixteenventures.com/desired-outcome). We know that. Here’s the secret. Their customers also have a desired outcome. We can take two paths when we’re selling to somebody who is going to be selling to somebody. We can ignore the fact that there is an end customer. We can focus only on trying to get our distributor, our partner, our whatever it is that we’re working with or just our customer who has customers. We can just focus on their needs and hope, hope, hope beyond hope that they do what is necessary to make their customer successful because if that doesn’t happen then our customer is going to churn or instead of just relying on hope and faith, we can actually try to understand what would be necessary to ensure that their customer is successful and give them the tools, give them the training, give them the resources, give them the help in order to make sure that their customers are successful. I’ve gotta be honest, though. The number of companies out there that have a Partner Success program or are looking at things this way are few and far between, but those that have done this, those that have actually figured out how to ensure those that are representing them out in the market, their resellers, their partners, or just those that are using their product with their customers … The ones that are thriving are the ones that have figured out how to make this work. That all starts with understanding that across this value chain everybody has a Desired Outcome, everybody has a required business outcome. Everybody has an Appropriate Experience. If I’m an accounting product and I sell either to or through accountants to businesses or individuals, if I can help that accountant do more of their core business, have a better relationship with their customers, then my product isn’t just going to be seen as a nice-to-have add-on that they may or may not really work to get customers to use. But, if I can give the accountant something that allows them to do more of their core business, if I can be their trusted resource, I can be the place that they turn to for compliance understanding, I can make sure that they have the tools necessary to reach out before tax day, etc. my position in their world changes dramatically. If we can set all of that up, then I’m ensuring that my accountant partner is going to be successful because I’m ensuring that they will ensure their customers are going to be successful. It really comes down to understanding the Desired Outcome of everybody across the value chain and operationalizing that to the extent possible. Look at in the middle of that value chain somebody sitting between us and the end user. Let’s help them do more of their core business and really set them up for success. That usually means giving them the tools necessary to make sure that their end customers are getting as much value as possible. Don’t just leave them hanging. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: How to Monitor Customer Happiness *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/monitor-customer-happiness/ Customer Success is not about making customers happy. In fact, there are [8 other things Customer Success is not](https://sixteenventures.com/customer-success-is-not) if you’re so inclined. But for the sake of this post, just know that we’re here to make customers successful, not happy. But how do you monitor that? Good question… let’s explore that a bit. For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Monitoring Customer Happiness *Douglas asks, “What’s the best tool to monitoring individual customer happiness in an onboarding team?”* It’s time to talk about [happiness versus success](https://sixteenventures.com/customer-success-is-not). If you try to solve for the happiness of your customers, you’re probably going to be in for a long, disappointing ride. Happiness is not something … Maybe there’s a language issue there. Maybe we’re just talking about that. I think when people say, “We want happy customers, I think they actually mean it.” Sometimes that can cause you to go down the wrong path of solving for things that are either outside of your control or outside the scope of what we need to be solving for. That said, what we need to be focused on is the success of our customers, which means we need to figure out, first of all, talking about [onboarding](https://sixteenventures.com/customer-onboarding), what does that even mean? This is the thing that I run into all the time, which is, when is a customer onboard? What is that point? When I see companies who will say, “Our customers are onboard after 30 days. Onboarding is 30 days,” and then day 30, they move them out of onboarding. Whatever that means. They check a box. They’re not onboard. They just made it through 30 days. They didn’t actually do anything. That’s a problem. What we want to make sure of is that we know what onboarded means. The way that I look at it is one of two ways. Either they’ve achieved some actual value for the first time. We call it maybe First Value Delivered (measured by Time to First Value – TTFV), whatever, or … This is really true for a lot of more complex products. There’s some products that you might take months and months and months before you can actually get real value out of it because there’s not just setup time, but there’s actual time of using it before it becomes truly valuable. In that case, onboarding may be when a customer for the first time sees the value potential in our relationship. Maybe that’s after going through some setup and onboarding and getting some dashboards and things like that up and running. There’s setup and implementation and getting those dashboards and everything set up, but they’re not actually usable yet. They’re not getting true value from it yet, but they will and they see it for the first time outside of your promises and sales and marketing. They see the value potential. It’s either when they get first value or when they see for the first time the value potential. That’s what we would call onboarding. What has to happen to get us there? Work back from that. If they’re doing those things. If those things are happening … If we have a dedicated onboarding person or a dedicated onboarding team, that may look more like a project management situation. Are they doing the things that are necessary in order to get value? If they aren’t, they’re not successful. The onboarding isn’t working. Your Customer Success person or practitioner or pooled resource, or whoever owns the relationship with the customer, needs to be able to have visibility into those steps that the onboarding team is taking with the customer so that they can see whether or not things are working. If things are not working … “working” means are we moving through these milestones in the onboarding process? If they’re not the Customer Success Practitioner could intervene with the onboarding. They could intervene with the customer, whatever. We don’t have to overthink that process. There’s workflow tools, project management tools, whatever. There’s different ways to manage that. The main thing is we need to understand that that’s what we’re trying to solve for. Do you also look for satisfaction, happiness, or whatever, in the onboarding process? You can, but most of the time as long as we’re moving them through the steps that are going to be necessary, we don’t have to go look at other things. We know that they’re on the right track to being successful. That’s the most important way to look at it. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Determining the Perfect Number of Customer Segments *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/perfect-number-customer-segments/ In Customer Success, customer segmentation should be logical (take a step back and really think about it) and done from the customer point of view (think: [Appropriate Experience](https://sixteenventures.com/desired-outcome) segmentation) rather than from an internal-focused view (i.e. ARR, revenue potential, etc.). It’s not about what a customer pays us… it’s about the customer’s appropriate experience. Let’s dig into this… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## The Right Number of Customer Segments *This is from Brandon: “How many segments should there be for a B2B SaaS company that has an ARPU of $60? How many is too many? What is the proper balance in your opinion?”* The question is how many segments should there be for a product that’s $60 a month? Seven. I don’t know. There’s no blanket answer. I don’t know of any way to benchmark this from one company to another. You would have to look at a company that’s selling exactly the same product to exactly the same customers. All I can say is you have to know your customers. You have to understand the appropriate experience of your customers. You may find that for you, yes, you could get super granular. You could go down to seven different segments, but really if we’re not trying to find an excuse not to do this and we actually want this to work, we may find that there are just two [logical segments](https://sixteenventures.com/logical-customer-segmentation). There’s no blanket answer. I don’t know of any way to benchmark this from one company to another. You would have to look at a company that’s selling exactly the same product to exactly the same customers. All I can say is you have to know your customers. You have to understand the appropriate experience of your customers. You may find that for you, yes, you could get super granular. You could go down to seven different segments, but really if we’re not trying to find an excuse not to do this and we actually want this to work, we may find that there are just two logical segments. We can really point out that, “Look, this customer in this particular vertical has a very specific, appropriate experience that we can call out.” We can make that right for them. Everybody else fits into this other bucket and their appropriate experience is going to be this. We just have to bridge some success gaps for this industry, talk about some use cases, maybe have a little bit more … One to many, but more of the human interaction. Over here can be all tech touch, whatever. Don’t overthink it and don’t go too granular, but there isn’t a right or wrong answer there. You have to really understand your customers and also what it is you’re trying to do. I would say the worst thing you could do though is say, “Because we’re a $60 a month product, this is what we’re going to do.” The reality is you may be selling to customers that have an appropriate experience that is something you cannot give them in an economically feasible way for you if they’re only paying you $60 a month. Then you have to be realistic about the fact that … You could ask them to pay you more. That’s certainly something. Most companies will go in the direction, unfortunately, of taking a customer that pays us $60 a month and saying, “Hey, this is what they deserve. They’re only paying us 60 bucks a month. I can’t give them any more. In fact, we’re giving them too much as it is,” … customer-negative things. What tends to happen there is those customers come in. They may even achieve their required outcome, but they churn out because the appropriate experience is not there. You can have customers that don’t pay you very much and you can give them a lesser experience than what’s appropriate, but that’s probably going to be [cause for a lot of ](https://sixteenventures.com/churn-symptom)churn. What you should do is say, “[Those are bad fit customers](https://sixteenventures.com/success-potential) because I cannot give them the experience that they need, the experience that is appropriate for them in an economically feasible way. I’m going to not do business for those customers.” There are ways to get really clear, really deliberate on this. A lot of times, those are decisions that people don’t want to make. It requires you to be intellectually honest about what you’re trying to do, but I would say, “Don’t get too granular.” Let’s open our eyes to what our customers’ actual appropriate experience is and look for logical groupings of that experience and there is your segmentation. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Difference between Customer Success and Account Management *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-account-management/ Customer Success is not Account Management. In fact, there are 9 things Customer Success is not, and Account Management [is one of those things](https://sixteenventures.com/customer-success-is-not). Traditional Account Management is old, outdated, and will hurt your relationship with your customers while failing to help them achieve their Dequired Outcome. But I’m getting ahead of myself… let’s dig into the difference and why knowing the difference is incredibly important. For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Customer Success and Account Management *Benjamin piggybacked on Katie’s question. “What are ways that you divide work and responsibilities between account managers and customer success managers in organizations that have both? Also, what are ways to effectively map complex customer journeys?”* Benjamin asking a couple of questions in one question there. We’ll separate those out. The first question was how do we separate Account Management from [Customer Success](https://sixteenventures.com/customer-success-definition). Account Management is really renewals and expansion, literally handing those account level functions of upsells, of closing more business with a customer, adding things to the customer account or handling the renewal. Those functions must happen whether it’s the Customer Success Practitioner (CSP) doing it or whether it’s a dedicated Account Manager (AM) doing it. Doesn’t matter. Those things have to happen. That said, at some point, you will probably end up either needing those functions to be done more frequently – more frequent expansion or more frequent renewals – or you’ll run into situations where those things become more complex, perhaps as you move upmarket or move into just different industries. I always say if all it takes to renew or to add something to an account is to push a button, the CSP should do that. Who cares? As it becomes more complex, you might need to have a dedicated resource do that. Really the only time when this matters is when those things are happening so often that it would take away from the CSP’s job of making the customer successful to handle those things or the complexity is just too much for a CSP to handle. You shouldn’t ever separate Account Management and Customer Success simply because you think a CSP handling renewals and upsells would hurt the trust with the customer. That is a garbage reason to separate them. It’s basura. It’s lixo. The reality is, if renewals and upsells in your company would hurt trust with your customer, that’s a bigger issue. You’re doing something wrong. You’re doing something customer-negative. You’re being nefarious in your actions. Don’t do that. On the flip side, if I am a CSP and I’m not comfortable with selling, negotiating, whatever, then I’m not actually interested in helping my customer be successful. By the way, if there’s really a lot of hardcore negotiating, you may need to have a dedicated AM resource that’s just really good at that, but again, it shouldn’t be about trust. Trust should be there across the board. If we’re doing things that could hurt trust, it doesn’t quite matter whether it’s the CSP that’s hurting trust with the customer or the AM that’s hurting trust with the customer; our company is hurting trust with the customer and that’s a bad thing. What we want to make sure of is that we’re all doing things that are customer-positive. It’s just maybe we need an AM to handle those things. What I want to be really clear about, and this will help any of you that have CSPs that don’t want to sell, don’t want to handle any of that, the renewal or whatever or if you, yourself, are a CSP and don’t want to do these things, think about it this way: I used to say renewal and expansion came from a successful customer. That’s not wrong because the reality is a customer that is not successful is not going to buy more. They’re not going to renew, at least not for very long. They might do that while they’re looking for another solution. It’s not wrong to say that expansion and renewal come from a successful customer, but when I said that originally, what I started seeing, unfortunately, some companies would say, “Well, okay, if that’s the case, then all I have to do is find a successful customer and I can try to shove product and services on them when they don’t need it.” No, that’s not it at all. So I evolved how I talk about it. My thinking was always in line with what I’m about to say, but I wasn’t articulating it properly. Think of it this way: In order to for our customers to be successful, to achieve their ever-evolving Desired Outcome, they have to renew, they have to consume more of our services, buy more of our add-ons, etc. They have to at some level, at some point, expand their relationship with us. Our customers are always evolving and growing. That’s what we want. I don’t ever want a customer to be the exact same today as they are in a year. That doesn’t make any sense. My customers should be growing and evolving. Our relationship with the customer should be growing and evolving as well. That, by the way, is the definition of [Customer Success-driven Growth](https://sixteenventures.com/customer-success-driven-growth). In order for our customer to be successful, they may have to consume more of our product. They may have to take other services. That’s just part of their growth. That may or may not happen in that arbitrary time box that we call a contract. We have a 30-day renewal on a subscription. We have a one-year contract. That’s just the financial contract that we put in place. Are all of our customers going to achieve their Desired Outcome within that arbitrary time box? Probably not. That means in order to achieve their desired outcome, our customers will have to go past a renewal. They will have to go through some expansion. That’s just the way it is. And that’s awesome. If you are here to make your customer successful, you have to be comfortable with having the conversation about expansion, having the conversation about upsell. With upsell, it’s actually relatively easy to make that something that just happens. [It’s all about orchestration](https://sixteenventures.com/elements-customer-success-management). It’s all about managing expectations. Ultimately, these things – whether you separate them out into various functions within the company or the CSP does everything -it’s all within that relationship that we have with the customer. It’s all about making them successful. I hope that gives you a little bit more context. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Secret to Defining Customer Success Coverage Models *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-coverage-models/ Customer Success is not Account Management. This means using traditional Account Management ideas will either limit your (and your customer’s) success… or will cause you your Customer Success initiative to fail miserably. The traditional method of simply looking at what a customer pays us and giving them a particular level of ‘touch’ is old and outdated. It’s time to logically segment customers based on [Appropriate Experience (AX)](https://sixteenventures.com/desired-outcome). Let’s dig in… For context, on Friday, May 5, 2017, I did a [Customer Success Ask Me Anything (AMA)](https://sixteenventures.com/customer-success-ama-05052017) on [Facebook live](https://www.facebook.com/LincolnMurphyShares/). It was awesome. The video (audio only… sorry) is embedded below and below that is the transcript (edited for better readability) that answers the question. ## Customer Success Coverage Models *Katie asks, “Should customer success members be responsible for both small and enterprise level accounts or is it recommended to have a dedicated member for only enterprise level accounts?” Currently, her team has a mix.* First, I’ve talked about [Determining the Number of Accounts per Customer Success Manager](https://sixteenventures.com/account-coverage-ratio) before. Instead of just straight-up answering that question, what I want you to do is go back and look at the desired outcome of your customers, specifically looking at the appropriate experience. Right there, I can almost guarantee you that a small customer and a big enterprise customer are going to have a different Appropriate Experience. The experience that would be appropriate for each of those types of customers is most likely different. Right there, that means that if you try to put the same coverage on those customers, you’re going to end up with something that is inappropriate for either both of those customers or one of them. One of them is going to have an inappropriate experience. What I say is really get to know your customer. Understand what their appropriate experience is and define your coverage levels from there. That will probably end up having … It almost always does. You’ll probably end up having dedicated resources for your higher end customers and dedicated resources for your lower end customers not based on just what they pay [but really based on what their appropriate experience is](https://sixteenventures.com/account-coverage-ratio). I hope that makes sense. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Lincoln Murphy Customer Success AMA Transcript and Video – May 5, 2017 *May 5, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-ama-05052017/ On Friday May 5, 2017, I did a [Customer Success](https://sixteenventures.com/customer-success-definition) Ask Me Anything (AMA) [on Facebook live](https://www.facebook.com/LincolnMurphyShares/videos/649170771941275/). It was awesome. The video is embedded below and while there seems to be an audio/video sync issue, the audio is crisp and listening to this will be time well-spent. If you don’t want to watch or listen, I got the entire AMA transcribed (and cleaned it up a bit for readability, added links, etc.) and posted that below. I answered 20 questions in excruciating detail. I’m planning on doing another [Customer Success AMA on May 19, 2017, on Facebook](https://www.facebook.com/LincolnMurphyShares/videos/653075378217481/). *The audio and video are a bit out of sync, so just listen, don’t watch. Or… just watch and don’t listen (but that’d be weird).* ## Table of Contents Here’s the list of questions I covered in this AMA: - [Setup Fees](https://sixteenventures.com/customer-success-setup-fees) - [Sales & Customer Success Alignment](https://sixteenventures.com/sales-and-customer-success-alignment) - [Favorite Customer Success Management Software](https://sixteenventures.com/best-customer-success-management-software) - [Drawing the Line between Customer Success and Support](https://sixteenventures.com/customer-success-support) - [Customer Success in early stage Startups](https://sixteenventures.com/customer-success-startups) - [Upgrading Grandfathered Customers](https://sixteenventures.com/upgrading-grandfathered-customers) - [Customer Success Coverage Models](https://sixteenventures.com/customer-success-coverage-models) - [Customer Success and Account Management?](https://sixteenventures.com/customer-success-account-management) - [The Right Number of Customer Segments](https://sixteenventures.com/perfect-number-customer-segments) - [Resources for Customer Scorecard](https://sixteenventures.com/success-vector) - [Monitoring Customer Happiness](https://sixteenventures.com/monitor-customer-happiness) - [Customer Success Manager Resume Best Practices](#12) - [The B2B2C Customer Success Value Chain](https://sixteenventures.com/partner-success) - [Improving Customer Adoption](https://sixteenventures.com/improve-adoption) - [Customer Success in Two-sided Markets](https://sixteenventures.com/customer-success-two-sided-markets) - [Customer Success Org Structure](https://sixteenventures.com/ideal-customer-success-org-structure) - [Number One Customer Success Mistake](https://sixteenventures.com/customer-success-biggest-mistake) - [Starting a Customer Success career](#18) - [Closing the Feedback Loop](https://sixteenventures.com/customer-success-feedback-loops) - [Discovering your Customer’s Desired Outcome](https://sixteenventures.com/discover-desired-outcome) ## 12. Customer Success Manager Resume Best Practices *Jimmy is asking, “How should customer success professionals package their experience on a resume? What are companies looking for when they hire CS professionals?”* Jimmy, how do you package things up on your resume? I don’t know. I don’t know how to get a job in some wide blast your resume out way. Never done that. What I’ve done is figure out who is hiring, what they’re looking for and if I’m doing a resume craft it to meet what they’ve said. Before that, I would cold email or reach out in some other way to the hiring manager or to the CEO and get delegated down to the hiring manager. Be deliberate in the way that you go about getting a job. I’m not going to be your career counselor here. I’m really good at getting jobs, not so good at keeping them. That’s why I make a much better consultant. That’s what I would do. If you just wanted to put a bunch of keywords on your resume and blast it out, I’m not the guy to talk to about that. I have no idea how to make that work. Next question. But I wish you the best of luck, Jimmy, in your future endeavors. [|Back to Table of Contents|](#toc) ## 18. Starting a Customer Success career *Marcella is curious about starting or building a career in customer success. What kind of knowledge and ability is important to have? Where do you get started? She’s saying hey from Brazil.* Getting started in customer success, what I would suggest doing … Again, we have to look at all sorts of different things that are going on. You have to figure out what kind of company. Take a step back. I think too many people simply have a job. They’re miserable. A lot of that has to do with the fact that they weren’t deliberate. Just like when you have customers that you don’t like. Your customers are stupid and you hate them. It’s because you weren’t deliberate. You didn’t bring in good fit customers. You didn’t bring in the kind of customers that you really wanted to work with. It’s true that sometimes companies change. You get a job and it’s great. Then the company evolves and it’s not so great. Sure. A lot of times it’s because we just needed to get a job. We weren’t deliberate about this. My suggestion would be before you do anything, figure out what it is you want to do. Figure out the kind of company you want to work with. Figure out the kind of customers you want to work with. Are you more of an analyst? Are you more of a people person? You really want to have that high touch relationship? Maybe it’s a middle ground. You want to talk to customers. You want to be in front of them, but you’d be better of in more of a one:many kind of situation. You like Facebook Live or you want to do webinars or whatever. You want to work in a particular industry. You really think it would be awesome to work in a company that’s helping with education. AppProva right now is hiring a customer success manager. Go look at what they’re hiring for. If it fits you, go work there. VQV, shout to my AppProva guys. Figure out the kind of company you want to work for. Figure out what it is you want to do and then go find those companies. You may find some companies. List some companies that you think match that criteria. Even if they’re not hiring, reach out. Even if they don’t have a customer success organization, reach out. If you want to be part of something early on and build something from the ground up, reach out. Read my book, my customer success book. Read my blog. A lot of my stuff has been translated into Portuguese, which is awesome. We had some amazing people translate my stuff so it’s easier to read. I know reading in English, even if you’re really good at it, if English isn’t your first language, it tends to take its toll. Some of the stuff that I’ve written has actually been translated. I’m working on a deal to get the … I’m talking to some people, maybe get the book translated in Portuguese. We’ll see how that plays out. Learn as much as you can. Study human psychology. Figure out what you want to do, the kind of company you want to work for and then go reach out to them. If anybody is hiring, do what I said earlier. Make your resume match them, reach out to their hiring manager. Go to the meetups. Consume as much content as you can. Network all over the place and be very, very clear on what you want to do. The worst thing you can do is go up to somebody and say, “Hey, I’m looking to be a customer success manager.” I’m really pushing this agenda, which is there’s no such thing as a one size fits all customer success manager. It doesn’t work. It never worked. Certainly now, when we’re getting into more sophisticated understandings of segmentation and appropriate experience and what are the kinds of customer success practitioners we should have … Whether it’s analyst, whether it’s a copywriter, whether it’s customer marketing or whether it’s more of a consultant or project manager. Whatever. All those different people could totally be customer success practitioners. You have to figure out where you fit and find a company that you fit in nicely. Go to the meet ups. Go to … This is what’s cool. Brazil customer success has really taken off and there are meet up, certainly in Florianopolis, Sao Paolo. I think they’re doing stuff in Belo Horizonte. That’s only three cities, but there’s a good chance that you’re around there. I don’t have anything going on just yet in Rio de Janeiro, but hopefully soon. There are lots of opportunities out there. Go network, talk to people, figure out what you want to do and get deliberate. That applies, by the way, also in the US and anywhere else you’re joining from. This is just the kind of advice I would give. It’s the stuff that I would do to go get a job. Hopefully, that helps. Next question. [|Back to Table of Contents|](#toc) ## Join the next AMA I’m planning on doing another [Customer Success AMA on May 19, 2017 on Facebook](https://www.facebook.com/LincolnMurphyShares/videos/653075378217481/). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The 5 Fatal Flaws of most Customer Journey Maps *April 28, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-journey-maps/ Customer Journey maps are a favorite tool of Customer Experience (CX) and [Customer Success Management](https://sixteenventures.com/customer-success-definition) (CSM) professionals around the world. Very often, they are elaborate, colorful maps – some look like movie storyboards or even children’s board games – that take the customer on a journey to nowhere. What journey are you mapping? If it’s not the one that takes your customer to their Required Outcome in an Appropriate Way (together, those two things make up the customer’s [Desired Outcome](https://sixteenventures.com/desired-outcome)), then it’s a map to nowhere for the customer… [and to churn for you](https://sixteenventures.com/churn-symptom). Honestly, from a true Customer Success Management standpoint, we shouldn’t even be talking about maps at all. Instead, we should be talking about something more like a navigation app like Waze that doesn’t just show how to get from static point A to point B, but changes the journey (and ETA!) based on the realities on the ground (current location, traffic, obstacles, the driver simply ignoring directions, etc.). But for now, we’ll talk “maps”… and here are five fatal flaws of Customer Journey maps; some will only have one of these, others will have all 5. Enjoy. ## 1. Focused on the Vendor’s Goals for the Customer Customer Journey maps are usually designed to get the customer to do what the vendor wants from a functional standpoint, instead of what is appropriate for the customer. This is especially true in high-tech industries where the vendor has invested heavily in building out features customers may not even need or want. Because of this inward focus on the functional use of the product, most Customer Journey maps do not include things the customer must do outside of the product. ## 2. Assumes Customers are Static The design of Customer Journey maps assumes customers are static, when the reality is, customers evolve, grow, and change. One reason for churn is that the customer evolves and grows [but the vendor fails to recognize this](https://www.linkedin.com/pulse/nothing-changed-lincoln-murphy). On the other hand, a huge reason for exponential growth is that the customer evolves and grows and the vendor fully recognizes, understands, and operationalizes around this! That’s [Customer Success-driven Growth](https://sixteenventures.com/customer-success-driven-growth). Customers evolve and change over time and vendors need to recognize that their relationship with the customer – and the journey that customer must take to achieve their Desired Outcome – must evolve, too. ## 3. Details only Early Lifecycle Stages Customer Journey maps focus only on early lifecycle “stages” like [Onboarding](https://sixteenventures.com/customer-onboarding) and Implementation (which are often easier to understand or visualize) but fail to take into detailed consideration the 3, 5, 7, or 10 years a customer might be with the vendor. The more you recognize this part of the customer lifecycle – the majority of it – the more likely you are to get a customer that will stay 3, 5, 7, or 10 years. Fail to do this and you won’t need to worry about those subsequent years. ## 4. Expects Customers to Achieve Success at the same Pace Most Customer Journey maps incorrectly assume all customers move along at the same pace – achieving success on a common cadence – rather than being built around [Success Milestones](https://sixteenventures.com/success-milestones) or Data-driven Triggers (internal within the customer company or external from the market). Onboarding is not complete simply because 30-days have elapsed. Onboarding is complete when the customer is “onboard” … which needs to be a defined milestone. What does “onboarded” mean in the unique relationship you have with your customers? ## 5. Assumes All Customers are the Same Customer Journey maps generally treat all customers the same instead of being designed specifically around the Appropriate Experience for each [logical customer segment](https://sixteenventures.com/logical-customer-segmentation). This comes from an inward focus on the functional use of the product rather than a focus on the customer’s success. ## Design a Customer Success-driven Experience Your Customer Journey map will be awesome if you understand what the Desired Outcome of the customer actually is and map their journey toward that ever-evolving success. Which means, to even start creating a Customer Journey map… you must know what the customer’s Desired Outcome is. Otherwise, you’re creating a map to an unknown – or incorrect – destination. So before you draw an elaborate map to nowhere, start with an ugly line-listing of the steps required to get the customer from where they are when they sign-up for your product or service to where they need to be. It’s not about the map… it truly is about their journey. Remember, your entire Customer Experience will be awesome if you design that experience to actually deliver success. Otherwise, what experience are you designing? [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Cost of Bad-Fit Customers: How a Simple Sales Mistake Wiped Out $1.2M in Revenue Overnight *March 20, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-bad-fit-customer/ *[Também disponível em Português](http://blog.superlogica.com/assinaturas/o-custo-de-clientes-sem-fit/) por Superlógica* Do you need to [churn](https://sixteenventures.com/churn-symptom) and burn customers to learn? A lot of people in startups think so. In fact, a lot of people in companies of all shapes and sizes think so. Think you need to churn and burn through thousands of customers before it starts to have a negative impact on your growth velocity and costs? I’ll show you why that’s just not true. If you think churning and burning customers so you can learn is the way to go, sit back and let me tell you a fun little story about an expensive lesson that didn’t need to be learned. In fact, what I’ll share is why startups need to build-in [Customer Success](https://sixteenventures.com/customer-success-definition) from the ground up, and established companies need to bring Customer Success into their universe ASAP. First, I have to acknowledge what Steve Blank famously said: “Your startup is essentially an organization built to search for a repeatable and scalable business model.” This means it’s totally accurate to say that, at first, you don’t know what you don’t know. The problem is that some people use that startup definition as an excuse; a crutch to never have to make a real decision (“we don’t have the data – yet”). But there are a lot of things you **DO** know but simply – and to your detriment – choose to ignore. ## Ignorance is not Bliss You might choose to ignore what you know because you don’t think what you know to be true is valid. Perhaps it’s imposter syndrome or the like getting in your way. But whatever the reason, you just don’t trust what you know to be true. Some ignore these things because they don’t even realize they know it in the first place, usually because they never stopped to think about it. It’s easy to get caught up in the day-to-day grind that is business and never take a step back to think, which makes it easy to overlook the valuable insights sitting right in front of you. And of course, some people ignore these things not because they don’t know them, but because they need to make the sale so they can get that money! Maybe it’s a nefarious money grab (certainly, the last one fits into that category), or maybe it’s a misguided, self-persuaded “take care of stakeholders” [stretching-a-bit-more-than-you-should](https://sixteenventures.com/stretch-bad-fit-customer) money grab. Either way, it’s a money grab, and one that has a much higher interest rate than you were prepared to pay. This is where the story gets good, y’all. ## How Churning Just Three Customers Hurt Growth I worked with a company that signed three customers whom they shouldn’t have signed. Those customers did not have Technology Fit (the most obvious of the [five inputs into Success Potential](https://sixteenventures.com/success-potential)), which should have been a non-starter because there was a 0% chance those customers would be successful when the product they’re using is built on a third-party system they don’t use and won’t acquire. Non. Freakin. Starter. Or it should be, especially if you claim to have Customer Success as your operating philosophy or model. But they signed those three bad-fit customers anyway. (If you have bad-fit customers – or just aren’t sure – [I wrote a whole post on what you need to do ASAP](https://sixteenventures.com/customer-success-goals) from a Customer Success Management perspective.) $25k Annual Recurring Revenue (ARR) deals. Sounds good, right? Remember that. $75k/ARR total. Make those monies! So those customers ended up actively canceling (literally working to get out of their contracts, which, in the early days of a startup, were written on the customer’s “paper” – or in their favor – so the contracts were easy to get out of), taking all of the $75k the company had booked with them. But those three customers also took with them the $75k/ARR from the future 3 or 5 or 7 years that they’d remain a customer, not including any expansion revenue, plus the money spent to acquire (Customer Acquisition Cost or CAC)and serve them. Starts to add up, right? Those customers didn’t just end up not making that company any money, but they actually cost money in CAC and cost to serve. In fact, the cost to serve bad-fit customers is often much, much higher than the cost to serve customers with Success Potential. Companies generally end up diverting resources from the customers with Success Potential who could actually benefit from their attention to those that, regardless of effort, will not be successful. Anyway… don’t worry, it gets worse. Those customers also took with them the potential value of all the customers who – because of the negative sentiment they’d create in the market – now wouldn’t do business with my client in the future. That stings. Typically, I like to say that when a customer churns, they also take some unquantifiable number of customers that won’t do business with you because of the negative market sentiment caused by all that churn. But we could actually quantify this… and it’s bad, man. Real bad. So those three bad-fit customers are gone now. Lessons were learned, and they brought me in to help from there. And the first thing I had them do was to operationalize the process of no longer knowingly acquiring bad-fit customers. ## Learning from Lost Deals The second thing we did is leverage an outside party to start [interviewing churned customers](https://sixteenventures.com/know-why-customers-churn), customers we won (to determine the real reason we won, like “you were 50% of the closest competitor” vs. what they told us), and prospects we lost to competitors. And it was in those lost deal interviews that the names of the three customers they signed that didn’t have Technology Fit came up time and again. In fact, over the course of 18 months, the name of those former customers came up 13 times. 13 times!!! You see, all three of those customers went to the closest competitor at the time and told them about their terrible experience with my client. Now, if you think the competitor would say, “Okay, thanks for telling me; that’s our little secret,” then you don’t know how things work in the real world. Instead, the competitor said, “Tell me more,” and got a ton of intel on the way my client did business and used that against them in the sales cycle. And the companies that were angry at my client? They were more than willing to be advocates against them and then advocate for the vendor they favored. All of this made my client’s sales cycles longer, increased their overall CAC, and decreased the efficiency of that CAC by lowering the annual contract value (ACV) of new customers because of the provisions and concessions required to get customers to commit. The competitor’s tactic of parading these three failed implementations in front of prospects continued to successfully knock my client out of the running for at least 18 months after those bad-fit customers churned despite the fact that my client’s business practices were far more customer-positive than in the past. ## Just Blame Sales? It’s easy to put the blame on the sales organization or the salespeople that closed those three bad-fit customers. And yeah, they likely should carry some of the blame; ignorance isn’t a defense. But I don’t put the blame just on sales; that’s the easy way out. I blame the sales leadership for focusing so much on hitting their short-term numbers that they were willing to allow their sales people to acquire revenue that would ultimately **REDUCE** the value of the company (more on this later). I blame the executive leadership for allowing the sales leadership to let their salespeople get away with closing bad-fit customers. In fact, if the same executives are knowingly allowing bad-fit customers to be signed **WHILE** actively investing in [Customer Success Management](https://sixteenventures.com/customer-success-management), they’re bad at their jobs. Why invest in people, processes, and systems to make the customer successful when you’re allowing customers without Success Potential to be signed? You’re just setting everyone up for failure. That makes zero sense. [Salespeople should be educated on what a bad fit customers look like](https://sixteenventures.com/sales-customer-success-alignment), instructed to not sign them, and perhaps even incentivized on post-sale metrics like retention, activation, expansion, and engagement even if those are (and they should be) outside of the sales person’s control. Most sales people won’t knowingly sign a bad fit customer once they know the customer is a bad fit; but if they’ve never been told, is it their fault or the fault of management? ## Calculating the Damage If the customers that churned had stayed just 3 years, that would have been $225k in recurring revenue total. Instead, my client got nothing. That should be quite upsetting. If you’re wondering… yes, it gets worse. Those 13 customers that didn’t sign because of those three that churned and spread the negative word – if they were just $25k/ARR deals (and that’s the minimum; they could have been much bigger) and those customers stayed 3 years without expanding their relationship with my client – that’s $325k/ARR, or $975k total, that was lost because of those three customers they churned and burned. Let me cipher up the bill so far… Take the $225k from the three customers that churned ($25k * 3 * 3 = 225k), and add the $975k from the 13 that they didn’t sign ($25k * 13 * 3 = $975k). That’s $1.2M in revenue over 3 years lost that is 100% attributable to those three bad-fit customers that were signed, churned, and burned. Remember, these were customers my client **KNEW** were a bad fit but decided, “It’s okay as long as we learn something.” $1,200,000.00. And if the average customer lifetime is more than 3 years – and it is now, BTW – that number goes up significantly. But at least they learned something, right? Oh, but it gets **WAY** worse. ## Negative Impact on Company Valuation So what my client lost with those 16 customers (3 churns + 13 losses) was $400,000/ARR. I’ve detailed before [how Customer Success has a direct impact on the value of a company](https://sixteenventures.com/customer-success-drives-company-valuation), and in this case the lack of a focus on the customer’s success means, at their 5x valuation multiple at the time, $2M ($400k * 5) wasn’t added to the value of their company! But they needed to learn, right? NO! No, they didn’t need to learn that a prospect that doesn’t – **AND** is unwilling to – use the base product upon which their product is built is going to fail. They knew that. That’s a given. But they chose to ignore it for the short-term money grab. So, uh… that $25k they ended up getting from those customers hardly seems worth it compared to the $1.2M in revenue and $2M in company value they lost because of them, does it? Oh, but it gets even worse! ## The Hurt Could Actually be 5x Bigger! Those third-party interviews where the intel on lost deals came from only have a hit rate – on a good day – of 20%. That means, for every five lost deals contacted, only one will engage with the interviewer. That means it’s entirely possible that there could have been 65 (13 prospects interviewed * 5) prospects that were lost because of those three that churned. The real number is probably somewhere between 13 and 65… but it is almost 100% guaranteed that it’s more than what we could directly quantify. And if those 65 lost deals are assumed to be the minimum ACV of $25k and to stay 3 years (without expansion), then the amount of lost revenue could be $1.625M/ARR! That’s $4.875M in lost revenue over 3 years. And if you have a valuation multiple of just 5x revenue, then that lost revenue of $1.625M/ARR would also equal a loss of $8,125,000 in company value! But it was totally worth it to churn and burn those three customers, right? If you aren’t sure, know this… it gets even worse. ## Now the Valuation Multiplier Takes a Hit All of that negative sentiment they created in the market by churning and burning just three customers didn’t just cost them in revenue and company value. No, by negatively impacting key metrics that go into the multiplier investors applied to my client’s revenue to come up with the value of the company (churn, CAC, Net Revenue Retention or NRR, total addressable market, market sentiment, etc.), this churning and burning of customers actually negatively impacted the multiplier! Essentially, the multiplier is the investor’s confidence in the company (or at least the management); if it’s going down, that’s a really bad sign. So, sticking with the known 16 lost customers, I guess the silver lining is that the multiplier dropped to 4.5x (down from 5x) revenue, so all they lost was $1.8M in company value, down from $2M. And if you think that’s somehow good, you’re doing it wrong. All of it. The multiplier reduction means the overall company value went down, too, given that the multiplier applies to all revenue (and not just that which is lost). If they were at $10M in revenue, their company valuation went from $50M to $45M – a $5M loss in value! At least they learned, right? ## Your Company Could Straight-up Die I didn’t want to take this post to the ultimate logical conclusion because I didn’t want the super-important message contained herein to be overlooked because of hyperbole and bombastic statements. I know, right? I actually toned this piece down! But a friend of mine who’s co-founder of a hyper-growth startup  just went through a painful 18-months where they had to reduce their churn in order to even get their next round of funding; a round, by the way, that came with a significant hit to their multiplier. Here are his words, anonymized for his protection. *Lincoln, I would add something in the comments about our funding process but I would expose very confidential information so I rather tell only you, so, you can use it in the future without mentioning us.* *For us, the hit in the multiplier was absurd.* *In the beginning, we were thinking about getting 6x forward rev, after all, Slack got 10x forward rev. Very naive perspective. There is only one Slack and every fund is fighting for their deal, that’s not the case for other SaaS companies.* *As soon as we started talking to investors we realized that 5x ARR was already something that only very good SaaS companies get.* *And when they started analyzing our churn rate, the valuations dropped to 4.5x past revenue! PAST revenue, not FORWARD.* Meaning they didn’t have confidence in us. *Take that lower multiplier and look at the past 12 months revenue – which for a hyper-growth company like ours is around 60% lower than our current ARR – you can see where the math goes.* *But as you say, Lincoln… it only gets worse!* *For that level of valuation, you’re honestly risking not getting the money at all. You’re simply not a good deal anymore.* *And your company can die if you fail to raise funds.* *SaaS companies spend a lot of money in R&D, customer acquisition, Customer Success Management, etc.* *Without money, they can burn their cash out and die. Even if they get to the break-even, in the SaaS space, most of the time “winners take all” so who cares. Some companies simply can’t stay alive long without growing fast.* *Of course, it was not only bad fit customers that led to those difficulties we had, it was an overall failure to operationalize around ensuring success. Our country was in the middle of the worst crisis in 20 years, so a lot of our churn was because customers were literally going bankrupt.* *But the [majority of our churn was our fault](https://sixteenventures.com/churn-reasons); I think the only reason why we got our round of funding on more favorable terms was because we could restore investors’ confidence in our future by showing them how we’ve implemented [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) to ensure our customers get the value from us that they initially thought they would* *At the end of the day, churn rate and you customers’ success can be the determining factors not only in your valuation but literally in if you live or die as a company.* Yikes. ## Flame on! The moral of this tale is simple: you don’t have to churn and burn to **LEARN THINGS YOU (SHOULD) ALREADY KNOW!** And when you do churn a customer, don’t just think [that’s the cost of doing business](https://sixteenventures.com/near-zero-churn). Learn from it and try not to let it happen again in the future. Remember, you don’t have to churn and burn **THOUSANDS** of customers before it starts to have a massive negative impact; this company did it with three, and the impact was huge. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success Goals: Cohorts, Metrics, and Prioritization *January 2, 2017 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-goals/ [Também disponível em Português](http://useronboarding.com.br/resultado-desejado/) por Conpass I asked the VP of Customer Success what her goal was for the [Customer Success Management](https://sixteenventures.com/customer-success-management) (CSM) organization, and she said, “to ensure customers achieve their Desired Outcome through their interactions with our company.” That’s the [definition of Customer Success](https://sixteenventures.com/customer-success-definition) that I developed, so I obviously loved that answer for this reason. But I didn’t like it because that’s not actually a goal. That’s their purpose. That’s why the CSM org exists (in fact, it’s why the company exists), but it’s not a goal. A goal is something that’s meaningful, actionable, and reachable; it’s an objective and a timeframe. And if you’re a Customer Success leader who wants to get a “seat at the table” with other executives, you need to be able to tie your goals with those of the company and become so important – so valuable to the rest of the company – that you need to reach your goals to drive the company towards their goals. Let’s dig in… ## Your Current Customer Success Reality I know that I talk about best practices extensively, and in my opinion, these are very important to understand even if you can’t implement them today. You have to know what you’re ultimately working towards, and it’s critical that you work to create an optimized organization. But unless your company is just getting started, you’ll likely have a bit of real life get in the way of implementing those best practices… if it doesn’t shut the implementation of those best practices down completely, such implementation will likely progress at a slower pace than you’d like. In fact, I’d say roughly 100% of the companies I work with are already in market with customers at various lifecycle stages and with varying degrees of success (with a sizable number having no success and are on the verge of – or already – churning), so some form of what I’m about to share has been relevant in pretty much every situation I’ve dealt with. So it’s important to get real, real fast, and start planning around the reality on the ground, which is your current Customer Success reality. First, you start by… ## Understanding Non-existent and Unrealized Success Potential If you haven’t done this, as soon as you’re done reading this post, create a list of characteristics that indicate when a customer is a bad fit or the things that would indicate they don’t have [Success Potential](https://sixteenventures.com/success-potential). If you’re not sure or just curious, you can explore the difference between [Bad Fit and Stretch customers](https://sixteenventures.com/stretch-bad-fit-customer). After you’ve identified the characteristics of a Bad-fit customer, tag all of your customers in whatever system you use to manage your customer relationship as a “good fit” or “bad fit.” This will tell you who – exactly – has the potential for success and who doesn’t, and this will be the key bifurcation point in our cohort creation (below). Oh, and for customers that have already churned, you should do the same thing – only go a step further, and mark the churn as unavoidable or avoidable and unexpected or expected. I’ve covered this in “[You Have to Know why Customers Churn](https://sixteenventures.com/know-why-customers-churn).” Okay, so now we move on to… ## Identifying Logical Customer Cohorts Within each [Logical Customer Segment,](https://sixteenventures.com/logical-customer-segmentation) you’ll want to identify customer cohorts based on their Success Potential and current Success Vector. You can’t treat all customers that are a bad fit or all customers that are a good fit but on a neutral [Success Vector](https://sixteenventures.com/success-vector) the same. You must take into consideration their unique characteristics and provide them an Appropriate Experience, even if you’re actively off-boarding customers without Success Potential or moving those Good-fit in Neutral to a Positive Success Vector. For those that are a Bad Fit, that is, those that do not have Success Potential, we need to carve them out and work with them in a manner different from those with Success Potential. And for those that do have Success Potential, remember that they may still churn because what they have is only “potential” … it’s not Success Guaranteed. We need to ensure they’re on the right path toward success. I’ve come up with five different customer cohorts spread across Bad- and Good-fit customers. Whether that model directly applies to your company and customers isn’t important; use this as a jump-off point, and come up with logical cohorts that work in your unique situations. That said, the first cohort I carve out is the… ## Bad-fit Customer Cohort These are customers that do not have Success Potential. They are not going to get value from their relationship with you, or you’ll spend resources trying to help them or ignore them but continue to take their money, both of which won’t end well. Companies have Bad-fit customers for a variety of reasons; some were signed early when the company didn’t know who an ideal customer was or made the decision that they’d sign anyone and everyone, regardless of Success Potential, in order to “learn” or for cash flow reasons. None of those reasons are valid, by the way, but that doesn’t mean they don’t happen. The reasons for acquiring Bad-fit customers notwithstanding, the fact is you have them, they won’t be successful, and you need to do something with them. ### To (Actively) Churn or Not to Churn For the customer cohort without Success Potential, they will likely – and probably should – churn out. You can just wait until they churn organically, or you can create a plan to off-board the customers systematically, ideally giving them some alternative products or services they could move on to. You know the right thing to do. You should spend very few actual Customer Success resources on these Bad-fit customers because they can never be successful, so it’s kind of the opposite of what a Customer Success Organization is meant to do. You may need to spend some resources to off-board them in a way that doesn’t leave them [emotionally unhappy](https://sixteenventures.com/customer-success-is-not) or that’s likely to result in the negative word being spread about your company and your product – which may even include buying a subscription to a competing product or providing access to an integration service to migrate data – but that is the only reasonable, legitimate expense associated with Bad-fit customers. If your executives – or you – disagree and think you should invest in these Bad-fit customers, whatever; just don’t say “Customer Success doesn’t work” when those customers eventually churn out. And if you think keeping customers long enough to pay back the acquisition cost is enough, you’re a fool. I don’t even care that you don’t get the spirit of Customer Success or that it’s not your Operating Philosophy… no, you’re a bad business person. Keeping Bad-fit customers to simply milk them for revenue until they churn has a potentially enormous cost to it… you’ll kill your Total Addressible Market (TAM), you’ll hurt your brand, and ultimately, you’ll [lower the value of your company](https://sixteenventures.com/customer-success-drives-company-valuation). ### Accepting and Reporting High (Cohort) Churn I am acutely aware that it will be very difficult for you and your leadership to accept a large amount of churn in this cohort, as it will make your overall retention numbers look bad – maybe really bad. The high churn you’re not just going to experience, but make happen, as you actively jettison your Bad-fit customers will offset the high retention numbers you’ll have in your Good-fit customer cohorts. So what I suggest that you do is – where possible – when you report churn (to your board, investors, executives, etc.), explicitly call out this Bad-fit cohort – along with it’s incredibly high churn rate – as an anomaly (“these are Bad-fit customers; we won’t make that mistake again”), and then report retention for the rest of the Good-fit customer base separately as the high number that it is. You’re not hiding anything – in fact, you’re making everything more visible – but you’re looking at it realistically, too. The bad-fit cohort that is otherwise bringing everything down is not who you’re building the future of your business around, and you’re working to get it off the books and reduce the resources needed to support that cohort to zero to free up precious resources to work with Good-fit customers. If your investors, board, or executives want to see an aggregate, roll-up churn, or retention number that includes all cohorts – even the bad-fit – okay, fine. But you might as well try this reporting technique… not just to make yourself look better, but because it really does represent a more realistic, forward-looking view of your customers. Now we move on to… ## Good-fit Customer Cohorts It’s important to remember that just because a customer has Success Potential doesn’t mean that this potential will be recognized. So when a customer with Success Potential churns out – vs. those that are a bad fit – it hurts. It should sting. Your Customer Success Practitioners, Organization, and Leaders should be held responsible for the churning out of customers that have Success Potential, for sure. Why? Because when a customer has Success Potential but churns out, it’s your fault. You didn’t work to make them successful. You let them stray off course. You failed them. But that’s actually a good thing! It’s a good thing because you can fix it! If it were outside your control, that’d be one thing. But it’s not… you can put into place the systems, processes, and workflows necessary to ensure that customers with Success Potential actually realize this potential and succeed. But to do that, we have to get real about what’s going on with your Good-fit customers right now by splitting them into cohorts, starting with… ### Good-fit Cohort 1: On a Negative Success Vector The “Negative” here is based on my Success Vector KPI, but this might be a Good-fit customer with a low Customer health score, in a Code Red state, has a thumbs-down emoji status… whatever you use, these are the customers that are ultimately getting no value from their relationship with you. But they should be, since they’re a Good-fit. They have Success Potential, but you’ve not worked to unlock that potential. Almost always, customers that are a Good-fit but aren’t getting the value they should share a common trait: they were acquired before you got your Customer Success act together. They weren’t onboarded properly, they weren’t trained, their integrations were faulty and/or non-existent, and they’ve generally been neglected. Because they know they have Success Potential, the customer hangs on, knowing that someday, things will work out… until it one day when it just doesn’t. And you probably ignore them because you’re afraid that if you interact with them, they might remember you exist and remember that they wanted to churn. Or, even worse, they might expect you to help get them back on track. It’s time to step up and make things right with those customers. There’s no other way to say it; you’re failing them, and eventually, it’s going to catch up with you. You need to get them back on track toward success. ### Good-fit Cohort 2: Gone Dark Good Customers go Dark; it happens every day to good companies around the world. Maybe it’s happened to you. A customer stops opening your emails, won’t take your calls, stops opening support tickets, stops using your product… They’ve gone dark. They’re ignoring you. They’re hiding. And you’re freaking out. The biggest issue with customers that have gone dark is that you don’t know if they’re on the verge of churning or if they’ll stick around for a while. But you can be 100% sure that if they’ve stopped using your product or consuming your service, there is a 0% chance that they are successful. And what do customers that aren’t successful do? They churn. So this cohort is the next priority for you after those that are on a known Negative Success Vector. But here’s the reality about customers that have gone dark: you didn’t work to make them successful from the outset, you didn’t onboard them properly, and you didn’t send them the right message at the right time, which taught them to ignore your messages. You taught them you don’t care. So why should they listen to you? You’re going to have to get creative; try different communication methods (email, SMS, WhatsApp, social, phone, FedEx, etc.) to try to get their attention. All you’re doing at this point is “saving” a customer – this really isn’t “Customer Success” – and you may resort to concessions to get them back on track such as discounts, free Training, product Demos, “restarting” or “resetting” the contract, etc. But whatever you do, make sure the communication you use to get them to engage is all about them, and be clear on what the next step is. If you can get them out of the darkness, remember that all you did was bring them to the light… now you need to get them on a path to success. I’d consider them to be on a Negative Success Vector at this point unless you know for sure otherwise. ### Good-fit Cohort 3: On a Neutral Success Vector The “Neutral” here is based on my Success Vector KPI, but this might be a Good-fit customer with a moderate Customer health score, in a Yellow state, has a “hang loose” emoji status… again, whatever you use, these are the customers that are getting some value and aren’t going to churn but aren’t growing. Their adoption has stagnated, they aren’t going to buy add-ons, and they won’t advocate for you. This might seem like a customer that’s fine – one that doesn’t need your attention. But if you understand that expansion (and renewal) is part of Customer Success – not a byproduct of it – then you’ll know that a stagnating customer is not a customer that is successful. And when you understand that merely maintaining the status quo is not ideal, you’ll know why customers on a Neutral Success Vector – while not at immediate risk of churn – are not something to be ignored. If all you’re doing is renewing customers at the same level, you’re actually failing in your Customer Success initiative. If you aren’t sure why that’s true, go back up two paragraphs and read again. The vast majority of companies that I’ve worked with who have customers on a Neutral Success Vector signed those customers before they had a fully operational Customer Success approach. They may have had the [onboarding](https://sixteenventures.com/customer-onboarding) phase locked down, but they failed at – or hadn’t gotten around to – operationalizing success across the entire lifecycle. So the customers got initial value but were then left to fend for themselves. Going forward, the only customers that should be on a Neutral Success Vector are those that just moved up from Negative or those you pulled back into the light after having gone dark. ### Good-fit Cohort 4: On a Positive Success Vector The “Positive” here is based on my Success Vector KPI, but this might be a Good-fit customer with a great Customer health score, in a Green state, has a thumbs-up or clapping emoji status… again, whatever you use, these are the customers that have been getting value and are expanding their relationship with you. They were onboarded correctly, are increasing adoption, inviting you into other parts of their company, and advocating for you externally. Any customers that sign from now on will go through proper vetting (to ensure they’re a good fit before signing), activation, and onboarding, and they will have an Appropriate Experience across their lifecycle as they work toward their ever-evolving [Desired Outcome](https://sixteenventures.com/desired-outcome). But how do you go about… ## Prioritizing Success Vector Cohorts Customers are always evolving, so you need to stay on top of things to ensure that a Good-fit customer doesn’t become a Bad-fit customer or so you’ll know when a customer on a Positive Success Vector suddenly drops to a Negative for whatever reason. You’ll need to monitor the Success Vector of your customers and intervene proactively on an ongoing basis, but at first – when you’re just trying to reduce the risk in your current customer base – you need to figure out what is happening right now. The Bad-fit cohort gets resources dedicated to them until they’re taken care of, peeling off resources as the remaining cohort of customers without Success Potential get smaller. On an ongoing basis, the number of Bad-fit customers you have should be so small that you’re spending very little time on these types of customers. If possible, put resources on all four of the Good-fit cohorts, but whenever you need to prioritize, the Good-fit customers that are most likely to churn should get attention first. As that number starts to reduce, you can peel off resources to work with other cohorts. If you are legitimately resource-constrained, you’ll focus on the Good-fit, high-value customers on a Negative Success Vector first. But remember, your resource constraints should never give a Good-fit customer a less-than-appropriate experience. If you cannot afford to provide a customer with their Appropriate Experience, then they are a Bad-fit customer. The fact that there are five discrete customer cohorts – for each Logical Customer Segment – should tell you something about… ## Customer Success Management KPIs and Taking Action One of my favorite pastimes is dispelling the myth of “One Metric that Matters.” Sure, some companies have this as a symbolic rallying point, but when it comes to actually running their business, there is never JUST one metric that matters. When it comes to Customer Success, while you might need to report on something like Net Revenue Retention (NRR) as a roll-up financial metric across all of your customers, you’ll also need to sanity check that against the aggregate Success Vector to ensure that the revenue you retained will stick around. But even those two “metrics that matter” are made up of several other metrics that matter – in this case, a different KPI for each customer cohort. So when you want to figure out your Customer Success Management KPIs, you can have those roll-up, high-level metrics, but the real, actionable metrics are going to be developed by looking at each cohort and asking where you want to be with each of those segments in 3, 6, or 12 months. You’ll have to be very clear about how you reach those goals, what the coverage ratios of human intervention and technology ([maybe even AI & chatbots](http://venturebeat.com/2017/01/02/why-the-customer-success-market-needs-chatbots/)) need to be, etc. By having a goal for these cohorts and knowing how you’re going to get there, you’ll start to unravel the types of talent and skill sets required and, from there, [the number of Customer Success Practitioners you’ll need](https://sixteenventures.com/account-coverage-ratio). Some ideas for where you might want to be in 6 months are… ### Bad-fit Customers Zero Identifiable Bad-fit Customers. This may be 100% churn for this cohort, or it might be 75% churn and moving 25% to a Good-fit cohort because you added functionality that gave them Success Potential. ### Good fit, Gone Dark Zero Identifiable Customers that are “dark.” This is going to take work; it will not be easy, and it may not have the entirely positive outcome you’re hoping for. Some customers that are dark may end up churning out. That’s actually a good thing; you don’t want zombie customers that are paying you while getting zero value. You aren’t running a low-end gym where your business model would break if all of your members showed up at one time. You’re better than that (even if you are running a low-end gym!). While some customers that have gone dark will churn, the vast majority will re-engage, and you’ll be able to move them from a Negative to, ultimately, a Positive Success Vector. But it will take work, and you’ll have to get creative; but it’ll be worth it for sure. ### Good fit, Negative Success Vector Off-boarding Bad-fit customers and bringing those that have gone dark back into the light are easier tasks than actually ensuring that customers achieve success. So it’s easy to say for those other two cohorts that you can hit “zero identifiable” in 6 months. Sure, it comes down to resources, but that’s about the only constraint. When it comes to moving customers from one Success Vector to another, it’s a little more complicated because customers – even within the same Logical Customer Segment – achieve success on their own cadence. So you’ll need to be realistic about what you can achieve for this cohort within the given timeframe. Your ultimate goal should be to get all Negative Success Vector customers on at least a Neutral Success Vector, but what can you do in 6 months? An example might be: in the next 6 months, we can reduce the number of good-fit, Negative Success Vector customers in the Small Agency customer segment by 50% by doing x, y, and z. But for the same cohort in the Large Agency segment, we can reduce this number by 25% by doing x, y, and z. However, for this cohort in the Mid-sized Agency segment, we can reduce this number by 75% by doing x, y, and z. ### Good fit, Neutral Success Vector Again, moving customers from one Success Vector to another is more complicated than what you’ll do with Bad-fit customers or those that have gone dark, again because customers – even within the same Logical Customer Segment – achieve success on their own cadence. Similarly, you’ll need to be realistic about what you can achieve for this cohort in the given timeframe. Your ultimate goal should be to get all Neutral Success Vector customers on a Positive Success Vector, but what can you do in 6 months? When a customer is on a Positive Success Vector, they’re expanding their relationship with you, they’re increasing consumption or adoption, or they’re advocating for you publicly. If you can take a Neutral customer and get them to do some or all of those things, you’ll be able to move them to a Positive Success Vector. However, you have to do it in a way that is customer-positive; working them toward success and then making logical offers to them for upsells or add-ons, getting them to invite you into other parts of their company, or proactively getting them to advocate for you when the time is right. Think of ways to [short-circuit their path to success](https://www.linkedin.com/pulse/how-quickly-25x-your-recurring-revenue-lincoln-murphy). This is less about getting them do the thing that will move them to a Positive Success Vector – like buying an add-on – and more about getting them to be successful and making buying that add-on the most logical next step. You’ll want to be clear that for this cohort, in this segment, we’ll do x, y, and z to make that a reality. ### Good fit, Positive Success Vector For this cohort, we might start to apply a KPI different from just the number of customers that are in this cohort; we might want to focus on a financial metric like NRR. So we might say that in the next 6 months, for the Good-fit customers on a Neutral Success Vector in the Small Agency customer segment, we can drive a 120% NRR by doing x, y, and z. This means we’ll expand the revenue we get from this cohort – net of any revenue churn and not taking into consideration what new customers are bringing in; it’s only for this cohort – by 20%, or we end the 6-month timeframe with 120% of the revenue they started that period with. And for this cohort in the Large Agency segment, we can grow NRR to 150% by doing x, y, and z. However, for this cohort in the Mid-sized Agency segment, we will grow NRR to 130% by doing x, y, and z. A lot of people say that much of Customer Success is simply common sense. Well, maybe that’s true, but behind all of the common sense are a lot of processes, workflows, strategy, and tactics! Hopefully, what I just shared makes that “common sense” journey toward making your customers successful a little bit easier for you. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Contents of an Awesome Customer Success Playbook *December 31, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-playbook/ [Customer Success](https://sixteenventures.com/customer-success-definition) has been clearly defined and what goes into [Customer Success Management](https://sixteenventures.com/elements-customer-success-management) has been fully documented. But when it comes to certain aspects of Customer Success Management, there are still a few things that remain a bit mysterious to some. A great example of that is the concept of the Customer Success Playbook, the sports analogy-based workflows, processes, interventions, etc. – called “plays” – to run with the customers when something happens. I haven’t talked about Customer Success Playbooks much, and here’s why. While there are high-level Customer Success frameworks like those I use with my clients, the way we orchestrate and operationalize a Customer Success-driven Growth strategy is different enough across companies, products, and customer segments, that trying to create a one-size-fits-all Customer Success Playbook that works for all companies is never going to – or should never – happen. But my lack of coverage of this subject doesn’t mean Customer Success playbooks aren’t important; they absolutely are super-important. They’re so important in fact, that trying to come up with generic ones that would work for any company isn’t something I think can be or should be done! So I’ve avoided talking about it publicly. A friend of mine asked me for some advice the other day. She knows that I’ve helped hundreds of companies around the world with their Customer Success-driven Growth strategies, but she decided to start by Googling around. After finding unhelpful posts or forum answers on how to create generic Customer Success playbooks, she came to me. So I typed up the following for her and since she liked it, I thought I’d share my take on how she should go about creating Customer Success playbooks for her unique situation with you, too. ## Caution: No Sample Playbooks Included I’m not going to give you a sample playbook here. If you’re looking for that, stop reading. What you’ll find below is what should go into a Customer Success Playbook, why that is, and links to articles I’ve written that will help you develop the right plays for your business. I’m a big believer in knowing “why” you’re doing something first, so that the “how” will actually work. For example, three clients I’m working with right now are: - A Point of Sale software & hardware vendor for a very specific regulated retail niche in the United States - A content generation service that powers the inbound marketing of a handful of business types in South America - An email marketing SaaS in Australia focused on Large Enterprise customers It should be very clear that a playbook for one of those would not be appropriate for the other two (if that’s not clear, please keep reading, follow ALL of the links, and read those, too). I don’t want to share a sample playbook here… if you need one, go find someone else that doesn’t care if you learn how this stuff actually works and get a playbook from them. I’m not here to make less work for you… I’m here to make you successful! In fact, you should be careful about people that are… ## Sharing Their Limited Experience In public forums, individual Customer Success leaders looking to be helpful will often say “this is how we do it at XYZ corp.” And while that’s potentially interesting, unless what they’re doing fits your unique situation (same product, same customer segments, etc.), what they’re doing, their plays aren’t really that helpful. What would be more helpful is if those people talked less about what their plays are and more about how they came up with the playbook; the thinking that went into it. This never really seems to happen if for no other reason than they probably haven’t had the luxury of taking a step back to think about what went into the thinking in the first place! But even then, their experience is likely limited to the company they currently work for and maybe the one before it. There’s nothing wrong with that, but it is a limited perspective. So that limited perspective, coupled with a lack of time, means most of the time, what’s shared is simply what they think should go into a playbook from a functional standpoint: roles, events, high-level plays, etc. At a high-level and with some basic understanding of Customer Success, those inputs into the creation of a Playbook are somewhat obvious, so I won’t cover those here. Instead, I’ll talk about… ## The Non-Obvious Aspects of a Customer Success Playbook While the roles, events, and plays themselves might be obvious, what you should include for YOUR Customer Success playbook and why may not be so obvious. Like everything in Customer Success, it all starts with understanding your customers: - Your Customer Success Playbook will be 100% unique to your company - Customer Success Playbooks are meant to help your customer achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome); help them get the outcome they require in an appropriate way - A playbook may contain some of the same things found in the playbooks of other companies, but the details will be 100% unique to your company - You’ll need a separate playbook for each of the [discrete, logical customer segments](https://sixteenventures.com/logical-customer-segmentation) for each of your unique products and services - You’ll need a separate playbook for new customer segments that are formed when one segment of one product expands their use into another product - You’ll need a separate playbook for the [different cohorts ](https://sixteenventures.com/customer-success-goals)(within the discrete logical segments) based on [Success Potential](https://sixteenventures.com/success-potential) and [Success Vector](https://sixteenventures.com/success-vector) - Each playbook may share 90% (just an example) of the same things, but it’s that 10% difference for each customer segment that will make or break the effectiveness of the playbook - You’ll need Proactive plays that you use to move the customer along the path to success - You’ll need Reactive plays that allow you to intervene when the cusotmer goes off the path to success - Map out everything listed below for your unique business and the unique customer segments within, and then build your playbooks around that ## A Playbook for Life(cycle) Your Customer Success Playbook should be structured around the customer lifecycle and what must happen for customers to be successful – on your side and on their side, inside the product and beyond – for them to: - Achieve first value through effective and efficient [customer onboarding](https://sixteenventures.com/customer-onboarding) - Reach their initial adoption goals - Achieve long-term adoption goals (rarely will this be 100% where expansion opportunities exist; you’ll want to upsell them around 90% utilization or earlier so they never stagnate at capacity) - Continually realize evolving value; considering this is the [majority of the 3, 5, 7, or 10+ years their with you](https://www.linkedin.com/pulse/visualizing-importance-customer-success-lincoln-murphy), obviously one line in a list doesn’t do this part justice ## A Playbook for Customer Success-driven Growth Remember, [Customer Success-driven Growth](https://sixteenventures.com/customer-success-driven-growth) is growth – upsells, cross-sells, customer advocacy, viral expansion, etc. – that occurs as part of the customer’s evolution and success. As customers succeed and evolve, their relationship with you should evolve and grow as well. For customers to achieve their ever-evolving Desired Outcome, they’ll need to stay past a renewal, and they’ll very likely need to consume more of our core product, adjacent products, services, etc., so we say Expansion and Renewal are part of the customer’s success. Your Customer Success Playbook should include: - What to do when they reach a [Success Milestone](https://sixteenventures.com/success-milestones) where there’s an upsell opportunity - How to [orchestrate the upsell](https://sixteenventures.com/logical-expansion) internally and with the customer - When they reach a success milestone where they’d want to [advocate for you publicly](http://influitive.com/blog/blending-customer-success-advocacy-strategies/) or internally - How to orchestrate the advocacy opportunity internally and with the customer - What to do when an external trigger exposes an upsell or advocacy opportunity (and how to orchestrate those; see above) - What to do when the internal champion moves to another company (should be two plays here: one on how to handle the change at the customer and one on how to leverage the connection at a new company) ## When Bad Things Happen As much as we try to keep anything negative from happening, you need to create your Customer Success Playbook to include how to handle negative situations, too, like when the customer: - Veers off the path toward success (and [we need to intervene](https://sixteenventures.com/customer-success-management)) - [Goes dark](https://sixteenventures.com/customer-success-goals) - [Doesn’t pay their bill](https://sixteenventures.com/reduce-credit-card-failures) - [Unexpectedly churn](https://sixteenventures.com/know-why-customers-churn) - [Expectedly churn](https://sixteenventures.com/churn-symptom) - Graduates or outgrows your product or service ## Systematic Enrichment Your Customer Success Playbook should include how to apply insights: - To proactively feedback the insights gained from the customer lifecycle to marketing In most cases, especially in the early days of Customer Success in your company, no one is going to ask you for this stuff… you have to be proactive - For [enriching Sales](https://sixteenventures.com/sales-customer-success-alignment) so it helps them acquire good fit customers and avoid bad fit customers - For enriching Marketing so they can target higher-value customers and avoid customers that are a bad fit - For enriching Product so it helps them understand how the product is actually being used - To enrich your Executive team to show [how much value the Customer Success Management organization is bringing](https://sixteenventures.com/customer-success-drives-company-valuation) to the company ## Operationalizing Customer Success Playbooks Other considerations for your Customer Success Playbook are: - The playbook needs to be centralized so everyone is working from the same version of the truth This is one of the key elements of purpose-built Customer Success Management software, with some products incorporating a Playbook sharing platform into the product (though remember what I said earlier… it has to apply to your situation!) - The playbook will constantly be updated as you learn; there is no set it and forget it in Customer Success - Make sure everyone is aware of the changes as you make them so they know to work off the new or updated plays - Your playbook will never be “done” … so temper your – and management’s – expectations around that - [Customer Success Bots](http://venturebeat.com/2017/01/02/why-the-customer-success-market-needs-chatbots/) – powered by underlying Artificial Intelligence (AI) and Machine Learning (ML) – will eventually be able to serve totally custom “plays” to each customer either directly through a conversational user experience (UX) or by involving a human CSP to give the right message at the right time. I hope this helps you on your journey toward making your customers successful. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Understanding Customer Success Management Compensation Models *December 28, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-compensation-models/ What’s the best Comp Model for Customer Success Managers (CSM)? How can I create a compensation model that drives the type of behavior we need? What percentage of CSM comp should be variable, and what impact should individual vs. org-level performance have on the variable piece of compensation? The more this comes up, the more I realize – especially when you’re first operationalizing Customer Success Management in your company, but very likely eventually – that when it comes to Customer Success, variable compensation is a red herring. You’re going to spend a lot of time on it even when you don’t need to. You – and your CSMs – have better things to do than worry about this… like actually making your customers successful. Let’s dig into this… This post assumes you have a clear understanding of Customer Success. If you have time, I’d suggest reading [The 8 Elements of Customer Success Management](https://sixteenventures.com/elements-customer-success-management) or, if you’re very busy, read [Customer Success Management: An Executive Overview](https://sixteenventures.com/customer-success-management). Okay, so… ## First, Ask the Right Question This question of “What’s the best Customer Success Management Compensation Model” seems to miss the fact that there isn’t a one-size-fits-all Customer Success Manager. As Customer Success Management has evolved, so too have organizations, and it’s not uncommon to see a mix of Customer Success Analysts or Quants, Customer Success Managers, Customer Success Executives, Customer Success Operations, as well as Onboarders, Marketers, etc., spread across different customer segments and lifecycle stages. You first need to go through the process of determining the [Customer Success Practitioner Coverage Ratios](https://sixteenventures.com/account-coverage-ratio). This actually starts with [Logically Segmenting your Customers](https://sixteenventures.com/logical-customer-segmentation) by understanding the Appropriate Experience for each segment. Then you can start thinking about the compensation model, which starts with understanding… ## Variable Compensation Models in Customer Success Management Unfortunately, like so many other things in Customer Success Management, the idea of variable comp is a carry-over from traditional Account Management, where customers were treated literally as just an account… a number. And to ensure those numbers were going up, the Account Managers were – and still are – paid a commission that incentivized them to increase prices on renewal, renewing contracts for longer and longer periods of time, and pushing for upsells and cross-sells that the customer often didn’t need, etc. As we’ll explore below, the blame can’t be entirely placed on the Account Manager; the leadership is at fault for creating an environment where these types of customer-negative actions were routinely taken. But the reality is, in an environment that lacks a Customer Success focus, if you want to expand within or from your existing customer base, these types of aggressive, often nefarious, actions are required. Why? Because the customers are not successful – or, if they are, it was in spite of the efforts (or lack thereof) of the vendor – and are therefore not organically predisposed to expansion. They have to be talked into it, convinced, or otherwise encouraged (strong-armed?) into expanding. In an organization with Customer Success as the Operating Philosophy and Customer Success Management as the Operating Model, these types of heavy-handed tactics are simply not required to get the customer to expand their relationship with us. Yes, [Logical Account Expansion](https://sixteenventures.com/logical-expansion) strategies and tactics are still required to ensure expansion happens on a predictably consistent basis, but even then, it’s only done in conjunction with the customer’s success. And of course, Account Management has its roots in – or is an extension of – New Business Sales, and as we know… ## New Business Sales Requires Incentives Incentives are necessary to get salespeople to chase the newly made-up business sales goals that executives put in place. I know it’s crazy to think of it this way, but when the company leadership says, “this is our sales goal for Q3,” that’s just a number they want to hit. It’s based on hope, faith, some market and past performance numbers, and pressure from the board. None of that is bad; it’s just reality. Based on that goal and the number of Account Executives (AE) you have, you come up with a number that each AE has to close; that number becomes their quota. If they “hit quota,” you’ll hit your number for the quarter. If they don’t, you won’t hit your number. Simple. Let’s say you need to close 100 deals in Q3, and you have 10 AEs. Generally, the company will provide some type of assistance in getting enough leads for each AE to close those 10 deals through Prospecting (SDRs) or Marketing (MQLs). By determining the close rate of the average AE – let’s say that is 20% – they need to get 50 leads into the AE’s hands to ensure – based on averages – that these AEs hit their quota. While the math behind this Predictable Revenue model is easy, the reality is it takes a special kind of person to do what is required to find and close new business. And these people need incentives to drive them because new business is, frankly, not easy to land. But with your existing customers, this type of incentive-driven upside potential simply isn’t required. So… ## What Actually Drives Behavior? I used to say that “incentives drive behavior” and that incentivizing the wrong behavior would lead people to do the wrong things. An extreme case of this came to light a couple of years ago when Comcast made headlines for a recording of [a “retention” rep trying to “save” a customer](https://www.youtube.com/watch?v=yYUvpYE99vg) by any means necessary so they could meet their quota and actually get paid that month. Based on my experience – and backed-up by Dan Ariely’s book [Payoff: The Hidden Logic That Shapes Our Motivations](https://www.amazon.com/Payoff-Hidden-Logic-Shapes-Motivations-ebook/dp/B01CO34D12/ref=as_li_ss_tl?_encoding=UTF8&qid=1482520328&sr=8-1&linkCode=ll1&tag=ilocom08-20&linkId=14300f196aca061c1431e04f623ba6bb) – I’ve come to realize that incentives really don’t drive behavior. So while it’s true that incentives can be used to influence behavior – at least in the short-term – something else is true, and that is: leaders drive behavior. Leaders may use incentives where necessary, but real leaders recognize when to use incentives and when they aren’t needed. And the opposite is true; poor leaders (maybe they aren’t leaders at all) will tend to jump to incentives as a shortcut to achieving their goals… and then end up wondering why it’s always so much work to reach those goals! True leaders understand that for some people, incentives are not needed. Real leaders recognize that some people will behave the way they behave, regardless of whether there is an incentive. Leaders will often use bonuses or rewards for a job well-done – and to ensure that the person they’re rewarding continues to do a great job for them instead of going to another company – but everyone understands that the great job in question was going to happen even without the reward. Increasingly, leaders building world-class Customer Success Management organizations realize that those rewards – whatever they are – are given on top of the market salary their team members receive, not part of a variable comp model. But the reality is, in the…. ## Early Days; You Don’t Know what You Don’t Know My suggestion is to avoid variable compensation models for your CSPs for the first year… or at least the first 6 months of your Customer Success organization. The vast majority of the Customer Success executives and leaders that I’ve worked with and talked to about this tell me that if they had known that they could simply avoid dealing with variable comp in the early days, they would have. It was a distraction that would have best been avoided. So even though they’re doing quite well today, they wasted resources, money, and ultimately time dealing with something they didn’t need to. There are so many other things going on that you need to focus on, so don’t waste your time on this overly-complex-yet-generally-unnecessary part of building your organization. You also need to ensure your team is focused on making the customer successful and learning from that process. Don’t distract them from this valuable process by forcing them to do certain things to “make their nut” when you aren’t even sure that that’s what they should be doing. Frankly, you don’t know what you don’t know, and it’s not fair to have some portion of your employees’ On Target Earnings (OTE) tied to what you don’t know. How would you like that? New Business Sales, even in a brand-new startup, is a well-known process. As long as you have product or market fit and know why what you’re selling matters to your customer, the process of getting in front of and closing that customer is relatively well established and understood. But what is required to onboard customers and move them from one Success Milestone to the next – and how that differs across your logical customer segments – is not known at all. Sure, there are frameworks you can apply and playbooks you can adopt, but how it’s actually going to play out for your customers is not known. It can’t be; you’ve not done it yet. As you take that first 6 months or year to learn, you may find that variable compensation has no place in your Customer Success org, ever. Or you may find that variable comp is going to be a lever you can pull to get more out of your team. I don’t know, and neither do you. As you’re getting started, it’s in everyone’s best interest not to worry about that. You have much bigger things to worry about right now. ## Variable Comp Considerations for Customer Success Management If you’re going to go down the route of variable comp for your Customer Success Management organization, you’ll need to figure out what that looks like for each team member (or team member type). Some CSPs will have a greater impact on the customer’s success than others. Some will work with customers who have much more exposure to a highly cross-functional representation of your team than others. Some customer segments will be very straightforward and more inclined to success than others. When you hear that a CSM’s base salary should be 70% to 80% of his or her OTE, and the rest variable, that seems like you’re saying there’s only one type of CSP – a CSM – and that the one-size-fits-all CSM is real. But it’s not. And there are many types of CSPs. And all of that has to play into your model. Which is why I say it’s often a red herring. It’s going to distract you more than help you. I’d suggest figuring out the right type of talent you need to provide the appropriate experience for each customer segment, paying them market salaries, and having objectives (Management by Objectives, MBOs) that you measure them against to ensure they’re doing what needs to be done. And keep in mind – and communicate this to your team – that all of that will evolve over time. So if you’re trying to forecast spend over the next year, keep it simple, and don’t worry about variable comp. Figure in something for bonuses if CSPs exceed their MBO by a mile, otherwise, keep it simple. Above all else… ## Be Clear and Be Fair You can provide bonuses or career path advancement as rewards for meeting those evolving objectives, but just keep it simple, pay as close to market as you can, and motivate your team through high-quality leadership while you learn. Remember that some CSPs have more control over the success of the customers they work with than others, and when you’re managing them – regardless of compensation model – org-level vs. individual contributions should be weighted accordingly. Eventually, you’ll start to understand what type of effort will go into renewals and expansion and whether you need dedicated resources. Even then, based on [Success Vector](https://sixteenventures.com/success-vector), you should be able to know which customers should renew or take an upsell, and you manage towards that as the expected outcome if they are successful rather than incentivizing to hit that as a quota; different take, same (if not better) outcome. But if you need to create a variable comp incentive model for expansion and renewals, fine… just do it when you have a better understanding of what’s involved. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Determining the Number of Accounts per Customer Success Manager *December 27, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/account-coverage-ratio/ This is otherwise known as, “How to Determine Customer Success Practitioner Coverage Ratios.” Initially, the question was “how many accounts should a Customer Success Manager (CSM) handle?” But people quickly realized that answers like “37 on the low end; 200 on the high end” weren’t actually helpful. Then, an ex-CEO-turned-VC with a strong content marketing machine, said a different thing that has, unfortunately, stuck: “1 CSM per $2M/ARR.” That’s not accurate, it never was, and it needs to stop being propagated. Here’s what to do instead… By the way, this post assumes you have a clear understanding of Customer Success. If you have time, I’d suggest that you read [The 8 Elements of Customer Success Management](https://sixteenventures.com/elements-customer-success-management) or, if you’re quite busy, read [Customer Success Management: An Executive Overview](https://sixteenventures.com/customer-success-management). Okay, so one of the main things that made that well-known-but-totally-wrong CSM coverage ratio obsolete is that… ## Customer Success is not SaaS-specific First, the fact that the Customer Success Manager (CSM) coverage ratio myth is $2M per ARR – Annual Recurring Revenue or Annual Run Rate – means that it is specific to Software-as-a-Service (SaaS) companies. But Customer Success Management – and Customer Success in general – is certainly not limited to SaaS. In fact, I believe the concepts behind Customer Success are even more applicable to – and important for – non-SaaS (think: transactional, non-tech) businesses that don’t have an ongoing, recurring relationship with their customers. I’m going to work hard to ensure 2017 is the year Customer Success breaks through to the mainstream, but I digress. So, beyond the fact that this myth is SaaS-specific, let’s go deeper by talking about how… ## A Holdover from Traditional Account Management As I laid out in my “[9 things Customer Success is Not](https://sixteenventures.com/customer-success-is-not)” post, Customer Success Management is not just another name for Account Management. But this $-per-CSM model is a direct carry-over from traditional Account Management, which was all about treating customers like an account… a number. This literally means seeing customers as the revenue they give us and nothing more. Segmenting customers based on how much they pay you is one of those traps that a lot of Customer Success organizations fall into, mostly because it seems logical, and it’s what the industry has been doing for a long time. But this, too, is a legacy of traditional Account Management. In my piece on [Logical Customer Segmentation](https://sixteenventures.com/logical-customer-segmentation), I describe in detail why you shouldn’t segment based on what customers pay you – which is the core of the traditional Account Management approach – and why, if you’re applying that model to Customer Success Management, you’re doing it wrong. So if the $-per-CSM model is a carry-over from traditional Account Management, too, it should also go away. Instead, you need to look at… ## The Customer Success Manager Coverage Model Formula Don’t try to come up with “one CSM per $xxx/MRR,” as that doesn’t fit a modern, segmented coverage model. In fact, if you’re looking for a generic indicator of how many CSMs per Customer or per Dollar of Revenue you should have, there isn’t one. It doesn’t – and can’t – exist since it’s 100% based on your unique situation. Trying to normalize that way doesn’t take into consideration that you will have different types of Customer Success Practitioners (CSPs) working with different customer segments, not to mention the Customer Success Operations and Support team members you’ll need to have in place. Rather, you need to do the following: - Logically segment customers based on their Appropriate Experience - For each logical Customer Segment, discover what coverage level and type of coverage is required (from the customer’s POV; not based on what you can or want to deliver) Now, maybe you discover (discover is the key word here; not dictate) that one segment requires that you provide a high-touch, consultative experience. You need to figure out the details of that required coverage model and the characteristics of the CSPs that will cover these customers, and from there you can see how many accounts each CSP at that level will be able to handle. If it’s 5 accounts per CSP, and you will have 100 accounts in this segment in 6-months, you’ll need to hire 20 CSPs. Over time, you’ll be able to optimize even the most high-touch coverage levels to eek out more efficiency, so maybe you shoot for 17 to cover 100 customers in 6-months. Maybe at some point you’ll get to a 1:10 CSP:Customer ratio, but not out of the gate. Do the same for each of the other segments. Also take into consideration supporting CSPs (Ops, Analysts, etc.), whether those are there at the start or you bring them in at a certain level (for example, you bring in an Ops person after you have x customers across y segments). Figure that into your fully-loaded Customer Success Management cost. After you go through that discover process you realize you can’t afford to deliver the level of coverage for a particular customer segment – let’s say 1 CSP per 5 customers isn’t economically feasible, or the required coverage levels amount to 30% of revenue – you have two choices: - Look at that spend as an investment in the process and try to get to a ratio – while delivering the appropriate customer experience – that makes economic sense at some point in the future, or - Don’t do business with customer segments for whom you can’t provide an appropriate experience in an economically viable way Many companies will go for a 3rd option – which doesn’t or shouldn’t actually exist – and that is to reduce the coverage level to a point that makes economic sense (for the company) but likely doesn’t provide the customer with an appropriate experience. That’s something, but it’s not Customer Success. Okay, so that’s how you determine the appropriate coverage model, and why you should look at… ## Customer Success Management as a Percentage of Revenue Just like Marketing or Sales, you should look at Customer Success as a percentage of revenue. Industry surveys have shown that the fully loaded cost of Customer Success Management is anywhere between 15% and 25% of annual revenue. My biggest problem with industry surveys focused on newer and rapidly evolving areas of innovation (like Customer Success Management) is this: those who are doing it best may not even be represented in the survey! And if they are, their results are either removed for being outliers or are offset by the poor results of everyone else. So fully-loaded Customer Success Management costs falling between 15% and 25% of revenue sounds plausible with a few caveats. - No one can agree on what “fully loaded” means (Salaries? Infrastructure costs? What else?)… the more you figure into this calculation, though, the closer you’ll get to reality. By the way, I assume the rather large range of 15% to 25% of revenue is due, in part, to the lack of agreement on what “fully loaded” means. - Don’t include too many things, though… fully loaded Customer Success Management costs likely shouldn’t include Customer Service or Support costs (those often sit under Operations or a different part of the business and are – while important to the success of the customer – not direct Customer Success Management costs). - Should you include the cost to support fee-based Customer Success Management services, such as expedited onboarding, implementation, consulting, etc.? If those resources also contribute to the included Customer Success Management services, then yes; if not, it depends. - For a lot of companies – and this will likely vary across different customer segments, too – Customer Success Management costs are heavily front-loaded ([Onboarding](https://sixteenventures.com/customer-onboarding), Implementation, Training, etc.), so the percentage of first-year revenue will be higher than the percentage of revenue in the ensuing years. Of course, the heavily front-loaded nature of Customer Success Management is often attributed to the fact that companies simply haven’t operationalized across the rest of the lifecycle! - If you’re taking advantage of true [Customer Success-driven Growth](https://sixteenventures.com/customer-success-driven-growth), your customers should be expanding their relationship with you over time, meaning your customers will pay you more (through upsells, cross-sells, etc.), but the required human coverage levels may actually go down, meaning the percentage of revenue you’ll spend on Customer Success Management will decrease over time. - For companies that are just getting into Customer Success Management, you should probably over-invest right now; it’s about learning, not about profitable unit economics. If you’re anywhere close to 15% of revenue at this point, you’re WAY too low… increase spending to increase learning - Maybe 15% to 25% is accurate, so keep that number in mind, but know that it’s likely to evolve as the industry learns more. Also, remember that it may never, ever apply to your business. Every other part of a (mature, well-run) business applies a “fully-loaded-cost-as-a-percentage-of-revenue” model, not a staff-per-customer or staff-per-revenue number. Why should Customer Success be different? [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success-driven Growth: Rapid, Exponential, and Efficient *December 27, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-driven-growth/ Doing whatever you can, spending whatever you can spend, to acquire any and all customers – whether they’re a good fit long-term or not – is played out. That’s not a valid growth strategy anymore (it never really was). Today, Investors, Boards, Executives, and Startup Founders are all looking for rapid, exponential, and efficient growth. And yes, you can actually have all three of those. In fact, there’s no more efficient – and done correctly, rapid and exponential – growth than growth within and from your existing customer base. And the key to unleashing the power of this growth engine is Customer Success. I even wrote a post that illustrates just how much of an impact Customer Success-driven Growth can have not just on Revenue expansion, but [literally on the value of your company](https://sixteenventures.com/customer-success-drives-company-valuation)! Let’s dig into what Customer Success-driven Growth is… ## Customer Success as a Growth Engine Customer Success-driven Growth – seeing Customer Success not as a way to [make customers “happy,”](https://sixteenventures.com/customer-success-is-not) but as a true Growth Engine – is all about expansion (upsells, add-ons, land and expand, viral expansion, etc.), but in a way that absolutely requires a baseline focus on the customer’s success. **[Customer Success](https://sixteenventures.com/customer-success-definition)** is when your customers achieve their Desired Outcome through their Interactions with your company. The actual process of moving customers toward their ever-evolving Desired Outcome is called **[Customer Success Management](https://sixteenventures.com/customer-success-management).** Customer Success-driven Growth is growth – upsells, cross-sells, customer advocacy, viral expansion, etc. – that occurs as part of the customer’s evolution and success.  As customers succeed and evolve, their relationship with you should evolve and grow as well. Through Customer Success-driven Growth, account expansion happens in a predictable, scalable way that is a part of the customer’s journey through [Success Milestones](https://sixteenventures.com/success-milestones). However, historically within Customer Success (yes, it’s old enough to say historically), it was said that Renewal and Expansion happen because a customer is successful; but that’s not quite accurate. The reality is… ## Expansion and Renewal are Part of a Customer’s Success For customers to achieve their ever-evolving [Desired Outcome](https://sixteenventures.com/desired-outcome), they’ll need to stay past a renewal, and they’ll very likely need to consume more of our core product, adjacent products, services, etc., so we say Expansion and Renewal are part of the customer’s success. Through a combination of effective orchestration (managing expectations and teeing-up expansion opportunities early in the lifecycle), operationalization, and proactive intervention (three of the [8 elements of Customer Success Management](https://sixteenventures.com/elements-customer-success-management)), customers that achieve a Success Milestone with a logical expansion opportunity attached – and that are on a positive [Success Vector](https://sixteenventures.com/success-vector) – will take the upsell when it’s presented. The key to making customer expansion work in a way that is customer-positive at scale is knowing exactly what expansion offer to present to the customer and when to do it. This means knowing – [for each customer segment](https://sixteenventures.com/logical-customer-segmentation) – exactly what Success Milestones have associated expansion opportunities and knowing when customers will hit those Success Milestones. It also means understanding how to [short-circuit the customer’s journey](https://www.linkedin.com/pulse/how-quickly-25x-your-recurring-revenue-lincoln-murphy) to that Success Milestone by offering training, consulting, add-ons, etc. Done correctly… ## Customer Success Leads to Truly Predictable Revenue It doesn’t get more predictable than being able to look at your existing customers, say these 100 customers will reach this Success Milestone in the next month, that milestone has a [logical expansion](https://sixteenventures.com/logical-expansion) opportunity associated with it, the value of that upsell is $1000/ARR, and the percentage of customers that should take the upsell based on their Success Vector is 90%. That means, for that cohort, you’ll add $90k/ARR next month. Then, by combining the expansion value of all of the milestone cohorts, you can give an accurate prediction of the revenue you’ll generate from our existing customers. Now that’s actual, real predictable revenue. Something that needs to be addressed, however, is… ## Management by Objectives vs. Expansion Quotas When you can build a revenue forecast model based on actual customer Success Vectors, then you can manage against that rather trying to force the issue through expansion quotas. You can say “according to Success Vectors, this cohort should deliver $90k/ARR in the next month.” When you have Success Vector in place, internal expansion quotas are not needed, which means you won’t have Account Managers trying to shove products down a customer’s throat when they aren’t ready for it, don’t need it, or are otherwise not in a place where that is the logical next step. Rather, you can [create Objectives to manage against](https://sixteenventures.com/customer-success-goals), essentially saying “this is the expected expansion from these cohorts in the next 30, 60, or 90 days and if we hit that, it means you simply did your job.” However, if you miss that mark, it means the customer didn’t hit that Success Milestone, because if they had, according to Success Vector analysis, they would have taken the upsell. So that’s a fail on Customer Success Management; not that they didn’t make the upsell, but since the customer who you thought would reach that milestone obviously didn’t. So [there’s no need to quota](https://sixteenventures.com/customer-success-compensation-models) on expansion; instead, use Success Vector-based projections to manage the success – or failure – of your Customer Success Management (including Account Managers, Expansion Resources, etc.) org. Customer Success-driven Growth is the way to get rapid, exponential, and efficient growth in a customer-positive (and, ultimately, sustainable) way. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Why You Can’t Offset Churn with Upsells *December 22, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/offset-churn-upsells/ If you lose $1 in revenue through churn – either because a customer cancels their subscription or decides to stay but pays you less because of discounts or downsells – you first need to replace that $1 before you can start to grow. Now, you can acquire those churn-offsetting revenue dollars in two ways: by acquiring net new customers or by getting your existing customers to buy more or expand their relationship with you. For the longest time, companies looked at acquiring new customers as the logical way to offset churn. But at some point, it would occur to them that this was a losing proposition for several reasons, ranging from a longer payback period for Customer Acquisition Cost (CAC) to the negative market sentiment created by so much churn. So the logical next step in offsetting the revenue lost from churn was for vendors to look at getting their existing customers to buy more or to otherwise expand their relationship with them. But as you’ll see, this doesn’t work, either. Some people think that having churn – even a lot of churn – is okay as long as they’re making up for it by getting more from the customers that stay. In fact, I’d say this is one of the biggest – yet least talked about – misconceptions around Customer Success: that you can “use” existing customers to offset whatever churn you have. It’s time to address this directly so there are no more misconceptions… ## Why Customers Churn Customers that churn out – that cancel their subscription with you or don’t renew – do so for only two reasons (which [I’ve documented in detail before](https://sixteenventures.com/churn-reasons)): - Something changes on their end (they go out of business, get acquired, etc.); or - They don’t achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) We can’t really do anything about (1) – though some products are so valuable that customers keep their relationship with the vendor going even when their business fails – so let’s focus on (2) here; they don’t achieve their Desired Outcome. Customer Success is when your customers achieve their Desired Outcome through their interactions with your company. If they don’t achieve their Desired Outcome through their interactions with your company, that could be attributed to the fact that they don’t have [Success Potential](https://sixteenventures.com/success-potential) (you acquired bad-fit customers), or they do have Success Potential, but you failed to unlock that potential and make the customer successful. The good news is you can fix both of these reasons by acquiring only customers with Success Potential and then ensuring they achieve their Desired Outcome. And doing that is the secret to achieving [near-zero churn](https://sixteenventures.com/near-zero-churn). So where does Upsell – or any type of Expansion – figure into this? ## Expansion is Part of the Customer’s Success Historically, within Customer Success (yes, historically), it was said that Renewal and Expansion (upsell, cross-sell, etc.) happen because a customer is successful. But looking at it that way (“oh, a customer’s been successful; let’s make them an offer”) is what allows for the error of applying “new business” sales or traditional Account Management tactics to renewals and expansion, even when that’s exactly the wrong approach. On the other hand, if you understand what [Customer Success](https://sixteenventures.com/customer-success-definition) is and realize that Expansion (and Renewal, too) is actually PART of the customer’s path toward success – and that churn happens when the customer is no longer on that path – it should be obvious that the conditions for churn are incongruent with those for expansion. You can’t use upsells to offset churn because churn is caused by the very thing that prevents upsells from happening. Let that wash over you for a minute. Meditate on it. Breathe it in. Retweet if you agree: > You can’t use upsells to offset churn because churn is caused by the very thing that prevents upsells from happening. - Lincoln Murphy (@lincolnmurphy) [December 24, 2016](https://twitter.com/lincolnmurphy/status/812721351932911616?ref_src=twsrc%5Etfw) This isn’t just a numbers game. In fact, it’s not a game at all. Customer Success-driven Growth – seeing Customer Success as more than just [making customers “happy”](https://sixteenventures.com/customer-success-is-not) but as a true Growth Engine – is all about expansion (upsells, add-ons, land and expand, etc.), but in a way that absolutely requires a baseline focus on the customer’s success. But… ## The Math Says you Can; Reality says you Can’t What about negative churn or, because I want that term to die, Net Revenue Retention (NRR)? NRR is the Revenue that remains at the end of a timeframe, net of any upsells and churn. If NRR is less than 100%, this means that revenue churn was higher than the revenue generated from upsells – because customers canceled, didn’t renew, or stayed but paid less for the privilege through discounts, downsells, etc. – and it means your company is shrinking. 10-3+1= 8 or NRR of 80% (that’s bad) However, NRR of 100% does not mean your company is shrinking; it means you’re not growing. And if that status quo is due to expansion “offsetting” revenue churn just to break even, that’s likely a really bad sign. 10-3+1+1+1 = 10 or NRR of 100% (that’s actually not great) If, however, NRR is greater than 100%, which means you’re making more from expansion than any revenue churn you might have, things are looking good. 10-3+1+1+1+1+1 = 12 or NRR of 120% (that’s pretty good) Consider the following scenario… wait, before I go on, know that things like the cost to acquire customers (CAC) and the damage done through the negative sentiment created in the market by those customers that churned out (through negative public reviews, revealing how you failed them to your competitor, etc.), do not figure into the very simple math presented below. Okay, consider the following very simple scenario: You start the month with 10 customers, each paying $1000/year for $10k/ARR total. One customer churns out and take $1000 with them. Two customers threaten to churn, but you “save” them with 50% discounts on their $1000/year fee, which means you lose a total of $1000 for the two. So your total revenue churn is $2000. If this is all that happened, you’d now have only $8k/ARR and a shrinking business. But you’re making sure your customers (well, except for those that represented 20% of your revenue, but whatever) are successful, and you have four customers that expand their relationship with you, adding a total of $7k in new ARR. That new ARR of $7k offsets the $2k you lost, leaving you with net new revenue of $5k/ARR. So it looks like this: $10k – $2k + $7k = $15k The NRR for that timeframe is $15k, and since you started with $10k and ended with $15k, we would say you had NRR of 150%! Yay, math! But while that’s how it works from a math standpoint, how it works practically, in actual reality is… a very different story. First, let’s explore… ## Where Traditional Account Management Failed Traditional Account Management failed because it treated customers like Accounts… literally like numbers. Account Management was focused only on Renewal and Expansion from the company’s revenue perspective and honestly didn’t care if the customer was “successful,” only that they would take the latest offer being shoved down their throat. In the past(and some today), Account Managers were given quotas for expansion and renewal and were incentivized to hit those numbers, or punished if they didn’t. Taking this mentality to the extreme is the [Wells Fargo fraudulent account scandal of 2016](http://www.prweek.com/article/1417005/timeline-crisis-wells-fargo), where quotas were so out of line with the success of the customers, and leadership put such an emphasis on incentives – and used these to drive action – that account managers opened accounts in customers’ names without their permission. So Traditional Account Management no longer works, but Customer Success-driven Growth absolutely does. And while the function of Account Management – handling the process of upsell and renewal – is still required, it should sit within, roll-up to, or otherwise be governed and monitored by Customer Success Management. As I said before – but really want you to understand – Renewal and Expansion are actually part of a customer’s success; in order for customers to achieve their ever-evolving Desired Outcome, they’ll need to stay past renewals (if you’re on a month-to-month agreement with customers, every month is a “renewal”) and will likely need to consume more of your core product, adjacent products, training, etc. Which means this is all part of [Customer Success Management](https://sixteenventures.com/customer-success-management); even if your organization decides to have dedicated Account Managers to handle Upsells, Cross-sells, and Renewals, those should roll-up under Customer Success Management. ## Churn and Expansion Cannot Coexist You can’t use upsells to offset churn because churn is caused by the very thing that prevents upsells from happening. If you are acquiring customers without Success Potential and/or not doing what is necessary to ensure your customers that have Success Potential are unlocking such potential, then you are not creating the conditions necessary for expansion. You’ve created – by choice or by accident – an environment and experience that are not congruent with the customer’s success; so how can you realistically expect enough customers to buy more or invite you into other parts of their company to offset the damage that’s being done by the customers you’ve failed? I’m sure there are edge cases that have been able to do this – success in spite of what they do rather than because of it – but most of the time, without worrying about outliers, this is not going to work. You simply cannot achieve the revenue expansion necessary to offset revenue churn – in a scalable, repeatable way – when you’re not working to ensure your customers are successful since expansion is **PART** of the customer’s success. Which means if you’re working to ensure your customers are successful, your customers will expand because that’s part of their journey toward success; thus, you won’t have to worry about having to offset churn. ## Focus on Offsetting Churn; Always Have Churn to Offset If you’re focused on offsetting churn with expansion revenue, remember that you’ll always be trying to offset churn because you’ll always have churn. The reality is, you don’t need to have churn… figure out how to get rid of churn (hint: by making sure your customers are successful), and churn won’t be a thing in your world. When you don’t have churn, you don’t have to offset the lost revenue; all of your expansion revenue just adds to the top line and improves your margins. It’s true that it costs less to get revenue from existing customers than from net new customers, but this only works if you create the conditions for Customer Success. And ultimately, this focus on the customer’s success directly [increases the value of your company](https://sixteenventures.com/customer-success-drives-company-valuation). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 9 Things Customer Success is Not *December 13, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-is-not/ The [definition of Customer Success](https://sixteenventures.com/customer-success-definition) has been clearly laid out. What [goes into Customer Success Management](https://sixteenventures.com/elements-customer-success-management) has been fully documented. But there’s still a chance that you have a misconception or misunderstanding about Customer Success that could keep you from fully embracing this potentially transformative concept. So I want to make sure any preconceived notions about Customer Success aren’t standing in your way of understanding something this powerful. So let’s go through a few things that Customer Success is not… ## 1. Customer Success is Not Magic Simply claiming to be a customer-centric company isn’t enough to magically make your customers successful. Even operationalizing Customer Success Management and hoping it will magically transform bad-fit customers into successful, growing customers isn’t going to work. In fact, if you’re knowingly acquiring bad-fit customers (those without [Success Potential](https://sixteenventures.com/success-potential)), then you are setting up everyone who will work with the customer after they become a customer for failure. You’re also setting the customer up for failure. Customer Success, when done correctly, can have results that appear magical (customers stay longer, buy more, invite you into other parts of their business, and advocate for you externally, [ultimately driving up the value of your company](https://sixteenventures.com/customer-success-drives-company-valuation)), but behind those seemingly magical results are a lot of changes that have to happen and a ton of work. ## 2. Customer Success is Not Just a Department It’s critical that you understand the difference between Customer Success and Customer Success Management. But even if you understand that difference, if you have a part of the company that’s responsible for Customer Success Management (whether you call it that or not), then it’s easy to fall into the trap of “it’s their problem.” But unlike the old adage, “everyone’s in sales” … everyone really is in Customer Success. Even if you have a Customer Success Management department, the cross-functional realities behind true customer success dictate that everyone must be working toward the same goal. Customer Success has the potential to be transformative, but you have to work together as a company to unlock that potential. ## 3. Customer Success is Not Only Account Management Customer Success Management is not just another name for Account Management. Traditional Account Management failed because it literally treated customers like Accounts… literally like numbers. Account Management was focused on Renewal and Expansion from the company’s perspective only. Account Management didn’t care if the customer was “successful,” only that they would take the latest offer we’re trying to shove down their throat. Traditional Account Management doesn’t work anymore, but Customer Success-driven Growth absolutely does. This is why the function of Account Management, which is still required, should sit within, roll-up to, or otherwise be governed and monitored by Customer Success Management. Historically within Customer Success (yes, historically), it was said that Renewal and Expansion (upsell, cross-sell, etc.) happen because a customer is successful. But looking at it that way is what allows for the error of applying “new business” sales or traditional Account Management tactics to renewals and expansion when that’s the exact wrong approach. Rather, Renewal and Expansion are actually part of a customer’s success; in order for the customer to achieve their ever-evolving Desired Outcome, they’ll likely need to stay past renewals and will likely need to consume more of our core product, adjacent products, training, etc. Which means this is all part of Customer Success Management; even if your organization decides to have dedicated Account Managers to handle Upsells, Cross-sells, and Renewals, those should roll-up under Customer Success Management. Account Management is part of Customer Success Management, but Customer Success Management is not just Account Management. ## 4. Customer Success is Not Customer Support Customer Success Management is not simply another way of talking about Customer Support. Customer Support – reactive, break/fix type of support where customers go when they have an issue, encounter a bug, etc. – that is an absolutely required, super-valuable part of the business. But it’s not Customer Success Management (no matter how much the Support vendors want to ride the Customer Success wave to get web traffic). The best companies – those growing rapidly and taking over or redefining their product category – recognize that helping their customers achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) is critical and they’ve operationalized around this simple notion in the form of Customer Success. These companies understand that offering reactive, break/fix support – while required – is not enough and have evolved to providing proactive Customer Success by orchestrating the journey of the customer on their way to achieving the outcomes they desire and ensuring the customers stay on that path. Customer Support – specifically the number of interactions with the customer and how quickly those interactions are resolved – is a critical input into an overall Success Vector (a key Customer Success metric). It’s pretty obvious that if customers can’t use the product, they can’t achieve their Desired Outcome. But Customer Support is not Customer Success. ## 5. Customer Success is Not Churn Mitigation or Saving Customers If you focus on churn mitigation, you’ll always have churn to focus on mitigating. Remember, [churn is a symptom](https://sixteenventures.com/churn-symptom) of an underlying disease; if you only focus on the symptom, and not the disease, you’ll always have the symptoms to worry about. And the symptoms will likely get worse. Customer Success isn’t about saving customers who are about to churn; it’s about not letting customers get to that point in the first place. Keeping a customer from canceling often involves begging, promises, and discounts, which is fine if you have to do that (though, again, you shouldn’t have to do that), but just remember this is not Customer Success. If you can save a customer from churning, great, but once saved you must work diligently to get the customer back on track to achieving their Desired Outcome. At that point, they are likely still at-risk. In fact, if you all you do is “save” the customer and you don’t get them back on a path toward success, you’re just prolonging the inevitable; they will churn. Only this time when they churn, they’re going to be really upset since you wasted their time and now on their way out they might leave negative reviews. Focus on making customers successful and [you won’t have to worry about saving customers](https://sixteenventures.com/near-zero-churn). ## 6. Customer Success is Not “Checking in” with Customers This is one of those things that people who think they understand Customer Success say, but when they do, it’s clear they don’t know anything about Customer Success. Don’t ever “check-in” with the customer. In fact, remove “check in” from your vocabulary. Only call or otherwise make contact a customer when you have value to add. Sure, there may be times when you legitimately don’t know where the customer is on the path toward success (though there are often context clues that we have access to but, perhaps, choose to ignore), so you need to find out where they are. Just make sure that when you find out where they are, that you know where they need to go (the next Success Milestone) and come equipped with a plan, resources, and whatever else they need (based on their Appropriate Experience) to get there. Isn’t this just semantics? No, it’s not… and here’s why. Interactions with customers where you provide no value (from emails to in-person meetings) will teach customers that interacting with you is pointless and they’ll start to ignore you. And then you’ll wonder why your customer goes dark. ## 7. Customer Success is Not Customer Hand-holding or Babysitting In order to create systems and put processes in place to ensure our customers achieve their Desired Outcome, we need to understand our customers. We need to have empathy for them, or at least for the humans that make up our customer organizations. We need to understand what happens in their world, where our product fits in their daily life (you might not be the center of their universe yet… or ever; be realistic), and what your customer is trying to accomplish in their relationship with you. So if you talk about how stupid your customers are, how you need to hold their hand, or that you spend all your time babysitting them, that tells me you’ve lost focus on why you exist in their world. Sure, you just told the customer something that you’ve told 1,000 other customers… but you forget that, for your customer, that was the first time they’ve heard that. You forget that while your customer is struggling with the functionality of your product, or hasn’t mastered something they need to in order to get value from your product, that they didn’t buy your product to do those things. They started a relationship with you – and keep that relationship going – because they believe, through their interactions with you, that they’ll achieve their Desired Outcome. If you’re doing everything on your end correctly, and you’re maintaining empathy for the customer, you should never feel like your customers are stupid or that you have to coddle them. The good news is if you aren’t doing the things you should be doing to ensure your customers are successful… you can fix that by doing those things. And if you do all of that and you still feel like your customers just don’t get it; maybe they won’t ever. They could be a bad fit customer, which is also good news because you can just stop acquiring customers without Success Potential. ## 8. Customer Success is Not just Product Usage Active customers never churn. True or False? False. It’s false. So, since active customers churn, that means product usage isn’t directly correlated to Customer Success. True or False? True. That one’s true. Having worked with well over 400 Software-as-a-Service (SaaS) companies – as well as Enterprise Software vendors migrating to SaaS – I can say without a doubt that Customer Success must be a fully-integrated, tightly-coupled component of a complete SaaS Business Architecture. I can also say, without a doubt, that if you’re a SaaS company, you either think – or thought before you realized you were wrong – that having visibility into a customer’s functional use of your product was everything you need to know. As I’ve said before, [Active Users are a Vanity Metric](https://sixteenventures.com/active-users-vanity-metric). Remember, Customer Success is when your customers achieve their Desired Outcome through their Interactions with your company… “interactions” being the keyword. Product usage is one interaction; perhaps a big one. But it’s likely not the only interaction. And beyond interactions with your company, there are things your customers need to do on their end – outside of your product – that product usage won’t help you with. In Customer Success, context is everything. Yes, product usage can be a valuable input into Success Vector, but it’s just one, properly weighted input. ## 9. Customer Success is Not Happiness or Delight Happy customers never churn, right? Customers we have “great relationships” with stick around forever, always buying more and advocating publicly on our behalf. Right? Unless the “great” part of that relationship is predicated on the customer’s success, no. No, they won’t stick around forever. Look, the only thing having a great relationship with a customer guarantees is that – if they aren’t successful – it’ll be a little more difficult for them to tell you that they’re canceling their contract and moving to your competitor. If they aren’t successful, they will churn; whether they’re happy or you have a great relationship, it is going to happen. Yes, I saved the best – and most controversial thing that Customer Success is not – for last. This is definitely the one I get the most pushback on, but hopefully, you’ll see where I’m coming from. Customer Success is when your customers achieve their Desired Outcome through their interactions with your company. Desired Outcome includes the customer’s Required Outcome (what the customer needs to achieve) and their Appropriate Experience (how they need to achieve it). Unless one or both parts of Desired Outcome is that the customer is emotionally happy (perhaps the Required Outcome for a Cirque du Soleil customer is to leave emotionally happy), then trying to solve for the customer’s happiness is trying to deliver something that’s unnecessary and may even be impossible. Look, I want the people I work with – customers, coworkers, etc. – to be emotionally happy. I love it when I speak at events and can get the crowd to laugh. I love facilitating workshops where the attendees have great breakthroughs that trigger positive emotional responses. But while I love that, I also realize that the things I talk about can be heavy, they require work to implement, minds often have to change, comfort zones have to be broken out of, and that stuff doesn’t always come with emotional happiness, at least (or especially) in the short-term. I also realize that I work with humans and sometimes humans have a bad commute to the office, aren’t feeling well, or have something going on in their lives that might keep them from being emotionally happy. I also know that some customers are very demanding, always pushing back when we say no, always asking for more, opening support tickets, never giving you a high NPS score, etc. This doesn’t mean they aren’t successful. It doesn’t mean they’re not getting all the value they expected to get from their relationship with us; it just means they aren’t happy. But if you confuse Happy and Successful, you might look at the customers that don’t seem happy and try to optimize your processes around them, not realizing they’re actually your best customers! Remember, context is everything. On the flip side, you might not worry about customers that “seem” happy enough – because they don’t ever open support tickets, ask for things, push back, etc. – when, if you’re going to optimize around any customers, it should probably be them. So operationally, not understanding the difference between Happiness and Success can lead you down the wrong optimization path. But also, Customer Success can seem fluffy and something that can’t really be quantified (which is absolutely not true), yet many people still talk about Customer Success in terms of customer happiness or delight. While you can call your Customer Success Management team the Customer Happiness Group (or whatever), if you want to be taken seriously by your executives, focus on making your customers successful and instead of reporting on satisfaction and delight, report on how the customer’s success is impacting the business. Report on what matters to them… how Customer Success is helping drive the value of your company! Okay, so now that you know what Customer Success is not, check out an Executive Overview of Customer Success Management so you’re clear on what it is. There’s a 10th one: Customer Success is Not NPS… I’ve already addressed the [psychological power of surveys](https://sixteenventures.com/psychology-of-surveys) and my thoughts on NPS therein, but I could spend another 3000 words on why NPS is just one input into Success Vector and why it’s generally weighted way too heavy. I’ll leave that discussion for another day. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success Management: An Executive Overview *December 12, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-management/ **[Customer Success](https://sixteenventures.com/customer-success-definition)** is when your customers achieve their Desired Outcome through their Interactions with your company. The actual process of moving customers toward their ever-evolving [Desired Outcome](https://sixteenventures.com/desired-outcome) is called **Customer Success Management.** It’s important to understand the difference between Customer Success and Customer Success **Management**; the former can be thought of as an Operating Philosophy, while the latter is your Operating Model that can [increase the value of your company](https://sixteenventures.com/customer-success-drives-company-valuation). Okay, let’s dig in… ## Customer Success vs. Customer Success Management When it comes to Customer Success Management, you first need to know where the customer is right now (point A). When they’re just getting started, this is easy. However, when they’ve been using the product for 18 months, have increased the breadth and depth of use, brought our product into other areas of their company, purchased some add-ons, added capacity, and just purchased a license for an adjacent product, and there’s a second wave of users getting ready to start the [onboarding process](https://sixteenventures.com/customer-onboarding), it gets a bit more challenging. It’s situations like these where technology like bots – and the underlying Artificial Intelligence/Machine Learning – hold so much as-yet unrealized promise, but that’s a discussion for another day. Regardless of the complexity of the customer’s relationship with you, you should be able to know where the customer and users are right now. *Should*. Second, you need to know what the next [Success Milestone](https://sixteenventures.com/success-milestones) is for the customer (point B). When the customer is just starting out, or their relationship with us isn’t complex, knowing the next Success Milestone for that customer is necessary. Again, should. When the customer is just starting out, or their relationship with you isn’t complex, knowing the next Success Milestone for that customer is necessary. Then you need to figure out the steps required to move them from point A to point B. This includes things they will do using our product, things they need to do on their own outside the product, etc. Some things they do, you’ll have direct visibility into; others will need to be self-reported. Some things, our customers will know how to do, but some things will require training, guidance, or professional services. For the things you can’t do for them, you will need to provide or point them to the resources to bridge those “[Success Gaps.](https://sixteenventures.com/success-gap)“ You can do those things in an ad-hoc fashion, or you can move on to… ## Systematized Customer Success Management To [operationalize Customer Success Management](https://sixteenventures.com/elements-customer-success-management), you will need to proactively intervene in the appropriate way for that customer segment (a mix of technology and human touches; the “appropriate” part will dictate the ratios therein) to get them to do the things they need to do to move from point A to point B. If they do those things, great; they’re on their way to being successful. If they don’t do those things, however, you need to change up and/or escalate intervention modalities to get them to take action. If an email is sent to get the customer to take the next required action, and that action is not taken (regardless of whether the email is opened or the link is clicked), send a different email from a different person. If the action isn’t taken, escalate the modality to Facebook Messenger or SMS. If the required action is still not taken, escalate to a phone call that, upon connection, brings a Customer Success Practitioner into the mix. What starts as a proactive intervention to move them toward their Desired Outcome escalates to a Reactive Intervention to prevent the customer from going off course and get them back on track. Of course, there are other context clues to keep in mind – are they on vacation? are they a seasonal customer? – but, in general, this is what needs to happen. Done correctly, systematizing Customer Success Management will take you from just Customer Success to [Customer Success-driven Growth](https://sixteenventures.com/customer-success-driven-growth). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success Management: The 8 Elements of this Valuable Business Function *December 12, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/elements-customer-success-management/ Customer Success is when your customers achieve their Desired Outcome through their Interactions with your Company. To actually ensure your customers achieve their Desired Outcome – or what they need to achieve, the way they need to achieve it – and not just hope it happens, you need to actively work your customers toward that goal. That’s where Customer Success Management comes in. I define Customer Success Management as the process of moving customers toward their ever-evolving Desired Outcome. And Customer Success Management is made up of the following things: ## 1. Segmentation [Logical Customer Segmentation](https://sixteenventures.com/logical-customer-segmentation) is at the core of a sound – and scalable – Customer Success Management strategy. Segmenting customers based on how much they pay us (ARR, LTV, ACV, etc.) is one of those traps that a lot of Customer Success organizations fall into. It seems logical (from your perspective, at least), plus it’s what the industry has been doing for a long time (it’s a holdover from traditional Account Management). Just because that’s how it’s been done, doesn’t mean it’s right! Each customer segment has it’s own [Appropriate Experience (AX)](https://sixteenventures.com/appropriate-experience-required) – even if they share the same Required Outcome – so if we understand what their AX is, we’ll know the type and level of coverage (humans – required skills, characteristics, etc. – plus technology) to get them there. Segmenting your customers based on AX is the only way to both give the customer exactly what they need and the coverage levels to do that. ## 2. Orchestration One of the simplest – and yet amazingly effective – things you can do to ensure your customers aren’t just on the path toward success but to know what to expect along the way is what I call Orchestration. Orchestration is made up of three main elements: - Properly Manage Expectations - Lay out Joint Accountabilities - Tee-up future Expansion and Advocacy Managing Expectations [with your customers during onboarding](https://sixteenventures.com/customer-onboarding-process) by telling them what to expect in the first 30, 60, 90-days as a customer and what the major [Success Milestones](https://sixteenventures.com/success-milestones) are along the way are some very simple ways to reduce any anxiety they might have and to build trust in you. Giving the customer a list of things they need to do – both in the product and outside of it, on their own – and what you need to do – and showing that if both parties hold up their end (that’s why I call it Joint Accountabilities) they’ll reach their goal. But if they fail to do what they need to – and said they’d – do, then they won’t reach their goal. Of course, you have to do what you say you’ll do, too… and if both parties complete their Joint Accountabilities, the customer should reach their goal. Finally, letting the customer know that you rely on word of mouth (maybe you say to keep costs down so you stay cheap; don’t say this if you’re the high-priced option!), and that once they hit a certain Success Milestone, you’ll ask them to give you a testimonial or do a case study. But not right now, obviously, they haven’t gotten any value. Or that when they hit a different Success Milestone, you’ll “let them know about this add-on that other companies like theirs always buy… but you don’t need that right now.” Then you can start orchestrating [Customer Success](https://sixteenventures.com/customer-success-definition) – manage expectations, define joint accountabilities, and tee-up expansion and advocacy – right now; a very low-cost thing. ## 3. Intervention To operationalize Customer Success Management, you must proactively intervene in the appropriate way for that customer segment (a mix of technology and human touches; the “appropriate” part will dictate the ratios therein) to get them to do the things they need to do to move from one Success Milestone to the next. If they do those things, great; they’re on their way to being successful. If they don’t do those things, however, you need to change up and/or escalate intervention modalities to get them to take action. Intervention can be done a timed basis (after x number of days, send an email or every three months do a Quarterly Business Review), based on data (the customer is not doing what they need to do to move to the next Success Milestone), or Triggers (our internal champion just changed jobs). You’ll likely intervene based on a mix of all three of those factors, and the modalities for intervention (email, call, in-person meeting, etc.) will be determined by the Appropriate Experience of the customer (see Segmentation above). ## 4. Measurement There are two types of measurement that must happen in a Customer Success Management organization: - How are the customers doing? - How are we doing? If the second one (how are we doing?) is not based off the first one (how are they doing?), you’re doing it wrong. When it comes to Customer Success, you actually want to pay attention to a financial metric (usually Net Revenue Retention or NRR) and a Customer Success-specific metric like [Success Vector](https://sixteenventures.com/success-vector). It doesn’t matter if we’re hitting our retention or expansion goals if we’re doing it in a way that’s not aligned with our customer’s success, that new (or renewed) revenue won’t stick around. If you meet your NRR goals for the time period, but your Success Vector is getting worse, that could mean you did things to meet the financial KPIs in a way that had a negative impact on the customer. ## 5. Expansion (and Renewal) It’s typically said that Renewal and Expansion (upsell, cross-sell, etc.) happen because a customer is successful. But looking at it that way is what allows for the error of applying “new business” sales or traditional account management tactics to renewals and expansion when that’s the exact wrong approach. Rather, Renewal and Expansion are simply part of a customer’s success; in order for the customer to achieve their ever-evolving [Desired Outcome](https://sixteenventures.com/desired-outcome), they’ll likely need to stay past a renewal and they’ll also likely need to consume more of our core product, adjacent products, etc. This is part of Customer Success Management because even if your organization decides to have dedicated Account Managers to handle Upsells, Cross-sells, and Renewals, those should roll-up under Customer Success Management. Traditional Account Management failed because it treated customers like Accounts… numbers. It was focused on Renewal and Expansion from the company’s perspective only. Account Management didn’t care if the customer was “successful” only that they would take the latest offer we’re trying to shove down their throat. Traditional Account Management doesn’t work anymore, but Customer Success-driven Growth absolutely does; which is why this function should sit within, roll-up to, or otherwise be governed and monitored by Customer Success Management. ## 6. Communication It’s obvious that a major part of Customer Success Management is to communicate with the customer (including users, champions, sponsors, and other personas). Perhaps it’s proactively guiding the users to take the next logical step, giving the champion a status update, or scheduling the next Quarterly Business Review (QBR) with the executives or other appropriate personas. Or maybe it’s intervening reactively when the customer hasn’t taken the action necessary to reach their next Success Milestone. Those are rather obvious times when customer communication is critical; but one type of communication with the customer that’s not so obvious is Customer Marketing, of which there are two types: Marketing to your existing customers to drive adoption and increase the breadth and depth (land and expand) of use, including upsells, add-ons, etc. Using your customers in your marketing (case studies, testimonials, etc.)… combine 1 & 2 for a Customer Marketing power play Customer Marketing is either the responsibility of – or heavily influenced by – Customer Success Management. The former is ideal. There is a fourth type of communication that Customer Success Management is responsible for and that is internal communication. It is critical that the Customer Success Management organization communicate what they’re learning from customers, how they’re impacting customers, and the value they’re bringing to the company by getting customers to stay longer, buy more, bring us into other parts of their company, and advocate for us externally. Not only does that internal communication enrich the rest of the enterprise with customer intelligence, it also lets the rest of the company know just how valuable Customer Success Management really is. Level-up your Communication with these two resources: - [Introducing the Customer Engagement Communication Model](https://sixteenventures.com/communication-model) - [Introducing the BEAST Message Framework for Customer Engagement](https://sixteenventures.com/beast-message-framework) ## 7. Instrumentation Elements 1 – 6 really don’t require much technology or engineering work. Certainly, everything I’ve mentioned can be greatly enhanced by leveraging technology, but it really doesn’t require it. But these final two are where we start bringing technology into the mix. Far too many companies jump to buying a purpose-built Customer Success Management software product assuming it’ll fix any problems they have, give them the structure they need, etc. But just like any other part of your business, if you select a piece of software without knowing what it is you’re trying to operationalize, you’ll end up building your strategy around the capabilities of that software. Figure out what you need first, then find the solution that you think fits that model. Sure, you many not be 100% right out of the gate, but you’ll be a lot closer to where you need to be if you work in that direction. Instrumentation is the process of collecting data on the customer’s interactions with your company, across their lifecycle. From gathering usage data from your product to interaction records with the client, to Integration with other systems, Instrumentation is critical step in leveraging technology to guide your customers along the path toward success. Context is everything when it comes to Customer Success Management, so the more visibility you have into whether your customer is moving toward their Desired Outcome, the higher value your intervention will be. What you collect all of this data in – Excel, a BI tool, a purpose-built Customer Success Management product, is something you’ll need to figure out. And the next, and last, Element on this list will help you figure out what that should be. ## 8. Operationalization Wrapping all of this – Segmentation, Orchestration, Intervention, Measurement, Expansion, Communication, and Instrumentation – with processes – called Operationalization – is what takes Customer Success Management in your company from a lovely thought experiment, and turns it into the Growth Machine that it can be. Operationalization is the simply the process of taking the data from Instrumentation and acting on it. Whether the system acts on it without human interaction or the system notifies a human within your organization to take a certain action should depend on the Appropriate Experience of the customer. That’s why it’s so critical to have a clear idea of what the Appropriate Experience is for your various customer segments. If you try to operationalize across a normalized view of all customers, you’ll likely create a mix of technology and humans that is inappropriate for most of your customers. Best case, you’ll over-deliver to customers that don’t need such high-touch and lower your profit margins. Worst case, you’ll provide an experience that is so incongruent with that the customers actually need, you’ll drive them away. The latter is really bad, but don’t assume the former is okay; one of the biggest barriers to scaling that I’ve run into is when companies over-deliver for their customers; don’t over-deliver, just deliver an experience that is appropriate. Customer Success Management is not a technology-centric initiative; it requires you to understand what Customer Success is, how Customer Success Management is the orchestration of Customer Success, and what all of that means in the context of your customers. From there, you can – and probably should – leverage technology to enable you to perform Customer Success Management activities in a predictable, operationalized manner, which is absolutely required at scale. After that, the technology decisions will be easier as those that fit into your well-defined Customer Success Management needs will be few. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Logical Customer Segmentation: The Key to Scaling Customer Success *December 12, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/logical-customer-segmentation/ Customers that pay more need more human interaction, right? Customers that pay less don’t deserve as much human interaction, right? Customers that we give more human interaction should pay more, right? Segmenting customers based on how much they pay us is one of those traps that a lot of [Customer Success](https://sixteenventures.com/customer-success-definition) organizations fall into, mostly because it seems logical and it’s what the industry has been doing for a long time. But that doesn’t mean it’s right. Let’s explore a bit, shall we? ## Appropriate Customer Segmentation Each customer segment will have its own Appropriate Experience (AX) – even if they share the same Required Outcome – and this will tell you the type and level of coverage (humans – required skills, characteristics, etc. – plus technology). Required Outcome + Appropriate Experience is, of course, what makes up the customer’s [Desired Outcome](https://sixteenventures.com/desired-outcome). This means that segmentation should actually be logical (take a step back and really think about it) and done from the customer point of view (think: Experience Segmentation) rather than from an internal-focused view (i.e. ARR, revenue potential, etc.). It’s not about what a customer pays us… it’s about the customer’s Appropriate Experience. It’s easy to just assume that those things would be correlated, but that’s not always true; and that assumption can cost you dearly, in revenue, profit, and ultimately, customers. ## Don’t Over-deliver. Don’t Under-deliver. Just Deliver. Some high-revenue customers paying the same amount will have very different Appropriate Experiences and if you don’t know this, you’ll normalize across all customers paying us that same amount. But, one segment of customers within that same “revenue band” may have an Appropriate Experience that requires much less coverage by humans, resulting in a super profitable segment if you understood this. By not knowing this, however, we inadvertently take what could be a very profitable segment and over-deliver, costing us more in the process and – worst case – actually driving the customer away because the experience is inappropriate for them. ## When Appropriate Experience isn’t Economically Feasible On the flip side, this thinking could lead to us under-delivering for some customer segments when we should actually not be doing business with them at all since they’re a bad fit. Customers that don’t pay enough to get an Appropriate Experience; don’t give them an inappropriate experience because that’s all that’s economically feasible… don’t sign them in the first place! If you can’t provide them with their Appropriate Experience in an economically feasible way for you, either get them to pay more so you can (sometimes we just don’t ask for enough money), or, if they can’t pay more, don’t sign them [because they’re a bad fit](https://sixteenventures.com/success-potential) (lacking Experience Fit) right now. Maybe at some point in the future, you can provide them with an Appropriate Experience in an economically feasible way or, after being in-market for some time, they’ll trust that you can help them and will pay more for the privilege. But providing a customer segment with an experience that is inappropriate because that’s all they can afford is not actually helping the customer succeed… in fact, you’re punishing them when you should simply walk away from that engagement until you can provide them with an appropriate experience. ## Appropriate Experience Discovery process Before trying to figure out all of the logical segments that may exist across your customer base or Total Addressable Market, start with one and discover the Appropriate Experience for them. After that, you’ll start to see how important Appropriate Experience is to the customer, why it’s not going to be the same across all customer segments, and other logical segments will begin to appear. So do this: - Start with your Ideal Customer - Create a hypothesis based on the characteristics of your Ideal Customer - Interview Customers and Prospects that fit your [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) - Observe them in their daily routines - Ask about their goals - Ask about experiences with other vendors that they thought were right on - Ask about adjacent products/services they use and research the experience those vendors offer - Come out with a more solid Appropriate Experience hypothesis - Create a Customer Success Management process for that hypothesis - Run it by some of your trusted customers to see if you’re on the right track or - Start testing it with customers Once you’re comfortable you have the process down, start doing this with your other logical Customer Segments. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Orchestrating Sales and Customer Success Alignment *October 5, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/sales-customer-success-alignment/ If you aren’t familiar with the concept of [Customer Success](https://sixteenventures.com/customer-success-definition) yet, it’s when your customers achieve their Desired Outcome (what they need to achieve, the way they need to achieve it) through their interactions with your company. Customer Success begins at the first interaction with prospects by your sales team, and continues across their entire lifecycle, and is required for scalable, repeatable Account Expansion. Very often, Customer Success and Sales are thought to be on two different sides of the company, almost at odds. But the best companies have Customer Success as their Operating Philosophy (the best of the best have Customer Success as their Operating Model), and they see that the Customer Success Management org and Sales are more similar than different, and when they bring them together, magical things (read: exponential growth) happen. Let’s dig into this, shall we? ## Sharing Sales-Accelerating Customer Intelligence What’s the best way to understand the “voice of the customer?” Probably from the customer directly? What part of the company interacts directly with the customer and can be their “voice” inside the company? Yep, Customer Success Management. The best companies recognize that Customer Success Practitioners (CSPs) – those working directly with customers to proactively ensure their success – have a direct line into how their customers think and talk about their goals, and how customers are using their product to reach those goals. In fact, they even have insights into the language they use and other aspects of customers’ culture, all of which can be invaluable in accelerating the sales process and positioning the prospects for success once they become customers. The best companies also realize that during the sales cycle with a prospect, from first interaction by a Sales Development Rep (SDR) to when the Account Exec (AE) closes the sale, the customer is sharing information that can not only be useful in ensuring the customer is successful but in mapping out the account for expansion later on. Beyond the identified [Desired Outcome](https://sixteenventures.com/desired-outcome) for their customer segment, understanding why they’re buying, what the catalyst was for them that made them seek out your solution, etc., the intel gathered during the sales cycle can be used to grow the customer over time. The initial catalyst – the reason the customer decided they need your solution – doesn’t go away once they buy; in fact, it actually gets stronger once they’ve made that commitment. And sales communicating that catalyst to Customer Success not only sets the customer up for success but the company as well. So it’s critical that you remember both Sales and the Customer Success Management organizations hold a treasure trove of useful intel on your customers that you can tap into grow new business sales and drive in-account expansion. But you can’t just hope it happens. Introducing… ## Enrichment: Orchestrated Intelligence Sharing The best companies don’t just hope this type of alignment happens (because they know it won’t), so they work to orchestrate and operationalize the intel sharing between Sales and Customer Success Management (and marketing, product, execs, etc., too). I call this process Enrichment because, well, we’re enriching the other parts of the company with the treasure that is customer intel. Calling it Enrichment instead of feedback or some other low-value term positions this as the super-valuable activity it is. Sales, Marketing, Product, and Executives can all learn from Customer Success Management, but they won’t come to you asking for customer intel. If you’re in Customer Success Management, you need to proactively share this with the rest of the organization; probably on a more aggressive cadence than you’re initially comfortable with. I’d suggeaskinging for forgiveness rather than permission when it comes to Enriching the rest of the company. Customer Success Management might ask Sales for better turnover of sales context, but without leadership intervention to ensure this happens – from education on why this is important to incentives/disincentives to motivate behavior – AEs may be less willing to do this than they should be. But if you truly understand the value in Enrichment, you’ll make sure it happens, since… ## We’re All In This Together Now, on the surface, telling sales to **NOT** go after a specific type of customer would fly in the face of what drives a sales organization, but by giving sales a list of the characteristics of good and bad fit customers, we’re giving sales the intelligence they need to find customers who are ready, willing, and able to take action immediately, reducing the length of the sales cycle and allowing sales to hit their number this quarter. And what’s great is that we’re hitting those short-term numbers in a way that – because they’re bringing in more customers with [success potential](https://sixteenventures.com/success-potential) – sets the company up for consistent victories in the long-term, which is often at odds with optimizing for short-term sales goals. Win-Win. So let’s first explore… ## How Customer Success can help Sales Like I said above, the reality is, Sales is going to be less likely to help Customer Success Management at first, so those in the CSM org will have to take the first step. These are not all of the ways Customer Success can help Sales, but, hopefully, this gets your brain moving in the right direction. ### 1. Help Sales close more deals this month or quarter If you want Sales to trust you, don’t start the Enrichment process with all of the ways they screw things up for you! Gather good-fit Customer characteristics, successful use cases, terms and language the customers use and pass that to them on a consistent, frequent basis. If you can help salespeople close more deals, and they’ll trust you forever. ### 2. Help them avoid signing bad-fit customers Once salespeople trust that Customer Success Management is actually operating in their best interest, too, CSM can start getting sales to [avoid signing bad fit customers](https://sixteenventures.com/stretch-bad-fit-customer) Gather bad-fit Customer characteristics, explain why they’re a bad fit, and explain the [acute pain associated with closing bad-fit customers](http://www.saleshacker.com/acute-pain-closing-bad-fit-customers/). ### 3. Tee-up future Account Expansion In companies where the sales org – or even the initial salesperson – handles account expansion, this is critical. “oh, and when you [achieve this [success milestone](https://sixteenventures.com/success-milestones)] we’ll talk about [this add-on] as you’ll be ready for it then. You don’t need it now, but [“we’ll talk about it” or “I’ll introduce you to our {upsell person}, Susan”] when you’re ready. When they hit that milestone, either talk to them about it or introduce them to the person responsible for upselling (dedicated account manager / expansion resource or the original salesperson). ### 4. Orchestrate Advocacy References are a critical part of the sales process, but always asking the same customer for a reference is less-than-ideal Asking customers to be references when they are on a positive Success Vector and have just hit a logical Success Milestone can drive a steady supply of super-valuable references for sales to leverage But this isn’t a one-way street… time for a little quid pro quo. ## How Sales can help Customer Success Once Customer Success Management has the trust of Sales – or if the company actually has a strong CEO that has introduced Customer Success as the Operating Philosophy of the company and Sales trusts Customer Success organically – you can actually operationalize Enrichment from Sales to Customer Success, too. Just like I said before, these are not all of the ways Sales can help Customer Success, but, hopefully, this gets your brain moving in the right direction. ### 1. Don’t Acquire Bad-fit Customers! Acquiring customers that cannot achieve success in their relationship with you is the antithesis of Customer Success. Bad-fit customers are a drain on resources, morale, and reputation in the market. Bad-fit customers make it harder to acquire good-fit customers; the friction from negative market sentiment can dramatically increase sales cycles. I actually have some pretty strong beliefs around this, including if you’re a CEO that allows your sales people to sign customers without Success Potential – those “bad fit customers” – you should fire your Customer Success Management org because you’re just setting them up for failure anyway! (but probably don’t do that… just stop signing bad-fit customers!) ### 2. Manage expectations properly Lay out clearly with the prospect what will happen in their first 30/60/90-days as a customer so they know what to expect. Introduce the concept of [Joint Accountability](https://sixteenventures.com/customer-accountability); “to be successful, this is what we’ll do to ensure your success, but this is what you’ll need to do.” [The seeds of churn are planted early](https://sixteenventures.com/seeds-of-churn) … but so are the seeds of massive success. It’s up to you which you sow. ### 3. Introduce CSP during sales cycle The Customer Success Practitioner (CSP) is the person (or type of person) the customer is going to be working with across their lifecycle; it’s good to get them acquainted early. CSPs can usually ask questions salespeople (even sales engineers) can’t and the customer will answer For high-value accounts, introduce a second CSP (“if Sam is out, you’ll talk to another highly-qualified Customer Success Executive like Mary.”) In many cases – especially vertical-specific companies where a CSP may have domain experience – introducing the CSP earlier in the sales cycle can reduce time to close. And of course, once the sale closes, the AE should be the one to set up the transition from Sales to the CSM org; even if they just set up the call, join for the first 10 minutes, say thank you, set expectations, make intros, and then jump off the call. ### 4. Transfer discovery (Enrichment!) Don’t ring the “new sale” gong just to celebrate the new sale; use it as a signal for BDAs/SDRs, AEs, CSPs, ONBs (Onboarders), SIs (System Integrators), PS (Professional Services), etc. to gather to learn why the customer signed. It’s easy to update the account in the CRM with the common data points; it’s another to transfer actual context learned by the AE during discovery to those handling the customer immediately post-sale. The real catalyst for making the purchase is discovered during the sales cycle, and even though it doesn’t’ change (and may even get stronger!) once the prospect becomes a customer, yet it is very often not recorded or communicated by the AE to those taking over immediately post-sale. The transition (here’s what [I think about the term “handoff”](https://sixteenventures.com/customer-success-terms-to-avoid)) from Sales to Customer Success Management is a place to totally drop the ball with the customer, kill excitement, and hurt trust with the customer by having to ask the same questions again… don’t let this happen by transferring full discovery Remember, the best companies have Customer Success as their Operating Philosophy (the best of the best have Customer Success as their Operating Model), and they see that the Customer Success Management org and Sales need to be aligned, ensuring our customers achieve their Desired Outcome and that as they evolve and grow, their relationship with us grows and evolves as well. That’s Customer Success-driven Growth. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Success Potential: The Foundation of Customer Success *October 4, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/success-potential/ *[Também disponível em Português](http://www.exactsales.com.br/potencial-de-sucesso/) por Exact Sales* [Customer Success](https://sixteenventures.com/customer-success-definition) starts with acquiring customers that have Success Potential. Customers that have Success Potential are said to be good fit customers. This is the opposite of [bad-fit customers](https://sixteenventures.com/stretch-bad-fit-customer) that cannot get value from a relationship with us now or in the near future. If you knowingly allow bad-fit customers to be acquired, nothing else you do in Customer Success will have the result you’re hoping for as those customers – no matter what you do – will never achieve their Desired Outcome. In fact, if you’re a CEO that allows your sales people to sign customers without Success Potential, you should fire your Customer Success Management org because you’re just setting them up for failure anyway. And if you’re a Customer Success Practitioner or Leader that works for a CEO that allows bad-fit customers to be signed, you should quit and go work for a CEO that isn’t setting you and your team up for failure. Bottom line… if you want customers to: - Stay longer - Buy more - Advocate for you …then don’t acquire customers without Success Potential! Okay, so let’s dig into this concept of Success Potential, shall we? ## A Quick Reality Check Before you even start logically segmenting your customers, you’ll want to do a quick reality check on what’s necessary for your customers to be successful in their relationship with your company. BTW, if you go through this Success Potential exercise, when you do start to [logically segment your customers](https://sixteenventures.com/logical-customer-segmentation), you’ll be able to quickly see what segments you cannot help right now and which are a perfect fit. Okay, so Success Potential is a binary, yes or no answer to this question: *Based on the realities of what we can offer right now, and – assuming Joint Accountabilities are met on both sides – is this prospect likely to achieve success in their relationship with us?* If your customer doesn’t have Success Potential, and you know it when you sign them, don’t be surprised when they churn out and say terrible things about you publicly. ## Success Potential Evolves There is no “set it and forget it” when it comes to Success Potential (or Customer Succes… or any part of your business!). Success Potential can (and likely will) change, either because you’ve added or removed functionality, changed your culture, removed or increased your ability to serve, etc. or because of changes on the customer’s side, like their expert quit, they got acquired and their culture changed, or they simply evolved out of being a good fit for your company. Once you have a Bad-fit Customer Profile created, you’ll use that to figure out how to actually operationalize around your existing customer base. When you’re done reading this post, read my post on [Customer Success Goals: Cohorts, Metrics, and Prioritization](https://sixteenventures.com/customer-success-goals) for what to do next. That all said, let me get to the heart of the matter… ## Stop Acquiring Bad-Fit Customers This is one of those little ideas that will challenge the status quo in your business. This is the thing that will prove if you really do have a Customer Success culture or if your executives are all talk. Are you willing to stop signing bad-fit customers? Are you willing to disqualify customers already in the pipeline that do not have Success Potential? If not, why are you investing in Customer Success Management? It’s a waste of money (and other resources) since you’re essentially setting everyone up for failure post-sale… including the customer. [Good luck with that.](https://sixteenventures.com/churn-bad-fit-customer) Done right, though… ## Success Potential isn’t Limiting; it’s about Focusing A typical reaction to any type of action that appears to limit your market is the Fear of Missing Out (FOMO). So when I say that you should NOT do business with a customer that doesn’t have Success Potential, FOMO is going to tell you that you should. FOMO is going to tell you that this is limiting YOUR potential, that it’s lowering your Total Addressable Market (TAM). But FOMO is wrong and if you let it dictate how you run your business, you’re wrong, too. The reality is simple: the TAM you share with investors or that you came up with when you decided to start your company is really the ultimate TAM if everything was perfect. If your product was feature complete for every type of customer, if you could provide an Appropriate Experience to every customer segment, and if you could afford to get in front of all of those customers, then that TAM wouldn’t just be a theory, you could actually “address” that total market. But right now, that entire TAM isn’t ready for you and you’re not ready for it; so you have two choices. - You can either try to acquire as much of that TAM as possible, regardless of Success Potential, churning and burning your way through customers that are a bad fit, ultimately shrinking that TAM by not just the number of customers that churn out, but also those that the negative market sentiment (created through all of that churn) pushes out of the TAM, or… - You can recognize that right now you have a specific segment of that TAM that has Success Potential and that as you improve your product and your ability to serve customers, you increase the number of market segments that have Success Potential, opening up more and more of that TAM. In fact, if you choose the second option, your overall TAM may grow since your successful customers will spread the word, not just to customers like them, but potentially to customers in markets you haven’t considered in your TAM calculations. Check out this quick presentation to visualize those options: Okay, so here are… ## The 6 Success Potential Inputs There are six areas of Success Potential and you need to be intellectually honest about what it would take for a customer to be successful – to achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) – in their relationship with your company. You’ll note that four of the following Success Potential inputs are tied to the Required Outcome part of Desired Outcome (what the customer needs to achieve) and the other two are tied to the Appropriate Experience part of Desired Outcome (how the customer needs to achieve it). Success Potential includes, but may not be limited to: ### Technical Fit (Required Outcome) What technology must they be using – or must they acquire – in order to get value from our product? Example: Our product is built on top of Salesforce.com; they need to be – or become – a Salesforce.com customer ### Functional Fit (Required Outcome) What features and functionality are absolutely required for this customer to be successful? Example: Agencies need a roll-up view of all customers; not having that is a show-stopper ### Resource Fit (Required Outcome) If they do not have the resources to invest (money, time, energy, etc.) into everything required to be successful, they are a bad fit. Example: if they can’t afford the required advanced integrations – even though they can pay our base fee – that will be a problem. ### Competence Fit (Required Outcome) What level of expertise internally must they have – or be willing to acquire – in order to be successful? Example: They could functionally use our product for project estimating, but without someone on their team that knows how to prepare the data for estimation, they will not be successful. We offer training, are they willing to buy it? ### Experience Fit (Appropriate Experience) We cannot give them an experience that is appropriate for them, from how they buy to how they get value across their lifecycle, and including reactive support and proactive Customer Success Management, we cannot give them the overall experience necessary to ensure their Desired Outcome is met. Sales Example: Selling Enterprise deals in Spain requires high-touch relationships, often with long, extended lunches and we don’t have the resources to provide that level of service. Support Example: We do not have the ability to staff a 24/7 telephone support center ### Cultural Fit (Appropriate Experience) What beliefs, morals, attitudes, etc. do we feel like won’t be a fit with our culture? Example: If they speak ill of their customers, have an abrasive attitude, and demand rather than ask it’s a bad fit. Example: If they want to publish porn on our video distribution site, that’s a bad fit. But keep in mind that… ## It’s Not Success Guaranteed! Acquiring good-fit customers – those with Success Potential – is foundational to Customer Success. But customers with Success Potential aren’t guaranteed to be successful! It’s just potential… and it’s up to you to unlock that potential! If all it took was to acquire customers with Success Potential, that’d be awesome. I wouldn’t have to travel the world helping companies implement this concept of Customer Success. But it’s not guaranteed. Which means we need to know what is required for our customers to be successful and ensure that’s possible. Note my wording… ensure that’s possible. We can’t (always) do that for them (though sometimes we can, maybe even for an extra fee) But we need to know what is required for them to be successful and orchestrate the process of moving them toward that success. That’s [Customer Success Management](https://sixteenventures.com/elements-customer-success-management). One aspect of managing the success of your customers is knowing where to meet them, and for that, we have to look to the… ## Spectrum of Readiness A good fit customer is one for whom you can check all of the Success Potential boxes. They meet all of the criteria that would indicate they have the potential to be successful as your customer. But within that cohort of good fit customers exists a Spectrum of Readiness (SoR), from those customers that are not at all ready to those that are able to hit the ground running. It’s up to you to meet them where they are and take them where they need to go, but you can’t do that if you don’t know where they are on the SoR. If you fail to recognize that customers exist across this spectrum and instead normalize an experience across all good-fit customers, you will fail to unlock that Success Potential for at least some of those customers. And a good fit customer that churns out (but is still in business themselves) is the worst kind of churn. It means you failed them. Now, one last thing to consider… ## Is this All or Nothing? I recognize that some of these inputs into Success Potential are going to require you to spend some cycles working to uncover, meaning some of these will be harder to come up with at first. That’s perfectly okay. So should you wait until you have all of the inputs fully developed/discovered or should you start with what you know and evolve the definition of Success Potential from there? The latter… do the latter. You know some of these already, so start there. Start with Technical and Functional Fit (the two that are generally the most obvious) and share that with sales and marketing; don’t go after – or sign – customers that don’t meet these criteria. Other “Fits” like Resource or Experience may take more time to uncover, so don’t wait until then to start implementing the Success Potential checklist across your customer experience. As you add to the Success Potential definition or as it evolves, share the updated definition with everyone so you’re all working from a single version of the truth. Don’t wait until it’s perfect… it never will be, so go with what you have and iterate from there. In fact, overall, you need to ensure you’re… ## Communicating Success Potential Internally Acquiring customers that cannot achieve success in their relationship with you is the antithesis of Customer Success. You cannot say your company is Customer Success-centric and knowingly and actively acquire bad-fit customers; those two things are at odds with each other. That said, most of the time it isn’t that a company is acquiring bad-fit customers on purpose, it’s that they’ve never gone through the process of defining Success Potential… and they certainly haven’t communicated that internally. For instance, when we see [sales closing a lot of bad-fit customers](http://www.saleshacker.com/acute-pain-closing-bad-fit-customers/), it’s not that most salespeople wake up in the morning and say “today I close ’em all and let Customer Success sort ’em out,” it’s that no one ever told them the characteristics of a bad-fit customer and what the acute pain of signing a bad-fit customer really is to the company so they just close. But if you identify the six things that make up Success Potential and require a checkbox by each one for every new customer that’s acquired, you’ll truly be on the path toward Customer Success. And now that you know about Success Potential, you can’t un-know it… if you choose to go forward without doing this work on Customer Success and continue to acquire bad-fit customers, you’re choosing to do things that will hurt your company, stakeholders, and customers. I go into even more detail on Success Potential in [This Customer Acquisition Mistake Can Kill your Growth](https://sixteenventures.com/customer-acquisition-mistake) --- # Excuses and the Myth of Near-Zero Churn *September 5, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/near-zero-churn/ Churn is a drag on growth. Churn hurts company valuation. There is no good reason to have churn in your business. I did an “Ask Me Anything” on Slack as part of the build-up for my “Building an Engine of Growth” Workshop and Keynote at SaaStock 2016 in Dublin, Ireland and it was awesome… until the last question, which started out like this: “*I’ve always felt like Lincoln’s recommended churn rates are, in many cases, unreachable.*“ Oh no… and I’d been having such a great time until that point. He went on to say… “*Yes, I understand low churn rates are best for business, but realistically, how many companies actually do have 5% annual churn instead of what I more commonly hear which is closer to 5% monthly (painful, but technically survivable).*“ Who starts a business to just “technically survive.” WTF? Well, even though what I talk about is unrealistic, he still wanted to know how to lower his churn from 5% per month to, you know, 1 or 2% per month. Okay, so I composed myself and addressed his question… and I thought it would be useful to you, too. But first, let’s get clear on why so many people think near-zero churn is unrealistic; they’re trying to justify negative results by blaming the customer instead of owning their failures. ## Illogical Conclusions Roughly 100% of the time, the pushback I get around my “unrealistically low churn” is from executives, leaders, founders, etc. of companies that haven’t been deliberate in their growth. They didn’t identify an [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) and didn’t specifically target those customers with their sales and marketing efforts, essentially taking whatever customers came their way. Because they didn’t develop an ICP – or otherwise take the time to learn about their best customers – they didn’t know their customer’s Desired Outcome. Not knowing the customer’s [Desired Outcome](https://sixteenventures.com/desired-outcome), they failed to orchestrate and operationalize an experience that ensures the customer continually achieved value, causing the customers to churn out at a high rate. And then they’re like, “well, I guess 45% annual customer churn is just the norm.” It might be the norm, but that’s because so many companies do so many things wrong! But just because it’s the norm, doesn’t mean it has to be your experience. If I were you, I’d want to do what the best companies do, not the average companies. ## Level-up Your Understanding of Churn To really understand all of this, you need to get clear on a few things: - The difference between [Customer and Revenue Churn](https://sixteenventures.com/free-trial-churn) - The fact that [Churn is a Symptom, not a Disease](https://sixteenventures.com/churn-symptom) - What [Customer Success](https://sixteenventures.com/customer-success-definition) is in the first place - The [Only Two Reasons Customers Churn](https://sixteenventures.com/churn-reasons) - 5 Lesser-Known Ways [Churn Hurts your Company](https://sixteenventures.com/churn-hurts) - 7 Ways Customer Success [Drives Company Valuation](https://sixteenventures.com/customer-success-drives-company-valuation) Okay, so now that you’ve leveled-up your understanding of churn, here’s… ## The Recipe for Near-Zero Churn Here’s the three-part not-so-secret secret to near-zero customer churn: - Acquire good-fit customers; that means actively turning away [those customers that are a bad fit](https://sixteenventures.com/stretch-bad-fit-customer) - Get super-clear on the Desired Outcome of your Good Fit (Ideal) customers, which is made up of Required Outcome, or what they need to achieve, and Appropriate Experience, or how they need to achieve it - Orchestrate and Operationalize the journey to achieving that Desired Outcome – from marketing and sales, to onboarding, across all of their interactions with your company, in-app and beyond – understanding that the same Required Outcome may be shared across discrete customer segments, but the Appropriate Experience could vary wildly from segment to segment - Bonus: Since you have Good Fit customers that are achieving their Desired Outcome and you aren’t in fire-fighting, save-the-customers mode, you can now focus on [Logical Account Expansion](https://sixteenventures.com/logical-expansion). That’s it. (Easier said than done, obviously, but it’s a pretty simple concept to grok.) Okay, I guess that’s not so much a secret as something a lot of companies know, but choose to ignore. That success recipe requires you to figure out what it’s going to take for the customer to be successful – what they have to do, what you have to do, what the product does, what you can do for them (for a fee), etc. – and operationalize around that. Of course, that may require you to completely change everything about your business,  but don’t say it’s not possible to achieve super-low churn rates. It is, you’ve just chosen to do business a different way. Oh, and you need to be aware of… ## The Storm before the Calm When you decide to get deliberate in your growth, you may encounter some obstacles that will test your commitment to doing what’s right. - Your new business conversion numbers will go down because your pipeline is full of bad fit customers that you’ll stop closing, but your conversion rate will go up.  When we ramp marketing/sales around good fit customers, your conversion numbers will go back up. - Your sales pipeline will be cut in half (or more) because, as above, it’s full of bad fit customers that you’ll kick out of the pipe. Of course, we’ll replenish what we remove from the pipeline with more good fit prospects, but at first, it’ll look bad. - Your Customer Churn will go up; as you actively jettison bad fit customers, you will experience a cycle or two where churn is higher than it ever was. Once those bad fit customers are gone and you’re actively acquiring good fit customers with success potential – and then working to ensure the customers achieve their ever-evolving Desired Outcome – churn becomes a non-issue. You have to understand that those things are going to happen and you need to manage expectations with everyone (executives, the board, etc.) that – because you screwed up so bad to this point – tweaking little things here and there isn’t going to cut it; you need to rip it apart to make it stronger. Now, let’s tackle this typical refrain… ## “But My Market has High Churn” I can almost guarantee someone reading this post – not you, of course, but someone – will read my words and say “yeah, that’s great, but there’s just a lot of churn in my market…” Yes, some markets that you choose to do business in – or some customer segments within a market – may have customers that churn out more than others. Maybe this is because companies in that market go out of business frequently, maybe they get acquired at a higher rate, or perhaps they are simply more transient in nature (seasonal, project-based, transactional, etc.). If those things are actually true for your market (they generally aren’t; they’re usually something you think, hope, or made up as the reason for your high churn), then those are the realities of the market you chose to do business in. Frankly, they may not even constitute “churn” as much as “they did what they needed or outgrew your solution and moved on.” Sure, that’s a negative hit to your revenue, but it’s very different than a customer churning out for not achieving their Desired Outcome. What’s usually true when it comes to churn is that your customers failed to achieve their Desired Outcome – either because you [signed customers without Success Potential](https://sixteenventures.com/success-potential) in the first place or failed to deliver on your promise to Good Fit customers – and they churned out; they either actively cancel (if contractually able; some will even pay a fine to cancel) or simply decide not to renew. Which means you need to understand… ## Avoidable vs. Unavoidable Churn [Unavoidable Churn](https://sixteenventures.com/unavoidable-churn) is when, regardless of what we do (because they’re a bad fit, don’t have success potential, or they go out of business, etc.), customers are going to churn. Customers that would continue being our customer if we proactively ensured they continued to achieve their ever-evolving Desired Outcome, but who cancel or don’t renew because that didn’t happen, are referred to as Avoidable Churn. There’s actually a secondary classification that helps us get an even better grasp on what’s going on with our churn and that is Expected vs. Unexpected. We’d say those that didn’t have success potential were “expected” since there wasn’t any way they were going to be successful, while those customers who were on Positive [Success Vector](https://sixteenventures.com/success-vector) but suddenly went out of business were “unexpected.” Now, unless you’ve done everything wrong in your customer acquisition process, the amount of churn you have that is truly unavoidable is likely **FAR** lower than what you think (or want to admit). ## Pulling it all Together Will you ever get to zero customer churn? I don’t know, but you should try. If you have any churn, you should learn from it, and try to reduce it. Customers that churn out stop paying you. Customers that churn out, take with them what you’ve spent to acquire and serve them as they leave. Customers that churn out add no value to the business; they only reduce value. Churn is a symptom of something else that’s going on; you’re acquiring the wrong customers or not helping the right customers be successful. Churn is ultimately your fault and if you choose to ignore that, fine; but don’t blame your customers. By ensuring the customer is on a path to achieving their Desired Outcome, you reduce avoidable churn. By being deliberate and only acquiring customers with Success Potential, you reduce unavoidable churn. That’s not just how you get to near-zero churn… that’s how you build a real, sustainable, and efficiently scalable business. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Success Vector – a Better Customer Health Score *August 18, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/success-vector/ Customer Success is a Growth Engine. Investing in Customer Success-driven Growth is an efficient way to drive revenue and [company valuation](https://sixteenventures.com/customer-success-drives-company-valuation), and we need a metric that is designed to measure that growth. Introducing, Success Vector. Customer Health Score, historically the Key Performance Indicator (KPI) of Customer Success, is too much of a moment-in-time snapshot; a lagging indicator. We need something more forward-looking. More of a Key Success Indicator – KSI – than a simple KPI. So, looking at Customer Success as the growth engine it is, we need a KSI that we can use to ensure we’re on track to meet the growth potential [Customer Success](https://sixteenventures.com/customer-success-definition) will unlock within our existing customer base. ## The Key to Real Predictable Revenue Every company wants predictable revenue, but most turn to new business Sales to get it. They create a goal they want to hit – essentially a made-up number the CEO or Board wants to see – and then they try to figure out how to hit that number. The “predictable” part of all of this comes down to ensuring your pipeline is loaded with (at least) 5x more leads than your target goal so you can hit it with a 20% close rate. Math! While that may be “predictable” in a spreadsheet, in reality, hitting that goal requires a lot of work, coordination, effort, hustle, incentives, and luck. Yet, historically, this is where companies look for new revenue by default. That’s changing as companies realize it doesn’t get more predictable than being able to look at your existing customers, say these 100 customers will reach this Success Milestone in the next month, that milestone has a logical upsell associated with it, the value of that upsell is $1000/ARR, and the percentage of customers that should take the upsell based on their Success Vector is 90%. That means, for that cohort, we’ll add $90k/ARR next month. Then, by combining the expansion value of all of the milestone cohorts, we can give an accurate prediction of the revenue we’ll generate from our existing customers. That’s actual, real predictable revenue. Historically, Customer Health Score was a Key Performance Indicator (KPI) for Customer Success, but it wasn’t giving us what we need in this new world of Customer Success-driven Growth, so I went into my lab (probably a Starbucks or on an airplane) and tore the idea of a Customer Health Score apart with the sole purpose of giving us a real way to see not just what’s happening with our customers today, but where do we think they’re going in the future. And Success Vector was born. Until now, only my clients knew about Success Vector as a Customer Success Key Success Indicator (KSI)… it’s time to let everyone in on it. Let’s dig into Success Vector, shall we? ## Why “Vector” instead of “Health” Aside from the reasons already stated above, the term vector appeals to me since I fly on airplanes a lot and am also a fan of the movie Airplane, especially this scene “[What’s our vector, Victor?](https://youtu.be/fVq4_HhBK8Y?t=13s)” the idea of having something that doesn’t just tell us where we are, but where we’re going, seems so much more powerful – and appropriate in the context of Customer Success-driven Growth – that it’s the most logical progression. Vector is defined, according to a quick Google search, as “a quantity having direction as well as magnitude, especially as determining the position of one point in space relative to another” and to me, that’s exactly what we’re looking for. Direction + Magnitude. That’s more like it. ## It All Starts with the Customer One of the biggest mistakes I see in Customer Success is when the CEO of a company hires a Customer Success Manager (CSM), declaring they are now customer-centric, and then telling the CSM to “figure it out” without giving budget or resources. Though sometimes, if any resources are given, it’s to buy software. Because software solves all the problems. Look, people are a huge part of  Customer Success Management. Systems are absolutely necessary. Processes and Software tie all of those together for efficient scaling. But if the implementation of those things isn’t predicated on a deep understanding of the customer – and knowledge that the customer will evolve over time so your understanding must, too – then the people are going to be setup for failure, the systems won’t do what you “designed” them do, and the software will fail to deliver a real ROI. If we want our customers to grow with us over 1, 3, 5, 7, or even 10 years, ensuring the customer is engaged and continues to achieve their evolving Desired Outcome is critical. In fact, it’s why your company actually exists in their world. Before you can Orchestrate, Operationalize,  Instrument, and Intervene – or develop a Success Vector – you need to be clear about the [Desired Outcome](https://sixteenventures.com/desired-outcome) for each of your discrete customer segments. And remember, Desired Outcome has two pieces: Required Outcome and Appropriate Experience Required Outcome is what they need to achieve; there are some things that must happen otherwise you know they couldn’t possibly be achieving their Required Outcome. So you measure their progression through the required activities and [Success Milestones](https://sixteenventures.com/success-milestones) (are they making required progress), check on Joint Accountabilities (are they doing what they need to do, are you doing what you need to do), look at Ascension Velocity (are they buying more, expanding use, etc. because if they are, they’re likely finding success), and other things that indicate whether they’re actually achieving their Required Outcome. Appropriate Experience is how they need to achieve their Required Outcome, so it takes some of the previous measures into consideration, as well as Satisfaction & Confidence, Support interactions, and other contextual inputs… including the gut feel of any human interactions / interventions that took place with the customer. Together those make up the core of the Success Vector of the customer and will tell you if the customer is on track, needs help getting back on track, or is heading out the door. ## Key Success Vector Inputs The inputs that are 100% required for Success Vector to be meaningful are: - Success Potential - Success Milestones - Joint Accountabilities ### Success Potential If my customer doesn’t have success potential, that’s something we need to address (possibly by actively separating from those [bad fit customers](https://sixteenventures.com/stretch-bad-fit-customer)). When it comes to [Success Potential](https://sixteenventures.com/success-potential), there are several things we need to look at: - **Technical Fit** – They aren’t using or don’t have and can’t / won’t acquire a key piece of technology - **Functional Fit** – Our product is missing a key piece of functionality for them - **Resource Fit** – They can invest – beyond simply paying our fee – in what’s required to be successful as our customer - **Competence Fit** – They have – or will acquire – the expertise internally required to be successful? - **Experience Fit** – They do not have the experience internally and cannot get / are unwilling to source or train resources that have the necessary experience to be successful with our product - **Cultural Fit** – They have beliefs, morals, attitudes, etc. that you know won’t jibe with the way you work If we can’t check all of the Success Potential boxes, then we can be absolutely sure that those customers are not going to achieve their Desired Outcome – both their Required Outcome and the Appropriate Experience – so we’re setting everyone up for failure if we keep them around. ### Success Milestones & Joint Accountabilities The biggest problem with Customer Health Scores is they rarely include whether or not the customer is actually doing the things necessary – inside the product and beyond – that would indicate they’re on the right path toward achieving their Desired Outcome. For Success Vector, knowing where the customer is on their path toward success – including whether they’re holding up their end of the bargain on the joint accountabilities we agreed to – is the main input. In fact, if you don’t pull in any other contextual data and only looked at Success Milestones and Joint Accountabilities, you’d be better off than most companies that pull together complex Customer Health Scores. Look, if the customer does have Success Potential, but they aren’t doing what needs to be done to achieve success, that’s a problem and we need to intervene. If those things aren’t included in the Success Vector, then what purpose does it really serve? It’s like creating a Customer Success strategy without starting with the customer (which, sadly, is pretty common still). When it comes to predictable revenue, this is where it gets good. Some Success Milestones will have a logical Upsell or Advocacy opportunity associated with them. Based on which Success Milestone our customers will hit in the next month – and our confidence in both hitting that and taking the upsell or advocacy opportunity associated with the milestone – we should be able to accurately predict the revenue expansion from our existing customer base. ### Revenue Ascension Pipeline vs. Expansion Quotas And when you can build a revenue forecast model based on actual customer Success Vectors, then you can manage against that rather than the other direction where we have expansion quotas. We can say “according to Success Vectors, this cohort should deliver $90k/ARR in the next month.” When you have Success Vector in place, internal expansion quotas are not needed, which means you won’t have Account Managers trying to shove products down a customer’s throat when they aren’t ready for it, don’t need it, or are otherwise not in a place where that is the logical next step. Rather, we can say “this is the expected, [logical expansion](https://sixteenventures.com/logical-expansion) from these cohorts in the next 30, 60, or 90 days” and if we hit that, it means you simply did your job. However, if we miss that mark, it means the customer didn’t hit that Success Milestone, because if they had, according to Success Vector analysis, they would have taken the upsell. So that’s a fail on Customer Success Management; not that they didn’t make the upsell, but because the customer who we thought would reach that milestone didn’t. So there’s no need to quota on expansion; instead, use Success Vector-based projections to manage the success – or failure – of your Customer Success Management (including Account Managers, Expansion Resources, etc.) org. ## Additional Success Vector Inputs Companies with more robust Success Vectors also have inputs like: - **Ascension Velocity** – Are they taking upsells when they’re logical? - Meaningful Product Activity – Also known as product usage data. It has to be [meaningful activity](https://sixteenventures.com/active-users-vanity-metric), though. - **Adoption** – Did they meet initial adoption goals? Are they meeting ongoing adoption goals? - **Advocacy** – Are they advocating for us in appropriate ways where logical? - **Usability Issues** – Are there problems or missing features keeping them from achieving success; missing features would indicate a lack of Success Potential and should be noted as such - **Customer Company (Account)** – Are negative things happening with their company? External triggers, bills not being paid, M&A, etc. - **Support** – Support tickets aren’t bad unless they’re not being closed in a positive way quickly; also if support tickets slow or stop. - **Satisfaction & Confidence** – NPS, C-sat, etc. My clients know how I really feel about NPS and what I prefer instead. ## Success Vector Status Definitions The Success Vector of a customer will change from time to time, but we ultimately want all of our customers on a Positive Success Vector. Stagnant customers on a Neutral Success Vector simply renewing at the same level is no longer considered good enough. The new measure of success is customers that are engaging, evolving, and expanding. ### Positive Success Vector - They’re on the right track - “the right track” means that they aren’t just static, but are expanding or on-track to do so ### Neutral Success Vector - Stalled or Stagnated - Does not fit with the new measure of success - We need to get the customer back on track to achieving their Desired Outcome and on a logical Ascension Path ### Negative Success Vector - They’re not on the right track and we need to intervene - Come up with some type of gradient to indicate level of and type of intervention ### Ghosts - Your key contacts at the customer have stopped engaging or responding - This [customer is about to churn](https://sixteenventures.com/churn-symptom) ## Situational Awareness and Customer Triage If you’re just starting out integrating the Customer Success Operating Philosophy into your business, there’s a really good chance you’ll have some customers that have gone dark. For the customers that are a good fit and should be saved, you need to do what have to do to save them. Just know… that’s not Customer Success! To pull them from darkness back into the light or otherwise save them from churning, that’s begging, promising, discounting, etc. but it has nothing to do with actually helping them achieve their Desired Outcome. They’ve given you another chance, but they should be considered to still be on a Negative Success Vector. Customer Success would have been ensuring they didn’t get to this point, to begin with! You now have to work to take that cohort, plus any other customer that’s on a Negative Success Vector and move them to Neutral and then Positive. At first, you’ll have customers in each category, but eventually, as you Orchestrate and Operationalize your Customer Success Management processes, you’ll get to a point where you only have Neutral and Positive Success Vector customers. Success Vector shares many of the underlying qualities of Customer Health Score, but the big differences are what make this the KSI for Customer Success-driven Growth. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Don’t Mix SaaS Free Trial and Churn Metrics *July 29, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-churn/ 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](https://www.corvuscoffee.com/), 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.” There was more to Phil’s email that indicated he was falling into the same trap I’ve seen a lot of people fall into recently, and that’s mixing or otherwise connecting Free Trial numbers with Churn numbers. I wrote out a long answer for him and decided to share it publicly so you could benefit, too. And he was cool with me using his name and company if you’re curious. Spoiler alert: do not include prospects that fail to convert from your Free Trial in your churn metrics. Not only will doing that make your churn numbers look much worse than they probably are, the result of doing so will not be actionable (in a good way). Honestly, if that’s all you take away from this article and you stop reading now, great, but if you really want to understand Free Trials, Churn, and how to measure in a way that produces a level of actionability that’s beneficial to you, do yourself and your company a favor and read the rest of this post. But first, if you don’t know the difference between an opt-in and opt-out Free Trial or would like to be clear on what best-in-class Free Trial conversion rates are, read this post on [SaaS Free Trial Conversion Rate Benchmarks](https://sixteenventures.com/saas-free-trial-benchmarks). Okay, so all of that being said, when looking at Free Trials and Churn, I would suggest separating out the following metrics: ## SaaS Free Trial Conversions When a prospect does not convert to a paying customer during or after a Free Trial, they didn’t churn; they failed to convert to a paying customer. This isn’t semantics or nitpicking. It’s a critical distinction since what happens during the trial probably has more to do with expectations management, getting the customer to first value, or otherwise aligning their actual experience with what you promised in your marketing / sales pitch so you can get them to a point where becoming a paying customer is the most logical next step. Later in the customer lifecycle, [churn is due to other reasons](https://sixteenventures.com/churn-reasons) (though [the seeds of churn are often planted early](https://sixteenventures.com/seeds-of-churn)… even during the trial!), meaning a different approach to reducing churn (vs. increasing conversions) is required. ## Pre-Stick Point Churn The [Stick Point](https://sixteenventures.com/stick-point) is a point (time, milestone, billing cycle, etc.) where if the customer reaches that point, and everything else goes according to plan (no interruptions, hiccups, or unresolvable problems, etc.), chances are they’ll stay the estimated or average lifetime. If a customer hasn’t hit that Stick Point yet, [they shouldn’t be counted as a customer](https://sixteenventures.com/saas-metrics-customer-definition), and therefore their “churn” shouldn’t be lumped in with regular customer or revenue churn (see below), since the reasons for churn this early are going to be different from churn that happens post-stick point. In fact, for [opt-out Free Trials](https://sixteenventures.com/saas-free-trial-benchmarks), you’ll often have customers cancel within the first 2 or 3 billing cycles because they forgot to cancel before the trial ended. This is especially true for companies that “hide” or otherwise [rely on forced continuity](https://sixteenventures.com/one-dollar-trial) and other nefarious tactics to trick customers into not canceling their trial. It also happens when the trial is poorly designed, fails to engage, and the prospect stops using and forgets to cancel. If your investors or board only want to see roll-up churn metrics that includes pre-Stick Point churn, cool. Whatever. Include it. But when it comes to taking action on *your* business, you’ll want to separate these out. ## Customer and Revenue Churn When a customer has stayed beyond the Stick Point, we can start looking at actual churn. Of course, it’s not that simple as there are two main types of churn you need to know about. ### Customer Churn This is, once a customer has stayed past the Stick Point and they’re contractually able, when they stop being your customer. This could be when they actively cancel their contract or close their account, or, when the contract is up, they choose not to renew. When a customer stops being your customer, we call that, well, **customer churn**. Some call it “logo” churn, but I don’t like how that reduces a customer with a [Desired Outcome](https://sixteenventures.com/desired-outcome) they’re trusting us to help them achieve to a trophy on our customer page. Oh, and keep in mind that [Churn is a Symptom, Not a Disease](https://sixteenventures.com/churn-symptom)! ### Revenue Churn This is generally something that happens when a customer is beyond the Stick Point, but could happen anywhere post-conversion, and it’s when the customer stays a customer but pays us less in doing so. Revenue Churn is revenue that is lost from customers churning out entirely (the above “customer churn”) or when the customer stays a customer but pays us less in doing so, also known as “contraction.” Contraction happens when we give discounts, when they downgraded their account (fewer seats, users, licenses, features, etc.), or they pre-paid for a year and got a couple months free. Whatever the reason, if they are still our customer but they’re paying us less, we consider that revenue churn. Revenue Churn is critical to pay attention to as it paints an often more complete story than just customer churn. For example, we might have 0% customer churn one quarter, but when you dig in, you find that we had 50% revenue churn because a bunch of customers were going to cancel and we used a huge discount to keep ’em on. You have to look at both. ### Look at Both Types of Churn to Tell the Whole Story You need to look at both Revenue and Customer churn to tell the whole story, as together they paint the complete picture of what’s really going on in your business. 100% customer retention/0% customer churn might sound great… until you realize you had 50% revenue churn because they all took you up on an offer you shouldn’t have made. There are more ways to slice and dice churn; I’ve covered [Avoidable vs. Unavoidable churn](https://sixteenventures.com/unavoidable-churn) before. I’ll talk about Expected vs. Unexpected soon. Phil said about my response: “This is super helpful, Reading many opinions online regarding churn makes it a bit confusing to ‘align’ with some sort of baseline expectation because most of the articles are really talking about what you call post stick-point churn or real churn.” I hope it was helpful to you, too. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Free Trial Conversion Rate Benchmarks *July 28, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-benchmarks/ 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… ## SaaS is dead. Long live SaaS! When it comes to SaaS in general, the reality from my vantage point is that, especially at this point in its evolution, SaaS is really a loose business framework. I stopped calling it a Business Model many years ago, and instead referred to it as a Business Architecture, but I think we’re even past that. With so many different Business Models, Revenue Models, Pricing Strategies, Freemium types, etc. SaaS is now a blanket term we throw at any web or cloud-based service. What that means if you are a SaaS company (and this, BTW, is another conversation I have a lot!), is don’t compare your company to another SaaS company, just because you both self-identify (or have been identified as) SaaS companies, and expect that to yield meaningful results; only compare your company to companies that share similar characteristics. For instance, a SaaS company I was helping with [Customer Success](https://sixteenventures.com/customer-success-definition) had a lot of churn; much more than other SaaS companies. But they didn’t have a recurring revenue model. And their customers were using their product for a project, completing the project, and “churning out.” Only to come back months later to do another project. Of course, that’s going to look bad compared to a SaaS company with subscriptions locked-in with 3-year contracts. They chose to do business in a market with transient customers that come and go – it’s just how they are – so they need to adjust how they operate and measure within that reality. Normalizing survey responses may yield “statistically significant” results, but that doesn’t always translate into useful or actionable insights. And when it comes to “SaaS Free Trial conversion rates” this is a big deal. But we have to address… ## The Free Elephant in the Room If you are reading survey results and the publisher of that “research” combined Freemium & Free Trial results… run away. Quickly. BTW, research that’s given away by vendors is usually called “content marketing.” Think about that. Anyway, if you downloaded a report that combines Freemium and Free Trial results into one “average conversion rate,” delete that file. It’s basically malware that’s screwing up your business. In fact, take your computer, smash it on the ground, and cover it with sand and magnets. Then, create a Duolingo account and replace those completely misguided metrics you got from that report that are in your brain ready to influence some really bad decisions, with a new language. I’m studying Portuguese for my [next trip to Brazil](https://sixteenventures.com/speaking) (I’m 16% fluent as of this writing). [You can’t – YOU CANNOT – combine Freemium and Free Trial](https://sixteenventures.com/freemium-or-free-trial) conversion rates and get a true picture of how Free Trials convert. Freemium (classical Freemium, where you have a free version and a premium version of the same product, and what most people think of when they say “Freemium”) tends to convert from free to paid in the low single digit range. The big success stories are in the high single digit range; it may reach super-low double digits when you look at conversion on an “active user for > 6 months” cohort. This means that “average” conversion rates where Freemium and Free Trial results are combined is going to be super, crazy low. If a SaaS company has a 10% conversion rate in their Free Trial and executives read some of the “research” on Free Trial conversions, they’ll be happy about it. But they shouldn’t be and I’ll tell you why in a bit. But there’s one other thing that you have to pay attention to, and that’s the… ## Two Types of SaaS Free Trials Not all Free Trials are the same, and conversion rates across the two types will be very different. So even if you don’t combine Freemium and Free Trial conversion rates, if you look at all Free Trials as a single “thing” then you’ll also come out with a skewed result. For many SaaS companies, 100% of their customers come in [through their Free Trial](https://sixteenventures.com/optimize-your-free-trial). For the rest, it’s likely a significant number either [come in through or go through](https://sixteenventures.com/enterprise-free-trial) a Free Trial after a [different initial engagement method](https://sixteenventures.com/enterprise-pricing). And yet Free Trials continue to be treated as a black box on a flow chart, with very little thought going into the actual Free Trial process. Which is the other – and main – reason that most Free Trials are not as efficient as they should be in converting prospects to paying customers. One of the most basic things about Free Trials is that there are two kinds (though you’ll rarely see this talked about): ### Opt-in Free Trials ***Opt-in Free Trials*** are those Free Trials that can be started without a credit card where the prospect needs to opt-in to a subscription by providing payment details during or after the trial is over. With opt-in Free Trials, while you still need to work hard to get people into the trial in the first place, since there’s not as big of a barrier to starting the trial, the real emphasis should be on ensuring your prospects quickly get to the point where [becoming a paying customer is the most logical next step](https://sixteenventures.com/customer-onboarding). ### Opt-out Free Trials ***Opt-out Free Trials*** are those Free Trials that require a credit card to get started and that you have to actively opt out of or it turns over to a subscription at the end of the trial. I’ve been very open about [why I dislike opt-out Free Trials](https://sixteenventures.com/saas-free-trial) in the past so I won’t go into that here. When it comes to opt-out Free Trials, the biggest hurdle is getting people to sign-up in the first place since you’re asking them to take out their credit card and essentially make a buying decision right then. If you are a well-known brand in the world of your customers, this is obviously much easier to overcome. However, if you’re new and unknown, this is challenging. You have to do a lot to get them to know, like, and trust you enough to give you their credit card just to try your product. Of course, just because someone gives you their credit card to start the trial doesn’t mean it’s a guaranteed conversion; it’s not. In fact, when someone opts-out of your Free Trial – they actively cancel the trial rather than convert to a paying customer – that’s rough. It should sting a bit. They bought into you enough to try it but then decided your product wasn’t for them. So even though you have their payment information, you’ll still have to work hard to get them to a point where continuing on as a paying customer is the most logical next step. Knowing the difference is super-important when it comes to… ## Free Trial Conversion Benchmarks Generally, and this is from my own experience, the best SaaS companies with opt-in Free Trials see a free trial-to-paid conversion rate of > 25%. Less than 25% and we know we have to work on optimizing for conversions. More than 25%, further conversion optimization may result in diminishing returns on that effort, which means you’d likely be better off working to get more prospects into the trial, as well as focusing more on expansion (upsells, cross-sells, etc.) to grow revenue. Best in class SaaS companies with opt-out Free Trials should have free-to-paid conversion rates of > 60%. The same rules about optimization apply with this type of trial, too. Of course, all of this should be sanity checked against the realities of your market, product category, [ideal customer](https://sixteenventures.com/ideal-customer-profile), etc. And like I said in the “[Reasonable SaaS Free Trial Conversion Rate](https://sixteenventures.com/free-trial-conversion-rate)” article, it’s great to see these numbers, but if you have a 5% conversion rate on an opt-in Free Trial, don’t worry about the 25% benchmark right now, go for 7%. Then aim for 10%. Then 15%… and so on. If you get 100% of your revenue through your Free Trial, going from 5% to 10% will DOUBLE your revenue. Those are big gains and even if you’re seeing conversion rates less than “best in class” companies, doubling revenue is a pretty nice result. ## Switching from Opt-out to Opt-In Free Trial A word of warning if you have an opt-out Free Trial and tear down that Credit Card wall to switch to an opt-in Free Trial: your conversion rate (the percentage of prospects that start the trial and that convert to a paying customer) will likely go down. However, the overall number of paying customers coming from the trial may go up significantly. Without a CC-wall in the way, you’ll have more prospects start the trial, meaning a smaller percentage of a larger group will convert, but more overall customers will come out the other end. That’s not bad, you just need to know this going in and manage expectations with management or your board accordingly. Of course, taking down a Credit Card wall and dumping a bunch of prospects into a Free Trial not designed to convert prospects into paying customers isn’t advisable. I hope this helps! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Churn is a Symptom, Not a Disease *June 21, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-symptom/ *[Também disponível em Português](http://resultadosdigitais.com.br/blog/churn-nao-e-doenca-mas-sim-o-sintoma/) por [Mathias Luz](https://twitter.com/mathiluz)* 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](https://sixteenventures.com/customer-success-definition) 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](https://sixteenventures.com/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](https://sixteenventures.com/success-potential) in the first place. Either way, let’s dig into this a bit. ## Cure the Disease and the Symptoms Clear up > churn is a symptom, not a disease - Lincoln Murphy (@lincolnmurphy) [March 15, 2016](https://twitter.com/lincolnmurphy/status/709878141855076357?ref_src=twsrc%5Etfw) Churn is an indication that something else is wrong; churn isn’t actually a problem itself. Well, it’s a problem for you – you lose revenue, fail to pay back CAC, hurt morale, burn through your Total Addressable Market, etc. – but it’s actually not a problem for your customers. Your customers have a different problem, the result of which is their churn. Well, it IS a problem for your customer in the sense that they bought your product to help them achieve a Desired Outcome [and you failed to do that](https://sixteenventures.com/churn-reasons) so now they have to find a different solution. But what ultimately resulted in their churning out is something else; a deeper problem. Now, you can focus on fixing your problem, or you can focus on fixing their problem (which will ultimately fix your problem). That’s the conclusion I’ve come to after working with hundreds of companies over the last decade… churn is the result of something else 100% of the time. So obvious… but something pretty much everyone misses (you’re not alone; I did, too, until I realized what was going on). Bottom line is, if you’re not taking care of the root cause of the symptom, the symptoms will always be there and will likely get worse over time. Focus only on churn reduction, and you’ll always be focused on reducing churn because you’re not fixing the actual problem. Instead, you need to focus on fixing the root cause of the churn – or ideally, avoid the root cause entirely by focusing on Customer Success from the beginning – so you can move beyond dealing with churn. But what’s beyond churn mitigation? Account Expansion! ## The New Measure of Success Account Expansion – when customers consume more of your product, buy add-ons, move to higher pricing tiers, and invite your product into other parts of their company- is the [new measure of success](https://sixteenventures.com/customer-success-drives-company-valuation) for SaaS companies; simply ensuring customers renew is not enough anymore. Account Expansion is the basis for the [type of efficient growth investors](https://medium.com/storm-ventures/customer-success-at-storm-ventures-444eafa1e3#.wujq6mipc) are looking for. But when your attention is focused on churn reduction – that is, simply keeping the customer from canceling – the best you can really hope for is an increase in status quo retention. That’s because Account Expansion – putting a customer on a real repeatable, predictable, at-scale Ascension path  – only occurs when those customers are achieving their Desired Outcome. And “churn mitigation” tactics rarely stem from a focus on the customer’s Desired Outcome because they are meant to solve your problem, not the customer’s. From discounts and cancel-blocking workflows, to free months and long-term contracts, the go-to tactics are generally inward-focused quick fixes that temporarily relieve the pain… but the disease is still very much active; the lack of immediate symptoms only cause a false sense of security. However, once  you tackle the underlying issues that cause the symptoms of churn, you can move into a world where Account Expansion isn’t just a nice theory, it becomes part of your operating model going forward. > If you focus on churn more than you focus on the success of your customers, I think we found your problem. - Lincoln Murphy (@lincolnmurphy) [May 3, 2016](https://twitter.com/lincolnmurphy/status/727525164045332480?ref_src=twsrc%5Etfw) ## Customer Success isn’t about Saving Customers So let’s say right now you have a cohort of customers that is on the cusp of churn; you’ll have to do what you can to save them (though some [bad-fit customers](https://sixteenventures.com/stretch-bad-fit-customer) should be mercifully jettisoned). Whatever you have to do to save those customers, do it, but remember that this is NOT Customer Success. It’s begging, discounting, promising, etc. Customer Success is recognizing that a customer that you “saved” is still very much at risk and that you’ll have to work diligently to get them back on track since all you did was convince them to stay; you didn’t actually make them successful! If you don’t have a plan to get them back on track, saving them will just delay the inevitable, only this time when they churn, they’ll be really upset that you wasted their time, and that’s not good for anybody. Customer Success, of course, is also not letting them get to the brink of churn in the first place and that if a customer has started to veer off the path toward success, you intervene to get them back on track quickly. Once you save that cohort from churn by whatever means are necessary and put them on a path to success, take any other potentially at-risk cohorts and put them on a path to success, then ensure any new customers coming in are – you guessed it – on a path toward success, and all of the sudden churn simply isn’t an issue anymore. Then, once the underlying disease is cured and the symptom of churn is out of your life, you can focus your resources where they should be focused: [Account Expansion](https://sixteenventures.com/logical-expansion)! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 7 Ways Customer Success drives Company Valuation *May 14, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-drives-company-valuation/ I’ve been saying for years that [Customer Success is transformative](https://sixteenventures.com/customer-success-definition); 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 keynotes around the world… … 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. In the good times, when investment dollars are flowing like wine and acquirers are flocking to startups like the salmon of Capistrano, Customer Success will help ensure the irrational valuation for your company is exponentially higher than the irrational valuation of a similar company. In the bad times, when $1 of recurring revenue is worth less today than it was 6 months ago, investment is drying up, and deal-seeking acquirers are circling like vultures, you’ll make sure that your company is valued at the top of whatever the cynical market is willing to pay. ## Valuation: Simplified There are many ways to determine the value of a company. I’m going to use a very simplified version of how startups are valued here, but everything I’m going to cover can be extrapolated out to fit any scenario. For SaaS startups, the value of your company (to investors or acquirers) is determined by this simple math problem: Recurring Revenue x Multiplier = Company Value Customer Success impacts **BOTH** sides of that multiplication problem. ## Recurring Revenue First, Customer Success drives the value of your company in a very simple way; you’ll have more revenue. ### 1. More Revenue I’m going to keep this super simple, so we’ll say that “revenue” is simply Monthly Recurring Revenue (MRR). But it could be ARR (Annual Recurring Revenue/Run Rate), Bookings, Sales Velocity, or whatever fits your situation. - When customers stay longer and don’t churn out, you’ll end the quarter with more customers and, therefore, more revenue than if you had a high churn rate. - When customers don’t downgrade or if you don’t have to offer discounts to keep ’em around, you’ll end the quarter with more revenue. - When customers pay more (they buy more seats, add-ons, or move to a higher pricing tier, or they invite your product into other parts of their company, etc.) you’ll end the quarter with more revenue. Ensure this happens by operationalizing around a predictable Ascension Model. - When customers buy more non-recurring services – like training and consulting – they will buy more of your recurring revenue product (if you operationalize this correctly) and you’ll end the quarter with more recurring revenue. - When customers advocate for you and your sales velocity accelerates, you’ll end the quarter with more revenue. - When you understand the customer’s [Desired Outcome](https://sixteenventures.com/desired-outcome) and continually feedback learnings from your Customer Success Management organization to Sales, Marketing, and Product to better align and resonate with the customers, the sales cycle will shorten and velocity will improve, leading to more revenue at the end of the quarter. Yeah, so even if you don’t know or care about this “multiples” concept (or you’re bootstrapped, will never raise money, and never plan to sell), at least realize Customer Success drives revenue growth. That’s never a bad thing! But it gets even better… ### Multiplier Inputs If you’re interested in how company valuations are derived, and how Customer Success can be a catalyst to a higher valuation, then you’ll want to understand how investors and acquirers come up with this “multiplier.” Unfortunately… they won’t tell you what goes into the multiplier. But I will. And I’ll even tell you how Customer Success impacts each input. Just know that the better you’re doing in each one of these categories, the higher the multiplier. If you’re failing at one (or all) of these, the investor or acquirer will reduce (discount) the multiplier accordingly. While I can’t be certain this constitutes the entire proprietary multiplier recipe your investor(s) or potential acquirer is using to determine their idea of the value of your company, these are a few of the common inputs you should be aware of: ### 2. CAC Ratio Customer Acquisition Cost (CAC) is a key SaaS metric that indicates the fully-loaded cost to acquire one customer. The misconception is that this cost should be as low as possible. That’s not true, and in many cases, you want to be able to spend more on acquiring customers than your competition. The more important metric is the CAC Ratio, that is how the CAC stacks up against the lifetime value of the customer. The quicker you can get to a profitable customer (unit economic-wise), the better, since this means we have more time with a profitable customer and less risk of losing that CAC should they churn out before they hit their Stick Point. CAC costs will also be reduced by an increase in customers advocating on your behalf. From online reviews to case studies, and from viral expansion to reference calls, customer-driven growth is an accelerator of CAC Ratio efficiency and shouldn’t be left to chance (it should be orchestrated just like account expansion… see below). Investors and Acquirers want to see this ratio improving, with the CAC being recouped quickly and ultimately eating up a relatively small part of the overall Customer Lifetime Value. Customer Success leads to an improved CAC Ratio in several ways: from Sales & Marketing better aligning and resonating with prospects and thereby reducing sales cycles and increasing effectiveness of other marketing spend, to acquiring only good-fit customers with Success Potential which drives down avoidable churn and virtually eliminates [unavoidable churn](https://sixteenventures.com/unavoidable-churn). Of course, the best way to improve CAC ratio is to improve the… ### 3. Customer Lifetime Value (LTV) Have you ever wondered – privately, no one would ever admit not knowing this publicly – how Customer Lifetime Value (LTV, CLTV, CLV, CCTV?) fits into this whole thing? It always struck me as odd that LTV is talked about as important – and it seems obvious that it would be – but when you talk about valuation, you only ever hear about multiples of current revenue. And it seemed to me that even though LTV was “important” it was really current revenue that mattered most. That’s why salespeople are incentivized (and full-on instructed) to close whatever deals they can today, long term success of the customer be damned. It’s all about today’s revenue. But then I learned that while revenue today is great – it’s what is being multiplied to come up with the value of your company – it’s the other side, the multiplier, that also matters a whole lot. And it’s within the multiplier where LTV becomes important. Straight-up, investors and acquirers want to see LTV increasing; when they buy revenue today, they want it to be worth a lot more in the future. Read that again. Increasing LTV, through extended lifetimes (simple customer retention), and expanded revenue (Upsells, Cross-sells, etc.) is a very good thing from their point of view. And Customer Success is the way to keep customers longer, which increases their LTV even if they never increase the amount they pay, but is also the key to moving customers along an Ascension Path, substantially driving LTV along the way. ### 4. Runway / Burn Rate Investors – outside of the irrational times – don’t like to see out of control burn rates, or the using up of invested funds to simply exist. They want to know that when they invest in a company that the capital will go to things that increase the value of the company. What a company spends to exist is the gross burn; when you reduce that by the revenue generated, you get the net burn. So the more revenue you have, the less net burn you have (in theory and assuming your expenses don’t increase to match the new revenue). And while Customer Success won’t do much to reduce the cost of an office in San Francisco or daily catered brunch and beer pong tables, it will impact net burn rate in several ways (beyond those I’ve mentioned elsewhere in this article). Here are two of the many, many ways Customer Success can help increase your runway: #### Leveraging AX-Based Coverage Segments for Optimal Capacity Planning When you’re aiming for optimal capital efficiency - stretching your runway and reducing burn rate - your Customer Success headcount becomes a key variable. Traditional models of Customer Success focus on revenue-based segmentation, resulting in inefficient allocation of your most valuable resources - your Customer Success Managers (CSMs). The old-school approach can lead to both underutilized and overburdened CSMs, ultimately draining your runway faster and affecting your burn rate negatively. Enter AX-Based Coverage Segments. By focusing on the customer’s Appropriate Experience (AX), and [grouping customers by shared AX](https://sixteenventures.com/coverage-segments), you align your resources in the most efficient way possible to deliver those experiences. What does this mean in terms of capacity planning? It means your CSMs are focused on delivering the specific outcomes that customers in their segments truly value, enabling more precise resource allocation. The right CSM is matched with the right customer segment, optimizing workloads and improving both customer and employee satisfaction. This streamlined approach minimizes overhead and operational inefficiencies, allowing you to get the most value from your headcount. In doing so, you can significantly extend your runway, reducing burn rate while ensuring your customers still achieve their Desired Outcomes. By adopting this nuanced approach to Customer Success, you’re not just ticking off boxes - you’re building a sustainable, scalable model that respects both the customer’s journey and your company’s financial health. #### Get Paid First When the economy takes a negative turn – or when something happens in the industry you serve – customers may have to make decisions on what vendors to pay this month. If you are focused on Customer Success and are therefore ensuring your customers achieve their Desired Outcome, when your customer has to make the tough decision of who to pay this month, you’ll be at the top of the list. Of course, this logic applies to the good times as well. The best way to ensure that you get paid quickly, that renewals happen in a timely manner, and that you don’t have to offer discounts or other concessions to make that renewal happen – or to keep the customer – is to ensure they know they are getting value from their relationship with you. ### 5. Account Expansion However you look at this phenomenon – Gross Revenue Retention (upsells), Net Revenue Retention (upsells – revenue churn), Expansion, Ascension (whatever it is, please never say “negative churn” again… ugh) – this is one of the key drivers of company valuation. This is why I say Account Expansion – aside from the fact that it helps your customers evolve and get more value from their relationship with you – is too important to leave to chance; operationalize [logical account expansion](https://sixteenventures.com/logical-expansion) and create a truly predictable revenue model. If you think about it that way, when you can grow revenue from your existing customer base, you could turn off new customer acquisition and not just stay in business, but actually continue to thrive and grow. Think about how that looks from an investor standpoint? They aren’t putting money into something that they first have to stop from shrinking; they’re putting money into something that could sit there and grow. Yaaaas! Now consider that scenario, but with Desired Outcome-fueled customer acquisition turned back on. Yowza! ### 6. Total Addressable Market (TAM) Investors and acquirers want to know that there is a massive opportunity out there that you (or they) can take advantage of. If you’re churning and burning through customers, however, you are shrinking that TAM. If you say you have a TAM of 100k customers in your pitch deck for investors, but you’re churning through 10k customers per year, your TAM, after one year, is now 90k. Those customers who aren’t your customers anymore are very likely never going to be your customer again. They’re gone. You can remove them from your TAM calculation. Of course, if you’re churning through 10k customers per year, the likelihood that you only reduced your TAM by 10k is low; that’s a lot of customers to burn through and it probably came with some bad feelings. Some ill will. And that negative sentiment didn’t stay with the customers that left, oh no; they shared their feelings on review sites, forums, blog posts, social media, bathroom stall doors,… anywhere and everywhere they could. So your TAM – because you’ve been churning and burning customers – is now maybe reduced by 50%. That’s bad. On the flip side, if you focus on Customer Success, create an environment purpose built for your customers to thrive, and you’ve operationalized getting your customers to achieve their Desired Outcome, your TAM won’t just shrink… it’ll grow. Since you won’t have churn, you’re not burning customers who’ll go out and spread the negative word. And since you’re helping them achieve their Desired Outcome, they’ll be likely to advocate for you. And since you’ve operationalized that advocacy (and aren’t leaving it to chance), you can ensure it’s happening at scale on a predictably consistent basis. And since you’re constantly improving your understanding of the customer’s Desired Outcome and the successful use cases, you’re constantly expanding your reaching into – and quickly resonating with – new market segments, further growing your TAM. ### 7. Ability to Acquire Talent Something few people really think about is how the ability to acquire talent impacts the value of a company. Something even fewer people think about is how Customer Success impacts the ability of a company to acquire talent. Did you know a good source of competitive intel is [Glassdoor](https://www.glassdoor.com/Reviews/index.htm)? Go look at the Glassdoor profile for your competitors (and your company) and you might find some interesting things. If a company is churning and burning customers, it is very likely they’re churning and burning employees, too. Aside from the fact that the culture in a company that doesn’t care about its customers is not one conducive to employee longevity (and vice versa), it just plain sucks to work for a company that can’t keep it’s customers. Maybe they don’t care about the customers, [maybe they sell to customers they shouldn’t](https://sixteenventures.com/customer-acquisition-mistake), maybe they don’t have the product they tell their customers they have (or maybe all of the above), but whatever it is, working in that environment is not a fun way to go through life. So people quit. But in 2016, you don’t have to go quietly (I mean, you’ll still be escorted by security, but after that, all bets are off). You head over to Glassdoor and you spill your guts. No trade secrets (maybe), but you lay out the horrible environment, the abusive CEO, the “vaporware” your aggressive sales people are talking people into buying, etc. And Glassdoor ranks really, really high in Google search results. How likely are you to acquire top talent for your company with Glassdoor reviews like that? How likely are you to acquire **ANY** talent? So when an investor puts money into your company and says “step on the gas” by ramping up hiring and you can’t because you churned and burned customers and employees… that’s a problem. A company with Customer Success as it’s purpose and it’s Operating Model will by its very nature avoid many of these problems. Investors and acquirers will like that. ## CEOs and Executives Must Care About Customer Success Now maybe you can see why if you’re a CEO, CRO, or CFO, this is why I’m always warning you not to see Customer Success as a low-level departmental function, but as a strategically important initiative for the value of the company and the value to your shareholders. And if you’re a Customer Success Practitioner, VP Customer Success, or obviously a Chief Customer Officer (CCO), this is why I tell you to stop talking about “customer happiness” or “delight” and start focusing on the real value you bring not just to your customers (actual success), but to the company stakeholders (increased valuation). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: The Difference between Stretch and Bad-Fit Customers *April 13, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/stretch-bad-fit-customer/ What are the characteristics of a Bad-Fit Customer for your business? It’s great to know who your Ideal Customer is (my [Ideal Customer Profile Framework is constantly updated](https://sixteenventures.com/ideal-customer-profile)), but it’s much easier – and I say required – to first identify the types of customers that are a bad fit and the characteristics that make that so. If we want to build a business that’s free from churn and designed to move customers along an [Ascension Path](https://sixteenventures.com/logical-expansion), we must acquire customers that have [Success Potential](https://sixteenventures.com/customer-acquisition-mistake). Period. Like any good idea, though, there’s always some pushback… things like “but we’re a startup, we should take on any customer we can” or “how are we supposed to grow and evolve if we don’t stretch to work with bad-fit customers?” I get it… and yes, there are times you should stretch, startup or not. But don’t try to convince yourself that you’re just “stretching” when you’re actually trying to justify signing bad-fit customers. I always share the difference between bad-fit customers and stretch customers with my clients… …and I’ll share this with you, too. ## Bad Fit Customers A customer should be considered a Bad Fit when you cannot deliver immediate value, nor can you – based on where you’re at today, your available resources, etc. – realistically deliver future value in the required timeframe for these customers. You should avoid doing business with these customers; it’s not worth all of the problems that’ll come up when you sign a customer that has zero Success Potential. In the spirit of [Customer Success](https://sixteenventures.com/customer-success-definition), it’s better to pass on these customers for now and be able to go back to them later – when they’re a potentially good fit – than to sign, churn, and burn them today. ## Stretch Customers A customer should be considered a Stretch when you can definitely deliver initial value, and – though you’ll have to hustle (again, based on where you’re at today, your resources, etc.) – you believe you can honestly deliver the required future value in a timeframe that works for the customer. That said, you have to be sure that this “future value” is worth delivering; meaning it’s (hopefully) valuable to more than just this one customer. It’s often worth taking the chance with Stretch customers – assuming you’re honest about your ability to deliver that future value to them – but I always suggest that you get very clear on what the “stretch” part is, why it’s worth it, and how stretching for that customer will help you make other customers successful, too. This last part is a good sanity-check against any potential one-off “stretches” that end up being a distraction. ## Definitions Evolve You should revisit the profiles for these types of customers frequently as your business and product continue to evolve. A bad fit customer today may not be in 6 months. And a stretch customer today may be your ideal customer tomorrow. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Two Ways to Reduce SaaS Cancellations *February 20, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/cancellations/ 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, 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](https://sixteenventures.com/churn-reasons) – do so because they did not achieve their Desired Outcome through their interactions with your company. Customers achieving their [Desired Outcome](https://sixteenventures.com/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… I got a question in the comments section of this post on [Unavoidable Churn](https://sixteenventures.com/unavoidable-churn) that I thought it was really good. Here’s the question (I added some clarifying context): *What about at the point of account cancellation? There’s a great opportunity to make things right or gather data rather than simply letting users cancel.* *Take a look at CrazyEgg and the way Neil Patel slowly offers different options before cancellation, each option upping the ante to make you stay (increased discounts, more support, etc).* After I posted my response to his comment, I thought it was valuable enough to warrant it’s own post so I cleaned it up and expanded it a bit… here it is: ## Are Cancellations an Opportunity? No, and here’s why. I’ve seen this suggested before: between the time a customer cancels and the end of their contract (I believe CrazyEgg is – or at least used to be – an annual pre-pay situation, so when you “cancel” you’re basically just turning off auto-renew at the end of the year and you keep access until the end of your pre-paid term) you have an opportunity to get them back. That’s a nice theory, but it rarely plays out that way. By the time a customer has already cancelled, it’s generally too late for this now-former customer to once again become a customer. And that’s how you need to look at it. They’re a former customer at this point. Which means, coming back requires them to make a new buying decision that is incongruent with the cancel decision they just made. Uncancelling isn’t as simple as it might seem. Even if you make it super-easy to “uncancel” without re-entering payment information, they still have to make a buying decision, which is a major barrier; and it’s worse since it’s a buying decision for a product that they just had a poor experience with and decided not to use anymore! ## Winning them Back Could be Worse If you somehow win them back after they’ve churned out, but do nothing to ensure their success once they come back, they’ll just end up churning again. Only, this time, they’ll probably be super-irritated that you wasted their time and once again didn’t deliver. Remember, customers tend to blame the vendor [when they don’t achieve their Desired Outcome](https://sixteenventures.com/success-gap). And of course, if you win them back through a discount, you might both lose. First, offering a customer that’s already churned a discount may further irritate since it seems arbitrary (it is) and maybe something you could have offered before they cancelled (you should have). Second, you’re asking a customer that, to date, has not gotten value from your product to stay around and probably continue to not get value, but for less money… that seems like a recipe for failure. You’re not just prolonging the inevitable here; you’re actually making it worse when it happens. So if you do end up winning them back, great, but ensure they’re back on the path to success. ## Introduce Cancel Flows So how do you keep customers from cancelling (besides working to keep them from getting to this point in the first place)? Introduce what I refer to as a Cancel Flow into the mix. A [Cancel Flow is an off-boarding workflow](https://sixteenventures.com/growth-hacking-retention#12) that allows them to cancel in-app if they want but reminds them what they’ll lose if they do and gives them another, compelling option other than cancelling. I’ve seen dramatic results introducing Cancel Flows, including an immediate 15% reduction in churn for an email marketing system where the in-app Cancel Flow replaced the need to call in to cancel. What I’ve found is that by giving people the ability to cancel from within the app – vs. having to call or email to cancel – there is a psychological effect that seems to calm them down and make them feel more in control. They know they have the option to quit, which is sometimes all they want. If they decide to click the “cancel” button, it’s up to you to remind them of the value they’ll lose (along with data, history, etc.) when they do cancel. Remember, they signed up and bought your stuff for a reason; remind them of that reason (and then get them back on a course to make that reason a reality). After they click cancel, and as part of reminding them what they’ll lose, give them, at least, one other option than just cancelling outright, such as: - Offer to downgrade them to a lower pricing tier - Offer a discount (but use caution – see the next section) - Give them access to training (even if, or especially if, that is premium training) - Make an hour or two of consulting available to get them back on track - Offer partner services to help them bridge success gaps - Offer partner services to help them bridge success gaps - Provide the ability to hibernate an account for x months (especially good where there’s seasonal volatility) - Give them the option to speak with someone (right then or schedule a call) to help resolve any of their issues That’s certainly not a complete list, but should help you start thinking about this the right way. ## Take a Concession Stand If you’re going to offer a discount, a few months to get back on track without requiring payment, or some other concession to keep the customer, that’s fine; just make sure there’s a quid pro quo in place. [How are they going to hold up their end of the bargain](https://sixteenventures.com/customer-accountability) and work toward being successful with your product once they get the discount? If you don’t have a plan in place and get them to agree to it, you’re just buying back customers that won’t be successful. ## Saved Customers are Still Churn Risks This is critical to understand: customers “saved” by the Cancel Flow should still be considered very much at risk for churning. Remember, they wanted to cancel because something wasn’t right; all you did was stop them from cancelling, you didn’t fix the glitch. So reach out or otherwise engage and make sure they get back on track. Then track your saved customers for the next 6 months to make sure that your save stuck; otherwise, you won’t know if you’re just prolonging the inevitable or actually saving and getting them back on track. ## Cancel Intent: When they Cancel the Cancel Flow It’s great when the cancel flow does its job and saves the customer by having them take one of the offers we put in front of them. So it must be equally great when the customer starts to cancel and then aborts the process, right? Totally… as I’ve said, it’s much easier to save a customer that is still a customer than it is to win back a former customer after they’ve cancelled. And maybe reminding them what they’d lose made them rethink their decision to cancel. But(!), where most companies go wrong is not doing anything at this point; assuming that (if they even know this happened… most aren’t monitoring for this) a customer that was going to cancel but didn’t is fine. Crisis averted. What you should do is setup a process where when the customer shows what we call Cancel Intent – they perform any of the pre-cancel activities that will be unique to your product, but may involve simply accessing the cancel screen or hovering over the cancel button – mark them as a churn threat and reach out to re-engage; (doesn’t have to be manual, can be automated… a great time to use the [Customer Success bot Method](https://sixteenventures.com/personal-emails), BTW). If they start the ‘cancel flow’ and then exit that flow, or perform any Cancel Intent behaviour (download their data, remove your widget from their site, mouseover the cancel button, or even if they tell you they intend to cancel on a support call), this should trigger appropriate intervention to try to move them back on track toward achieving their Desired Outcome. How we react to Cancel Intent shouldn’t be about “saving” them – or what most people say when they really mean “saving their revenue” – at this point; it’s about getting them back on track. ## Don’t Let ’em Get to this Point You focus on [acquiring good-fit customers](https://sixteenventures.com/ideal-customer-profile) and work to ensure they achieve their Desired Outcome (are you sensing a theme here?). Saving customers by offering discounts or other concessions may not be an ideal situation (as should be clear by now), but it is certainly something you can do. That’s not Customer Success, though. You have to know that if you need to save customers – or win back former customers – something is wrong. This may sound cliche (or maybe that’s because I say it so often), but you should do everything you can to keep customers from getting to the point where they’re thinking about cancelling, actively cancelling, or have already cancelled. You do this by focusing on Customer Success across their entire lifecycle, not just when they’re about to leave. If you aren’t familiar with [Customer Success, read my Definitive Guide](https://sixteenventures.com/customer-success-definition) ASAP; Customer Success isn’t about saving customers, it’s a transformative concept at the heart of the fastest growing companies. ## When Trying to Win Back Customers is a Good Idea And just so there’s no confusion; I’m all for trying to win back customers that churned out when it makes logical sense. If you know there’s a cohort of former customers that experienced any of the following (definitely not a complete list): - Missing critical features - Poor user experience - Poor customer experience - Inability to provide the appropriate level of service - Lack of required integrations - Bugs, infra issues, and downtime due to maturity/growth issues … and you’ve truly fixed those glitches or added the features they need and can now support the customer in the way they need to be supported, it is probably a good idea to re-engage them. In fact, segmenting former customers into cohorts around the reason for churn will allow you to be even more targeted with your win-back tactics. If you don’t have direct intel from the customer [indicating their reason for cancelling](https://sixteenventures.com/know-why-customers-churn), if you know the period leading to cancellation or non-renewal was when we were having a lot of downtime, they opened a lot of tickets, and they complained on Twitter like Snoop Dogg, it’s probably safe to assume they fit into the cohort that needs to know about our new cloud infrastructure and uptime guarantees. Remember, this isn’t [prospects that chose not to buy that you can now win over](http://blog.close.io/lost-prospects) with your new and improved Customer Experience; these are former customers that decided to stop doing business with you. And if they were using your product, it’s more likely they switched to another product – or otherwise found a way to do what they needed – than went back to doing nothing. And if they went back to doing nothing, what your product solved for them wasn’t really that important or valuable to them anyway. So your chances of winning back a large portion of these former customers are slim, but you may get a few and, even better, you may change their perception of your product. If you’ve been around for a few years and have former customers out there that had a poor experience with your product, that’s still the impression they have of your product; re-engaging, while it may not win them back, may help in fixing misperceptions in the market. ## Should you try to Reacquire Cancelled Customers? Obviously, it’s better to focus on keeping customers from cancelling – or even getting to the point where they are contemplating that move – in the first place than trying to win back those that have already cancelled. So, does that mean you shouldn’t try to win them back? Well, it depends; if you have limited resources, I’d suggest you focus on keeping at-risk customers from cancelling rather than putting your efforts into trying to win back former customers. If you have unlimited resources, I’d do those things in parallel so eventually (sooner rather than later) you won’t have to constantly work to save or win back customers; you can get out in front of that problem, plugging the leaky bucket while also replacing the bucket with a proper analogy. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Only Two Reasons Customers Churn *January 27, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-reasons/ 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](https://sixteenventures.com/know-why-customers-churn) 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… There are only two reasons for customer churn, and only one is even slightly acceptable and that is… ## 1. Something Happened to or with the Customer It could be that the customer goes out of business or they get acquired: death or marriage in industry speak. Of course, if you do things right, when your customer gets acquired, they’ll bring you with them. In fact, you should look at a smaller customer of yours getting acquired by a bigger customer as a huge foot-in-the-door, land-and-expand opportunity for you. And if you really do things right, the customer that goes out of business will either bring you into the next venture, individual users will bring you into their new jobs at new companies, or they’ll straight-up keep their account active for various reasons (winding down the company, to transition as part of a sale of certain piece of the business, etc.) If the customer doesn’t go out of business but has financial issues, sometimes they have to make a decision – due to cash flow issues – about which vendor they’re going to pay this month. If you do things right, you’ll be at the top of the list of vendors that get paid this month. I’ve covered this – and [how to avoid credit card or other payment failures](https://sixteenventures.com/reduce-credit-card-failures) in general – before. Now all of this depends on many factors, but don’t just assume churn is inevitable even in the worst situations… a fun (and potentially super-valuable) thought experiment is to ask: “What needs to happen to get the users of our product to take us with them when they leave the company they’re currently working for?” It’s easy to look at your churn rate and say “that’s just the way it is” but in reality – at least in my experience – the level of [truly unavoidable churn](https://sixteenventures.com/near-zero-churn) is always lower than you think; sometimes dramatically lower. It just requires you to look at things differently. Okay, so something happening to the customer is the only slightly acceptable reason for churn. The other (far more common) reason for churn is that… ## 2. The Customer Did Not Achieve their Desired Outcome Remember, [Desired Outcome](https://sixteenventures.com/desired-outcome) has two parts: Required Outcome and Appropriate Experience. Simply put, Desired Outcome is what they need to achieve, and how they need to achieve it. It’s very simple; customers that achieve their Desired Outcome tend to not churn. And remember, customers that are achieving their Desired Outcome aren’t just far more likely to stay, but stay longer, increase their usage/consumption and spend more over time, and help spread the word about your product. But that means that both parts of their Desired Outcome must be met or they’ll be at risk for churn (if they haven’t already left). The quickest way to lose a customer is when they fail to achieve their… ## Required Outcome Required Outcome is the thing your customer needs to achieve, the thing they are trying to accomplish; helping them achieve that is why you exist in their world. Helping them achieve their Required Outcome is what gets you in the game. If you can’t help them achieve their Required Outcome, that’s a non-starter. From a product standpoint, this is what gets you in the game; it’s table stakes. If you don’t solve this for them, you aren’t even an option. If you fail to deliver on this, nothing else matters. But this thing that needs to be done can be done in myriad ways: - your product - a competitive product - open source software - homegrown solution - outsourced to humans - done by humans they hire And that’s hardly an exhaustive list. And when it comes to Required Outcome, it all about whether or not they can achieve what they need to achieve through your core product or service. Can the customer do what they need to do with your product? If yes, you’re in the game. If not, that’s a non-starter. Now, some of the reasons a customer might not achieve their Required Outcome with your product are: - Your product is missing critical functionality required to do the thing they need to do - You have a poor (from absent to overwhelming) [onboarding experience](https://sixteenventures.com/customer-onboarding) - The customer had a bad implementation / configuration / setup - The customer hasn’t adopted your product and isn’t using it (for whatever reason) - There are bugs and other stability / usability / access issues keeping the customer from doing what they need to do Again, that’s also not an exhaustive list, but those are some pretty obvious reasons why a customer may not be able to do the thing they absolutely need to do with your product. Of course, if you don’t claim in your sales or marketing efforts that they’ll achieve at least their Required Outcome, they won’t engage with you in the first place ([which is actually good](https://sixteenventures.com/customer-acquisition-mistake)). However, if you claim that they’ll be able to achieve their Required Outcome with your product and you do not deliver on that, they will churn… and probably churn quick. Make sure you don’t do that… but also make sure you understand that… ## Success Gaps Will Derail Required Outcome Required Outcome is not the functional use of your product! Your customer didn’t sign-up for your product so they can use your product (no matter how cool it is). They signed-up so they can use your product to achieve an outcome. You sign-up for an email marketing product not to send emails but to make more sales, get people to come to your events, etc. Emails enable that outcome.. in theory, at least. And that’s where the Success Gap exists. If you don’t know how to build a list, write compelling emails, craft strong calls to action, have a compelling subject, create a landing page that converts, craft an irresistible offer, etc. then the emails you send successfully through the email marketing product will probably not get you the result you’re looking for. As the vendor, you need to be acutely aware of the gap that may exist between the functional use of your product and the customer’s true Desired Outcome. The best companies aren’t just aware of that gap, but proactively work to [bridge the Success Gap](https://sixteenventures.com/success-gap). But the reason they chose your product wasn’t because you could just help them achieve their Required Outcome. No, they chose your product specifically – against all those other options I listed before – because of the other part of their Desired Outcome… ## Appropriate Experience This is, well, the appropriate experience for the customer. Some people or companies want to build things themselves or hire humans to do the work; others want a technology solution to their problem or to help take advantage of an opportunity; this is what dictates how they solve for their Required Outcome. But after they have the baseline decision (some people don’t even know how they want to solve the problem; you have an opportunity to get them to see your way as best), the overall experience the customer wants or needs to have varies. In fact, each customer segment, for each of your products, will have a uniquely appropriate experience. In complex customer segments, each persona will have different Desired Outcomes (but that’s a discussion for another day). ## Desired Outcome Example For an example, let’s say the required outcome is the validation of a mailing address. From a required outcome standpoint, there are myriad ways that could be accomplished. But let’s assume the customer wants a SaaS solution to that problem. If you’re selling to early-stage startups or technical folks like developers, you could probably go to market with an API, a self-service method of obtaining an API key, some lightweight documentation, and a Slack channel for community support. Feed in an address, get a result; done. That’s the Required Outcome and Appropriate Experience for that type of customer. If you’re selling to Enterprise customers with business users, you might need to have a high-touch sales and onboarding process, complete with formal training, a full-blown UI, integration with their system of record (maybe providing the resources to make that integration happen), as well as offering 24/7 telephone support, committing to SLAs, etc. The Required Outcome is the same – validate a mailing address – but the appropriate experiences for the two customer types are very different. That’s good to keep this stuff in mind if you have one [Ideal Customer](https://sixteenventures.com/ideal-customer-profile) that you’re focused on right now, or if you have multiple customer segments; there isn’t a one-size-fits-all experience that is appropriate for the customer. It’s also critical to keep in mind that a customer will evolve over time and what they see as an Appropriate Experience will evolve, too. Most operationalized “[customer success](https://sixteenventures.com/customer-success-definition)” models forget to take this into consideration and are built around the idea of a static customer. Those examples above also show that “Appropriate Experience” isn’t just about the product; it’s about ensuring the customer has everything they need – in-app and beyond – to achieve their Required Outcome the way they need to achieve it. If you fail to provide your customer with the Appropriate Experience, even if they are able to achieve their Required Outcome – they will not feel successful. They didn’t achieve their Desired Outcome and they’ll either churn immediately or – if they’re able to at least get the Required Outcome, they may stick around until they find a vendor who can provide them with the Appropriate Experience. But don’t expect them to be an advocate for you while they wait. ## Non-Technical Example: Commercial Airlines [I travel a lot](https://sixteenventures.com/speaking) so this one is on my mind a lot; it’s also a good non-technical, non-SaaS example most people can immediately understand (even if they aren’t as emotionally invested as I am in this example). I got a real life reminder of Desired Outcome this week when my flight on American Airlines was canceled due to weather and, in scrambling to find a way to get to Charleston from Dallas on time, I ended up on Southwest. Southwest is a no-frills airline, and while I made it safely and in just a couple of hours from DAL to CHS (my Required Outcome), the experience of not having assigned seats (you can sit anywhere, but if you’re not first on the plane and/or if there are passengers from a previous leg already on the plane, the good seat is generally already taken), basically no leg room, literally no room to get any work done, no wi-fi on the plane (it wasn’t out; this plane was not equipped with wifi), minimal snacks and drinks, and an overall unpleasant atmosphere was not appropriate for me. So I made it safely to my destination, but I didn’t feel like it was a “successful” flight. I couldn’t work (I was forced to read a book on my phone!), it was uncomfortable, etc. While I may have to occasionally fly Southwest when all else fails, I will always do my best to avoid them. And you know what? For Southwest, that’s 100% okay… I’m not their Ideal Customer. Southwest knows exactly who their Ideal Customer is and they know that, sure, every once in a while someone like me will use them, but they’re not going to change their ways to cater to me or worry if I feel like the experience wasn’t right. This isn’t about ensuring every possible customer has an appropriate experience; it’s about ensuring your ideal customers achieve their Desired Outcome. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # You Have to Know why Your Customers Churn *January 20, 2016 · by Lincoln Murphy* Source: https://sixteenventures.com/know-why-customers-churn/ When customers churn, that’s a problem. Even if their [churn was “unavoidable”](https://sixteenventures.com/unavoidable-churn) it still hurts. Churn hurts on several levels: from lowering revenue to hurting employee morale. And churn means something happened to the customer (out of business, acquired, etc.) or – and MUCH more likely – they didn’t achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) through their interactions with your company. In order to avoid churn in the future, we need to learn from the churn that has occurred in the past. Which means every former customer must have a reason associated with them. By focusing on [Customer Success](https://sixteenventures.com/customer-success-definition), you should get to a point where customer churn isn’t a big deal anymore. But until you get to that point, you may lose customers -maybe a significant number – so you have to figure out how to get our customers on the right path toward their Desired Outcome. One of the ways we can do this is by looking at the reasons our customers are churning today. Ideally, every former customer will have two churn reasons associated with their customer record: an internal reason – one derived from our understanding of why they churned (finance data, support tickets, pre-cancel usage data, etc.) – and where possible, a reason from them directly. This can be from a conversation, survey, third-party interview, etc. They could have told you directly as they were canceling, but you may not have that in one place yet. That said, while I would try to get a customer-specified reason for canceling, I wouldn’t spend a ton of time on it and I’d definitely take any answers given as they’re trying to cancel with a huge grain of salt. Reasons given (usually in the form of shared frustrations, support tickets, survey responses, etc.) **before** they ask to cancel are often **far** more valuable but may be missed as “churn reasons” since the customer hasn’t asked to cancel yet. Call analysis tools can certainly help here, but also training the CSMs (or others) to take note of these types of things on the customer record – ideally in a way that affects their health score (or churn likelihood rating), should also be done. When your internally-inferred reasons do not align with the reasons given by the customer, you know your ability to predict churn is low. If they are aligned, you know you’re relying on the appropriate [Success Vector](https://sixteenventures.com/success-vector) inputs. But you can’t do that sort of comparative analysis unless you’re capturing and recording both internal and customer-sourced reasons for churn. So add two fields to your customer record and from now on, when a customer cancels make sure you have 100% coverage on internal reasons and as many customer-derived reasons as possible. I like to see at least 50% coverage for customer-shared reasons. And if you can, go back, at least, 30-days for self-service, month-to-month “contracts” or a quarter or two for annual contracts to get customer-derived reasons for churn. Asking customers that churned further back than those time frames may not yield enough to warrant wasting cycles, but you could – and should – go back as far as you can (don’t worry about your early adopters) to fill in the internal reason. When you ask your customers why they canceled (or didn’t renew), ensure you ask about their experience and not “so you can help other customers better” or help yourself. Keep it about them. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Use Customer Success to Reduce Credit Card Failures *December 15, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/reduce-credit-card-failures/ Customer Success, done correctly, has the potential to impact your business in myriad positive ways; from customer retention to advocacy, and from [account expansion](https://sixteenventures.com/logical-expansion) to CAC Efficiency. So when I got this question in the comments section of [one of my churn rate posts](https://sixteenventures.com/saas-churn-rate) and started to answer, it turned into a post all its own. The question was: “How is it possible to keep churn rates under 3% when we have an average of 10-15% in failed payments from Stripe and PayPal? Or are failed payments not to be included in the total churn?” There’s a lot going on in that question… and the answer is far from simple. And while this post is about Credit Card failures – the lessons herein relate to any subscription company that takes credit card payments and for any SaaS company, whether they accept credit card payments or not. At the core of this post is the notion that a failed payment doesn’t mean the customer has churned… yet. Let’s start from there. The reality is… ## Sometimes Payments Fail and Cards Expire Credit cards do expire (though Stripe updates card info for stored cards directly from the bank, which is just one of many reasons to use them), and sometimes payments fail because accounts are closed, info changes, or other anomalies that don’t always mean the customer is insolvent and on the verge of bankruptcy. Which is why I say a failed payment or expired card doesn’t mean the customer has churned… yet. So unless you really want that to be the case – “if your payment fails or your card expires you’re gone” does seem to be the way some companies want to operate – then that shouldn’t be the point where they are not a customer anymore. But that does require us to consider… ## When a Customer Isn’t a Customer Anymore Clearly at some point – after going through the dunning / collections process and not being able to get an updated card or a payment from the customer – you will have to consider them no longer a customer, though what exactly that point is varies from company to company. How lenient you are with the customer is totally up to you; you can immediately turn off access until the payment situation has been resolved, continue to allow access as long as they never fall more than x months behind, etc. Whatever that milestone is, when you determine them to no longer be a customer, it’s at that point that you’d add them to the “churned” category and include them in your churn calculations and reporting. Before that point, they aren’t “churned;” but they should be classified some other way. Perhaps they’re now “at-risk.” In more complex Customer Health Score  or [Success Vector](https://sixteenventures.com/success-vector) (my preferred method of understanding what’s going on with a customer) calculations I recommend including payment information as it speaks to how they view you as a vendor (more on this shortly). Regardless of how they’re classified now and how we’re trying to resolve that, our goal should be… ## Don’t let Credit Cards Expire Credit cards have an expiration date, but we don’t have to wait around for the card to expire before we get the customer to update their info. Again, Stripe should handle updates to existing cards without intervention from the customer assuming nothing else changes (and everything goes right); but for other processors and for situations where that might not work for some reason, we need to be proactive and not let cards hit that expiration point. If we know a card is going to expire in January, and we can assume credit card companies will send out new cards 30-60 days ahead of the expiration, then we should start letting the customer know 30-60 days before – in November or December of the previous year – that the card expires that they need to update their info. And keep notifying them – leverage different channels: email, phone, SMS, in-app on the next login or during their session, chat, etc. – until they update the card. By the way, there are several pre-dunning products in[ the Stripe ecosystem](https://stripe.com/docs/integrations) that do this for you; check those out for sure. No matter what modality, we want to… ## Get ’em to Drop Everything to Update their Payment Info If you’ve made sure your product is super-valuable to the customer, when they get the message from you that their card is going to expire, has expired, or their payment otherwise failed to go through, they’ll drop everything and update their card so they don’t miss a beat with your product. > be so valuable to your customers that when their credit card expires or a payment fails, they drop everything and fix the issue immediately - Lincoln Murphy (@lincolnmurphy) [December 11, 2015](https://twitter.com/lincolnmurphy/status/675202162033586176?ref_src=twsrc%5Etfw) Another thing to consider is that sometimes customers have to make a decision – due to cash flow issues – about which vendor they’re going to pay this month. In addition to ensuring they update their payment info when card details change, when it’s more about them having to decide who to pay, we want to make sure we’re consistently at the top of their vendor list so we get paid first. And this is how… ## Customer Success Reduces Payment Failures [Customer Success](https://sixteenventures.com/customer-success-definition) is when your customers achieve their Desired Outcome through their interactions with your company. Ensure your customers are continually achieving their [Desired Outcome](https://sixteenventures.com/desired-outcome) through their interactions with all aspects of your company – and make sure you’re reporting this back to them so they’re fully aware of this, too – so when their payment fails or a card expires, they will drop everything to make sure you get paid. Cards expire and payments fail… but customers that are achieving their Desired Outcome tend to not want to stop doing that, ensuring that payment glitches and card changes are resolved quickly and financially-based tough decisions are made in your favor. Just another small way an investment in Customer Success keeps on giving. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Upgrading Grandfathered Early Customers *December 15, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/grandfathered-customers/ In my epic tome, the [Pricing Strategy Framework for SaaS Startups](https://sixteenventures.com/pricing-strategy), I mentioned that the price testing I recommend will result in some customers paying a different price from what you have now; and that this is okay. Sometimes this “grandfathering” of customers happens because you’re explicit with those customers; “if you sign-up today you can lock this price in for as long as you’re a customer.” Sometimes you’re less overt and this comes from testing prices, getting your pricing wrong and having to change it later, or [going Freemium](https://sixteenventures.com/freemium-or-free-trial) and deciding that’s a bad idea and having a large cohort of free customers. No matter how you end up there, having a cohort of customers that are “grandfathered” into their price – that is, they are allowed to continue to use your product at the price they originally signed-up regardless of how that may differ from what they’d pay if they signed-up today – is certainly not uncommon. Though, while not uncommon, grandfathered customers are often a source of frustration and management overhead and I want to explore a few ways we can upgrade those grandfathered customers in a way that’s a win for all parties. First, we have to remember that… ## Early Customers are a Gift When doing price testing like I mentioned in my [Pricing Strategy Framework for SaaS Startups](https://sixteenventures.com/pricing-strategy) post, you will at some point in the near future end up having a cohort of customers that have pricing that’s inconsistent with your current (at that point) pricing. The reality is, as a quid pro quo in helping you learn, you gave them a low price, unlimited use, or otherwise gave them terms that, frankly, you now regret. My suggestion is, instead of looking at these customers as if they’re taking from you, consider those early customers a gift. They helped you accelerate your learning and got you to a point where you could mature your pricing strategy faster than you would have been able to do without them. Don’t forget that. Also don’t forget that you most likely completely mismanaged expectations with them, making them think – very likely because you told them this – that as an early customer they’ll always have unlimited access to everything, all the support they’d ever need, and other things that are now coming back to bite you because now they feel entitled. But that entitlement is your fault, and it was given (even if, in hindsight, it shouldn’t have been) in exchange for accelerated learning. Early customers are a gift. Now, as long as we’re going into this with that mindset, let’s figure out how to… ## Upgrade those Grandfathered Customers *“Let me, let me, let me, upgrade ya, grade ya” – Beyonce* Understanding the value our early customers brought – beyond the actual revenue they generated for you – is critical, but it’s also critical that we figure out how to get those customers off of grandfathered plans as quickly as possible. When it comes to grandfathered accounts, the big frustration isn’t usually that you’re leaving money on the table – that revenue is a small sacrifice to the learning gods; rather, it will eventually become a pain to support and manage them at some point. In fact, it probably already has. The best way to move a customer off of a grandfathered plan – whether due to the implementation of the type of strategy framework I’ve outlined here or the natural course of price changes – is to make them a compelling offer to move off that plan. First, be clear on… ## The Wrong Way to Upgrade Grandfathered Early Customers The goal here isn’t to strong-arm these super-valuable early customers into paying us more or kicking them out if they don’t, it’s about finding a way to make it a no-brainer to move off the grandfathered plan in a way that’s mutually beneficial. A quick anecdote you may be able to relate to. Many years ago I signed up with at&t for my mobile service and got the unlimited data plan. Perhaps they offered a plan like that to observe usage patterns and more intelligently segment customers and create a pricing model based on that segmentation; I don’t know. But what I do know is that I started getting notifications from at&t that said something to the effect of “you have unlimited data – awesome – but you’re using too much data so, while we won’t turn off your service, we’ll reduce the speed of your service so you can maybe just check your email. No more streaming WWE Network for you. Thanks for being an at&t customer!” That scared me because I didn’t know when they’d throttle me and since I was technically – and legally – on “unlimited data” there was no way to simply have them charge me an overage fee for data so I could get back to the fast 4G speed. So I changed my plan to one that includes a bunch of data, but isn’t unlimited, so when I hit my limit they charge me an extra $10 per GB (or whatever) and I keep going at 4G speed. That’s better for me so I don’t get throttled, but man… that was not fun. All of that felt very punitive because, well, it was; I was using the service the way they originally sold it to me and now I was being punished for using too much of my unlimited data, only they were doing it in a really sneaky way (throttling). That sucks… and it was a terrible experience. Raising prices, reducing features/capacity/support, or otherwise creating a negative reason to move off of the plan you gave them is just not a wise decision long-term. So, unless you’re part of an Oligopoly and have contractual lock-in and high switching costs like a phone company, that’s the absolute WRONG way to get me to move off of the plan they gave me many years ago. And when I say that’s the wrong way, I mean the actions at&t used resulted in a class action lawsuit that got them to stop that garbage. So avoid the nasty pitfalls of punishing your early customers by trying one of these… ## 3 Good Ways to Upgrade Grandfathered Early Customers There are probably other ways to entice a customer off of a grandfathered plan, but these three are a good place to start. ### 1. Offer them a Discount You could make them an offer for one of your retail plans that best fits their current and near-future situation – based on usage patterns and where they are on the trajectory toward their [Desired Outcome](https://sixteenventures.com/desired-outcome) – at a discount. “Get our Pro plan for 50% off for the first year.” That way they’re off the grandfathered plan and on course to eventually paying retail prices. If you wanted – though this may end up resulting in another grandfathered cohort – you could continue the discount in perpetuity (unless they cancel and come back), but at least, they’d be on a modern, retail plan. ### 2. Pile on the Value-Add You could make them an offer for one of your retail plans that best fits their current and near-future situation – based on usage patterns and where they are on the trajectory toward their Desired Outcome – at the regular retail price, but by adding other value-added services or products (yours, your partners’, etc.) that dramatically increase the value prop for the customer. ### 3. Use a Strategic Discount You could make them an offer not for the plan that best fits their current and near-future situation – based on usage patterns and where they are on the trajectory toward their Desired Outcome – [but the next plan up](https://sixteenventures.com/saas-pricing-discounts) that they can really grow into. Offer the next “biggest” plan at the same price as the plan that would fit them best today. This also adds an “aspirational” element to the mix by giving them a plan they can grow into (and then, of course, encouraging them to do the things to grow into it). And if none of those feel right for your situation, cool, use your imagination. But do it from the starting point of “Early Customers are a Gift.” Regardless, the idea is to entice the “grandfathered” customers into moving off the plan in a positive, win-win way. Don’t punish them for helping you out… reward them for being an early customer with this new offer. ## Ensuring Success for All I originally titled this section “Firing Unprofitable Customers” but I realized that might send the wrong message. This isn’t only about profitable customers; this is about ensuring that everyone – the customer and us – are successful in this relationship. If the customer is costing us more money to serve them then they pay us, that ultimately takes away from our ability to serve our other customers. It hurts our ability to keep our promises to internal stakeholders, too, which then hurts their ability to serve the customers. So sometimes you have to actively jettison customers that are hurting the ability of all parties to be successful. So, what if you try all of the ideas I mentioned in the previous section and some people are stubborn and don’t budge? What are you supposed to do with these customers if they’re costing more to support than they bring in? First, I’d make sure that’s true; sometimes we just think this is the case because we feel like they’re taking from us. See the section titled “Early Customers are a Gift” if you need a refresher. Now, if it is true and they won’t take you up on any of the offers you made – including the one you make during a frank phone conversation – it might be wise to cut ties with them (make sure you can do that legally, contractually, etc.). If you do this, I would suggest you do at least the following: - Be transparent about why (the cost to serve is just too high) - Give them some time to move to a different solution and provide export/transfer support if possible - Provide some alternative solutions for them to move to (including setting up a discount or bonus with the new vendor) Things happen and if you really can’t afford to support them, that’s reality; but have a bit of empathy and give them a clear way forward (doing for them what you can to ease the transition); don’t leave ’em hanging. And setting them up with a discount (or even paying for the first month) with your competitor is a win-win for everyone; a place to go for your customer… and a new customer for your competitor. 😉 Again, regardless of how they got there, you should look for ways to move as many people off of grandfathered plans in a way that isn’t punishment for the customers that helped you in the early days. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Pricing Strategy Framework for SaaS Startups *December 9, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/pricing-strategy/ Pricing doesn’t exist in a vacuum and is therefore not something you can tackle on its own. Pricing is a function of marketing and determines, among other things, your market position. It also indicates – or is ideally derived from – the type of customer you want to do business with. And of course in SaaS, pricing is tightly coupled to the product itself, which is different from other types of software and non-tech products where the price is decoupled from the product. Which is why I can’t recall a time where a SaaS company came to me with a “pricing problem” and there wasn’t something else that was going on, too. In fact, their “pricing problem” often had little to do with the actual “price” – the numbers – and more to do with pretty much everything else (chosen revenue model, customer segmentation, value proposition, marketing strategy, conversion optimization, etc.). So, when those in an early-stage startup – or those bringing a new product to market within an existing company – ask me for help on pricing, I always say that you won’t get it perfect out of the gate, but you can get it as right as possible. And then I give them a high-level pricing strategy framework, which I thought I’d document and share with you in this post. Now I’ve written before about all of the inputs that need to go into [developing your pricing model](https://sixteenventures.com/develop-pricing-strategy). But this framework is different from pretty much everything I’ve talked about publicly (well, I’ve mentioned it before in passing) as it’s specific to early-stage startups and new products, so don’t assume you know what I’m going to say even if you’ve consumed everything I’ve published before. It all started with this AHA! moment for me: ## We Don’t Know what we Don’t Know I had someone reach out to me recently and say “it was when you [said in this post](https://sixteenventures.com/saas-pricing-strategy) that no one knows what your startup pricing should be that I trusted you.” Hmmm… so admitting that I don’t know something is good? Well then… I know very, very little! Actually, when it comes to pricing and your startup, none of us know very much. That’s because… ## Everything will Change, Always The very nature of a startup is that you don’t know what you don’t know, so developing a pricing strategy for launch that will also be relevant 6 months later (or maybe 6 hours later) is not going to happen and you shouldn’t try. Instead, you should get something out the door, learn, iterate… OMG, MVP – Minimum Viable Pricing. Please don’t ever say that, though. Thank you. But really, you don’t know what you don’t know when you first start so keep it super-simple and increase the chances for learning. In the early days… ## Goldilocks Pricing isn’t Just Right Most companies will attempt to go live with (at least) 3 retail pricing tiers, an Enterprise plan or two, annual discounts, and, for some odd reason, an overall strategy that **LIMITS** use. Generally speaking, the reason for this is based on: - Pretty much just making stuff up, or… - Copying what other – usually completely unrelated – companies that sell to unrelated customers are doing, without knowing if that’s even working for them, let alone why it might work for you and your customers Most of the time it’s a nice combination of both of those. So, instead of wasting time and effort pulling things out of thin air (or somewhere else), acknowledge that you don’t know what you don’t know and go forward in a way that’s designed to intelligently fill those knowledge gaps. That all said when it comes to pricing… ## Only Learnings from Paying Customers Matter Only intel from paying customers is valid when you’re trying to get intel on how to charge customers. Think about that for a minute. What someone says they’ll pay or what they say your product is worth is irrelevant if they don’t follow that up with giving you money. Rather, it’s much better to deeply understand the customer, their Desired Outcome, and the value of achieving that outcome. For example, I’ve talked before about how [Beta users aren’t actually customers](https://sixteenventures.com/beta-testing-pricing) and won’t give you the same intel (feedback, usage patterns, etc.) as customers that pay you something. When it comes to pricing, at first… ## Keep it Simple, Startup So when I say keep it simple in the beginning, I’m talking about – if you can – going as far as offering unlimited access to everything (all features and functionality for unlimited users within their company) for a very specific cohort of early customers in exchange for a fee. That first cohort can be as many customers as you like, but I suggest putting some bookends on how many you’ll let in and when they can sign-up. Perhaps open your product up to 100 customers over a 30-day period, allowing you to ensure they all have a fairly similar experience (the numbers don’t matter here as much as the concept). After you get 100 customers, you can turn off sign-ups for a bit – or not – but you should look at that group of customers as a specific cohort and monitor, measure, and learn from them on that basis going forward. But first you need to… ## Come up with a Price I’ve said it many times before; price should be an input on a spreadsheet, not a result from one. There are financial implications to pricing, obviously, but if you need to charge $100/mo to achieve a 30% margin, but the market will only pay $50/mo for your product, all of the financial modeling to get to that price doesn’t matter. So you need to come up with an initial price to start testing from, and that price needs to be derived from your understanding of the value the customer will derive from your product. And this is where it gets really uncomfortable for those who don’t want to get to know (talk to) potential customers and who want quantifiable data points to build their startup from because it’s a lot more art than science at this point. But hopefully, we can apply some scientific methods that move you from art to science. ## Initial Pricing Inputs “Umm, okay, are you actually going to tell us how to come up with a price, Lincoln?” you ask. First, you need to figure out with whom you want to do business. This would be a great time to bust out the [Ideal Customer Profile framework](https://sixteenventures.com/ideal-customer-profile) if you’ve not gone through it. Everything – Ev. Ery. Thing. – is easier and more effective when you’re focused on a very specific type of customer (especially in the early days). From there you might look to the [10x rule](https://sixteenventures.com/saas-pricing-strategy) – understanding the customer’s (theoretical) derived value and pricing at 10% of that – as well as all of the different inputs into an overall pricing strategy. One of those critical inputs is how your customers buy; it doesn’t matter if you want to sell monthly via credit card if your customers don’t buy that way (yet). You can also sanity check your initial pricing by looking to other vendors in the market to see if you’re way off base; though if you are, that doesn’t actually mean you’re wrong, it just means you may have to explain why you’re different. Ultimately, the best thing you can do is… ## Know Thy Customer (and Market) In fact, if you come up with a pricing strategy that’s totally different than what the existing companies in the market use, it may be that you’re the only company in your product category to be right. Unless you have direct intel otherwise, if you’re basing your pricing off of your understanding of the customer and their [Desired Outcome](https://sixteenventures.com/desired-outcome), you’re closer to right than most companies. Guaranteed. So you can also look to competitors, but do so to understand what customers may be used to / expecting vs. assuming your competitors got it right. You might also want to talk to some of their customers (start with those listed as advocates on their site) about their use of the product and how that jibes with the way the product is priced. Also, look at how those competitive products are positioned… are they positioned lower or higher than where you’re going to come in? Figure that into your pricing. You could look to adjacent products that sell to the same customers (and same individuals/departments within those companies) at the same position as yours (high-value vs. low-price leader). So once you have your starting price, the fun begins as you… ## Test your Prices Pricing (like pretty much everything) is never a set-it-and-forget-it situation, and that’s never more so than in the beginning. So, the first prospect you talk to on the phone or in person in the cohort will hear your pitch based on your initial value proposition hypothesis followed by the price you pulled out of the 10x rule. After they convert (I’ll write something later about what happens if no one converts. Update: I never did), each subsequent prospect will be told a higher price (increase increments are up to you, but don’t be shy… +5% each time seems like a nice place to start) until you start to get some serious pushback; my friend Steli at Close.io says that until you get to [20% pushing back on pricing](http://blog.close.io/charge-your-users) your prices are too low. I agree. And yes, if you start out at say $100 and increase that by 5% each time, after 34 customers you’ll be at $500 (or if you start at $1000, you’ll be at $5000 by your 34th customer). That’s a big increase, but if you’re still not getting 20% pushback, keep raising the price until you do. Or you might run into that pushback at $105. You just don’t know and you could end up leaving a ton of money on the table if you don’t test. By testing the prices like this, you’ll start to get some idea of the price sensitivity vs. your value prop and you’ll have a much better place to start for the next cohort of customers. I say it like that because you will learn use cases and the value realized by this cohort that will totally change your understanding of the value of your product to your customers. Also, by testing prices behind the scenes with each prospect individually, you’ll avoid the type of pricing fiasco we’ve seen in the past where a company increased prices for new customers, didn’t tell existing customers about the change, and when the change was noticed on the website, existing customers thought they were going to have to pay the new, often much higher, price. Fiasco-avoidance is a good goal, so remember when (or if) you end up publishing prices; if you do make a change, communicate that to your customers first (ahead of a public announcement) and assure them they’re grandfathered in and won’t have to pay the new, public price. ## Value Prop Refactoring Okay, so as you hit the 20% pushback threshold, you should probably refactor your value prop to ensure you’re hitting the right notes. You may be able to restart the price increases by changing your pitch. All of this learning will very likely result in a massive price increase (assuming you position the product correctly to go along with that increase) with the next cohort. And yes, this process will result in some customers being grandfathered in; while [upgrading grandfathered early customers](https://sixteenventures.com/grandfathered-customers) is something you’ll work through later, it’s not something to worry about right now. No matter what, you will have to… ## Talk to your Prospects As part of keeping it simple, you’ll want to have a conversation with every prospect and pitch the price to them personally. This is simple because it requires no design, engineering, programming, or other excuses not to do it. Record those conversations (please conform to the laws that govern your jurisdiction) and get them transcribed so you can reflect on their questions, their pushback, and how you overcame the objections they raised. I often hear from early-stage founders “no one converts through the self-service flow, but once I get on the phone with ’em, they convert like mad.” This is usually because the self-service sign-up flow is all about the product, but when you talk to the customer you talk about them, use their language (mirroring), add some personality and excitement, or otherwise resonate with them on some level. So get ’em on the phone, convert ’em like mad, learn from those conversations, and roll that “conversion magic” into the self-service sign-up flow (as well as other aspects of your sales and marketing). Having those conversations recorded and taking note of what worked, what didn’t, what were common patterns and what were edge-cases will make optimizing your self-service sign-up process much easier and effective. Once you’re converting customers at the top of the price you tested (20% are saying it’s too expensive), you’ll want to start looking for patterns that lead to… ## Logical Price Segmentation So, once you have a group of paying customers that have no limits on use, do everything you can to encourage wider and deeper use of the product. You should probably do this all the time, anyway, right? This, by the way, is just one of the reasons for building your company around [Customer Success](https://sixteenventures.com/customer-success-definition) from the very beginning. Ultimately, we want the customers to use as many of the features as possible (so let them know all of the ways they can use it, schedule training calls, show them demos, make sure they’re clear on [what they’re responsible for](https://sixteenventures.com/customer-accountability), bridge [success gaps](https://sixteenventures.com/success-gap) where they exist, etc.), explore as many use cases – both known and undiscovered – and get them to invite as many users from within their company as possible. Why? We want to see how – unimpeded by limits on consumption, seats, etc. – real, paying customers actually use the product. You’ll start to see – even with access to everything – that (roughly) 80% of your customers will only use 20% of the features (with possibly the same distribution among their users), and that’s just fine. Of course you’ll want to validate this by ensuring that the 80% that are using 20% of the features are, in fact, achieving their Desired Outcome: they’re able to both achieve their Required Outcome and are doing so in the way they need or want (Appropriate Experience or AX). You can only do that by talking to your customers, understanding their use cases, their experience, etc. Then you can start mapping those use cases and customer characteristics to the different pricing tiers. Which means you’ll end up… ## Mapping Pricing Tiers to Desired Outcome I referred to Goldilocks Pricing in one of the headers above, and that’s the low, middle, and high price you so often see. It’s an age-old gimmick used to push people to the middle “just right” plan. That means the high and low prices are decoys meant to trick the prospect into selecting the middle plan. You anchor them off the high and low plans so it makes the middle one seem like a good deal for what you get. I could go on about why Goldilocks pricing is stupid – and maybe I will someday (update: I still haven’t) – but just consider that today we’re inundated with price gimmicks all day long across multiple devices, we’re busy and distracted, and we just don’t need to make more unnecessary decisions. Every pricing plan you offer should have a story behind it; a use case, a type of customer, and a Desired Outcome. In fact, when you start to tie pricing to [Desired Outcome](https://sixteenventures.com/desired-outcome), you move into the revenue goodness that is real Value Pricing; selling outcomes rather than features and technology. Assuming your customers’ Desired Outcome is being met, what you have with the 80% of customers using 20% of the features is essentially your entry-level pricing tier. And the 20% using the other 80% of your features? Those are the folks using the “Advanced” or “Premium” tier and will likely be willing to pay a higher price. Now, the Appropriate Experience portion of the Desired Outcome may differ across pricing tiers, meaning the higher-price tier may need to include better support, SLAs, etc. Or not, perhaps that stuff is reserved for the [Enterprise plan](https://sixteenventures.com/enterprise-pricing) you wanted to launch with. Regardless, this becomes… ## The Path to Further Customer Segmentation Within the 20% of customers using the other 80% of your product, you may also have another 20% using 80% of those features…. that may constitute an even higher-level tier. Or you may find that the base 80% using 20% of the product can be further segmented themselves; perhaps bringing in a middle tier or carving out something at the low end or perhaps a free tier if you were to venture into the [Freemium model](https://sixteenventures.com/freemium-or-free-trial) (but probably don’t). The more you can monitor use, talk to customers, understand Desired Outcomes and use cases, the better you’ll be able to position the pricing tiers for the appropriate audiences, and that will lead to… ## Further Price Testing After your first cohort of customers that have full, uninhibited access to your product, you’ll want to [onboard another cohort](https://sixteenventures.com/customer-onboarding), starting at the price where 20% of the prospect balked because it was too expensive. But now you’ll have deep knowledge of your customers allowing you to start pitching the appropriate pricing plan for those in this next cohort, using appropriate language and value prop. In fact, you’ll find that when you do this in a way that resonates with them, the price you originally started out with – that 20% said was too high – actually starts to seem really low! As you continue your testing, you can funnel some customers to the self-service sign-up to see if the changes you’ve made help there. And if the changes don’t work, follow-up personally, bridge any gaps, overcome any objections, record the conversation, analyze it, and roll that back into all of your sales and marketing. You’ll also (eventually) identify the… ## Core Value Metric During this process you’ll start to identify the core value metric for each pricing tier – should you end up moving away from unlimited access for a flat fee; and you likely will – that your pricing tiers will be based around. I have to be clear here; you don’t have to move away from unlimited access, but many companies do for various reasons (board pressure, competitive pressure, profit, excessive costs to serve, etc.). If you do move away from unlimited access per tier (after you’ve learned from your first few customer cohorts), you’ll want to find a metric that your customers find very valuable that doesn’t limit their use. By its very design, per seat licensing limits the number of people that can use the product. That’s kinda the opposite of what we’re trying to do here, right? So find a metric that doesn’t limit the number of users but, as they add more people, they need to buy more of **that** thing. Example: Project Management software might be better priced on a per-project instead of per-user / seat basis. Pricing tiers could be segmented not on consumption or use (seats), but on functionality. Then the Project Management software vendor could help the account owner understand other types of Projects they could manage with their software so they expand their own usage, then encourage the account owner to invite collaborators on those projects, and encourage those collaborators to spin up their own projects, and invite other collaborators on those projects. Viral. Exponential, internal viral expansion is something that’s not possible – or incredibly difficult to achieve – when you have to make a buying decision just to bring another person into the product. So, instead of putting your efforts into creating ways to limit use, put your effort into driving breadth and depth of use… so you can learn from that. I hope this helps you… [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Qualifying Leads in a SaaS Free Trial *December 2, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/qualifying-leads-saas-free-trial/ I got this set of questions on [Twitter](https://twitter.com/lincolnmurphy): “Is there a certain level of activity during the free trial that is likely to predict conversion from free to paid? Also, how do other companies handle Sales vs. Marketing Qualified Leads (SQL vs. MQL) when it comes to Free Trials?” I thought that was an awesome set of questions because it indicates the person asking is starting to look at their Free Trial as a true sales pipeline; something more people and companies should do. So I loved the question and I thought my answer was equally awesome (if I do say so myself), so I decided to expand on it a bit and share it with you, too. ## Free Trial as a Sales Pipeline I’ve said before that [“active users” is a vanity metric](https://sixteenventures.com/active-users-vanity-metric) because if any type of “activity” actually meant something, then active customers and users would never churn out. But they do. And of course, “active” prospects in your free trial don’t always convert to paying customers; so clearly “activity” isn’t something we can look to when we’re trying to figure out whether or not a prospect might convert to a customer. Done correctly, you should be able to look at your Free Trial pipeline and attach a value to the leads therein based on both the price at which they’ll convert (which plan they chose at sign-up, their current usage level, etc.), as well as their realistic likelihood of conversion just like you do other parts of the sales pipeline. 100 prospects in the trial at $100/MRR (Monthly Recurring Revenue) is a $120k/ARR (Annual Recurring Revenue) free trial pipeline; but if only 30% are qualified (based on what I’ll discuss shortly), the ARR value of the pipeline is – realistically – closer to $36k. Emotional rollercoaster. To be able to get to that level of pipeline management, we need to evolve our thinking around Free Trials and Qualified leads, which means we need to look at… ## Meaningful Activity When it comes to prospects in your Free Trial, meaningful activity is key as it is the activity that moves them along the path of [Success Milestones](https://sixteenventures.com/success-milestones) to the point in the trial where becoming a paying customer is the most logical next step for them. This point in the Free Trial is where the prospect has realized value – or they’ve seen the value potential in the product for the first time outside of your marketing or their discussions with sales – and they’re technically ready to convert. That could [happen on day 2 of a 30-day free trial](https://sixteenventures.com/customer-onboarding), but most companies will let them go the full 30-days (or even longer) before they try to get them to convert. Don’t wait, ask for the sale right then. But I digress. While we can equate meaningful activity with the potential for conversion, there are other factors at play that may indicate the likelihood of conversion and, thus, indicate true “qualification.” And that means we need to look at… ## Additional Qualifying Factors Just like most things, there’s really no blanket answer that works for every situation, but here’s the basic framework I use in addition to the Meaningful Activity I mentioned above that you can build into your [conversion-centric Free Trial](https://sixteenventures.com/effective-free-trials). Depending upon the customers, the market, their buying cycle and process, the complexity of the sale, etc. I might look at company data (size, industry, maturity/funding, etc.), the title/seniority of the account owner, the industry and known sales cycles (if they’re higher-ed and it’s May, but they buy in September, I can assume the sale won’t happen this quarter), etc. to help us better understand whether they’re going to convert. There will be some set of characteristics shared by those most likely to convert and those should be considered qualified leads. Qualified + Meaningfully Active = Super-Likely Conversion BTW, knowing what those characteristics are will help shape your [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile), ensuring that you’re filling your Free Trial with prospects who are much more likely to become customers. Also, you should know that companies are measuring [Free Trial conversion rates](https://sixteenventures.com/free-trial-conversion-rate) on a cohort basis, often segmenting conversions (and overall activity) among qualified and unqualified (Ideal vs. Non-Ideal) prospects in the pipeline and feeding that back into the overall lead generation process, again, to ensure the trial pipeline is being filled with conversion-likely prospects. Circular. Of course, we have to touch on… ## The Age-old MQL vs. SQL Battle As for determining whether the type of qualified lead, it’s quite simple: If marketing drove those leads and got them to the point where they’re “qualified” (including enriching and qualifying the lead behind the scenes), it should be designated a Marketing Qualified Lead (MQL). If someone from the sales organization manually did the qualification (BDA/SDR, AEs, etc.) via email, phone, chat or the like, regardless of the lead source, call it a Sales Qualified Lead (SQL). Or not. The only thing I’m sure of is that you’ll fight internally over the demarcation between those two lead qualification designations and/or you’ll introduce other metrics like Sales Accepted Leads (SALs) which will further muddy the water. I’ll let you guys argue about discuss that while I briefly touch on… ## Common Conversion Activities In the past, I’ve talked about [Common Conversion Activities (CCAs)](https://sixteenventures.com/free-trial-metrics), and they’re still relevant. However, remember that CCAs are generally derived from usage data, so be sure to sanity check that against the actual steps for your Ideal Customers to achieve their initial [Desired Outcome](https://sixteenventures.com/desired-outcome). If you look only at CCAs, and you acquired customers that are not your ICP (or even bad-fit customers), what they did prior to converting may or may not be useful. Of course, none of this matters if you don’t understand why you should [optimize your Free Trial process](https://sixteenventures.com/optimize-your-free-trial) in the first place. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success and Logical Account Expansion *November 28, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/logical-expansion/ ***Updated July 2026.** I wrote this in 2015 about expansion orchestrated logically around success milestones. Eleven years later, that sentence became the machinery: [readiness milestones](https://ltvmax.com/posts/readiness-milestones) and [orchestrated expansion](https://ltvmax.com/posts/orchestrated-expansion-ltv-lever). Original text below.*Customer Success is a powerful growth driver. Sure, in the early days when you’re putting out the fires of churn, Customer Success seems less like a growth driver and more like a stop shrinking driver. But once you move past churn busting – or if you avoid that altogether by [being smart about customer acquisition](https://sixteenventures.com/customer-acquisition-mistake) in the first place – Customer Success starts to come into its own as a true driver of growth. One of the ways Customer Success drives growth is through account expansion or getting existing customers to pay you more over time. When you can grow revenue from your existing customer base, you could essentially turn off new customer acquisition and not just stay at the same level of revenue, but continue to grow. Sure, it’s probably a good idea to continue to acquire net new customers, but the impact of account expansion to both the bottom line of a company as well as the valuation (something very important when raising money, going public, or being acquired) is potentially transformative. But for account expansion – upsells, cross-sells, add-ons, etc. – to be a consistent and long-term driver of growth, it cannot be arbitrary or expected to occur organically. Account expansion must be orchestrated, and that starts with applying logic to the process. Let’s explore… ## Forcing the Issue I was talking to a good friend of mine that runs [Customer Success Management](https://sixteenventures.com/customer-success-management) for a startup in San Francisco and she said they’d separated the account expansion function from the regular Customer Success Manager (CSM) function. She said the catalyst for this was that her CSMs didn’t like to do the constant hard sell that was required to hit the expansion revenue quota they’d set. She said trying to hit their numbers often interfered with focusing on helping the customer achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome). [](https://sixteenventures.com/desired-outcome) So she said they transitioned one of their sales guys who “loves this stuff” to handle the upsells, and while she’s confident he’ll hit his short-term number, she worries about how that might affect the long-term health of the customer. That’s a valid concern. ## Customer Success is Required Before we go any further, I have to say that while account expansion is one of the awesome ways Customer Success can have a positive financial impact on your business, you can’t just do Customer Success to try to get the upsell. Rather, to “get the upsell” on a repeatable, predictable, and consistent basis, you must first and always focus on helping the customer achieve their Desired Outcome, [which is the definition of Customer Success](https://sixteenventures.com/customer-success-definition). If you can keep that in mind, everything else I say here will be framed properly.If you fail to understand that key concept – that Customer Success is required for account expansion – then you’ll fall into the trap that many companies are falling into; trying to force expansion without pegging it to success. ## The Dedicated Customer Expansion Team Trend There is a current trend for companies to separate the Account Expansion (add-on sales, upsells, cross-sells, etc.) function for some [customer segments](https://sixteenventures.com/logical-customer-segmentation). In fact, the best companies are operationalizing expansion across all customer segments by leveraging technology for the low-revenue customers and dedicated personnel for the high-revenue segments. So it’s not unusual (it’s also not really common, yet), but let’s tackle the part that she’s rightly concerned by; the impact of expansion on long-term customer health. Incentives drive behavior, and when you’re given the mandate to increase revenue from the current customer base – and provided incentives for that outcome – without other checks in place, you may just reach that goal… collateral damage be damned. ## Incentives Don’t Drive Behavior, Leaders Do My friend said her CSMs were trying to make the sale during their Quarterly Business Reviews with customers, which was proving to be difficult for the CSM and quite off-putting to the customers. And outside of QBRs, when they should be focused on guiding the customer to their next [success milestone](https://sixteenventures.com/success-milestones), she said the CSMs were instead trying to sell the customer on an add-on they just didn’t need. [](https://sixteenventures.com/success-milestones) She even had customers actively calling her and the other executives to complain they were being sold things they didn’t need and it was like her company didn’t understand them (the customer) at all. Because the Customer Success org had to hit their number, she really couldn’t afford to stop forward momentum, so she brought in the sales muscle to make it happen. So for her – and you if you’re truly focused on Customer Success – I recommend that you implement a post-expansion review on their [Success Vector](https://sixteenventures.com/success-vector) (my improved, forward-looking Customer Health Score alternative) or Customer Satisfaction (90-days is a good timeframe) and to either pay out a bonus or the full commission to the expansion person if the customer Success Vector is as good or better than it was pre-expansion. Or, if the customer Success Vector/c-sat is lower that in was pre-expansion, since that likely indicates some strong-arm or other less-than-positive tactics were used to get the expansion win or expectations were simply mismanaged, you need to not pay the full commission or perform a clawback to take away some of the expansion person’s commission. ## Hard Selling or Hardly Selling? Now, the other part my friend said was her CSMs didn’t like the “hard sell” required to get the expansion, would avoid selling so as to avoid making the customer – and themselves – uncomfortable, and would miss quota. That’s because they were trying to sell something the customer didn’t need when they didn’t need it. Only a sociopath would actually enjoy that type of selling. No CSM with actual empathy for other humans is going to enjoy – or be anything near effective – in that situation. A quota in that situation is a non-starter. But, if you and your CSMs – and everyone in your company – understands the customer’s Desired Outcome and believes that your products are the way to help them achieve that, then getting the customer to consume more, buy an add-on, or otherwise expand their use is actually what’s necessary to continue on the path to success. ## Right Message + Right Time = Win By forcing the CSM to sell something “out of cycle” – that is, when it’s not actually needed or wanted by the customer – you not only hurt the CSM, you [hurt the customer](https://ltvmax.com/posts/expansion-hurts-the-customer); their trust and overall faith in you goes down because you either don’t care about their actual progress and success with your product or you’re clueless… maybe both. I suspect this is one of the reasons so many people say Expansion Sales and Customer Success Managers should be separate (even if still under the Customer Org); CSMs are trusted advisors to the customers and Expansion Sales are sociopathic monsters with a mission to hit quota by any means necessary. But it doesn’t have to be this way. In fact, if you truly believe that somehow selling to your customers hurts trust… you’re doing it wrong! ## The keyword is “Logical” When it comes to Expansion sales – whether done by a dedicated Expansion Sales person or your trusted CSM – I told her the keyword is “logical” and that most of the time that simple word is overlooked or ignored. So, if you’d like to take advantage of expansion opportunities with your customer in a way that builds deeper trust, ensures the customer stays on or accelerates their path to success, and is truly the proverbial “win-win” you must clearly understand what the Desired Outcome is (for the customer, not you!), and then operationalize around the milestones required to achieve that outcome. Simple. Not easy, but simple. Some of those milestones will have a logical upsell or add-on associated with them, and creating a system that allows a CSM or dedicated Expansion resource to surface an upsell ask with the customer at the right time – based on that success milestone they just achieved – ensures the customer is in a prime position to see the offer as the logical next step, and keeps the CSM making the upsell ask from having to overtly sell in order to convince the customer to buy. Again, assuming the CSM is bought into the idea that the add-on or additional seats are actually the right things for the customer (based on their Desired Outcome and where they are on the path to success), the CSM won’t be “selling” but will simply have a matter-of-fact conversation with the customer. ## A Way With Words And when I say CSMs don’t have to sell, let me be clear; they need to bring it up with the customer. And having a system in place that tells them when they should bring it up ensures it actually gets done. But in terms of “selling,” the CSM would literally have to say something like “You’re really on your way to achieving [your Desired Outcome]. Most of our customers that [reach this success milestone] buy [this add-on]…” and get the customer to agree to add it to their account. If the customer wants to negotiate, the CSM can actually invoke the “I’m not a salesperson” gimmick and say “oh, I’m not a salesperson; if you’d like to negotiate the price, I can bring [salesperson] into the conversation.” 60% of the time, it works every time. I told my friend that her CSMs were trying to sell stuff the customers didn’t want or need when they didn’t want or need it, so the only way to sell in that scenario is to strong-arm or otherwise try to convince; something most CSMs won’t want to (and shouldn’t) do. ## A Dedicated Account Expansion Resource or Nah? [Traditional Account Management](https://sixteenventures.com/customer-success-is-not) doesn’t work, but the functions of Account Management – Renewal and Expansion – are still required; they just need to report to, roll-up to, or otherwise fit within Customer Success Management. My opinion is that separating expansion and other customer success activities should be done for one of two reasons: - When the expansion sale requires negotiation or is otherwise too complex and is a distraction for the CSM. - When you can afford to have a dedicated expansion resource even if the complexity isn’t there. Don’t separate for trust issues or to hit your numbers by any means necessary. You want your CSMs focused on helping the customer achieve their Desired Outcome and while having the add-on will help them reach their goals if the process of getting the add-on added to their account is distracting or time-consuming, then optimize that process. No matter what, the CSM must manage expectations with the customer, let them know from the start that at various times add-ons or other expansion opportunities will occur and when they do, the expansion resource will be brought into the conversation. That way there are no surprises and everything makes logical sense. Always keep in mind what Customer Success actually is and orchestrate account expansion around that. It’ll transform your CSMs effectiveness (and happiness) and transform your business. Be Logical. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Reasonable SaaS Free Trial Conversion Rate *November 27, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-conversion-rate/ 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](https://sixteenventures.com/free-trial-average-conversion-rate) it [several times](https://sixteenventures.com/average-free-trial-conversion-rate) 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. ## A Reasonable Conversion Rate I don’t know what’s reasonable… if you have a 2% free-to-paid conversion rate right now, shoot for 5%, then refactor and shoot for 7%… then 10%… then… Now if you’re creating a business plan, to make it compelling (regardless of the truthiness therein), indicate a conversion rate of > 50%… if you want to put a number you can definitely reach with minimal effort and exceed expectations, make it a number less than 10%. Now, if you want to do what’s right for your business, read on.. ## Measurements Change Since I first tackled this question publicly several years ago, not much has changed in terms of actual conversion rates. They’re still dismally low for most companies I talk to, work with, and have visibility into (well, before they bring me in at least). But a few things have changed in terms of how companies are looking at Free Trial conversion rates. More companies are measuring conversion rates on a cohort basis, often segmenting conversions (and overall activity) among qualified and unqualified (Ideal vs. Non-Ideal) prospects in the pipeline. That’s interesting and appears to show companies maturing in their relationship with Free Trials, but measurement doesn’t magically result in more conversions; it just allows you to quantify the poor performance of your trial and lead-generation activities. Ultimately, my feeling is that when we’re seeking “reasonable” we’re probably looking for “average” (or maybe “realistic,” which isn’t the same thing). Which means I should remind you… ## Don’t be Average Be careful looking for averages or median Free Trial conversion rates (they’re out there, from anecdotal reports to the results of surveys, including poorly-executed ones that [combine Freemium and Free Trials](https://sixteenventures.com/freemium-or-free-trial) and should be ignored completely) since averages are just that; average. And when so many SaaS companies [completely botch their Free Trial process](https://sixteenventures.com/optimize-your-free-trial), “average” usually equates to “horrifically low.” Instead of seeking the average free trial conversion rate, a better question is: “what conversion rate from free to paid are the best SaaS companies achieving?” ## Garbage In, Garbage Out Honestly, even if you asked what conversion rate the best companies get, the reality is I don’t have a great answer for you and your specific situation. It varies too much based on your product maturity, product category maturity (is it new or being defined), market forces and buying patterns, etc. that, to get to a legitimately useful answers, you’d have to do some very specific comparisons against similar companies, in similar situations, selling to similar customers. But one thing I can say that is true across the board, Free Trial conversion rates are – to a very large degree – dependent upon the quality of your top-of-funnel activity. Garbage in, garbage out. Low quality leads in, low conversion numbers out. Simple. If you have a [well-optimized Free Trial process](https://sixteenventures.com/customer-onboarding), but low-quality prospects coming in the top of your funnel, your conversion rate will be low. On the other hand, if you have [high-quality leads](https://sixteenventures.com/ideal-customer-profile) coming into a terrible Free Trial experience, expect a lower free-to-paid conversion rate than you should have given the quality of leads. Okay, okay… ## But what’s a Reasonable Conversion Rate? In a well-designed and continually optimized Free Trial of a Premium product (not Freemium) with highly-targeted leads filling the pipeline, I’d want to see 25-50% conversion (at least) depending upon maturity and time in-market. Likely you’ll end up moving from the former (25%) to the latter (50%) over time as you learn and refactor and learn and refactor and repeat. It won’t happen instantly; you don’t know what you don’t know. I’ve seen a couple of companies in the 80%+ conversion rate range, but they are very targeted in their distribution / lead gen strategies and [have designed the trial to convert their Ideal Customers](https://sixteenventures.com/effective-free-trials). Those are likely to remain edge cases, though, no matter how much I evangelize this incredibly powerful lever in your sales process. A Free Trial conversion rate of less than 25% for anything but the most horizontal, low-end, commodity B2B products is something that should warrant immediate attention. ## Don’t Believe the Hype A free trial conversion rate of 25% is a lot higher than most companies have…. if you look to industry averages you’ll probably see 10% or less… and you’ll see people talking about how 10% is good. It’s not. It’s terrible and means something isn’t working. Free Trials aren’t Freemium… the expectation shouldn’t be that conversion will be super-low. The expectation should be that conversion rates can be super-high and your actions should work to bring that expectation to fruition. ## Conversion Rate isn’t the Only Metric that Matters Oh, and it’s important to not just focus on conversion rate, but actual numbers of customers coming out of the trial. In certain scenarios where top-of-the-funnel activity is massive and the conversion **rate** is low, but the number of customers coming out the other end is high, that might be just fine. Or it might not since fully-loaded Customer Acquisition Cost (CAC) goes up when conversion rates go down, [CAC efficiency goes down](https://sixteenventures.com/saas-cac-efficiency), and you’ll likely burn through large swaths of your [Total Addressable Market (TAM)](https://sixteenventures.com/churn-hurts) in a way that affects future growth potential. It depends on your market and your position therein. Look, when it comes to Free Trial conversion rates, don’t be average… you’re better than that. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Acceptable Churn Rate for Small Accounts *November 17, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/acceptable-churn-small-accounts/ What drives a company to focus on [Customer Success](https://sixteenventures.com/customer-success-definition) 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… *“Lincoln, we had a potential investor look at our business and they were dismayed by our user churn.* *This was surprising to us, as our large accounts churn at 6% annually, which we thought was quite good, our 2-3 user accounts at 11% annually, which according to your article on acceptable churn rates is starting to get a bit high.* *But our individual accounts, however, churn at about 30% annually.* *We were under the impression that individual accounts normally churned in this range. Do you have any insight there?”* Now I don’t want to say who asked this, but I will say they have a B2B SaaS product designed for very specific types of customers (think professional services orgs, consultants, etc.), not a low-end, horizontal B2C product. So here’s the slightly edited response I sent her: As I said in my “[what’s an acceptable churn rate?](https://sixteenventures.com/saas-churn-rate)” post, you want as little churn as possible. Annual customer churn of less than 5% and annual net revenue retention of > 120% is what the best companies have. So your high-end accounts are probably fine, your mid-range accounts are a bit high, and the 30%… well, let’s explore that. 30% annual churn is likely off-putting to any investor at first (and perhaps every) glance, so you need to either get it lower or be able to explain it away… probably both. If those customers that are buying individual accounts are a very low-end, low-revenue, transient type of customer, perhaps that level of churn is acceptable… but for the industry you serve, and your product category, that level of churn seems (appears to me to be) excessive. For that level of churn to be acceptable, it should be mostly unavoidable churn where, no matter what you do, how well you onboard, support, or otherwise enable your customers to be successful – and assuming [you’re acquiring customers that have success potential](https://sixteenventures.com/customer-acquisition-mistake) in a way that isn’t overselling or mismanaging expectations – 30% are going to churn out. Unavoidable is just that. The problem is that the level of truly [unavoidable churn is almost always overestimated](https://sixteenventures.com/unavoidable-churn). And if that level of churn is unavoidable, these customers better be super-cheap to acquire (CAC payback happens quick), cheap to onboard and support during their short lifetime (so at least they’re profitable), and there better be a huge total addressable market (TAM) because that 30% of customers that churn out are most likely [no longer a part of your TAM](https://sixteenventures.com/churn-hurts). Some truly transient markets like cell phone service and other utilities have customers that churn out and then come back (hence “transient”); but in B2B, that doesn’t happen outside of very horizontal products like marketing and project management. That all said, if you can show that even with 30% customer churn you have low revenue churn (by [expanding the revenue from existing “individual” accounts over time](https://sixteenventures.com/logical-expansion)), then that might put investors at ease a bit. If you can do that while also lowering unavoidable churn (or show a plan to do that), then that number isn’t so bad. You have to look at it from the investor’s perspective; worst case, they put money in and the market tanks and acquiring new customers is impossible. With 30% churn, that entire customer segment will be gone in 3 years. But if you are keeping and expanding customers, even if new customer acquisition drops to zero, the company not only continues, it actually grows. Said another way, you need to acquire enough customers to fill that 30% hole every year just to stay at the same level of revenue, so out of the gate, they know some chunk of their money is just going to maintain the status quo rather than truly grow the company. Investors don’t invest to just keep things the same. Or it could be that they just didn’t want to say they weren’t interested so they used churn as a way to let you down easy. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Success is Uncomfortable *November 16, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/success-is-uncomfortable/ I’ve talked before about [holding customers accountable](https://sixteenventures.com/customer-accountability) and how customer success [isn’t about making customers happy](http://www.gainsight.com/customer-success-best-practices/customer-success-not-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. I experienced this firsthand when I was in Brazil and did a private customer success workshop for [Resultados Digitais](http://resultadosdigitais.com.br/) (RD) in Florianopolis a couple days after their amazing RD Summit 2015 (see [my slides & pictures from the event](https://sixteenventures.com/rdsummit)). At a hotel conference room, 40 of their Customer Success people gathered for a full day of Customer Success learning… the planning of which started back in May when Guilherme Lopes, RD co-founder and head of Customer Success, attended the full day CSU Live! that I conducted for Gainsight the day before Pulse 2015. Guilherme stopped me at the CSU afterparty and asked me to speak at RDSummit, and somewhere in the 6 months between Pulse and RDSummit, he asked that I do a CSU Live! just for RD Customer Success folks. But after talking to different people on the RD team – and knowing that RD is one of the most progressive Customer Success-oriented companies not just in Brazil, but on the planet – I knew CSU Live! wasn’t what they needed; they were beyond that. So I decided to introduce some seriously advanced Customer Success concepts and to use our time together to move them forward in a big way. I knew it was risky, but it was absolutely what they needed based on where they were and their [Desired Outcome](https://sixteenventures.com/desired-outcome); I knew both what they wanted to accomplish and understood how they needed to get there. I knew we could make some massive breakthroughs in our day together, but I knew that to do that, it would be uncomfortable because real, sustainable, long-term success is always uncomfortable; if it’s not, then you haven’t moved forward as far as you think. So a day that started with handshakes and pleasantries quickly moved into confusion and frustration as I presented and challenged the group to identify [Success Milestones](https://sixteenventures.com/success-milestones) and [Success Gaps](https://sixteenventures.com/success-gap), and visualize the entire process using the [RACI model](https://sixteenventures.com/customer-success-terms-to-avoid) on a per-Customer Segment-basis. But I knew that this was going to be challenging and had empathy for what they were going through. I let them know it was absolutely okay that this was frustrating since it was a totally new way of looking at the process of taking our customers from where they are to where they need to be. I didn’t stop though and I didn’t let them quit; I knew they needed to do this if they wanted to take their already advanced Customer Success practice to the next level. It worked and the breakthroughs were palpable, the energy at the end of a long day was higher than ever, and what started with handshakes, devolved at times into frustrating headshakes, ended in hugs and a celebration, and a follow-up email from Guilherme that I’ll never forget: “I didn’t have the time to thank you properly. The workshop was awesome. You didn’t just get ’em thinking about important aspects of their work at RD, you’ve filled up 40 young guys with energy to improve themselves and pursue the customer success career. The picture attached proves my point :-)” Success is often quite uncomfortable, but when you get there, it’s totally worth it. Do the same for your customers, and they’ll love you for it. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Risk (and Opportunity) in Stealing Customers *November 13, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/stealing-customers/ Picture it, São Paulo, Brazil, October 2015. After one of the [sales and customer success workshops](https://sixteenventures.com/shbrazil) I did, a few of us went out for a snack – fried polenta sticks – and to talk shop… and the idea of [Success Gaps](https://sixteenventures.com/success-gap) 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? The consensus was that it should start as the latter, but done correctly could turn into the former. If a prospect didn’t achieve their Desired Outcome with the last product, and, therefore, blamed the product (and the company behind it), it’s fairly likely that they’ll blame you when they don’t achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome) while using your product. If the competitor did nothing to set them up for success – to bridge the success gaps – and you don’t do anything either (or will [even acquire them knowing they don’t have success potential ](https://sixteenventures.com/customer-acquisition-mistake)with your product), then you’ll have the same fate as the competitor who’s losing that customer. Only they might not even stay as long with you as they did with the other guys; they’re coming to you with one foot out the door already. As soon as they feel like they’re experiencing the same thing as before, they’ll leave you and go onto the next competitor… and keep doing that – faster and faster each time – until they find a company that – through a better product, training, outside experts, webinars, courses, consultants, office hours, communities, videos, ebooks, etc. – helps them both bridge the Success Gaps that exist and [holds them accountable](https://sixteenventures.com/customer-accountability) for the things they need to do to be successful. You need to understand this context, ask questions about their goals and experiences to date, manage expectations with them pre-sales and immediately after they buy, show them the path of [Success Milestones](https://sixteenventures.com/success-milestones) to achieving their Desired Outcome (again, even pre-sales), what part the product will play, what part they’ll play, and what part partners or others from your company (prof services, implementation, etc.) will play in helping them achieve their Desired Outcome. You need to recognize that when a customer is switching because the competitor’s product didn’t help them do what they needed to do, it’s both a great opportunity and a potential problem. If you handle it right and do what’s necessary to get them on track to achieving their Desired Outcome, or at least get them to realize they have to do certain things (or pay you to do those things for them) to reach their goals, you’ll be setting them up for success and a long lifetime as a customer. The good news is, even if they don’t do what’s necessary to achieve their Desired Outcome – since you managed expectations from the beginning – if they don’t achieve success will be less likely to blame you since they knew hat they needed to do. And, of course, if you do everything wrong and just think it’s a great opportunity while ignoring the red flags, they might not even stay long enough to pay back what it cost to acquire them and – for good measure – tell everyone how much you suck on the way out. Be careful out there. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # A Foolproof Way to Get Testimonials Without Asking for Them *October 20, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/get-testimonials/ 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](https://calendly.com/lincolnmurphy/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](https://sixteenventures.com/customer-success-definition) 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](https://sixteenventures.com/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). ## Look Both Ways Before you Go I said the following on Twitter recently (and it applies to this technique, too.): > sometimes a technique that works in a particular situation is taken and used in a different situation without understanding why it worked - Lincoln Murphy (@lincolnmurphy) [October 8, 2015](https://twitter.com/lincolnmurphy/status/652004701781684224?ref_src=twsrc%5Etfw) I got some pushback from people who said you should just try stuff without thinking too much about it. Look, I’m all for taking imperfect action, but it’s probably good to have **some** idea why what you’re about to try might work. I passed the driving portion of my drivers license test when I was 16 for one reason;  when the light turned green I took < 1 second to look both ways before I took off and avoided getting the DMV guy and me killed by a car that ran the red light. I passed the driving test right then and after we got back to the DMV, the guy testing me (I assume), went directly home to have a scotch and figure out a different career path. But that simple lesson – pause and look both ways before you start – is a good one that’s saved me, both literally while driving and figuratively in other areas, many times. Have some clue about why you’re doing what you’re doing… and then do it. You don’t have to be an expert, but don’t be clueless. So the first thing is to understand…. ## The Unexpected Power of Customer Advocacy You want Testimonials and Referrals because you know Social Proof is powerful. But do you really understand how powerful it is? How about the fact that customers that come in through the advocacy of other customers – according to research firm McKinsey – actually stay longer and pay you more over time? Or what about the fact that – according to research conducted by advocate marketing software company Influitive – customers who advocate for you, actually stay longer and pay you more? That all seems like a win-win-win to me. But there really is such a thing as… ## Testimonial Anxiety Testimonial Anxiety exists on both sides; the requestor and the requestee. As hard as it might be for you to ask for the testimonial, it’s like 10x harder for the other person to fulfill the request. I worked with a company recently that sells a marketing app to hair stylists, tattoo artists, and professionals like that; I was helping them with their [customer onboarding process](https://sixteenventures.com/customer-onboarding). Their customers are people that take pictures of their work and post to Facebook, Pinterest, and Instagram all the time as part of their “marketing” so they’re definitely the [Ideal Customer](https://sixteenventures.com/ideal-customer-profile) for this product. Well, the product my client provides essentially repurposes the pics they take, adds a Call to Action (CTA) to book an appointment, turning what is a static pic of their work into an action-oriented marketing tool. Sweet! Totally sweet. But the one thing they had to overcome – which was completely unexpected until they went out and spent time with customers – was as soon as the picture their customer is supposed to take is going to be used as part of an ad, their customers felt immense pressure. Now they have to get it right. Before it was just casual; for fun. Now they couldn’t figure out what to take a picture of. They froze. They had anxiety. They stopped using the app. And they quickly went back to posting pics directly to their social profiles. The irony (tragedy?) is that this is the exact same thing they needed to do with the app, but the anxiety was too much. My client’s customers were facing… ## Contextual Overhead Sometimes there’s additional overhead just in the context. I take a pic of my work and post it. Easy. Done. I take a pic of my work and have to make it an ad that may – or may not – bring clients my way, clients upon which my livelihood – and whether my children get fed – lies… whoa. Stop. Too much pressure. I’m done. Ain’t nobody got time for that. The same thing happens when we ask someone for a testimonial. Umm… how do you write a testimonial? Do it in third-person or first-person? Or second-person? Am I allowed to write a testimonial? Do I need approval from legal? What should I say? Should I be a raving fan or throw in some real talk so it doesn’t seem fake? I’ll just mark the request as unread and do it later (but later never comes). I know people that have looked up other testimonials or googled “how do you write a testimonial” in response to a simple testimonial request. I know others that have engaged in back and forth conversation for weeks only to disappear off the face of the Earth once the testimonial ask is made. Poof! Gone. They made like a tree and disappeared. Writing a testimonial is hard. I think. I don’t know, it seems like it should be hard. So they don’t. It’s mental overhead. Which means it violates the rule where you avoid making extra work for your customers trying to help you. People want to help, they say they will, they have good intentions, but then they either get overwhelmed by the request itself or life gets in the way… or probably both. Let’s make it easy for them by making… ## The Right Ask at the Right Time I get pushback all the time on, well, pretty much everything I say (at least at first), but especially when I mention sending the right message at the right time. For all the people that hate spam, everyone seems fine with “blasting” messages en masse at unsuspecting users and customers all willy nilly while not understanding the consequences. Those consequences range from annoying your customers to appearing incompetent to having your users and customers opt-out of future messages from you or simply ignoring those future messages. We’ll hit some of the people at the right time so it’s okay… everyone else will just ignore the message. Yes, the latter is true, but the problem is it won’t stop with this misguided message. They’ll ignore everything else you send. And you’re basically saying you’re okay with that happening to all the people for whom **RIGHT NOW** is **NOT** the right time to hit them with a message. That seems like a bad idea, right? Yes. So when I talk about making upsell offers at the right time, I get pushback; why not ask everyone all the time? I recently needed to get my carpet cleaned so I googled and started reading reviews of local companies providing this service… and pretty much all of the ones that had 2 stars said something like *“the service was fine, but the constant upsells from the moment they got there to the time they left were simply too much. **I’ll NEVER** do business with this company again.”* They’ll never do business with them again, but the service was fine. Wild. Funny how the wrong message at the wrong time (and most likely the wrong tone/delivery) can completely ruin an otherwise fine customer experience. The same rules apply when trying to get a testimonial… since the cost of sending another email to your customer is basically zero, it may seem like there’s no cost associated with doing that (beyond labor/time), but that’s not true. That cost is the negative sentiment, customer’s opting-out, the decision to ignore future messages, etc. Those are more difficult to quantify than the labor and time costs associated with creating and sending an email, or the per-message costs from your email infrastructure provider, but rest assured.. those costs are significant. Which is why you should [move away from date-driven and onto data-driven](https://sixteenventures.com/email-follow-up-sequence) (or behavior-triggered) communication. And the best way to do that is to first… ## Identify Key Success Milestones If you’re not familiar with the concept, I go into great detail in this post on [Success Milestones](https://sixteenventures.com/success-milestones). You need to figure out what Success Milestones along their path to achieving their Desired Outcome have a logical advocacy ask associated with them. Is there a Success Milestone – when they close their first customer, complete their first project, fun their 10th campaign, etc. – where you know that they achieved their Desired Outcome and are happy with your product. Let me be totally clear… while solving for the[ customer’s happiness isn’t really our goal](http://www.gainsight.com/customer-success-best-practices/customer-success-not-happy/), the reality is when your customer achieves a success milestone, the humans that work there are likely to have happy feelings toward you. We solve for success and happiness comes along. If you have access to other contextual inputs into your customer’s [Success Vector](https://sixteenventures.com/success-vector) – their latest NPS survey, their attitude the last time someone from your company interacted with them, etc. – then by all means leverage that intel and don’t ask a customer about their experience if they’re not “happy” or “healthy.” There are [lots of reasons not to do that](https://sixteenventures.com/psychology-of-surveys), but one of the best is… you already know about their experience! Engage them in a different way, but trying to get a testimonial is probably the wrong thing right now. And if you’re wondering if what I’ve said so far – and what I will say below – is applicable outside of email, the answer is yes. Whether you call them at the right time, pop up a [Bravo](http://getbravo.com) widget to get a video testimonial, or otherwise make an advocacy ask, this Testimonial Framework will make things much more effective. Okay, so at the right time – right after they achieved a success milestone – send an email to the key contact(s) at the company (your internal champion, the account owner, their power users, your certified users, etc.) and ask them… ## The Secret Question Well, it’s not so much a secret question as a framework that’s hidden in plain sight. Ultimately, the real secret is that you’re not asking for a testimonial, but getting one anyway. And it’s very simple. Don’t ask them for a testimonial – for all the reasons we’ve talked about so far – instead, ask an open-ended question or start a conversation about their experience. The last part is critical. Don’t ask about your product or what you could do better. Don’t ask how you can improve to help others later. Just ask them about their experience with your product/company in a way that compels them to respond (open-ended questions do this very well). Remember, they just achieved a Success Milestone and are happy with you, so asking this question right then should yield a more positive response than asking at other times. *“Hey Mary, looks like things are going great… what’s your experience with [our product] been like so far?”* *“Hey Joe, looks like things are going well… I’d love to know more about your experience with [our product] so far.”* Whatever you do, don’t give them an opportunity to say just “yes” or “no.” BTW, this is a great place to use the [“Customer Success bot” method](https://sixteenventures.com/personal-emails) and just forward a “milestone” email to them along with your open-loop email. ## The First Follow-up is Critical *“Interesting… tell me more.”* In whatever way works in the context of the conversation you’re having, ask them to tell you more. You might jump on a call. If you do, record the call or – depending on the rules in your jurisdiction – at least record your side of the call (so make sure you repeat back to them what they just told you) and get the recording transcribed. At the end of the email thread or the conversation, you’ll have a bunch of great stuff about your customer’s experience. Edit that down into a… wait for it… testimonial! Okay, now… ## The Final Follow-up is Critical, too *“You know… what you just said would make an awesome testimonial. I edited it a bit for brevity, but I’d like to post this on our website with your name, title, and company if that’s cool.”* Boom! Easy. (but use your own words) Now, there are a few possible outcomes from that final follow-up… ### Yes - *“Sure!”* Well, okay… now boom! You’ve got a testimonial. BTW, this is where Cialdin’s Consistency & Commitment Principle of Persuasion comes into play. They already said what they said… taking an action that’s in-line with what they said makes total sense. ### No - *“I can’t do that”* Hmm, okay. But get a reason. - *“It would need to go through [some approval process they clearly don’t want to go through]”* Okay, can you at least use it internally to prospect into other areas of the company? Can you share it with prospects via email and/or if they’d be willing to talk to prospects? If they say yes, be sure to share the quote with the internal prospect or when you’re going to set up the meeting for them to give you a reference… invoke consistency and commitment so they stick to the narrative they already committed to! - They don’t need approval but won’t let you post it, so what gives? The fact that they won’t let you publish it – even though they have the ability to do so – may be indicative of something they’re not telling you and here’s your chance to get to the bottom of it Customer Success-style. You could skip to just asking an open-ended question, but if you don’t know why this stuff works, you won’t know what to tweak and what to leave alone in your quest to make it work. Hopefully, you’ll look both ways and then go… and if you do, I bet this technique works wonders for you. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Success Milestones: The Path to the Customer’s Desired Outcome *October 19, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/success-milestones/ I talk about Success Milestones all the time, not just in the context of [Customer Success](https://sixteenventures.com/customer-success-definition), 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. ## Everyone Gets Success Milestones Wrong When I ask the companies I work with to come up with a list of success milestones for their customers, I usually get something like this: Trial ==> Sale ==> Onboarding ==> Use ==> Upsell ==> Renewal Those are phases of the customer lifecycle and – if they should even be considered milestones – they’re **YOUR** milestones as the vendor… they’re based around your success. I tweeted this recently: > When I say "Desired Outcome" I'm 100% of the time talking about your customer's desired outcome… not yours. Yours is easy to figure out. - Lincoln Murphy (@lincolnmurphy) [October 7, 2015](https://twitter.com/lincolnmurphy/status/651581818253082624?ref_src=twsrc%5Etfw) So just to be clear… I’m talking about the Success Milestones of the customer, in the context of your product and their interactions with you. So how does this differ from “customer journey maps” and the like? Let’s explore… ## A Paper Map vs. Waze Almost every customer journey map I see is vendor-focused and static. The “customer experience” is almost always based around the product as the center of the universe, making it less a “customer” experience and more a “product” experience that the customer has. The problem with that is – from the customer’s perspective – it’s always a “Customer Experience” … and when you opt to not focus on the customer and their Desired Outcome, you’ll instantly be misaligned with them, meaning whatever experience you orchestrate will be incongruent with the Appropriate Experience they’re looking for. If that ends up working well for you, just know it’s in spite of your efforts rather than because of your efforts; only the latter efficiently scales. Most customer journey maps or overall “Customer Experience” is based on an internally-focused goal; often but around our functionality, feature set, and ultimately our goals… rather than the goals of your customer. You should have a clear starting point and a clear destination for your customer. Any map or navigation system requires at least those two inputs to be useful. And when you sense the customer is veering off course, you recalculate and navigate them back on course. Unless they update the destination – which can happen along the way – you need to keep guiding them back toward their Desired Outcome. And if they do change the destination mid-trip, that’s fine… help them arrive at the new destination. I’m not sure how organizations that claim to be focused on Customer Success or “Customer-centric” can do that without baselining customers when they sign-up and clearly understanding the customers’ evolving Desired Outcome across their lifecycle as a customer, but that’s a discussion for another day. No matter the metaphor, ultimately,… ## Desired Outcome is the Goal [](https://sixteenventures.com/desired-outcome)Success Milestones are the steps required for a customer to achieve their ever-evolving [Desired Outcome](https://sixteenventures.com/desired-outcome). Remember, Desired Outcome has two parts: Required Outcome and Appropriate Experience. Required Outcome is the customer’s goal, the thing your customer is trying to accomplish; it’s what gets you in the game. If you can’t help them achieve this, that’s a total non-starter. Appropriate Experience (or what I refer to as AX) is how your customers want or need to achieve that Required Outcome. This is why they bought your product and didn’t just use Excel or roll their own. It’s why they chose you over a commercial competitor. it’s why they chose you over a different-but-functionally-equivalent product. It’s called “appropriate” instead of “great” or some other adjective because, well, we’re talking about an experience that is appropriate for the customer. If the customer needs a “great” or “polished” or “high-end” or “bare-bones” experience, then that is what’s appropriate for them. [Know your customer](https://sixteenventures.com/ideal-customer-profile). So once you know what their Desired Outcome is (point B) – and you know where they are today (point A)- you can more easily come up with the steps to get them from Point A to Point B. But this requires getting clear on two very important things: the difference between functional and success milestones. ## Defined: Success Milestones Success Milestones are an action or event marking a significant change or stage in the customer’s journey toward their ever-evolving Desired Outcome. Between Milestones there are steps. Success Milestones can be product- or customer-centric, and it’s critical to know the difference and where they both fit in. ### Functional Milestones The easiest way to think about functional milestones is to label this “product-centric” or milestones that are reached / occur inside the product. Almost every technology company focuses here. Period. Unless you’re pegging the functional milestones to the success-oriented use of your product, it’s easy to mistake “functional use” for meaningful activity. Focusing solely on Functional Milestones also exposes the customer to [Success Gaps](https://sixteenventures.com/success-gap) which are caused by the Desired Outcome of the customer being outside the scope of complete functional use of the product. So, in addition to Functional Milestones, you need to also pay close attention to… ### Customer Milestones Think of Success Milestones as “customer-centric” or milestones reached by the customer that may or may not take place within your product, but have a direct impact on their relationship with you. Customer Success Milestones will include functional milestones within the product, of course, but they won’t just be [activity for activity’s sake](https://sixteenventures.com/active-users-vanity-metric). They will be the result of meaningful activity and will be tied to other inputs to ensure we know that the customer is actually achieving their desired outcome. It is critical that you understand what has to happen for the customer to be successful – for them to achieve their Desired Outcome – both within your product and outside of it and then operationalize around that. Orchestrate as much of the process as you can and hold your [customers accountable](https://sixteenventures.com/customer-accountability) for the parts that are within the scope of their responsibility. I covered some examples of [early-stage Success Milestones](https://sixteenventures.com/customer-onboarding) before, but here’s an example we’ll pick up after onboarding is complete when the customer is an engaged user. **Email-based CRM***Desired Outcome is to close customers without having to talk to them on the phone* This is just an example I made up, but hopefully it gives you some ideas on how to go through the process for your customers. The key takeaway is that if the customer continues to achieve those 10 milestones (probably more rapidly repeating steps 5-7, with 8-10 repeating less often but hopefully fairly often), they’ll continue to be a customer. ## 3 Reasons Customer Success Milestones are Valuable If it’s not entirely clear why you should go to the trouble of mapping out the Success Milestones for your customers, let me give you three very quantifiable reasons to do so: ### 1. Conversion Rate Optimization There will be a point in the Free Trial when becoming a paying customer is the most logical next step. That’s a big success milestone itself, sure, but there were probably some things they needed to do before then to get to that point. Those are also success milestones, too, and at certain points in the customer lifecycle you’ll need to get fairly granular. ### 2. Expansion Opportunities This is my all-time favorite use of Success Milestones and is really the key to the efficient scaling of your existing customer base by [orchestrating Upsell and Cross-Sell activity](https://sixteenventures.com/logical-expansion). Some Success Milestones (not all of them; don’t force it) have a logical expansion opportunity associated with them. It’s at that point that an add-on makes the most sense, buying additional seats because it’s time to invite Project Managers into the mix, or spinning up a relationship with an adjacent department or division is the logical next step. The sales mantra of “right message, right time” is powered by Success Milestones. ### 3. Customer Advocacy I spoke too soon earlier… this is my favorite use of Success Milestones. Fine… I love them all! Look, when asking your customer to be an advocate for you – either internally and externally – doing so after they’ve achieved a Success Milestone is the perfect time to ask. There are definitely going to be other data-driven times to reach out with an advocacy ask, [after a strong NPS survey response](https://sixteenventures.com/psychology-of-surveys), for instance, but there are going to be milestone-based times to make that ask, too. Know what those are and operationalize that process. In fact, start early with small asks and increase the level of ask over time, again, pegged to their success. Your list of Success Milestones will vary… but if you apply this type of thinking to your business, your success won’t. Or it might. No guarantees. But thinking this way probably won’t hurt. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Accountability: The Missing Piece in your Customer Success Strategy *October 9, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-accountability/ This is the origin story of [Joint Accountability](https://sixteenventures.com/customer-success-definition#jointaccountability), an incredibly powerful concept in Customer Success that you need to be using. A little while ago I introduced the concept of the [Success Gap](https://sixteenventures.com/customer-success-definition#successgap) and how customers can use your product to the fullest and still not achieve their [Desired Outcome](https://sixteenventures.com/customer-success-definition#desiredoutcome). 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 bridge those gaps 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 ultimately accountable for achieving their goals. In fact, one of the things we have to do as part of an operationalized [Customer Success](https://sixteenventures.com/customer-success-definition) 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. ## Customers Blame you… Even if that’s Not Fair While I’ve applied this thinking to SaaS companies I’ve worked with – as well as non-SaaS technology and professional services firms – I actually learned this lesson several years ago when my mom called me… she was crying. My mom is a personal trainer and one of her clients had just come into the gym and yelled at her in front of her other clients and the members of the gym. This client was extremely upset because she hadn’t lost the weight she wanted to and wasn’t going to be able to fit into her dress for her daughter’s wedding. The client said some choice words, said she was going to tell everybody about how awful of a trainer my mom was and how she just takes people’s money and doesn’t produce results, and then stormed out and slammed the door for good measure. The worst part for me is that my mom really cares about her clients – like actually cares – so this was particularly devastating to her on a personal level. So she called me and wanted to talk about how she can be sure this type of thing never happens again. And let me be clear… she wasn’t even saying “hey, how can I stop churn? How can I keep my customer so that I can continue to have the revenue?” or anything like that. No, she was 100% focused on just making sure that something that negative doesn’t ever happen again. Of course later on – after we got past the emotional response to such an outburst – the realities of lost revenue and potential negative sentiment being spread in the market sunk in; but at first it was really just about “how can I make sure that the client doesn’t have such a negative feeling if they don’t reach their goal. Or, as she said “how can I keep them from blaming me when it was their own fault!” Wait… what? Let’s explore that. ## The Other 165 Hours I thought about it for second and I asked her how many hours a week she spent with that client. My mom said that client came into the gym three times per week. Every session was 1-hour. So I did some quick time math; seven days a week multiplied by 24 hours a day equals 168 hours in a week. And this client spent a grand total of 3 hours in the gym with my mom. That means the client is ON HER OWN, with all the temptations in the world – the food, the booze, cigarettes, and the sedentary lifestyle – the other 165 hours per week! She is literally on her own 55x longer than she is with my mom each week. Which means, if she works out perfectly for each of the three 1-hour sessions, follows every direction in the gym, does every exercise perfectly, keeps her heart rate at the appropriate level the entire time, and burns the right amount of calories during the session, that she can still be completely offset by what happens during the massive amount of time that she’s on her own. This is so obvious, right? But it wasn’t to my mom who spends 60+ hours a week in the gym and had to be reminded that people still eat at McDonald’s (this is true. I had to remind her of this). Sometimes when you’re so deeply involved in something you forget other (normal) people aren’t. This all represents both a  huge Success Gap, but a massive Accountability Gap, as well. ## Customer Accountability Gap Like I said in my introduction to the Success Gap, when your customers functionally use your product completely and still don’t achieve their Desired Outcome, they will blame you. And my mom saw that firsthand with her business; to some extent, this exists in every business that has customers. But how could we fix this for my mom’s personal training business? Interestingly, it was a very simple fix: a lifestyle diary. When clients sign-up and go through [onboarding](https://sixteenventures.com/customer-onboarding) for Personal Training – they are given a journal and are instructed to document everything they eat, how much water they drink, anything else they drink including alcohol, how many cigarettes or other things they smoke, how much time they spent sitting watching TV or doing other sedentary things, and how much other activity they engage in outside of the gym. They’re instructed to keep track of all of that. The clients are told to bring that in for their first session of the week and my mom or their trainer will go over it make sure they’re on the right track, address any issues they ran into, and make sure the client is confident going into the new week. The clients are told “you’re with us 3 hours per week and on your own the other 165 hours; in order to achieve the goals you’ve set, you have to follow the eating and activity plan you’ve agreed to. If you don’t, it is very likely you won’t reach your goals. Is that fair?” Boom! Burden successfully placed back on the client. She tells them she’s there to support them and to call if they are tempted by something, she’ll give them recipes and resources, and generally point them in the right direction… but ultimately it’s up to them. And they agree to that. There are joint accountabilities in every business relationship and it’s critical that those are clearly defined and assigned. If they are not, you can’t be surprised when one doesn’t hold up their end… they either didn’t know it was on them or did, but no one was holding them accountable. And they’ll blame you! ## Your Customer’s Success is Your Business Your clients and customers chose to do business with you because they have a Desired Outcome and for some reason believe you can help them achieve that. If you can’t actually help them achieve that, then you shouldn’t do business with them. But if you can, it is up to you to do whatever it takes to make them successful; but that doesn’t mean taking it all on yourself. Part of doing “whatever it takes” is pushing back on the customer to hold up their end… to keep them accountable for what they need to do. Maybe they can buy their way to a higher-level of support where you do that for them – maybe my mom could create a personal chef service to shop and cook the meals for her clients; you could offer professional services, concierge onboarding, done-for-you or managed services, etc. – but if customers opt to not have you do everything for them, then they need to know that in order to achieve their Desired Outcome, the things they’re agreeing to do has to actually be done. In my mom’s business, those clients that fill out their diaries tend to get the results they’re looking for, while those that don’t fill it out tend not to. But even those that don’t do what they need to do understand that it’s not my mom’s fault and they take ownership and accountability that they’re not achieving their goals. And the food and activity journal is a legitimate way to work them towards their Desired Outcome by knowing that they’re not doing the things outside of their time in the gym that they need to be doing. ## Customer Accountability is Powerful Since implementing this accountability practice in her business, no one has accused my mom of not delivering value and stormed off on the way that other lady did. Unavoidable churn like financial issues still exist so churn isn’t zero, but [avoidable churn](https://sixteenventures.com/churn-classification) has gone down significantly and negative sentiment has gone down completely. Customer Success is not about doing everything and anything to help your customer be successful; it’s about ensuring your customers know where they fit in and holding them accountable. You have to recognize the Success Gap you have and do what you can to bridge it, but know that there are things you can’t do because they’re totally in the control of your customer; when that’s the case you have to hold your customer accountable. By the way, your customers really appreciate that because they know what it takes, they know what the reality is, and this process puts it all out on the table and helps them help you help them. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # This Customer Acquisition Mistake Can Kill your Growth *October 2, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-acquisition-mistake/ *[Também disponível em Português](http://resultadosdigitais.com.br/blog/o-erro-de-aquisicao-de-clientes-que-pode-arruinar-o-crescimento-da-sua-empresa/) por [Mathias Luz](https://twitter.com/mathiluz)* 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](https://calendly.com/lincolnmurphy/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… ## Your Growth is tied to Their Success Potential If you care about the customer actually being successful with your product or at least the things that go along with that success like: - Keeping them as a customer - Getting them to stay longer - Having them pay you more over time - Activating them as an advocate for you …then don’t actively try to acquire customers that don’t have Success Potential. Put a different way, customers that aren’t achieving their [Desired Outcome](https://sixteenventures.com/desired-outcome) through their interactions with your company tend to not stay around a long time, pay you more over time by buying add-ons or increasing consumption, and they certainly don’t advocate for you. One of the most critical inputs into your [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) is the Success Potential of the customer. So if you just want to acquire new customers and don’t care if they’ll be successful – I’m not sure why you’d ever want to do that – then you can ignore this everything I say here. But that seems like a bad idea… knowingly and actively seeking to acquire wrong-fit customers is just a way to burn through your total addressable market and create a bunch of negative sentiment while you’re at it. Makes zero sense. Which means you need to…. ## Be Realistic about Your Capabilities You have to be realistic about your capabilities today both as a company and within your product. You also have to know what those capabilities will (or should) be in the future. Only then can you know who is and is not a good fit today and who will be a good fit in the future from a Success Potential standpoint. Customers that require a certain level of high-touch support will not be successful if you don’t have the resources to provide support congruent with their requirements. Other things that might keep a customer from being a good fit right now are sales cycle length, their procurement processes, stringent data storage/privacy requirements, SLAs, in-depth consulting, etc. At the product level, customers that require – require being the keyword here – features, functions, integrations, etc. that you don’t have simply can’t be successful with your product as it is right now. That doesn’t mean that in the future – perhaps the near future – things won’t change and they’ll be able to achieve their Desired Outcome with your product; but not right now. I often get pushback on this from CEOs who ask “if we want to really grow, shouldn’t we stretch beyond what we can support today?” The answer is it depends on 1) whether the REQUIRED features/functions/etc. are there to ensure the customer can at least achieve their Required Outcome and 2) whether or not you’re at a place as a company where you can support customers for whom your product is not “there yet.” Which brings us to… ## The Evolution of Appropriate Experience It’s critical to understand that features and functions aren’t the only consideration when deciding if a customer is good fit today. You may have the features and functions that allow their Required Outcome to be met (but so do a lot of things, from Excel to a commercial competitor), but do you offer the Appropriate Experience for that customer today? If you’re selling to innovators (in Crossing the Chasm parlance), maybe having just an API will help the customer meet both the Required Outcome and do so with an Appropriate Experience; but as you move from innovators to early adopters to early majority, the Appropriate Experience for those new customer types will evolve. You’ll maybe have to have a dashboard to manage API consumption, tools for testing, and SDKs for easy integration by developers as you move from innovators to early adopters. And when you move beyond early adopters, you may have to build a rich UI and eventually a slick, refined UX. You’ll have to have highly visible and complete help systems, training programs, etc. You have to know where you and your customers are on that continuum and be realistic. ## Situational Awareness is Critical One of the things people miss when implementing the Ideal Customer Framework – even though I try to be very clear about this in the instructions (I may need to refactor) – is that it’s situational. Before you start coming up with your Ideal Customer Profile, you have to define your situation: set a timeframe, set a goal, and be realistic about what you can and can’t support in that timeframe. So I asked the CEO of that company I was talking to how long it’ll be until this critical-but-missing feature is ready for commercial use…. he said 3 months. Okay, so I said that in 3 months their Ideal Customer could be agencies, awesome. But not right now. Then I asked if for the next 90-days there was another customer type that is a better Ideal Customer for what they have available today and he said independent and in-house designers; but that while not critical, the reporting piece would be great for independent designers. Next I asked if in-house designers are the ones that have the most Success Potential right now with their product the way it is and he said yes. Okay, cool, but then I wanted to know if the in-house designers know they have the problem his product solves, that they’re ready to take action, they have the financial resources to take action, are they easy to find and get in front of (marketing/sales channel), and can the sales cycle be completed within the next 90 days. He said yes to all of that – though obviously this was high-level; more in-depth work through the [Ideal Customer Profile Framework](https://sixteenventures.com/ideal-customer-profile) is needed – but we were on the right track. So we said that for the next 90 days they would set a goal (number of customers, amount of revenue, etc.) and focus their resources on acquiring in-house designers as their Ideal Customers, giving the product team time to create the agency-level functionality required. ## Success Drives Advocacy Only customers that are successful with your product – and through their interactions with your company – will become advocates for you; at least in a repeatable, scalable way. Customers that are not achieving their Desired Outcome may talk about you, but not in a good way; so we want customers that are successful as they’re more likely to become advocates for you and help spread the word. There aren’t any guarantees that a successful customer will become an advocate for you – some can’t be advocates for you, at least publicly – so if you’re looking to increase the number of advocates as your Ideal Customer situational goal, don’t try to acquire, say, government contractors who might not even be able to admit they exist, let alone than they’re doing business with you! But for the SaaS CEO I was talking to, there is big Advocacy Potential (another input into your Ideal Customer Profile) at play in this scenario; in-house designers often know and work with designers in agencies; so success with in-house designers could be a jumping-off point into agencies. ## Create Demand with your Next Ideal Customer I told this SaaS CEO that once they were 30 days into this Ideal Customer cohort – while they’re still actively going after in-house designers and assuming everything is on track with the agency features in the product – they should start building an audience of agencies (webinars, content, retargeting, etc.) so when the feature is ready to launch, they have an engaged audience to release it to. Remember this: just because they aren’t the Ideal Customer today, doesn’t mean you shouldn’t start preparing for when they are the Ideal Customer in the very near future. But because they aren’t an Ideal Customer yet, don’t actively pursue them as a customer today or you’ll churn ’em and burn ’em and when you are ready for them… they won’t come back. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Stop Using these Anti-Customer Terms *September 28, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-terms-to-avoid/ 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](https://calendly.com/lincolnmurphy/clarity), 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. ## 1. Don’t Deal with Customers This is probably one of the most common phrases that we’re all guilty of using and yet I believe it to be one of the most damaging. When you say you have to “deal” with your customers, you’re putting your customers in the category of being a burden on you and not being an asset. If they truly are a burden, maybe you need to redefine your [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile). “Dealing” with your customers is one of those terms that when we say it, our behavior really does start to follow suit. A good sanity check on this term – and, in fact, all of the terms mention here – is would you say it to your customer? Think about it: “Next in line, I’ll deal with you in a minute.” Yikes! No way you’d ever say that to their face, but when you say it behind the scenes a lot of things come up in your customer interactions; body language, the way you talk to the customer, and the processes you setup, etc. all may totally reflect having to “deal” with them. ## 2. No More Handoffs Handoffs occur in all aspects of business, not just customer success, but over the years I’ve found this term to be damaging from a customer success standpoint and I’ve started removing it from my vocabulary. Just like saying “dealing with the customer,” I’m guilty of talking about “[nailing the handoffs](http://www.gainsight.com/customer-success-best-practices/nail-the-handoffs/)” between sales and [onboarding](https://sixteenventures.com/customer-onboarding), onboarding and your customer success manager, etc. But what I’ve seen is that the simple term “handoff” brings about this notion of taking the customer and throwing them over the wall to someone else to “deal with,” ultimately making them no longer your responsibility. Handoffs reinforce the notion of “us vs. them” internally rather than encouraging cross-functional cooperation; handoffs reinforce silos. And silos aren’t good for anybody. [](http://www.gainsight.com/customer-success-best-practices/how-customer-success-teams-can-drive-cross-functional-coordination/)RACI Framework for Customer Success The best Customer Success-driven organizations don’t actually hand-off a customer from one person or department to another; rather, they have someone run point with the customer; someone who is accountable for the success of the customer (generally a CSM) and orchestrates, facilitates, manages, and monitors the customer’s interactions with other parts of the organization across their entire lifecycle. I haven’t landed on the best term going forward, but “orchestrating touchpoints” has a better, more positive vibe than “nailing handoffs.” And when considering how to operationalize around touch points, the [RACI framework for Customer Success](http://www.gainsight.com/customer-success-best-practices/how-customer-success-teams-can-drive-cross-functional-coordination/) is a great model to use when moving beyond handoff-thinking. ## 3. Ban the Check-in Call My friend and Gainsight Chief Customer Officer Dan Steinman (in)famously said “ban the check-in call” and he was really onto something. Checking-in with a customer to see how they’re doing is the bane of a customer’s existence (“Hi, I’m just calling to see how things are going.”) and is ultimately the opposite of what we’re trying to do with operationalized Customer Success. You should never reach out to a customer to ask how they’re doing or to just check in with them. Rather, based on proactive data, date, or success-driven milestones you should reach out to proactively ensure that they are on the right track to achieve their desired outcome. You do this by gathering the appropriate customer insights and approaching them not to see how they’re doing but to tell them how they’re doing and to ensure their original [Desired Outcome](https://sixteenventures.com/desired-outcome) hasn’t changed. For data-driven reactive events – for example changes to [Success Vector](https://sixteenventures.com/success-vector) (my much-improved customer health score alternative), poor NPS result, or if they’ve hit 90% o their allotted usage – you want to reach out  to fix whatever problems there are or to take advantage of whatever opportunities there to expand their use or to get them back on track to achieving the desired outcome. So this isn’t to say don’t contact your customer (if we’ve worked together you’d know I encourage contacting your customer more than you’re probably comfortable with), in fact, it’s the opposite… communicate frequently, just don’t call or email to check-in. ## 4. Stop the Hand-holding When I talk about operationalizing Customer Success, the idea of “holding the customer’s hand” comes up, as if they are a child and that is such a negative way to look at the customer. Your customers aren’t dumb; they’re busy or distracted and have other things going on. But they bought your product with the assumption that you’d help them achieve their Desired Outcome and it’s up to you to make that happen or they’ll stop being your customer. It’s up to you to proactively ensure the customer is actively engaging your product in a meaningful way; a way that ensures they’re on the way to achieving their Desired Outcome. If that means creating a wizard or developing a multi-step process external to the product to walk them through exactly what they need to do to get value from your product, then so be it. If that means having weekly calls with your customer for the first 12 weeks, going on-site with the customer, doing work for them to enable your product to deliver value (integrations, data seeding, customizations, etc.), then that’s what has to be done. If that’s not economically feasible, and that’s what the customer requires, you’re in trouble and need to rework things (like going through the aforementioned [Ideal Customer Profile framework](https://sixteenventures.com/ideal-customer-profile)). Bottom line, would you say to your customer “let me hold your hand as you work through this process with our product?” Probably not, so don’t say it behind the scenes because it will come out. ## 5. But they don’t get it! This is perhaps one of the most infuriating things someone can say to me: “my customer just doesn’t get it.” It’s not the customer that doesn’t get it… it’s you, my friend. Just like I said before, customers are busy or distracted… not stupid. And defaulting to this idea that your customers are stupid will start to permeate everything you do. The reality is, you know more about your product, how it works, and how it functions than anybody else, which means you can read between the lines and fill in the gaps where there’s functional deficiency. You know what should happen and what to expect so everything is easy for you, but your customers don’t yet and they struggle. But not because they “don’t get it” but because you failed to create an experience that was appropriate for them. So have some empathy for your customers and help them get value from your product as quickly as possible. If you’re smart, you’ll take all of the things that your customer says when they’re frustrated and “don’t get it” and go back to the drawing board to figure how to re-work your overall user experience to ensure the customer can quickly get value from your product. The smartest companies will do that at a level that doesn’t scale efficiently – things like talking to individual customers – to get intel so they can roll that into the products, services, and everything else they do so they can scale efficiently. In fact, you should always have an ongoing customer development process, which one of the secret benefits of having an operationalized customer success organization and human CSMs; your CSM’s should be feeding back into product and every other customer-facing part of the organization. CSMs are a treasure trove of customer intelligence. ## Customer Success starts with the Things We Say! Hopefully, you see that this isn’t just an exercise in semantics. I’m a really big “words matter” guy and I believe the things we say really do drive our actions. Leaders should be extra sensitive to this. If your CEO uses any of these – or other customer-degrading – terms, you should try to get her to not say them. Lead by example. Honestly, I’m trying to lead by example, but it’s not easy. I’m working to remove some of these deeply-ingrained terms from my own vocabulary; it’s a process… one you should start now, because it won’t happen overnight. But it should happen. BTW, what are some other terms you think we should eliminate? Let me know in the comments. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 7 Reasons to Optimize your SaaS Free Trial *August 5, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/optimize-your-free-trial/ 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](https://sixteenventures.com/ideal-customer-profile) and getting them into your trial – because [a Free Trial of a Premium product is not Freemium](https://sixteenventures.com/freemium-or-free-trial). 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? ## 1. Optimized Free Trials Increase Conversions You get prospects into your trial to – ideally – convert them to customers (assuming you agree with me about the sole purpose of a Free Trial). And I know that for many SaaS companies, every single customer you get comes through that Free Trial. However, from my experience working with companies ranging in size/maturity from smaller, early-stage companies to those with more than $1B/year in revenue, I can bet that LESS THAN 25% of the prospects that enter your Free Trial actually become customers. And even though more than 75% of your potential customers – prospects you worked hard and paid a lot to get into your trial – are getting squeezed out by your Free Trial, you were probably thinking it’s something else that’s causing low conversion rates, not your Free Trial. It’s not… your Free Trial strategy is broken… you need to fix it – to optimize it – so you can convert more customers! ## 2. Optimized Free Trials Build Trust People want to try before they buy. They either have a list of things to check off during their “evaluation” of your product or they need to see for themselves; not just take the salesperson’s word for it. Think about why you offer a Free Trial in the first place. It is so prospective customers can get to know your offering before paying for it… … remember, they don’t already know, like, or trust your company or product yet. And in B2B especially, trust is huge… trust that your product does what you say it does, trust that you’ll support your customers, trust that you won’t rip them off, etc. When your prospect can see for themselves that your product will help them achieve their [Desired Outcome](https://sixteenventures.com/desired-outcome), that’s better than any convincing you could do. ## 3. Optimized Free Trials Convert Customers Earlier We all want shorter sales cycles and Free Trials – when optimized properly – convert customers faster than they otherwise would convert. The faster you can convert a customer, the sooner they’ll start getting value, the sooner you can upsell them to more seats, add-ons, etc. and ultimately, the higher their customer lifetime value will be. Even if you just convert customers two weeks sooner than before, at scale - across hundreds or thousands of customers – that can really add up. Which is why Free Trial length absolutely MUST be decoupled from the behind-the-scenes sales process, including conversion timing. So if you’re trying to figure out your sales cycle length based on your current Free Trial length… you’re doing it wrong. Once they’re in, your job is to convert them into a paying customer ASAP regardless of the [free trial length](https://sixteenventures.com/saas-free-trial-length). I helped one SaaS company take their average conversion time on a 30-day Free Trial from 42 days (yes, an average of 12 days post-expiration) to 3 days. Oh, and through the use of creative discounts I helped them drive their Average Subscription Value (ASV) up by 33%. ## 4. Optimized Free Trials Increase Engagement Instead of thinking “what’s the minimum features and functionality I can give these freeloaders?” think instead “what’s the maximum I can give my prospects during their trial?” Why would you want to limit access to the things that makes your product great? If you sell Ferraris, would you go out on a test drive with the prospect and say “okay, let’s do this… but let’s keep the top up… oh, and keep it under 50mph.” WHAT? No, that’s insane. You want the top down so the prospect can feel the wind in her hair, you want her to speed by everyone else, and you want her to drive by those buildings downtown that are like mirrors so the prospect can literally see herself in the car. The same thing goes for the Free Trial of your SaaS product. While admittedly (probably) not as cool as a Ferrari, that same mindset should be employed. We don’t want to limit their experience with the product, but rather expand it. And we want them to [invite others to help “test” or “evaluate”](https://sixteenventures.com/invite-hacks) the product, too. ## 5. Optimized Free Trials Increase ARR/ACV/ASP When the prospect has expanded their engagement in the product by being exposed to features they might not have thought they needed when they signed-up and getting others within their organization to help “test” the product, it’s easy to understand why a customer will pay you more when they convert. Whether by adding more seats, including add-ons, or otherwise requiring more of the product or additional services to get started post-conversion, increasing engagement during the trial can have a compounding effect on the level of revenue generated by each new customer. You can even use [strategic discounts](https://sixteenventures.com/saas-pricing-discounts) increase the amount the customer pays at conversion. ## 6. Optimized Free Trials Plant the Seeds of Massive Success The early days of your relationship with your customer are critical; whatever analogy you want to use (planting seeds, laying a foundation, etc.), just know that whatever happens in the first stage of engagement (a period of time that’s unique to your situation) really does impact the long-term growth of your customer as a customer. And the Free Trial – even though (or especially because) it is pre-sales – is where [a lot of seeds are sown](https://sixteenventures.com/seeds-of-churn); for better or worse. And if you have the opportunity to plant seeds of Massive Success – instead of seeds of churn – during the Free Trial, you should. And you do. So you should. Always remember that Customer Success starts at the first point of contact with the customer and continues across their entire lifecycle… if done correctly, starting with their experience in the Free Trial, that lifecycle should be much longer than it otherwise would be (more profitable, too). ## 7. Optimized Free Trials expand Customer Lifetime Value When you plant the seeds of Massive Success early and you convert customers at a higher ARR out of the gate, you’re on the road to a huge spike in Customer Lifetime Value. A customer that converts earlier, pays you more initially, stays longer, pays you more over time, and brings in other customers through advocacy (because they achieved their Desired Outcome through their interactions with your company)… that’s a pretty awesome outcome. So there you have it… 7 pretty compelling reasons to optimize your Free Trial. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Desired Outcome is a Transformative Concept *July 29, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/desired-outcome/ *[Também disponível em Português](http://resultadosdigitais.com.br/blog/desired-outcome-um-conceito-transformador/) por [Mathias Luz](https://twitter.com/mathiluz)* 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](https://sixteenventures.com/customer-success-desired-outcome-understanding), 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. ## Quick Refresher on Definition of Customer Success First, remember that when your customers achieve their Desired Outcome through their interactions with your company, that is customer success. And the process used to proactively ensure your customers achieve their – or to orchestrate – Desired Outcome, is what we call Customer Success Management. That is both a function within an organization and software product category. Read my [Definitive Guide to Customer Success](https://sixteenventures.com/customer-success-definition) for a great primer on this concept if it’s new you. > you can focus on adoption, retention, expansion, or advocacy; or you can focus on the customers' Desired Outcome and get all of those things - Lincoln Murphy (@lincolnmurphy) [April 11, 2016](https://twitter.com/lincolnmurphy/status/719576284049727488?ref_src=twsrc%5Etfw) ## Desired Outcome has Two Parts The two parts of Desired Outcome are: **Required Outcome** and **Appropriate Experience** In the [original article on Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding), I went into detail on how to think about the two parts, but as I’ve been traveling around the world and sharing this concept with my clients and at conferences, I could tell there was still a disconnect. But it was a few years ago at a private event in Toronto that I keynoted and facilitated a workshop that I finally hit on how to best describe the two parts of Desired Outcome… and I want to share it with you. > Desired Outcome is what the customer needs to achieve (Required Outcome) and how they need to achieve it (Appropriate Experience) - Lincoln Murphy (@lincolnmurphy) [May 14, 2016](https://twitter.com/lincolnmurphy/status/731278227457617920?ref_src=twsrc%5Etfw) This is so awesome… here we go. ## First Part: Required Outcome (RO) Required Outcome (RO) is the thing your customer needs to achieve, the thing they are trying to accomplish; helping them achieve that is why you exist in their world. Helping them achieve their Required Outcome is what gets you in the game. If you can’t help them achieve their Required Outcome, that’s a non-starter. > Desired Outcome > Job to be Done - Lincoln Murphy (@lincolnmurphy) [May 4, 2016](https://twitter.com/lincolnmurphy/status/727949503228076032?ref_src=twsrc%5Etfw) But let me be very clear; Required Outcome is **NOT** the functional use of your product. It is **NOT** the Job to Be Done. The Required Outcome is an outcome that matters – often deeply and even emotionally – to the customer. For bigger or more complex customers, this may matter in different ways to the various personas within the customer account. ### Required Outcome Example: Event Promotion The example I always like to give – because I think we can all wrap our brains around this even if we are never in this situation – is when an event organizer needs to get more people to signup for their event; that’s their Required Outcome. The thing is, there are many different ways to achieve that Required Outcome. They could print fliers about the event and hand them out on the street, they could run ads on Facebook, they could create content on the subject the event will cover and use inbound techniques to attract potential attendees to read that content and, hopefully, signup to attend the event. But, since this event organizer already has a list of email addresses, for the sake of this example, they’re going to choose email marketing as a way to achieve their Required Outcome. As a SaaS vendor, remember that it could be a commercial SaaS or on-prem software competitor, open source software, DIY project, or manual labor that could be the alternative method the customer could use to achieve their Required Outcome. The thing the customer needs to get done can be achieved in myriad ways; it’s good to keep this in mind if for no other reason than to keep your ego in check. Now, the email marketing software vendor the customer chose in this example needs to know – and keep top of mind – that the customer didn’t choose to do business with them because they want to send emails; they chose to do business with them because they need to achieve their Required Outcome… they need to get more people to attend their event. Remember, the customer believes, because of your marketing materials or what they learned from your salesperson (or both) that you can help them achieve their Required Outcome. They also believe that you’ll help them achieve their Required Outcome in a way that is appropriate for them, which is why they chose you over your direct, analogous competitors. Let’s explore that part… ## Second Part: Appropriate Experience (AX) Required Outcome – no offense to it – is really nothing without Appropriate Experience (AX). For long-term success – yours and the customers’ –  you need to not just help your customers achieve their Required Outcome, but you need to help them do that in a way that is appropriate for them. And yes, every customer segment (for every product you have!) will have a different experience that is appropriate for them. That may give you pause as it presents a significant amount of work; that pause is fine, just don’t let it stop you… keep moving forward, it’s totally worth it! Look, anyone can slap together some features and functionality that could help someone achieve their Required Outcome and call it a “product” (and many do!)… but if it doesn’t help your customer achieve that Required Outcome in the right way – the way **THEY** want or need to achieve it – then you failed to deliver the appropriate experience and the customer won’t see the experience as one that was successful. Even if they achieved their Required Outcome! It may seem a bit counter-intuitive, but it happens all the time… it’s likely happened to you. The perception of an Appropriate Experience is why your customers buy your product and not your competitors. It’s why they decided to do business with you vs. your competitors or, frankly, any of the other ways they could have achieved their Required Outcome. Appropriate Experience is your differentiator; it’s why you exist. It’s why customers choose you over the next best alternative. Appropriate Experience is – BTW – just that; appropriate. That’s why I don’t say you need to provide an Awesome, Modern, High-Touch, or Rich experience… only what’s appropriate.if you’re selling to tech startups, you might be okay launching with just an API. As you move beyond early adopters, you may need to build a UI and offer 24/7 support to provide that new cohort of customers the **appropriate** experience. And you may sell to both of those customer segments at the same time! But if you try to sell one the experience that works for the other, or worse if you try to normalize an experience that “works for everyone,” you’re going to end up failing to deliver the appropriate experience to some segment(s) of customers. And just to be clear; Appropriate Experience isn’t only about your product. Appropriate Experience encompasses every interaction your customer has with your company; that includes your sales, marketing, thought leadership, onboarding, professional services, support, customer success management, ecosystem, and yes, your product. That’s why I say “through their interactions with your company” in the definition of Customer Success, rather than “through your product.” Learn more about [the process of discovering the Appropriate Experience for your customers here.](https://sixteenventures.com/appropriate-experience-required) ## Desired Outcome is the Secret to Success > you can focus on adoption, retention, expansion, or advocacy; or you can focus on the customers' Desired Outcome and get all of those things - Lincoln Murphy (@lincolnmurphy) [April 11, 2016](https://twitter.com/lincolnmurphy/status/719576284049727488?ref_src=twsrc%5Etfw) As I mentioned earlier, one of the really interesting things about Desired Outcome – and why it’s so powerful – is that if you only help the customer achieve the Required Outcome, they may not feel “successful.” That’s the opposite of what we tend to think, but it’s true. A great example of this is when I exit a Southwest Airlines flight and complain to myself as I walk down the jet bridge to the terminal about the horrible experience; cramped seats, no wifi, and no assigned seating so I couldn’t get any work done. Obviously, they met my Required Outcome – get me from Point A to Point B quickly and safely – because I’m alive and able to complain, but otherwise I 100% of the time don’t feel like flying on Southwest was “successful.” For me. But I’m not the Ideal Customer for Southwest… the person exiting the plane behind me who is going on a vacation and was looking to save money in the process may feel like it was a great experience and wonder why I look so unhappy and mumbling swear words to myself. That person is their Ideal Customer. To bring it back to the SaaS world, if you use a “bare bones” app that someone hacked together quickly that “gets the job done” but the UX is pretty rough and there’s no support or documentation and you have to work hard just to figure out how to use it, do you feel successful? Do you want to continue to use it? Are you going to invest your political capital into introducing this product into other parts of your company? Are you going to tell the world they should use it, too? No. No. No. And no. So, even though you technically achieved your Required Outcome using that product, something was missing and you want to find a different solution. That something that was missing is the Appropriate Experience. And if you’re the SaaS vendor, it’s up to you to understand the customers’ Desired Outcome better than they understand it themselves and provide an experience that’s so appropriate – so on point – that they don’t even notice it. Now, when you mix Desired Outcome with a well-designed [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile)… you’ve got Growth Rocket Fuel! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Seeds of Churn are Planted Early *July 28, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/seeds-of-churn/ “The Seeds of Churn are Planted Early” is a phrase I came up with in early 2013, [published shortly thereafter](https://sixteenventures.com/saas-churn-rate-attract-right-customers), 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](https://sixteenventures.com/customer-success-definition) 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. ## Developing a Churn Hypothesis Before I flew out to meet with them, I asked them to send over a bunch of data – including exit survey results – as well as for them to answer a bunch of questions. After preparing for our time together by reviewing the data and their answers to my questions, I had a pretty good hypothesis of what was going on. That hypothesis became much stronger when one of the guys that greeted me at the door was wearing a “we send email, you make money!” t-shirt! That was their tag line – “we send email, you make money!” – and, well, it just wasn’t playing out like that for pretty much every customer. > Churn seeds are usually planted early – often during the sales process, especially when trickery is used – but they may take time to sprout - Lincoln Murphy (@lincolnmurphy) [March 15, 2013](https://twitter.com/lincolnmurphy/status/312643236600614912?ref_src=twsrc%5Etfw) ## Ideal Customers Can Still Churn This company knew who their [Ideal Customers](https://sixteenventures.com/ideal-customer-profile) were, targeting a very specific band of customers across a handful of verticals who they knew were already using an email marketing system. Chances are, if you’re using an email marketing system you know of the potential value of email marketing so education isn’t required… but, also, chances are you’re not getting the value out of it (since most companies don’t) so poaching customers from existing do-it-yourself solutions wasn’t a problem. And to do that they had a very large group (20+) of outbound sales reps… these weren’t Sales Development Reps (SDRs) or Business Development Associates (BDAs) that would source the lead, maybe do some qualification and set an appointment; these were closers. They smiled, dialed, got the prospect on a demo right then, and closed the deal… all in one call (they used a nifty little join.me trick to expedite the process). ## Completely Mismanaged Expectations Yes, it was a fairly aggressive outbound sales approach, but it worked; primarily because they were selling what every small business wants; customers. Or, more specifically, sales. If we’re honest – and marketing or sales method/modality aside – we really just want to buy revenue. At the same time, while it was aggressive, they weren’t being nefarious or trying to pull one over on the prospects… they honestly believed that if they sent email on behalf of the customers to their mailing lists, given the way the system worked, their customers would make sales. It’s just that it didn’t work like that and customers were churning; even though they were “active” in the system. They actually had a fairly robust [customer onboarding](https://sixteenventures.com/customer-onboarding) process and customers were adding contacts to the system on a monthly basis (they integrated with a company that would send a box every month to collect business cards, digitize them, and automatically upload to their account), so they were “active.” But while [they were “active”](https://sixteenventures.com/active-users-vanity-metric) (it’s difficult to know how meaningfully active a customer or user is in a somewhat passive product like this), they certainly weren’t [achieving their Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding); a Desired Outcome which had inadvertently been shaped by their complete mismanagement of expectations in the sales process! Look, the customers weren’t being unreasonable in saying “you sent an email, I didn’t make money. I quit.” because, well, that’s what they sold. ## Diagnosing Customer Churn; Starting at the Sales Process So we started going through their sales process together and they said “Lincoln, we have a churn problem, not a sales problem, can we focus on the end-of-life issues we brought you here for?” Yowza… so I said back to that – ever so eloquently – “the seeds of churn are planted early, my friend” … and then I went on to explain that churn is not an end-of-lifecycle issue, it’s a **LIFECYCLE** issue; meaning it can be caused during – and happen at – anytime in their customer lifecycle. Yes, once churn happens we can say that was the end of the lifecycle for that customer, but when that actually occurs – [contractual issues not withstanding](https://sixteenventures.com/saas-metrics-customer-definition) – can be anytime. ## The Seeds of Long-Term Success Are Planted Early, Too. And just so I don’t come off as incredibly glass-half-empty pessimistic – and I have to give a major hat tip to my friend Micky Deming from [Kahuna Accounting](http://kahunaaccounting.com/) and the [TREPX Entrepreneurial Community](https://sixteenventures.com/customer-success-podcast-trepx) for bringing this up – but the seeds of churn aren’t the only thing that can be planted early. The early days of your relationship with your customer are critical; whatever analogy you want to use (planting seeds, laying a foundation, etc.), just know that whatever happens in the first stage of engagement (a period of time that’s unique to your situation) really does impact the long-term growth of your customer as a customer. So along with “churn seeds,” the seeds of Massive, Long-Term Success are planted early, too. It’s maybe harder (though not impossible) to measure that a great onboarding experience directly resulted in the customer staying longer and expanding their use (and the revenue generated from that customer) over time in the same way we can quantify the effects of a poor onboarding experience with churn, but that doesn’t mean those “success seeds” aren’t being planted. Always remember that Customer Success starts at the first point of contact with the customer and continues across their entire lifecycle… if done correctly, that lifecycle should be much longer than it otherwise would be (more profitable, too!). It’s pretty simple; plant “success seeds” not “churn seeds” if you want long-term customers. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 5 Situations When Massive Churn is Just Fine *July 8, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-is-fine/ The mantra of “grow at all costs” – that seems to include acquiring wrong-fit customers (those who aren’t your [Ideal Customers](https://sixteenventures.com/ideal-customer-profile)), 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](https://sixteenventures.com/customer-success-definition) 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. A small caveat before we get into this list, though; the chances are – and I mean these are really good chances, statistically speaking – none of this applies to you. So use caution. Okay, let’s dive into the list… ## 5 Situations When Massive Churn is Just Fine I came up with 5 for this list, but I’m sure there are many other examples feel free to share those in the comments below. ### Example 1: You Have a Legitimately Massive, Transient Market If you have a product where the market of potential users and customers is legitimately massive and you know that those users and customers come and go and that’s just the way it is perhaps having a high churn rate in this market is just the way things will be. And what I mean by a massive market is literally something that everybody with an Internet connected device is a potential customer, everybody that uses an iPhone is a potential customer, everybody that has a job is a potential customer, everybody that eats food is a potential customer, etc. Those are massive markets. But just having a massive market doesn’t mean that churn is a good thing, the other part of this is the transient aspect. Some markets have customers and users that come and go in a fashion one might describe as willy-nilly. In a transient market, churn is expected because customers change their minds frequently, their situations change and they have to lower costs and then they get more money and they come back, trends change, fads come and go, and customers use and stop and come back and it’s just this perpetual churn machine that is the reality. That’s my definition of a “transient” market. If you are in a legitimately massive market and there is a transient nature to that market, then churn might not only be the reality on the ground, it might be just fine because when customers leave, they probably come back. And when they leave, it’s probably not due to anything you did so they probably won’t badmouth you on the way out. But again, I have to remind you that you probably don’t fit into this category! ### Example #2: You Are Your Competition Two examples of “you are your competition” that immediately come to mind are web hosting roll-ups like EIG and restaurant groups like Yum! Brands. EIG owns HostGator, Bluehost and a ton of other “hosting brands” … but this is not exactly common knowledge. Which means, when a customer has a negative experience with Bluehost, for example, they search or ask friends for alternatives and they find HostGator. This means customer churn for Bluehost, a new customer for HostGator… but who cares. It’s all in the same family for EIG. Yum! Brands owns Taco Bell and KFC (among other brands)… so when I swear off Pizza Hut (again) and decide to go back to Taco Bell for my dinners this week, that’s a customer gone from Pizza Hut (for now; see #1 above) and a new customer (well, I’m not new… just back) for Taco Bell, but Yum! is the real winner. SaaS companies do this, too, when they roll-up their low-end (flailing, generally) competition. While the smaller competitors are usually purchased for their revenue or to keep around as additional distribution/lead gen/down or upmarket expansion, sometimes they just keep the competitors around as “alternatives” for churning out customers to go to. As with example #1 above, I feel the need to remind you that you probably don’t fit into this category. I have seen some relatively small SaaS companies acquire their even-smaller competitors, though, so even if you’re a smaller, bootstrapped company, this isn’t outside the realm of possibility for you… but statistically speaking, you probably still don’t fit into this category. ### Example #3: You’re Going to Buy your Competition Just like in example #2 above, if you can buy your competitors then you know when your customer leaves, they’ll just go there and – eventually – they’ll be back under your profit umbrella. But, if you’re planning to buy the competitor(s) you’re losing customers to, you might want to do this sooner rather than later since every customer you lose to your competition means that competitor is going to be worth more when it comes time to buy. Also, I’d be remiss if I didn’t remind you that as your customers churn out and go to your competition, [that affects how investors see your company](https://sixteenventures.com/churn-hurts) and could impact – if not your ability to raise the infinite funds available out there – high churn will certainly affect how your company is valued by investors and the cost of that investment (i.e. their equity stake), or a nice combination of both. All of that could then impact your ability to buy the other company who is now more expensive because they now have your customers and their associated revenue. And just as with examples #1 and #2 above, you probably don’t fit into this category so high churn is not something you can have and expect to thrive. It just isn’t. ### Example #4: You’re Going to Outlast your Competition You’ve got more money in the bank, you’ve got investors on the hook for additional funding, you’ve got lines of credit on the ready, you’ve got all the world of oysters at your fingertip… and your competitors don’t. Cool. And as for your nearest competitors, you know their funding level and current runway, you know their pipeline, you know everything that’s going on in your major competitors world and you’re very confident they’ll start dropping like flies. At some point in the very near future your competitors are going to go out of business and their customers will have no choice but to come back to you, so who cares what your churn looks like right now; you’re in a great position and they’re not. You can wait them out… so it’s no big deal. If this is the case for you fantastic you’re in an enviable position; I wish you nothing but the best of luck, though clearly you don’t need it. However, just like examples 1, 2, or 3 above… you probably don’t fit into this category so high churn is definitely not a good thing for you. ### Example #5: You Can Spend to Offset the Negative Market Sentiment When customers leave, if you’re not in the type of market listed in example #1 above, they typically leave with a bad taste in their mouth. Word-of-mouth is the type of thing that spreads bad news fast – which, as I said before, is generally because the bad experience they had with you is the **ONLY** remarkable thing they’ve ever experienced in their relationship with your company – and now not only do you have a churn problem, but they’re spreading the bad news, potentially limiting your ability to land new customers. Now if you have enough money – and the marketing and PR machine that is powered by those funds – to offset the negative market sentiment that comes along with the high churn (churn that is obviously caused by not focusing on customer success or some other thing that’s in the favor of your customers), then you might be just fine. But if that’s not you and just like in examples one, two, three, and four above it’s probably not you, then high churn is something you need to avoid. ## Reality Check: Churn is Always Bad The 5 cases above are only a few where – I suppose – the case could be made that having a high churn rate isn’t horrible. But even then, if someone were actually giving me one of those examples, I’d push back and say it’s still bad to have high churn. In fact, even in the first example where you have a “transient” market, I bet some of that churn that you see as inevitable is [actually preventable](https://sixteenventures.com/unavoidable-churn); but the inevitability of it has caused you to stop looking for ways to mitigate the churn, so it continues to occur. You just can’t see the root cause forest because of the inevitability trees. > when you see churn as inevitable ("that's just the way it is in THIS market"), you stop looking for the root cause and ways to stop it - Lincoln Murphy (@lincolnmurphy) [July 7, 2015](https://twitter.com/lincolnmurphy/status/618543178518429696?ref_src=twsrc%5Etfw) Considering [all the ways churn hurts a company](https://sixteenventures.com/churn-hurts), there doesn’t seem to be any reason – even if you happen to fall into one of these five categories – that you should sit back and just accept churn as either inevitable or a good thing. Unless you fall into one of those categories, high churn is a big problem. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 5 Lesser-Known Ways Churn Hurts your Company *July 8, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/churn-hurts/ 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](https://sixteenventures.com/customer-success-desired-outcome-understanding)). 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? I know this might sound crazy, but there’s more than just a dollar cost associated with acquiring those customers that aren’t a good fit for your product or service; there are emotional and other intangible-but-valuable-resource tolls associated with that churn that negatively affect your business. Churn hurts revenue – obviously – but have you considered these… # 5 Lesser-Known Ways Churn Hurts your Company I came up with 5 ways for this list, but I’m sure there are other situations where this applies, so feel free to share those in the comments below. ### 1. Churn Hurts Your Company Valuation When you have high churn, potential investors or acquirers will apply what amounts to an arbitrary “discount” (some refer to it that way, some don’t… but that’s what it is) to your company valuation. I go into A LOT more detail on how churn – and Customer Success in general – [affects the valuation of your company in this post.](https://sixteenventures.com/customer-success-drives-company-valuation) This could be due to a lack of faith on their part because something is clearly wrong with your business or your ability to lead, or it could simply be a way to get a better deal for them and their investors. Remember, investors that are using other people’s money (VCs, institutional investors, corporate acquirers) are in the business of producing the biggest return possible for their investors and stakeholders so they will look for every reason to get the best deal possible. This isn’t bad; it isn’t good… it just is. And just so I don’t come off as too negative, sometimes this works in your favor if your business/sector is smokin’ hot and just being in the deal – even at a premium – might be enough to ensure (in theory) a great return. Either way, just know going in that high churn (regardless of all the other great stuff) is a lever for them to pull to make the deal better… for them. ### 2. Churn Hurts Your Total Addressable Market One of the reasons people (investors, buyers, etc.) might cite for “discounting” your company due to high churn is the simple notion that a churned customer is no longer part of the Total Addressable Market. Where you’ve stated that your Total Addressable Market is “Restaurant chains with > 5 locations in North America” the reality is that it’s that **MINUS** the customers you already had that bought and bailed. If you’re churning customers faster than new customers are entering the market, your TAM is shrinking. Churning and burning customers just isn’t gonna fly anymore, so you might consider getting deliberate and building your [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) from Day 1 (you can always pivot, but this will ensure you don’t go too far down the wrong path). ### 3. Churn Gives your Competitors a Weapon A customer churns out (or doesn’t renew) and goes to the competition; you think they won’t tell your competitor where they’re coming from and why they left? You couldn’t be more wrong. There’s even some psychology at play there (detailed in Dr. Robert Cialdini’s book Influence) that actually dictates that they’ll do things that are consistent with – and enhance – the decisions they made to leave you. So even if their experience with you wasn’t horrible, the more they talk about it and the more they re-live it, the more “horrible” it will become to them… and they’ll be reliving it with your competitor. And your competition will bring these up with new prospects “XYZ company dropped that other product for our’s because of this, this, and that reason” … and since this is so valuable to your competitor (meaning they’ll really push for it), and their new customer is still in the consistency-and-commitment phase of their decision to move away from you, they’ll be willing to talk to new prospects of your competition against you. It doesn’t take very many churned customers to give your competition a ton of firepower in their sales process. Protip: you should probably find out if your competition is doing this and know how to 1) respond (“we had some missteps in the early days, but after time in market and helping x number of customers [achieve their desired outcome], we know what types of customers can be successful and we only work with those.”) and 2) turn the tables on your competition if need be. I hate stuff like that, but if they’re doing it… well, don’t just take it. ### 4. Churn Hurts Your Goodwill and Market Sentiment Building on #3 above, your former customers don’t just tell your competition, they tell their colleagues at work (who’ve probably seen the fallout firsthand), their peers in networking and professional groups, they leave reviews online, share war stories in online forums or LinkedIn groups, or answer anonymous (leading, probably asked by your competitor) questions about your product/company/pricing/etc. on Quora. People that move on from the company that was your former customer leave that company with the bad taste of your product in their mouth and when they go to a new company, they bring that bad taste with them. When that company pops up on your radar as a lead to reach out to, you have a built-in obstacle to overcome now. And all that hurt goodwill and negative market sentiment is the gift that just keeps on giving, because… ### 5. Churn Hurts Your Employee Morale It’s not fun to work hard to get customers, to close deals, to do marketing, [to onboard customers](https://sixteenventures.com/customer-onboarding), or to support and serve customers that aren’t a good fit. Frankly, it sucks to work for a company that has a lot of negative stuff being said about them, their product(s), their leadership, etc. Yeah, it’s great to get a paycheck, but it’s also good to be proud of where you work… and companies that churn and burn customers – at least in my experience – tend to churn and burn employees (and very often leaders), too. It’s hard to maintain a positive culture surrounded by constant negativity. It’s even harder to maintain a hypocritical culture where you claim to be customer-centric but have high (avoidable) churn. And rest assured… employees that have to exist within that hypocritical culture won’t for long. So yeah… churn can have a very real cost to your company beyond the simple math that says less revenue equals a lower valuation. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Podcast: Getting Inside the Minds of Your SaaS Customers *July 7, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/inside-minds-of-saas-customers/ 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](https://sixteenventures.com/customer-success-desired-outcome-understanding) 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](http://www.insightsquared.com/2015/07/podcast-lincoln-murphy-gets-inside-the-minds-of-your-saas-customers/), 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](https://sixteenventures.com/ideal-customer-profile) to reducing churn. If you want happy, engaged customers who rave about your product, you should take a listen. Listen to the episode now: In this 30-minute episode, we discuss: - Why tracking usage metrics is useless - How you can drive down churn before it gets out of control - How you find and then target your ideal customers If you’re just getting started with customer success or re-focusing your efforts on your customers, you should listen to the newest episode of [Ramp Podcast](http://www.insightsquared.com/2015/07/podcast-lincoln-murphy-gets-inside-the-minds-of-your-saas-customers/). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Fiction that Friction Improves Customer Onboarding *July 2, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/friction/ A few months back an article was published that talked about how this popular brain training game (I can’t remember what it’s called) made their onboarding process **MORE** complex – not less – and increased their active users by 10%. While the article was very clear on when to add friction, most of the discussion around the article that I saw fell into the category of “yes, that’s brilliant! I hate my users and customers anyway, so I’ll add **MORE** friction to our onboarding and we’ll improve like crazy!” Crazy is the right word… but the context is wrong. What they should have said was “I’d be crazy to simply add friction and think for a second that the outcome would be in some way positive.” Unfortunately, this idea of adding friction has come up a few times recently, so I feel the need to dig into why adding friction all willy nilly is simply one of the stupidest things you could do. But some people think we just… ## Gotta Make ’em Jump Through Hoops If you make your prospects jump through hoops to use your product, they’ll be more dedicated, right? They’ll be more “invested” – they’ll have more skin in the game (OMG I hate that term) – and because of that they’ll magically become a long-term paying customer because that’s how things work in your make-believe world. That’s not how things work in reality though. Sorry. However, while simply adding steps – friction, hoops to jump through, game within which to invest skin – is a losing proposition, doing things that get the customer or user more engaged is always going to be a winning proposition. You wanna be a winner, right? If you do, then… ## Simplify the Process of Achieving Value I’ve covered the secret to [successfully onboarding customers](https://sixteenventures.com/customer-onboarding) before, and if you’ll recall, one of the keys is to focus on your [customer’s Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding). Nowhere in anything I’ve written, anything I’ve talked about, or in the work I’ve done with clients, have I ever said you must always reduce the number of steps a customer has to do to get value from your product. In fact, sometimes you need to add steps; but it’s not some arbitrary addition of friction into the mix. What I’ve always said is that you should reduce the number of **unnecessary** steps; but simplification doesn’t mean the number of steps always gets reduced. In fact, quite often, in order to simplify the process of getting the customer to first value delivered – to that point where they either achieve real value for the first time with your product or see that it’s actually possible – we have to increase the number of steps. Think about this… sometimes you sign-up for an app and there’s just two or three steps to get started and you’re like “this sucks” and “why do they need that?” in addition to lots of swearing. But you’ve also experienced apps or services (more likely the latter since they’re less likely to fall into the “we’re software!” trap), that took you through 17 steps but it was engaging, and you felt like each form field you filled out was going to make your experience even better. It may be hard to remember the latter and that’s kind of the point, right? (Yes, that’s kind of the point.) The truth is… ## Sometimes More is Less Sometimes we add more fields or ask for more information and we – gulp – actually try to improve the UX around that to soften the blow and drive engagement. Even when you’re trying to add friction just to get people to jump through those hoops, you may catch yourself inadvertently adding elements to improve the experience. That’s not a bad thing at all! In fact, you might even add some marketing elements to it to get people to fill out the form and give you more info. When that happens, the takeaway is often reduced to “we added more form fields and increased signups” but the truth is more nuanced than that. The reality is simple; if you didn’t design the process to be better and it just happened to turn out that way, then that change was caused in spite of your efforts… not because. And that’s a hard way to grow. So treat your signup form like the marketing page it should be and continue the marketing (value prop) narrative through the entire process of customer onboarding. When you do, you’ll see increased signups and more [Free Trial conversions](https://sixteenventures.com/effective-free-trials). It’s so simple; good things happen when you… ## Improve Your Customer’s Experience Adding contextually appropriate steps doesn’t equal friction, but actually improves their experience by quickly customizing the product or moving them down the right path and gets people engaged in the product quickly and deeply, But just adding friction for the sake of adding friction makes zero sense. But man, it sure gets people to click on headlines. Lumosity. That’s the name of that… ummm… game. It’s a game. And here’s the [link to that article](http://firstround.com/review/How-Lumosity-Spiked-Active-Users-10-with-Complexity-Not-Simplicity/) that I talked about at the top. Now that I made you jump through so many hoops to get to that link, if the logic holds, you should become an avid reader of that blog. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Psychology and the Unexpected Power of Surveys *June 30, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/psychology-of-surveys/ Surveys can be dangerous if used wrong, but can be super-powerful if used correctly! Whether it’s the Net Promoter System to gauge customer satisfaction, doing pre-launch customer development work for your startup, or one of the myriad methods we use to interact with and learn from our customers, prospects, and other people, surveys are by far the easiest to implement and most effective feedback mechanism at scale. The problem with surveys, aside from all the ways that people generally mess them up (too many questions, leading the witness, not specific enough, poorly targeting / segmenting the audience, etc.), is that the underlying psychology of surveys is rarely taken into consideration. [Now I’ve said before that I’m not a big city psychologist](https://sixteenventures.com/social-proof), but I spend a lot of time studying psychology and human behavior as I try to figure out why people do what they do and also how to get them to do what I want them to do. And some of that studying led me to realize that many of the behaviors we employ around surveys – especially in the [Customer Success ](https://sixteenventures.com/customer-success-definition)world with the use of NPS surveys – can have a very negative impact that does the exact opposite of what we’re trying to do. In this article, I explore how we use surveys and suffer the often unintended consequences. Now, I’m sure there are edge cases that don’t fit one of these categories or ways to get much more granular, but in my experience there are… ## Three Use Cases for Surveys If we look at surveys from a high-level, there are really only three reasons to send a survey: - Learn things you don’t know - Validate your assumptions - Get the recipient to validate and recommit to their beliefs The first two use cases – learn things you don’t know and validate your assumptions – are relatively self-explanatory so I won’t spend any time on those. But the third use case is less well-known and interesting as it’s both incredibly powerful but dangerous if misused. And a lot of people accidentally and unknowingly fall into the third use case while trying to solve for the first two. Let me explain by starting with…. ## Cialdini’s Principle of Consistency Once again we’ll be returning to the work of Dr. Robert Cialdini, his book influence, and his ideas around the Principles of Persuasion. In fact, we can look at my wallet-sized card that I got when I spent some time with the Influence at Work folks for the definition of the Principle of Consistency: “*Once people make a choice/take a stand, they will encounter interpersonal pressure to behave consistently with what they have previously said or done.*“ Most marketers use the concepts posited by Dr. Cialdini as a way to elicit certain behaviors from their customers, which is valid. But most marketers (and Customer Success people) would be wise to really understand what’s going on with these principles and how misusing them can have the exact opposite effect of what we’re trying to achieve! For instance, when I talk about [customer onboarding](https://sixteenventures.com/customer-onboarding-process) with my clients, I often talk about the Principle of Consistency. This very simple-yet-powerful idea that once you do something or state your intention to do something, your next behavior will most likely be in-line with what you already committed to or have done. And the reason this happens has nothing to do with how likely we are to stick with commitments we made, our willpower, or how good of a person we are. These Principles of Persuasion, Consistency being one, are powerful because our brains are wired to work in this way; they happen outside of our conscious effort and whether we know they’re happening or not. So because this isn’t a choice or just how we operate, it’s just the way our brains work, if we do the wrong thing or something that is incongruent with the positive outcome that we want from our customers, the principle still kicks in! We don’t get to pick and choose when these principles work, so you have to be very careful out there. Let’s explore how this applies to… ## Surveys with Customer Success in Mind When we send a survey – NPS or otherwise – asking about someone’s experience when they had a bad experience might seem good because we learn from their experience, we give them a place to vent, etc. But the reality of the situation is if they’re upset and they get to voice and otherwise re-commit to that negative belief around your product or service in a way maybe they hadn’t done to date, we may be enabling consistency where we otherwise don’t want it to exist. So while surveying the customer and finding out that they’re unhappy is good if we didn’t know that going in (definitely one of the valid use cases for surveys), you can still lead them down a path of being of acting consistently with that negative view of your company product or service. In Customer Success, where we take a proactive approach to [helping customers achieve their Desired Outcome](https://sixteenventures.com/desired-outcome), we should know whether a customer is on the right path to achieve that Desired Outcome, we should know whether they’re successful, and to a certain degree we should know whether they’re happy (even if were not trying to solve for happy). From a Customer Success standpoint, we should know that a customer isn’t in a good place and simply not send a survey asking how they like our product or service and if they’d be willing to tell a friend. Makes sense, right? It’s simple… ## Don’t Knowingly Survey Unhappy Customers Knowingly surveying a customer that is not achieving their Desired Outcome or is otherwise unhappy is a recipe for disaster as you activate the Consistency principle around that negativity. And since you already know they’re not successful, you’re not trying to learn something you don’t know… so why are you surveying them? Right. So never send a survey asking if they would recommend you to a colleague if you know they wouldn’t. Ever. Don’t get me wrong, though… you absolutely should contact unhappy / unsuccessful customers to help them get back on track toward success, it’s just that a survey is not the right approach. Reach out and help them instead. Okay, so that said… ## If you Don’t Know, Survey a Small Cohort While the damage may occur by surveying customers who are unhappy, if you don’t know that they’re unhappy and have no other way of determining that outside of the survey, then you have to do it. That’s a valid use case for a survey. But you still need to be careful. You might try surveying a subset of customers and looking for patterns with those who said they aren’t happy. Then go back and identify customers that share those same characteristics and, instead of a survey, reach out to help them achieve their desired outcome. You went from not knowing to knowing by surveying only a few customers – and invoking the Principle of Consistency with those few people – but once you knew, you didn’t need to survey anymore. No matter what, I encourage everyone who conducts surveys for marketing, Customer Success, or whatever, to really understand… ## The Psychological Impact of Surveys The power of Consistency in surveys is really interesting. Surveys can introduce new ways of thinking about a subject by way of phrasing the questions and then activate consistency on that new way of thinking. Some companies use surveys in the sales process to gather and share insights with prospects. This helps start a conversation while also activating the principle of consistency. If you understand the three use cases and the underlying psychology of surveys – especially around Cialdini’s Principle of Consistency – you can actually turn your surveys into a Growth Hack and make your customers successful (and happy). One of the ways you can do that is to… ## Use Surveys to Reinforce Positive Feelings I said not to survey customers that you know are not happy. On the flip side, you absolutely want to survey customers who are achieving their Desired Outcome. In fact, the best time to send an NPS survey – at least from my point of view, which isn’t completely aligned with NPS purists – isn’t just after any interaction with your company or on a timed interval, but once they’ve achieved a success milestone. Yes, your results from an NPS survey will be skewed towards the positive and I know that flies in the face of NPS dogma, but it does amazing things to get the recipient to validate and recommit to their beliefs! And when they come back and say they will absolutely be a promoter for you, close that loop and get them to take an action to be an advocate for you, to spread the word to invite their friends or colleagues and you just created a growth hack around your NPS survey. So yes, there are reasons to send a survey when you already know the answer; it’s about reinforcing what the recipient already believes. Remember, taking some time to understand psychology and how our brains work can massively improve your Customer Success and Marketing efforts. The mind is a terrible thing to waste… [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How Social Proof Actually Works in Marketing *June 24, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/social-proof/ I’m not a psychologist, but I play one every day as I try to figure out why people (users, customers, visitors, etc.) do what they do… and how to get them to do more of what I want them to do. I spend a lot more time reading books about – and otherwise studying – human psychology and the way our brains operate, than I do on specific marketing techniques, growth hacks, or the latest viral sensation. Those things are fleeting, but the way our brain works is much slower to change. One of the people I’ve learned the most from when it comes to human behavior is Dr. Robert Cialdini, starting with his game changing book Influence. He and others from his [Influence at Work](http://www.influenceatwork.com/) group have released other books that provided real-world examples of how to leverage the principles of Influence – or avoid them – but Influence is still my go-to resource. Dr. Cialdini has posited that there are six principles of persuasion – Reciprocation, Liking, Consensus, Authority, Consistency, and Scarcity – each of which has the power to elicit certain behaviors (simply due to how our brains work) in those at whom the principle is focused. In this article I want to explore the Principle of Consensus, otherwise known in marketing as “Social Proof” and in [Customer Success](https://sixteenventures.com/customer-success-definition) as “Advocacy.” Generally when we think of Social Proof we think of… - A person wearing nice clothes crossing the street against the light, so you follow her (she must know what she’s doing… she’s dressed so professionally). - A group of people looking up in the sky… so you look up, too. - 9 out of 10 Dentists prefer… - The number of Retweets, Likes, or Repins a piece of content gets on the various social networks. - The number of backers on Kickstarter - This many other readers highlighted this section in a Kindle ebook - A hit counter on your web page (for those of you joining us from 1996) But when we’re marketing B2B SaaS and software products, the proof isn’t in the pudding (or any of those things on the list above), it’s with others who have used – or can vouch for – your product. ## Social Proof and The Principle of Consensus That sounds like a fantasy genre book title. Anyway, according to my wallet-sized Principles of Persuasion card I got when I spent some time with the Influence at Work group in Phoenix a while back (that I carry with me everyday because I’m just that awesome), Consensus is when “people decide what is appropriate for them to do in a situation by examining what others are doing.” The card goes on to say that Consensus is **ACTIVATED** by evidence of how others are thinking, feeling, or acting. It also says that Consensus is **AMPLIFIED** by evidence from many others, similar others, and by uncertainty. Every Principle of Persuasion has Amplifiers; things that, when they happen, markedly improve the effectiveness of the principle, but let’s talk specifically about… ## Social Proof Amplifiers Of the three amplifiers of Consensus, similarity and uncertainty are the most interesting in the world of B2B SaaS, especially for niche or vertical-focused products. I’ll discuss similarity in a lot more detail later, so for now I want to touch on uncertainty; such a simple, but incredibly powerful concept. When we don’t know what to do, we look to others for cues (or sometimes exactly what we should do). When we don’t know what to do it’s usually for one of two reasons: there are no obvious choices or too many. We’re either starting from scratch or are overwhelmed by options. So we look to others to help move us forward. Looking to others when we don’t know what to do is human nature. Social Proof – the Principle of Consensus – simply leverages (takes advantage of) that human nature. If you’re entering a crowded market with your SaaS product, one way to cut through the clutter is to heavily leverage Social Proof. If you’re creating a new product category (like we did at Gainsight by literally creating the Customer Success Management software product category), you’ll probably need to leverage all three types of Social Proof below at various stages of your evolution. Understanding Consensus and what activates it – what triggers our brains to react a certain way – and what amplifies this principle, are absolutely critical when it comes to putting these concepts to work. That’s why I wanted to examine this idea of Consensus as it relates to Social Proof as a marketing technique. That starts by understanding that there are… ## Three types of Social Proof You can probably get more granular and come up with other types, but in my experience, when it comes to Social Proof there are basically three kinds: Similar, Aspirational, and Endorsement. Knowing the difference will help you get the results you’re looking for in your marketing. On the flip side, NOT knowing the difference could literally derail your marketing efforts, so it pays to know what you’re doing. Let’s look at each type in more detail. ## 1. Similar Social Proof Social Proof that’s “similar” is when you display the logos of – or testimonials from – customers that are the same as [your Ideal Customer](https://sixteenventures.com/ideal-customer-profile). This is the most basic type of Social Proof and is generally what we think of when we hear “social proof” from a marketing standpoint. When we display logos of our customers on our marketing websites, if we think about what we’re trying to do at all, it generally falls into the “similar” category, right? “I’ll put these logos on my site and hope that others like them will contact me or sign-up for our service” you say to yourself. So you put all the logos on your site without really thinking through the ramifications of that. In fact, you’re quick to add the logo of that giant company you landed because, well, how cool is that, right? Well, it might not be that cool if your Ideal Customer isn’t like that giant company and thinks, based on the presence of that logo, that your solution – even if it’s right for them – is likely too far out of reach. “If Walmart can afford it, we can’t.” It is tempting to show off that giant logo you landed, but if that’s incongruent with your Ideal Customer Profile you may scare them away. When it comes to Social Proof, defining your Ideal Customer Profile is critical so you can leverage Social Proof that’s similar to the customers you really want to land; outliers (and ego-boosters) be damned. ### A Quick Note on Viral Expansion If you’re thinking about your viral expansion opportunities – [both intra and inter-company virality](https://sixteenventures.com/invite-hacks) – for your product, remember that you’ll be taking advantage of the principles of Social Proof there, too. Awesome, right? Sure… but just know that virality is almost always horizontal, which means you shouldn’t assume advocacy programs and viral loops will help you land better (more ideal) customers than you already have. It just doesn’t tend to work that way in reality. If you have less-than-ideal customers advocating for you or otherwise spreading the word, they’ll bring in more like them. Yet another reason to focus on your Ideal Customer in the first place. Okay, all of that said, there IS a time and place for displaying logos of companies larger (or more successful) than your Ideal Customers and that’s called… ## 2. Aspirational Social Proof Lincoln Murphy and Dr. Robert Cialdini in Phoenix, Arizona Social Proof that’s “aspirational” is when you display reviews, video testimonials, or logos of companies that your Ideal Customer prospects want to be like. But let me be clear; aspirational social proof is potentially dangerous as your ideal customers may not get it & think bigger customers mean you’re out of their price range. This is yet another reason to really get to know your Ideal Customer, [understand their Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding), and then use that knowledge to engage these psychological principles. If you sell to B2B startups that are post-series A funding, for example, the leaders of those organizations may have aspirations of being $100M (and eventually $1B Unicorns) companies and want to operate as such. They may not need a world-class subscription management platform like [Zuora](https://www.zuora.com/) or a world-class [Customer Success Management product like Gainsight](http://www.gainsight.com/) today, but if they want to be a $100M company, they should act like one. Knowing that this is your Ideal Customer, you’d show them the logos (and other Social Proof elements) from the companies they want to be like someday… not the companies they’re like today. But you have to know your [Ideal Customer](https://sixteenventures.com/ideal-customer-profile) or this could have the opposite effect. Okay, so what if you’re just starting out and don’t have any “Similar” or “Aspirational” Social Proof to offer? You can use… ## 3. Endorsements (Celebrity or Otherwise) Endorsements are just that… someone that your Ideal Customer trusts, advocating for your product. When you don’t have customers yet – or don’t have customers that have achieved the necessary [success milestones](https://sixteenventures.com/success-milestones) that would make being an advocate for you a logical next step – you may have to go a different route. Finding someone that you can show the product to, who can see the real value (potential) in it, and is willing to share their perception of the product (sometimes for a what amounts to a fee) with your potential customers can go a long way. You might have to give them or their customers access to your product at no charge in order for them to see the value in your product, but it’s probably worth it at first. Or you might have to “sponsor” research that – fingers crossed and breath held – comes out in your favor so you can distribute the research to your prospects. Trusted analysts can “endorse” you without actually endorsing you. What a world. And of course there’s the celebrity endorsement route… think about what happens when Tim Ferris or Oprah mention a product. But that “celebrity” has to be someone that jibes with your Ideal Customer, otherwise it really won’t have the desired effect. Kim Kardashian shilling for your project management app may not give you the result you want. Snoop Dogg on the other hand… [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success Starts at Sales Done Right *June 23, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-sales-done-right/ After getting a demo of their new product from their Chief Data Officer (Luke Deka) while I was in Poland, I was excited to catch-up with Greg Pietruszynski, CEO of [Growbots](http://growbots.com/), when I got back to San Francisco. We talked about lots of different topics, but the post that my friend Steli Efti from [close.io](http://close.io) shared a while back – [4 Sales Mistakes That Lead To High SaaS Churn](https://sixteenventures.com/sales-mistakes-cause-saas-churn) – came up. Greg said the post was a brilliant summary of tactics that can help you focus on the right customer segments and therefore decrease long-term customer churn. But then he said something that I thought would make a great post… it’s one thing to know who to sell to; it’s quite another to actually make the sale. It’s yet a another to make the sale with Customer Success in mind. Luckily, Greg agreed that this topic would make a great post. I have a few things to say in the After Word about how churn hurts your Total Addressable Market, but until then, take it away Greg. ## Customer Success Starts at Sales Done Right At growbots.com we help SaaS companies create high quality sales funnels, so I decided to describe most common sales mistakes that lead to losing customers, that could’ve been retained otherwise. ## There are a Limited Number of Companies that Will Buy your Product How many customers will buy your enterprise package? The truth is that there is a very limited pool of potential clients, that could become your most valuable customers, generating most of your profit (as the 80/20 rule says). And those customers rarely come from inbound sources, which means you have to reach them first. To be blunt – your long term revenue and profits depend on how good you are in reaching those customers and closing deals with them. The more prospects you lose, because of bad treatment or poor strategy, the less Monthly Recurring Revenue (MRR) your company will see during its lifetime. Let’s say you have a 1000 companies targeted and the average outbound sales channel gives you a 5% response rate. How many out of those 50 companies will become paying customers? Looking at an average outbound sales funnel conversion rates you should expect around 5 paying customers. Just 5 customers out of a thousand companies – that’s an incredibly low conversion rate. It’s still incredibly low even if you double or triple that number. ## Choosing the Wrong Metric The situation described above happens if you focus on the wrong metric. Most startups work under a huge growth pressure, so no wonder some of them myopically disregard conversion rates and think that they just need to reach out to more customers in order to meet their sales targets. That might work in the very short term, but after a couple of months there is nobody left on the “sales ideas” list because you already contacted everyone! It’s not a bad dream scenario, but reality where your short term sales victories become a reason of your long term failure. What you should do instead is convert more companies into paying customers, even if it takes much more time. Often people tell me: “You know what? We’re really trying hard to personalize emails, we spend lots of time on proper lead qualification, but the conversion rate is only 50% higher”. The problem is that they don’t realize they focus on the wrong metric! What matters is how many customers you DIDN’T LOSE because you annoyed them with your SPAM. If you really care about their problems, spend time analyzing challenges they face, etc. then in the worst case scenario you will simply hear: “Thanks for your email, but it’s not the right time”. Nobody gets angry, nobody puts your message into the SPAM folder. The contact is not lost and you can still close the deal with that company when the time is right. It usually takes much more time than just sending an email. ## Not Qualifying Prospects Before Contacting Them “Positive answers” are great, but are not all equally good. Getting a lot of interested customers will only bring you success if they match your perfect customer profile. Steli already elaborated on the importance of focusing on the right customer, so I’ll only add: getting on a phone with an interested customer only to learn he won’t make a great customer is a waste of time. At growbots.com we always qualify all prospects before performing outreach activities, which helps to decrease the amount of work spent on trying to close a deal with a lead that is bad fit to a minimum. Your sales team should also do that – otherwise you will always waste time on talking to the wrong people. Take better care of the most promising customers instead. ## Using Ready-to-Use Templates Ready to use sales templates are the best way of saying: “I don’t care about you enough to even take the time and write the email myself”. Do you think that using a template from “Predictable Revenue” (don’t get me wrong – it’s an awesome book and you definitely should read it) is a great idea? Believe me – the person you want to reach out to already knows this template. Not because they read the book, but because they saw it in their inbox not once, but like 20 times, the same pitch repeated ad nauseam! It was super-efficient before Aaron published it in a book, but now it’s just another copy & paste email template you can find on the internet. And boy do people hate those. You have to write your own emails and make them uniquely about your customers challenges. Customer Success starts with first impressions – nobody will believe in the standard of your services, if you won’t show that you care about their individual problems. ## Directly Pitching the Product “Hey, I don’t care that you are busy – please leave everything and think about buying a new project management tool. The best time to make that decision is now! Our software will help you to [insert sales pitch]. Ok, that’s all. How about you postpone all your plans for tomorrow 2:00 pm and get on the phone with me (so I can close that deal asap)?” – this is what I get from most of the “sales pitches” I receive in my inbox. You can also find those long letters from a person who’s claiming they know everything about my problems, without even talking to me for a minute – yet they know I should buy their product. Well, all those people haven’t yet realized, that actually… even direct sales activities are not about selling the product in the first place! The process leading up to a purchase decision for most SaaS products takes a few weeks, involves couple of decision makers, competitors evaluation, testing the ROI and budgeting. There’s plenty of time for you to start a relationship with your potential customers. Try to provide any sort of feedback they might find useful, give advice or simply ask “how are you doing?” – whatever you do is better than just pitching the product. This way you can learn more about their business and gain their trust. You will know more about their needs and your potential customers will remember that you’re trying to help their business, which means they’ll come back to you when the time is right. Being patient and not pushing too much will help you to convert way more than 0,5% (or 5 out of a 1000) of companies into paying customers. ## Summary At growbots.com we often experience 100% email open rates and over 25% of positive answers – it’s really worth stopping spamming people and taking a quality approach instead. And yes – we send automated emails, because automated doesn’t mean low quality and poor performance. In your outbound sales activities you should focus on long term revenues and not ruin the first impression with an impersonal, direct sales pitch spam. Smart companies gradually convert their list of target companies into their customer base, because they know the number of their potential customers is limited. The most important metric in the direct sales process is the conversion rate from a sales opportunity to a lost opportunity. The fewer opportunities you lose short term, the more MRR you can drive long term. You should care about every potential customer, as if they already were your customer. ## About Greg Pietruszynski Greg Pietruszynski is CEO and co-founder at [Growbots](http://growbots.com), a 500 Startups company. Growbots’ goal is to create A.I. for Sales. Greg is a serial entrepreneur, he was running 3 companies in China & Europe before Growbots and developed more than 200 different web/mobile products over last 6 years. He’s an automation freak and growth geek. Follow him on Twitter [@pietruszynski](https://twitter.com/pietruszynski) ## After Word by Lincoln Churn is a big problem and can significantly hurt your Total Addressable Market (TAM). Think about it, churn reduces the number of potential customers when you burn through potential customers by selling to them when you’re not ready to help them achieve their [Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding). It’ll be difficult – if not impossible – to get them to give you a try again if you burned them in the past. But churn does even more to reduce your TAM – it’s really the gift that keeps on giving – including hurting your reputation (which becomes a drag on new customer acquisition and therefore growth) as well as making investors see your company as risky which hurts your ability to raise funds (at least in a way that’s favorable to your stakeholders). Remember… the seeds of churn are planted early, and it’s often during the sales process that those seeds are sown en masse. Here are some additional resources for you: - [You Don’t Know Me. Can I Get 30 mins?](https://www.linkedin.com/pulse/you-dont-know-me-can-i-get-30-mins-lincoln-murphy) - [7 Sanity Checks for Sending Cold Email](https://sixteenventures.com/cold-email-sanity-checks) - [Engaging at Scale: The Secret to Automating Personal Emails](https://sixteenventures.com/personal-emails) I hope this helps you! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Achieve Network Effect on a Smaller Scale *June 22, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/network-effect-smaller-scale/ I was talking to my friend Piotr Zaniewicz the other day about the importance of network effects on SaaS businesses. I mentioned how the common misconception around network effects is that, in order to achieve a real network effect (this is the reason some people say B2B SaaS can’t be “viral”), the level of critical mass necessary for network effects to take place usually requires a lot of time, effort, energy, and resources to develop, on top of that ‘mass’ of users and customers. But Piotr, the CEO of [RightHello](http://righthello.com), an outbound sales startup based in Poland, and I know different. We started talking about this really awesome way he came up with to generate network effects, but on a small-scale. This is exactly what he did for his company. I told him – as I do – to write it down and let’s publish it so everyone can learn about it. He obliged and his post is below. I have a couple of notes and some more resources for you at the end that you’ll want to read, but for now… take it away Piotr. ## Achieve Network Effect on a Smaller Scale Network effect is the holy grail of every startup. Happy clients recommend you, adding more clients (in consumer market however you go “viral”). The basic idea is that each new user brings 1+x more along, and you start to experience organic growth. We all read stories about Dropbox and Slack, yet it seems more like magic than something you could repeat. And if you counted on a step-by-step how-to-guide here, I’m afraid you’ll be disappointed; there is no proven or repeatable way of achieving that. There are too many factors, starting with a great product or service. Though there are strategies that might help you achieve it. In RightHello we managed to achieve a network effect on a small market of about 1000 companies and I wanted to share things we did right. I’ll spare you dozens of those we did wrong. ## Niche = Tribe Even if you can sell to most b2b companies (stuff like invoicing software) there is always a smaller market where it works better or it’s easier to acquire a customer. Lincoln built his [Ideal Customer Profile framework](https://sixteenventures.com/ideal-customer-profile) around this idea. A good niche is a set of people or companies that know themselves pretty well. Similar companies find ways to talk to each other. Through social media, discussion boards, magazines, they keep in touch. In smaller circles, everyone knows everyone. Good example of a niche are startup founders – they read similar media, they know each other, they communicate on discussion boards and conferences. They are a kind of tribe that understands a lot of things in a similar way. But this tribe is massive – let’s say there are about 100.000 startup founders out there. There is a little chance that CEO of an early-stage B2B saas from Berlin knows guys that just created a fitness app in San Francisco. So if you have a tribe this big it’s a good idea to narrow it down – by industry, type of business or location. Startup founders from London for sure know each other better and communicate more frequently. The same goes with companies within a certain niche – let’s say sales support. From my experience good tribe to start with has from 1000 to 10.000 people/companies in it. In our case we chose a niche of Polish IT companies (services & products). As IT market here is still quite small (but growing quickly), we could estimate that there are about 1000 companies that could be our customers. And the best part is that Polish IT companies know themselves very well and communicate frequently. ## Signing First Deals To start closing deals in a new segment, you have to build trust. It’s hard because you can’t show any results for similar companies in your portfolio yet. What you may already have won’t help much as well. The easiest way to get your first customers in a new market is by approaching your closest network, where people already trust you just for who you are. If you don’t know anybody from the tribe, the best way to start is to ask your network for introductions and referrals. If you don’t have anyone that could introduce you to first customers, just start marketing and selling, but be prepared that it will be tough. Without knowing what’s important to decision makers in a given segment, it’s hard to get them onboard. You need a few early adopters who trust you for who you are, not what you do. And give you honest feedback. Our first customers here were companies that I know (and they knew me) pretty well. I also pitched a few times on local startup events – there are always plenty different people there and it’s likely that you will find somebody that would be in your target audience. ## Get first case study ASAP Next milestone is to build your portfolio and get your first case study with a company from the tribe. The reason why is quite obvious – if you can show that you helped a company your future clients can identify with, you will build trust. And close new deals easier and faster. There is a not-so-obvious reason as well – if you already have a customer that you brought value to, you will be more confident while selling your product. It’s a milestone in your head as well. This part is the trickiest one – even if your product is proven on other markets, there will be problems you can’t predict before working with new clients. You will have to test and measure and most of all improve over time. It took us two months to finish our first case studies, with clients who loved our service and had a lot of connections (big thanks to Tomek Karwatka from Divante!). Effects on sales were amazing: - we started to get leads from recommendations - we closed more deals, faster – to deal with objections, we would show a case study and say “talk to this guy, he is similar to you and he was very happy with our services”. Your first advocate, that you know will talk about positive results to whomever you point to, is a game changer in B2B deals. Especially if you don’t offer free trials and each new customer has to pay something upfront (back then this was our case). Don’t forget to show non-believers that you did your homework. It’s wise to come back to clients whom didn’t want to buy first due to lack of track record. Show them those successful case studies. It might change their mind. ## Direct Sales and Marketing Now should be the time you can invest in marketing and sales with much bigger ROI than before proving yourself. You know where the leads are, what to do to make’em happy and you have proof of how well you do business. If you chose your target audience well you shouldn’t have a problem with choosing a channel to start with. As we could list almost every company from our target audience, we just started cold emailing almost every of them. Once we let them know we’re here and eager to solve their problems, they started discussing whether to try us out. And of course they reached out to companies we had in our portfolio (pro-tip: be sure that if you listed somebody’s brand on your site you actually did great work for them. They will be asked about you by other companies). Of course, this is not the only way – maybe events and conferences will work better for you ([but before going to one read this](http://righthello.com/2015/03/dont-waste-time-at-conferences/)). Or paid media, content marketing, twitter ads etc. ## Cold Email Hack To get more conversion from our sales at the start, we did a little hack by reaching out to people who knew companies from our portfolio. We just went on LinkedIn and checked our portfolio clients employee networks. When we see somebody from a company in our target audience in his network, we just approach them and use our client name in the email. It’s stalkerish, but also effective and that’s the only thing that matters. ## Magic Happens With every new prospect approached and every new deal closed we started getting more and more inbound leads and referrals. We only needed a bunch of happy customers and dozens of companies that knew about us. Had we gone to a bigger market (for example whole Europe), it would have been much, much tougher. In terms of footprint big enough to create small network effect, 10 customers from Germany + 10 from Poland have a totally different effect than 20 from Poland. After some time, when somebody asks for a lead generation company on a polish IT discussion board, there is always somebody that points to us. Then we could focus on markets other than Poland (we have customers in 11 now), because a stable number of leads from Polish IT simply comes in every month. There is a drawback here though – with every new market we are heading into we need to do the same job almost from the beginning. But with the scenario I just showed you it gets much easier. If you would like to learn more, I recommend a book entitled ‘Crossing the chasm’ by Geoffrey Moore. I think it’s a must-read for all technology entrepreneurs and an inspiration for me in choosing a go-to-market strategy. If you’d like more about those aspects after reading Mr. Moore I’d suggest to try Seth Godin. In the end, there is one last piece of advice: ## Don’t Screw It Up If you won’t manage to provide a value, have poor support or just screw something up, you can spoil your network effect. As you chose a small tribe of people and companies, few unhappy customers could kill your sales. A mistake can happen to anyone, so if you mess it up – do everything you can to fix it. Offer discounts, give money back, improve your product, do whatever it takes to make them smile again. Negative opinion will cost you money, happiness, health and your last shirt. But if the customer sees that you are more sad than him and that you are doing everything to make the sun shine again, you can win him back. ## About Piotr Zaniewicz Piotr Zaniewicz is Founder and CEO of [RightHello](http://righthello.com) and loves Startups, marketing and product development. Follow him on Twitter [@piotrzaniewicz](https://twitter.com/piotrzaniewicz) ## After Word by Lincoln This is a great example of using an Ideal Customer Profile – one heavily weighted on the Advocacy Potential input – to drive results. Sometimes, to grow big… you have to think small. Here are some additional resources for you: - [Ideal Customer Profile Framework](https://sixteenventures.com/ideal-customer-profile) - [Infiltrate Their Network (for good, not evil!)](https://www.linkedin.com/pulse/20140604164554-7018284-infiltrate-their-network-for-good-not-evil) - [5 Rules for Successful Growth Hacking](https://sixteenventures.com/growth-hacking-rules) - [SaaS Marketing: 21 Growth Hacks to Test Today](https://sixteenventures.com/saas-marketing-growth-hacks) - [7 Sanity Checks for Sending Cold Email](https://sixteenventures.com/cold-email-sanity-checks) - [Customer Success is NOT about Happy Customers](http://www.gainsight.com/customer-success-best-practices/customer-success-not-happy/) (since Piotr mentions happy customers) Hope this helps! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Podcast: Customer Success is the Foundation of Your Success *June 11, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-podcast-trepx/ Micky from [Kahuna Accounting](http://kahunaaccounting.com/) 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](https://sixteenventures.com/ideal-customer-profile). 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! ## The TREPX Podcast Episode Check out the podcast right here or go to the [TREPX page for other ways to listen and subscribe](http://www.trepxgroup.com/episode-12-lincoln-murphy-customer-success-is-the-foundation-of-your-success/). ## ## Micky’s Email: 0 to $480k/ARR in 12 Months Lincoln, I just wanted to share that things have absolutely taken off for us. It’s all happened because we identified our ideal customer and went narrower and narrower with our focus. Ever since we fully committed to serving and understanding the needs of law firms, things have blown up. Your help played a big role in this. Not only in working directly with us, but even with your content that I still read pretty regularly. We tried a few different ideal clients who didn’t work, and then once we found the one that did work (Ready, Willing, Able, etc.) we went all in and it’s blown up. To test our assumptions, I interviewed everyone I could who was in the space. I interviewed people who I thought looked like our ideal client (Younger, tech savvy, using practice management tool that integrated with our accounting software, firms w/ 1-3 attorneys) I also interviewed the thought leaders and bloggers in the space. This proved to be incredibly valuable once we gained traction because I already made a connection with the right people. This was the most eye opening thing about going narrow – that once we committed to a niche, the world got really small. We are right now a big fish in a small pond (that’s not really all that small) and everybody knows us. After a long round of interviews affirmed our direction, we went all in with our marketing into this niche. We created a landing page specifically with this market in mind, and learned to speak their language and focus on the pain points they were dealing with. We created a whitepaper based on what we learned in the interviews. We offered discounted rates to some of the ideal prospects we interviewed in exchange for feedback and referrals. We started getting strategic ad placement on the key blogs where our ideal client was. We wrote guest posts and were featured on posts. We collaborated with parallel services in the industry for partnership opportunities. Most recently we have now started attending a few events in the space that have proven to have a really nice ROI. What you have taught about the [awareness ladder](https://sixteenventures.com/how-to-communicate-value) has been really valuable for me as a marketer, because there are certain attorneys we meet who are already at like the 3rd rung and many others who are at the very bottom. So we’ve learned to have a totally different conversation, and ask different questions based on where they are. Now that we’ve kind of taken a breath, added staff and figured out some of the systems, we’re planning on really ramping up. It’s going to be absolutely nuts, and I’m looking forward to seeing it through! Thanks Lincoln, talk to you soon, Micky ## My Reaction to Micky’s Email The coolest thing in the world for me is when a client of mine comes back and says that the things we came up with together completely transformed their business. I love that. While Micky’s results are obviously unique to his business – your results will vary – I hope it’s as inspiring to you as it is to me. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 3 Secrets of High-Converting SaaS Free Trials *June 10, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/effective-free-trials/ While just about every B2B SaaS company offers a Free Trial – especially those with self-service sales models – in my experience, the percentage of SaaS companies that feel their Free Trial is “successful” is fairly low. Disappointingly low, actually. And it absolutely doesn’t have to be that way and in this article I’ll show you how to create high-converting Free Trials! ## The Core Inputs for a Successful Free Trial Now, just to level-set, I’ve talked about the [best SaaS Free Trial length](https://sixteenventures.com/saas-free-trial-length), about the [best email follow-up sequence](https://sixteenventures.com/email-follow-up-sequence), and why the [first in-app experience](https://sixteenventures.com/saas-free-trial-engagement) (first-run experience in old-timer parlance) is critical to [successfully onboarding your customers](https://sixteenventures.com/customer-onboarding). Of course I’ve also covered how [asking for a Credit Card up front is less-than-ideal](https://sixteenventures.com/saas-free-trial), how [extension requests aren’t a good sign](https://sixteenventures.com/saas-free-trial-extensions), and how doing [nefarious things like forced continuity](https://sixteenventures.com/one-dollar-trial) isn’t cool. That’s all true still, for sure, and you’ll need to roll all of that into your Free Trial strategy to ensure success. However, if you really want your Free Trial to knock it out of the park and be that customer-creating machine it should be, I’ve boiled down the… ## 3 Secrets of High-Converting SaaS Free Trials These aren’t really secrets as much as they are things that SaaS companies with high-converting Free Trials do that others don’t. If these secrets are hiding… they’re hiding in plain sight. ### 1. Design For Conversion Your Free Trial must be designed to quickly get the prospect to a point where becoming a paying customer is the most logical next step. It’s that simple. It’s not necessarily easy, but it’s simple. You must remember that your customers are approaching your Free Trial as a way to **EVALUATE** your product to see if it’s right for them… but you must approach the Free Trial to get them to **USE** your product. So the point where becoming a paying customer is the most logical next step is either immediately after your customer achieves (or sees that they could actually achieve) [their Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding) by actually using the product. Most SaaS apps do not have a Free Trial that is designed to get a customer to use and then convert to a paying customer… in fact, most don’t even seem to be designed at all. Letting a prospective customer just poke around and try stuff is pretty much the exact opposite of what I’m talking about here. Any success you have with that “strategy” is in spite of your effort, not because of it. And that isn’t sustainable or scalable. Remember that. ### 2. Engage Beyond the App At this stage of their lifecycle with you, your app is not the center of your prospect’s universe, yet. So you need to take into consideration when designing your Free Trial all of the things that are required to get the prospect to the point where becoming a paying customer is the most logical next step; inside the app and beyond. You must consider everything that needs to happen in their life to make becoming a paying customer the most logical next step. What’s going on in their world – outside of the app – that will affect their ability to get to that point and what can you do to design around that or otherwise help them? We want to leave as little to chance as possible. The more disruption to their existing routine that’s required for a prospect to adopt your product, the more you need to take that into consideration and design your engagement process around that. It’s not all about your product… think beyond the app and really engage your prospect. Honestly… if you haven’t [developed your Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile), it’s going to be very difficult to understand what’s going on beyond the app that you need to be aware and orchestrate around. It’s never – ever – just about functional onboarding. ### 3. Consider All Players You must take into consideration all of the different participants in the evaluation and buying process… yes, even in a self-service model. As I mentioned above, it’s critical to remember that the prospect is approaching your Free Trial as if they’re evaluating it… but you must approach it from the “let’s get them to actually use it” standpoint. So we have to be cognizant of the fact that the person who signs-up for your Free Trial might not make the ultimate decision. Depending upon who signs up, that could require different paths into the app, different first in-app experience, different path to first value, etc. In fact, you could segment the various aspects of your Free Trial based on entry point (CTA followed from a persona-specific piece of content) or self-selection of role. Also, the person that signs-up and the one that evaluates a technical/functional fit, may still not be the person that can pay for it so the economic buyer must be introduced (give the ability to invite someone else to the payment flow). You may find that technical folks might have to get involved, too, where APIs or code snippets are involved (you see this frequently with “mail code to webmaster” for widgets). And again, if you haven’t defined your [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) it will be virtually impossible to know who the various players are. Okay, so those are three high-level ideas that you should use to frame your Free Trial strategy. If you apply this way of thinking along with all of the other Free Trial concepts I linked to at the top of the article, your Free Trial really can become that a customer-creating machine. And that’s a lot better than just an under-performing box on a flowchart! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How To Get Sales To Help Test your Ideal Customer Profile *June 4, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/sales-testing-ideal-customer/ I was talking to the CEO of a [SaaS startup on Clarity](https://calendly.com/lincolnmurphy/clarity) about a dilemma many companies go through. They’ve decided it’s time to get deliberate about their progress and start testing their [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile)… but there’s a problem. They already have sales develop reps (SDRs) generating leads and account executives (AEs… aka sales people) closing deals. Both of those groups carry a quota; SDRs on the number of touches and AE the number of closed deals. So while they know they need to make a change to ensure their long-term success, they know that the SDRs and Sales orgs will want to stick to what works (for them). Here’s what I told them… hopefully it’ll help you if you run into this situation, too. ## Incentives Drive Behavior The reality is, the CEO could try to strong-arm change or just fire the SDRs and Sales teams for not helping with what’s best for the company long-term. But firing the teams wouldn’t be fair since it is the action of the CEO – and his direct reports like the VP Sales – who caused this behavior in the first place! This CEO needed to understand what drives behavior and realize he actually has the power to invoke change in a very simple way; incentivize different behavior. Right now SDRs and AEs are incentivized to make their numbers; contacts and sales. Because of that, they’ll do what works to hit those numbers and get their compensation that’s tied to hitting those numbers. If you tell them to do something different – even if it’s for the long-term good of the company – and don’t change the incentives – the behavior will not change. And they’ll continue to make sales that are incongruent with your long-term success, and might even be [incongruent with the long-term success of the customer](https://sixteenventures.com/customer-success-desired-outcome-understanding); it’s this that is likely the reason it’s time to test an Ideal Customer hypothesis. So… ## Change the Incentives, Change the Behavior In business, it’s just a given that you pay commission on sales and variable compensation to SDRs based around positive contacts. But it’s less obvious that this is not something you have to do. You can pay commission or other “variable” comp like spiffs based on whatever you want. There are no rules (outside of what’s legal / ethical). So if you want to drive behavior that’s in-line with what you feel is the necessary for the long-term success of your company, then create an incentive program for SDRs and AEs that make it worth their while to stop doing what’s just best for them. Everybody wins. But let me be clear on something… ## It Isn’t an All or Nothing Decision If you need to keep making sales in order to survive and literally couldn’t continue if your sales stopped, just remember this doesn’t have to be all or nothing. Let me take a stop back for a second… your sales dropping off completely is not likely to happen – that’s kind of the opposite of what we’re going for here. But if you put all of your resources into testing an Ideal Customer hypothesis, I suppose it could happen in theory, so you need to be aware of that. So, when you decide on a new [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) to test, you can either have all of your SDRs and AEs working the new Ideal Customer Profile, or you can carve out a subset of each group to handle the testing. This way you still have some SDRs and AEs continuing down the existing path and some SDRs and AEs testing the new path. It doesn’t have to be an all or nothing thing, but if it can be it should. If you decide to go the route of having just a subset do the testing, let’s hope it’s not because… ## FOMO Makes an Appearance The only acceptable reason to not have all SDRs and AEs participating in testing your Ideal Customer hypothesis is the aforementioned “we’ll go out of business if sales stop.” But when you get deliberate and focus on an Ideal Customer Profile – one that you’ve developed using the Framework I developed and approach it thoughtfully and purposefully and your team all agree on it – you just should not experience all sales stopping. That’s just not a realistic concern. So if you have concerns like that which are making you think about keeping one foot in the old way and trying the new way with the other foot, it’s FOMO – the Fear of Missing Out – rearing it’s ugly head again. All I can say is this… as a CEO its time to grow up and move past FOMO and get deliberate about your progress as a company. If you need to know why, read the amazing book Essentialism: The Disciplined Pursuit of Less by Greg Mckeown, especially the part about Southwest Airlines vs. Continental Airlines and how Herb Kelleher took Southwest to new heights (pun 100% intended) by avoiding the “Straddle Strategy.” Okay, so here are some things you can build incentive programs around… this is just a sample to get your brain moving in the right direction. ## SDR Incentives for Ideal Customer Testing Sales Development Reps (SDRs) or Business Development Associations (BDAs) or whatever you call the people that reach out to prospects… this is for them. If your SDRs/BDAs also qualify inbound leads, you’ll just have to do this exercise for them, too. That list will be different than this one. ### Ideal Customer contacts If you want to accurately test an Ideal Customer Profile hypothesis, it helps to contact only those customers that fit the profile. To keep your SDRs on track and not go outside the profile to try to increase other numbers, provide an incentive of some sort – might just be a spiff based on accuracy – to actually keep their target lists small. ### Number of Positive Responses If you narrow your focus and really target wisely, you should sky-rocket the number of positive responses you get as a percentage of messages sent. So focus on the actual number, not the percentage rate… especially if trying to benchmark against your “wide net” generic messaging that got a 0.5% positive response rate. ### Number of Message Variants tried You need to be able to test your message, and this is the best way; each variant shouldn’t go out to less than 50 contacts to test what resonates. Ideally, what the SDRs are doing is being backed-up by marketing (landing pages, URL parameter-based dynamic messaging, etc.), so this should be coordinated with marketing. Okay, so those are just some ideas for SDRs. Now some… ## Account Executive Incentives for Ideal Customer Testing ### Ideal Customers Closed While we’re testing an Ideal Customer Profile (and remember, we’ll only test that ICP for a defined period of time), I don’t care how many deals an AE closes overall. I only care about how many deals they close with customers that fit the Ideal Customer Profile. And that’s what I’ll incentivize against. ### Number of Message Variants tried I want my AEs to try different things with prospects; positioning statements, benefit messages, other ways to enter the conversation already going on in the mind of the customer. In order to get that to happen when they already have a version that works, we have to make it just as enticing for them to try the new message as it would be to use the existing one. Or, if you have a particularly complex sales process (hopefully narrowing down to one Ideal Customer Profile will help streamline that process), then you might need to do something like… ### Sales Process Variants tried Obviously you’re never going to close the deal on the first interaction between the AE and the customer so even with the “number of message variants” concept above you have to be diligent about keeping track of messaging/positioning for each customer (add a field in your CRM). But for some situations you might actually want to test a whole different sales process. Maybe it’s high-touch vs. low-touch, where the 1:1 demo happens, whether there’s a demo webinar before the 1:1, etc. You may have several hypothesis about what will work for your Ideal Customer Profile; you need to incentivize your AEs to actively test that variant. This would need to be aligned with SDRs (and incentivized accordingly) and also Marketing, ops, and other team members, too. Speaking of them, here’s what to do… ## For those Without Incentive Plans If you have others involved – from sales ops to lead “research” (scrapers) people, or even your marketing folks – you may not need to create an incentive plan for them since their compensation is likely not based on the same level of variable comp. But you may want to measure their progress differently during testing. Instead of measuring marketing on Marketing Qualified Leads (MQLs) or Sales Qualified or Accepted Leads (SQL or SALs), you might want to start measuring them on how many different variants they tested across ads, landing pages, marketing site, etc. Defining an [Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) is absolutely one of the best things you can do for your company… but there are some things you need to work around, and an existing sales organization is one of those. I hope this helps you make that transition a bit smoother. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Stick Point: When Your SaaS Customer is Truly a Customer *June 4, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/stick-point/ In my recent article on [accurately calculating your SaaS metrics](https://sixteenventures.com/saas-metrics-customer-definition), I mentioned how some customers shouldn’t be considered customers yet. I referred to the fact that there’s a “stick point” or that point in time in the early part of the customer lifecycle where – if a customer makes it that long – they’ll likely stay the entire estimated or typical lifetime. Let’s deep dive on this topic so you really understand what it is and why it matters. ## Determining the Stick Point for your SaaS The Stick Point is something that can either be determined by existing customer data or – at first – may be based solely on contract specifics, credit card refund rules, [success milestones](https://sixteenventures.com/success-milestones), or your gut. While we can assume that a customer that has reached the “first value delivered” stage (the point where they hit that first Success Milestone or where they can – for the first time post-sales – see the real value potential in the product), contractual or other obligations may trump that so we’ll want to put the Stick Point there. So even if we get the customer to First Value Delivered at 21 days in, if the stick point is 60-days due to credit card refund rules (see next paragraph), then we need to wait 39 more days before we consider them a customer. But I want to be 100% clear: the most common Stick Point driver is [your Customer’s Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding) and whether or not they reached success milestones than anything financial or contractual in nature. But, here are some financial/contractual things to consider when determining the Stick Point. In low-touch, self-service, quick-configuration SaaS products, I’ll suggest waiting 1-2 billing cycles (60-90 days) post-conversion before I say they’re a real customer since they technically could ask for a refund and we’d be required to give it. This is doubly important if you do [anything shady like forced continuity](https://sixteenventures.com/one-dollar-trial) or if you require a credit card to start your free trial; after 2-3 billing cycles it’s less likely they just forgot to cancel. For higher-touch, [more complex, or “enterprise” SaaS and Software products](https://sixteenventures.com/enterprise-free-trial), the stick point could be after their 90-day “out” clause expires, after their their POC is complete, or it could be the first renewal; if they renew after the first year or renew their first contract (of a any length), they’ll likely stay the estimated or typical lifetime. ## Why the Stick Point Really Matters in SaaS The reason we care that customers that haven’t reached the stick point yet shouldn’t be considered real customers, yet, is that it helps you calculate your Annual Recurring Revenue (ARR) more realistically. If you simply figure every dollar you acquire instantly into your ARR without taking the stick point into consideration, you’ll likely be off by some (possibly significant) amount. Of course, this only matters if you care about accuracy in what you’re reporting to stakeholders and what information you’re using to run your business. If that doesn’t matter to you, simply ignore everything I’m saying here. The Stick Point is useful far beyond just measuring your customer metrics more accurately; it’s a way to segment the pre-stick point cohort so you can do what’s necessary to ensure they’ll make it to the stick point. The reality is, our relationship with this cohort is more fragile at this stage and we need to [work diligently to get them past that stick point.](https://sixteenventures.com/customer-onboarding) ## Now that You’ve Defined the Stick Point Ultimately what the Stick Point does is help ensure you don’t rest on your laurels after making the sale, that you don’t lose momentum post-sales, and that you don’t drop the ball in the handoff from sales to post-sales org (onboarding, customer success, etc.). It really forces you to keep your eye on the ball and ensure that customers get value in the early days of their relationship with you. The Stick Point is something you can optimize around by focusing on onboarding and customer success, helping your customers form habits, and playing into the psychological factors of Consistency and Commitment (as put forth by Dr. Robert Cialdini in his book Influence). I hope this helps you both calculate your customer metrics better, but also helps you get your customers to a point of success faster and keep them longer! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Free Trials Do Not Devalue Your Enterprise SaaS *June 3, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/enterprise-free-trial/ The CEO of a SaaS company reached out to me the other day and he had a very dangerous misconception that could seriously impact their potential as a company. I hope by talking about it here I can save more SaaS companies from falling into this trap. They sell to large customers and the dangerous misconception was that offering a Free Trial would devalue their otherwise “enterprise” product. That couldn’t be further from the truth! Free Trials **DO NOT** devalue your offering. Let’s explore why that is and what you can do if a Free Trial simply isn’t something you can offer right now. ## Free Trials Don’t Hurt your Value Prop Let’s just get this out of the way; Free Trials don’t hurt your Value Prop. Your offering or company doesn’t look cheap for offering a Free Trial. I suppose a Free Trial could hurt your value prop if it’s a crappy experience, poorly executed, incongruent with the [prospect’s Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding), etc. But a Free Trial in-and-of-itself will not hurt your value prop. But, assuming you’re acquiring high-value prospects that [have success potential](https://sixteenventures.com/ideal-customer-profile), a Free Trial should help reinforce that value prop with the prospect and allow them to get to know, like, and trust you and your product. Free Trials lower the barrier to entry for a prospect significantly, taking the focus off of an immediate buying decision and putting it on just the technical, functional, and [successful onboarding process.](https://sixteenventures.com/customer-onboarding) ## Isn’t “Free” Bad, though? Free isn’t a negative in this context. Free Trials are different than giving something away for free, forever. I really suggest you spend a bit of time [understanding the difference.](https://sixteenventures.com/freemium-or-free-trial) Ultimately, a Free Trial says to a prospect “try my product for 30 days, and then, when you’re hooked, pay me $250k.”Or $20… or $2000… whatever. It’s a Free **TRIAL** of a Premium product, and the customer knows this. Their expectations are that they try the product and at the end of the trial (though you want to make this happen ASAP), they either pay you or they stop using it. Does test driving a Ferrari reduce the value of a Ferrari? No… if anything, that’s what seals the deal for most buyers. ## Free Trial Alternatives for Complex Enterprise SaaS Sometimes however, typically for Enterprise SaaS, doing a Free Trial is legitimately not feasible. It’s usually when there’s simply too much manual effort that’s required to get the customer to a point where they can recognize value (or recognize the true value potential). In those cases, you should still do whatever you can to lower the barrier to entry for the customer. Remember, the customer still needs to know, like, and trust you. So I always suggest at the very least offering one of (or all of) these options as a way to reduce friction and lower the barriers to entry for your customer. ### **Offer a Proof of Concept** I always suggest that these are paid POCs – $10k or $25k is not much to Enterprise customers and should (ideally) be enough to cover your actual costs associated with the POC. There’s not a formula to determine the POC price – like always saying 10% of contract value – so just pick a number that allows you to cover costs and get them to a point where becoming a paying customer is the most logical next step. ### **Give them a 90-day “out” clause** This is basically a way for the customer to ensure they’re getting value in the first 90 days or they can cancel their contract. That might mean that they pay nothing or they just pay for the 3 months. Regardless of whether they’ll pay anything for this first 90-days if they opt out, this can be a great risk reversal tactic for the customer… but your job is to ensure they get value within that first 90-days and that continuing as a paying customer is the most logical next step. ### **90 Day Money-Back Guarantee** The granddaddy of all risk reversal tactics, money back guarantees – whatever the length of time – are super-simple to implement. If for some reason you don’t like our product, you get your money back. It can be a no questions asked scenario, or it can be a “if you aren’t satisfied, contact us” and then you can offer to help them achieve their Desired Outcome instead of just immediately giving their money back. If they insist, obviously fulfill your refund obligation, but it’s critical to know that achieving their Desired Outcome is what customers want… they didn’t buy your product just to waste a few months and then get a refund. Sometimes SaaS vendors don’t want to offer a money-back guarantee because of the abuse potential, but remember this – especially for larger or Enterprise deals – customers don’t sign-up just to cancel later. They’re putting in resources on their end – an investment that is likely more than what they’d pay for your product – and aren’t doing this just to ask for a refund of your subscription fee. This isn’t something people in Enterprise deals will just take advantage of all willy nilly. That’s not something to worry about. ## Keep ’em From Wanting an ‘Out’ The key to all risk reversal tactics is to never let the prospect or customer get to a point where they want to take advantage of an “out” or a refund. Instead of worrying about people taking advantage of your willingness to offer a refund, just offer it to lower the barrier to entry and then work diligently to get customers to achieve their Desired Outcome. Do that, and you’ll never, ever have to offer a refund. Nice. That all said, a Free Trial is still the best and I’d encourage you to get to a point where offering one is feasible… that’ll also force you to think about – and optimize – the entire onboarding process, which is definitely a good thing. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 4 Undercover Ways to Hack Social for More Sales *May 25, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/social-sales/ How often do you hear the term “Social Selling” and either can’t figure out what it actually means or just want to call shenanigans on it? You know you’re not going to close a six-figure deal on Twitter, right? That’s not reality. But that doesn’t mean that Twitter (or any social network) can’t be leveraged to accelerate that same six-figure, high-touch B2B Enterprise deal. In fact, this was the subject of a conversation I had the other day with my good friend Max Altschuler, founder of [Sales Hacker](http://www.saleshacker.com). We talked about all the super-cool ways you can leverage social these days in both the business/market/sales development phase as well as in the sales phase by the Account Exec / sales person. As we talked it occurred to me that this would be a great topic for an article, and Max agreed. I have a couple of things to add in the After Word at the end… but for now I’ll give it over to Max to share 4 of his best social hacks to accelerate sales. Take it away, Max. ## 4 Undercover Ways I’m Hacking Social for More Sales Never before has it been so easy to get so much information about your customer prior to reaching out. But it’s not information in the way we’ve always been able to get it; we’ve always had – albeit less efficiently than today – access to company information, demographics, etc. Today we have access to information from personal interests to the tone a prospect uses; all provided by the prospect themselves! We can even see what our competition is up to and covertly get our brand – or ourselves – in front of our prospects so when we reach out it feels to them like they already know us. This is an exciting time to be in sales, and here are 4 of my best social hacks to accelerate your deals. ## LinkedIn – Frenemies Salespeople are almost always taught to connect with their prospects on LinkedIn. What they aren’t taught is how to configure their privacy settings. Therefore, if you are connected to someone and they haven’t fixed their settings, you can see when they have a new connection. Now why am I telling you this? First go out and connect with reps at your competitor’s companies. Most of them probably haven’t played around with their settings and won’t think anything of it when you ask to connect. Once you’re connected, just wait to see whom they connect with. When they connect with a prospect, you’ll be notified via news feed and you can send a very well timed e-mail. Just don’t mention how you knew to send them an e-mail at the perfect time. **Might tip a competitor off that Emmanuelle could be engaging in a deal with Qualified Opps. Or maybe Farlan is looking to hire Shahira. Matt could be looking at both those options for Andrew. Derive what you can, sometimes it’s more obvious than others.* **Side note:** You can turn this off in your privacy settings in your Accounts tab on LinkedIn. ## LinkedIn – SearchQuant [SearchQuant](http://www.searchquant.net/) allows you to upload a list of attributes or conditions that you’re looking for in a prospect, and then will go out and view the profiles for those types of people repeatedly. This will show up on their Who’s Viewed Your Profile page and will naturally bring them back to see who you are. This actually works wonders for engaging new prospects because it gives you a reason to reach out after they’ve viewed you back. Plus, now they have context and you are more familiar. **h/t to Gregg Thaler of Ringlead for showing me this tool.* ## Twitter – Gauging Tone on Social Tone is how someone acts or vocalizes their thoughts on Twitter. This is important because I can gauge their personality which will be reflected in my outreach efforts. For example, if someone checks into a bar during a big sporting event or tweets his distaste for Mayweather’s fighting style, that places him into a personality type bucket. This type of person will reply to a message differently than someone else. Maybe another prospect is on Twitter tweeting about economic impact of XYZ or something of religious nature. They’ll respond differently. If someone doesn’t have Twitter at all, that’s another sign. Reading these signs allows you to adjust your messaging appropriately so that your recipient is being treated like a friend would treat them. This will lull them into a sense of security and lower their guard. Now you can have a real honest and open conversation about your product. **Take Shep’s casual, friendly tone from his Twitter into consideration when reaching out cold.* ## Twitter – FollowerWonk There’s this tool called [FollowerWonk](https://followerwonk.com/) made by the people over at Moz. Used correctly, you’re able to search Twitter bios by location, or keyword to scope out potential prospects. Then you can have a virtual assistant or bot favoriting things so you stay on the radar. When you’re out sending emails or running through you outreach cadence, they’ll wonder to themselves, “oh, I know this person” or “I’ve seen them around”. Basically, you’re not a stranger. Even more, you’ve been supportive on Twitter. **Another great way to surface leads you wouldn’t have otherwise seen. Get a Virtual Assistant or even a bot to run this for you.* If you enjoyed theses, you can check out more hacks, tips, and tactics on the entire sales process and over 150 sales and BD tools in my new book [Hacking Sales: The Playbook for Building a High Velocity Sales Machine](http://www.hackingsales.com). ## About Max Altschuler Max Altschuler is the CEO and Founder of [Sales Hacker Inc.](http://www.saleshacker.com/) Previously he was the first sales hire at Udemy, and the VP of Business Development at AttorneyFee (acquired by LegalZoom). Follow him on [Twitter at @MaxAlts](https://twitter.com/maxalts). ## Lincoln’s After Word I love these ideas. If you want more ideas – aside from what’s covered in Max’ book – here are some resources I’ve published before: - [Growth Hack: Warm-Up Your Leads Before You Email Them](https://sixteenventures.com/saas-growth-hacking-email) - [Introducing the Co-Outreach Sales Hack](http://www.saleshacker.com/sales/introducing-co-outreach-sales-hack/) - [Use Partner Offers to Quickly Grow Your Business](https://sixteenventures.com/saas-marketing-partner-offer) And of course, before you reach out to your [Ideal Customer](https://sixteenventures.com/ideal-customer-profile), make sure your [email passes these 7 sanity checks](https://sixteenventures.com/cold-email-sanity-checks). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Success Gap: A HUGE Opportunity You Haven’t Considered *April 3, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/success-gap/ There is often a gap between the functional completion of your product and the customer’s Desired Outcome. I call this the ***Success Gap.*** And this Success Gap that stands between what your product does and your customer’s [Desired Outcome](https://sixteenventures.com/desired-outcome) is a huge risk for you. It’s also a huge opportunity if you bridge the gap for your customers. This Success Gap also has another meaning… it’s the gap between what you think represents the customers’ successful use of your product and what they think equates to success. As you’ll see, if you mark a customer as being successful just due to certain use patterns within the product – as far too many SaaS companies do – you could have a distorted view of how successful your customers actually are. That just expands the risk potential within the Success Gap. Let’s dig into this a bit more, shall we? We shall indeed. The Success Gap occurs when your customer functionally completes the tasks necessary in your product to do the thing they want or need to do, but yet they could still fail to reach their desired outcome. Fixing this requires that you acknowledge their “success” may be outside the scope of your product, which means thinking about your customers and not just your product… and then thinking about how you can help them achieve that desired outcome. The closer you can get to that, the better. ## Examples of Success Gaps Some examples I’ve seen first hand that come to mind are: ### Email Marketing The functional use of an email marketing product may be that they send an email to their list. Simple. And as a vendor, you could look at metrics like the number of emails sent and feel good knowing [your customer is “active”](https://sixteenventures.com/active-users-vanity-metric) and using your product. But what if the email was garbage and didn’t help them achieve their Desired Outcome of making more sales? What could you do to help them achieve their Desired Outcome? Teach them to write better emails so they can get more opens, reads, clicks, and ultimately more sales? Help them develop a cadence that engages their audience better? Show them how to build a list of quality contacts that will want what they have to sell? Yes… all of the above. ### Ad Managers A product that allows you to create and manage ads on Facebook. They go through the process of creating and publishing the ads… but what if the ads don’t produce results? Simple… Help them create better ads. Ideally, you can know how the ads perform by pulling in results from Facebook – or whatever the platform – but if not, ask the customer to rate the results and if they rate them low, provide a next step for them to improve. [Close the loop](https://sixteenventures.com/saas-customer-success-eliminate-dead-ends)… if you know a customer is not achieving their Desired Outcome, either automatically or because the customer self-reports, don’t just let that stand… give them something to do, read, watch, or otherwise learn to improve the result next time. The secret to this is to do that even if the results are good… say “Awesome. Let’s make sure you get such good results next time. Here’s a video…” or whatever. ### Lead Capture So they installed your lead capture widgets and now they’ve got the addresses, great… now what? While it might appear that someone is finding success with your lead capture system if their list is growing fast… if they’re not doing anything – or even worse – doing something that isn’t working – with those addresses, it’s not really success. They probably want more customer, more sales, more interactions of some kind… and though the potential for that is there in their growing list, they’re not actually achieving that. You can help them do that by saying “you grew your list by 100 contacts this week… attend this webinar and learn 5 ways to get the most out of those new contacts.” or whatever. ## Opportunity Knocks All Around Even though all of the above examples are marketing apps, please know everything here applies across the board; my examples were just what were top of my mind when I wrote this. The Success Gap can be present in horizontal and vertical apps, passive (like website monitoring, CDNs, etc.) and interactive SaaS, project or campaign-based solutions and those that are used in an ongoing fashion (CRM, HCM, ERP, etc.), etc. You get the picture, right? I hope so because here’s a reality check for you… ## They’ll Blame You! If your customer doesn’t achieve their desired outcome, even if that outcome is beyond the scope of what your product does (but your product is being used to get them there), then if they don’t achieve it, they’re going to blame your product; they’re going to blame you. They’re going to blame the tools that they use because nobody ever wants to take the blame themselves. It can’t be that their ads were poorly designed or targeted or that their emails weren’t designed to generate results. Doesn’t matter. ## You’ve Got Two Choices… All they know is they signed-up for your product, used your product, and didn’t achieve their Desired Outcome. That’s a real problem for you, even though it might not be logical. You have two choices… - Ignore this reality, focus on the functional use of your product and leave “success” up to your customers, knowing that some (many) won’t achieve that and will churn out, or… - Accept this reality and mind the success gap by doing things to help your customers achieve their Desired Outcome. Training, Articles, Videos, Presentations, Courses, Tools, Consulting, Professional Services, etc. In fact, a mix of free (do it yourself) and paid (done for you) may be exactly what you need to expand LTV both “organically” due to increased success reducing churn and increasing customer lifetime and whatever the opposite of organically is due to getting them to actually pay you more. ## The Psychological Benefit of Bridging the Success Gap There are also some really awesome psychological effects that happen when you offer to bridge the Success Gap by teaching someone how to get better results and achieve their Desired Outcome. First, though, remember, I’m not a trained psychologist; I just play one every day as I try to figure out why people do what they do. So the first thing that happens is by offering to train them on how to get better results, you subtly put the onus on them for achieving their desired outcome. You’re sending the message that says “we’ll provide the tools and infrastructure for you, but to get the best results you’ll have to write better emails, design better ads, etc.” That is step one in getting them to stop blaming you for their lack of success. The other thing that happens when you teach someone to be better at their job or to otherwise achieve their Desired Outcome is that they simply like and trust you more. We often remember someone – or some company – that taught us something really important. This is why some companies have such a large army of advocates out there; because they elevate the people that comprise the companies who are their customers. I know of several vendors who have customers that continue to be customers not because of the core technology product they provide but because of the customer-exclusive content they produce. In fact, I know of some situations where one vendor has kept some paying customers who outgrew their product, bought another vendor’s product, but still pay for the first product simply so they can continue to learn from that vendor. While we want customers to be using our product and getting success from it, helping some of your customers achieve their Desired Outcome to the point where they outgrow your solution, but stick around to continue to learn from you… that’s not a bad scenario. Ultimately the side effect of bridging the Success Gap for your customers is they stay longer, pay you more, and tell their peers. Not bad. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Your SaaS Metrics Are Wrong if You Include These Customers *March 20, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-metrics-customer-definition/ A user is someone that uses your SaaS product, right? Or is it someone that signed-up? Or someone that’s active? Or someone that logged in a few times? Hmm. Okay, so maybe defining a user is hard, but defining a customer is easy, right? A customer is someone that pays you for your product or service. Even if they’re still within the legal timeframe for a refund? Or a contractual “cooling off” period? Or if they’re within the 90-day “stick point” (if they make it past 90-days they’ll stick around for a long time)? Or… Wow, so even defining a customer isn’t as straightforward as it might have seemed. And it gets even messier if you’re in a market with a more transient customer base (i.e. [the level of real unavoidable churn](https://sixteenventures.com/unavoidable-churn) is high), if you offer a completely free or freemium product, if you just launched with a lot of early-adopter interest (i.e. the “Product Hunt effect”), etc. To get honest about what’s going on in your company, you need to modify the customer (or user) definition, which is the main input into how you calculate the core metrics of your SaaS business. Let’s explore this a bit… ## Standard User Definition You could totally just use the basic definition of customers and users for your calculations. If your board or investors want to see roll-up numbers, by all means, use roll-up numbers (most good boards and investors will want to get more granular, however). But, just like all high-level roll-up metrics, the real inner-workings of your business can be hidden (obfuscated – often unintentionally… sometimes not) and the actionability of those metrics will be limited. So I’m not trying to talk you into anything here, but if understanding what’s really going on in your business – and then being able to do something about it – are useful to you, this might be something to consider. Cool. ## Defining Users Realistically I’ve covered the topic of [Free Trial users being a vanity metric](https://sixteenventures.com/free-trial-users) before, and I just recently covered the topic of [“active users” being a vanity metric](https://sixteenventures.com/active-users-vanity-metric), as well. Ultimately, when it comes to defining “users” you probably want to start only with those that are actually “engaged” with your product or service (whatever “engaged” means… [hopefully it’s well-defined in your world](https://sixteenventures.com/customer-onboarding)). This means getting away from low-value metrics like “signups” or “installs” or “logins” or even general “activity” and into specific metrics like “contextual activity” or activity that indicates whether the user is doing something from which they will derive value. I’ll be honest… this will likely reduce the number of “users” you have – which will cause a hit to the ego – but it will give you a better, more realistic view of what’s really going on in your business. And of course, the same thing goes for customers… ## Not All Customers Can Churn (Right Now) In the [Customer Success](https://sixteenventures.com/customer-success-definition) world, we often talk about calculating churn for a given period of time only against customers that could churn, i.e. those with an expired contract, who are up for renewal, with an out clause, etc. Those that are otherwise bound by a contract couldn’t churn this month, so if we figure them into our churn calculation, we might look like we’re doing better than we actually are. I’m no mathamagician, so I’ll keep it super-simplified, but here’s how this plays out (for these simple examples I’m talking about [customer or logo churn and not revenue churn](https://sixteenventures.com/saas-churn-revenue-customer)): ### The Standard Churn Calculation (Super-Simplified) Started with this many Customers: 100This many Customers Churned: 10Left with this many Customers: 90 Customer Churn Rate: 10%Customer Retention Rate: 90% ### Only Counting “Churnable” Customers Started with this many Customers: 100This many customers are in the “unable to churn” cohort: 13Started with this many Churnable Customers: 87This many Customers Churned: 10Left with this many Actual Customers: 77 Customer Churn Rate: 11%Customer Retention Rate: 89% While this example might not look like a big deal – just a 1% difference – it’s actually a 10% increase in churn rate if we look at the customers that can churn. Rest assured, that small percentage will quickly compound into something significant. Okay, so there are customers that aren’t eligible for churn, that makes sense, but to get an even more realistic metric, we need to acknowledge that there customers that we really shouldn’t consider customers… yet. ## Not All Customers are Customers (Yet) In the same vein as only considering customers eligible to churn in your churn calculations, you should only count customers that are actually customers in all of your other SaaS metric calculations. Many SaaS companies will have a cohort of customers that – immediately after the sale or right after their conversion from free trial to paid customer – really shouldn’t be considered a customer, yet. Maybe it’s a cohort of customers that came from being featured on Product Hunt, or from being included in a bundle with other SaaS products, or by running a discount campaign (the [way I do discounts](https://sixteenventures.com/saas-pricing-discounts) doesn’t cause this problem, but I digress) where we aren’t sure if they’ll stick around. Or – like I said at the top – maybe it’s a cohort that’s still within the legal timeframe for a refund or they haven’t [reached the “stick point” for your product](https://sixteenventures.com/stick-point) – so we don’t want to figure them into long-term revenue projections just yet. We also don’t want to figure them into “real” churn numbers yet because, for this “too-early” cohort, their churn rate may be higher. Also, their churn ***REASONS*** will be different from more tenured customers ([were oversold](https://sixteenventures.com/sales-mistakes-cause-saas-churn), onboarding didn’t happen, they exercised an out clause, etc.). Of course, you’re going to work to reduce the churn rate in this cohort just as you’re doing for the rest of the customers, but you’re just not figuring it into the overall churn numbers. For instance, in low-touch, self-service, quick configuration products, I suggest that you wait one or two billing cycles (60-90 days) post-conversion before I say they’re a real customer. This is doubly important if you do anything, err… shady… like [forced continuity](https://sixteenventures.com/one-dollar-trial) or if you [require a credit card to start your free trial](https://sixteenventures.com/saas-free-trial); after 2-3 billing cycles, it’s less likely they just forgot to cancel. Again, I’m no mathlete, but it’s actually not that hard to come up with some pretty significant results: ### The Standard Churn Calculation (Super-Simplified) Started with this many Customers: 100This many Customers Churned: 10Left with this many Customers: 90 Customer Churn Rate: 10%Customer Retention Rate: 90% ### Including “Churnable” & Excluding “Too-Early” Customers Started this time period with this many Customers: 100 This many customers are in the “unable to churn” cohort: 13Started with this many Churnable Customers: 87 This many customers are in the “too early to be considered” cohort: 17Started with this many Actual Customers: 70 This many Customers Churned: 10Left with this many Actual Customers: 60 Customer Churn Rate: 14.3%Customer Retention Rate: 85.7% As you can see, by excluding customers that are unable to churn and those that are in the “too early” cohort, we have a real churn rate of 14.3%… or nearly 50% greater than what our “conventional” churn rate is. That’s significant. And you’ll see similar differences in other key SaaS metrics – like Customer Acquisition Cost (CAC) and Monthly or Annual Run Rate – when you start calculating based on more meaningful definitions of users and customers. Of course, you can use whatever metric you want externally to show how awesome you’re doing, but internally – if you want to see how things are ***REALLY*** going – you should be honest in how you measure things by starting with accurate definitions of customers and users. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Active Users are a Vanity Metric *March 20, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/active-users-vanity-metric/ Active customers churn. And when they do we’re shocked and confused. How can this happen? Your customer was very active, logging-in several times in the last month. I think it’s fair to say that if Active customers churn, then “active” – as a customer “state” – clearly doesn’t equate to success. So if it doesn’t mean your customer is successful, what exactly does “active” mean? Let’s explore this a bit further… ## The State of Your Customer is **NEVER** Binary In my experience, “Active” is usually a vanity metric. We feel good when our users are “active.” We can tout metrics like Daily or Monthly Active Users (DAU / MAU)… it’s fantastic, as long as “active” means something. “Inactive” on the other hand is an opposite-of-vanity metric; we panic when they flip from active to inactive. But neither of those “user states” – active or inactive – actually mean anything on their own, without additional context. “Active” is a made-up “metric” that may or may not equate to the customer achieving success, realizing value, or doing anything that actually matters to them. Quite often – at least in SaaS – “active” is unfortunately tied to in-app activity with one of the key inputs being “logins.” Inactive is more telling, right? The user stops “using” and they stop getting value. Unless the email reports are all they need (are they interacting with those emails a lot but not logging in?), right? Or their seasonal downtime kicks in. Or they’re on vacation. Or you’re defining “inactive” as not using certain features you **WANT** them to use (or they bought) but in fact, they’re achieving their [Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding) thank you very much. Context is everything, which is why… ## Logins Don’t Matter While you generally need to sign-in to an app to get value, that action alone is probably not the thing that delivers value to your customer. Simply being “active” in the product doesn’t mean you’re being “successful” either. In fact, a lot of logins and random in-app activity could be a sign that your customer can’t figure out what to do… but they sure would like to. It’s a signal that something’s amiss… but a lot of companies might wrongly classify that customer as “active” and [therefore “onboard” and “successful.”](https://sixteenventures.com/customer-onboarding) “Active” – logins, random in-app activity, etc. – without context could be that the user wants to do something but can’t figure it out, so “active” in that case is actually a churn threat. Crazy. ## A Better Definition of “Active” When it comes to “activity” in your app, you need to know what activity patterns equate to value delivered. No, that doesn’t have to be realtime analysis of complex clickstreams across user cohorts… but it might mean that if their Desired Outcome with your CRM is more sales, that they’re adding leads, calling or emailing those leads, scoring those leads, killing some, closing others, and marking some as “won.” In fact, just a subset of all of those – marking some leads as “won” – would be enough to know their activity is generating the desired results. On the other hand, you could say that – since they’re **NOT** using the 42 other features that your product has – or that the pricing tier they signed-up at includes – that they’re inactive and are a churn threat. Even though they’re marking leads as “won.” ## The Context of Desired Outcome If you tag a customer as “active” or “inactive” simply by looking at usage activity **WITHOUT** the context of Desired Outcome, you will miss things, waste time and resources trying to “save” a customer that’s not a churn threat, ignore customers that are a threat, and otherwise inhibit your growth as a company. But if you knew what they were trying to achieve, and knew that they were in fact achieving that or at least taking the actions necessary in your product to get them to that point ([there is often a ***Success Gap*** between functional use of your product and their Desired Outcome](https://sixteenventures.com/success-gap)), you would know that they are as “active” as necessary and are achieving success with your product. If value is being delivered – if their Desired Outcome is being achieved – then Activity is where needs to be, at least at this point in the customer lifecycle. Of course, you need to show them what their Desired Outcome should be, which would require activity and adoption to increase, which is why you need to develop a customer Nurture Program… but that’s a topic for a [webinar I did recently with KISSmetrics.](https://grow.kissmetrics.com/webinar-86-recording) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # CAC Strategy is the Key to Scaling your SaaS Company *February 26, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/cac-strategy-scaling-saas/ Starting a SaaS company and scaling a SaaS company are two very different things. The same is true for “scaling” a SaaS company in the very early days vs. scaling a SaaS company through the growth phase. And since every company is different and experiences those “phases” at different times in different ways, you have to be careful with blanket statements about what works and what doesn’t. Everything is situational, which is why when you read a post where the author says Customer Acquisition Costs (CAC) doesn’t matter, you need to understand the big picture. Perhaps what you missed was when he said they don’t matter in the early days. Or maybe you missed the part about how that post was talking specifically about heavily-funded startups with 6-figure Annual Contract Values (ACV) and an Enterprise sales model. The reality is, every person that writes about SaaS metrics is doing so with certain situations in mind and if you aren’t in the situation the author is talking about, then you may wish to consume that writing with a pinch of reality salt. Not because what the author said isn’t true, but because it might not be true for your current situation… for your current reality. Which is why when my friend Aaron Bird, CEO and Founder of Bizible (they’ve raised $10.5M since mid-2011), was talking about how a SaaS company’s Customer Acquisition Costs (CAC) Strategy (and Efficiency) is key to scaling I asked him if he’d share that with the world… and he did. I have a couple of things to add in the Afterword below, but for now I’ll turn it over to Aaron… ## Scaling A SaaS Company? Why Your CAC Strategy Is The Most Important Factor Scaling a SaaS company looks very different compared to businesses with non-recurring revenue streams. And this often confuses investors attempting to measure the health of a growing SaaS company. In microeconomics 101 you are taught companies that can reduce cost of goods will have a competitive advantage. With reduced cost of goods it costs less to produce each unit, giving that company the ability to beat competitors on price. As the theory goes, in the long run the price will equal the marginal cost of production (i.e. the incremental cost of producing one more unit). And you could use these cost indicators to measure whether you had a winner or loser. But this theory doesn’t work in SaaS. In SaaS the marginal cost of production is just about zero. The additional server costs to serve one additional customer is very close to zero. There are no inputs like factories or production workers. This suggests the price of SaaS will approach zero, but we know this isn’t true. If anything the price of SaaS is going up. ### So how do you compete on unit economics and why doesn’t econ 101 work in SaaS? In SaaS the cost of sales and marketing is the real marginal cost. Scaling SaaS is finding a scalable way to lower your customer acquisition costs. For founders, two things are true, you have to grow fast and you’re going to have to fundraise to fuel it. To do both, you need a strategy for lowering your customer acquisition costs. It’s the competitive advantage for SaaS companies. It’s the predictor for growth - i.e. getting from initial traction to initial scale. When you achieve lower CAC, it cuts down the acquisition cost payback period, allowing you to invest immediately into acquiring more customers - i.e. grow faster. Hubspot became the second fastest SMB SaaS company to IPO [due to its CAC efficiency](https://sixteenventures.com/saas-cac-efficiency). Hubspot’s efficiency in acquiring customers comes from its mastery of demand generation, having built a content hub that generates sales (its blog). Hubspot’s inbound hub is an asset they no longer have to pay for, they don’t need to pay for web traffic or media. Hubspot built and paid off its factory. And they use that competitive advantage to beat it’s competitors on lead generation. Apptio created the Technology Business Management conference. It attracts c-level IT leaders from Fortune 100 companies to meet about the future of IT. The conference draws in thousands of CIO’s and senior IT managers, i.e. their target buyers. The event is a growth engine for Apptio, allowing it to generate leads at much cheaper cost compared to competitors without a brand recognizable event. Hubspot and Apptio created a barrier to entry with their marketing assets. Each additional visitor to HubSpot’s blog has very little incremental cost for HubSpot. And each CIO that attends Apptio’s annual conference requires less advertising spend. They don’t pay for sales leads. The graph below illustrates the impact of a scalable marketing channel or asset. Once a CAC strategy becomes scalable, that company experiences a competitive cost advantage and pays progressively less than the competition to acquire a customer. ### How do you know when you’re getting to initial scale? Healthy SaaS companies spend less to acquire customers WHILE yielding a positive financial return over the lifetime of the customer. If your numbers are healthy it means you have an effective way to scale your CAC strategy. These numbers will help you from a fundraising standpoint, a lower CAC says you’ll be able to scale quickly. You’ve hired a team that generates demand and closes deals faster and cheaper. This efficient unit means each dollar that goes in results in a positive yield the following the year; and you can expect this yield to continue its upward trajectory. Building a scalable marketing asset comes after you’ve hit initial traction. The tactics you used to get to initial traction won’t get you to scale. On the latter, you need to be building a marketing asset that reduces your CAC. Microeconomic theory doesn’t fit the SaaS model, especially given the [freemium strategy in SaaS marketing](https://sixteenventures.com/freemium-customer-acquisition-costs). Manufacturers win with superior products and cheaper production costs. SaaS companies win through efficient sales and marketing. Manufacturers find a cheaper way to produce something, generating demand. SaaS companies design a product AND design a way to generate demand. A good product can help get you there, but a cost efficient sales and marketing team will get you there. ## About Aaron Bird Aaron Bird is the CEO and Co-Founder of [Bizible](http://www.bizible.com/), a that helps companies – particularly B2B SaaS – make profitable marketing decisions by attributing digital marketing to revenue in the CRM. You can follow him on Twitter at [@birdstweets](https://twitter.com/birdstweets). ## Afterword by Lincoln Lincoln here again. I just have to repeat what Aaron said: **“SaaS companies win through efficient sales and marketing.”** It’s true, and whatever sales and marketing model is required to reach, connect with, and convert your [Ideal Customers](https://sixteenventures.com/ideal-customer-profile) – high-touch or self-service, inbound marketing or outbound prospecting – the key to scaling is making that process as efficient as possible. And that’s why when Jason Lemkin (the SaaStr, and who I was referring to in the intro above) said recently that [Customer Acquisition Cost is Usually Irrelevant in the Early(ish) stage of a SaaS company](http://www.saastr.com/why-cac-is-usually-irrelevant-in-early-ish-stage-saas-companies-vs-b2c-where-its-critical/) it was a good reminder that you should totally listen to what he says because his words are very wise, but you should do so knowing that his words are also very, very situational. Which is why it’s awesome to also hear from someone like Aaron, who is speaking about his situation… which reminds me… it’s his situation… yours may be different. BTW, Key & Peele has ruined me… [I can’t say Aaron’s name the right way anymore](http://youtu.be/Dd7FixvoKBw?t=1m44s). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Let Your Customers Write Your Marketing Copy *February 24, 2015 · by Lincoln Murphy* Source: https://sixteenventures.com/customers-write-your-marketing-copy/ I spend a lot of time talking to SaaS companies about how they should identify their [Ideal Customers](https://sixteenventures.com/ideal-customer-profile), understand how they operate, know what their [Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding) is, listen to what they say, etc. etc. Whether it’s a focus on acquiring new customers, working to engage prospects already in the pipeline or customers you’ve just acquired… or nurturing and growing your long-time customers, knowing how they operate and the words they use in those operations is critical. Well, a friend of mine took this idea of “listening to what your customers say” to the extreme by literally getting his customers to write his marketing copy for him. Genius! His name is Sujan Patel and he’s VP Marketing at When I Work, an HR SaaS product specifically for companies with hourly employees (and the scheduling headaches therein) and I’ll let him share exactly what he did and how it worked out. Take it away Sujan… ## What Happens When You Let Customers Write Your Marketing Copy ### Or… What Happens When You Actually Listen To Your Customers!?! As a seasoned marketer and former CEO of a multi-million dollar marketing agency, I’m a little embarrassed to say that I never really fully recognized the true value of personally talking with customers until just a few months ago. Its not that I didn’t understand the importance of customer engagement and support – I did. But I never made it an ongoing part of my own day-to-day responsibilities as the former CEO of digital marketing agency Single Grain or as the VP of Marketing for [When I Work](http://wheniwork.com/), the SaaS startup that I work for now. But that all changed at the end of 2014 after I was able to boost conversions by over 30 percent as a result of spending two weeks working as a customer support agent for When I Work. Here’s how it happened: ### It Started With a Simple Experiment It all started back in November of last year when I set out on a mission to learn everything I could about our users. I wanted to find out what makes them decide whether or not to convert. After reading that Amazon founder and CEO Jeff Bezos (along with hundreds of his managers) ­[attends](http://www.helpscout.net/blog/customer-focus/) two days of call-center training each year in an effort to truly understand his customers, I was inspired to do something similar at When I Work. As an experiment and personal challenge, I decided to immerse myself in our support department for two full weeks in hopes of learning as much as I possibly could about our users and our processes. ### Diving Head First Into Customer Support After spending the majority of my first day getting trained in and brought up to speed by the head of our customer support department, I got my first taste of customer interaction during day 2 when I was asked to start answering tickets and responding to questions from users over live chat. By day 3, I was feeling pretty comfortable and confident in my ability to help users, so I began to let myself think more like a marketer again. I started inserting a handful of strategic questions into conversations - questions like “what made you sign up for a trial?,” “what’s your biggest challenge or frustration when it comes to scheduling?,” and “what’s preventing you from upgrading to a paid account right now?” The feedback and answers I got were so good and genuinely helpful that by day 5, I was literally picking up the phone and calling people within minutes of them signing up for a trial to talk to them about their businesses, their pain points, their objections, their questions, and, of course, our product. Halfway through my experiment things were going so well that I decided to take things even further by setting up Intercom as an additional way to collect feedback from users. I was so excited about the conversations I was having with our users that I wrapped the second and final week of my experiment up by booking plane tickets for me and various team leaders to attend upcoming trade shows so that we could all have the opportunity to actually talk with and learn from our prospects and customers in-person. In the two trade shows I attended personally, I ended up talking to over 200 of our users over the span of four days. ## What I Learned From My Experiment Before I dive into how I used all the feedback I collected to ultimately boost conversions, I want to start by outlining what I learned. It really came down to three things: ### 1. I learned that we were focusing on the wrong value proposition. At When I Work, our main value proposition has always been that we can save small business owners a lot of time. Business owners and managers who use our app to schedule their hourly employees instead of using programs like Excel can typically save 8 hours or more each week. Saving time has always been the focus of our marketing copy. What I learned from our customers, however, is the idea of saving time isn’t why they’ve decided to use or keep using our app. They care way more about features and solutions. ### 2. I learned that a big chunk of our customers are former Excel-users. During my experiment I also determined that over half of our new inbound trials in our “businesses that have under 20 employees or less” category are currently using Excel to schedule their teams. What I also learned was that a lot of these people felt overwhelmed going from scheduling their employees using Excel to scheduling using our app. Its a big change for a lot of business owners who are used to doing everything the old fashioned way. ### 3. I learned that we don’t spend enough time continuing to sell to or educate our users after they’ve actually converted. Finally, I learned that we really don’t spend enough time selling our users on our features once they become customers. I lot of people I talked to either didn’t know that certain features existed, or if they did know, they didn’t know how to actually use them. ## How I Used Customer Feedback To Actually Boost Conversions With this new knowledge in hand, we made the following changes in an effort to address issues, make improvements, and boost conversions: ### 1. We created new feature-focused Facebook ads. The first thing I did was launch new Facebook ads that focused on features. As mentioned, the messaging in our previous ads focused on the value proposition of saving time. We used language like: - Save 8 hours per week on employee scheduling - Spend less time scheduling your employees - Spend less time scheduling and more time doing what you love With the feedback from customers, we launched new ads that promoted the features people talked to us about most, like: - Shift Reminder Text Messages - Employee Availability - Shift Acknowledgment For these ads, we used language like: - Make sure your employees get to work on time by sending them text message reminders about their upcoming shifts. - Schedule your employees when they’re actually available to work. - Stop your tardy employees from claiming they never saw the schedule. - Since launching these new feature-focused ads, we’ve seen a 43% increase in conversion to trials. ### 2. We ran homepage copy A/B tests that targeted Excel users. The second thing I did was write new copy to A/B test on our homepage that directly targeted people who use Excel to schedule their employees. As mentioned, through my interaction with customers I determined that over half of our new inbound trials were coming from businesses that have 20 employees or less, and that nearly all of these businesses scheduled their employees using Excel before switching to When I Work. Since launching these A/B tests, we’ve seen a 54% increase in conversion to trials. ### 3. We created an entire implementation assistance team and put them in charge of uploading Excel schedules for trial users. The third thing I did was present a solution for the ‘moving from Excel challenge that a lot of our users face. To fix the problem and reduce friction, we ended up creating a small team of implementation assistance specialists whose sole job is to help trial users upload their existing Excel schedules into our app. So far we’ve seen a 225% increase in conversions from this single tactic alone. ### 4. We made revisions our onboarding messages and marketing automation. The fourth thing I did was make significant revisions to our onboarding messages and marketing automation. As mentioned above, I learned from my interaction with users that we weren’t spending enough time educating, or “selling,” users on our features and product once they actually become customers. To address this issue, we added new emails to our onboarding drip campaigns that were geared toward education. Since making these revisions, we’ve seen a 6% increase in LTV so far (only 30 days have passed since we made these revisions). ### 5. We launched behavior-based messaging in the app Finally, as a result of my experiment we also decided to launch behavior-based messaging in the app using Intercom. Its only been a few weeks since we started using the service, but we’ve already started to see a 15% increase in conversions (within the first month) and have been able to improve click-through rates in our email campaigns by 41 percent and reduce outbound emails by 70%. ## Final Thoughts Taking the time to actually talk and listen to customers ended up being an incredibly valuable and rewarding experience for me. If you’re running a business or marketing department and you’re wondering how to take your business to the next level, I challenge you to do something similar to what I did. Spend a few hours, days, or weeks talking to your customers and learning more about them. Authentically engage with them, be open to criticism and honesty, and use the feedback you get to make improvements to your products, your processes, and your business as a whole. Want to learn about more growth strategies like this? Download my new book: [100 Days of Growth](http://100daysofgrowth.com/). It’s packed full of 100 actionable tips that you can use to build brand awareness, boost customer acquisition, and grow your startup fast. Every tip in the book includes a summary, examples of use, recommended implementation tools, links to helpful resources and case studies, and the three steps you need to take to actually implement the tip being presented. ## About Sujan Patel Sujan Patel is the VP of Marketing at [When I Work](http://wheniwork.com/) and author of the book [100 Days of Growth](http://100daysofgrowth.com/). He’s helped companies like Mint, TurboTax, Salesforce, and others land more customers, make more money, and grow their businesses. As the Founder and former CEO of Single Grain, he grew his business from a bootstrapped consulting startup to a multi-million dollar digital marketing agency. ## Afterword by Lincoln Hey… Lincoln here again. There was so much actionable awesomeness in what Sujan had to say that I don’t have a lot to add. Listen to what he said, buy his book, and use this way of thinking across the customer lifecycle. Think of this not only as a way to accelerate your Customer Acquisition process (imagine [writing cold prospecting emails](https://sixteenventures.com/cold-email-sanity-checks) using words your customers have given you), but to guide the [Customer and User Onboarding process](https://sixteenventures.com/customer-onboarding), and even to drive your [Customer Success initiative](https://sixteenventures.com/customer-success-definition). Awesome. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Exposed! A Top-Secret “Enterprise Pricing” Growth Hack *December 22, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/enterprise-pricing/ When it comes to SaaS, you basically have two sales models: high-touch and self-service. Small, bootstrapped SaaS companies often like to go the low-touch, self-service way. Large, venture-backed startups often like to take the high-touch, Enterprise sales approach. And sometimes it’s the opposite of that. It depends. There are just so many different factors that come into play in making the decision about which model to use – not the least of which is who you’re selling to – that it’s simply beyond the scope of this article. While high-touch Enterprise SaaS vendors could certainly learn a thing or two about sales process optimization from what’s below, this is more aimed at low-touch or self-service SaaS vendors that have a “contact us for Enterprise Pricing” option on their Pricing page. But why is this necessary if you have a self-service sales model? Well, read on… I’ve given this advice to my clients over the years, so I thought I’d just share it here once and for all. ## Your Pricing Will Evolve When it comes to SaaS, pricing is not a set it and forget it event. The longer you’re in business, the more customers you interact with and that use your product, the more you learn… the more you will evolve your pricing. Whether it’s to better align with your customers (always a good reason), or because you left money on the table (most companies start out by pricing too low, not too high), or because you want to segment your pricing tiers to reflect more accurate use cases, your pricing will evolve over time. My suggestion to startups is to keep it simple out of the gate… to the point where I say unless you have a compelling reason not to do this, stick with one pricing plan and unlimited users (you can price against a different, probably more valuable metric but this model encourages as much use as possible). Then you watch and interact with your customers, observe and learn from customer behavior both in-app and beyond, and over time you’ll start to see patterns emerge that will indicate how you might further segment pricing. One way to really understand your bigger customers – or at least prospects at first – is to tell those that “need more” (whatever that means, but a lot of folks that might self-identify as “Enterprise” customers may immediately assume they need more) to contact you. This may be uncomfortable for some entrepreneurs who just want that self-service, “no-touch” experience… that passive revenue (that doesn’t actually exist)… but talking to customers is pretty much never a bad thing. And talking to customers that want to pay you MORE than the other customers is also not a bad thing. ## Test Prices Behind the Scenes So you’ll learn what their needs are and you’ll get to come up with a quote for them. Come up with anything you want… there are no rules (except the ones set by the customer… and, well, the law, I guess) which means you get to test pricing hypotheses all day long because these deals are all behind-the-scenes. Sure, you have to be comfortable with potentially losing a deal by throwing out a price that’s too high or terms that won’t fly, but that’s how you learn. This is so different than what happens at the retail level with transparent pricing. ## Enterprise Clients are More Demanding Of course your Enterprise clients won’t just pay you more because they can; they have expectations of service, uptime, security, control, etc. above and beyond that of your retail customers. You’ll learn what those needs are from your interactions with Enterprise prospects, which is one reason to start offering “Enterprise Pricing” on your site as soon as possible. Consider it inbound Customer Development. If you can’t support what they want right now, there may be ways to make that happen… which can often be accelerated by the fact that they’re willing to pay for it. Get them to pay for it, then make it happen… probably don’t act on a promise. Let me be very clear, though… I’m not talking about one-off development for a customer whose willing to pay for it. Again, this is another thing that’s beyond the scope of this article, but the only acceptable development when it comes to SaaS is development that can be leveraged by multiple customers going forward. It’s okay if its development for one customer – right now – but if it’s only that one customer and it won’t be useful for others, then it’s not helping you move your business forward and, in fact, is a distraction. If it is a distraction, even if it appears as good revenue now, it will ultimately cost a lot as you lose focus on the longer-term goals for your company and slow your growth. Just be careful… Okay, now here are the… ## 5 Steps to Improve your “Enterprise Pricing” Sales Funnel Here’s the overall process of what I’m about to describe: ### 1. Prospect Visits the Retail Pricing Page Consider your existing Pricing Page as your “retail” pricing page. This is for your self-service customers only. That might seem obvious, but where a lot of companies go wrong is to also put Enterprise messaging on this page. They even put the Enterprise “tier” in the pricing comparison grid as if we should be comparing the “Small” and “Medium” plans with the Enterprise plans (hint: we shouldn’t). ### 2. Reframe and Re-anchor Enterprise Pricing So instead, just have a CTA for Enterprise Pricing that says something like: “Need More? Contact us for Enterprise Pricing (starts at $XYZ/mo on a 1-year contract)” In this case, $XYZ/mo is like 10x the highest “retail” price on your pricing page. And the exact wording isn’t important here, it’s the sentiment. But don’t talk about volume pricing; leave that for bulk lentils at the grocery store. If you’re going to discount, [do it right and drive up Annual Contract Value](https://sixteenventures.com/saas-pricing-discounts). This completely re-frames the discussion for Enterprise. They were anchored to whatever your retail pricing was, but by putting a “starts at” price before they click the CTA to go to the Enterprise Pricing Landing page, you anchored them to a much higher price and reframed the conversation. The “starts at” pricing also acts as a nice little self-qualification piece for the prospect, too. While they may still try to talk you down a bit, at least you’re starting from a much higher price than if you tried to work them up from “retail” pricing. ### 3. Enterprise Pricing Landing Page The link should go to an enterprise pricing landing page that has a contact form page that has a look and feel relevant to enterprise customers, includes messaging that’s relevant, a reminder that “pricing starts at,” etc. The same contact form rules apply here as do other places… less is more. But at the same time, given the nature of the contact form, asking for a few more pieces of customer data is completely expected. I still say only ask for information that you’ll actually use, though. Definitely include a Notes or Comments form field so they can tell you exactly what their issue or opportunity is. Other data points can be drop downs and checkboxes so you can normalize responses, but let them sound off for sure. Don’t include a captcha. If you must stop the bots, include some type of honeypot, like a text box that is displayed a million pixels off screen or hidden by CSS; if anything gets put in that field you know it’s a bot and just kill it. But don’t put the burden on the person whose trying to give you their money. Protip: Some customers – especially Enterprise customers – may still want to call instead of fill out a form so include a phone number. ### 4. After they Contact you, Get ’em Into the Product Often we think that “sign-up for a free trial” and “contact sales” as two different things. And they are… at first. But we’re going to use the power of Cialdini’s “Consistency and Commitment” to get them to take another action after they already contacted us that’s also in our favor. After they fill out the contact sales form (remember, they know pricing starts at $XYZ so that’s awesome) don’t just give them the standard “okay, someone will contact you shortly” message on the next screen. Instead, either send them directly into the product to get started with their Free Trial… or give them a CTA to sign-up for the trial while they wait for someone from the sales team to contact them. Make sure you let them know this is just in the meantime, and that you’ll be contacting them shortly. Why does this work? A lot of times Enterprise buyers are used to a certain path – contact sales, request a demo, etc. – and if you don’t let them take that path, they may not get started. Basically, after they contact you (which is probably what they NEEDED to do from their perspective as an “enterprise” buyer) you can then give them a CTA to actually try the product. Make sure it’s clear that a sales person will reach out shortly, but in the meantime, they can give the product a try. We often kill momentum in the sales process when we could play off of their actions to drive further action. ### 5. The Best Demos Get ’em Started They’re not just going to sign-up for a trial. But if you let them do what they need to do – request a demo – then show them that they can get right into the product and “play around” on their own, they’re more likely to do that. And then when you do the demo you can do it with them in the product. In fact, if you don’t do this now, I’d get them to sign-up for (or create an account for them) and always do demos within their actual account so that they can hit the ground running from the demo. Once they have a trial setup we can give the demo in their instance (and even if they don’t, when we do the demo we’ll set that up for them) so the demo can be a way to actually get them to use the product. You can invite their employees on the demo, change settings, start projects, etc. all live, and all setting them up for success. It’s all about momentum and velocity… and greasing the skids along the way. ## Who owns Qualifying and Follow-up? Inevitably the question will come up about whether these leads should go right to an Account Executive (AE) or if a Business Development / Account Development rep should intercept the “lead” and then qualify them before they’re turned over to the AE to work. Or there’s the question of whether or not you should take the “lead” information, backfill with data from [InsideView](http://www.insideview.com/) or another source or use a product like [Infer](http://www.infer.com/) to score the leads as they enter the funnel so you can either send to the AE or send to a nurture track because they’re not ready. I can’t answer those questions for you in this article – though if you [hit me up on Clarity](https://calendly.com/lincolnmurphy/clarity) I can probably steer you in the right direction – but I will say that follow-up and qualifying is critical. Otherwise, why put so much effort and spend so much time and money generating leads… if you’re just going to ignore them or let them fall through the cracks? The key takeaway here should be that – like everything else – the follow-up and qualification process will evolve.  No matter what you start out with (or whose process you copy), no two companies are exactly the same and you’ll eventually get to a process that works best for you. But it has to be deliberate; this is not a place for doing things half-way. I hope this helps you optimize your Enterprise Sales process a bit… [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Only 3 Acceptable Pricing Page Discount Tactics *December 21, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/pricing-page-discount/ I get this question from time to time: “Lincoln, is it okay to offer discounts right on your pricing page?” Short answer: No. The longer answer, with some nuanced yesses thrown in,  along with some tactics that you can employ, is below… First, if you haven’t read my article about [optimizing your “Contact Us for Enterprise Pricing” process](https://sixteenventures.com/enterprise-pricing), read it to understand how I view Pricing Pages. Don’t want to read it? Fine… the short version is to look at your pricing page as the place to display your “retail” pricing and how to use that view to streamline your Enterprise opportunity flow, but it all starts with reframing how you view the pricing page. ## Reluctantly Acceptable Discount The typical “annual discount” is just about the only one that is acceptable for a public pricing page, but as I’ve said before that [there’s a better way to do discounts](https://sixteenventures.com/saas-pricing-discounts). Rather than reducing the price on something your customer is going to pay for anyway, I’d rather see you add value and charge the same price (or more). The main reason I’m not a fan of offering a discount on your pricing page is that your prospect may sign-up for the discounted plan when they would have otherwise signed-up for the regular priced plan. And on a general purpose, public page like that you just don’t have context to know whether they would have or whether the discount was the only way. ## Why’d they Take the Discount? Though once they signed-up, you could ask them if the discount was the catalyst or if they would have signed-up anyway. While the validity of the responses to that type of question is tricky to gauge, if you have a lot of people saying things like “honestly, I totally would have signed-up at full price but the discount was offered, so I took it” then you may have a valid result. You can test that hypothesis, BTW, by raising the discounted price to the current list, and raising your current list prices by whatever the original discount percentage was. Then you’ll know that people just take the discount… the price isn’t the issue. In fact, and this is why [you ***MUST*** know your Ideal Customers](https://sixteenventures.com/ideal-customer-profile) – there are some companies out there that, especially older and/or larger companies that have a procurement policy in place that requires them to take a discount offered by a vendor they were already going to do business with. So if you offer a discount, and those are your customers, [they ***MUST*** take the discount](https://sixteenventures.com/develop-pricing-strategy). You can use that knowledge for profit or loss… it’s up to you. So here are… ## 3 Acceptable Pricing Page Discount Tactics Actually… there are 4… I put in a bonus tactic just for you. ### 1. Don’t Show the Discount on the First visit Set a cookie on the first visit and if they return to pricing page a second (or greater) time, show them the discount on the page. Could be just a different version of the page, a different element switched out, a new element on the page, a modal pop, etc. While the discount may get them to sign-up initially, remember to make them a one-time-offer for a discount on the next plan up, getting them to essentially sign-up for the same (or higher) price than what they would have without the discount. ### 2. Only show the Discount When they Leave Do an exit intent popup that says “before you leave, here’s a discount…” Don’t do that only from the pricing page, either… do an exit pop with a discount offer whenever they intend to exit the site. If you can get more sophisticated, then only do a discount exit pop if they visited the pricing page and > x other (perhaps specific) pages. You could use the same logic for offering discounts via a Live chat widget. If you’re using a product that ties website activity to a person you’ve already connected with (and therefore have their contact info) you could send them an email after they’ve bounced around your site. Or you could trigger an alert to the Sales Rep on the account to reach out with a Discount offer. You could use that along with the [“Customer Success bot” method](https://sixteenventures.com/personal-emails) for even better results. ### 3. Retarget with a Discount Offer You could retarget with a discount offer based on the first visit, but I’d rather retarget to get them back to the site, to learn more, to sign-up for the trial, etc. It’s better to do discount-specific retargeting after at least the second visit. (on the second visit, kill the original retargeting cookie and set a new “discount” one… kill it if they make it to a post-signup page.) Discount retargeting works even better to do it after interactions with several price or product-specific pages on a second (or greater) visit. Send them back to a landing page specific to that discount ### 4. BONUS! Behind the Scenes Discounts Ideally, you can build your marketing message around a strong-enough value prop to get them to try the product without a discount. But then, once they’re signed-up, you can [make them a one-time-offer](https://sixteenventures.com/saas-pricing-discounts), behind the scenes, to convert to a paying customer right then (again, do the discount right and grow LTV!) The reality is, while it’s likely you could tighten your value prop, improve your trust factors or sales copy, you just may need a discount to entice them to sign-up. You can still give them their [14- or 30-day free trial](https://sixteenventures.com/saas-free-trial-length)… and you can start it [without asking for their Credit Card up-front (the preferred method)](https://sixteenventures.com/saas-free-trial), but you can immediately make them an offer – right after they sign-up – to get them to enter their CC details, lock in the price, and not miss a beat when the trial expires. The cool thing about making a discount offer like this behind the scenes is that you can test different offers to see what works while knowing that – to a certain extent, at least – people signed-up for your product not just to get the discount. ## Discount to Grow LTV… not as a Crutch As I’ve said before, Discounts might not be as necessary if you get the rest of your marketing and pricing in check… or they let you get away with not fixing those things but continuing to make “progress.” Or discounts might be a part of a strategic plan to drive customer Lifetime Value (LTV). I prefer the latter. Which is why I say, no matter what tactic you use, when they go for the discount, make them a one-time-offer for a discount on the next higher plan or the plan plus a bonus of some sort, to get them to essentially sign-up for the same (or higher) price than what they would have without the discount. And yeah, while that might be a one-time-offer for that discount, you can make as many one-time-offers as you want… though after the first offer post-signup, I’d make the next offers after the prospect reaches an [early success milestone](https://sixteenventures.com/customer-onboarding). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Engaging at Scale: The Secret to Automating Personal Emails *December 21, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/personal-emails/ About a year ago I shared my super top-secret way to automate personal emails more effectively – called the “Customer Success bot” method – with the awesome folks on my mailing list. Since then, I’ve come up with several new uses for this framework that have proven to be incredibly effective ( I’ve shared those below) that go far beyond just the welcome email that started all of this. Now some people will wonder why I share these things publicly when they’re obviously incredibly valuable – and make no mistake, they are **INCREDIBLY** valuable – but releasing them publicly won’t diminish that value. And personally, putting these things out there for the world to see just forces me to get even more creative to stay ahead of the pack. > [@lincolnmurphy](https://twitter.com/lincolnmurphy?ref_src=twsrc%5Etfw) hey Lincoln, I implemented your auto follow up bot strategy & have a 100% open rate over 2 weeks w/it. 🙂 - Morgan Brown (@morganb) [January 21, 2015](https://twitter.com/morganb/status/557976141068111872?ref_src=twsrc%5Etfw) But first, let me give you a little context… *(2026 update: [what changed once the content stopped being the weak point](/automate-the-work-keep-the-pace-human/).)* ## Where Automated Personal Emails Went Wrong If you aren’t familiar with the “Customer Success bot” method (you should use one of the forms on this page to get instant access to the PDF), it’s a method I came up with to combat a side-effect of the “personal email from the founder or CEO, a sales person, or a customer success manager after someone signs-up” trend. The reason sending “personal” emails from the CEO or founder became a trend is because, more than anything, it worked really well. It works to start a conversation, to get people engaged, and as a customer development tool… it was awesome! These emails would be triggered as a response to the prospect that signed-up for our Free Trial, joined our mailing list, or whatever. But then everyone started doing them… poorly. What I mean is that, while “personal welcome emails” are great, the automated method of invoking them proved to be not so great. And here’s why… ## Sleepless CEOs, Desperate Founders, and Deception Aside from the fact that the CEO would send a personal email at 1AM her time, the sheer speed with which she reached out was often a dead giveaway that this was automated. So we’d play with delays… 17 minutes, 1 hour, 1 day… but even though it was better than instantly sending them a message, it was still sending the wrong message. Aside from the problems with authenticity – and especially when sent from the CEO – it just looks like the CEO is waiting around for people to sign-up! Seriously, it looks you’re just sitting there watching your dashboard and when a new prospect pops up, you fire off an email. And of course this would happen at 3AM your time because they’re in London and we’re in San Francisco. So it either doesn’t pass the Turing test (i.e. it’s obviously a bot) or it reeks of desperation. Probably both. Not a great first impression, right? We need to change things up. We need to do something better. And that’s how I came up with the “Customer Success bot” method. A key element to this – or any system that automates personal emails – is… ## You Have to Factor in Business Hours Any personal emails that you want to appear to be, well, personal, should be sent during ***YOUR*** business hours, right? That just makes sense. That means, even if your customers are in a timezone where it’s the middle of the day for them, if you aren’t living on that timezone’s time, then you’re setting unrealistic expectations and doing all the other negative things we talked about. That all said, I’d think of this as less about “business hours” and more as “realistic response hours” and know that what you choose is closely aligned with the positioning you’re creating. You may allow it to go until 7 or 9PM on weekdays and Saturdays (but start it after 11AM on Saturday), but turn it off on Sundays; that’s a little less buttoned-down, a little-less Enterprise. But some companies (or executives, really) will want it to be 8-5PM, M-F, period, no exceptions. Go with what works for you, but probably never allow messages to go out in the middle of the night your time. BTW, this is not a function built into most lifecycle messaging systems so you’ll have to build in your own workaround until the vendors realize how important this really is. While I’m not going to spoil what’s in the PDF (you should get it), I do want to ensure you really understand the premise of what I’m talking about here, so let me continue by… ## Introducing the “Customer Success bot” Method (Again) These new use cases for “Customer Success bot” method doesn’t actually change the method at all; they just expand on the original concept and take it to a whole different level! Remember, the basic idea is that the “Customer Success bot” is a thing inside your network that emails you when something happens, and you then “forward” that email to the recipient. If you aren’t sure why that’s super awesome, it’s all in the PDF. Oh, and remember that there are several things you need to do – some technical, some operational – to ensure that this appears to be a personal email from you, which is all in the PDF. Okay, here we go with… ## 7 New “Customer Success bot” method Use Cases Since I first released this method to my mailing list, I’ve come up with several new uses for this framework that have proven to be super-awesome… and it’s time to share those with you. BTW, I shared these with my mailing list a couple of months ago. They get all the good stuff first… you should join them (use the form above). And remember, these are just 7 new ways to use this framework… I could come up with 7 more easily. You could, too. Use your imagination and make it happen. ### 1. [Customer Name] Achieved their [First Success] “Hey, I just saw you closed your first deal, awesome!” - I’d definitely add something like “PS: I can’t see details; it just tells me about high-level actions.” just to take out the creepy factor. - Here’s more on just what the heck a [“first success” might look like](https://sixteenventures.com/customer-onboarding). ### 2. [Customer Name’s] Support Ticket was just Closed “I just saw your support ticket was closed, was it a good experience?” - If you automatically send out an NPS survey, for example, make sure these don’t interfere with each other. - BTW, this may be a great way to trigger an NPS survey, actually: - A positive response flips the “send survey?” bit to 1 in the customer record - But a negative response warrants outreach by the CSM to smooth over any problems - Once that is resolved, flip the “Send survey?” bit to 1 and send them an NPS survey - Yes, this biases the NPS result… it makes more Promoters that you can then leverage as, well, promoters.. as advocates to spread the word for you. Win! ### 3. [Prospect Name] Requested Pricing “Hi… I saw you requested pricing…” - Ask an open-ended question to help qualify them - You can either do that before you give them the pricing they requested – a bit of a give and take or quid pro quo (a good thing to understand in sales) or you can include a PS: w/ the link to price list or pricing page. ### 4. [Prospect Name] Requested a Product Demo “Hi, I’m James… I’ll be doing your demo. I want to make sure we use our time together wisely, can you tell me…” - Ask an open-ended, specific question so you can help them better - This also gauges interest… no response, or terse response, may show that they’re shopping around and evaluating other products ### 5. [Customer Name] Completed a Survey “Just saw that you filled out the survey, thanks for doing that. BTW, I was wondering…” - Ask an open-ended question… the hypothesis is that they’re more likely to answer this bigger question because you asked them directly than in the survey itself. - You could trigger this email based on certain response criteria in the survey itself. ### 6. [Customer Name] Cancelled their Account “Oh man, I’m sorry to see you cancelled your account. Could you tell me about your experience with our product?” - Don’t ask for feedback… that’s about them. Ask about their experience. - Send it the next day, after you let ‘em [go through the cancel flow](https://sixteenventures.com/growth-hacking-retention#12). - A lot of companies like to ask people “why are you leaving?” while someone is leaving. You might get some good answers, but most likely you’ll get whatever they can answer that allows them to cancel as quickly as possible. In fact, even if they weren’t upset with you before, they might be as soon as you make them answer questions to cancel their account, pretty much ensuring you get a less-than-helpful answer to the question. - But once they’re canceled, they’ll be calm and will probably give you a better answer. ### 7. [Customer Name] Visited the Cancel Page - Even if they didn’t actually cancel their account, [this is a churn threat](https://sixteenventures.com/saas-churn-threats). - You could also just trigger a regular lifecycle message that will help them get value, offer a discount, give a testimonial or case study, etc. but doesn’t mention the cancel page visit. - Or you could use the CSBot to reach out to them, saying something like: “**Yikes… my little alert bot told me you visited the cancel page. Just want to make sure everything is good on your end…**“ - Now, in the [Customer Success Management](https://sixteenventures.com/customer-success-management) world, we like to say that you shouldn’t ask “if everything is okay” you should know. And if you don’t know, it’s likely because you haven’t been in communication with the customer (to get context beyond their usage data), which might mean that this email after they hit the cancel page is the first one from you in a long time, which is probably why they have one foot out the door to begin with. - But it’s never too late to get started, and trying to save your customer is a great place to start. Just don’t let that be the only reason you reach out to your customers. Okay, hopefully that gets your brain moving in the right directly. There are obviously tons of other ways to use this “Customer Success bot” method… how are you using it? [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 5 Growth Hacks to Supercharge your Invite or Referral System *December 19, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/invite-hacks/ When was the last time you referred your friends or invited co-workers into an app after you just signed-up for the free trial? When was the last time you imported your address book right after you opened an app for the first time? Right. So why do you expect your users and customers to behave differently? Unless you have specific intel indicating they will share your app with everyone immediately after first interacting with you (like, for instance, my Mom is your target audience), then you should probably assume they won’t. And if you sell to a B2B Audience, you should double-down on that assumption. Here’s why and how to overcome that… Far too many SaaS products and apps ask the user, prospect, or customer to share the app with their friends or colleagues **WAY** too early in their relationship. In the early days of your still-fragile relationship, people don’t know, like, and trust you to a point where sharing your product with their colleagues on step 3 of your Free Trial is a realistic ask. It’s not, and it’s due to Social Capital. ## The Power of Social Capital Let’s talk about [Social Capital for a minute](https://sixteenventures.com/saas-marketing-growth-hacks#16) and you’ll understand why making such a heavy “ask” too early in the relationship doesn’t work. People on Facebook will share things with friends and family that make them look silly or even stupid. Social Capital with family and friends… and even strangers… is plentiful. In fact, doing something stupid in front of your friends might even make your Social Capital rise. But at work, in a business setting, things are different. Very different. People are actually **LESS** likely (my own observations) in a B2B setting to do things they know could make them look stupid. And if they aren’t sure how something is going to make them look – good or bad – guess what? They’re going to err on the side of caution. If you understand this, you can take advantage of that to drive invitations. If you don’t get this, you’ll wonder why no one invites their co-workers before they’ve even had a chance to see the product in action. Below are five things that have worked for me and my clients over the years to make the “invite a colleague” system not just work but become a critical growth (both intra- and inter-company virality) driver. But first… ## The Reality of Network-Centric Products The reality is that some products are really only useful when you use them with others, for instance collaboration and communication products. I mean, you can try to make them useful on their own, but that’s just not always possible (given time, resources, etc.) and may defeat the actual purpose of what you set out to build initially. Sure, I’ve done things things like use bots to provide “interaction” or even to get them to add me (or a person within my client’s organization) as a stand-in… but it’s just not the same. Ultimately, we want them to bring other people that they trust into the fold. And in a land-and-expand model – or any model where [upsell or expansion revenue](http://customersuccess.gainsight.com/customer-success-upsell-renewal/) comes from additional people accessing the system – an invitation system can be the difference between mediocrity and wild success… … and these hacks should help you do get closer to the latter. ## 5 Growth Hacks to Supercharge your Invite or Referral System It’s actually 6… there’s a bonus. ### 1. Move the “Ask” to Later One of the simplest things you can do is remove the “invite a colleague” thing from the initial engagement process in your Free Trial. Then, once they’ve reached a [Success Milestone](https://sixteenventures.com/customer-onboarding) that indicates they’re sufficiently engaged and that they know enough about your app, you can ask them to invite colleagues. ### 2. Tell them who to Invite Get specific on who they should invite (beyond “Invite your Friends/Colleagues/etc.”). Be Prescriptive; don’t make them think. The more specific we’ve been able to get, the better it seems to work. I say it like that because there’s no empirical evidence that I know of and I’ve only done this in about 10-15 situations over the last couple years. But when we could get specific (“most people invite a Project Manager, Developer, and Designer”), it’s worked well. Well as in I’ve seen a 20x increase in these types of invitations. I’ve also seen it not really have any lift at all, so there’s that. But I’ve never seen the variant do **WORSE** than the control, so to me it is worth trying. But… it requires you to know your customers, though, and understand who they’d likely refer. At a tactical level, if you’ve had them log-in (or sign-up) with LinkedIn or Google Apps, you could take their professional title and use that suggest the three people for them to invite. Not just the titles to invite (though if you didn’t want to go too far with this, you could stop there), but the actual people, with their profile pictures, that they should invite. That’s powerful. The same thing for app developers on mobile devices; you have access to some very interesting context even without the user or customer logging in with a 3rd party service; how could you use that to make this “invite hack” work? Use your imagination. ### 3. Limit the Number of People They Can Invite This is a super-ninja hack I discovered while helping an employee evaluation company whose prospects were having a bad experience during the free trial. Why was it a bad experience? Well, the people they invited – their direct reports – were not all interacting with the system, or were interacting but in less-than-ideal ways, and overall just making more work for the manager… who was the prospect. That led to frustration and ultimately led to a lot of prospects bailing on the trial and not converting. But to actually see the power of the system in action, the prospect really did need to invite others. So what to do? Well, since we couldn’t give specific suggestions on titles (we probably could if we had more info from them like industry, department, company size, etc. OR used a 3rd party login like Linkedin or Yammer), I thought the best thing we could do in this case was limit the number of people they can invite. Make them handpick 2 or 3 people to help them test the system (see #4 below). And without any prompting to “pick your favorite employees” they would just intuitively pick their favorite employees. That was the hypothesis and it turned out to be true. They aren’t going to be like “yeah, let me invite my least favorite people – who I’m actively trying to figure out how to get rid – of to help me test this thing.” And it worked. And I’ve used this exact method in several other instances and it’s worked really well. I’ve actually done this in some instances where we might normally have an unlimited invite system to just make the “ask” smaller (vs. add your entire address book). Choices increase the cognitive overhead…. let’s reduce that for them as much as possible. From a psychological standpoint, scarcity may come into play here, too. At some level it forces them to think about who to invite, meaning they’ll likely invite only people that will help them have a positive experience with your product. Win-Win. ### 4. Get ’em to Invite Others to Help Test During Free Trials, instead of just asking your prospect to invite their colleagues/coworkers/friends – this is a big ask since they don’t know, like, and trust you yet – tell them to invite 2-3 people to help them **TEST** or **EVALUATE** the product. You may (should) be trying to get them to actually use your product, but remember… they’re still evaluating, so play into that mindset. So simple, yet so easy to overlook. ### 5. Get ’em to Follow-up with Invitees Remind your user/prospect/customer to tell the people they invited that they were invited. This is another Super Ninja hack that I’ve just continued to refine over the years. After they invite people (on the “thank you” or “invitations sent” screen), remind them to tell the invitee to be on the lookout for an email from your system, with the subject of, etc. You could even email the person who did the inviting to remind them to ping the invitees. It’s critical that you get their invitees into the system; they invited them and need them in there and for you… it can only help close the deal and/or ensure their longevity as a customer. If you know something about how they operate – distributed teams, for instance – tell them to hit those people up on IM or Slack or whatever. Or to walk down the hall and tell ‘em if most of your customers are departments in company HQ. ### 6. Bonus! Make Multiple Asks It’s one thing to make the ask too early in the relationship and to make it too broad (hopefully the previous hacks will help you get past that). But it’s another thing to let that be the **ONLY** time you make the ask! Sure, I may be able to access the invite screen from within the app somewhere (or not… I’ve seen plenty of instances where if you don’t do it in the first part of the Free Trial onboarding you’re out of luck), but are you actively surfacing a call to action to invite co-workers later in the process? During the Free Trial, I want to invite others to help me test. But whether I pass on that or take advantage of the opportunity to invite other “testers,” after I’ve converted to a paying customer, it might be time to invite a few more people to get the platform setup. And then after they all reach a [Success Milestone](https://sixteenventures.com/customer-onboarding) surface another opportunity to invite others. Think of invitations as a graduated ask; not all at once, but as milestones are achieved. Or you could trigger an invite ask after a customer’s NPS survey response indicated they are a “Promoter” – since they raised their hand and said they’d tell others about your product, don’t let them not do that… give them the invite CTA. BTW, this is an **AWESOME** way to get people to spread the word beyond their own user group or department and introduce you to a whole different part of the company. Think of that as Intra-Company Virality! ## Don’t Forget to Optimize Invitee Onboarding And finally… don’t forget to make the [onboarding process for the invitee](https://sixteenventures.com/customer-onboarding) awesome, too! This is often an afterthought and a reason “invitations” don’t work (aside from making the ask too early in your relationship). This includes ensuring invitees get the same (or equivalently great) first in-app experience, get follow-up and triggered emails, etc. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Myth of Unavoidable Churn *December 10, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/unavoidable-churn/ When it comes to customer churn, there are two kinds: avoidable and unavoidable. But I guarantee that the amount you label as “unavoidable” is actually much smaller than you think. I know, but… “Most of our churn is out of our control, so it’s unavoidable” “We sell to SMB and in that market churn is inevitable.” Accepting that churn is inevitable since x% of companies fail every year is like saying why workout, you’re just gonna die anyway. But the excuses continue… “We have a low price, so of course we have high churn.” “We sell to [a certain market segment] so of course churn is high. That’s just how this works.” “We sell to a very transient market, so of course churn is inevitable” Unavoidable. Inevitable. To paraphrase a monologue from a classic Seinfeld episode: *“No matter how desperate we are that someday a better customer will emerge, with each notice of cancellation, we know it’s not to be; that for the rest of this sad, wretched pathetic quarter, this is who we sell to, to the bitter end. Inevitably, irrevocably; low churn? No such thing.”* SO MANY SaaS – and other types of companies – make this costly assumption, so let’s dig into why this is a dangerous myth. ## Time to Reevaluate Unavoidable Churn It’s very easy to fall into the “unavoidable churn” trap, but you must resist it at all costs. Which means you can’t blindly accept any churn as “unavoidable.” You have to challenge that notion every time it surfaces. In fact, anytime you find yourself saying churn is unavoidable, put a dollar in your “unavoidable churn” pizza fund jar and then go research whether your assumption is correct or not. In my experience, actual unavoidable churn is much lower than most people think; not sure why it is, but for some reason we generally accept that churn just happens. That isn’t to say that some churn doesn’t happen, or that a portion isn’t truly unavoidable – it does and it is – but churn will happen a lot less if you figure out the root cause and do the things necessary to keep it from happening in the first place. it’s only once you truly understand this that you can realistically – and effectively – apply the [Churn Classification Framework For Customer Success Management.](https://sixteenventures.com/churn-classification) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Secret to Successful Customer Onboarding *October 22, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-onboarding/ *[Também disponível em Português](http://resultadosdigitais.com.br/blog/o-segredo-do-sucesso-na-ativacao-de-clientes/) por [Mathias Luz](https://twitter.com/mathiluz)* Customer onboarding has come up a lot lately, which is great since having a poor onboarding experience for your customers can pretty much kill your growth… if not your business. The first in-app experience your customer has with your product [sets the tone for your relationship](https://sixteenventures.com/saas-free-trial-engagement), and if it’s confusing, overwhelming, or otherwise puts up barriers to achieving success (or at least recognizing the value potential in your product), you’re in trouble. As I say all the time, [the seeds of churn are planted early](https://sixteenventures.com/seeds-of-churn), and those seeds are planted deep if your onboarding experience for new customers or your prospects during a free trial is terrible. Every time I talk to a low-touch, self-service SaaS company experiencing massive drop-off immediately after sign-up, low Free Trial-to-Paid conversion rates, few customers staying past 90 days post-conversion, etc. it is always an onboarding issue. When I talk to Enterprise, high-touch SaaS companies that experience a lot of churn or non-renewals, aside from misleading sales practices, the main culprit is the customer onboarding process. Whether the [Time to First Value](https://sixteenventures.com/saas-customer-success-quick-wins) is too long, the experience is painful, or expectations are simply mismanaged, those “seeds of churn” can be traced back to onboarding. > Proper onboarding isn't done to prevent churn; it's done to ensure the customer achieves their Desired Outcome. Retention comes from that. - Lincoln Murphy (@lincolnmurphy) [April 21, 2016](https://twitter.com/lincolnmurphy/status/723245447901368321?ref_src=twsrc%5Etfw) Regardless of whether it’s a high-touch or low-touch scenario, 100% of the time, the problem is that the SaaS vendor either doesn’t know what the customer or prospect’s [Desired Outcome](https://sixteenventures.com/desired-outcome) is… or forgot that solving for that is the most important thing. ## What defines an ‘Onboarded’ Customer? Most people think in terms of “functional” or technical onboarding; getting their customers and users to go through the motions to get “up-and-running” with their product rather than equating onboarding with a value delivery milestone. But even if they focused on value delivery, there’s still no universal definition of a fully-onboarded customer; it’s simply different for every company. And for SaaS vendors – where customers can start small and (ideally) expand their use of the product over time – the notion of “onboarded” as a status is even harder to nail down than it was with traditional Enterprise software. So, since it’s hard to nail it down and there’s no universal definition for it, I prefer to consider a customer “onboarded” as one of two poential states: - they’ve achieved “initial success” with your product (consider this First Value Delivered – FVD) - they haven’t gotten actual value yet, but for the first time outside of your sales and marketing, they see the real value potential in this relationship with you. So, what “initial success” (realized or potential) does my customer ***need*** to achieve when all parties understand that the breadth and depth of use will continue to evolve and expand over their lifetime as a customer? That’s a great question to keep top of mind as you go through this process. When I talk to someone about [optimizing their SaaS Free Trial for more conversions](https://sixteenventures.com/optimize-your-free-trial), as an example, I ask them what a successful Free Trial looks like for their prospect. And no… it’s not “they convert to a paying customer.” That’s **YOUR** definition of success; don’t confuse that with **THEIR** definition of success. ## Situational Success: Trial, Proof of Concept, and Early Lifecycle While we’re solving for their initial success – not ours – you’ll find in a Free Trial, for example, that initial success for your customer is actually the point where becoming a paying customer is the next most logical step. So you’ll get that “they convert to a paying customer” outcome you want, by focusing on the outcome they want. Winner-Winner. They’ve realized value – or they’ve seen the value potential in the product – and they’re technically ready to convert. That could happen on day 2 of a 30-day free trial, but most companies will let them go the full 30-days (or even longer) before they try to get them to convert. Imagine if you asked for the sale right after they achieved “success” … if that happens on day 3, you could convert a customer on day 3 of a 30 day trial, instead of waiting until the trial is over. This is also why you should tie your customer or prospect communication (in-app messages, emails, phone calls, etc.) to their progress – or lack thereof – through those [success milestones](https://sixteenventures.com/success-milestones) instead of saying you’ll just send something on Day 1, 5, 7, and 32. Since your customers will achieve success on their own cadence, [having a timed autoresponder sequence](https://sixteenventures.com/email-follow-up-sequence) – when the technology is readily available to trigger based on milestones reached – is just irresponsible. Okay, that makes sense… but how do you create a plan, customer journey map, etc. that will guide the customer to achieve “success” in the first place? You create a plan to get here by identifying “initial success” and backing out from that goal while identifying success milestones along the way. ## Not Sure How they Define Success? Ask. Whenever I layout that plan for creating the success milestones, though, I always get people saying they don’t even know what success looks like for their customers in the first place. How do you figure that out? That was a great question to ask **BEFORE** you built your product, probably… but at least you’re asking it. The easiest way to figure out what success looks like for your customer – before you can break that down into milestones – is to ask them. - What is their [Desired Outcome](https://sixteenventures.com/desired-outcome)? (Don’t ask them this directly, but ask questions that expose this) - How do they measure success themselves? - How are they measured by their boss? - What are they trying to achieve with your product? I’d ask them what “success” means to them first, do that with several from a similar cohort (if you have multiple types of customers across various use cases – as you often find in very horizontal products – you may want to [pick an ideal customer to focus on](https://sixteenventures.com/ideal-customer-profile) initially), analyze that for similarities and patterns, reduce it down to a handful of absolute required outcomes, and then turn it back to them for approval/buy-in. But to be absolutely clear, you’re getting them to tell you the outcomes they desire, and maybe the milestones needed to get to that “success” with your product. You’re not asking them what they need or want (features, functionality, or even workflows) since they’ll just tell you what they’ve done before or what they wish they could have done; if you build end up simply being iterations on existing ways of doing things. You can make big leaps forward by understanding not what they need to “do” but what they need/want to achieve and using your creativity/engineering prowess/entrepreneurial spirit to solve for that. This is where [Desired Outcome](https://sixteenventures.com/desired-outcome) thinking really shines, BTW. Iterating on existing processes isn’t fun or really the lucrative in the long run. ## A Thought Experiment: The Online Store Builder Let’s say you have an e-commerce store builder, what does initial success look like for your customer? The first time they sell an item? Sure… we’ll go with that. What are the things the need to do to achieve success? ### Customer-Centric Success Milestones: [](https://trello.com/b/ih3W3Hmd/customer-centric-success-milestones) - Decide to open an online store <== the required step 0 - Create the Store - Make the store their own - Figure out how to get paid - Stock the virtual shelves - Get feedback on the design - Open for Business - Get customers? (Potential [Success Gap](https://sixteenventures.com/success-gap) here, BTW) - Make their First Sale! <== success (at least at first) To the right is what it would look like if mapped out in Trello (you can get access to the [actual Trello board here](https://trello.com/b/ih3W3Hmd/customer-centric-success-milestones)). What might that look like in the product? - Sign-up for the Trial <== the required step 0 - Create the Store - Customize the Store <== [The “Wow!” moment](http://lincolnmurphy.com/customer-success-wow-moment/) is here maybe - Setup Payment Method <== gotta get paid! - Add & Configure Items - Soft-launch Store w/ Friends and Family - Incorporate Feedback and Refactor - Publish Store and Promote - Their First Sale! <== this is actual success, right? Below is what it would look like if mapped out in Trello (you can get access to the [this Trello board here](https://trello.com/b/6O7ra4d7/online-store-builder-product-centric-success-milestones)): [](https://trello.com/b/6O7ra4d7/online-store-builder-product-centric-success-milestones)   [](https://trello.com/b/6O7ra4d7/online-store-builder-product-centric-success-milestones) Whether that’s the right set of success milestones for an e-commerce store builder isn’t the point, but I got there by saying “what would success look like for my customer?” and backing out from there to meet them where they are at first. Like I said earlier, don’t guess about what “success” is for your customers. If you don’t know, ask them. In the early days, this is where Customer Development work really pays off. But, if you’re in-market and looking to optimize, this is where leveraging the expertise, experience, and knowledge of your [Customer Success Management software](https://sixteenventures.com/best-customer-success-management-software) (or your Customer Success Managers) and/or continually doing new Customer Development really comes into play. ## Just Focus on the Next Success Milestone The cool part of breaking down the onboarding process like this is that while you must keep the overall goal of success in mind, you only have to solve for the next success milestone with your lifecycle messaging, app design, etc. Once they reach that milestone, onto the next one and so on. This makes creating those email or in-app lifecycle messages easier and results in them being much more effective. Oh, and keeping this “success milestone” way of thinking after they become a customer – or are otherwise past the customer onboarding process – will allow you to surface upsell/cross-sell offers, as well as advocacy requests, at the perfect time so you’re more likely to get a positive result. BTW, this way of onboarding customers is exactly how I helped one SaaS company take their average conversion time on a 30-day Free Trial from 42 days (yes, an average of 12 days post-expiration for conversion to paying customers) to… 3 days. Yes, you read that right. Average conversion time went fro 42 days to just 3 days. Oh, and [through the use of creative discounts we also drove their Average Subscription Value (ASV) up by 33%. Awesome!](https://sixteenventures.com/saas-pricing-discounts) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 7 Sanity Checks for Sending Cold Email *September 22, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/cold-email-sanity-checks/ Email Prospecting, the once-secret method (still) used (to great effect) by the hottest companies to get the attention of the biggest enterprises out there – even if all they talk about publicly is inbound marketing, adwords, and social – is no longer a secret. Thanks to folks like Heather Morgan of SalesFolk, [Aaron Ross](http://predictablerevenue.com), author of Predictable Revenue, and [Steli Efti](http://blog.close.io/5-cold-email-templates-that-will-generate-warm-leads-for-your-sales-team) from Close.io, the cat’s out of the bag that sending emails to people you’ve never met before in order to get their attention and get your product in front of them doesn’t just work… it is often required and can be super-effective. This isn’t to say that blogs, social media, AdWords, etc. aren’t useful… they’re ***ENORMOUSLY*** useful to accelerate deals, elevate and educate various personas at [your Ideal Customers](https://sixteenventures.com/ideal-customer-profile), etc. But it is to say that these methods may not be the way you reach potential customers *initially*, especially in the early stages of your existence. And in some cases, they may not be how you reach your potential customers ever. Now, after they know about you, as a result of outbound “cold” email campaigns, or once they’re a customer to drive loyalty, your blog, white papers, webinars, infographics, and marketing website etc. are super-valuable; just sometimes not at first… ## The Secrets of Great Cold Outreach Emails Heather Morgan of [Salesfolk](http://www.salesfolk.com) and I did a webinar recently where we talked about the things that make or break a cold outreach email (and why so many of them are horrible!). If you have an hour or so, definitely check out the video archive of the webinar here. ## The Evolution of Cold Sales Outreach While the methods, tools, techniques, and tricks – [including warming your leads before you email them](https://sixteenventures.com/saas-growth-hacking-email) – have evolved over time, which is awesome, the way people consume email has evolved, too. And of course this stuff applies to LinkedIn message and other social media “pings” as well. ## Wait… isn’t this spam? As someone who talks about “[customer success](https://sixteenventures.com/customer-success-definition)” as much as I do, how can I also talk about sending email to people that you don’t know. Spamming people! It’s simple… I believe in starting a relationship with a potential customer in a super-positive way. Which is why if – IF – you’re going to send a cold email to someone, it should pass the sanity checks below, but it should also be full of WIIFT – What’s In It For Them. It should be well-researched, personal, honest, etc. It should also be super-targeted so we’re not bothering people that aren’t a potential customer. That all said, here’s the bottom line. If you’ve got a product that really will help people do their jobs more efficiently, be more effective at what they’re best at, get more customers, keep more customers, or otherwise better their situation… it’s in their best interest to know about your product, right? If you’re solving for the customer’s success, then without your product, they’re not achieving the level of success they could. So not reaching out is the opposite of customer success. Don’t get me wrong… I’m not all altruistic here – a profit motive isn’t just acceptable to me, it’s pretty much required if you’d like to stay in business. But what I’m saying is simple. If you have something that will help others do better, you need to get it in front of them. They need to know about your product. The problem is, if your product is in a new product category or solves a problem your potential customers don’t even know they have (i.e. they’re super low on the [Awareness Ladder](https://sixteenventures.com/how-to-communicate-value)) then spending your time optimizing for SEO or buying AdWords ads or other “inbound” methods is honestly a waste of time and money. And doing  content marketing where you attempt to educate and elevate while building a new product category, while a useful strategy over the longer-term, is likely too slow to get the results you’re looking for (validating the market, hitting your numbers, etc.). Sometimes you just have to reach out and touch someone… and there is NO reason to apologize for that. Ever. Ev. Er. ## Don’t Hit Send: 7 Sanity Checks for Sending Cold Email Over the years I’ve come up with a list of sanity checks I go through before I send a cold email, and I want to share this list with you, too. For these to be effective, though… you have to be willing to be 100% honest with yourself. If you can’t, get someone else to run these checks for you. ### 1. How would I react to getting this email from out of nowhere, from someone I don’t know? Would I think this email is spam? Would I see, open, read, and take action on this message if I was the recipient? Is it in the style that will engage rather than turn off?Is the tone congruent with the tone necessary to get a positive reaction from the recipient? That’s the sanity check – how would “I” feel – but the truth is, you probably aren’t like your customer so what you think and what they think may be very different. If it doesn’t even pass this sanity check for you, it’s unlikely to do so from your recipients’ point of view. To really ensure that your email hits the mark, really take into consideration the recipient of your email (something people tend to over look) and run this sanity check from their POV. Barring that, however, a quick self-check like this and the next six will likely suffice. Though you have to be intellectually honest with yourself. ### 2. Am I talking TO them or AT them? Am I starting a conversation or ignoring their humanity? Not much more to say on this one… are you hitting them over the head with your pitch, or are you attempting to communicate with another human being? So simple yet, like most things… so easily overlooked! (Why we default to non-human-mode so often is beyond me…) ### 3. Does this seem like a “blast” or an email a human sent to another human? From just a content standpoint, does this seem like robots talking to robots? The biggest mistake people make when sending a cold email is to treat the recipient on the other end like… a human. I 1000% guarantee that if you simply take the time to say “does this seem like a normal person writing a note to another normal person?” your email will stand out in a good way over all the noise. How many horrible emails do you get every day that you shake your head at? Who writes those things? And who do they expect to actually read it? Don’t let that happen to you. This should fix that. Also, there are some technical things you need to do, especially if you aren’t sending from your own email system, like GMail, but are instead routing through a 3rd party service or server. See this article for [things you can do technically](https://sixteenventures.com/saas-email-marketing) to make it look like a human sent the email. ### 4. Is this email too long? I tend to be quite wordy (not sure you noticed). This one is hard for me. Luckily, I’m also active on Twitter ([you should follow me!](https://twitter.com/lincolnmurphy)), so my ability to get my point across quickly, in as few characters as possible – without losing context – has been honed quite well. This is the same thing with cold email. > Is it better not to respond to an email or respond with TLDR? - Noah Kagan (@noahkagan) [September 23, 2014](https://twitter.com/noahkagan/status/514443058612420608?ref_src=twsrc%5Etfw) Bottom line, would I – or even better, my intended prospect – actually read this email right then? The problem with long emails… the intention might be to read it, but it’s so long they’ll put it off for later… only to never read it. What’s the minimum you need to say to get their attention and your point across? Say. Nothing. Else. ### 5. Is this readable AND actionable from a small mobile device? Another totally simple one… but also easily overlooked, especially if you’re in a hurry (and who isn’t, right?). Test it on your iPhone, iPad, Android, whatever you think your audience might use. Make sure the subject – or at least the juicy bit – is visible as an “unread” message (usually bolded, and takes up more screen real estate) in “portrait” mode in the inbox. Make sure the pre-header/preview text will help entice them to open the email. This is an oft-overlooked opportunity to drive-up open rates. I remember a short time a few years ago where I used a screencast tool that was super-easy to use, but the output was a Flash movie.  I would then send these awesome little onboarding tear-downs or landing page critiques to my mailing list and get very little interaction. Then people started telling me they couldn’t play the movie. Then I looked at what devices my audience was using to consume my emails… whoops… overwhelmingly iOS… you know, where Flash doesn’t work. So now I make sure to the greatest extent possible whatever I send is consumable on all devices. But if I had to use a technology – for some weird reason – that was only usable on one platform, for me (this is for ME… your situation may, and probably does, vary), I’d pick something that worked on iOS. You won’t have the benefit of knowing what platforms your recipients use (before you send to them), but since you’re not going to make a big ask in this initial email, this shouldn’t be a huge deal, but if you wanted to link to a video or something, just make sure it plays across all platforms. ### 6. Am I starting out with too big of an ask? Would I respond favorably to the a “let’s jump on a 15-minute call” request from a cold email? If you’re going to ask for a meeting, 15-mins is probably the shortest, realistic amount of time to ask for. Anyone who’s been around for any time knows that shorter meetings don’t work or, even worse, turn into longer meetings. So 15-mins is the shortest I’d ask for… but I wouldn’t ask for that on the first-ever email from me. > I honestly don't think people realize what a big ask "can I get 30 minutes of your time" really is to a super-busy person. Or anyone, really - Lincoln Murphy (@lincolnmurphy) [August 28, 2014](https://twitter.com/lincolnmurphy/status/505045369294979073?ref_src=twsrc%5Etfw) Is there a smaller ask I can make? Can I just ask them an open-ended question to start a conversation? ### 7. Am I trying to circumvent the process by jumping to that ask too quickly? Am I being impatient and asking for a meeting in the first email instead of working the process? This is a big one. You know you should start a conversation, then get them to watch a video, then ask for a meeting (or whatever), but you’re in such a hurry to meet your goals, hit your number, etc. that you think “nah… I’ll just ask for that meeting in the first email. If they’re not ready to meet with me, then phooey on them!” (yup… I said phooey). “I’ll send it to 100 people and I’ll get 5 meetings out of that.. big win for me!” But the reality is, while you might get 5 meetings, if you work the process, which often adds only minutes (your question, their response, you send link, they reply, you ask for meeting… can take just a few minutes to get there), you might get 20 or 50 meetings out of that list of 100 addresses. But instead, you opted to jump the line… and you wasted 95 contacts who see you as pushy or spammy rather than a real person who’s interested in them. ## Cold Email Next Steps If your email passes those sanity checks, then it’s probably good to go. If not, rewrite until it passes. Simple. Not always easy, but simple. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # You’re Doing Annual Pre-Pay Renewals Wrong *August 28, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/annual-pre-pay-renewals/ Getting customers to pay up-front for a year is great… the challenge comes 12 months later at renewal time. There are four ways to do renewals, but only one right way. This came up recently with a SaaS founder, and since annual pre-payments are often the go-to funding source for many early-stage B2B SaaS companies or those bootstrapped companies – regardless of their stage – that have chosen to forego any serious external funding, I thought it was important to discuss publicly. While that up-front money from annual pre-pays is great, when it comes time to renew those customers, well, that’s where things get tricky. I’m going to help you make that less tricky. First, let me take a quick step back and cover a couple of basic ideas. ## SaaS Sales Models There are basically two types of sales models in SaaS: self-service and high-touch. In the self-service, e-commerce sales model, the expectation (and generally the reality) is, post-sale, there will be no interaction with humans. [The product “sells itself”](https://sixteenventures.com/sell-itself) and then magically works to onboard and engage the new customer, eventually turning the new customer into an old customer, all without human interaction on the vendor side. Cool. In the high-touch model, and while the level of touch varies greatly from company to company, overall this model differs from the self-service model in that a human is involved in the entire process. In the self-service model, a human interaction is the exception, not the rule. Now, the higher-touch sales model often – not always, but often – leads to some higher-touch post-sales engagement (or, at least, that’s the oft-oversold expectation by the customer), meaning there will likely be someone to help the customer along the way as they use the SaaS product. Sure, support might be available, but anything beyond break/fix issues and bug reports either gets pitched to Professional Services (if that’s even an option) or… ignored. No matter what, in a high-touch situation, there are often several – typically ad-hoc and unplanned – touches between the vendor and the customer. This means, when the time comes for renewal, at the very least, the renewal event isn’t the first time the customer has heard from, or interacted with, the vendor in some meaningful way… which is a good thing. Of course it could be A LOT better if the interactions with the customer are pre-arranged, you understand what success is for them, plan a customer journey around that success, etc. But at least, the vendor isn’t hiding from them in this scenario. ## Startups and the Long-term Contract / Annual Pre-Pay Trap When it comes to early-stage startups, I suggest that you don’t lock early customers into long-term contracts or even offer annual pre-pays. BLERG! What? I know… not what you want to hear, right? My reason is simple: it’s too safe and reduces the potential for learning. You simply won’t have the pressure to properly onboard or otherwise get your customers up and running, you won’t feel the need to really help your customers achieve success both initially and over time… and you won’t really know about churn for 12 months or more. It’s tempting to ***GET THAT MONEY!***… but if you’re in this for the long-haul, then I’d forgo that in exchange for learnings and a sense of urgency around helping customers achieve success. ***PROTIP***: If you absolutely need the cash-flow that annual pre-pays bring – and you’re in the early stages – do this: Figure out how much you ***NEED*** (need is the key here; not want) and divide that by the amount you’d get from an annual pre-payment. That will give you the number of pre-payments you’ll accept. That limits your exposure to the potential downsides of pre-pays, raises the funds you need, and, for the ninja Growth Hacker in you, this puts legitimate scarcity on the availability of a the pre-payment discounts available, which should improve conversions. Win-Win! ## Annual Pre-Pay vs. Contracts I want to be very clear here; annual (or multi-year) contracts like we see in Enterprise SaaS are different from annual pre-pays in this context. What I’m talking about here is simply when a customer gives you an up-front, pre-payment for 12 months of continuous month-to-month service, often heavily discounted (though I think there’s a [better way to use discounts](https://sixteenventures.com/saas-pricing-discounts)) to encourage that pre-payment. In the Annual Pre-Pay scenario, the customer can cancel anytime; there are no contracts. Of course, how the vendor handles that cancellation depends on what was in the original agreement (no contracts, of course… just agreements. Sure, why not.) ranges from a pro-rated refund and immediately revoking access to the more extreme (but relatively common) no refunds of any kind, you can use the system until the end of the period you pre-paid for, all we did was simply ensure we won’t renew your subscription at the end of the period you paid for. Probably. You basically just canceled your annual renewal. No matter what – Annual Pre-pay or Long-term Contract – if you focus on Customer Success and ensure that your customers are achieving success with your product, [renewals will be a non-event](https://sixteenventures.com/customer-success-definition#15); contract or not. ## 3 Bad Ways to Handle Annual Pre-Pay Renewals + 1 Good Way When month 12 ends and month 13 begins, what do you do to get that renewal? There are basically 4 ways to handle renewals on Annual Pre-pays in a self-service SaaS model, and only one is the right way: ### 1. Charge ’em and Ask for Forgiveness This is where you bill ‘em without warning or asking for permission first. If you’re afraid of asking your customers if it’s okay for you to bill them – or just reminding of the fact that you’re going to bill them soon – then there’s something bigger going on here. You don’t have confidence in your relationship with your customers. You don’t know if your customers are being successful with your product. You can’t know that or you’d be confident in your relationship and wouldn’t be afraid to tell them you’re going to bill them. If you’re honest, you know this is basically a fingers-crossed maneuver. You hope it works. You hope the credit card goes through. You hope they don’t get mad. You hope they don’t notice… and don’t even notice your notification of successful payment. And of course, when you charge them first and then tell them what you did, you’ll get refund requests because some people wanted to cancel but forgot to. You hope they don’t ask for a refund, but even more, you really hope they don’t do a chargeback because they completely forgot who you were in that year since they last interacted with you. Don’t do this. That said, there are some instances were a once-a-year notice that a vendor charged  your card after they did it is potentially, maybe, slightly somewhat acceptable: Online backups or other Disaster Recovery services, security, etc. For these services, an “ask for forgiveness and just charge ‘em” methodology is the least likely to cause mass cancels or chargebacks because they’re already ***super-passive*** (i.e. little to no interaction is needed/wanted, except in the case of emergencies) and where the longer you use it, the more valuable they become (i.e. you’ve now stored another year’s worth of data, files, music, pictures, etc. with them). For these services, you get the receipt and you’re like “oh, good. That’s taken care of.” Those are just about the only types of services where I think this sort of silence-followed-by-a-charge is even slightly acceptable. But even then, I wouldn’t do it. I’d send weekly status updates to let them know the service is working for them along the way, and then auto-renew. For everything else, don’t do this. If you’re only interacting with your customers once per year, you’re probably not heavily focused on Customer Success, so you don’t really know who’s likely to churn and who’s a good candidate for renewal, right? How do I know you’re not focused on Customer Success? Because the first time your customer hears from you in 11+ months is to tell them you just charged their credit card! That, and you’re actively trying to justify this “ask for forgiveness” approach. ### 2. Ask for Permission to Charge ’em Before you run their credit card and charge them for the new billing period – whether another year or the next month – you send them an email telling them you’re going to charge them. If this is the first time they’ve heard from you in 11+ months, you’ll get a lot of folks scrambling to keep that charge from happening. Guaranteed. Unless you fall into the category of disaster recovery, security, or online backups… this will probably result in a lot of churn. Oh, and if you make it difficult to keep the charge from happening – i.e. they have to call to cancel when they were able to sign-up online – don’t expect a lot of calls… but definitely expect a lot of refund requests or worse – chargebacks – because you put up artificial and arbitrary barriers to canceling. Consider [creating Cancel Flows](https://sixteenventures.com/growth-hacking-retention#12) instead of creating artificial barriers to closing their account. But also consider not letting the first time your customer hears from you in 11+ months be to tell them you’re going to charge their credit card. Don’t do this either. ### 3. Hide Completely but still Charge ’em Don’t ask for permission. Don’t send a receipt. [And don’t forget to keep it sleazy](https://sixteenventures.com/one-dollar-trial). If your price is so low that you think you can survive as a grey or phantom charge then whatever… that’s your bag… but I don’t really want to know you, thank you very much. Obviously don’t do this, right? Okay, so what’s the right way? ### 4. Deliver Customer Success while you Charge ’em If it’s not clear yet, this is the right way to deal with annual pre-pay renewals… or any renewals for that matter. And while some people are averse to saying there is only one right way to do something… I’m not. This is it. You can’t just communicate with a customer when it’s time to renew. You need to stay engaged with them so they’ll stay engaged with you. There’s no excuse for hiding from customers. There’s no excuse for not engaging with customers. There’s no excuse for not working to make your customers successful. Period. And with all of the amazing automated lifecycle messaging products out there – like [Vero](https://www.getvero.com/) – there’s no excuse not to stay in contact with your customers, frequently, across their entire lifecycle. [Leveraging Use- or Activity-based lifecycle messaging](https://sixteenventures.com/email-follow-up-sequence), ideally you’re getting them back into the product often as you’re moving them along a path to continued success. And with and increasing number of [purpose-built Customer Success Management software ](https://sixteenventures.com/best-customer-success-management-software)products out there and the vast amount of information on implementing [Customer Success](https://sixteenventures.com/customer-success-definition) in your organization, there is simply no excuse for ***not*** knowing whether your customers are being successful with your product. ## Expired Credit Cards Shouldn’t Happen I wrote an entire post on this called “[Use Customer Success to Reduce Credit Card Failures](https://sixteenventures.com/reduce-credit-card-failures)” if you’d like a deep dive on this subject. Of course, all communication isn’t about getting them to do things that will lead directly to their success though I’d argue if they don’t pay for your product then how can they be successful with it, right? Some messages might be “your credit card on file is about to expire” messages. [Pre-dunning, if you will.](https://sixteenventures.com/growth-hacking-retention#18) This is a big deal for SaaS companies that rely on Credit Cards for, oh, 100% of their revenue. Clearly, expired cards aren’t the only reason transactions fail, but since credit cards typically expire every 3 years, or every 36 months, one could ascertain via simple math that roughly 3% of cards will expire every month – though obviously it’s not that evenly distributed; some months will have more, some less – this will be a very big deal for you when it comes to annual renewals. And if the first time they hear from you in months is when you try to get them to fix their credit card info, that might be a reminder to cancel. And the more times you have to remind them to fix their credit card info… [the more they become a churn threat](https://sixteenventures.com/saas-churn-threats). But if they’re engaged and successful, when they get that credit card expiry warning, they’ll actually want to fix that issue right away so they don’t miss the renewal, which of course you’ll tell them about in advance AND send them a receipt for. ### Super-Ninja Tactics Reminding them in-app that their credit card is about to expire is awesome and works well. Doing it right after they performed a series of activities that we know will lead to success is ninja. Another ninja move is allowing the user to forward the CC expiry notice to someone else to take care of… and allowing that “economic buyer” to take care of it without having to be a user in the system (but getting their contact info so you can ping them next time with CC issues)! Now that’s hyper-ninja! Hope this helps a bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 10 Growth Hacking Lessons from Dodgeball *August 14, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/growth-hacking-dodgeball/ I hit Nick Mehta, CEO of Gainsight, right in the gut. And then I took a hard shot to the chest by Gainsight’s New Business director. Working in a startup is rough, lemme tell ya. As Nick and I stood on the sidelines during this company outing – battered, exhausted and laughing – watching the remaining players trying mercilessly to eliminate each other (and have fun at the same time), Nick turned to me and said: “You should write a blog post on what Dodgeball can teach us about Growth Hacking.” So, looking for any excuse to rest – this wasn’t just dodgeball but TRAMPOLINE dodgeball – I came up with a list of 10 lessons (5 Do’s and 5 Don’ts) you can, in fact, take from Dodgeball and apply to Growth Hacking. Okay, here we go. ## 1. Don’t Take your Eye Off the Ball This one is fairly obvious in Dodgeball; there are five or six balls in play and they may all be deployed right at you. You need to be able to see where each one is, where they may be deployed, and take the appropriate action to evade. But you must do this while keeping the goal of the game in mind. In Growth Hacking, you always want to make sure you know what growth you’re hacking. What’s your goal? How do you know if you’re successful? What metrics are you tracking? What’s your goal and what are the key results along the way that indicate whether you’re making the right progress. In Growth Hacking as in Dodgeball… never take your eye off the ball. ## 2. Don’t Make Illegal Throws In Dodgeball (at least the rules we played by) you weren’t allowed to hit your opponent in the head. So you could throw the ball at someones head all day long, but you wouldn’t eliminate them (your goal) and you would probably start to make them – and everyone else – mad if you ignored the rules and kept making illegal throws. The same thing goes for Growth Hacking… don’t be a jerk. You can be as creative as you want, but don’t cross that line and start full-on spamming or using illegal and unethical tactics to attempt to get the results you want. ## 3. Don’t Hide Behind Other People One way to keep from being eliminated in Dodgeball is to hide behind your teammates… but you end up putting the burden on them and, really, you’re not actually playing the game. Oh, and eventually they’ll get eliminated and you won’t have anyone to hide behind. Oh, and when that happens, because all you’ve been doing is hiding and not really playing… you won’t know how to play and you’ll get eliminated. Your hiding was just prolonging the inevitable, really. In Growth Hacking this is what happens when you’re not as aggressive as you need to be to make whatever is is you’re attempting to do actually work. I say “aggressive” a lot and its often met with, if not pushback, a bit of a head tilt. In this case, I mean aggressive in terms of cadence of messaging, channels leveraged, tacts attempted, etc. Sometimes we get shy. Sometimes we lose faith. Sometimes we just want to hide… and that’s just prolonging the inevitable.. in Growth Hacking tha means not reaching your goals. ## 4. Don’t Play to Not Lose In Dodgeball, as in business… and life in general, you can choose to play to win… or just play to not lose. In Dodgeball you can be passive (hiding behind people as in the example above), hold on to the ball when you get it rather than throwing it, being defensive and evading the other team rather than actively engaging them. That’s just not as fun and you’re never going to achieve your goal of winning. I believe there’s a saying about trying and failing being better than not trying at all. This idea of playing not to lose vs. playing to win is huge in Growth Hacking. If you look back at the greatest growth hacks in history (or that are happening now) – things like Hotmail, Paypal, Airbnb, Uber vs. Lyft, Kim Kardashian’s Hollywood, etc. – you know these Growth Hacks were 100% driven by a “play to win” mentality. Perhaps they bordered on (or crossed into) “making illegal throws” territory, but they were 100% playing to win. I can’t think of a company that ever made history (or a ton of money) simply playing not to lose. ## 5. Don’t Reach too far In Dodgeball, a quick way to get eliminated is to reach for a ball that’s heading your way. Whether you have a ball in your hands and you’re wanting to deflect or you’re trying to catch a ball that’s flying near you, you have to understand your surroundings and be aware of where you are in relation to the ball. If the ball is too far away, you may reach and miss, exposing yourself to a follow-up shot from the other side. Or, as I did, if you reach to catch the ball and it’s too far away, you may deflect the ball with your hand instead of catching it (cue my older brother when we’d play catch saying “if you can touch it you can catch it” when I was little) causing you to be eliminated. In Growth Hacking, this idea of not over-reaching is super-important. You want to have a very specific goal (what growth are you hacking) and be clear on the tactics to execute on that goal. You need to be laser focused and not trying scatter shot tactics to reach a wider audience. Growth Hacking isn’t brand marketing. It isn’t casting a wide net. It’s about being targeted, focused, and specific. As soon as you reach too far, you’ll take your eye off the ball and either not get the results you want, miss a competitor coming in and disrupting your plans,… or both. Okay… here are some things that you should do. ## 6. Do Deflect Your Opponent’s Shots In Dodgeball, the goal is to take out your opponents. To do this, you must avoid being hit. A great tactic is to catch a ball, and then use that ball to deflect the other balls that are being thrown at you with that ball so that your teammates can pick up the balls and retaliate. Then, once your opponents are out of ammo and your team has all the balls… you take the ball you were deflecting with and join your teammates to go on the offense. Simple, but effective. In Growth Hacking, most of the time we’re being offensive… proactively going after new customers, users, revenue, leads, etc. Whatever the growth you’re hacking is, that’s what you focus on. But, sometimes you don’t get to do that without running into another company in your space doing the same thing. In fact, you may find your competition “making illegal throws” that you have to deal with. They may be spreading rumors, telling lies, using other nefarious techniques to poach your users/customers, etc. How do you deal with that while continuing to move offensively toward your goals? You have to deflect your opponents. In Growth Hacking (this is really a higher-level business/marketing issue, but still) you have to take the situation you’re presented with and get creative to combat these tactics; it’s a bit more complex than what you do in Dodgeball. But it’s possible to incorporate that deflection into your proactive Growth Hacking – for instance surfacing the nefarious acts of your competition through 3rd party sources and perhaps not even addressing it directly – and to continue the momentum rather than falling into the trap of defending yourself. This is a topic for an article all on its own! ## 7. Do Try New Things In Dodgeball, you have to try things if you want to get better and, frankly, if you want to have fun. For instance, I realized that to save energy – remember, we were on trampolines – I would stop bouncing so much. It worked, and it also allowed me to react faster to balls being thrown at me. But then I decided to change tactics and bounced really high… and was the first to be eliminated that round! But I tried something. Sure, it didn’t work, but all I had to do was wait until the next round, and then I didn’t do it again… and I stayed in and got to play much longer. In Growth Hacking, this “try things” mentality is absolutely critical. But you have to be know that not everything you try will work (first you have to be absolutely clear on what “work” means) and you have to be comfortable with this. You often hear that organizations where Growth Hacking works have a primary focus on Growth. Yeah. Obviously. What companies don’t want to grow? (Probably those that play to not lose) No, the real secret to making Growth Hacking work is having an organization that encourages experimentation and is okay with hypothesis being false (or, said another way, failure). You have to have a culture that encourages and supports trying new things (but not wild, scatter-shot, see-what-sticks randomness) if you want to take advantage of the Growth Hacking mindset. Trying to fit Growth Hacking into an environment where you play to not lose (or where loss aversion runs rampant) is a recipe for, well, Growth Hacking not working. ## 8. Do Be Observant In Dodgeball it is easy to get overwhelmed by, well, a bunch of people throwing balls at you. But if you kind of soften your gaze and don’t look at anyone in particular, but look at all the players, you start to see the balls being thrown almost in slow motion. It becomes easy, actually, to just move out of the way. The less you panic about getting hit, the less you stare down one person with one ball aimed at you, the more likely you are to not get hit by three other balls flying at you. In Growth Hacking thoughtful observation is one of the foundational skills. Period. From observing user behavior to exposing organic network effects to exploit, and from surfacing opportunities in different market segments to identifying the best tactics to leverage in a given scenario, without proper observation before you even get started, you’ll waste a lot of time and miss a lot of amazing opportunities. ## 9. Do Change the Rules As You Go Guess what? Dodgeball isn’t a real sport. Or, I don’t know… I guess it might be – it actually exists – but there’s not a governing body that regulates Dodgeball and sets the rules under which we must abide. It’s just a game. It’s just something to do for fun. Whatever “rules” exist can be changed. The generally accepted rule around catching a ball thrown at you is that the person who threw it is eliminated. Sometimes the team that caught the ball can have one of their previously-eliminated players return to the game. Or maybe you don’t want catches to work like that. So change the rules… whatever works for your situation. The reality around Growth Hacking is that, even though it’s been around for a few years now and everyone is – or has been at some point in the past – a Growth Hacker… [there aren’t any actual rules](https://sixteenventures.com/growth-hacking-rules). In fact, to me, the only rule in Growth Hacking is “no head shots” … don’t make illegal throws. Don’t break the law or be unethical (probably both!). That’s it. So all of the other “rules” around Growth Hacking can be changed, by you, at any given time, on whatever whim you wish. And they should be changed… constantly. ## 10. Do Have Fun Dodgeball is just a game – especially when played on trampolines – that should be fun. If it’s not fun, don’t play. Simple.Growth Hacking is generally not just a game. In fact, Growth Hacking can be tedious, time-and-brain-power-consuming. Growth Hacking can be the end-all-be-all for your business. Growth Hacking can (and probably will be) hard. And to get the results you want will be super-hard. But it should be fun. If it’s not fun, you’re doing something wrong. Examine why it’s not fun. Are you not getting the results you want? Don’t get upset… re-evaluate why that is. Add more granular key results and/or time intervals to look at those results that you can use to gauge progress and react/pivot/stop sooner; before it gets not fun. Life is too short (or too long… depends on how you look at things, I guess) to do things that aren’t fun. I had an awesome time playing Trampoline Dodgeball, and this was just one example of the great culture at [Gainsight](http://www.gainsight.com)… we work hard and we play hard. And it turns out, I was able to take a simple game of Trampoline Dodgeball into a post about Growth Hacking. That is also a lesson of some sort. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Understanding Your Customer’s Desired Outcome *August 4, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-desired-outcome-understanding/ So… what does Success look like for your customer? That’s the question that’s at the base of my wildly popular “[The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding)” article. BTW, this article is good… but I have another one that goes into more detail on [Desired Outcome](https://sixteenventures.com/desired-outcome) you should check out, too. But it’s not actually a very good question. What does “success” look like for your customer? What does that even mean? Unless it’s a hard ROI, that’s a tough question to answer. So I always found myself moving to different ways of phrasing basically the same question. And when you do that – when you have to say “in other words,…” next time just start with the “other words” and move past the confusion. So now I ask about your customer’s Desired Outcome… but even that easier-to-understand concept has its nuances. Let me explain… ## Quick Definition of Customer Success First, let me start with the latest iteration of my quick definition of Customer Success: > “Customer Success is when your customers achieve their Desired Outcome through their interactions with your company.” And the process used to proactively ensure that Desired Outcome is achieved by your customers is what we call Customer Success Management. Now I’m always refining that quick definition of Customer Success – [though my definitive definition of Customer Success](https://sixteenventures.com/customer-success-definition) and all of the functional areas of a business it encompasses still stands –  but that’s where I am right now and I think it works well. I’ve found that “Desired Outcome” resonates in a way that “success for your customer” never really does. But even then, there’s more to Desired Outcome than meets the eye… and it can be a [transformative concept](https://sixteenventures.com/desired-outcome) if you’ll let it: ## The Definition of Desired Outcome Think of an advertising product. The Desired Outcome for the customer isn’t actually placing ads. It isn’t even increasing the click-through rate on the ads. Or optimizing spend. Or… or… or… Nope, the Desired Outcome is acquiring a customer. Something to consider with all advertising and sales enablement tools… ultimately, we just want to buy a customer. And even if that Desired Outcome isn’t achieved 100% within the scope of the advertising product (there are factors beyond the ad that figure into acquiring a customer), that doesn’t change the fact that the Desired Outcome for their customer is acquiring a customer. Okay, so knowing the Desired Outcome and being able to build your value prop – and ultimately your marketing, pricing, sales process, onboarding, and overall Customer Success program – around that knowledge will make your company ***MUCH*** more valuable… both to the customer, but literally more valuable as an entity. That said, the key to leveraging the Desired Outcome is to understand that… ## Desired Outcome has Two Parts Desired Outcome has two parts… Customer Goal and Appropriate Experience. I made the mistake originally of saying “Great Experience,” and while “great” is relative, that actually isn’t accurate. Rather, the odd-sounding “Appropriate Experience” is much more accurate – though maybe someday I’ll come up with a better word – but what matters is that it’s the experience congruent with your customer’s expectations. Okay, so the Goal part is fairly obvious… this is what they need to happen. So the Customer Goal is, well, what’s required; but how you get to that Customer Goal becomes the key differentiator for you. I like to use the airline analogy here… in the United States, I can fly on any commercial airline to get from Point A to Point B and be assured I’ll get there fast and safely. Fast and Safe are the baseline. But there is a huge difference in the experience of achieving that Customer Goal depending on if I fly Southwest, Spirit, or Virgin America (dated reference… RIP). Only one will give me ***MY*** Desired Outcome and for that – in my case since I travel so much – I’m willing to pay a premium (Virgin America – sad face). So the Desired Outcome is both the Customer Goal + Appropriate Experience… and knowing and really understanding that is huge. At the very least it will keep you from trying to sell me a flight on Spirit knowing that I would rather walk… or just not go than fly that airline. But the up-side potential of knowing that is where things get super-exciting. When it comes to prioritizing development and design resources, you should consider… ## How to “Weight” the Two Parts of Desired Outcome When I mention those two parts, I’m frequently asked how you should weight them; does Customer Goal matter more than Appropriate Experience or vice versa, and to what degree? Customer Goal is a given. It just is. Of course, through Customer Development, you may discover that the actual Goal they’re focused on is a subset of what you originally thought, reducing the effort needed to get them to that point, which is great. But no matter what, required means just that… required. So this question is really more about “weighting” the experience side. A part of me wonders when I get this question if it’s not an attempt to explain away the need for – or to avoid altogether having to spend time/resources on – the “experience” side of things. Okay, so it’s a legitimate question, but one – I’m afraid – that lacks a great answer, because… it depends. Which is why I say “Appropriate” Experience and not “Great” or “Awesome” or “Modern” or whatever. It’s appropriate. That’s all. If you are selling something to developers, you might not just be able to get away with a very basic UI that just “gets the job done” … you may be able to get away with no UI… just an API. But once you move beyond developers – if that’s a valid direction in which to move – your (potential) customers may find that API-only approach a bit lacking. If you’re selling to Early Adopters, that cohort will usually be okay with – and even expect – an experience that others along the maturing product lifecycle would not be willing to. And just to be clear – because I believe words matter – it’s not accurate to say they’d put up with a “bad” or “poor” or even a “limited” experience… it would be a completely appropriate experience for them. But as your product matures and you move beyond the early adopters, you will likely have to adapt the experience to be appropriate with the new cohort of customers. So how you “weight” the Appropriate Experience side of “Desired Outcome” totally depends on the customer you’re selling to and their expectations. Of course, if you don’t know what type of experience your customers want/need/require/expect … [then you don’t know your customers well enough](https://sixteenventures.com/ideal-customer-profile). As a quick side note for super-early-stage startups… ## Why Minimum Viable Products (MVPs) often Fail One of the reasons Minimum Viable Products (MVPs) fail (and give the entire MVP concept a bad name) is that the creator solves for the Customer Goal and not the Desired Outcome. You see this all the time when a startup has a “functional” product – technically the product allows for the “job to be done” – but the experience is incongruent with the expectations of the customer. Think about it… how can a product that helps you achieve your Goal still suck? Because the experience is incongruent with your expectations / needs / wants/ desires. That’s why the key to success is in understanding that… ## Customer Success is tied to Desired Outcome This is where “Desired Outcome” really starts to shine as a way of thinking about Customer Success. It’s our job to understand what the customer is trying to accomplish, but moreover, it’s our job to understand how they want to accomplish it. And of course the airline analogy I used can play out in other transportation methods, too, but also in pretty much every product and service category. But in technology, we’re seeing this all the time: Enterprise software is being disrupted by cloud offerings even if on-premises products do the same thing ***AND*** there is infrastructure in place to support them simply because the cloud experience is preferred. Products with old-feeling (Legacy) UIs are being displaced by products from smaller vendors who understand the need in certain market segments for a great, modern UI, to the point where UX is more important than feature parity. Mobile-first startups are disrupting even “modern” cloud providers as consumer desires are evolving faster than “legacy” cloud providers can – or are willing to – keep up with. Uber disrupted the awful experience of taxis or – like in Dallas – disrupted the inefficient valet procedures at popular restaurants. So while helping your customer achieve their Goal, helping them achieve their Desired Outcome is even better. And some people are willing to pay more for that Desired Outcome. So… does “desired outcome” resonate better? I think so. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How-to Avoid SaaS Free Trial Abuse *July 27, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-abuse/ At the Black Hat conference in Las Vegas, a security research duo showed how they built a cryptocurrency-mining botnet by leveraging cloud platform services – like Amazon Web Services, Heroku, or Google App Engine – [using only Free Trials and Freemium accounts [PDF].](http://www.syscan360.org/slides/2014_EN_CloudBots_RobRaganOscarSalazar.pdf) Cue the overly-dramatic sky-is-falling music as we mourn the demise of SaaS Free Trials and Freemium ([remember, it pays to be clear on the various uses of “Free”](https://sixteenventures.com/freemium-or-free-trial)). I know a lot of entrepreneurs, founders, executives, and product marketers at SaaS and Cloud companies will read that Wired article and say to me – since I’ve been quite vocal about not being a fan of [requiring a Credit Card to get started on a Free Trial](https://sixteenventures.com/saas-free-trial) – “See Lincoln… not having a credit card wall opens up our system to abuse!” But they’re wrong… and here’s why. People want the best practice to be that you should collect Credit Card details up-front on a Free Trial, because, let’s be honest… it means they don’t have to “sell” later on. It means anyone that enters the trial is “serious” and they’ll become a paying customer because they have “skin in the game.” They want this to be true. But it’s not. Don’t get me wrong, it’s very important for stories like this botnet use case to be surfaced by the white-hats so that proper safeguards can be put in place. But it is also super-important to take a step back, learn from this, and then to really think about how to apply this learning in a rational way that doesn’t punish the prospective customer’s experience to your service. The knee-jerk reaction, because it jibes with underlying biases, is generally to punish the user, prospect or customer; the captcha is a well-known example of a device that punishes the good guys. When I work with web companies that have the potential for large-scale abuse – email marketing, website creation/publishing, landing page creation/publishing, vertical-specific ad creation/publishing (cars, real estate, etc.), phone dialer services, data or content providers, or even Infrastructure / Platform-as-a-Service companies – I tell them all the same thing: ## Abuse Points are Value Points. Let me repeat that: Abuse Points are Value Points. When someone is “abusing” a system, they’re basically saying “this is where I find value in the system.” Normal, ethical people probably find value in that same place in your system as the bad guys. So these “abuse points” are where value is realized by the customer, at least from a functional standpoint; in this case, the functional standpoint is that they completed the “job to be done” with the product. Real value may come as a result of the functional completion, but that’s a story for another day. For Email Marketing, value is realized when the email is sent to a large list. For an e-commerce store, when I open the store for business. For a Platform-as-a-Service, when I move my app to production. What I’m about to say is for ***SOME*** web services that are legitimately prone to abuse. For ***MOST*** SaaS companies, this does not apply, but it’s still interesting to think about. For ***SOME*** cloud services – again, not all – it is perfectly acceptable (and possibly even expected) for some features or functionality to only be activated or available only after a Credit Card (or some other financial instrument) has been presented and/or charged. But let me be absolutely, 100% clear. If you can let a prospective customer experience the full power of your entire product for free before you ask them to enter their Credit Card or before you ask for the sale, that will always be better. But there are times when that simply can’t be the case. For instance, before you can send emails to your entire list (rather than a small subset), you need to at least enter a Credit Card so we can validate that you’re a real person (not a big time spammer). Before you can open your e-commerce store for business, we need you to enter your Credit Card info. Before you can move to production with your App on our Platform, you have to pay us. ## The Logical Next Step So on a 14-day Free Trial ([or whatever the best length is for your Free Trial](https://sixteenventures.com/saas-free-trial-length)), if the prospect hits an “abuse point” on day 3, that’s great. Now they’re ready to take an action that, instead of being a way to abuse the system, is actually in your favor. What that action is – what happens next – is up to you (though I encourage you to take your customer into consideration, as well as what they’re used to with adjacent and competitive products), but you have a couple of options. - Ask for their Credit Card, end the trial, and start their subscription right then - Ask for their Credit Card and continue the trial from there, automatically billing their card and starting their subscription at the end of the trial Then, once they’re paid up or you at least have their Credit Card on file, you can let them do the thing they couldn’t do before. ## Grow LTV with this Sales Hack A nice hack to grow Customer Lifetime Value (LTV) is to follow that action they take with a One-Time Offer (OTO) to get them to convert to a paying customer right then (to end the trial) or – if they already paid – to take advantage of an even better offer. One way is to offer them a discount, but make sure [you offer the right kind of discount.](https://sixteenventures.com/saas-pricing-discounts) So even though you have a potentially abusable system, by understanding how things work, you can create a system that doesn’t keep your prospects from signing-up initially by requiring a Credit Card up front, but rather one that works in-concert with how a potential customer might like to experience your product. Remember, putting up a Credit Card wall doesn’t keep out the riff raff…. it keeps out many real, legitimate prospects who don’t know, like, or trust you yet. If you understand that “abuse points” are actually Value Points, you can take back the power from the bad guys and keep the good guys flowing in. I hope this helps you a bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Free Trial Extension Requests are a Bad Sign *July 15, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-extensions/ I got this question about SaaS Free Trial Extension requests and I thought I’d answer it here, for all to see. *“Lincoln, that was a great guest post by Steli Efti from Close.io on [sales mistakes that lead to churn](https://sixteenventures.com/sales-mistakes-cause-saas-churn). I was reading Steli’s blog and found a recent post where he says “[short trials + liberal extensions](http://blog.close.io/5-ways-to-increase-saas-activation-rates)” is the way to go. While you haven’t covered this directly (unless I missed it), it struck me as something you’d likely have an opinion on. I’m confused… who’s right?”* I’m right, obviously. [End of Article] No, actually, I think we’re both right, but my view on this is from a slightly different angle. I agree that if someone asks for an extension you should probably give it to them. However, I see the fact that they asked for the extension in the first place as an indicator that there’s a deeper problem, this request is a symptom of that problem, and the request itself as an opportunity to engage and learn what we can do to solve that problem. Don’t worry; I go into great detail on why I think that, how to treat the symptoms, and how to eliminate the underlying problems. Just to be clear, Steli said “short trials + liberal extensions” and since [I already tackled the “short trials” part here in great detail](https://sixteenventures.com/saas-free-trial-length), I’ll focus on the extensions part of what he said in this article. ## Liberal SaaS Free Trial Extensions It’s true, I’ve never really addressed Free Trial extensions publicly so this is like a bit of therapy. I’m not a fan of Free Trial extensions, at least automated and/or automatic extensions. I’m especially not a fan of incentivized extensions… this isn’t Freemium. [Don’t confuse the two.](https://sixteenventures.com/freemium-or-free-trial) Seriously… it’s dangerous for your business. I prefer to do the extensions on a one-off basis, engaging with the prospect during that conversation around a Free Trial extension to understand WHY they need it (and rolling that learning – where possible – into the trial process itself). ## Extensions are Better than Losing Them Forever Obviously it’s better to offer – or be asked for – an extension than having someone not convert and disappear forever. The problems arise when you extend the trial and nothing else changes. No deeper engagement. No commitment from either party. Just another 7 days and then what? Insert definition of insanity here. Now, let me be clear. If you [do ask for a Credit Card up-front](https://sixteenventures.com/saas-free-trial) – which I’m generally not a fan of and tend to reserve CC-walls for edge cases – and therefore the prospect has to actively opt-out of your Free Trial (vs. opting-in to become a paying customer without the CC-wall in place), then you could ask them if they just need more time to try it. Of course, that should trigger an immediate follow-up on a human-to-human basis to cover what’s below. Even if you have an automated, self-service sign-up and engagement process, when an extension request comes in, this is the time to engage with – to actually talk to – the prospect and do two things: - Learn the reason behind the extension request - Get them to engage during the trial extension ## SaaS Free Trial Extension Reasons In my experience, the main reason prospects request an extension to their Free Trial is that they got distracted/busy and didn’t have time to get going… then the trial ran out and now they want to extend it so they can “really try it this time.” Other reasons a prospect might ask for an extension might include: - Need to “run it up the flagpole” and might have to demo it internally - Need to get other folks to try it (and perhaps those folks were busy, too)… [here’s a solution to that, BTW.](https://sixteenventures.com/invite-hacks) - They aren’t finished evaluating the other 7 products they need to evaluate to complete their “due diligence” Honestly… none of these are good reasons for needing an extension, and I’ll address that shortly. ## How to Handle a SaaS Free Trial Extension Request Okay, so ***SHOULD*** you offer an extension to those folks who ask for one using one of those – or another – excuse? Yes… ***BUT***… use that opportunity to do these things: - Find out why they need an extension (they may not provide an excuse) - Agree on what a “successful” trial for them looks like - Plan and Orchestrate the process with the prospect to get them to achieve success Include concierge on-boarding if it makes sense for your situation (LTV) Roll that into your Customer Acquisition Cost (CAC) calc - Know who else needs to be involved and [ensure they’re a part of this evaluation](https://sixteenventures.com/effective-free-trials) - Have clear [Success Milestones](https://sixteenventures.com/success-milestones) Read more about that in [How to Successfully Onboard Customers](https://sixteenventures.com/customer-onboarding). - Probably map these to [Common Conversion Activities (CCAs)](https://sixteenventures.com/free-trial-metrics) - These should be agreed upon between you and the prospect - Allows both of you to ensure they’re on their way toward achieving success - Once success is achieved, ask for the sale! If that happens on day 3 of a 30-day Free Trial, great! - BTW, this is how you avoid the terrible 31-day average conversion time on a 30-day trial Now, as I go into why I think Free Trial extensions are a symptom rather than a feature, you’ll see how that extension process can and should likely be a part of the product / trial / onboarding process itself. ## 5 Reasons Extension Requests are a Symptom… not a Feature ### 1. The Free Trial isn’t Designed to Convert This is always the main thing I run into, where the Free Trial is either an afterthought, just a black box on a customer acquisition flow chart. If it was planned, it’s all about “functional” onboarding vs. getting the prospect really invested emotionally into the trial. The trial process is generally not working to get them engaged, it’s not designed to move them to a point – quickly – where becoming a paying customer is the most logical next step, and it’s just not working overall. Some things to do are: - Simplify the process (I know your product is “too complex” to simplify… but give it a shot, you’d be surprised) - [Start with Quick Wins](https://sixteenventures.com/saas-customer-success-quick-wins) - Orchestrate the process around [Common Conversion Activities](https://sixteenventures.com/free-trial-metrics) (CCA) - Don’t have a blank screen, but also don’t overwhelm… [confused minds don’t buy](https://sixteenventures.com/saas-free-trial-engagement) ### 2. The Prospect isn’t Finding Success Contrary to the belief of folks who’s Free Trial is failing to convert customers, people don’t sign-up for your Free Trial just to mess with you. Most people – especially in a B2B situation – sign-up for a Free Trial with the expectation that they’ll be able to either Realize Value immediately or see the Value Potential immediately. If they don’t get to that point, what we might refer to as them having a successful Free Trial, then they’ll do one of two things: ask for an extension or fail to convert and leave forever. Those that ask for an extension are likely the minority, which means they’re representing the tip of the iceberg of lost sales. Some things to do are: - Know what a Successful Free Trial looks like for your prospects and [map that out and create metrics around that](https://sixteenventures.com/free-trial-metrics) - [Orchestrate the Engagement Process](https://sixteenventures.com/improve-saas-churn-rate-engagement) to get them to be successful - Effectively leverage [Social Capital correctly to On-board Users](https://sixteenventures.com/saas-marketing-growth-hacks#16) - Have a [proper welcome email](https://sixteenventures.com/saas-customer-onboarding-email) - In fact, have a [proper email follow-up / lifecycle messaging process](https://sixteenventures.com/email-follow-up-sequence) - Honestly, [Customer Success](https://sixteenventures.com/customer-success-definition) should be your main focus – not just in your Free Trial but overall ### 3. Involving / Engaging the Wrong Personas It’s their buying cycle not your sales cycle and you don’t get to dictate how people buy. If 3 different personas have always been involved in the buying processes for competitive or adjacent products in your category, just because you have a self-service (or lower-touch) model, doesn’t mean those personas go away. It does mean that if you fail to involve, engage, or appease those personas during your Free Trial – and rely on one prospect persona to do the heavy lifting for you – the process will either be slowed down, causing them to ask for an extension… or it will fail and they’ll leave forever. If part of  a successful Free Trial (see #2 above) is getting the different personas onboard and on the same page, the SaaS vendor that facilitates that process will win. Some things you can do are: - Understand who all is involved and create a process that takes them into account - Know who’s likely finding the solution to “evaluate” and then who they involve internally - Understand their [buying process and their internal procurement process](https://sixteenventures.com/develop-pricing-strategy) (two different things) Do they need to provide an ROI calculation and a comparison chart (showing proper due diligence was performed) to the CFO? Give them that - Do they need to show the CMO how this will help them achieve their MQLs in Q3? Provide that report. - Oh, and give them the ability to [share that directly from the product](https://sixteenventures.com/growth-hacking-retention#17) - And make that the CTA once they reach the level of success within the product to make this the most logical next step - If the only persona is likely just them, ask for the sale and get their CC But that might not be the case, so build that into the flow - Some of this can be done by getting them to self-identify the type/size of company they are ### 4. Attracting the Wrong Prospects If those other three things are fixed (which should solve 99% of your problems), and you still have some folks who ask for extension you may need to take a look at the types of prospects you’re attracting. Some things to consider… - Are they [your Ideal Customer](https://sixteenventures.com/ideal-customer-profile)? Really think about the “Successful” input when developing your Ideal Customer Profile - Consider “successful” at all stages of their lifecycle with you - If they could be successful at 6-months as a customer, but are unlikely to find any level of success during your Free Trial, then you need to rethink your  Free Trial strategy - Everything else being great, it is likely not your Ideal Customer that’s asking for an extension as they missing a real sense of urgency - Where are they in their buying cycle? [Where are they on the Awareness Ladder?](https://sixteenventures.com/how-to-communicate-value) Etc. ### 5. The Trial is Actually Too Short Remember, [SaaS Free Trial Length is a Marketing Gimmick](https://sixteenventures.com/saas-free-trial-length). It’s just something you put out there to give your prospect a way to try your product with some time-scarcity bookends attached to avoid negative “freemium” psychology issues. But this “marketing gimmick” shouldn’t be taken lightly… it has very, very real repercussions, with the biggest being people simple will not engage with you because it appears that your Free Trial is too short to really evaluate your product. Some things to consider are… - Some folks will ask you for an extension, which is great because you can learn from it But it means they didn’t get to accomplish what they wanted in the allotted time - They didn’t find success during the trial which may [plant a churn seed that will sprout later](http://blogs.salesforce.com/company/2014/05/subscription-growth-focus-on-customer-success-gp.html) and cost you a customer - It is very likely that those that ask for an extension are the minority; the majority didn’t ask for an extension and just bailed - The controversial aspect of this is “were those that didn’t ask for an extension actually real, potential customers?” My experience is that yes they were, they just didn’t find success so they left - My experience also says many folks will try to justify low conversion rates by saying[ those who didn’t convert weren’t going to become customers anyway](https://sixteenventures.com/b2b-saas-lies) If that’s the case, okay, but see #4 above - Some will ask you for an extension right away because they know the trial length isn’t going to work If this happens a lot, you know the perception is that the trial is too short - Be very concerned about how many people DIDN’T take that step and ask for the extension! - Most folks simply won’t ask you for an extension and [just won’t even sign-up](https://sixteenventures.com/saas-free-trial-length), and that’s a problem And it’s not because they’re not “serious” or “qualified” … it’s because you put up barriers and obstacles and made it too hard for them Luckily, when things are your fault that means you can fix them! Assuming all of those things are fixed, the symptom should go away, and when you do get a flare up, you can address it directly by giving an extension and of course… learning from it in the process. So yeah, if someone asks for an extension to their SaaS Free Trial, probably give it to them… but learn from the process and understand that it’s not a good thing; it’s a symptom of something deeper going on. I hope this clarifies things a bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Best SaaS Free Trial Length *July 13, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-length/ Here’s a secret no one talks about: SaaS Free Trial Length is a Marketing Gimmick. There isn’t a best SaaS Free Trial length that works for every SaaS company, in every category, for every market. I know, that contradicts my reputation for saying “always do this” or “always do that” but that’s the way it is; the only best Free Trial length is whats best for your current situation. For instance, I recently helped a company that has a 7-day free trial. In the context of their current situation – offering / market / customer / value prop / speed of value recognition by customers / etc. – a 7-day free trial seemed to make the most sense. Sure, they had 99 problems, but Free Trial length wasn’t one of them. But there is something I want you to always do … and that’s to think before putting up a [Credit Card wall](https://sixteenventures.com/saas-free-trial), [developing your Pricing Strategy](https://sixteenventures.com/develop-pricing-strategy), or coming up with a Free Trial strategy – including choosing the length of the trial. This article will help you avoid picking a Free Trial length at random, will help you understand why doing that is a bad idea, including why you should understand your customers, the market, expectations, how your value prop and competition will influence your prospects view of the trial length you selected for your product, and much more. Here we go… ## Short Free Trials Keep Potential Customers Out If the trial is too short, you run the risk of keeping potential customers from signing-up in the first place, which is the exact opposite of what we’re going for here. I say it all the time, but you should be looking for ways to get MORE people to sign-up for your SaaS app… not ways to keep them out. As I’ve said before, Free Trial length is an external-facing marketing gimmick and if the Free Trial length is considered too short to be realistically effective, it’s a non-starter. And when thinking about the length of a Free Trial, remember that “too short” is relative… it’s all about the customer. Remember, people are busy and distracted… if they don’t think you’re going to give them enough time to evaluate the product, they’ll pass. They might tell themselves – and maybe even you – that they’ll come back later when they have more time or the time is right… but they won’t. You lost ’em before you ever had ’em. ## Decouple Trial Length and Time to Conversion And this is why Free Trial length absolutely MUST be decoupled from the behind-the-scenes sales process, including conversion timing. Which means, if you’re trying to figure out your sales cycle length based on your current Free Trial length… you’re doing it wrong. Believe me… this way of thinking about SaaS Free Trials flies in the face of conventional wisdom… it goes against just about everyone anywhere that ever talks about Free Trials. And as far as I know, no one thinks about Free Trials like this but me… and my clients and friends who’ve found success with this thinking. ## Free Trials and Perceived Bandwidth The length of Free Trial you promote to your prospective customers has to be long-enough for them to feel like they’re going to be able to adequately evaluate your offering. Too often, short trials keep people out because they don’t feel like they’ll be able to adequately “test” or “try” or “kick the tires” or “evaluate” or …, your product. Okay, but how do you know that your Free Trial length is keeping – or will likely keep – prospects from even signing-up? - Talk to customers to understand their product evaluation process - Talk to prospects to understand their product evaluation process - Talk to the customers of your competitors and see if they didn’t try your product due to trial length - Talk to the customers of adjacent products – shared customers, same price, same buying cycle/process, etc. – to understand expectations around trials - A/B test a 14-day Trial and 30-Day trial CTA (even if the rest of the trial is still the control length) - Analyze, Monitor, and Optimize your “website visits to sign-up” metric - Use your imagination… come up with other ways to figure this out ## Myth: Short Trials Keep out The Riff Raff I don’t know about you, but I want as many people to sign-up so I can convert more customers, even if that drops the conversion “rate” but drives the number of actual new customers up. Sometimes conversion “rate” can be a vanity metric. But I know the pushback on this… “if we offer a longer trial, we’ll get people in who aren’t serious and they won’t convert.” In my experience, if we’re getting a lot of people in the trial that aren’t converting or engaging with the product, it isn’t the lack of time pressure from a short trial that’s the problem! Rather, it’s other things like who we’re targeting, our messaging, value prop, the partners we have, etc. The reality is, people (marketers, startup founders, executives, investors… humans!) tend to blame things we don’t understand, rather that tackle the things we know (if we’re honest) aren’t really working. You may have the most engaging, ah-ha-moment inducing on-boarding process – especially if you’re disrupting a staid, Enterprise-focused product category – but if people won’t even sign-up to try it because they don’t think 3 days or 7 days or whatever is long enough to properly evaluate the product (possibly because “how can it be… this is [a BIG Enterprise category with a reputation for complex installations] “), then they won’t even sign-up to try it and you’re missing out. Of course, once they’re in the trial, you have to work diligently to convert ’em to paying customers in a short of time as possible. The bottom line is that fee trial length is an external-facing marketing gimmick Offer a 30 day free trial? Great.. work diligently to convert ’em on day 3 if you can. (hint: by asking for the sale after they’ve achieved the [Common Conversion Activities – CCA](https://sixteenventures.com/free-trial-metrics)). Take Constant Contact for example. Their suite of products based around their core email marketing platform is targeted primarily at the Small / Medium Sized Business (SMB/SME) market. They realize that these people are super-busy and offer them a full 60-days to try Constant Contact. But reading [this post by Constant Contact CEO Gail Goodman](http://www.forentrepreneurs.com/time-to-wow/) about getting people to that “Wow!” moment quickly, it’s clear they’ve decoupled the external-facing Free Trial length of 60-days from their internally-facing sales process timing. ## SaaS Free Trial Length tied to Perceived Complexity You can even do what Salesforce.com does, and that’s to use Free Trial length to differentiate their $5/mo, $25/mo, and $300/mo editions at 7, 14, and 30-days respectively. The more complex the product edition, the longer you’ll need to evaluate it, right? Makes sense. ## So, How Long Should your Free Trial be? **Customer-Facing:** Long-enough to make your prospect feel like they can effectively evaluate your product. **Internally:** As short as possible. To figure out how long your trial should be, you need to understand your customer, know what the expectations are in the market, how your customers think, what your product is displacing in their world, etc. and you’ll know how long the trial length should be. Once they’re in, your job is to convert them into a paying customer ASAP regardless of the trial length. If you have a 30-day Free Trial, it doesn’t mean they don’t become a paying customer until the trial expires or on Day 31 (though this is unfortunately typical). They come in thinking they have 30-days to evaluate the product, but you see it as you have 3 days to get them to ***USE*** the product and to convert them to a paying customer within the first 7 days. You do this by streamlining the on-boarding process, getting them to the Wow! moment quickly, getting them to realize value ***ASAP***, and then asking for the sale by making offers congruent with their use thus far. This is how I helped one SaaS company take their average conversion time on a 30-day Free Trial from 42 days (yes, an average of 12 days post-expiration) to 3 days. Oh, and through the use of creative discounts I helped them drive their Average Subscription Value (ASV) up by 33%. I hope this helps a bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Ideal Customer Profile Framework *June 25, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/ideal-customer-profile/ Having a clear definition of your Ideal Customer is one of the most important things you can do for your business. Your Ideal Customer Profile – ICP – dictates (or should dictate) everything from the features and functionality of your product you build or what makes up your service offering, to the words you use and the emotion you invoke or tap into in your marketing. I think people forget that you actually get to choose your customers. You get to choose who you want to do business with. So creating an Ideal Customer Profile isn’t limiting… it’s empowering! In fact, if you don’t choose who you want to do business with, your customers will choose you… and they may very well be less-than-Ideal. There are obviously lots of ways to come up with your Ideal Customer Profile, lots of methods and templates and canvases… but over time I’ve developed this framework that works well for me. And I continue to evolve it. When I do, I will update this post. The current version is for **Q12017**. If you’re looking for information on why you should create an Ideal Customer Profile, here are a couple of articles and a presentation that will help set the stage. - [Who’s your ideal customer?](https://sixteenventures.com/ideal-customer) - [Churn is a Symptom, Not a Disease](https://sixteenventures.com/churn-symptom) - [The Only Two Reasons Customers Churn](https://sixteenventures.com/churn-reasons) - [Sales Funnel: Stop Optimizing for the Wrong Customers](https://sixteenventures.com/saas-sales-funnel) - [Churn Rate Reduction Starts with Attracting the Right Customers](https://sixteenventures.com/saas-churn-rate-attract-right-customers) - [Where is Your Ideal Customer on the Awareness Ladder?](https://sixteenventures.com/how-to-communicate-value) ## Not About Persona Development… Yet This Framework is not about persona development, it’s about the types of Customers (generally, in a B2B setting… a company) that you should target with your sales and marketing initiatives for a particular situation (more on this shortly). We’re not trying to come up with “HR Henry” or “Marketing Maxine” or define the characteristics of the economic buyer, technical buyer, or coach in this exercise. Persona development has to come after ICP development because you simply cannot know what the personas look like – let alone what Marketing Channels, Pitch, Pricing, or Messaging to use – until you are clear on your Ideal Customer Profile. Think about it…. the CMO at one type of customer will have different motivations / interest / desires / budgets / influencers / etc. than a CMO with matching demographic and psychographic characteristics but at a different type of company. So get clear on your Ideal Customer… then move on to persona development, empathy mapping, etc. That’s all very important, but it’s not the first thing you have to do; this is. But first, some bad news; there is no…. ## Universal Definition of an Ideal Customer Sorry. There is no Universal definition of an Ideal Customer; not for your company… not for any company. Your Ideal Customer Profile is a living, breathing “definition” that you’ll come back to – and modify – often. Ultimately, you should think of your Ideal Customer as *the customer type that – over a clearly-defined time frame – you will dedicate Sales and Marketing Resources to acquire.* In fact, your Ideal Customer is really specific to: - The situation you’re solving for - Your goal - Your capabilities ##   Before you can develop your Ideal Customer Profile you must overcome… ## FOMO – The Fear of Missing Out A lot of people I share this framework with are afraid of narrowing things down to one Ideal Customer – even if just for a single situation – and that’s due to FOMO (the Fear of Missing Out). They think that if they focus on only one type of customer, they’ll miss out on all the rest. But the reality is when you don’t focus, and instead, try to be everything to everyone, you end up making a connection with no one. When that happens, I guarantee you’re missing out. You’re missing out on every one of those people who are, in fact, your ideal customer. So to overcome FOMO… ## Situational Awareness is Critical Determining your Ideal Customer is **NOT** about determining the **ONLY** type of customer you’ll ever do business with, ever. No, it’s about determining the Ideal Customer for a particular situation. That should ease the FOMO pain a bit. The situation definition has three inputs: ### 1. The Time Frame Use whatever timeframe makes sense, but  3 or 6 months is generally a good amount of time for adequate testing. Less than that is likely not enough time and more than that is, you guessed it, probably too much time. But if you have a valid reason for the timeframe you’ve chosen – a mandate from investors, a gut-level feeling, etc. – then go for it. The key is to be specific with the overall timeframe but to also identify milestones along the way where you can check-in to see if this ICP hypothesis is proving true or false. If a 90-day ICP hypothesis is proving false after 45 days, you can either adjust your tactics or make the call that this ICP is in fact not Ideal and pivot to a different ICP. ### 2. The Goal Just as you need to be specific with the timeframe for this situation, you need to be specific with the goal you wish to achieve in that timeframe. - x amount of additional revenue - x new customers - x customer advocates You’ll notice that the goal isn’t only revenue or new customers, but could be customer advocates (those customers willing to help you land other customers). The goal can really be anything you want, and it’s this goal that will really dictate how heavily we weight the different inputs into the Ideal Customer Profile. That said, it should be clear that once you define the time frame and the goal that the type of customer you go after – your Ideal Customer – becomes very, very important. Reaching that specific goal in the specified timeframe without being extremely deliberate in your customer acquisition efforts is essentially a non-starter. You’ll also need to be clear on where you are starting from (baseline) and what metrics you’ll use to measure progress for this situation (and ensure you’re keeping track of those) ### 3. Your Current Capabilities This final point is critical; regardless of what your goals are, you have to be realistic about what you can actually do for your customers. Sure, in order to grow and expand you sometimes need to take on [“stretch” customers](https://sixteenventures.com/stretch-bad-fit-customer) that require you to extend your capabilities… but you have to be realistic about the amount of stretch you can handle. If you only have an API and Enterprise customers require a fully developed rich UI, that may be too much of a stretch right now so they won’t be your Ideal Customer for this situation. Some things to consider:: - The maturity of your product (API only vs. MVP vs. Feature Parity with Market Leader, etc.) - Your ability to serve customers (onboarding, training, customization, customer support, etc.) - Technology or other dependencies (these will figure heavily into the Success Potential input All of that allows for something we don’t have when we just try a bunch of things with a broad audience… ## The Scientific Method The Ideal Customer Profile Framework allows you to take a more scientific approach to your marketing and sales. It’s one of the only ways I know of that allows you to test **CUSTOMERS** vs. just marketing tactics. If you have 90 days to acquire $100k in new ARR, if you’re not at $34k in new ARR by the end of 30 days, you can decide to change your tactics, keep going, or pivot to a new Ideal Customer Profile if you feel the profile you originally came up with isn’t working out for you or was just wrong. It’s so much better to know something isn’t working and be able to cut bait and move on to a new fishing hole, than to just keep fishing in the same place even though nothing’s biting… and this framework finally gives you a more scientific (and less subjective) method to achieve that. Sorry for the fishing analogy. Okay, so onto the actual framework, but don’t skip the Situational Definition… it’s absolutely critical. Without a clearly defined situation, just defining an Ideal Customer will not work. ## A Note about ICP use in Customer Success Management When developing an ICP from scratch for a Sales or Marketing effort, you’ll start with the goal and the timeframe: 100 new customers in 3-months, for example. So, for us to reach that goal in that timeframe, we need to identify potential customers that we can both get in front of and close within that timeframe. While many of the same rules apply when developing an ICP from a Customer Success Management-standpoint, if you decide to focus only on things that happen after they’re already a customer, you don’t have to worry about the sales cycle for in your timeline. Okay, here’s the… ## Ideal Customer Profile Framework (Version: Q32017) If you can find a customer that is Ready, Willing, and Able, that’s a great start. But if the customer is more likely to be successful with your product, you can acquire and support that customer profitably, there is expansion potential there **AND** they’ll be an advocate for you… that definitely is an Ideal Customer. Okay, so here’s the breakdown of the Framework, starting with the baseline characteristics. ### 1. Ready - They have a problem they need to have solved or an opportunity to take advantage of - They know they have the problem  to solve or the opportunity to take advantage of - The problem or opportunity is acute … there’s a sense of urgency you can take advantage of ### 2. Willing - They’re ready to solve that problem by taking action - Even better if they’re exploring options to solve that problem - There’s a strong Catalyst driving change: M&A, Investments, Bankruptcy, hiring/firing, RFP, etc. ### 3. Able - They have the means to solve the problem (i.e. they have the money) - They have the authority to solve the problem - The way you sell matches their [Buying Cycle / Procurement Process](https://sixteenventures.com/pricing-strategy) Ready, Willing, and Able are the baseline characteristics of an Ideal Customer. But you can do even better by applying the value-add inputs of Successful, Efficient Acquisition, Expansion, and Advocacy Potential. ### 4. Success Potential - Success Potential is such an important part of developing your Ideal Customer Profile, I’ve dedicated [an entire post to understanding it](https://sixteenventures.com/success-potential). - Success Potential has six different “Fit” inputs (Technical, Functional, Resource, Competence, Experience, Cultural)… you should definitely read the post [dedicated to this super-important part of ICP](https://sixteenventures.com/success-potential). - The opposite of Success Potential is a customer that is a Bad Fit - Remember, it is just Success Potential… not Success Guaranteed. You still have to [operationalize around the customer’s Desired Outcome](https://sixteenventures.com/elements-customer-success-management) to ensure they unlock their full potential. - I go into a lot of detail on this input in this post: [This Customer Acquisition Mistake Can Kill your Growth](https://sixteenventures.com/customer-acquisition-mistake) - In the next major update to the ICP Framework, Success Potential will be carved out as a stand-alone step in developing your Ideal Customer profile. ### 5. Acquisition Efficiency - This means that it’s cost-effective to get in front of them Could mean CAC < (LTV/x) where x = the lifetime of the customer in months - If they’re strategic, the actual monetary cost to acquire may not matter, but the ease of acquisition might - It may mean that you can reach them by leveraging existing distribution channel knowledge, but it might not. Don’t let existing channel knowledge or expertise bias you if the other ICP inputs tell you what you know best – AdWords for example – isn’t the right way to reach them - Include [Onboarding](https://sixteenventures.com/customer-onboarding) & Support costs when considering cost-effectiveness of the acquisition It’s one thing to pay little to get the initial deal, but if they amount of work required to deliver first value is too high, for a situation where CAC matters, they may not actually be your Ideal Customer. - Figure in Estimated Lifetime (eLT) as well; this is a metric you should have developed either without data or with data sourced from your Customer Success Management system. eLT will help you understand [CAC efficiency](https://sixteenventures.com/saas-cac-efficiency) and whether or not a targeted cohort of customers will be profitable, which would help determine if a cohort you’re evaluating fits your ICP or not. - You must know the Buying Cycle / Process of your customers to truly understand if they fit into your situational ICP. If you’ve decided that you want to add 25 customers in the next 90-days, your ICP for that situation will need to have a shorter buying cycle, a buying cycle that doesn’t have a procurement window or has one that’s within the next 90-days (schools in the United States, for example, often procure products - Customer Success begins by acquiring the right customers – see #4 above – but in itself drives use/consumption/revenue and extends the customer lifetime, therefore driving up LTV and improving CAC efficiency overall. Generally speaking, this is how you improve the per-unit profitability of a customer ### 6. Ascension Potential - This is Intra-Company Virality or Land-and-Expand - Includes Additional seats (or licenses, users, etc.), as well as Upsell and Cross-Sell Cross-sell can be selling the same thing to different parts of the company - Cross-sell can also be selling other (different) products to existing customers - Cross-sell often re-introduces the sales organization into the mix as it generally requires a new sales cycle - Upsell can often be handled by Customer Success Managers / Account Managers - [Expansion must be logically orchestrated](https://sixteenventures.com/logical-expansion) around the Customer’s Success - Expansion drives customer Lifetime Value (LTV) Known expansion potential can lead to immediate ASV (Average Subscription Value) boost [through strategic discounting](https://sixteenventures.com/saas-pricing-discounts) - This is a major consideration when deciding to sell to Enterprise Dept vs. SME, Agency vs. Enterprise, etc. - Customer Success is absolutely required here… **no success, no expansion. Period.** ### 7. Advocacy Potential - Advocacy, Word of Mouth, Virality Inter-Company (beyond our four – even if virtual – walls) Virality - Spreading the word with their peers and friends - Improves Customer Acquisition Cost (CAC) Efficiency Spend $1 CAC to bring in 2 customers (1 refers another) and your CAC drops to $0.50 - Many ways to achieve Advocacy Defined Customer Advocacy Programs - Use-based Virality - [Referral / Invitation Systems](https://sixteenventures.com/invite-hacks) - [Word of Mouth](https://sixteenventures.com/word-of-mouth-follow-up) - [Testimonials](https://sixteenventures.com/get-testimonials) - Network Effect = [Built-in Social Proof](https://sixteenventures.com/social-proof) - Social Proof – logos that get more logos Be careful with the customers you attract initially - Advocacy is generally horizontal; people will refer/advocate for you to their peers - Customers will generally not bring in higher-value customers than themselves; it may happen, but don’t bank on it - So if you bring in low-value / less-than-ideal customers initially, if there is advocacy potential, it will probably not result in higher-value customers. - Customer Success is required here, too… no success, no Advocacy > Chasing logos is fine, but chase logos that get you more logos instead of logos that just feed your ego (or your bank account short-term) - Lincoln Murphy (@lincolnmurphy) [June 19, 2014](https://twitter.com/lincolnmurphy/status/479724384974692352?ref_src=twsrc%5Etfw) ## Ideal Customer Sanity Checks Here are some quick Sanity Checks to do before you run with the profile you’ve created. ### Ideal Customer POV - Would they know they’re your ideal customer if they looked at your site? - Would they feel comfortable in your app? - Would they feel like your service was designed for them? ### Who’s your less-than-Ideal Customer? - Make sure you’re not going where they are! - Then make sure you’re not actively attracting them - Would they think they’re your ideal customer if they looked at your marketing assets? That’s bad. Fix it. ## Ideal Customer Profile Defined; Now What? - Develop buyer personas with confidence! - See how your Ideal Customer profile compares to the rest of your customer base - prospect funnel - customers that churned - current churn threats - prospects that didn’t convert during the trial - cohorts by acquisition channel - Test or Complete your Hypothesis [Use this Customer Development Hack](https://sixteenventures.com/startup-customer-development-hacks) - Use traditional Customer Development methods - [Use my Competition-Customer Stalking method](https://sixteenventures.com/distribution-channels) - [Logically Segment your Customers](https://sixteenventures.com/logical-customer-segmentation) based on their Desired Outcome - Use the Ideal Customer Profile to get look-alike leads - [Buy leads that match their characteristics](https://www.slideshare.net/lincolnmurphy/dark-artofbuyingcustomerdata) - Give the profile to [LeadGeni.us](http://leadgeni.us), [Carburetor](http://carb.io/), or [Growbots](http://growbots.co/) to find leads or people to talk to - Run the profile through [Mintigo](http://www.mintigo.com/) and find others like them - [Figure out how to get in front of them](https://sixteenventures.com/distribution-channels) I hope this helps you take your business to the next level! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 4 Sales Mistakes That Lead To High SaaS Churn *June 21, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/sales-mistakes-cause-saas-churn/ I’ve said many times that the seeds of churn are planted early. Whether it’s in your marketing – both the things you say but also the types of customers you target with your messaging and outreach – to the things you say and do during the sales process, you could be acquiring customers that already have one foot out the door. Because this issue is so important and really can’t be talked about enough, when my friend Steli Efti – CEO of [Close.io](http://close.io) – reached out and offered to share these four sales mistakes that lead to high churn, I was thrilled. Be sure to check out the Afterword  below Steli’s article where I share some articles and resources that will help you further refine your Ideal Customer and reduce churn. Okay, without any further ado… here’s Steli… ## Four Sales Mistakes That Lead To High Churn for SaaS Companies Churn is the biggest threat to sustainable SaaS growth. Sales teams often aggressively close deals because of myopic focus on immediate growth. What they fail to recognize are the long-term implications of short term focused selling to the business. Here’s how to avoid the 4 most common sales mistakes that lead to high churn in SaaS. ## #1: Selling To Customers That Shouldn’t Buy Your Product Everybody is eager to close as many deals as possible. At the same time you need to be disciplined to close only truly qualified prospects. There will be many times when you can sell to someone who isn’t really a great fit. In SaaS, selling to the wrong customers will actually kill your business. ### The Consequences - You’ll get feedback from the wrong people, which can result in bad choices to your future product roadmap and development. - You’ll have to deal with a lot of bad customer support issues. - Poor team morale – dealing with customers who don’t appreciate what you do is just discouraging and can take the wind out of your teams’ sails. - Wrong customers won’t get value from your app and not only churn, but tell everyone about their bad experience. ### How to fix it? Don’t just focus on closing more deals – focus on closing better deals. - Who are your ideal customers? - What are their wants and needs? - What industry are they in? - What size of business are they? - Are they switching from another solution or first time buyers? - What’s their budget for this kind of application? - Who is the decision maker? - Who are the users? Clearly define criteria that are required to qualify as a good customer, to make sure that everyone who buys your product will get value out of it and succeed with it. ## #2: Overpromising Startups are never where they want to be – you’re constantly improving your product. It’s tempting to sell an improved future-version of your product today, and hope that the customer will stick around long enough to actually experience it. ### The Consequences It’ll hurt your credibility and damage your relationship if you announce feature X will be released in 3 weeks, and 3 months later you’re still telling them: > “We’re working hard on it, but there are some unforeseen issues.” Many potentially good customers will cancel, and they’ll never trust you again. Even if your product is the perfect fit for them three months later, they won’t believe you anymore. ### How To Fix It Let your prospect know the timeline of future improvements – and err on the side of caution. You expect a feature to be released in two weeks? Tell your prospect it’ll be ready in four weeks. If a feature release is too far in the future, don’t let them buy yet. Tell them: > “Look, I want you to be our customer, but at this point our product is just not the right fit for you. We have the features you need in our development pipeline, but it’ll probably take us three to four months to get there. So what I’d like to do is to follow up with you once we’re there.” ## #3: Selling on low price, not value A prospect tells you that your price is too high, often early on in the sales process, before you’ve really had a chance to demonstrate how the product will benefit them. They’ll focus the sales conversation on pricing and request a discount. Eager to close the deal, you let them have their discount. ### The Consequences Customers who buy only because of low prices are usually trouble. Oftentimes the people who request the biggest discounts will also request the most support later on, and constantly complain when your product isn’t doing what they want it to do the way they want it to do it. What’s more – after they signed up for a discount and created a ton of support requests, and made you deal with their bad attitude, they often cancel. ### How To Fix It Direct the focus on what matters: your product, and the value it provides. Not how much it costs. Did you find out what really matters to your prospect? Did you gain a true understanding of their objectives, and the problems they want your product to solve? Demonstrate the value your product will create for their business specifically before talking pricing and offering any discounts to win deals. ## #4: Letting customers cancel without selling them to stay A customer cancels, or metrics show that he’s disengaging with your app (an indicator that they’ll cancel in a coming billing cycle). Since you already had a sales conversation with them before they signed up, and they already used your product and got to know it, you just let them go, without garnering any information. You assume they cancelled because your product isn’t a good fit for them. In that case, cancelling is the right thing to do. But oftentimes there are other reasons: - The product is actually a good fit, but they cancel because they aren’t using your app optimally. - They’ll cancel because they need a feature that your product doesn’t have – but maybe you’re already working on that feature and they are unaware of it. - Or they cancel because your internal champion left and their new VP sales wants to use another software, because that’s what he has always used. ### The consequences You don’t know why your customers churn. And you’re losing many customers that you could have easily kept just by investing a little bit of effort. This is a scalable problem – the more you grow, the bigger this issue will become. ### How To Fix It Talk with your lost customers. Find out why they cancelled. If it’s an issue you can solve, do so. - Maybe you just need to help them find a way of utilizing your app better, and provide better training & support. - Or you need to let them know that you’re soon going to release that feature, and offer them a deal to stick with you for the time being. - Or sell your product to the new VP sales, and make him understand why your product is indeed the right choice. ## Reduce Churn From The Get Go There are [many ways to reduce churn](https://sixteenventures.com/retention-churn-reduction-resource-guide), and it’s important to recognize where you’ll get the biggest leverage. Sales is generally a good place to start because it’s early in the process and filters out prospects that would be painful to retain later on. ### About Steli Steli Efti is the CEO of [Close.io](http://close.io/), sales software that helps SaaS companies close more deals and make more sales. He has worked with over 150 venture backed startups helping them scale their sales models. You can [follow him on twitter here.](https://twitter.com/steli) ## Afterword Lincoln here again… if you want to use Steli’s article as a jumping-off point, here are some resources on identifying your Ideal Customer and Reducing Churn that I’ve put together for you: - [Who’s your ideal customer?](https://sixteenventures.com/ideal-customer) - [How to Get In Front of Your Ideal Customers](https://sixteenventures.com/distribution-channels) - [Stop Optimizing Your Sales Funnel for the Wrong Customers](https://sixteenventures.com/saas-sales-funnel) - [Churn Rate Reduction Starts with Attracting the Right Customers](https://sixteenventures.com/saas-churn-rate-attract-right-customers) - [22 Ways to Reduce Churn with Growth Hacking](https://sixteenventures.com/growth-hacking-retention) I hope all of this helps you get – and keep – more customers. Good luck! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Free Trial: Requiring a Credit Card is Shortsighted *June 14, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial/ I got this email asking whether to require a Credit Card to start a SaaS Free Trial or not and what the best Free Trial length is. So instead of just answering him directly, I decide to use it as the basis for this article. Here’s the email: > *Hey Lincoln, some dude told me to ask for a credit card up front with a free trial instead of the Freemium model I’m currently using. Just as your site says…customers psychologically get used to NOT paying with my freemium model and its a disaster.* > *However, your articles strongly suggest NOT to ask for the CC upfront for free trials as that dude suggests.* > *My plan was ask for CC upfront for a 7 day trial. Do you still advise against this plan? Reason I ask is your article is over two years old…so not sure if the market changed etc.* Here’s my response… Switching from [Freemium to Premium](https://sixteenventures.com/pivot-to-profit-ditch-freemium) is something I’ve talked about before, for sure, but it really starts with understanding the [difference between Freemium and Free Trials](https://sixteenventures.com/freemium-or-free-trial). ## Why offer a Free Trial at all? That said, why do you offer a Free Trial in the first place? So prospective customers can get to know your offering before paying for it… … remember, they don’t already know, like, or trust your company or product yet. And we know in B2B especially, trust is huge… trust that your product does what you say it does, trust that you’ll support your customers, trust that you won’t rip them off, etc. So… if that’s the case, how does asking them to provide a credit card simply to try your product help build trust? Right, it doesn’t. If anything has changed in the last few years, it’s that people have become LESS trusting… not more. Less willing to whip out the credit card to TRY something. Why? Because 100% free options abound. So they don’t need to. Couple that with the fact that people are busier and more distracted, and asking for a Credit Card up front (what I call putting up a CC-Wall) becomes yet another distraction rather than something that helps them move forward to becoming your customer. Distractions + Lack of Trust = Fail. So I’d say putting up a CC-wall – especially in a B2B setting – is even more a non-starter than it was way back 2 years ago when I wrote that post. ## Wait… It Actually Gets Worse Now let’s talk about the 7-day Free Trial length. Remember, the length of the Free Trial is a marketing gimmick. Its only job is to be long-enough for the customer to feel like they’re going to be able to evaluate or get value from the service – while putting some time-scarcity book-ends on the deal. My gut says 7 days may not feel like enough time to your prospective customer – though you may want to test and validate that hypothesis – so this could cause fewer people to even try your SaaS in the first place. Distractions + Lack of Trust + Super-short Trial = Huge Conversion Fail It almost seems like you don’t want people to sign-up for your SaaS at all. If I were you, I’d concentrate on ways of getting more people in rather than ways of keeping people out. So, I’m thinking double-whammy on that one…. and here’s the logic behind my thinking if you care to keep reading. ## Never Underestimate Spite as a Business Driver As for the advice you got, I can’t speak to where he’s coming from, but I will say people have their beliefs, which are often tied to their experiences. And of course, you can always find people that share your beliefs / experience so it’s easy to fall into the trap of thinking your beliefs / experience are the truth when it’s the echo chamber playing tricks on you. While I value experience obviously, I also know it can be skewed by various inputs (like emotion, for instance), so I try to work from data + an understanding of customer behavior/psychology as much as possible. When I catch myself being too emotionally invested in one way of thinking, that’s a red flag and I go back to the data and the science for a sanity check. That said, the data I’ve seen shows asking for a Credit Card up front causes fewer people to sign-up. Period. And that simply means you’ll have fewer chances to convert and grow long-term customers and to me, that’s a fail. ## Skin in the Game The misconception is that asking a prospective customer for their CC is “skin in the game” or “commitment” on their part.. or some part of a “qualification” process. But it’s not. A CC-wall is a barrier. And it’s the worst kind of barrier; a barrier erected out a misunderstanding of why things work. One often fueled by emotion, not data… emotions like frustration or anger (“freeloaders! I’ll show you.”). But if you don’t believe me that asking for a CC up front will cause fewer people to sign-up, you should A/B test this for yourself… just the part about a CC being required or not and see what happens. That’s not fair, though, as the value prop and trust factors required to get people to sign-up and pay first (or put in the CC first; it’s a very small difference between paying now and just entering a CC, right? Same action required by the customer… same barrier) are much higher, so simply changing the “no CC required” to “Valid CC required” isn’t a valid test. ## An Effective Way to Reduce Sign-ups But I can anticipate one type of pushback already… sure, a CC-wall may not get more people in, but they’re the right people. They aren’t the riffraff. They’re real, actual potential customers who are dedicated and not messing around. Well, the ones that stick around past 30, or 60, or 90 days are I suppose. But the ones that don’t? They’re the riffraff with credit cards. They’re the freeloaders who put in a credit card but ***OPTED OUT*** of your product when the trial was over. (this paragraph was basically sarcasm). You see how stupid that sounds, right? Clearly they just didn’t find your product compelling enough to stick around and pay you. But you can’t see that. You can’t deal with that. So you blame them. You blame them after you get their CC… and you blamed them when you didn’t ask for the CC. Stop blaming them and look at your product. Look at your processes. Look at yourselves. You didn’t land on your product, it landed on you. (sorry, got carried away). ## Conversion Magic: Improve On-boarding and Engagement The reality is, CC or not, it’s what happens after the initial sign-up that matters. It’s what gets people to convert to paying customers. If you know this, you’ll see that a CC-wall isn’t the point. Which means, having a CC-wall without a great post-signup experience won’t matter much to your conversion rate. This is why I routinely see SaaS companies with a CC-wall still with conversion rates of 10-20%. Those with awesome post-signup processes (on-boarding, engagement, etc) are in the > 85% conversion rate category. Now what would happen if you had an 85% conversion rate and took down the CC-wall? Would it drop? Maybe… but that’s the rate… the overall number would likely ***SKYROCKET***. ## But Credit Cards Improve Retention Rates, right? So if CC-walls keep people out, do they at least keep those who are in, in? No. As I just said, I often see an 80-90% cancel rate post-signup for SaaS companies with a CC-wall. That’s terrible and clearly shows that a CC – that skin in the game that you so desperately desire – doesn’t matter that much. In fact, I’ve yet to see a real, positive correlation between getting a CC up front and a higher 90-day post-sale retention rate. It’s always the other stuff that gets customers to stick around… experience, engagement, investment (time, resources, data, etc.), community, etc. To that point, when someone says anecdotally that they put up a CC-wall and got a higher conversion rate than before (remember what I said about RATE vs. ACTUAL numbers), it is almost always the case that they didn’t ***JUST*** put up a CC-wall. They did other stuff, too. From [improving the on-boarding process](https://sixteenventures.com/free-trial-metrics) and the UI and UX and CX and BS, to focusing on making the customer happier, working to make them more successful, etc. they did something else. I think that happens because it’s like “Okay… I got their CC, it’s go time.” So the entrepreneurial hustle (even if automated and built-into the product) kicks in and they work harder to get the customer to stick around. ## The Sting of the Active Opt-Out Or maybe it’s that they know when someone gives you their CC to try your product and then they cancel before the trial is over, that they didn’t like what they saw. And that hurts. That’s not like a no-CC Free Trial where they can just stop using the product and go away… when you have their CC they have to actively cancel and that stings. And it should sting…. but it should also be obvious that simply having their CC is no guarantee they’ll become a paying customer. So it’s not that the CC-wall made the customers instantly better… it’s that the vendor made the product better and that compelled those who took a chance and made it through the CC-wall more wiling to stick around and use the product. In other words, having a great product that you work diligently to get them to use is the key to keeping folks around within the first 90-days… not asking for a CC up front. And why do I care so much about the first 90-days? Because when you ask for a CC up front you’ll have some conversions that happen because your customer forgot to cancel. Maybe even a couple of billing cycles. So I don’t consider a customer a customer until they’ve paid for the first 90-days. When reporting Monthly Recurring Revenue (MRR) for a SaaS company with a CC-Wall, if you’re looking at a purely financial model, anything within the first 90 Days cohort should be reported as at-risk. Of course, [context is everything in Customer Success](https://www.linkedin.com/today/post/article/20140613060150-7018284-in-customer-success-context-is-everything), so if your customer is realizing value and the feedback they’re giving you is great, then they’re less at-risk. ## Exceptions to the Rule Just so you realize I don’t ***JUST*** make blanket statements, I realize there may be some necessary exceptions to what I described above. Though I’d say there are far fewer than what most people think so I always push back. For example, email marketing is a product category where there is a ton of abuse (potential). Some companies [do the $1 trial thing](https://sixteenventures.com/one-dollar-trial), but other companies like GetResponse offer a 30-day Free Trial with no credit card required. How? They realize that the “abuse point” is actually the “value point” so if they can get people to become invested in GetResponse during their free trial (set everything up, import their list, integrate their lead capture widgets, send some test messages, etc.) once they’re ready to send a normal volume of email, they’ll be willing to pay. So even in a high-abuse (potential) setting like email marketing, no CC-Wall Free Trials work. As an example of a service where value is received immediately and where a trial both isn’t required and is hard to implement, I wrote about a Press Release distribution service [in this post on LinkedIn](https://www.linkedin.com/today/post/article/20140512065424-7018284-both-pay-as-you-go-and-subscription-pricing-for-saas). I gave the example of letting the prospective customer set everything up for free with no CC-Wall, but once they were ready to send, charging them (or getting them to subscribe to the value-added service). ## The REAL Meaning of the Free Trial Length Now, as for the 7-day trial, again, [I think it may be too short](https://sixteenventures.com/shorter-free-trials). I don’t know, that’s your job to figure out. But what’s also your job is to convert them into a paying customer ASAP regardless of the trial length. If you have a 30-day Free Trial, it doesn’t mean they don’t become a paying customer until the trial expires or on Day 31 (though this is unfortunately typical). They come in thinking they have 30-days to evaluate the product, but you see it as you have 3 days to get them to USE the product and to convert them to a paying customer within the first 7 days. You do this by streamlining the on-boarding process, getting them to the Wow! moment quickly, getting them to realize value ASAP, and then asking for the sale by making offers congruent with their use thus far. This is how I helped one SaaS company take their average conversion time on a 30-day Free Trial from 42 days (yes, an average of 12 days post-expiration) to 3 days. Oh, and through the use of creative discounts I helped them drive their Average Subscription Value (ASV) up by 33%. I hope this helps a bit. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 3 Email Lead Capture Hacks to Get More Customers *June 13, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/email-lead-capture/ Sadly (for us… pretty awesome for them, I suppose) [Stacklead was acqui-hired by LinkedIn](http://stacklead.com/blog/stacklead-is-joining-linkedin/) and is being shutdown. If we’re honest, email lead capture is pretty much why we have a website. I mean, aside from making a sale the first time someone hits our site, the main goal of everything we do – especially content marketing – is to capture leads (or emails we assume are or will become qualified leads). The problem is that not every email address is created equal, right? Aside from those that are anonymous or otherwise of poor value (catchall, role-based, etc.) and likely to get you in trouble if you email them, some folks like to hide behind GMail or Yahoo addresses rather than using their work/professional address. This means that when someone sign-ups up for your mailing list, Free Trial, or Webinar with a GMail address, for instance, they might actually work for a big company, but you just don’t know it. And what if multiple people give you their GMail address to get that ebook you’re offering as a sign-up “bribe,” but they all actually work for the same big company? That’s probably something you should know, right?Enter [StackLead](https://stacklead.com). Give them an email address and they will return to you a complete social profile for that address. And since people often use their personal GMail address (or even an “anonymous” or “for spam” address) on social networks, StackLead will quite often find the real information for the person… including the company they work for. It might not return their work email, but [finding that is trivial](https://www.email-format.com/) if you know what company they work for. Every day tons of folks just like you sign-up for my mailing list (you should, too… I share awesome stuff from time to time), which means several times each day I get an email from StackLead that looks something like this: In the Afterword toward the end of this post, I’ll share with you exactly how I get that information sent to me… it’s a pretty sweet little Growth Hack that I used to do on my own, but with StackLead, that little hack is all grown up (and you can get it with one line of Javascript). Now, there are other backfill/data appending services out there – [I’ve mentioned a few before ](https://www.slideshare.net/lincolnmurphy/dark-artofbuyingcustomerdata)– but I first heard about StackLead through the [GrowthHackers](http://growthhackers.com) community, when they posted this [spreadsheet “hack” on their blog](http://stacklead.com/blog/hacking-the-email-spreadsheet/). This was a super-smart idea that allowed non-programmers (or lazy people like me) to start using their API without having to write any code. I immediately connected with Gordon Wintrob, Co-founder of StackLead, because I liked the hack so much and the service was – even in the early days – producing high-quality results. I asked him the source of the data they gather and he said these magic words that really resonated with me: “StackLead basically does what you’d do to hunt down information on a person… only we automate and scale the process.” We’ve been friends ever since, which is why when he came up with this list of 3 ways to capture more email leads, I was eager to share it with you. Again, be sure to read my Afterword below… I’m going to show you a super-awesome Growth Hack that I’ve used for years to capture tons of email leads. Okay, take it away Gordon. ## 3 Email Lead Capture Hacks At StackLead we’re always excited to see big jumps in our customers’ inbound leads and even more excited to see why. Sitting on the receiving end of lead capture forms has given us a lot of opportunities to see what tactics work and don’t work. In this article, we share some of the techniques and best practices that can dramatically increase (even triple) new leads. An effective email capture form has three main characteristics. It’s customized to a specific lead, earns their trust, and keeps things simple. ### Customization Creating a customized signup form isn’t always worth the effort – but if you have a press event bringing in a lot of referrals or an ad campaign targeting a specific customer segment, you have an easy opportunity to target a specific audience and boost conversion. When SendWithUs announced their product on Hacker News, they created an [interactive signup form](https://www.sendwithus.com/developers) that walked users through an example of their API, letting them test it out with their own email addresses. The hacker-oriented terminal interface and interactive content connected with visitors. [](https://www.sendwithus.com/developers) We used a similar [developer landing page](https://stacklead.com/dev) that captured 3 times as many email addresses as the form on our homepage. [](https://stacklead.com/dev) This brings us to an important part of customization – measure everything. The more information you have about web visitors, the better you’ll be able to determine why some users are signing up and others aren’t. Using A/B testing tools like Optimizely can show you what variations are working and automatically adjust over time. A few of the most common dimensions we’ve seen for customization are: - **Referral** – In particular, users coming from known high traffic sources will often match a specific customer profile. That could be a blog, forum, news, or community site. For search traffic, you could even consider the search keyword. A navigational keyword like “StackLead” indicates a different user than one who searched for “lead research”. - **Pages visited** – Someone who visited the pricing and documentation pages multiple times is further down the buying cycle and needs a different call to action than a new visitor reading a blog post. - **Location on page** – Visitors at the top of the page might just be skimming for information, while those who dive deeper and scroll down are looking for next steps. Oli from Unbounce has a great breakdown on [call-to-action location](http://unbounce.com/conversion-rate-optimization/landing-page-cta-placement/) and found that moving the CTA higher on their pricing page (where visitors are already engaged) increased conversion by 41%. - **Attention ratio** – Ideally, you only want to keep a single, targeted call-to-action visible for the user. This lets you think about your page in visible chunks of content, where each chunk has an action item like subscribing to a newsletter or starting a free trial. [Crazy Egg’s pricing page](https://www.crazyegg.com/pricing) is packed with content, but makes sure that multiple sections drive you to sign up. ### Earning Trust Getting visitors to convert into customers or users is all about earning trust. As email marketing continues to grow (driven by its 4,300% ROI according to the [Direct Marketing Association](https://imis.the-dma.org/bookstore/)), visitors are wary of handing out their email address without getting something in return. A LaunchRock landing page with a nice background and two lines of text probably isn’t going to compel anyone to enter their email address. A lead capture form is about converting users from anonymous website browsers into engaged contacts ready for a conversation. To that end, your forms should ask as little as possible from a new customer and offer as much as possible in the form of product demos, free trials, educational content, or custom promotions. What matters more than the specific offer is how you make it compelling to your audience. Sales is about educating customers on why they need your product – a demo or free trial is great, but only if you [tie it back to customer success](https://sixteenventures.com/customer-success-definition). Once you’ve shown how you’ll make the visitor successful, you also need to eliminate any fear about sharing their contact info. Having a link to your privacy policy and a brief sentence about how you will use their email builds trust and sets expectations. Customers will be more likely to sign up for your mailing list if they understand how frequently you’ll contact them, but remember to keep a positive message! “Get a bite-sized lesson in your inbox each week”, Segment.io’s trust-building message for [Analytics Academy](https://segment.io/academy/), sounds better than “We’ll never spam you”: [](https://segment.io/academy/) ### Keeping it simple At this point, you know to customize lead capture forms for your visitors and earn trust in the process. Now a potential customer wants to give you her email address and you need to make it as simple and accessible as possible! Here’s a great example from [Customer.io’s blog](http://customer.io/blog/). The content is targeted to their audience (businesses looking to drive growth through email), the language builds trust and sets expectations, and they only ask for your email address. [](http://customer.io/blog/) From an email address alone, you can learn a lot about someone like where they work, the products their company currently uses, their social following, and much more. Rather than overwhelming your visitors with unneeded form fields, you can research all of your email leads with a service like StackLead. ### Wrapping up Any other ideas on how to customize, earn trust, and keep things simple to drive more leads? Reach out at [team@stacklead.com](mailto:team@stacklead.com). As a bonus for Sixteen Ventures readers, if you [sign up for a paid StackLead plan](https://stacklead.com/pricing) today, shoot us an email and we’ll give you a free month! Gordon Wintrob is Co-Founder of [StackLead](https://stacklead.com/), he went to MIT, and you should follow him on [Twitter @gwintrob](http://twitter.com/gwintrob) ## Afterword: Email Lead Capture Growth Hack Lincoln here again… I told you I’d share a Growth Hack I’ve been doing for years, right? Well, here it is. Pretty much as soon as Ajax became a thing – the ability to communicate behind the scenes with the server without refreshing the page – I put some code in my forms that grabbed the email address when focus left the email input box – even if part of a larger form – and sent it back to the server. Once I have that email address, I can backfill info to build a customer profile (like through StackLead), use for [custom audience targeting in Facebook/Twitter/CRM Retargeting](https://sixteenventures.com/saas-growth-hacking-email)… the only thing I wouldn’t do right at this point in our relationship is add them to a bulk mailing list. This little hack is super-awesome because even if they don’t complete the entire form, as long as they fill in the email address, I get the data. Since I’ve always rolled my own over the years, and I really dig the StackLead service, you can imagine how excited I was when I saw that [StackLead released a Javascript snippet](http://stacklead.com/blog/qualify-leads-on-your-website-with-stacklead-js/) that takes the email address – both on submit or when the focus leaves the form field – and runs it through their magical system, producing that wonderful report I get several times per day. BTW, you should totally take Gordon up on that deal for a free month. That’s an actual free month of usage… not a trial, not a demo… 1 month free. Do it. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 5 Steps to Unstick Your User Onboarding Flow *May 12, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/onboarding-flow-unstuck/ The other day I got an email from a SaaS CEO friend of mine telling me his product team is finally ready to tackle a major problem with their onboarding flow during their Free Trial. It turns out they have one screen in the flow that is causing them big problems. And in this case, a “big problem” is that prospects entering their Free Trial would, at some point, hit that screen and leave… never to be heard from again! Yeah, that’s kind of a big problem. Now, as you can imagine, this screen happens to be a very important piece of the [customer onboarding](https://sixteenventures.com/desired-outcome) process, meaning prospects or new customers can’t skip it, and changing it will take significant engineering resources (not just the screen itself, but all the stuff going on behind it). That’s how screens like this get to be, well, screens like this, right? This SaaS vendor has basically tackled all the low-hanging fruit around this screen, which means this screen sticks out like a massive sore thumb even more. So, it’s time to make a change and unstick that stuck onboarding flow. But first… ## An A/B Testing Sanity Check Before they just ripped it out and started down the road of re-engineering this screen (or, more appropriately, this “process” as it will likely be several screens of varying complexity when “fixed”), they wanted to make sure that portion of the onboarding flow as really the problem. So they created a big A/B test (not red vs. green button colors, but a BIG test; different early-stage onboarding flows), and this screen was the common bottleneck with statistical significance. Across both versions, this screen was causing an almost 90% drop-off. That means that 9 out of 10 people that got to that screen left. But it gets worse… …most people that hit that screen never came back. They never logged in, again. The screen seemed to hurt their feelings or insult their family. When you’ve worked hard, spent money, and dedicated resources to getting people into your Free Trial… … seeing 90% of those folks churn out in what amounted to the first few minutes of usage hurts (ego, feelings, bank account, trust with those folks who wanted your product to help them, etc.). So his question to me was simple: “what should we do to this screen to make it work better?” That was a simple question, but like most simple/quick questions, the answers are anything but. So, my answer was “I don’t know…” but then I followed it up with these 5 steps I’d take to turn that “I don’t know” into “I have a better idea.” And I’m sharing them with you, too. ## 5 Steps to Unstick Your Stuck User Onboarding Flow This process involves talking to customers, watching users, and otherwise learning from those people you sell to and who use your product. Given that you’re at this point, I can only assume you really haven’t done much of that to-date. This will be uncomfortable… I’m sorry. ## 1. Talk to Those Who Bounced & Didn’t Convert This may be a little uncomfortable, especially considering you’d be reaching out to people that made a choice not to become customers. But that’s exactly why you’re reaching out. They didn’t convert. They didn’t even get started. And you need to know why. You can’t do any of the next three things on this list with these folks… it’s too late. The only way to extract the intel they hold in their brain (and heart… you hurt them) about why your Free Trial is repelling customers rather than converting them is to ask them. Get out of your own way and just do it. Send a quick email with an open-ended question. Leave your ego at the door, put your tail between your legs, and talk to them like they’re a real person. Don’t ask to jump on a call or if they could spare some time. Don’t offer a Starbucks gift card or anything for their time. Just lay it out for them, in plain, but terse, language, and then ask them what the problem was. You could – if you wanted – include a picture of the screen we know they bounced at to jog their memory, but that’s it. Keep it simple and human. Will everyone respond favorably to your request? No. Don’t worry about them. Who cares. Instead, focus on the handful that do respond and get as much from them as possible. Keep your back-and-forth congruent with the context of the conversation and if warranted (the other person may actually suggest it), you can ask for a Skype call… but only if it makes sense. Okay, so that’s the past (though you can do this for current/future prospects that bounce a few days later if none of the other ideas below work)… how do we get intel from those currently experiencing the pain that is this screen? Well…. ## 2. Ask ’em What’s Wrong While They’re On The Screen We know this screen is a problem (or we’re pretty darn sure, right?). So, since it’s no real secret (I mean, they’ve seen the screen), we might as well just address the elephant in the room. Normally I’m not a huge fan of bringing up potential objections, but in this case… we’re somewhat sure there’s an objection. So instead of hiding from it, we might as well put that knowledge to work. Okay, so when someone hits this screen, after a few seconds, ask them if they find the screen confusing. Do this right when they might be confused by the screen. Use a tool like [Qualaroo](https://qualaroo.com/), [Olark](http://www.olark.com/), or something to make this work. If you can do this live and start a chat session with them, even better. If you don’t want to do that (I’d ask you to reconsider), then you could just trigger an email once they hit the screen that asks the same thing. [Vero](https://www.getvero.com/) or [Customer.io](https://customer.io/) would work here. But I’d rather just hit ‘em up right when they’re staring at the monstrosity. Again, will everyone who you ask respond to your inquiry? Heck no. But some will. And those folks hold your fortune in their hands. Grab it. Okay, at this point you’ve talked to people who bounced before, now you’ve asked people while they’re on the evil page… and you’re starting to spot patterns. But there’s more you can do… ## 3. Leverage Exit Intent You know what exit intent is… other than the term being somewhat obvious (they’re intending to exit your site), you’ve experienced it. You know when you go to leave a page and a pop-up appears that tries to get you – one last time – to take an action? That’s exit intent. Most of the time it’s used to try to get you to join a mailing list, but in Internet Marketing circles, it’s often used as a down-sell trigger. Buy this thing for $19.99 => exit intent => wait… don’t leave. What about $0.99? => Yay! You know the drill. So why do *those* Internet Marketer types do that? Because they know that once you leave, they probably lost you forever. But… if they can get you to become a customer, even for just $0.99, they know that you’ll probably buy more stuff later (including the One Time Offer that comes after that down-sell). This “exit intent” thing has been big in IM circles for a while, but once high-end non-IM Internet Marketers like Neil Patel and Ryan Deiss started talking about and using this stuff on more mainstream properties, suddenly it became an acceptable thing to do. And you saw high-end services like BounceExchange pop up to offer this technology for $1000’s per month… only to quickly get commoditized [by cheap / free Javascript libraries](https://github.com/carlsednaoui/ouibounce) or WordPress plugins. Now every blog has an “exit pop” and it’s super-annoying. But it makes sense if you think about the transient nature of content consumption these days. We don’t follow blogs anymore… we react to social signals and community up-votes. We may read one article from someone today… and never read anything from them again. I think it’s just harder to cultivate a following from scratch these days, so it makes sense… if I don’t get aggressive and get you to opt-in to hear from me about my next post, we may never cross paths again. Okay, okay.. so what? What does this have to do with helping you unstick your onboarding process? Everything, but mostly the “get aggressive” and “transient nature” stuff. Look, if we can leverage “exit intent” to ask why they’re leaving, closing the tab, logging out, etc. we might as well. If we don’t, we may not get another chance. You must embrace this fact. Which means we need to do what we can to find out what’s going through their mind. Also, the “transient nature” piece speaks to the fact that in the onboarding process – and especially during a Free Trial – you have a very fragile, immature relationship with the customer or prospect. The reality is, you’re not at the top of their mind, yet. You’re not the center of their universe, yet. You will be (that’s the goal), but you’re not yet. And not yet means you can lose them really easily. And if they’re leaving, that’s because they just made a conscious decision to leave. If it’s not to close the tab our app is open in, it’s at least to stop the process we want them to complete to go do something else. What else is more important than finishing the onboarding process of our app? To them? Apparently anything else at all. To us? Nothing. Not. One. Thing. So get aggressive. Do an exit pop and just ask one question: can you follow-up with them to ask a few questions about the screen they were just on? If they click yes, ***IMMEDIATELY FOLLOW-UP*** with them via email, call, whatever. Shocker, Qualaroo is good for this as well, or you could leverage any of the exit intent pops out there or roll your own. Whatever. But do it. Okay, so now you have even more intel, but guess what… some people ***STILL*** won’t help you. Yep, not everyone that sees your exit pop will play the game. Some will – focus on them – and you’ll start seeing all sorts of patterns in what they say + everything else you’ve gathered. But there’s more you can do… ## 4. Record Actual User Sessions Okay, since they won’t tell us what’s going on, we’ll just spy on them. Use [SessionCam](http://www.sessioncam.com/), [Clicktale](https://www.clicktale.com/), [Inspectlet](http://www.inspectlet.com), [Mouseflow](http://mouseflow.com/), etc. to record real life sessions to see how people actually interact with the screen. Sure, you’ll miss out on how they feel about it, but you can probably figure that out when you see their mouse move in rapid circles before they closed their browser. There was probably swearing involved. Done right, you can even correlate the recorded sessions with any intel you get from the user through the other methods. Okay… so now you have intel from interviews with prospects that bailed on you and those that talked to you after the exit intent worked its magic, feedback from in-app surveying, and hours of recordings of frustrated users to review. That’s a lot of data! And it should be good, actionable data. So it’s time to rip out that horrible screen and build a new one, right? Clearly not… we’re not to #5 on the list yet. There’s one more thing you need to do before you get started re-engineering the offending screen, and that’s to… ## 5. Think about Customer Success You took your eye off the ball and that’s why the screen is the way it is. And in this case, the ball is the customer. When you start building things in a vacuum or building stuff for your ego instead of your customers, you end up where this SaaS company ended up. Or, this can also happen, by the way, when we listen to – and implement – customer requests while forgetting that part of [Customer Success](https://sixteenventures.com/customer-success-definition) may actually be saying “no” to requests that don’t drive (even the one requesting the feature) toward success. Sometimes customers ask for things they don’t need or that they had in other systems… and unless we truly understand what their [Desired Outcome](https://sixteenventures.com/desired-outcome) is, we may just say “yes” and build a feature which, ironically, ultimately leads to less success. So whether it’s being lazy or working too hard at the wrong things and forgetting about your position as the subject matter expert, you must keep Customer Success in mind. Remember, you really shouldn’t be selling your customers the features and functions of the software. Rather, you should be selling them the results they get when they use your software to perform those functions. I go into a good amount of detail on this subject in [an article I published on LinkedIn](https://www.linkedin.com/today/post/article/20140512065424-7018284-both-pay-as-you-go-and-subscription-pricing-for-saas). So now, when you start redesigning the problematic screen, look at the screen (or, the “process” as I more accurately referred to it above) as part of the flow or journey from the customer’s POV… really understand what they need to see at that point to make them take the next step toward success. The screen (as part of a greater process) doesn’t need to get them to do everything right then… just the one thing necessary right then to move one step closer to their goal. And their goal isn’t just the functional completion of the process, but the results the process delivers. If you do all of the things listed above, you should easily be able to unstick your stuck onboarding or Free Trial process, just like I know my friend and his product team will be able to do. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How-to Use SaaS Pricing Discounts to Grow Revenue *March 24, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-discounts/ When it comes to SaaS pricing, discounts are both awful and awesome. Unfortunately (or not), we just don’t live in a world of absolutes. Generally, I like to avoid discounts because the way they’re done most of the time can will devalue your offering in the eyes of the customer. And that’s because most of the time, discounts are a cop out. It’s just easier to lower the price than to do the work necessary to sell at full price (or even higher). I can’t help you if you just want to lower your price whenever someone objects, but if you want to ***NOT*** do that, and are interested in using discounts to actually ***GROW*** your business, well, then here are my three rules for using discounts. ## Table of Contents - [Price Objections are Value Objections](#1) - [Discounts should get people to pay you more… not less](#2) - [To be really effective, discounts require scarcity](#3) - [A Note on Discounts in Enterprise SaaS Deals](#4) ## 1. Price Objections are Value Objections If someone objects to your price, yet they have the means to pay it (i.e. no matter how much I understand the value of a Bugatti Veyron, I can’t pay $2.5M for a car), then it’s not the price they’re objecting to. Rather, it’s that they don’t think your offering is ***WORTH*** the price you’re asking. The value they perceive simply does not match the price you are asking. You can either lower the price permanently or in the form of a discount, and maybe get people who originally objected to your offering to pay (while calling you a sucker and thinking of other ways to rip you off or waiting for a more valuable solution to come along)… … or you can work harder to raise the value perception of your service to match the price you’re asking. Amateurs do the former… pros do the latter. BTW, you could also be attracting the wrong customer; you may need to [identify an Ideal Customer](https://sixteenventures.com/ideal-customer-profile) that immediately perceives the value in your SaaS congruent with the price you’re asking. Those images are from this ~35 minute video on SaaS Value Pricing… watch it if you need a refresher on the basics (everyone probably needs a refresher on the basics!). [|Back to Table of Contents|](#toc) ## 2. Discounts should get people to pay you more… not less I take flak for this all the time… until people try it and it produces crazy-awesome results. Please, don’t send flowers when you try this and it works… a simple “thank you” is all that’s necessary. And money. Like I said above, there are no absolutes here. Sometimes discounts are cool, like when you can get people who convert to pay you ***MORE*** than they were originally going to… by offering a discount. Let me explain. If someone self-selects the $50/mo plan when they start your trial, or if their usage during an unlimited trial or trial not tied to a pricing tier indicates they should select the $50/mo plan, what can we do to get them to convert at, say, $75/mo instead of $50/mo? Well, we could take the next tier up – $100/mo – and give them that tier for ONLY $75/mo. We could do that forever (until they upgrade/downgrade/cancel – a good reason to not cancel, especially if the price has gone up even more later) or for a limited time, like 6-months. Either way, that could be a mighty enticing offer, especially if triggered based on their actual usage during the trial (i.e. once they[ complete the CCAs](https://sixteenventures.com/free-trial-metrics), make them the offer… I like to use One Time Offers that will never be available again). This is how we took one client’s time from sign-up to conversion on a 30-day Free Trial to just 3 days (you read that right) ***AND*** increased Average Subscription Value (ASV) by 33%. Yep. In fact, this is a great reason to tie your trials to a pre-selected pricing tier, but make it unlimited so they use or get exposed to advanced (more expensive) features. Of course this works really well if your pricing plans are segmented on high-value metrics and not low-value commodity metrics (i.e. storage, bandwidth, etc.). Let’s bottom-line it… if you can get them to pay $75/mo at conversion instead of $50/mo, even if they never expand their usage beyond that, you drove up LTV 50% simply by offering a ***SMART*** discount at the right time. Yep. Yep. Oh, you could also make up a pricing tier that doesn’t exist publicly (yet) and offer that to them, thus avoiding any “discounting” altogether, but that’s a story for another day. [|Back to Table of Contents|](#toc) ## 3. To be really effective, discounts require scarcity Whether that scarcity is the amount of time the discount is available, the number of discount subscriptions available, etc. it needs to be there. This is both a customer-facing issue… but also internal. Externally, if you don’t put some bookends on the offer, it looks like you’re just discounting your product for no reason (or, several reasons like your product sucks, you don’t value it, you’re desperate, you don’t know how to market your product, you’re a sucker, etc.). Scarcity also gets people to take action… no scarcity, no sense of urgency to take the offer. If you’re using the discount the way I describe in #2 above and growing LTV by 50% on each transaction, you’re good… time to step on the gas! But if you’re using traditional discounts – especially things like annual pre-pay discounts – then putting bookends on the availability of the discount internally (i.e. offering just enough to make-up for that cashflow crunch you’re having), it means you won’t use it as a crutch. It means you’ll have to actually figure out how to attract better customers, raise the value perception of your offering… or, ideally… both. I mean, if you really do have cash flow issues, then figure out how much you need and offer only that many annual subscriptions, then stop offering them. If it really is about cash flow, that should be enough, right? [|Back to Table of Contents|](#toc) ## A Note on Discounts in Enterprise SaaS Deals Just so we’re clear… discounting in an Enterprise deal is common, but you generally start from a much-higher price than the “retail” pricing on your marketing site. Plus, discounting is generally done behind-the-scenes, one-off for each client, under NDA, etc. and therefore doesn’t have the same negative effect as plastering huge discounts all over your marketing site might have. Plus, you generally trade the discount for a logo, right? Quid pro quo, am I right? You did that, right? C’mon, man. Also, in many Enterprise SaaS deals, long-term contracts are the norm, and generally they allow for expansion revenue possibilities by locking in the rates of add-ons, higher pricing tiers, etc. And just in case you’re thinking “Who cares about contracts, this is SaaS!”  just know  that contracts are required in many market segments with certain types of customers and you probably aren’t in a position to change that yet. Oh, and a little trick I like to use on “retail” pricing pages is to have a link to a lead-capture landing page for “Enterprise” clients and both on the pricing page and that landing page say: “Enterprise pricing starts at $xxxx.” [More on that Enterprise SaaS “hack” here.](https://sixteenventures.com/enterprise-pricing) By the way, having the “pricing starts at…” really sets the tone for the conversation if someone calls or fills out the form, since they know we’re starting at $xxxx. It correctly reframes the conversation if all they saw before was your “retail” self-service pricing of $xx/mo. Good luck! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Development Hacks for SaaS Startups *March 13, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/startup-customer-development-hacks/ The two main concerns SaaS vendors looking to ramp customer acquisition have are 1) how do I get my product in front of my ideal customers and 2) how do I identify those ideal customers in the first place… the answer includes Customer Development. For super-early SaaS startups, however, the second question is the main one… who am I going to sell to when I launch? Just this week I did an online workshop – for SaaS vendors at any stage – specifically about identifying your Ideal Customer (join my mailing list to get notified of upcoming workshops) and we spent 3.5 hours going over everything that this process entails. And a couple times a year I do an online workshop – again, for companies at all stages – focused specifically on getting your SaaS in front of your ideal customers (again, join the mailing list to find out when the next one is). Clearly, there’s a lot to creating an Ideal Customer profile – I mean, we spent 3.5 hours just going over the process in my workshop – and there’s even more to actually using that profile to ensure you’re attracting the right customers into the top of your sales funnel. But if you’re just starting out, it’s tricky. While it’s wise to do Customer Development ideally before you even create or modify your product for that new market, the reality is you don’t really even know who to talk to yet. The core idea behind Customer Development – if you’re not familiar – is that it allows you to question and test the basic assumptions you have around your new business idea, rather than simply going forward solely on your gut and hope. But as my friend Greg Pietruszynski from growbots said to me the other day… Customer Development is great, but you may have to talk to 50 companies before you even figure out which ones are worth targeting, and that can take a while! But Greg has a faster way. He has a method for pre-launch and super-early startups to quickly come up with a list of companies to do Customer Development with – what he calls his Customer Development Hack 2.0 – and he’s been kind enough to share it with us. I have a couple of thoughts in the Afterword, but for now I’ll turn it over to Greg. ## Customer Development Hacks – 2.0 As an avid practitioner of the Lean Methodology I’m fully aware of the importance of Problem and Solution Interviews as a part of improving web applications. However you cannot argue with the fact that the traditional approach to Customer Development sometimes lacks efficiency and speed. I personally know a lot of people who “got out of the building” and stay out there for months, unable to move forward. I want to show some alternative methods that allow for loads of useful feedback while retaining high data quality. ### Find your niche in 15 minutes Especially B2B founders struggle to find their perfect niche, as usually multiple customer segments can benefit from their products. So let’s say your product can be used by 5 different customer segments. And according to customer development methodology you should interview at least 10 people from each segment. It means conducting 50 interviews just to find out where problems are most painful. Come on, that would take ages! But there is a better way. I’ll show you how we help growbots customers choose their best customer segment to interview in 15 minutes. The idea is bloody simple – just rank all of your potential customer segments in a special table. I’ve read about this approach on [Justin Wilcox’ blogpost](http://customerdevlabs.com/2012/08/23/prioritizing-customer-segments-with-excel/) and decided to adjust it to B2B market needs. Here’s how it works: assign points, from 1 to 3, to all your potential segments, in the following categories: - Budget – how much money can they spend to solve the problem - Market Size – how many potential customers are in the target group - Accessibility – how easy it is to reach decisive people - Pain level – how painful is the problem you’re solving for this customers - Customer Life Cycle – how long will they use your product After you’re done with scoring just sum up the points for each customer segment and there it is: your perfect niche. Let’s say you’re developing a new customer acquisition tool. Here’s the original Justin’s SPA Table tactic in action: B2B targets are usually very specific, so we’ve added additional criteria to make it work for SaaS products: [](https://docs.google.com/spreadsheet/ccc?key=0AtDncYYIwC-gdEVua3A4MzlURDRUeWt3T3JySWdIbXc&usp=sharing) It’s much better now! What if your products is targeted at a very narrow and specific niche? Just divide some segments into smaller ones, but don’t go to deep to avoid confusion: [](https://docs.google.com/spreadsheet/ccc?key=0AtDncYYIwC-gdEVua3A4MzlURDRUeWt3T3JySWdIbXc&usp=sharing) ***UPDATE:*** Abhishek Agrawal from [Restified.com](http://restified.com) put together a [Google Spreadsheet version](https://docs.google.com/spreadsheet/ccc?key=0AtDncYYIwC-gdEVua3A4MzlURDRUeWt3T3JySWdIbXc&usp=sharing) for you. Remember that this table is all about quick results! Is this accurate? Accurate enough! ### Learn to read customers’ minds Congrats, you’ve just avoided 40 unnecessary customer interviews! Fancy saving even more time? How about learning what your potential customers think without even talking to them? The truth is that people share their most painful problems, deepest thoughts and private opinions without being asked to. All you need is an efficient methodology of evaluating opinions found on the internet! [Amy Hoy](http://unicornfree.com/) calls this tactic Safari, because you can compare reading discussions in the internet to watching wild animals in their natural habitat. However I would not be myself if I didn’t modify her approach to get results faster. It’s like a safari in a jeep with a jet engine now! Enter Jet-Safari – your ultimate customer research methodology. Before trying it out, [download a sample Jet-Safari board](http://growthhacking.biz/download/). Start with gathering about 5-10 threads touching on the problem you’re solving. Usually I search for discussions on Quora, LinkedIn and in the comments under popular blogposts. Amy would tell you it’s best to pick up threads with 50+ comments, but it’s often impossible in case of B2B products. Go for shorter ones, but make sure they contain opinions about the problem and discussion between people. I sometimes even use threads with 3-5 comments! Once you’ve listed enough threads it’s time to dive into analysis! Reading through the threads one-by-one note down the following information: - Your main focus while reading is gathering hypotheses. Each time you see an important opinion about the problem or your solution – write it down in the hypotheses section. Use “x” or “|” to mark the hypothesis each time you spot it again. Sometimes people write in a straightforward manner what they think about the problem you’re trying to solve, but sometimes you have to come to conclusions on your own.For example if you see common expressions like: “I love the design”, “It looks awesome”, etc., then a probable hypothesis is that design is very important to your target. Focus on 10 most often recurring hypotheses – you can use them while designing a solution interview script. - In the keyword section collect expressions regarding the problem, your solution and potential features – all in order to learn the language of your target group. What keywords they use to describe: Problems they’re facing (examples: “high-priced software”, “no internal email”, “complexity”, “controlling workflow”, etc.) - Solutions they’re trying to use to solve those problems and opinions about competitor products (examples: “love Asana”, “to-do lists”, “calendar”, “excel”, etc.) - Feature ideas (examples: “graph/charts”, “multiple users access”, “time/progress tracking”, “intuitive/simple interface”, “premium support”, etc.) - Use “x” or “|” to mark a given keyword each time you spot it again. Keywords about your solution and it’s features disclose what’s most valuable for your target. There’s no single, best strategy in formulating these keywords – keep it convenient for yourself. After summarizing most popular keywords many new hypotheses may come to mind – write them down in the hypotheses section. Most popular words will create the core of your communication and a base for keyword research of your SEO strategy. - In the people section collect contacts – influencers and potential clients. You’ll have a database of contacts to conduct solution interviews and a list of persons whose activity you should follow. - Collect data on your competition to prepare for a quick analysis after you’re done with sifting through the threads. Thanks to using “x” or “|” to mark competitors names each time you spot them you will know which companies are most popular among your target group. - In the places section collect all sites that are being talked about, because those likely are the places where your target group is active. After you finish your analysis you should check out all of those websites! Alright, that’s enough theory! Here’s how we do it at [growbots](http://growbots.co/). Let’s say you want to build a new conversion optimization tool, but you have no idea what is the most painful problem there. Have a look on this thread [on Growthhackers.com](http://www.growthhackers.com/questions/ask-gh-how-do-you-determine-which-tests-to-run-on-a-site-when-looking-to-optimize-conversion-rates/). I’ve analysed only the first answer and already found 2 problems, 2 probable hypothesis, 2 important blogs and 3 competitors: [Jet-Safari – how to do it](https://hackpad.com/Jet-Safari-how-to-do-it-W2fBJyDQkfR)?  I hope it helps you to get a picture of a complete Safari board after analysing more threads. Continue until you observe what hypotheses and keywords are most popular. If you feel like you’re not getting any new insights – it’s time to wrap up. For example – it took me 5 minutes to list 3 most painful problems concerning the e-commerce discount coupons, but I needed about two hours more to confirm they were truly the popular ones: Now you know the most important issues without even asking anybody! During customer interviews just get more into the details and try to understand everything that remains unclear. Once you’re ready to start interviewing the right people about the right problems you will most likely encounter another roadblock: you need a list of people to contact. You’re in a great position after finishing your Safari, because you already have a contact list to start with, however there are other quick methods you can use: Launch a super-fast product’s landing page and fit it with an opt-in form to collect e-mail addresses from potentially interested customers. I recommend to use [launchrock.com](http://launchrock.co/) or [Unbounce.com](http://unbounce.com/), if you feel like creating something more sophisticated. Additionally start a Twitter account, link it to the landing page and start following about 200 people for your target a day. - You can improve your follow-back rates with testing different versions of your pitch – be very clear about the problem you’re solving. Contact all of people who signed up on the landing page or followed you on Twitter with a kind interview request. - Ask other startup founders for help. There are many websites dedicated to providing feedback on new initiatives, such as: [http://betali.st/](http://betali.st/), [http://startuplift.com](http://startuplift.com), [http://erlibird.com/](http://erlibird.com/), [http://ratemystartup.com/](http://ratemystartup.com/), etc. You also can try to attract a much more demanding audience and post a request for feedback on HackerNews or reddit.com/r/startups – just remember to add the magic “SHOW (HN or r/startups)” in your thread title. Last but not least – you can find a lot of startup groups on Facebook, Google+ and LinkedIn – join them, introduce your idea and ask for 30 minutes call to discuss the problem. - Hit [growbots team with an email](http://growbots.co/). We will select 50 people to contact and convince them to talk to you! We can also make sure you’re focused on the right target group and have designed your solution interview script properly. Don’t worry about the price – we have a decent offer for everyone making first steps in business. You shouldn’t worry about Customer Development slowing you down any more! Now you know how to quickly collect loads of useful customer feedback and move on to test your ideas on the market! Greg Pietruszynski is CEO of [growbots](http://growbots.co/) and you should [follow him on Twitter](https://twitter.com/pietruszynski). ## Afterword by Lincoln Lincoln here again. It’s cool to see the evolution of Customer Development over the last few years and how, with some practical knowledge and outside-the-box thinking, the process can be streamlined – or hacked – to quickly get you moving in the right direction. While I’m a big believer in Customer Development and believe that it is a serious process that needs to be treated that way, I’m all for “hacking” the process if that will get people to do it. I mean, if the decision is between doing the type of hack Greg presented here vs. doing nothing (because the process is typically overwhelming), then by all means take the shortcut… it’s so much better than avoiding the CustDev process entirely! Of course, as I said in the intro, I can spend well over 3 hours just describing the myriad ways to develop an Ideal Customer Profile, especially for established SaaS vendors or startups that have reached some level of Product / Market Fit… but sometimes a quick “hack” like this is at least a great way to get started. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Greatest Word of Mouth Follow-up Question… Ever! *March 10, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/word-of-mouth-follow-up/ Companies – SaaS or otherwise – tell me all the time that Word of Mouth (WOM) is one of, if not *the* top, method for acquiring new users and customers. While that’s great, what can you really do with that information? Here’s an idea… First though, I wrote an 11-minutes-to-read mega-post over on Medium called [A Meditation on Word of Mouth Marketing and Growth Hacking](https://medium.com/growth-hackery/2cc029e18afe) that goes into a ton of interesting detail on how to orchestrate WOM. You should read it sometime. This, however, is not a mega-post… it’s a short post that details one thing, and one thing only… ***THE GREATEST WORD OF MOUTH FOLLOW-UP QUESTION…. EVER!*** Okay, here’s how it plays out. You: How’d you hear about us? Them: A friend told me. You: Awesome, I want to know who your friend is so I can send them a thank you gift, but first… what’d they tell you? Now shut up and listen. That’s it. ***WHAT’D THEY TELL YOU?*** Or some version of that… make sure it works in the context of your conversation, use your own voice, etc. Don’t feel like talking to anyone? Well, I suppose you could include this as a free-form follow-up question if someone selects “A friend told me” as an answer to your “how did you hear about us?” question in your [Qualaroo](https://qualaroo.com/) or [Intercom](https://www.intercom.io/) (or whatever) workflow… it’s something to try at least. Though I suspect an IRL or even real-time chat conversation may yield better results. Anyway… So why is this the greatest follow-up question to someone telling you that they heard about you from a friend or colleague? Simple… it’s visibility into the secret, hidden world of your customers talking to each other. You get to know the catalyst for them reaching out to you, signing up, etc. It’s the why. The real why. Unless they go around doing everything their friend tells them about – which is just creepy/sad – they must have had a reason for taking action this time. And it probably had something to do with what their friend said to them, how they said it, etc. You need to know what that is. Once you know how others talk about you, what they say, the words they use, the emotion behind it, etc. then you can start to use that in your marketing, sales copy, conversations, pitches, etc. ***WHAT’D THEY TELL YOU?*** WOM can be powerful… with four(ish) simple words you just unlocked that power! Use it wisely. ##   [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How to Get in Front of your Ideal Customers *February 21, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/distribution-channels/ When it comes to marketing, distribution is key… getting your product in front of your prospective customers is the most important thing. And yes… there’s more to life than AdWords. But no matter what distribution channels you leverage, the most important thing you can do is get to know your customers and prospects better than they know themselves. In fact, what channels – as well as sales processes, customer success methods, metering/billing, etc. – you need to leverage all start with knowing your customers intimately. You need to know how your customers buy, where they look for information, who they trust, how they pay, etc. How you get that information is through customer development as well as primary (stuff you do yourself) and secondary (stuff other people have done that you get access to) market research. Here are some methods I use… This post was the catalyst for a webinar I did with KISSMetrics. You can [view the video from the webinar here](https://grow.kissmetrics.com/webinar-49-recording) and below are the slides from the presentation: Before we jump in, here’s an example of getting in front of your Ideal Customer: ## Sell Cookies to Pot Smokers In February 2014, [headlines were made](http://mashable.com/2014/02/20/girl-scout-cookies-marijuana/) by a Girl Scout in San Francisco who setup shop outside a medicinal marijuana store… and sold over 200 boxes in just 2 hours. While this girl will also gladly sell cookies to anyone who asks – she’s not ONLY selling cookies to pot smokers – she thought about it and came up with a group of customers super-ready, willing, and able to buy… and she got in front of them. If you don’t know – and I’m only relaying what I learned from the movies here – smoking pot makes you hungry. So… 2 + 2 = 4 and… go sell cookies to pot smokers. I assume her next sales trip is to Colorado or Washington. Anyway, keep this story in mind as we move forward. Which reminds me,… ## Who’s Your Ideal Customer? Ugh… there’s that question again, huh? But you know what, everything starts with defining an [ideal customer](https://sixteenventures.com/ideal-customer)… … and for that I suggest you check out my [Ideal Customer Profile Framework](https://sixteenventures.com/ideal-customer-profile). If you don’t know who your ideal customer is – and yes, you can have more than one – then everything from this point on is going to be difficult if not impossible to do. Okay, so once you figure out who your ideal customer is (understand their characteristics, demo and psychographics, etc.), it’s time to seek out more people or companies that fit our ideal customer template. ## Sources for Ideal Customer Analogs You might find that they’re existing customers (not all customers are Ideal… but some of your current customers might fit the template), unconverted prospects, or even customers of competitive offerings. From asking current customers – either via email, phone, chat, etc. or through in-app messaging/surveys like [Qualaroo](https://qualaroo.com/) or [Intercom](https://www.intercom.io/) “how’d you initially hear about us?” and “what blogs do you read?” (or whatever) – to industry-level secondary research and surveys, there are lots of ways to get this info. ## Talk to Your Customers But I need to be clear on this… the most overlooked resource for understanding customers in most companies is… current customers. This is generally because we don’t want to “bother” customers and that is often due to vendor insecurities and a perceived fragile relationship with the customer. Or it’s a real problem – they actually do have a fragile relationship with their customer – and they don’t realize that talking to listening to customers would actually be a good thing that might strengthen their relationship. But I digress… Sometimes you want (need) to get a wider perspective than just those folks who already bought into what you do, so you’ll need to talk to non-customers, too. Your list of cancelled customers, free trials that didn’t convert, etc. are also AMAZING resources most companies fail to exploit for better understanding. Eventually – or to start, depending on your stage I suppose – you’ll need/want to go talk to people that you’ve never interacted with, but that fit your ideal customer profile. ## Talk to Your Competitor’s Customers Sometimes I will hunt down customers of a competitor and reach out to ask about that competitor. How can you find them? - They’re named in testimonials and case studies on the competitor site - They mentioned the app in their LinkedIn profile - They ‘re a member of an app-specific group on LinkedIn - They have a certification from the vendor - They’ve tweeted about a product - They mention the product in their oDesk profile - They’re a fan on Facebook - Use your imagination… or pay me to use mine When I get an audience with them – and remember, this is ***NOT*** a pitch session – I’ll ask about other competitors they may have evaluated (and why they chose the one they did), who else they trust in the industry, (consultants, advisors, analysts, etc.), what blogs they read, did they buy direct or through a distributor/VAR/app store, etc. I’m learning about their product selection process, what they look for when making a decision, who they trust, etc. You’d be surprised at what you can learn in a 5-minute conversation. BTW, it helps if you aren’t publicly associated with the company you’re doing the research for… this is just one reason companies hire me to do this for them, but this is something they could do themselves with some creative thinking. Oh, and you now how I said it isn’t a pitch session when you’re doing this research… it’s not. But you will learn things that could be turned over to a Prospector / Market Dev / Sales person to run with. Sneaky. ## Infiltrate their Ecosystem! In your discussions you’ll learn about analysts, consultants, and associations from whom you can buy secondary research – which is cool – but don’t forget that you can also use them for primary research (i.e. you talk to them and learn stuff directly from them). Also look for associations [your ideal customers](https://sixteenventures.com/ideal-customer) belong to – both industry-specific and wider-scope associations – and events they attend. These can be national events or local meet-ups. You can get a ***TON*** of intel just from the industry event websites; sponsors, speakers, presenters, board members. Of course by actually attending the event and networking with all those folks as well as other attendees, you can accelerate your understanding of the market in just a couple of days. ## Look for Patterns If everyone I talk to says they read XYZ’s blog or buys research from ABC Firm, then I probably need to figure out a way to piggyback on those folks somehow to get in front of my ideal customer. Do they read this magazine, or listen to that podcast? Do they go to this event or trust that consultant? Are there ways to use that knowledge to get in front of my Ideal Customer? Ads, Guest Blog Posts, Distribution Deals, Email Drops… Does it seem like most buy through intermediaries such as VARs or Distributors? Do they seem to use corporate app stores? How can I get my app listed in those corporate stores or be included in distribution deals with VARs? Are there a lot of independent consultants in the market? If so, maybe an [Affiliate Program](https://sixteenventures.com/affiliate-marketing) is what you need to leverage for Distribution. The patterns will start to give you insights into how to get in front of your audience or what distribution channels you’ll use. ## Take Appropriate Action Then you’ll need to get creative to come up with the best way to leverage those, depending on whether they’re owned, earned, or paid channels. Here are some additional posts that will help you with this: - [43 Ways to Get Traffic to Your Site](https://sixteenventures.com/traffic-hacking) - [Use Partner Offers to Quickly Grow Your Business](https://sixteenventures.com/saas-marketing-partner-offer) - [Warm-Up Your Leads Before You Email Them](https://sixteenventures.com/saas-growth-hacking-email) - [21 Growth Hacks to test Today](https://sixteenventures.com/saas-marketing-growth-hacks) - [Where is Your Ideal Customer on the Awareness Ladder?](https://sixteenventures.com/how-to-communicate-value) - [SaaS Distribution: Time to Change the Channel](https://sixteenventures.com/saas-channels) So there is no “best” distribution channel for all SaaS apps… there are only “best” distribution channels for each Ideal Customer type. ## A Note on Customer Development You know the part about understanding their buying process like who all is involved in the process (personas), how do they actually pay, can they use a Credit Card or do they need to be invoiced and pay by check, do they need a 3-year contract, do they go through intermediaries, etc. Yeah, if you aren’t asking questions  – or otherwise learning – about these things, you aren’t doing ****customer**** development… you’re doing (functional) user development. How they buy or it’s not customer development! So, to reiterate… no matter what distribution channels you leverage, the most important thing you can do is get to know your customers and prospects better than they know themselves. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Email Marketing: How Vero Got a 450% Increase in Conversions *February 11, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/email-marketing-conversions/ For SaaS vendors of any size and at any stage, email marketing – from newsletters to transactional messages – can be an amazing customer acquisition and retention tool. Nothing has replaced, displaced, or outpaced email as a super-effective medium to engage your audience – from prospects to customers – and it doesn’t seem likely to happen anytime soon. No matter what social platforms pop-up, stick around, or go away, two things have remained true: - It’s still better to own and control your list rather than relying on the social network to manage – and disable or disrupt on a whim – your ability to communicate with your customers - Social Networks themselves rely heavily on email for on-boarding, to drive initial engagement, and to get you back to their platform. LinkedIn, Twitter, Youtube… they all have one thing in common: email marketing works really well for them. But the days of the “email blast” are long-gone (though some less-than-clueful folks still use this archaic term)… in 2014, it’s all about segmenting your audience/customers/prospects and leveraging actual user behavior to drive your email marketing. Which is why companies taking email marketing to the next level – like Vero – are super-exciting to me. In fact, I met Vero’s co-founder Chris Hexton almost exactly one year ago and we’ve been friends ever since. He recently told me how they got a 450% increase in conversions with some rather simple changes to their email marketing program. I asked just how simple those changes really were – after all, he’s not just running a SaaS business but it’s an email marketing platform; what’s easy for him may not be easy for others – and he said they were easy. I said prove it… a super-long, uber-detailed blog post or it didn’t happen. Well, it happened and below is the post with the proof and all the glorious details. I’ve got a few things to add in the afterword, but for now I’ll turn it over to Chris… ## How Vero Used Email Segmentation to Increase SaaS Email Conversions 450% Segmented your customer list recently? …no? Segmentation is the king of online marketing. As Lincoln shared a few weeks ago, you need to [stop round-hole/square-pegging it](https://sixteenventures.com/email-follow-up-sequence) with your email marketing – send your customers stuff that **makes sense** to them. Over the last three months I’ve been *particularly* interested in newsletters (i.e. emails sent once, not triggered individually) and how these can be used to augment the behavioural emails we send at [Vero](http://www.getvero.com), a SaaS email marketing product. I asked myself: what clever ideas could we come up with to push the boundaries and improve our email marketing? After all, we specialize in [data-driven email marketing](http://www.getvero.com) so we better be damn good at it. ## Background: what we send The four main email ‘streams’ we think about at Vero are: - **Emails surrounding customer on boarding**. The aim here is to turn customers from a free trial into a paying customer, with the focus being to get them to send an email through the Vero system. Once they do that, they’re usually hooked. - **Regular blog updates**. At least once (usually twice) per week we send out a standard template featuring our latest blog post. This email is designed to get customers to read our blog and stay engaged with Vero. - **An educational course**. We have pulled together the *[Marketer’s Email Conversion Course](http://pages.getvero.com/the-marketers-email-conversion-course/)*. This email series is designed to move customers from passive blog subscribers to trial customers. - **Random offers and updates**. These emails target a specific goal that changes depending on where we feel there is an opportunity. In October we analysed the campaigns that we were sending and realised we were reasonably strong on numbers 1 and 2 but relatively week on type 3 and extremely weak on type number 4. As a whole the goal of our campaigns is to move customers from the start of the buying cycle to the end. Here’s a rough visual representation of how we think about the campaigns I’ve mentioned above. We realised that there was so much opportunity to get people into the top of our funnel as well as to move them through the funnel faster if we improved our own email marketing. This was an exciting realisation. ## The Results For the purpose of this article we’re going to focus predominantly on a single figure. It’s the same figure I looked at in October 2013 when planning out the next few months. At that time, in October, the percentage of customers that visited our site from one of our email marketing campaigns and **actually converted to the required goal** (this includes both newsletters and triggered emails) was: 2% That means that, in total, 2% of the people we messaged in October using an email marketing campaign took the desired goal. In most cases this goal (conversion event) is ‘Signed up for a free trial’ as that is definitely the focus of most of our emails. Maybe 2% is good, maybe it’s bad…but, as this number encompasses every campaign we sent, it is a nice aggregate figure to look at over time and see how our email marketing approach has improved overall. In October we wrote down the hypothesis that by breaking down our customer base into smaller segments we would be able to send email in a more **targeted way** and that this would lead to **increased conversions**. In doing this we figured we’d **send virtually the same number of emails** in total, ensuring we weren’t just blasting our customers day-in-day-out. It turns out, we were right. Here’s that same statitistic in January 2014: **7.82%** **A 450% increase. ** Want to learn how we got 450% more customers to respond to our email campaigns and actually **do what we wanted**? What is really interesting is looking at the volume of emails sent out over the last three months, on a per week basis. Although there are some clear fluctuations, the volume is certainly going up. At first, our thought was that we figured that we had done what we said we wouldn’t and merely sent **more** emails to our subscriber base. We figured that perhaps this was the big driver of conversions. However, breaking down the **average number of emails received per subscriber per week** shows this is incorrect. Here we can see that the average number of emails sent per unique subscriber (that actually received any email at all) never went above 3 emails per week (which is my personal recommendation for most online SaaS businesses as an upper bound). Even going back before September, the average hovers at around 2 per week. This suggests it was **not** sheer volume that led to the awesome increase but an actual improvement in the quality and targeting of the emails we sent out over that period. By segmenting, things were no longer hit-and-miss. We could send the same number of emails as before with confidence that each email counts more than it ever has before. A quick look at our data reveals that we now have over 54 total segments, with around 20 of these used weekly. To learn how we’ve achieved these results, I reflected on the sorts of campaigns we sent over the last three months and pulled together **the top 3 things we’ve learnt optimising email segmentation** for a SaaS business. ## The Top 3 Lessons ### 1. Send the right message to the right segment Picking the right email or offer to send to the right group of customers is the essential point of segmentation and it makes a huge difference. In September 2013 we [released a new feature that allowed customers to use the data inside Vero to send newsletters](http://blog.getvero.com/emails-newsletters/), not just trigger-based email campaigns. We actually released the new feature as part of a pricing upgrade, giving customers the choice to unlock the new features on the new plans. This was **huge** for us and many customers jumped on board right away but we wanted to continue to encourage those that didn’t to do so. Rather than just sending the same email to our entire user base, we segmented out the customers that had not yet started using this feature. We observed that many of them had been extremely loyal, used the system multiple times per week for months yet didn’t necessarily send enough to put them near the top of their pricing tier. We wanted to reward these sort of customers whilst getting them to use our newsletters feature. We realised that we could further segment into two groups. In October 2012, [Vero was featured on AppSumo](http://www.appsumo.com/vero/?r=UPQj). We had a deal that gave customers access to Vero for an entire year at a single (ridiculous!) price. This meant that by November 2013 there was a swathe of active customers whose AppSumo offer periods were expiring immediately or in the next three months. We really wanted to get these customers using newsletters and decided to send the following targeted offer to them: This achieved three things: - It got them using newsletters (great for our customer retention) - It gave them a reward for their loyalty (free access to a new feature, furthering their happy experience with Vero) - It got them to upgrade sooner from their AppSumo deal (great for Vero’s customer LTV) Contrast this with the second segment. In this case we targeted active customers that already had access to the feature (had been part of the beta) but had not actively engaged with the newsletters feature at all. We sent them this campaign instead: The goal of these two campaigns was ultimately the same: get customers to be engaged with Vero’s new feature. The execution was entirely different and ensured the right customers got the most relevant message for them. It seems a no brainer when you read it here, but you’d be surprised how easy it is to overlook this sort of basic segmentation. ### 2. Use targeting, tone and style to avoid recipient fatigue A mistake we had made pre-October 2013 was sending similar kinds of newsletters every time we emailed. The same format, the offer, just to an updated list of customers. This was because we were lazy: we didn’t put enough effort into **testing new approaches** against individual customer segments. The solution was to try new email styles, tones and change our calls to action to see what resonated best with customers. Two of the emails we’ve sent over the last few months that illustrate this are below. The first was inspired by a great campaign from the team at [KISSmetrics](https://www.kissmetrics.com). This campaign targeted customers that had signed up for a free trial, had not taken **any** action inside Vero and had not become paying customers. This campaign was extremely successful: 4.6% of recipients booked a demo and, of these, 70% have now re-engaged and 40% already having converted to paying customers. Another example, to a similar segment, was this email sent out in the lead up to Christmas and New Years: This campaign is reminiscent of similar campaigns we had sent before, though we changed the CTA style and the template used. The conversion rate on this email was lower, with only 0.5% of recipients taking up the offer, but this was still good given the number of emails we sent. This does highlight the danger in repetition and also reflects the nature of the call to action: customers had to directly put down money to take advantage of it (plus it was over the Holidays!) Making customers feel special is always an effective tactic and inspired two of our latest campaigns. The first was sent to customers that had completed the [Marketer’s Email Conversion Course](http://pages.getvero.com/the-marketers-email-conversion-course/) but had not converted. We included everyone from the last three months, as long as they’d finished the course more than week ago. We used a similar tactic, inspired by a [campaign from YouTube](http://blog.getvero.com/15-data-driven-email-marketing-campaigns-to-help-you-kick-ass-in-2014/). Segmenting out a reasonably small number of customers that were amongst the first 5% of users to sign up to the Vero beta we sent this email: Naturally this segment included some very old and rather unengaged customers, though most had regularly received our email newsletters. This campaign had a relatively low click rate of 2.8%, but of those who did click-through, 20% actually converted to a free trial. This was also an extremely interesting process, allowing us to get back in touch with some customers we had not spoken to since Vero was first launched (and, frankly, at that time it was a very rough diamond!) These four campaigns, along with the rest you see across these five points, **all** focus on delivering a different message to targeted segments despite having the same goal: to get customers onboard a trial, engaged and paying. By varying the offers, you reduce fatigue and keep recipients interested. ### 3. Automate what works The final piece of the puzzle is being strict about automating those email campaigns that do work. Trigger-based emails can be extremely powerful because of their context – they’re usually sent just after or before a user takes an action and this helps increase click-throughs and conversions. Take, for example, Vero’s blog subscribers. We observed that customers who had signed up to our blog newsletter and received one blog update were extremely likely to convert to paying customers in the long run. We had already automated a blog welcome email that went out when customers subscribed and found that this increased conversions nicely. Based on observing the behaviour of this segment, we setup another email in the blog welcome series. We now send our **highest converting blog post** (about [Amazon’s awesome email marketing](http://blog.getvero.com/6-lessons-you-can-learn-from-amazons-killer-email-marketing/) two days after a user subscribes to the blog. It looks just like a normal blog update, but it’s known to work! Since doing this we’ve seen 5% of customers convert to start a free trial **directly** after receiving this email. That is a lift of nearly 30% over just the single email in the series. Here’s the email in question: …further more, the ‘Want a demo?’ I mentioned above was so successful above that we’ve added this as an automated campaign two weeks after a subscriber joins the blog but doesn’t sign up for a free trial. This is currently an experiment but it will be interesting to see whether the success of this email carries over to it’s automated version. We have high hopes for this campaign as it will give our team the chance to move people along the buyers’ journey **much** faster. The trick here is to automate your email marketing campaigns **when you’ve tested them an know they work**. From there you can tweak and optimise timing, structure and the length of a series to see what generates the best results. ## Why you can do this too I’m aware that there is obviously a whole raft of factors that affect the various conversion points I’ve discussed here but I’ll take a 450% increase in trial signups any day. Given we’ve done no significant A/B tests on the main site in this time (and any we have done have resulted in small uplifts) and our automated campaigns have remanned unchanged, it’s fair to say segmentation has certainly had an impact on the numbers, in fact it seems the only real driver. The great news it that *every* SaaS business can do this. If you have a database of customers and track your critical lifecycle points (visits site, reads blog, views landing page, signs up, uses feature X, subscribes) then there is a ton of ways to slice this data – and that’s with only six data points! **Don’t** get caught up trying to construct the perfect segments: instead recognise that you can do better than you are now. Create new segments that seem logical, test out some campaigns and reflect each month on what works. If it **does** work, automate it! Then keep an eye on it. Chris Hexton is co-founder of [Vero](https://www.getvero.com/) and speaks Italian. You should follow him on [AngelList](https://angel.co/chrishexton) or [Twitter](https://twitter.com/chexton). ## Afterword by Lincoln Lincoln here again… I’ve written a few things about how Email Marketing should be a core element of not just your customer acquisition but also your retention strategy… and Chris sharing what he did should hopefully help you understand just how important – and potentially lucrative – email marketing really is. Here are some of my most relevant blog posts on the subject of using Email to grow your SaaS company: - [5 Rules for SaaS Email Marketing and Transactional Messages](https://sixteenventures.com/saas-email-marketing) - [Autoresponders are Dead (or… what’s the ideal email follow-up sequence?)](https://sixteenventures.com/email-follow-up-sequence) - [Growth Hack: Warm-Up Your Leads Before You Email Them](https://sixteenventures.com/saas-growth-hacking-email) - [SaaS Marketing: 21 Growth Hacks to Test Today (specifically #14 and #15)](https://sixteenventures.com/saas-marketing-growth-hacks) - [SaaS Customer Onboarding: 3 Steps to a Successful Welcome Email](https://sixteenventures.com/saas-customer-onboarding-email) - [22 Ways to Reduce Churn with Growth Hacking (8, 12, 15, 16, and 17 are email-related)](https://sixteenventures.com/growth-hacking-retention) What Chris told us, and all of those posts I just linked to, should help you get a big bump the success of your email marketing initiative. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Customer Success: 22 Ways To Reduce Churn With Growth Hacking *January 30, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/growth-hacking-retention/ [](https://sixteenventures.com/growth-hacking-retention#toc)As the SaaS industry continues to rapidly mature, more folks are looking at churn in SaaS companies – investors, analysts, executives, consultants, etc. – and more and more methods of measuring churn are going to surface… and that’s awesome. Of course, the problem is that, while analytics and metrics and new ways of measuring churn are fantastic – and no matter how you slice it, accurately measuring churn is not actually that simple – ultimately it’s what you do with that data that matters. So… even with all the different ways of measuring churn, how do you actively retain customers? What methods, tactics, techniques, and ways of thinking will help you keep the customers you already have so you can more efficiently grow your SaaS business? Enter… Growth Hacking. ## Fundamentals of Customer Retention How do you keep customers? Just have a great product, right? Focus only on making the best product with the most features, slickest UI, etc. and you’ll do great. And as you already know, it’s the companies with the best products and the most features that are the most commercially successful, so just focus on that. After all, a great product will retain customers just like having the best product will magically attract those customers in the first place, right? No. You’ll see that said a lot… but it isn’t a fact. It’s a wish. It’s wishful thinking. It’s hope. It’s… a lie. It’s a lie we tell ourselves because we want to believe it. And if we believe it… it isn’t a lie, right? ## The Truth is Relative Just like Growth Hacking – and Marketing in general – are required to build market share for even the best products, the same is true for keeping that market share. So if it was true that just having the best product, most features, or slickest UI was all it took to be successful, things would look very different in just about every product category. But that’s not how the world actually works. Very often market leading products aren’t the slickest, aren’t the best, don’t have the most functions, aren’t the most extensible, etc. And if your product is really the best or you’re trying to disrupt a category with a crappy incumbent product… I know this fact drives you freakin’ crazy. But you can’t make it not be true by ignoring it. You have to have a good product that solves an actual problem for your customers. But that’s just the baseline. That’s the starting point. It’s what you do from that point forward that determines your fate, and that’s what I’ll cover in this post. ## Growth Hacking Customer Retention While most of the Growth Hacking stuff you read is focused on the Customer Acquisition side – Traffic Generation, Conversion Optimization, and Viral Expansion – what if you applied that Growth Hacking thinking to retaining customers? It’s one thing to pull new customers in the front door, but if you’re [losing too many out the back door](https://sixteenventures.com/customer-retention-growth-accelerator), your growth could be severely hampered, could stall,… or worse. ## Churn Kills SaaS businesses Churn kills growth. [It kills momentum.](http://tomtunguz.com/maximum-viable-churn/) It kills profitability. It kills hairlines. It kills marriages. It kills revenue. It kills valuation. It kills relationships with investors. You get the picture. Now, it’s true that many early-stage companies haven’t experienced this pain yet, but if they make it long enough, they will come to understand the soul-crushing impact of customer churn. If your company is at the “churn doesn’t bother me stage” – well, good for you… enjoy it while it lasts. Think of this guide as something to help reduce the future pain of churn. If you’re experiencing the pain of churn now, though, what I write here may just save your business. ## It’s time to Change your Thinking While I’m going to give examples of tactics you can use to Hack Retention, the purpose of this guide is to show how I’ve applied Growth Hacking thinking to Customer Retention and to help get your brain moving in the right direction. Of course, before you go through this list, I need to once again reiterate that retention starts by having a great product that solves a real problem for the customers that are using it. That means that people could churn because your product sucks. In that case, fix the product. That means also that your product might be fine but you attracted the wrong audience in the first place. In that case, fix your marketing. But if you have a great product with the right customers, it doesn’t hurt to work harder to keep them engaged so they’ll stick around longer and grow your customer lifetime value (LTV). What I’ve listed here is also not a replacement for a professional Customer Success organization… but could very well compliment that organization. All that said… some of these might apply to you, some of them absolutely won’t… but all of them should get your brain turning. And just to reiterate my definition of Growth Hacking, it’s about a mindset of understanding customer and user behavior as well as market dynamics and what’s technically possible – or should be – and using your imagination to make it happen. Just like my other posts, some of these “hacks” I’ve used and have seen a big impact (such as an immediate 15% drop in cancellations), and others are just ideas I haven’t implemented yet but might if the occasion arises… oh, and some are just crazy ideas that I think would work if the situation is right. Guess what? Just like my other posts I’m not gonna tell you which ones are which so use your imagination and a good bit of caution. I’m also not going to show you live examples of what I’ve implemented or give you results. You see, I’ve helped my clients with these tactics and they’d like a little bit more time out in front of you. And I have to say that a lot of [what I’ve already talked](https://sixteenventures.com/growth-hacking-rules) about [regarding Growth Hacking](https://sixteenventures.com/saas-marketing-growth-hacks) can be used to – or will already – drive engagement and therefore customer retention. This list is just an “in addition to” not an “instead of.” Got it? Okay, here we go with Hacking Retention… starting with bigger-picture ideas then moving into tactics… ## Table of Contents - [Attract the Right Audience](#1) - [Real (Enough) Time Customer Segmentation](#2) - [Engaged… not Active](#3) - [No More Customers](#4) - [Member Exclusives](#5) - [Manage Expectations](#6) - [Position Customers for Success](#7) - [There are 5 types of follow-up emails](#8) - [Stay top of mind outside your app](#9) - [Infiltrate their Ecosystem](#10) - [Develop your own Ecosystem](#11) - [Introduce Cancel Flows](#12) - [Exit surveys](#13) - [Entrance surveys](#14) - [Track Pre-Cancel Events](#15) - [Always Drive ’em back into app](#16) - [Drive non-user engagement](#17) - [Don’t let credit cards expire!](#18) - [Professional Services](#19) - [Own the Industry](#20) - [Know what Retention You’re Hacking](#21) - [Use your imagination!](#22) - [(Bonus!) Let’s Grow Your SaaS Company](#cta) ## 1. Attract the Right Audience One of the most important things you can do to hack retention is to have good customers in the first place. Good customers are those that continually realize value from your product. Good customers come from properly targeting and bringing the right audience to your marketing website or otherwise getting in front of them to sell ’em your stuff. - [Develop your Ideal Customer Profile](https://sixteenventures.com/ideal-customer-profile) - [Identify and Market to your Ideal Customer](http://labs.openviewpartners.com/market-to-your-ideal-customers/) - [The Dark Art of Buying Customer Data](https://www.slideshare.net/lincolnmurphy/dark-artofbuyingcustomerdata) - [Warm-Up Your Leads Before You Email Them](https://sixteenventures.com/saas-growth-hacking-email) - [SaaS Churn Rate Reduction Starts with Attracting the Right Customers](https://sixteenventures.com/saas-churn-rate-attract-right-customers) - [SaaS Distribution: How to Get in Front of your Ideal Customers](https://sixteenventures.com/distribution-channels) Remember… churn is not just a customer “end of life” issue…. it’s a lifecycle issue, and the seeds of churn are often planted very early in that lifecycle. [|Back to Table of Contents|](#toc) ## 2. Real (Enough) Time Customer Segmentation I don’t care how you do it… use a 3rd party tool, roll your own, do it by hand… but you need to be able to separate the “active” (whatever that means to your company) from the in-active customers. This way you can take those who are active and add some grease to the engagement wheel while you work harder on engaging those that have slipped off the radar… or never quite made it on in the first place. Of course, you can further segment your in-active users by cohorts, those that are [legit churn threats](https://sixteenventures.com/saas-churn-threats) based on [predictive analytics via historical data](http://www.gainsight.com/), etc. But don’t get overwhelmed by that… have a clear definition of “active” and two main buckets… active and not-active. Work harder on the latter but watch the former to ensure they stay that way. [|Back to Table of Contents|](#toc) ## 3. Engaged… not Active You want “engaged” users … not just active. Remember how in [#2](#2) above I said “active” … I didn’t mean it. I don’t like the term “active” because it’s so one-dimensional and generic. And this isn’t one of those “which term should we use” BS arguments… this isn’t semantics. Engagement is simply different than active and is a lot more powerful. [Engagement is based on your customer](https://sixteenventures.com/improve-saas-churn-rate-engagement)… active is based on actions of your users. Ponder that for a bit. While you can [break down engagement into user actions](https://sixteenventures.com/free-trial-metrics), it’s the starting point for developing those – ***the context*** – that changes the game. Get granular with engagement measurement. Here’s a common definition of active: number of logins. Seriously. That’s a lot more common than I wish it were, but that’s how a lot of SaaS providers measure “active.” But from the customer POV – where you should be doing just about everything from – number of logins could mean several things, and none of those have anything to do with realizing value… which is what engagement is. Consider a user with a lot of logins but no other activity. That could mean they want to get started but they can’t figure out how. They know – or believe because of your marketing – that your SaaS product should do what they need but they can’t figure it out. So they leave. Then they come back later. And leave. Rinse and repeat for a while… until they stop coming back completely. So what many naive SaaS providers would believe is an “active” user…is really a huge, ugly churn threat. [|Back to Table of Contents|](#toc) ## 4. No More Customers Oh yeah, remember how I said “customers” in [#2](#2) and [#3](#3) above? Well, here’s the truth… I hope you never get another customer again! Yeah, I honestly hope you ***never*** get another customer… … because I want you to succeed beyond your wildest imagination. And that success starts with changing your mindset about the people that pay you for access to your SaaS. Customers buy commodities. Customers are short-term or transactional in nature. Customers are fleeting, fickle, and price-sensitive. But what if you just changed the way you talk about those people who give you their hard-earned (or hard-raised) money every month for access to your SaaS? What if you stopped calling them customers and started calling them… Clients? Clients rely on you for expertise and work with their best interest in mind. Clients have a formal, long-term relationship with their trusted advisor. Members? Members belong to something, they get perks, benefits… privileges. Membership is meaningful, it’s scarce… it’s valuable. What else could you call your members? Maybe something specific to what they do. Think about it, come up with something, and start using it in your internal communication. Even if you just change the way you talk about your customers ***members*** internally, it will change how you perceive your relationship with those people responsible – ultimately – for your success. Oh, and this means you have to stretch beyond what is probably comfortable and get past the [“software” and “user”](https://sixteenventures.com/free-trial-users) mentality that you probably have. [|Back to Table of Contents|](#toc) ## 5. Member Exclusives What if people continued to pay you every month but never logged-in to your app? This [might be a problem](https://sixteenventures.com/saas-customer-success-zombie-customers) or it might be because they don’t need your app (or might even use a competitive product) but love the extras you give them because they’re paying members. Offer Exclusive Content, Community, Tools, Webinars with industry experts, Meetups, Gifts, etc. to Members… next month, after the billing cycle. Moz is a great example of doing this with their [Perks program](http://moz.com/perks). I’ve always been a fan of the [Wishlist Member](http://member.wishlistproducts.com/) model (they aren’t SaaS… but don’t let that distract you too much) where, if you join their Insider membership program they give you plugins for their WordPress membership program. The longer you stay, the more plugins you get… if you leave, they won’t work. Super-awesome engagement tactic. Want to take all of this a step further? Tease the member-exclusive item right before renewal time. If everyone renews at the same time, this is super-easy… if they renew based on when they joined, this is a bit more involved to setup, but not that bad and totally worth it. In fact, this just becomes another reason to [move beyond timed Autoresponders](https://sixteenventures.com/email-follow-up-sequence) in your business. [|Back to Table of Contents|](#toc) ## 6. Manage Expectations Don’t over promise and under deliver. Manage expectations. Properly manage expectations throughout the entire sales and on-boarding process… a lot of churn (especially in the first 90 days, or what venture capitalist Tom Tunguz [refers to as “cliff” churn](http://tomtunguz.com/churn-fallacies/)) occurs because of something in the early part of the customer lifecycle… most often during the sales cycle! You’d be surprised (or maybe you wouldn’t) at what I’ve discovered as the culprit, especially in first 90-days churn… from promises of increased revenue to… well… promises of increased revenue is like the number one thing vendors promise that customers fail to realize. Whether it’s more revenue due to better email marketing or higher conversions because of site speed improvements, one of the biggest expectations that is most often mis-managed is the promise of increased revenue. You can do it… but it requires a light touch… something I’ve learned how to do well, thank you very much. I once helped a done-for-you email marketing company deal with mismanaged expectations that lead to high churn… and I knew exactly what the problem was when one of the guys greeted me at the door wearing a “we send email, you make money!” t-shirt. True story. [|Back to Table of Contents|](#toc) ## 7. Position Customers for Success Set your customer up for success at every stage of their lifecycle, which means understand what “success” looks like for your customers and how that evolves over their lifetime as a customer. Learn more about this here: - [The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding) - [Customer Success: Achieving their Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding) [|Back to Table of Contents|](#toc) ## 8. There are 5 types of follow-up emails Tutorial, Educational, Aspirational, Transactional, and Personal Which ones do you use? Know your customer [and read this post.](https://sixteenventures.com/email-follow-up-sequence) Hint: It’s probably a mix of several types Protip: Transactional emails are an absolute gold mine [if used properly](#16) [|Back to Table of Contents|](#toc) ## 9. Stay top of mind outside your app Get them to follow you on Social Media (tip: follow them first). Guess what? It’s not *just* about connecting on the various social media channels. No, you want to leverage social media that leverages other media to stay top of mind - Youtube Channel subscribers get emails when there’s activity on your channel - LinkedIn sends emails for just about anything - Slideshare says “XYZ Corp posted on SlideShare today…” - Quora sends answers to questions, or questions for you to answer, etc. All of these “social” channels push updates and messages to the subscriber/followers via email and/or other social networks. So it’s more than just saying “I have a follower on my Youtube channel”… it’s having yet another way to get in front of them and stay top-of-mind. Retargeting is another way to remind subscribers that you’re there… keep it subtle or get clever and do different campaigns depending upon where they are in your app (via tactical beacons) and get them to come back. Since you know you have a valid email, doing [email-based targeting & retargeting](https://sixteenventures.com/saas-growth-hacking-email) can also be used to stay top of mind, too. Think about what you could do with Facebook custom audiences and the email addresses of your non-engaged users… hmm… [|Back to Table of Contents|](#toc) ## 10. Infiltrate their Ecosystem Get embedded with their partners and trusted advisers so they have no choice but to continue using your SaaS. If your accountant recommends Xero, there’s a really good chance you’ll use it. You trust them, they know accounting, Xero is designed to make both of your jobs easier, so this is a no-brainer. But even if you decide you hate Xero, guess what? Your accountant uses it, they trust it, you trust it (if for no other reason than they do), so you stick with it. Of course, it’s even better if you like the product, but never underestimate the power of their ecosystem to keep ’em using your product. BTW, I’m just using Xero as an example here since I like their model and [they’ve been public](http://www.crn.com.au/News/355262,xero-accountants-are-the-new-channel.aspx) about how powerful their channel relationships are. [|Back to Table of Contents|](#toc) ## 11. Develop your own Ecosystem The obvious one is to cultivate a community of partners to build add-ons and integrations for your product or to build/create a community where people – your customers and prospects – commune. Moz is great at this, too. But also look to [GrowthHackers.com](http://growthhackers.com), built by Sean Ellis of [Qualaroo](https://qualaroo.com/). While it isn’t a “Qualaroo” property, it is 100% designed to develop and enhance thinking around something their CEO “created,” to continue to elevate Sean as a hero to this community, and by extension… to – seemingly organically – build a community around Qualaroo without actually doing exactly that. If anything, it gives Qualaroo a huge amount of data on what “Growth Hackers” are thinking and talk about, what their interests are, etc. so they can leverage that in marketing their product… one that is on the tool belt of Growth Hackers world wide. It’s genius… The less obvious method is to seed underground / unsupported / TOS-violating uses of your app. What? I know… crazy. I’ll let you use your imagination here. [|Back to Table of Contents|](#toc) ## 12. Introduce Cancel Flows Simply by giving people the ability to cancel from within the app, [there is a psychological effect](https://sixteenventures.com/how-to-reduce-churn-saas) that seems to calm them down and make them feel more in control. If they decide to click the “cancel” button, remind them of the value they’ll lose (along with data, history, etc.) when they do. And give them an option other than canceling: offer down-sells or the ability to hibernate an account for x months (especially good where there’s seasonal volatility). When they don’t cancel, take note of the fact that they got to the cancel screen, mark them as a churn threat and reach out to re-engage. I will say that we saw an immediate 15% reduction in churn for an email marketing system by implementing cancel flows… and that actually replaced the requirement to call in to cancel! [|Back to Table of Contents|](#toc) ## 13. Exit surveys Capture value even if they leave in the form of an exit survey. Normalize the data by providing several options for them to choose from and allowing them to then elaborate where needed. My suggestion is to put this at the very end of the [Cancel Flow](#12) or – even better – to send it a day later. While you should test everything, I tend to start with sending it a day later rather than include it in the cancel flow. You could put several options in an email each with different links… all they have to do is click the link and you’ve got your feedback… on the page it links to, you can have a “more detail” form if you want. Why send it later? You may just want to let them go and give them a cooling off period… what they tell you right when they’re canceling vs. even a day later may be quite different with the latter possibly being more useful. You might have better luck actually calling or reaching out through a different channel than email Oh, and don’t do an NPS survey at this point… probably a bit too late – and simply inappropriate – to ask them how likely they’d be to recommend your product to a friend. Of course, if you get high scores there… that’s maybe a result. Finally, give them permission to tell you why they’re leaving and manage expectations that you might follow-up. [|Back to Table of Contents|](#toc) ## 14. Entrance surveys Entry surveys (explicit as a survey through [Intercom](https://www.intercom.io/), Qualaroo, or the like) or built into the on-boarding process, the latter being ideal) can help you close the loop with the exit surveys. Knowing why they joined gives context for driving engagement, for following-up with them (automated or in-person), and for trying to save the account on exit (again, automated or in-person). If they say when they come in “I want to improve the performance of my employees” and when they leave “it didn’t meet my expectations” but nothing more, we can assume it didn’t improve the performance of their employees, right? Probably. BTW, I had a conversation with the creator of [Retained](https://getretained.com/), and he told me they’re adding this “loop closing” functionality to their product and it will be available at launch. [|Back to Table of Contents|](#toc) ## 15. Track Pre-Cancel Events In game mechanics this is XED: eXit Event Distribution and helps game designers better understand what people were doing right before they either stopped playing or uninstalled the game. In SaaS, you can start gathering information on XED by seeing what people did before they canceled. So put on your data scientist smock, fire up Excel, and bust out some k-means clustering with Euclidean (or Manhattan?) distance to look for patterns. Or if you’re new (i.e. a super-early stage Startup) and don’t have that data, think about what people might do to come up with a hypothesis to test. Then monitor for/trigger off of those things and work to re-engage in whatever way makes sense. Whether it’s reaching out with a personal email, calling a customer, making them an offer, etc. using this data to trigger action to save the client can be huge. As I said in the Cancel Flow process above, once they get to the point where they hit the cancel button, if they don’t cancel because you worked your retention magic, they’re still a threat and you need to work hard to re-engage them. But your customer may do something prior to getting to the cancel button, right? They may be considering leaving and if you can intervene early enough you can save them. While the [Cancel Flow](#12) will help… ultimately, we don’t want them to ever even get to that point, right? What might these Pre-Cancel Events be? Well, they might download data, run some reports, remove users, etc. I don’t know what that might be… it’s different for everyone… but for email marketing, downloading the full list of email addresses seems like an obvious one. [|Back to Table of Contents|](#toc) ## 16. Always Drive ’em back into app This goes back to[ Closing Loops and avoiding dead ends](https://sixteenventures.com/saas-customer-success-eliminate-dead-ends)… especially in transactional messages as I [mentioned in #8 above](#8). [|Back to Table of Contents|](#toc) ## 17. Drive non-user engagement OMG… this is so awesome I shouldn’t share this. A “non-user” would be, in this scenario, people who don’t actively use the product. They’re likely not included in any sort of “per seat” or “per user” pricing model. The most common example is a project management SaaS a service provider uses to communicate with clients. Their clients benefit from the system but (generally) aren’t paid users. While this has a great benefit from a viral expansion standpoint (your clients introduce your platform to their clients who might subscribe, too), the companies that win leverage this as a retention tool. What could you do to make your product super-sticky inside an organization? What could you do to encourage collaboration through your product with both internal and external stakeholders? Think about ways your clients are currently sharing stuff (data, reports, etc.) with non-user stakeholders and engineer that into the system. Do they download a report every day and email it around the organization? Do that for them and drive non-users to the app from the email. See [#16](#16) and [#8](#8) above. If you can get non-users hooked on what your SaaS provides, especially those up the chain of command from your paying members, the likelihood of them canceling their subscription to your SaaS goes way, way down. Bonus! Get non-users hooked [during the Free Trial](https://sixteenventures.com/free-trial-metrics) and you’ll increase conversions, too. [|Back to Table of Contents|](#toc) ## 18. Don’t let credit cards expire! What else do I need to say? If your clients or members pay you via Credit Card, you should probably do everything in your power to keep those cards from expiring. Far too many SaaS companies – especially those dealing with SMB customers – get a substantial amount of churn from expired credit cards. Many times the SaaS provider doesn’t want to “bother” the customer (read: wants to hide from the customer) to let them know the card is going to expire. Some might try to salvage the deal after the card expires… but even more will just let the customer go without ever “bothering” them. Since credit cards typically expire every 3 years, or every 36 months, one could ascertain via simple math that roughly 3% of cards will expire every month… though obviously it’s not that evenly distributed… some months will have more, some less. No matter what, it’s a big deal… [and for the most part completely avoidable](https://sixteenventures.com/saas-churn-threats). Don’t let it happen. I understand that there are some credit cards that will expire or otherwise fail for reasons outside of your control. Fine… but that’s a subset of overall credit card failure, and you should do everything in your power to keep as many credit cards as you can from failing or expiring. That’s pretty simple. But you have to be proactive. Find a billing system/payment processor/etc. that supports or provides credit card updater service. Use proactive pre-dunning to let customers know their card is going to expire and – if it does – use dunning messages to get them to fix that. If you use Stripe, there’s even a nifty service called [Stunning](https://bestunning.net/) (by the same guy that created Retained, wild!) that handles all of that dunning stuff for you. No excuses. [|Back to Table of Contents|](#toc) ## 19. Professional Services Doing work for – or with – your clients around your SaaS that they spend time doing and pay extra for rapidly will (often) exponentially increase their investment in your SaaS. And it makes leaving you a much less attractive option. This is not the same as concierge on-boarding or high-touch Customer Success (which are fine). Rather, I’m talking about consulting, including best-practices implementation, custom integrations, building reports, optimization, etc. For the longest time, SaaS companies were afraid to add non-recurring revenue to their books… and many stayed small and had high churn. So [add a layer, add some revenue](http://saastr.com/2014/01/10/your-belated-saas-new-years-resolution-add-a-layer/)… and lower your churn! [|Back to Table of Contents|](#toc) ## 20. Own the Industry When you own the industry association, the industry job board, and offer professional certification – in addition to your SaaS – you win. > When you own the industry association, the industry job board, and offer professional certification – in addition to your SaaS – you win > - Lincoln Murphy (@lincolnmurphy) [January 7, 2014](https://twitter.com/lincolnmurphy/statuses/420373308341645313) Create power users who champion your SaaS in their current organization and take you with them when they change jobs? Yes please. Also, if you run the job board for people that use your products / or aggregate jobs that mention your product, there’s probably a way to glean some really useful, actionable information from that. Even if you do this internally, just gathering the intel might be useful. I’m just not sure how… hmm… what could we learn from this. Gosh. [|Back to Table of Contents|](#toc) ## 21. Know what Retention You’re Hacking One of my [5 Rules for Successful Growth Hacking](https://sixteenventures.com/growth-hacking-rules) is to know what growth you’re hacking. And when it comes to churn, you need to know what ***retention*** you’re hacking. Just as there are different methods of measuring churn, there are different methods of measuring retention. Are you looking to keep more customers or are [you looking to keep more revenue](https://sixteenventures.com/saas-churn-revenue-customer)? This will really help you figure out what you need to focus on. You might want to work to actively retain only certain segments of customers while you work to actively jettison other, less-profitable customers. > Yeah, your churn is actually too low. Your unprofitable customers are sticking around too long and killing your business. > - Lincoln Murphy (@lincolnmurphy) [January 28, 2014](https://twitter.com/lincolnmurphy/statuses/428303098486857728) Maybe you work to push away low-value customers while working to up-sell or expand usage of higher-value customers. Here’s a hack: find a lower-price company in your product category and send them your low-value customers… get them to send you their higher-value customers that they can’t accommodate… win-win… but you go first to show good faith. [|Back to Table of Contents|](#toc) ## 22. Use your imagination! What we call Growth Hacking today, and what it’s been forever and what it’ll be later – Marketing – isn’t just about tactics. Tactics change. Tactics are different for every situation. No, it’s about a mindset of understanding customer and user behavior as well as market dynamics and what’s technically possible – or should be – and using your imagination to make it happen. There are no rules here… just a way of thinking about stuff. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Time Management for Startups: Quantify, Prioritize, and Automate *January 23, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/startup-time-management/ I have a confession… Sixteen Ventures – the best little SaaS Growth consulting shop in all the land – is just me… and I have a time management problem! I do everything… from writing blog posts to writing proposals and from interacting on Social Networks to Networking at Industry Events. One day I’m working with a startup in Poland via GoToMeeting on accelerating early-stage growth, the next day I’m on a plane to Atlanta to help accelerate the growth of a struggling $10M/year SaaS company with major organizational issues. All of that to say… I’ve been thinking a lot about “time” lately. I suffer from scarcity on several levels, but time scarcity is probably my biggest enemy… probably yours, too. We all feel like we need to be busy all the time or we aren’t working… we aren’t hustling. Yes, work and hustle are important, but not to the detriment of everything else… including the progress we claim to be “hustling” for. As has been said a million times by a thousand experts, busy isn’t bad as long as what you’re busy doing is moving you forward (and even then you should take time to just think… to contemplate… to meditate). But most of us spend far too much time on things that – while the outcome might move us forward – the doing of the things is actually a big waste of time… which is why outsourcing, Virtual Assistants, Fiverr, etc. are so popular right now. And so is automation. In fact, way back in mid-2013, I got an email asking if I’d heard of this cool new service called Buzzfork that helps you increase engagement – as well as followers – on Twitter… while you do other stuff. I was intrigued since Twitter is  where I spend most of my time when it comes to social networks and promoting my content (and business)… but I often feel like I spend too much time doing that… this was the answer! As soon as I learned about Buzzfork, I also learned about – and met – Chris Bolman, the founder of the company. Now, Chris and I have talked a lot about Growth Hacking, startups, etc., since then, but the thing that originally connected us was ***time***. So I asked Chris to put some thoughts together around Being Successful while effectively managing your Time – the only truly finite resource we have –  and he was kind enough to do just that. I’ll add a couple of  thoughts in the Afterward, but for now, I’ll turn it over to Chris… ## Optimizing Your Startup’s Most Precious Resource Whenever I write a guest post or article, I start by brainstorming how I can organize a collection of past experiences into a targeted story or message around a topic. I started doing that for this essay too, when a simple thought occurred to me: I have a lot of different experiences to choose from. In fact, I’ve been working at or on early-stage SaaS companies for over five years now. Wow. It certainly hasn’t felt like five years. Between trips to CES and SXSW (and close to a dozen different countries), hiring - and, sadly, firing - great people, building two successful businesses and struggling through two disappointing failures, five years got archived in a flash, almost 2,000 days. Could I have made better use of that time professionally? Could I have achieved more goals over that span? On reflection, I think the answer is “yes” – particularly early on. Because entrepreneurship is so centered around urgency, most of us not only find it challenging to maintain healthy work-life balances to begin with, but we often over-focus on the next customer meeting or feature release or conference, and the one right after that, failing to optimize around our most precious resource: time. ## Why Time is So Precious for Startups Startup time is different than normal time. Startups succeed by doing more with less, and they rely on the core advantages of speed, focus and vision to grow and distrupt rapidly despite smaller budgets, fewer people, scarcer resources and less established brands. Somewhere between 75-90% of startups fail and the average Y Combinator startup goes 23 months between its founding and either exit or failure. If you consider Y Combinator class-members to generally be the cream of the crop, that means the average tech startup has an even shorter lifetime. But although startups fold as a result of things like founder incompatibility and lack of product-market fit, ultimately, every startup’s most previous resource - and biggest risk – is time. Running out of money, not getting product traction, getting beat out by a competitor – all symptoms of not moving fast enough and losing out to time. Paradoxically, despite the fact that time is the lifeblood of innovation, most entrepreneurs don’t really focus on time management systematically or strategically. Prioritization is done out of necessity, so execution can keep base with business realities (i.e., getting sh*t done). But science and success suggests there are some better ways, and if you’re willing to commit to five more minutes of reading you can take advantage of them too. ## Three Principles for Optimizing Startup Time Although there’s no one size fits all time management cure-all, here are three practical, data-backed productivity principles I strongly encourage you to test professionally, particularly if you work at a startup: **1. Passively quantify how you spend your time**** 2. Prioritize for growth impact by focusing on growth importance, not growth urgency**** 3. Automate as much as [non-]humanly possible** Let’s walk through each one. ## #1 Passively Quantify Where You Spend Your Time At a unit level, time is easy to quantify. The challenge is actually collecting the data. I’ve seen time tracking attempted everywhere from tiny tech startups to Fortune 500 companies and it fails almost every time. Some people are too busy, some people are too lazy, some people have bad self-reporting biases and for virtually everyone involved (except maybe the consultants trying to implement it) it’s a distraction, an unpleasant obligation, an after-thought. But there’s power in that data when you passively collect it, just like it would be great to have a food log when you go on a diet if it could be automagically generated for you. Enter [RescueTime](https://rescuetime.com/). Install it, set it, forget it and RescueTime starts tracking how you much time you’re spending using a specific app or browsing a given website. Over time you’ll be able to see how and where you allocate your time, providing you with a base data layer you can analyze to understand your habits, inefficiencies, and go-to resources, then work to optimize around them. If you want to improve your productivity and you’re not tracking how you spend your time, start now, but make sure you’re not investing more of your precious time in order to do it. ## #2 Prioritize For Growth Impact by Focusing on Growth Importance, Not Growth Urgency > “You do not have 20% time. Identify your top three priorities. Throw away numbers two and three” – Brett Martin, co-founder and former CEO of Sonar As humans, we’re all evolutionarily pre-wired to respond to immediate sensory stimuli like loud noises and flashes of light. Back thousands of years ago when our ancestors were hunting for food with crude tools, this mental acuity kept them alive and safe from threats. Unfortunately, when the only thing we go hunting for is the occasional granola bar, immediately breaking concentration to focus on ephemeral, situational cues like the latest, incoming Snapchat is a huge productivity encumbrance. The first, basic breakthrough is to focus on task importance, rather than task urgency. You don’t need to respond to the latest push notification on your phone or email that emerged at the top of your inbox: arbitrary chronological ordering of content in a feed does not indicate its priority or importance. Instead, mute or turn off your phone whenever you can, use [OneTab](http://www.one-tab.com/) to close lower-priority browser tabs, and focus on what really matters. One simple productivity hack to help you achieve this is the “A-B-C-D-E Method.” A-B-C-D-E goes like this: write down all your “to-do’s” and then categorize them into bins: - ***A***: A task that is vitally important that you must complete as soon as possible. There are negative consequences if you put this off - ***B***: A task that is important, but not as important as your “A” tasks. There might be consequences if you don’t do it, but the impact is not as big. - ***C***: A task that is “nice to do” but not as important as your A and B tasks and there are no negative consequences for not completing it - ***D***: A task that you should delegate. - ***E***: A task that should be eliminated whenever possible. Go through your list marking the tasks A1, A2, B1, B2, B3, C1, C2, then drop them into an app like Evernote, AnyDo, Asana or Slack and start knocking them out in the order they deserve. At [Percolate](http://percolate.com/), we use weekly MITs (“most important tasks” – not the college in Cambridge, MA) as proxies for our “A” priorities, announcing them every Mondays then following up with short status and/or completion updates mid-week and Friday. It works well and it’s really helpful to organize your own priorities and understand your teammates’. But how should we think about priorities in terms of importance? For startups, the answer is simple: the priority is growth (unless you’re dying, in which case, the priority is life or a clean slate). Like Paul Graham famously says, “if you get growth, everything else tends to fall into place. Which means you can use growth like a compass to make almost every decision you face.” The ultimate outcome of A1 then should be the most growth-supportive task you can do, A2 the second, and so on. As a framework, this sounds great. In practice, when you’re an over-worked founder juggling hiring, shipping product, developing new features, dealing with customers and *shudder* fundraising, this gets messy fast. Nonetheless, there are some helpful signposts you can use to guide your decision tree: As long as you’re prioritizing the four essential avenues to startup value creation- (1) acquisition, (2) product, (3) team and (4) retention-your “A” and “B” tasks become fairly clear, while everything that doesn’t support efforts in these four areas washes out the bottom and off your to-do list. Focus is saying no to distractions (even if they’re fundamentally good ideas), experiment fast, fail faster, learn from your mistakes and always prioritize time and resource investments around acquisition, product, team and retention efforts that drive growth. ## #3 Automate as much as [non-]humanly possible Good programmers tend to think this way naturally, but for many this philosophy toward work isn’t very intuitive (and certainly isn’t how most of us are taught in school). Fact is, we live in an incredibly technology-enabled time, where access to great automation tools are well within the grasp of non-programmers. Generally, if you’re doing something repetitive on a computer, two things are true: - Some -if not all-of what you’re doing can be automated. - Someone, somewhere has probably already done it. From logic-based automation services like [IFTTT](https://ifttt.com/) and [Zapier](https://zapier.com/) to browser macros, [PhantomJS](http://phantomjs.org/) and marketing automation software, you can put everything from cross-posting on social media and scraping websites to syncing database objects comfortably on autopilot. Good automation is the only way to multi-task without compromising your focus and mental acuity – use it wherever possible. When you can’t automate, delegate to places like [Mechanical Turk](https://www.mturk.com/mturk/), [Elance](https://www.elance.com/) or [TaskRabbit](https://www.taskrabbit.com/). Collectively, by passively tracking your time use, using results-oriented logic to prioritize growth-supportive business initiatives and automating away repetitive, low-level processes, you can take meaningful strides toward optimizing the most precious resource for both you and your startup: time. As entrepreneurs we sacrifice a lot of time and energy to bring industry-changing visions to life, and we certainly owe it to ourselves to make the best use of it.Chris Bolman is founder of [Buzzfork](https://www.buzzfork.com/), an entrepreneur, writer, marketer, growth hacker, consultant and non-linear thinker, currently in-charge of Growth at [Percolate](http://percolate.com/) in New York City. [Follow him on Twitter](https://twitter.com/ChrisBolman) or [read his awesome blog](http://www.chrisbolman.com/). ## Afterword by Lincoln Lincoln here again… So grateful to Chris for helping us manage our time better… it really is something we only get so much of and we need to spend it wisely. Also grateful to my friend [Tony Mariotti](https://twitter.com/tonymariotti), VP Sales & Marketing at [FriendBuy](http://www.friendbuy.com/) for introducing me to Buzzfork and Chris. So, I’ll just second that I use Zapier all the time for service-to-service automation… super-awesome service that, BTW, is also a great distribution method for your SaaS. I’ve heard from several companies that they’re getting high-quality leads and customers simply by being integrated with Zapier and taking advantage of that ecosystem. Also, I use [Buffer](http://bufferapp.com/) extensively for automating posting and interactions across social networks. Other services I or my clients have had great success with that you might also look into to help you save time: - [https://premier.mobileworks.com/](https://premier.mobileworks.com/) – high-quality outsourcing/virtual assistants - [https://www.odesk.com/](https://www.odesk.com/) – another place to find people to do work for you, especially technical stuff - [http://import.io/](http://import.io/) – super awesome web-scraping tool that turns any site into an API - [https://colibri.io](https://colibri.io) – a killer Growth Hacking tool (also a new client, BTW… we’re working to optimize the on-boarding process) that finds conversations going on around the web (blogs, Quora, Twitter, etc.) for you so you can inject your message where appropriate I’ll end with one of my favorite Gandhi stories [I heard from James Altucher](http://www.jamesaltucher.com/2012/08/5-things-i-learn-from-gandhi/) about time management and making time for reflection: > One time Gandhi said to a group of his backers, “I need to set aside one hour a day to do meditation.” > One of the backers said, “oh no, you can’t do that! You are too busy, Gandhi!” > Gandhi said, “Well, then, I now need to set aside two hours a day to do meditation.” Don’t forget to live… to have fun… and to be receptive. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The best way to grow your SaaS business *January 20, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/deliberate-growth/ If your SaaS addresses a big- or specific-enough problem that people are willing to pay to solve,  you can probably achieve enough growth to result in a decent-enough sized business… in spite of your efforts. But you didn’t set out to build a “decent-enough” sized business, right? Don’t you owe it to your shareholders and stakeholders to do more than simply exist? Your investors and employees – not to mention their families, the charitable organizations they support, and the merchants in their communities – would like to see some type of return on the investment they put into building your company, right? Well, to get there, you need to be deliberate in your growth… you need to grow because of your efforts, not in spite of them. Unfortunately, that’s not how many of the SaaS companies I talk to operate… Look, regardless of the inefficiencies in your – or basic lack-of – marketing, distribution, sales, operations, etc. – the reality is, if you have a great product that solves a real problem for people, you will probably get some customers. Now, “some customers” could mean you’re doing $10k/year… or $10M/year… it depends. Unfortunately, I see a lot of companies that get to that point – whatever that point is – and stay there. They get to this point of having “some customers” and then things slow down or stop. They stagnate. They stop growing. Oh, and if there is churn – and there’s ***always*** churn – they start going backwards! Most companies – especially those with a technology-centric leadership team – at this point will buckle down on the wrong things… usually focusing on the product. They’ll add more features. They’ll make it faster. They’ll improve the UI. They’ll focus inward and on the technology because that’s “easy” and what they ultimately have the most control over. > Reminder… in a [#SaaS](https://twitter.com/search?q=%23SaaS&src=hash) company, the technology is the easy part > - Lincoln Murphy (@lincolnmurphy) [January 17, 2014](https://twitter.com/lincolnmurphy/statuses/424225856265781248)   And while that might get things going for a bit, adding incrementally more customers, maybe getting those customers that wouldn’t convert because your SaaS lacked this feature or that function, this “strategy” rarely brings about the exponential growth everyone was hoping for. And so it continues… a vicious circle (or cycle, whichever you prefer)… often including a great deal of disappointment and confusion… “why didn’t that work?” Ultimately, the stagnation that comes from growing in spite of your efforts makes sense if you understand that you’ll eventually reach a point where you’ve basically tapped the market for early adopters or people desperate enough for a solution to their problem that they are willing to figure out – again, in spite of your efforts – that your product will solve their problems. At some point you need to realize that in order for your company to become what it truly can be, you need to start growing ***BECAUSE*** of your efforts… not in spite of them. You need to have – and execute – on a well-thought out marketing plan, you need to have operations in place that allow you to take full advantage of the SaaS business model, and you need to ensure all aspects of your organization are aligned with and moving toward goals of the company. The last two there – ensuring operations and your entire organization are aligned with and moving toward the goals of the company – are absolutely critical for growth beyond Product / Market Fit. Remember, just because you’ve got a product the market wants, doesn’t mean you’ve got a business that can deliver that product efficiently and in a scalable and sustainable way! > Just because you’ve got a product the market wants, doesn’t mean your company can deliver that product in a scalable and sustainable way > - Lincoln Murphy (@lincolnmurphy) [January 23, 2014](https://twitter.com/lincolnmurphy/statuses/426235695007399936)   You need to ensure that marketing is delivering high-value leads to sales and sales is closing deals while properly managing expectations that make on-boarding and engagement an efficient experience for all so that Customer Success can take the ball and run with it in a way that moves the company forward… toward your well-established and communicated goals. Regardless of the stage of your company – from pre-launch startup to high-growth SaaS company – growing because of your efforts is always the better way to go. It just is. Think about it… simply relying on serendipity and hope are universally understood to simply not be sound growth strategies, right? So whether it’s getting to your first 1000 users or your first $10M quarter, you must be explicit in your effort and work diligently with an aligned organization toward the goal. Unfortunately, [throwing stuff at the wall and seeing what sticks](https://sixteenventures.com/saas-marketing-lazy-deliberate) or simply doing nothing and hoping that if you build it, they will come, might actually get you somewhere. The problem is, that somewhere is probably not where you really want to be, and that movement – or worse, momentum – you feel, is just a mirage… a distraction. It’s not real. It’s not sustainable. It’s not scalable. Ultimately, the big problem when you operate in this way is that you leave it all up to the universe to just send you customers, [leave it up to the product](https://sixteenventures.com/sell-itself) to keep the customers interested, to keep them invested in the solution, and to not just stick around but to grow with your product over time. Man… that’s asking the universe to do an awful lot, don’t you think? And though they might come a-knockin’, the velocity with which customers find you and decide to give you their hard-earned money, and over time to give you more of their money and to tell others to give you theirs, too, will be much slower than if you go out and make it happen in deliberately. I encourage you to take a good, deep look at your company and your current situation and ask yourself “are we growing because of our effort… or in spite of it?” Either way, I can help you accelerate your growth, but the latter requires you to decide that just getting by isn’t going to cut it and that you’re ready to make the changes necessary to reach your goals. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Case Study: Growth Hacking Pre-Launch Revenue *January 15, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/pre-launch-growth-hacking/ Whether you’re pre-launch, post-Product / Market Fit (P/MF), or an expansion stage SaaS vendor, Growth Hacking – the methods, tactics, and especially the mindset behind it – can be leveraged by companies at all stages to accelerate growth. Of course, the stage of your company dictate what growth you’re trying to hack achieve, the success metrics for those initiatives, and the methods or tactics you’ll use. And while the Growth Hacking tactics a pre-launch startup would use – to build interest, get press, or generate market-validating revenue, for example – may differ from the tactics an expansion-stage SaaS firm focused on increasing Dollar Revenue Retention (DRR) would use, it is very helpful to learn about methods that work at all stages even if it doesn’t directly correlate to your current situation. Which brings me to a conversation I had with Liam Gooding of Trak.io a couple of months back about Growth Hacking at very early-stage startups. I’ll let Liam go into the details, but essentially, while Trak.io was in invite-only beta with a lengthy wait to get in, as a way to offset infrastructure costs and – frankly – to see if people were willing to pay for early access to Trak.io, Liam and his team implemented a “jump the queue” one-time fee. And, well, it worked… and Liam was kind enough to share exactly what they did, the specific results, and the thinking behind this early-stage Growth Hack. What Liam and his team did with Trak.io is applicable to SaaS companies in the earliest stages, of course, but I think the psychology and thinking that they used – and what goes into [making Growth Hacking successful](https://sixteenventures.com/growth-hacking-rules) in general – apply across the board. Don’t let the fact that Trak.io was in beta when they did this – and you’re not – keep you from paying attention to what he has to say… if you do, you’re only hurting yourself! I’ll add a couple of thoughts to what Liam talks about – as well as share an awesome resource he is putting together for you – in the Afterword. Okay, I’ll turn it over to Liam now… ## Growth Hacking: How We Achieved 11% Conversion Rate on Upfront Payments Within 2 weeks of onboarding people into the private Beta at [Trak.io](http://trak.io/), we’d overloaded the servers and needed to slow down and limit how we brought users in – we were unfunded and a hosting bill approaching $1,000 /mo seemed quite daunting. So we decided to try something pretty radical – we starting asking people to pay to get into our Beta. Before they’d used or even seen the working product. They’d shown interest via a landing page, read our value proposition and listened to what problems we were trying to solve for them. And that’s it. We asked for $29, as a one time payment. When presented with the deal, 11% of people paid with their credit cards. Here’s how we did it, and all of the numbers. ## 1. People Want It Now! Because we decided to make people wait a while between signing up and actually receiving their invite code, we lost some people. Actually, “some” is the wrong word. We lost around 50% of our waiting list. And that was only for a few weeks wait. That’s huge. Our efforts on acquisition were literally halved because we were asking people to wait a few weeks. I was personally reaching out to as many people as possible to start conversations and to give people their invites. We also used an automated email sequence to keep the signups engaged with useful content and offer them multiple opportunities to use their promo code. I emailed users who never bothered to use their access codes, and the overwhelming responses were “*I’d forgotten what it was, I went and signed up for something else, I’d lost interest*“ I knew we needed to give it to people *now*. But we were full. I needed some kind of quality filter. So our $29 paid option became a ‘Priority Access’ program. Everyone eventually gets access for free, but those who are seriously looking for a solution ***NOW*** to fix a business problem, they can pay and get it now. All of the marketing copy around the paid option focusses on language like *now, time poor, waiting*… I stress that not paying means they’ll be waiting for a few weeks. I also give an explanation as to why we have to make people wait weeks. ## 2. People Want A Bargain For Being Early Adopters We weren’t really trying to offset the cost of servers with the payments from the Priority Access program. Instead it was all about validating our beta testers with a quality filter. But we wanted to make sure they got a great deal for their money. Not just instant access. Honestly, I was nervous I was going to turn away everyone. So we sweetened the deal, offering a 15% lifetime discount on whatever our paid plans happen to be. We also promised that they’d receive at least 2 months of usage of the product for free within their beta access. So worst case scenario, $29 bought 2 months of subscription. We also promised that their usage would be completely unlimited. No matter how big they are. Considering some of our beta testers send enough data to need a $499 /mo plan with KISSmetrics, that was quite a bargain. Trak.io is lucky to be in a market with a few comparable companies. That makes the perception of a bargain is pretty easy to communicate to customers, at least on the surface of commodity pricing. ## 3. People Want Guarantees As a brand new company, we needed to make sure we did our best to promote trust and confidence. So as well as the usual registered company number and address, we offered a no quibble refund policy, without any limits. This was important as until a tester has integrated our API and sent some data, they might not know if the product will actually fit their needs. Out of 105 needs, we’ve made 3 refunds. All 3 were people who were looking for a particular feature that was in our marketing messages but we’d actually not deployed it yet. We refunded all 3 and still let them stay in the Beta because we hope they’ll come back once the feature is live and give us feedback! In the grand scheme, refunding a beta tester isn’t a huge issue. They’ve already validated our marketing message with their payment, and provided us strong product signals by giving us the reason for requesting a refund, so if anything the refunds are more valuable! ## 4. People Want Personal Support On our sales page, people were offered a personal email from the CEO and hand-holding technical support in getting setup. Almost every $29 signup took advantage of this. Which is amazing. I want to have conversations with our beta users. I need to have constant dialogues. Writing a bit of JS and debugging their landing pages (95% of the time they’ve forgot to include jQuery!) is a tiny price to pay to be able to get to know our users.Scaleable? Probably not. But promising people that for only $29, they’ll have a few hours of hands on support with senior developers makes them feel confident and comfortable. We’re a developer API product and can be quite daunting (something we’re constantly working on improving). Knowing that they have the two cofounders Skype names and can call at any time is a big comfort. ## 5. People Want Sexy Users were asked to pay for software after only seeing our landing page and the Gumroad offer. We hadn’t yet let them have a play around the application at all. And the development overhead of a robust Demo staging server with dummy data didn’t make sense yet. We knew that user interface was going to be one of our differentiators among competitors, and so we knew we could use this on our landing page. So we had lots of screenshots, and made these screenshots into a video (which took around 30 minutes to make – it’s embarrassing to watch now!) Would we have made these sales without a beautifully designed landing page or beautifully design interface screenshots? No, I don’t think so. I don’t think we’d have made one. In a world of Lean Startup, design is the cheapest way to demonstrate prototypes, and I believe it has far higher ROI’s on a product. A great interface design makes software accessible. In Lean Analytics, Alistair Croll and Ben Yoskovitz advise that good metrics should be Accessible, so we knew that our product needed to be sexy and appealing. Something people wanted to grab and touch. And pay for. ## The Numbers and Total Revenue Total views: 983Total Sales: 105Conversion rate: 11%Total Revenue: $3,340 Note: The above revenue includes 2 x $499 Launch Partner deals we sold, 12 months of Trak.io for $499 paid upfront, both bought by people who had bought our $29 offer first. ## Disclaimer: Why Is This A ‘Growth Hack’? Before anyone gets a hernia arguing that I’m using a buzzword to bring some SEO-juice to this post, I just wanted to explain my reasoning. I could find no example of any B2B SaaS product offering a paid option to skip a Beta waiting list queue. Tweets and Likes, yes. But not paid. So I think this was an innovative and risky experiment. This also allowed us to grow the Beta a lot faster and gain qualitative feedback much faster. Our paid access Beta testers were more responsive to all my emails (90%+ response rate v.s 25%) and are already sending email referrals (9 email introductions from paid access testers, 0 from free access testers). We implemented this paid option in under 1 hour. We dropped in Gumroad’s embedding API. Implementing our full Stripe recurring billing system is around 2 weeks of development time for my cofounder Matt. This took 1 hour, and I could do most of the work (setting up the Gumroad product) with a simple embed code on our landing page. This was very low cost to implement. And remember what Lincoln says: > While you’re out trying to define and defend [#growthhacking](https://twitter.com/search?q=%23growthhacking&src=hash) your competition just stole your market share > - Lincoln Murphy (@lincolnmurphy) [November 25, 2013](https://twitter.com/lincolnmurphy/statuses/405111878478610432) Liam Gooding is CEO and Co-Founder of [Trak.io](http://trak.io/) … learn more about them on [AngelList](https://angel.co/trak-io) ## Afterword by Lincoln Lincoln here again… Just a few things to add. While there are many takeaways here – including doing the right thing when it comes to refunds – one thing you might have missed is how Liam knew where Trak.io sat adjacent to other products in their customer’s world, in this case understanding their customer’s use of – and commercial relationship with – KISSMetrics. By clearing understanding that the level of activity they were seeing would require a customer to pay KISSMetrics at least $499/mo – and knowing where Trak.io sits compared to KISSMetrics in their world – they can see that prospects are already spending money in this space and even get some idea of the price sensitivity of their prospects. That said, whether it’s beta or not, invite systems, queues, and requiring people to wait are a fun mix of tricky and potentially lucrative. Take [Stealth Seminar](http://www.stealthseminar.com/) – an automated webinar service – for example… they’re all about scarcity, making you wait for access, but keeping you engaged, and then opening up access – at a premium – at some pre-determined point in the near future. The problem is that when it’s false scarcity – i.e. completely made-up to provide the illusion that resources or access are limited – then that’s potentially not cool. You have to tread lightly here. But in the case of Trak.io, this was’t false scarcity… this was a way to get people into their beta who were most likely to use the product and provide valuable feedback. Instead of vetting testers, sorting and sifting through applications to find those that were most likely to be valuable testers… they let them self-identify as serious… with their credit card! People who pay you – anything – always give different and generally more helpful feedback than those getting something for free, which is why I say get to market and start charging money for your product as quickly as possible. And honestly, that’s why I’m actually not a big fan of “beta” periods in the traditional SaaS sense… I think it tends to send the wrong message (i.e. not production ready). [So just be careful out there.](https://sixteenventures.com/beta-testing-pricing) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Freemium or Free Trial? There’s a Better Question *January 9, 2014 · by Lincoln Murphy* Source: https://sixteenventures.com/freemium-or-free-trial/ I answer this question all the time… should we go Freemium or Free Trial for our SaaS app? And I get this question from companies of all stages and sizes, including pre-launch Startups, software companies moving to – or adding a product line based around  – the SaaS business model, or for later-stage SaaS companies that are questioning their current trajectory. I assumed I’d covered this topic so much the answer was obvious… but apparently that’s not the case. So now I’m going to address it once and for all… or at least I can point people to this post when I’m asked whether Freemium or a Free Trial is the better way to go. It’s time to ask a better question. Okay, so here’s the question I got this time: > “Hey Lincoln… We’re coming to the inflection point in our startup where we need to choose freemium vs free trial, and I’m… well…stuck. There are so many pros and cons for each. Can you help?” Here’s my answer: It isn’t a choice between Freemium and Free Trials… those aren’t the options. The options are Freemium or a Premium product. The better question to ask is which of those options is best for your company. If you choose to offer a Premium product, then you can choose to offer a Free Trial for your Premium product, but you don’t have to. This distinction isn’t just semantics or me trying to make an issue where there isn’t one. Let’s dive in… ## What is Freemium? Freemium is a marketing model that should really be considered a business model, where you give away access to some or all of your product for free forever, without a time limit. There may be other limits – features, usage, etc. – but there’s no time limit; you can use the product for free, forever. As a vendor, Freemium is what your offering must be architected, designed, and built around. Freemium as an add-on, as an afterthought, is basically a non-starter. It won’t be successful at all. Though “successful” in the case of Freemium is itself a relative and hard-to-define term. Where Freemium is most appropriate and where success is at least possible, is when your market is huge ***AND*** those who use your offering ***FOR FREE*** ***FOREVER*** will add value – hopefully exponentially more over time – to you and the other users and paying customers. When considering Freemium, you have to understand those things and consider the quid pro quo of the free users. What do the >97% of people that will likely ***NEVER*** pay you a dime bring to the table? Content? Data? Virality? Something? If they don’t add value, then you’re just running a charity. Charities are great, but not when you set out to run a for-profit business. Oh… and you have to actually build every aspect of your product to ensure your free users add whatever that value is… you can’t just hope they will on their own. ## Maybe even Remove the -mium Part Of course, if you just want to build up a massive user base and sell it for Billions like Instagram… cool. But I wouldn’t do Freemium, though… I’d just do “Free.” Don’t worry about revenue. See, the hard part with Freemium – assuming everything else is fantastic (market, product, experience, etc.) – isn’t getting users… it’s generating revenue. The main reason for that is… ## Psychological Barriers Remember, when you hook someone with “free forever” it becomes almost impossible (which is why you see 3% conversion rates on “successful” Freemium SaaS ventures) to charge them for access later on. It’s a real psychological issue. In fact, in this post [I wrote about several companies](https://sixteenventures.com/pivot-to-profit-ditch-freemium) that have moved away – or will soon – from Freemium to a Premium-only (but generally with a Free Trial) model and found success. You see, when you hook ‘em with free, their expectations are completely mis-managed. You can try to overcome this by always being up-front that there’s a premium version that they can pay to use if they’re so inclined – a tactic I recommend to Freemium companies all the time – but you need to do that from the very beginning or you’ve anchored them on “free.” This is where the – now ancient – idea of the “penny gap” came from… getting someone to pay – even a penny – for something they already get for free is super-difficult. And this is why you see… ## Several Types of Freemium Freemium has been moving away from just getting you to pay for what you’re already using – what I call the Classical Freemium model – for several years. Instead, we’re seeing [more diverse Freemium models](https://sixteenventures.com/seven-types-of-freemium) where you you are charged for add-ons, extensions, additional functionality, support, integrations, customizations, etc. instead of just “more” of whatever it is you already get for free. You may recognize this as the model of Freemium that B2C games use to – pardon the pun – crush it. Don’t get the pun? Get this… Candy Crush Saga, a Freemium game, generates – as of this writing – [nearly $950k per day](http://thinkgaming.com/app-sales-data/2/candy-crush-saga/). PER DAY. You’re still excited about your Project Management startup, right? Anyway, the model used by games like Candy Crush is to sell in-app virtual goods, additional levels, accelerated gameplay, etc. Of course Candy Crush, it seems, was designed to be a “habit” and includes the necessary psychological elements to [get people hooked](https://www.slideshare.net/nireyal/hooked-model) and drive consumption of the virtual goods in-app. Which brings up this little issue… ## New Habits Required As things have evolved, I’m starting to add another element to what I think is required for Freemium success in B2B apps, and that is that your product quickly becomes a habit that includes multiple-times-per-day interactions. I’m not saying all B2B SaaS apps must do this… frankly – for some – a metric as granular as daily activity (or Daily Active Users – DAU) is just not meaningful. But for Freemium B2B apps, I believe this is critical to success. And this makes even more sense when we go back to the idea of a quid pro quo with the free users – that they must deliver value back to the app. Given that requirement, we can probably assume those who use the app multiple times per day are ***MORE*** likely to bring value to the app – and other users and customers – than people that use it only once per week. So if your SaaS app can’t become a habit – and let’s not kid ourselves, changing behavior is ***INCREDIBLY*** difficult – then Freemium is probably not the right model for you. And when there are SaaS companies out there that have [paying but inactive customers](https://sixteenventures.com/saas-customer-success-zombie-customers) (for a while… until they realize what’s going on and cancel), it becomes obvious that actually paying for something isn’t even enough motivation to get started or switch from the previous solution if the switching cost is too high. Freemium or not, you must remove barriers to entry, reduce friction, and get your prospective customers to a point where they realize – or at least recognize the potential for – value as quickly as possible. This means letting them sign-up for your trial quickly and easily… and maybe even letting them experience your product without signing up (like [Optimzely](https://www.optimizely.com/) or [Gliffy](http://www.gliffy.com/) or [Codecademy](http://www.codecademy.com/)). No matter what, you must… ## Understand What You’re Displacing Back to the game scenario for a second… there are zero switching costs to start playing Candy Crush if I’ve been playing Clash of Clans. I just install it (probably from an ad ***IN*** Clash of Clans) and get going. Now I have two games. Games are awesome – from a business standpoint – because they’re an AND… not an OR. I can have this game AND that game AND that other game. I very likely won’t have this CRM and that CRM and that CRM… it’s this CRM – OR – that other CRM. Which is why it’s easier to get people to try a game (then it’s up to you to get ‘em hooked, quickly) than it is a B2B SaaS app. Games are impulse installs… no procurement process, committees, RFPs, migration, re-integrations, etc. No switching costs. But your SaaS app is a harder sell – even just to try it – because you’re probably an OR in your Product Category. Like I said… people/companies only use one CRM or one HR app or one POS system or one… whatever. Yes, different departments might use different software or SaaS apps to do the same thing, but they each only use one at a time. Perhaps there’s an Enterprise opportunity to consolidate everyone on a single product… but that’s a discussion for a different day. So you have to know where you stand in your customers’ world.. what are you displacing if they were to choose your app? Commercial competitors, home-grown solutions, open source products,… or nothing (which is a thing you need worry about). The more you displace, the more valuable you might be… but the higher the switching cost and the less likely you are to become a habit at scale, meaning Freemium might not workout so very well for you. Freemium or not, really consider what you’re displacing and how they’ll on-board with you while dealing with, continuing to use, or otherwise working around their existing solution. That’s not easy to figure out. And if you’re not displacing anything – meaning they don’t currently do anything related to what your product does – just know that now you’re inventing a market. While this is possibly very lucrative, it is 100% guaranteed to be difficult, expensive, and time consuming (though could be perfect for Freemium). And… ## Wait… there’s something else… I forget Oh right… I forgot to say this earlier because, well, I’ve got a lot going on and got side tracked… People are perpetually distracted these days! While an argument could be made that the distractions are self-induced (like maybe I’m trying to beat level 70 in Candy Crush while updating customer records and sending emails and tweeting and…), the reality is we just are. We all suffer from time and resource scarcity to some degree, so understand that you’re entering their world with a great deal of cognitive overhead already in place. You need to work with it, roll with it, compete with it… whatever and however, but just know it’s there. If you really want to really understand how this cognitive overhead affects people – humans… your customers and prospects – read the book “[Scarcity: Why Having Too Little Means So Much](http://www.amazon.com/dp/B00BMKOO6S/)” … but be aware that it’s really depressing the way our minds work sometimes. Good to know, but tough to take. Okay fine, but… ## What about Free Trials? More accurately, what about Premium + Free Trial? First, just about everything I said above about switching costs, scarcity, habits, etc. all apply to Free Trials as well. But with Free Trials, there aren’t any of the Freemium psychological issues (assuming you manage expectations properly) since it is what it is… a free trial of a paid (commercial, premium, valuable) product. As I outline in the video below, Freemium is free-forever to use, while Free Trials have a time-limit with two potential outcomes: pay or go away. So, if your app doesn’t fit into the “rules” for Freemium success I outlined above – it’s specific to a smaller target market, there’s not a lot of value free users can bring (they won’t really spread the word and network-effect data is of limited value), and the path to becoming a habit for them is a bumpy road at best… then you may want to go the more traditional route and avoid Freemium. That means, if you have a solid SaaS offering that you think you can charge money for and build a nice little $100M business off of, then just charge money for it out of the gate… and then offer a Free Trial of that ***PAID*** product. And I talk about FREE Trials specifically because I believe that’s the best route to take… if you’re considering doing a $1 trial or even asking for a Credit Card up front, [read this post immediately](https://sixteenventures.com/one-dollar-trial). That all said, Free Trials are not simple, nor are they a guarantee that you’ll get more customers. In my experience, offering a Free Trial alone – just offering a trial – will increase overall sales; but having a poorly converting trial – one that does little to facilitate on-boarding, engagement, and conversion – can be frustrating and a drain on [Customer Acquisition Cost (CAC) efficiency](https://sixteenventures.com/saas-cac-efficiency). There’s a lot to getting your Free Trial right, and here is a post on the [3 Secrets to High-Converting Free Trials that also links to a ton of resources](https://sixteenventures.com/effective-free-trials) to help you do that, but overall, Free Trials are a simpler approach if for no other reason than the lack of psychological hurdles present with Freemium. And if you’re curious about offering both Freemium and a Premium Product with a Free Trial, I wrote a post a while back that [specifically covers that crazy idea.](https://sixteenventures.com/freemium-free-trials) ## So… Which is Best? I can’t make the decision for you in this post – though I’m happy to setup a consulting engagement to help you make this decision- but I will say this… Ultimately – whether you engage me or not – this is one of those decisions that really calls upon your inner entrepreneur, because at the end of the day… it’s most likely a gut-level decision, even if you have a lot of market data to go off of. The reality is, if your target market does little to no sharing of any kind (i.e. it’s hard to even make a linkbait article go viral with them, let alone an app), you may not be able to change behavior with a large enough swath, fast enough, to generate the critical velocity required for Freemium to really become a viable model for you. On the other hand, just because it hasn’t been done before in your market, doesn’t mean it won’t work… I encourage you to go back to the drawing board one more time and make sure you’re looking at things the right way. And then I hope you make the best decision and crush it. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # WTF is a Growth Hacker, anyway? *December 27, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/growth-hacker-manifesto/ A recruiter looking for a Growth Hacker contacted me recently and my immediate reaction was “I wonder what that position was called two-months ago.” That seemingly innocent LinkedIn message from a recruiter just trying to do their job, combined with the facts that any marketing tactic is now considered a “Growth Hack” and anyone with any involvement with Marketing – at any level and in any function – calls themselves a Growth Hacker – has made me question everything. I originally liked the term Growth Hacking because I thought it most accurately defined what I do for my SaaS clients; I help them grow – rapidly and sustainably – by taking full advantage of the SaaS Business Model and unique distribution methods. From in-app Conversion Optimization and Retention strategies, to viral expansion in the most staid B2B product categories, Growth Hacking finally encapsulated what I do. But I didn’t gravitate to the term Growth Hacker on my own. In fact, it wasn’t until Bronson Taylor [interviewed me for Growthhacker.tv](https://sixteenventures.com/saas-growth-hacking) that I realized this term fit. BTW, that was WAY back in July 2013. In the months since, however, I feel like the term Growth Hacker has started to lose it’s meaning… that it’s been bastardized and co-opted by anyone and everyone. Growth Hacking – the term – is now just linkbait people use to get traffic while they rehash the Hotmail and AirBnB “hacks” or talk about SEO or Copywriting or [any generic marketing tactic] and tag it #growthhacking. Cut to the end of December 2013 and I’m lost. I’m not usually one that needs definitions, rules, structure,… but I’m not concerned about me. If Growth Hacking is to mean anything to anybody – and if true Growth Hackers are to stand out from the crowd – then I think it might be time for some parameters around the term. Otherwise it’s nothing more than a nerdy term of self-endearment we stick in our Twitter bio like ninja or rock star. Who cares. So once again, I turn to Bronson from Growthhacker.tv. My sage… my sherpa… my guiding light in this time of darkness. I emailed Bronson, told him what’s going on in my mind and asked him to comment on the current state of the Growth Hacker movement… he said this was just the catalyst for his ***Growth Hacker Manifesto***, and I’m excited for him to share it with us. I’ll let Bronson take over… ## Growth Hacker Manifesto After creating the primary destination online to learn about growth hacking ([www.growthhacker.tv](https://www.growthhacker.tv/)), where I have conducted over 100 interviews with the internet’s most successful growth experts, I have finally reduced growth hacking to its necessary and sufficient conditions. The following manifesto sums up growth hacking in a way that is understandable, and in a way that shows the uniqueness of what a growth hacker brings to a startup. After reading this I hope you still think that growth hacking is just a buzzword. That’s one less startup for everyone else to compete with 🙂 ## 1. Growth hackers have an obsessive focus on user growth The most important aspect of a growth hacker is their relentless focus on the bottom line growth of a startup. If their activities don’t ultimately increase the overall retained user base then they are not growth hacking. ## 2. Growth hackers combine the disciplines of marketing, product, and engineering A growth hacker has multiple disciplines to pull from. An understanding of marketing allows them to utilize inbound, SEO, PPC, landing pages, copywriting, etc. An understanding of product allows them to utilize product-market fit, registration flows, onboarding, UI/UX, email, roadmap decisions, etc. An understanding of engineering allows them to utilize event tracking/triggers, APIs, automated systems, code heavy growth tactics, etc. ## 3. Growth hackers scientifically test new tactics A growth hacker approaches new tactics like a scientist, with each experiment consisting of a question, hypothesis, prediction, testing, and analysis. ## 4. Growth hackers are concerned with the entire lifecycle of a user Acquisition is only the first step. A growth hacker has to find ways to effectively activate a new visitor and eventually turn them into a retained customer. Top of funnel growth alone isn’t relevant. A growth hacker will use CRO (conversion rate optimization), cohort analysis, and other tools to effectively plan the entire funnel. ## 5. Growth hackers are data-driven A growth hacker doesn’t rely on gut decisions or intuition. They are data driven. The numbers don’t always tell a growth hacker exactly what to do next, but they serve as a guide and a clear scoreboard for every growth attempt. ## 6. Growth hackers exploit new growth channels extremely early A growth hacker is on the cutting edge of what is working. Growth channels are most valuable when they are large enough to have impact but new enough that everyone is not using them. ## 7. Growth hackers use their creativity to create new growth opportunities A growth hacker doesn’t simply adopt growth tactics as they appear on the radar. Rather, growth hackers actively create opportunities for growth through creativity. There are ways to create massive user growth right now, in every industry, that are waiting to be discovered. ## 8. Growth hackers exhaust free growth first A growth hacker finds the low hanging fruit first. Low-cost or free growth is usually available to those that have the skill sets we’ve already listed, and these opportunities will be exhausted before moving on to paid channels. ## 9. Growth hackers only spend money if there is a positive ROI A growth hacker is not against spending money as long as the free options have been explored, and as long as there is a positive ROI. Growth hackers don’t spend money to raise awareness. They spend money to grow. ## About Bronson Taylor Bronson Taylor is a serial entrepreneur, startup advisor, instructor, author, and the host and co-founder of [Growth Hacker.TV](https://www.growthhacker.tv/), where the experts on startup growth reveal their secrets. ## Afterword by Lincoln Lincoln here again… First, make sure you [grab your copy of Growth Robot](https://gumroad.com/l/growthrobot/free) and take advantage of Bronson’s generosity… I grabbed my copy already and I think you’ll really dig it. Very actionable stuff! Second, the only thing I have to add to what Bronson said is that there seems to be a lack of emphasis put on the starting point for all scientific testing… the hypothesis. It’s one thing to be data-driven and to test scientifically, but it’s quite another thing to come up with something to test ([outside of copying others](https://sixteenventures.com/saas-marketing-plan-growth-copyists)). I think this is the scary part for “data scientists” because it isn’t necessarily data-driven. It might actually come from – ugh – your gut. To go a bit deeper on that subject, I wrote my [5 Rules for Successful Growth Hacking](https://sixteenventures.com/growth-hacking-rules) (not linkbait, I assure you), to give some insights into how I come up with that hypothesis to start from. Your mileage may vary. To that point, I’ve actually seen this focus on “scientific testing” get in the way of taking initial action. In fact, the other day I witnessed a discussion about my “[Autoresponders are Dead](https://sixteenventures.com/email-follow-up-sequence)” post where someone said “Lincoln is correct, but the problem is that his way is hard to test, while Autoresponders are easy to test.” #facepalm So we should keep doing what we acknowledge is the wrong thing simply because we can more easily test it? You can figure out how to test something – and a real Growth Hacker will – but to keep doing what isn’t working just because it’s easier to test doesn’t sound like Growth Hacking – or good sense – to me. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Predictions for Customer Success in 2014 *December 26, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-success-2014/ It’s safe to say that 2013 was the year of Customer Success, especially in the SaaS industry. But where do we go from here? What does Customer Success look like in 2014? Luckily, I’m friends with someone who’s job it is to know – or at least attempt to predict – what’s going to happen in this space in the near future, so I asked him to tell us what he thinks. His name is Nick Mehta and he’s CEO of [Gainsight](http://gainsight.com) – one of the Customer Success companies that [came to prevalence in 2013](http://www.crunchbase.com/company/gainsight) – and he’s going to share with us some predictions for the Customer Success movement in 2014. In case you’re wondering, I did a small paid consulting engagement with Gainsight in early 2013, but haven’t been paid by them for anything since, and certainly didn’t get paid for this post. Nick is a friend who’s opinion and industry knowledge I value, so I’m excited for him to share his predictions for 2014 with us. I’ll turn it over to Nick now… ## Prediction 1: Customer Success Organizations Become Must-Have Very few CEOs could imagine running a business without a dedicated team responsible for Sales. In a similar way, leaders will realize that they need to have an owner for Customer Success who maximizes revenue from existing customers. They will do this not only because “Customer Success” sounds good but also because it significantly impacts growth. In our [recent survey](http://www.gainsight.com/blog/infographic-diagnosing-churn) of 100+ leading subscription businesses, having a dedicated Customer Success team was correlated with a ***24 percent reduction in churn rate***, which yields a dramatic increase in growth. **Bottom Line:** If you don’t have a dedicated Customer Success organization in 2014, you might as well be rocking a Palm Pilot Blackberry in a holster, because you’re retro! ## Prediction 2: Customer Success Enters The Board Room For many savvy companies, Customer Success is already a hot topic at the Board level. Sophisticated Boards know that Customer Success can be a highly leveraged driver of revenue growth and shareholder value, with a [recent study](http://www.forentrepreneurs.com/why-churn-is-critical-in-saas/) showing that a 2 point increase in net retention results in a 20 percent increase in equity value. Yet many Boards still don’t know the questions to ask around Customer Success and many Customer Success execs have never had to present, in a meaningful way, to the Board before. Further confusing matters, metrics like retention and churn have so many different meanings, making it hard for companies to measure the impact of Customer Success. **Bottom Line:** In 2014, Boards will make a Customer Success a regular topic of discussion and will define a rigorous scorecard for measuring it. Churn will no longer be the [Elephant in the Board Room](http://www.forbes.com/sites/groupthink/2013/11/18/the-elephant-in-the-board-room-5-questions-boards-should-ask-about-churn/). ## Prediction 3: Putting the Success Back Into Customer Success Much of the early innings of Customer Success has been about avoiding customer failure. Companies used Customer Success teams to find [at-risk customers](https://sixteenventures.com/saas-churn-threats), identify clients who aren’t adopting and overall, minimize churn. Customer Success teams were the firefighters or disaster clean-up crew, depending on how you looked at it. But this is just one part of the opportunity for Customer Success. In 2014, companies will layer on top of Churn Mitigation the concept of Success Maximization. Success Maximization involves learning what is common amongst a company’s best customers and reinforcing those behaviors to all customers. Customer Success teams will study the patterns that link together customers that are adopting and buying more and that are becoming champions of the product or service. Maybe a company’s best customers are taking training or maybe they are using one of its high value features. Maybe they are from certain industries or were acquired through specific marketing channels. Companies will also study the bottom line metrics that matter to their customers. Whether they login or not is moderately interesting, but nobody buys a product to “log in” (except, I guess, when they buy LogMeIn). Customers buy a product or service to accomplish a goal (create opportunities, drive sales, improve customer sat) and vendors will become savvy about measuring “success metrics,” not just “activity metrics.” **Bottom Line:** In 2014, Customer Success teams will move from preventing failure to reinforcing success. And the job will get a little bit more fun in the process. ## Prediction 4: Customer Success Gets Reinforcements For many companies, Customer Success teams are fighting a battle on many fronts with no help. Customer Success Managers often handle onboarding, training, support, adoption, up-sells, renewals and references – as well as sometimes making coffee for their customers. In 2014, companies will assign cross-functional resources to help the Customer Success team maximize revenue from existing customers. Just as Marketing team members help Sales drive leads, Marketing will assign resources to help Customer Success create campaigns to drive engagement and minimize churn. Similarly, Product teams will recognize the wealth of customer insight that Customer Success teams have and will assign Product Managers to work with the feedback from Customer Success. **Bottom Line:** In 2014, Customer Success will become a cross-functional effort. ## Prediction 5: Success Moves Beyond SaaS While Customer Success as a concept was born in SaaS companies like Salesforce.com, it will grow up in the B2B world more broadly. With subscription pricing models and a wealth of customer data, SaaS companies were the natural early adopters for Customer Success. But as other businesses – from traditional hardware and software companies to information service providers to healthcare vendors – see the massive gains from leveraging data to drive customer retention, Customer Success will spread like wildfire. Even today, we are seeing Customer Success teams pop up in industries as diverse as medical device manufacturing, advertising and bond ratings. Any industry that gets paid by its customers over time will realize the benefit of having a team focused on maximizing customer lifetime value. **Bottom Line:** Nearly every B2B industry will take concepts and terminology from the Customer Success movement. ## Bonus Prediction: If You Work In Customer Success, You’re Getting A Raise Nick Mehta is CEO of [Gainsight](http://www.gainsight.com/), loves old-school Hip Hop, and you should definitely [follow him on Twitter](https://twitter.com/nrmehta). ## Afterword by Lincoln Lincoln here again… I agree with everything Nick says here – especially the part about having a dedicated CS team reducing churn. But as far as big predictions go, I like the 5th one… that Customer Success will move beyond SaaS. I think SaaS is actually the proving ground for lots of strategies, tactics, technologies, and techniques that eventually make their way to other online businesses… and then to offline businesses as well, so this is very interesting indeed. Of course, this could be a positioning statement for Gainsight (“look, we’re not just for SaaS companies”) – and there’s nothing wrong with that – but I really think Nick is onto something here. But what do you think? Do you agree with Nick… let me know in the comments. And of course, if you need help implementing a Customer Success strategy, then… ## Let’s Improve your SaaS Customer Success For immediate consultation and advice on SaaS Customer Success, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Autoresponders are Dead: 5 Types of Follow-up Emails *December 24, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/email-follow-up-sequence/ Whatever the scenario for the SaaS vendor – during a Free Trial, as a free user of a Freemium, for Demo requests or Enterprise Pricing Inquiries, or after a prospect becomes a paying customer, I get asked all the time what the best email follow-up sequence is. While addressing the ideal follow-up email sequence may seem like low-level tactical drudgery for most SaaS leaders, there’s a higher-level mindset that must be driven from the top of the organization down that ultimately drives the correct tactics. The mindset of Customer Success and properly aligning processes – including email follow-up – is critical to the success of a modern SaaS enterprise. C-level executives must fully understand and embrace the SaaS business model and then instill in the organization that understanding as well as the mindset to fully exploit the potentials of the chosen model. Quite often, tactical choices in the trenches are driven by strategic decisions at the top, and when you find an organization that isn’t Customer Success-focused and that doesn’t fully understand and embrace the SaaS business model, you end up with tactical execution that exposes those deep-seated strategic flaws. So yeah, this post is about email follow-up… but just like everything I write, it’s about so much more than that! I must confess that as recently as 2012, I shared with a private group of SaaS executives a PDF mind map of what I believed was the ideal email follow-up sequence. At the time, it was the best way to think about timed email follow-up sequences. But… even by the time I shared this, I saw the handwriting on the wall that timed follow-up sequences weren’t working that well. And when I shared this with the members of a that private group I ran, I had already started to move toward triggered emails based on in-app activity… and I shared the PDF with that caveat. Now, while activity-based triggered messages has caught-on, this type of functionality still isn’t ubiquitous… far from it, in fact. In fact, just a couple of years ago this type of behavior-targeting was barely on the radar for most SaaS vendors. At the time, people wanted a cookie-cutter process to follow (and I wanted to be able to provide it) even though – to be successful – a timed auto-responder sequence would still depend on your understanding how to [Successfully Onboard your Customers](https://sixteenventures.com/customer-onboarding), which would depend on your product, your customer, complexity, price, position, etc. But it’s time I put this out there… ## Auto-Responders are Dead At least in SaaS. The idea of a “best practice” auto-responder follow-up sequence is – or should be – ancient history. In fact, if you’re still sending emails based on a timed sequence instead of triggered by actual user behavior as it relates to [your customer’s Desired Outcome](https://sixteenventures.com/customer-success-desired-outcome-understanding) in your Free Trial or Customer Success once they’re a customer, you’re 100% doing it wrong. Yikes. Okay, I’ll concede this… …just having an auto-responder sequence like the ones I laid out in this PDF mind map is ***FAR*** better than doing nothing (something way too many SaaS vendors are still guilty of), but just know that 1) it’s far from ideal and 2) you’re better than that. Seriously… you’re better than that. I mean it. This is SaaS… Software-as-a-Service. The Cloud, man. The Cloud. It’s no longer acceptable to ***NOT*** take into consideration the actions of your prospects and customers and to interact with them accordingly. As Nick Mehta, CEO of [Gainsight](http://www.gainsight.com/) told me earlier this year (paraphrased)… “the voice of the customer are the actions of the customer.” Indeed. So to reiterate, there is absolutely no generic, cookie-cutter Free Trial Follow-up Sequence for SaaS products. Period. But that doesn’t mean that sequences are dead… on the contrary. ## Focus on the right Ideal Sequence There is a sequence you do need to understand… and in your Free Trial, that’s the process of [successfully onboarding your customers](https://sixteenventures.com/customer-onboarding) mixed with [ongoing Customer Success](https://sixteenventures.com/improve-saas-churn-rate-engagement). You need to figure out what sequence of events will lead your prospects and customers to success with your app and base your email “follow-up” on those events. Do that, and it will be the ideal sequence. So timed sequences are a thing of the past… and triggered, action-based emails are the thing to do now. Okay, got it… but what kind of emails do you send? ## Customer and Market-Driven Content Well, that also depends. This is where we get a little bit into tactics, but all of this is driven by strategic decisions you’ve already made. Who your customer is depends on the decisions you made (or didn’t make) about the market you’re doing business in, your position therein, your ideal customer, your price, your product, your sales process, etc. You must take all of that (and a lot more) into consideration when you start to think about what to send in your follow-up emails. For instance, did you know there are 5 types of emails you can use when following-up with prospects during a Free Trial and with customers beyond that? ## 5 Types of Follow-up Emails Yep, 5 types, and here they are: - **Tutorial** – about your product directly, or Educational (see below) but closely aligned with use of your product - **Educational** – about the thing your product helps people with. If you enable content marketing, educating people on how to do better with content marketing in general, beyond your app – fits in here. - **Aspirational** – Inspirational Use Cases of other customers or your own use of your app to create outcomes your audience would want. - **Transactional** – From account credentials to daily status updates, and from dunning messages to invoices, these are the most under-utilized messages for driving engagement by far. For many horizontal, lightweight apps where Education / Aspiration aren’t appropriate and Tutorial messages are unnecessary, [Transactional email messages](https://sixteenventures.com/saas-transactional-email) can be the key to growth - **Personal** – Whether automated or done by hand, these are messages that come from an actual person in your organization and are sent (as if) from that person to the individual receiving it. While many messages appear to be bulk or at least individually automated (like Transactional messages), Personal emails are one-to-one communications where the goal is often to start a conversation rather than taking a separate action (i.e. clicking a link). So which types of emails do you use? Like I said, it depends… you need to know your customer, but it’ll probably be a mix of several types, if not all of them. When you should send the messages – and even what types of messages to send – must be tied to behavior as much as possible. During your Free Trial, you should create [Success Milestones](https://sixteenventures.com/customer-onboarding) to track buyer behavior and peg your email follow-up to that. With customers you should peg email types and timing with [your definition of Customer Success](https://sixteenventures.com/improve-saas-churn-rate-engagement). ## Stop Round-Hole / Square-Pegging It I’m done trying to come up with a one-size-fits-all, cookie-cutter approach to this and I encourage you to do the same. Remember, SaaS is a business model, not a product category. That means that apps – often even within the same product category/vertical/niche and even in the same price range – are very different from one another and often serve very different customers. It is critical to understand who you’re doing business with plus all of the characteristics of those customers, and then create an experience around them and their use of your product. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Pricing Model: Mo’ Money, Mo’ Problems *December 15, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-complexity/ This is a post about SaaS pricing models… but it starts with a story about human behavior. We all know that money doesn’t buy happiness – it buys freedom, and it’s with that freedom that you can choose to do things that make you happy. Money is just the means. But quite often, as people and companies start to get more money, they run into problems… their lives and businesses start to become more complicated creating a situation counter to their original goals. In this post, we’ll explore how to use this idea of “Mo Money’, Mo’ Problems” (shout out to the Notorious One) to create a more effective – and profitable – SaaS pricing model. As we grow up we realize that ‘stuff’ isn’t the most important thing in the world – that when pressed for why we’re working so hard on our businesses, or why we’re killing it every day at work, it isn’t to have a bigger TV, or a fancy sports car, boat or giant house. Rather, it is the experience that those things might allow us to have with family, friends, and our employees or co-workers that matters. It is the people – and experiences with those people – that are the real reason we work so hard. ## Complexity Creates Obstacles But what’s interesting is that as people start to get more money, they run into more and more problems; this applies to businesses as well. Maybe those are things to do with compliance, operational efficiency, etc. Maybe those problems are actually opportunities that they cannot take on right now but want to. While “more money” usually means an increase in revenue, it does not necessarily mean “more profit” – but it usually means more *complexity* which equates to more overhead, more employees, less efficiency, more headaches, more time away from family and ultimately less happiness. Sort of the opposite of all of our goals, right? ## Putting the Value in Value Pricing So when I’m helping SaaS & Web App companies – startups or established alike – with their pricing strategies, I like to see if there is a way to scale pricing not with the size of their customer – revenue, employees, etc. – but with the complexity of the customers’ organizations. For some Apps, this isn’t going to work or matter – but in a lot of cases, we can see a direct correlation between the types of customers and the complexity of those organizations as it relates to the problem being solved by the App and their willingness to pay. In other words, as an organization grows its revenue, the side effect of that growth is that the complexity of the organization – human resources, operations, finance, everything else, grows too. This is a perfect example of “Mo’ Money, Mo’ Problems.” ## Complexity Creates Opportunities And there’s an opportunity for you if you can come in and eliminate or reduce those problems so they can enjoy that new money! So while having more revenue might seem like a blessing for your customers, if that suddenly means more work and more stress, that extra money might not seem worth it. Don’t you think people would be willing to pay if you could help them reduce complexity? It seems logical that the more you can help them with the complexities of their business the more they would pay. As I said, this won’t apply to every App or every situation, obviously, but if you haven’t considered this idea, you should take a look at it. While small and medium-sized businesses certainly feel this pain more than larger organizations simply because it’s new to them, every company goes through this. Remember that you’re selling to human beings regardless of the size of the company. What motivates them as people? [Figure that out and you’re golden](https://sixteenventures.com/ideal-customer). How does this play out in your SaaS business, though? ## A Thought Experiment: Per-Seat Pricing Let me present an example of applying this complexity-based thinking when [you’re building your SaaS pricing strategy](https://sixteenventures.com/develop-pricing-strategy) – or even if you already have it in place. Let’s say you offer all features to all customers, but differentiate pricing bundles or versions with a  metric like “number of users.” While user-based pricing is certainly very common – a carryover from enterprise software “per seat” pricing – it could actually cause you miss out on a lot of profit. Let’s assume you have these two subscribers: - A larger organization with very little complexity subscribed at the 50-user level - A smaller – but substantially more complex – organization subscribed at the 2-user level There are a lot of things going on here, let me break it down for you. - The smaller organization is likely using more features and functionality within the system because they need access to all of that… but they’re paying LESS – due to your pricing model – than the larger organization who is likely using only the basic features - The smaller organization might increase their usage of your product if they had unlimited users, but since you put a value on a user and not what they find value in, they’ll just keep the smaller account, perhaps sharing logins or otherwise gaming the system to keep from having to upgrade. You created an artificial usage barrier. - This may seem illogical if they’re getting value from the system, but it’s because you put a value on a metric that they don’t find value in and that’s how they’re determining their usage of your product. - The larger organization may also find value in having more people in the system – and perhaps a subset of those would need the more advanced features – but they won’t add users because that will cost more. By misaligning your pricing, you’ve created an opportunity for a price objection and – as well – created a barrier to expansion within the organization. - If you changed your thinking to align with the complexity of the organization, you would remove barriers to adoption and instead align price with where they actually get value - By aligning your price with what – in this example – is a low-value metric, you created a low-value position in their minds for your otherwise super-valuable product. This resulted in neither company being willing to pay you more since “number of users” isn’t where they find the most value If you scaled your pricing with the complexity of the customer organization, you would have sold the cheaper version with fewer features and unlimited users to the company that previously paid for the 50-user level and sold the substantially more expensive version with unlimited users to the company that is more complex, instead of the 2-user version. Wait… that sounds like I’m saying charge the 50-user client less than the smaller subscriber. That’s not it at all. I contend that by aligning better with the value perceptions of the customers – in this case, their complexity – each company would actually pay **MORE** in this scenario – both initially and over time, driving up your Customer Lifetime Value (LTV) with it – because you priced based on perceived value and not some low-value metric like “number of users.” It’s hard to talk about this in generic terms, so I’ll tell you a real story. Gather ’round, kids. ## Beware the “Seems Like” Value Metric Here’s an example from a company that didn’t start with per-user pricing… and still ended up in this same dilemma; a  shipping and fulfillment SaaS vendor. Their pricing was based on the number of packages the customer shipped each month, but all customers got access to all features. On the surface, “number of packages” seems like a pretty safe metric to go with. That ***seems** *like it would be a value metric. For an e-commerce company shipping packages to customers from their warehouse, you’d think a package is the key metric to peg off of. But, consider these two types of customers: - A company that ships novelty items with an average value of $5, but ships 100,000 packages/month - A company that ships electronics with an average value of $5,000, but ships just 300 packages/month Said that way, what we thought was a pretty safe metric to price off of… isn’t. The second company – though their volume is significantly smaller – has greater needs. They need to be able to rate shop, buy insurance, deal with customs, etc. while the first company just needs to move product, probably with just one carrier. What if this SaaS vendor offered pricing that included “unlimited packages” but instead priced around functionality tied to organizational complexity? The first company in the example above might pay the same, but company two would pay more for access to the functionality they need. And because you’re aligning with an understanding of how they operate, the more complex company will be willing to pay for the additional functionality. A couple of other examples of aligning pricing (and offerings) with complexity are: - Accounting SaaS vendors – [like Xero](http://www.xero.com/us/pricing/) – that segment pricing based on the need for payroll, taxes, multi-currency; all things more complex organizations would need. This is not a wholesale approval of Xero’s pricing model, BTW, as on their page they lead with low-value metrics, but it’s an example. - Email Marketing Vendors – [like GetResponse](http://www.getresponse.com) – that have low-end, retail pricing for the average marketer, but high-end offerings like dedicated IPs, DKIM/SPF authentication, extended API integration, etc. in their [GetResponse 360](http://www.getresponse.com/enterprise) offering. But… what if no one else has ever done this? How would you look at complexity-based segmentation in your pricing? A great place to start is remembering this: > People don't buy from you because they understand what you do… they buy from you because you understand what they do. - Lincoln Murphy (@lincolnmurphy) [March 20, 2013](https://twitter.com/lincolnmurphy/status/314346350869356544?ref_src=twsrc%5Etfw) The main thing here is to just get you thinking. That said… ## Price Objections are Value Objections So, when you start matching your pricing model to the needs of your customers – in this case scaling pricing tiers with the growing complexities of an organization – you are aligning with metrics that the companies and the decision makers inside the organizations will find the most value in. The [higher the value perception](https://sixteenventures.com/pricing-value-metrics), the higher the willingness to pay. They have Mo’ Money and Mo’ Problems… and now there’s Mo’ Money for you since you helped them fix that by clearly understanding their value perception. Oh, and since you fixed this on your Pricing Page and streamlined your sales process, this additional money you now have was generated [through no additional effort, stress, or time](https://sixteenventures.com/saas-cac-efficiency) and takes you one step closer to your goals of freedom and a better life! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # The Customer Acquisition Cost (CAC) Myth and Misguided Optimization *November 15, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-cac-efficiency/ For any company – especially those in the expansion stages – Customer Acquisition Cost (CAC) is a key metric to focus on. And for most companies and their CFOs and COOs, it’s all about making that number as low as possible. But in my experience, it’s not just about lowering CAC so you pay less to get a customer. No… to me it’s about CAC Efficiency… let me explain. ## Fully-Loaded CAC Defined When I talk about CAC, I’m talking about “fully-loaded” CAC. Fully-loaded – in this case – means CAC includes everything it took to get that customer – the cost of advertising, marketing, sales, support during the Free Trial, on-boarding costs, etc. – and even includes the costs associated with attracting prospects (and non-prospects) that didn’t convert to a paying customer. So, if you have to get 1,000 people to your site and 100 into your Free Trial to get one new customer: - [Email me](mailto:lincoln.murphy@sixteenventures.com?subject=Help!%20Our%20CAC%20Efficiency%20is%20Low!&body=Lincoln...%20we%20need%20help.%20When%20can%20we%20talk%3F) because that’s awful so I can help you fix that and - Your CAC includes the cost of sales and support for those 100 you tried to convert in the trial, and marketing / advertising that you spent to get the 1,000 to your site in the first place. That’s why people are often shocked at the *actual* CAC when they calculate it correctly… it’s not just the $7 you paid AdWords for the click. ## Introducing CAC Efficiency Now, I’m not trying to introduce a new business metric here as much as a concept; a way of thinking about stuff. Sure, some companies are starting to measure CAC Efficiency as a metric, which is cool, but that’s not the goal of this post. I just want to get you thinking about CAC differently. And to do that, let’s look at a simple, made-up example. So let’s assume there are two SaaS CRM companies that each pay $1000 in fully-loaded CAC and each company’s most popular plan is $100/mo (or ACV of $1,200). But the first company optimizes for CAC efficiency and gets paying customers faster, has profitable customers sooner, and has a higher customer lifetime value (LTV). For Company One, this results in cutting their CAC payback period down from 10 months to 6,  increases their ACV to $2000 (from $1200), and turns their LTV (based on 3-year estimated customer lifetime) to $6,000 up from $3,600. For Company Two, they’re just looking for ways to lower their CAC even more. Misguided. The first company optimized for CAC Efficiency where the second company simply bought into the myth that low CAC is the only thing to focus on. ## A New CAC POV We must get away from thinking that optimizing CAC is just about ‘paying less’ for a customer or reducing the cost of an AdWords click. By lowering CAC, you instantly reduce the time it takes to recover the cost of acquisition (what we in the game call the CAC Payback Period) and the sooner you pay back CAC, the sooner you have a profitable customer. Makes sense, right? But that just happens as a side-effect of “paying less for a customer” … it gets better when you work to eliminate waste and slack in your customer acquisition system. When you reduce the length of the overall sales cycle, increase the average Annual Contract Value (ACV) at conversion, and improve the [90-days post-conversion retention rate](https://sixteenventures.com/stick-point), you get a much more efficient – and profitable – customer acquisition process. Yes… a longer sales cycle sometimes adds to the typical CAC calculation; but not always. Sometimes the costs are the same, but if we can shorten it, the *efficiency* of the CAC drastically improves. And expansion-stage companies that focus on the efficiency behind their CAC and not just on “paying less for a customer” are the ones that win. Simple. Oh, and I won’t even go into the fact that if you can shorten your pay pack period and increase ACV, you could actually increase the amount you can spend for a customer and grow faster than your competitors, outbid them on AdWords, outspend them in other channels, steal their top sales people, etc. ## 9 CAC Efficiency Cranks When a company engages me to help improve CAC Efficiency (most engage me just to help them grow; CAC Efficiency isn’t what most people are looking for… yet), these are some of the things we work on: - Improve the Effectiveness of Existing Sales & Marketing Efforts / Spend - Quickly Engage Prospects and New Customers - Reduce Friction and [Improve Onboarding Process](https://sixteenventures.com/customer-onboarding) - Improve Engagement and drive Prospect Investment - Make Engagement a Measurable and Optimizable Metric - Increase the Number of Conversions from Free to Paid - Reduce the time from first interaction to paid conversion - Increase Average Selling Price / Annual Contract Value on Conversions - Improve First 90-Day Engagement and Reduce Cancellations Those are some of the high-level cranks and levers that I use to scale my clients’ customer acquisition machine… you should use these, too. ## Examples of Improved CAC Efficiency I’ve achieved levels of CAC efficiency that I’m almost afraid to say because most people will assume it’s unrealistic or that I’m lying. But I’m going to tell you because I’m super-proud of the work I’ve done and if you don’t believe these results are possible… that’s your problem, not mine. Okay, so here are some dramatic examples I’ve had with B2B vendors, all achieved without any changes in traffic generation, sales process, or marketing spend: - 240% Increase in Free-to-Paid Conversions in 30 days - 400% Increase in Free-to-Paid Conversions in 30 days - 600% Increase in Free Trial sign-ups in a couple days w/ better 90-day retention on the back end - Reduced time from Free Trial sign-up to Paid Customer from 41-days on a 30-day Free Trial to 9 days… and recently down to 3 days! Can we do the same for you? I don’t know… maybe. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 5 Rules for Successful Growth Hacking *October 29, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/growth-hacking-rules/ Growth Hacking is all the rage right now. In-fact, anyone even slightly involved with marketing or product development in tech companies now calls themselves a Growth Hacker. Now, once everyone identifies as a Growth Hacker the term will be meaningless… but what goes into Growth Hacking (or whatever it’s called in the future) will persist and in-fact, is transforming an industry right now. I generally describe Growth Hacking as a mindset that revolves around leveraging your understanding of customer and user behavior, market dynamics, and what’s technically possible – or should be – and using your imagination to put it all together to drive growth. But what does that really mean? Well, that’s why I wanted to go deeper on that definition, if only for my own clarification, though I hope you find value in it as well… First, you need to… ## 1. Know What Growth You’re Hacking > be clear on what type of growth you're hacking [#growthhacker](https://twitter.com/hashtag/growthhacker?src=hash&ref_src=twsrc%5Etfw) - Lincoln Murphy (@lincolnmurphy) [May 21, 2013](https://twitter.com/lincolnmurphy/status/336861730565128192?ref_src=twsrc%5Etfw) According to Sean Ellis, a Growth Hacker is someone who’s [“true north” is Growth](http://www.startup-marketing.com/where-are-all-the-growth-hackers/). But that leaves a lot of room for interpretation, which is actually good. And while some people will claim Growth Hacking has nothing to do with Revenue growth, I’m callin’ BS on that. The definition of Growth and the metrics to measure it are 100% unique to the enterprise seeking that growth. So whether you’re looking to drive sign-ups, revenue, engagement, retention, or even viral expansion, just know which one you’re focused on and make it happen. And to do that in a big way you have to understand that… ## 2. Social Engineering > Technical Engineering > The best bad-guy hackers (or crackers) are experts at social engineering above all; the same must be true for Growth Hackers [#growthhacking](https://twitter.com/hashtag/growthhacking?src=hash&ref_src=twsrc%5Etfw) - Lincoln Murphy (@lincolnmurphy) [July 11, 2013](https://twitter.com/lincolnmurphy/status/355343496938389504?ref_src=twsrc%5Etfw) If you build something without first having a good understanding of why humans do what they do – both on a general level and in the context of your chosen environment – you’re likely to be met with limited success. If you spend as much time (or more) studying human behavior and psychology as you do the latest marketing and growth hacking tactics you’ll actually be more successful when you implement those tactics. > Spend as much time (or more) studying human behavior as you do the latest marketing or growth tactics. - Lincoln Murphy (@lincolnmurphy) [October 23, 2013](https://twitter.com/lincolnmurphy/status/393016267101470720?ref_src=twsrc%5Etfw) In fact, understanding human behavior in the context of what it is your app does will actually help you identify the best tactics – growth hacking or otherwise – to leverage. The best Growth Hackers understand that it isn’t about their product or service… it’s about the user and the customers. It’s about understanding their behavior and exploiting that for gain, sure, but it only works if it is in the context of them…. not you. In fact, understanding how Social Engineering fits in, you can start to figure out how to… ## 3. Exploit Organic Network Effects Sometimes Network Effects are obvious… and sometimes they aren’t. Sometimes true network effects require massive scale… and sometimes we can take advantage of micro-networks to scale our business massively. Rarely can you force “network effects” where they don’t exist naturally. But often you can exploit, extrapolate, or otherwise leverage even the weakest network effects if you just try. Which is why those in the “know” saying B2B SaaS apps can’t go “viral” makes me angry… I guarantee it caused at least a few people to stop looking for ways to make that happen. Well, as it turns out, humans who work with other humans do certain things in certain ways. When they work with their team members, co-workers, subordinates, their boss, corporate leaders, colleagues at partner organizations, counterparts at vendors or customers, etc. they have certain patterns. And careful observation of those patterns – and an understanding of why they exist both functionally and psychologically – is the key to rapid growth in market-share (macro) and mind-share (micro). > Identify natural, organic actions that occur within a network. Exploit those through social and technical engineering. That's [#growthhacking](https://twitter.com/hashtag/growthhacking?src=hash&ref_src=twsrc%5Etfw) - Lincoln Murphy (@lincolnmurphy) [October 18, 2013](https://twitter.com/lincolnmurphy/status/391313388174733313?ref_src=twsrc%5Etfw) When I work with my clients to rapidly and sustainably grow their B2B SaaS businesses, while we might not ever reach the the level of Facebook or Twitter in terms of Viral Coefficient (this is what I’m talking about when I say [Orchestrated Virality](https://sixteenventures.com/saas-marketing-growth-hacks#11), BTW), we can reach a level of growth potentially unheard of in their product category simply by identifying these natural, organic actions that occur within a network. Then, through social and technical engineering, we exploit those in a positive way for gain. Simple. Not Easy… but simple. Another thing to remember is that… ## 4. Growth Hacking isn’t Free > FYI [#growthhacking](https://twitter.com/hashtag/growthhacking?src=hash&ref_src=twsrc%5Etfw) isn't free… even if the tactic you use has NO per unit cost (i.e. media buys), it can be very time-consuming. Time = $ - Lincoln Murphy (@lincolnmurphy) [October 18, 2013](https://twitter.com/lincolnmurphy/status/391222657997209600?ref_src=twsrc%5Etfw) Look, even if the tactic you use has no per unit cost (i.e. media buys), Growth Hacking can be very time-consuming, and time is money. It’s very common for people to not value their time – and not just in startups, BTW – so you need to know that Growth Hacking even via “free” channels is not free. That said, Growth Hacking is not only about free channels. In fact, to ignore channels that – if used properly – could accelerate growth simply because there’s a hard cost associated with them seems to be the antithesis of Growth Hacking. Sure, spending money is also the antithesis of the “bootstrap = charity case” crowd, but for real businesses that understand the value in acquiring customers, seeding networks, and orchestrating vitality, investing money to grow makes sense. But overall… ## 5. A Culture of Growth is Required > For [#growthhacking](https://twitter.com/hashtag/growthhacking?src=hash&ref_src=twsrc%5Etfw) tactics (and Growth Hackers themselves) to be effective, a culture of Growth must exist in the organization - Lincoln Murphy (@lincolnmurphy) [October 29, 2013](https://twitter.com/lincolnmurphy/status/395086135082242049?ref_src=twsrc%5Etfw) By now there are 100s of posts and several books about the famous Growth Hacks out there – Hotmail, Paypal, AirBnb, etc. – and everyone talks about the one gimmick that worked for each. Hotmail’s PS they added to every email sent that helped them spread virally, PayPal and Airbnb seeding both sides of their respective models with bots and social engineering through eBay and Craiglist respectively. In a week there’ll be 100 more posts talking about those same examples. Unfortunately, few people take the time to really understand the companies that employed these tactics. They don’t understand that it wasn’t just those Growth Hacks – in a vacuum – that worked. Yes, those were successful tactics, but those tactics were utilized by companies with a culture for growth. Those companies had a true north of “Growth.” … not just an individual within the organization. In fact, those very same tactics executed in a culture that isn’t defined by growth, doesn’t share the mindset characteristics leveraged by Growth Hackers (and outlined in this essay), would likely fail. In fact, I’ve seen them fail… miserably. The “Growth Hacks” become just another [random marketing tactic](https://sixteenventures.com/random-saas-marketing) that failed. Onto the next one. Recently, I’ve had several CEOs of SaaS and Web companies contact me because they want to “do Growth Hacking” … it’s the latest, coolest craze and many CEOs want to be able to say they have “Growth Hacking” taking place. This is great… I’m happy to help, and since I’ve been “Growth Hacking” pretty much my entire time in the SaaS industry (8 years total now – 5 years with Sixteen Ventures) and with several hundred companies, it’s great that it’s popular now and people are reaching out. And I suspect Growth Hacking is popular now because 1) this “thought process around growth” finally has a cool name and 2) people are really starting to see how ineffectual their existing marketing is, making Growth Hacking seem like the thing to do. Unfortunately, when I have spoken to more traditional CMOs – often after speaking with the CEO – they treat this “Growth Hacking” stuff as just another marketing tactic, somewhere between Adwords and “Email Blasts.” It’s just another campaign they’ll run or – even worse – they think it’s a quick fix for everything that ails ‘em. Growth Hacking should not be considered a quick fix in most cases… it will often require an organizational shift. In fact, an organization not aligned for growth, or one that lacks the necessary freedoms in place to allow the use of the agile (lowercase a) methodologies necessary to monitor, manage, and iterate on tactics, is a poor fit for Growth Hacking in my experience. While I contend Growth Hacking is not a startup-only phenomenon, this cultural requirement is more often found in early and growth-stage (obviously) companies that aren’t just okay with taking calculated, small bets (risks), they encourage it. “How else do you move the needle?” they’d ask. Indeed. However, in risk-averse organizations – generally older, larger companies, but not always – where the mentality is to just keep the status quo and avoid mistakes, missteps, and general boat-rocking… Growth Hacking will have a hard time finding a home and will probably end up as just another failed exercise. While Growth Hacking is often introduced and even driven from the bottom-up, the most successful Growth Hacks take place in organizations with a top-down, growth-focused leadership. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Use Partner Offers to Quickly Grow Your Business *October 25, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-marketing-partner-offer/ The other day I received an email with a very specific SaaS marketing question: “we have the opportunity to send an offer to the email list of one of our Integration Partners… do you have any tips for us?” Well, since having the opportunity to send an offer to a partner’s email list can be an awesome way to grow your business, I developed a very thoughtful response to the original emailer… and now I’m sharing that response with you. I hope this helps you… ## If You’ve Got The List of Customers… If you’re the company giving other vendors – SaaS, Cloud, or otherwise – the ability to make offers to your list, you want those offers to be congruent and effective. Feel free to send your partners to this blog post or contact me and we’ll work on something together. If you don’t help your partners make great offers that your customers and users really care about and take up, then you run the risk of “burning” your list and losing trust from your customers. By sending them terrible offers that are (perceived to be) pointless, worthless and/or incongruent with expectations or needs, it shows that you, as well as your partner, don’t know them at all. Something to think about, for sure. Something else to consider is that what I’m talking about in this post isn’t just for creating offers for partners… ## Not Just For Partners Since the original question was specific to leveraging an existing partner relationship, that’s what I’m going to focus on here. But, most of the ideas and methods I mention here – and the mindset you need to have – apply to making offers beyond your partners. Think about making offers to bought / rented lists, doing joint ventures, co-registration, affiliate deals, etc. If you look at things the right way – have the right mindset – you should be able to adapt what I talk about here to any situation. **Protip:** If you don’t have any partners that you can leverage, check out the document I put together called [“The Dark Art of Buying Customer Data”](https://www.slideshare.net/lincolnmurphy/dark-artofbuyingcustomerdata) on Slideshare (and embedded below). You might even try [Email Pre-Targeting](https://sixteenventures.com/saas-growth-hacking-email) to warm the leads if you can. ## The Partner Email Opportunity Having the opportunity to send an offer to a partner’s email list can be an awesome way to grow your business. And if you do this with several partners, you can significantly expand your customer base. Do this with several partners on a consistent basis, and you can have a scalable, sustainable way of growing your customer base over the long-term. But – like most marketing tactics, there’s more to it if you want to do it right. For instance, you need to first… ## Define the Goal for this Campaign Before you start crafting the offer, you have to know what your goal for the campaign is. Protip: Thinking of this as a campaign will help frame it properly. Do you need a bunch of cash fast or are you looking to siphon off the contact info for a bunch of their customers and then work to nurture & convert them over the long-term? Clearly, cash now vs. building a large user base, nurturing them and then growing customer lifetime value (LTV) are very different goals and should drive how you approach this opportunity. Okay, so once you know why you’re doing this, you need to… ## Get to Know Your Partner’s List Some things to consider about the list itself, are: ### How many people will your partner be mailing to? You need to know this so you can measure clicks and conversions to determine whether or not you’ll want to use this advertising channel again. If they won’t give you a specific number, ask for a general, ballpark number. ### Is there a direct cost associated with sending this offer? Perhaps you pay them for each click or sign-up (CPA or Cost Per Action) or maybe they charge a flat placement/drop fee. You need to know what the cost of this campaign will be – being sure to also include your time and effort – so you can figure out what your direct ROI is for this campaign (or when planning, what you’ll need to do to break even!). ### How is your offer going out to the list? Are you getting a dedicated drop to the list or are you getting a blurb in a crowded newsletter? You’ll need to adjust everything accordingly. ### Who are they mailing to? THIS IS HUGE! Are they only mailing to their current customers or to everyone, including their “tire kickers” and those just on their newsletter mailing list. While it might seem counter-intuitive, if they’re only emailing their current (paying) customers, you might be okay with lowering the barrier to entry (i.e. introducing your product & your free account, or giving their customers x number of free whatevers). Why? Because they’re higher-quality prospects; they already spend money on an adjacent product. On the flip side, if your partner sends to everyone and not just current customers, you might need to weed out the low-end, cheap, free-ride-seeking tire-kickers by raising the barrier to entry a bit. Okay, so we know our goal and we understand to particulars of the list, but… ## What Offers Have Worked Before? Before we sit down to craft our offer, let’s do some recon to figure out what has worked before. Some things to consider are… – What kind of offers have worked well for their other partners who have promoted to their list. If they send partner offers frequently, they might know or at least have an idea. **Protip:** You can find other providers that have made offers to your partner’s customers and ask them directly what they found worked well. It can’t hurt to ask! – Look at offers your partner sends out or otherwise makes to their customers…. there’s a good chance (no guarantees, though) that they understand the way their customers think and what resonates so you might want to go that route. **Protip:** You could just ask them what kind of offers they find work best, too. Again, it can’t hurt to ask! You don’t have to go with what has worked before, but if you were thinking about something vastly different from what has worked, this might help you reign in those wild ideas a bit. Or it might allow you to go 180 degrees away from the status quo… if you want to. It’s at least a good baseline. So now we also know what’s worked before, let’s start thinking about the offer, starting with this question: ## Why Would They Use My SaaS App? Just like in your overall marketing, you need to ask yourself this question: “why would someone decide to use my SaaS app?” In the context of this offer, you need to ask yourself “why would my partner’s customer  – right then, when they get this email from my partner – decide that my SaaS app is something they should check out?” What’s going on in their head that will make them see the email from your partner with your offer and want to take action? The reality is that these aren’t your customers, they aren’t leads, and they haven’t shown interest in your product. They are just potential prospects at this point. They are your partner’s customer and you need to think deeply about why – in the context of being your partner’s customer – they would be interested in your product offer. In fact, let’s explore…. ## The Hard Truth About Partner Emails I saved this until now because I didn’t want to kill the excitement about this opportunity you have right out of the gate… but it is time to temper expectations a bit. I hear all the time “they have 50k people on their list… but I only got 5 clicks!” Right… so, first of all, that’s 50k people interested in **THEIR** product; not yours. Second… in most cases, those “failures” happen when you talk about your product, rather than the problem your product solves, why it matters to them, etc. I mean, when you come along and talk about your product to a bunch of people that aren’t interested in your product… what do you expect? The hard truth is that it’s very likely your app – at any given time – will only appeal to a subset of your partner’s customers. Why is that? The most likely scenario is that you have a niche / vertical / limited utility offering and your partner offers a more horizontal / complete product. Or vice-versa. And while it’s great to get out in front of their user base, the reality is only a fraction of them would have any interest in what you offer at any one time. But it’s that “at any one time” that makes this really cool. And let’s be honest, a fraction of their audience might be a nice boost for you. So the idea isn’t to try to get all of their customers with your offer, but to get some of them. And then to do this often with that partner as well as with other partners. So, let me be clear about this “Hard Truth.” It doesn’t mean it’s not worth making them an offer, it just means that we should temper expectations and really try to speak to that subset who WILL be interested at the time our offer is presented. In fact, by doing this we might find our offers are a lot more successful in reaching our target segment of their list. If they have a list of 100k and we know that only 10% of those are likely interested in our offer (10k), then if we get 1k, we know we got 10% of our target segment. If we didn’t do that segmentation pre-work and somehow still managed to get 1k customers (unlikely without doing the segmentation pre-work), we might consider it less-than-successful at only a 1% response rate (even though we got 1k new customers!). Okay, so the big question is… ## Why Will They Care About Your Offer? This is huge and requires a ton of discipline and self-reflection; things we often like to skip to just throw an offer against the wall and hope it sticks. Don’t do that. Do these types of things instead. - Explore what known gap you fill in your partner’s product - Learn how your potential customers that use your partner’s app talk about the problem your app solves - If your partner is asked to support the functionality that your app has – however infrequently – perhaps they’ll share some of those requests with you so you can learn the language their customers use. Can’t hurt to ask! **Protip:** This info could be readily available on their forums, GetSatisfaction account, and out on in the wild web, too…. Quora, LinkedIn groups, clever Googling, etc. You need to “enter the conversation already taking place in the customer’s mind” as Robert Collier said way back in 1937… so spend some time thinking about that. Now we’re starting to get somewhere and we can start to consider… ## Pricing Your Offer Now, the great thing about offers is they can be completely different than your “retail” pricing… in fact, you could make up a partner-only price plan – made up of completely different ‘value metrics’ that resonate more directly with your partner’s customers – to make their customers feel special by getting something no one else gets. Now, knowing that your partner charges $24/mo or $149/mo depending upon features, per server… what does the typical customer of your partner look like? 10 servers @ $24/mo or 5 servers @ $149/mo? There are likely huge differences between low-end and high-end customers of your partner… so who are you targeting? There are probably more low-end customers… but are they looking for your type offering? Does your service appeal more to the high-end folks? If someone is paying your partner > $25k year, you might be able to offer a 50% discount on your Pro-Plus and Hi-Volume plans and they’ll jump on that. But if someone is paying your partner only $900/year… you’ll likely be hard-pressed to sell them even a 75% discount on your Pro-plus plan, right? Maybe, maybe not… It all depends on where you “sit” compared to your partner. Are you the more “important” product? Are they moving to a “larger” or more “complex” product category from your partner’s category to yours? Is your partner’s product “mission critical” but yours is just a nice to have? Yes, just for this little ol’ email offer, you have to do some deep reflecting on your market position and why you exist in the eyes of your potential customers. The good news is that once you’ve done this, it’s done. You’ll need to revisit it with every new offer you put out to your partner’s list, but unless something has fundamentally changed in the market, your position vis-a-vis your partner likely won’t change much. So we know what they’re thinking, we know where your product lives in the potential customer’s mind, we know what they’re paying to use your partner’s app, and we know where we can fit in to the mix pricing-wise, now we need to pull it all together and… ## Craft Your Offer So, what would the ultimate offer look like for one of your partner’s customers? Well, that very much depends on everything you’ve discovered thus far and will be very different for every company going through this exercise. But, the basic components of the offer include: ### The Hook What’s the thing that will make your offer resonate with that subset of their audience that should – at any given time – be interested in your product. ### The Body Depends on how you’re presenting the offer, but you need to craft the grabber, headline, sub-headline, identify the opportunity/pain/problem/timing, the why you, benefits, proof, etc. ### The Offer It doesn’t have to be a discount on your retail price, but basically this is the price, terms, bonuses, etc. ### The Call to Action What do they need to do to take advantage of this offer? Should they learn more or should they just go to a sign-up form? It depends on lot’s of factors, but remember… you should be talking specifically to a segment that needs less convincing and can be compelled to take action in the offer. ### The Landing Page Make sure your landing page, whatever the offer, is specific to the campaign so your offer resonates with the visitors and is congruent with what you said in the offer. Don’t send people to your main marketing page or to a generic page… you want it to say to them “Hello ABC App’s customer…” but maybe don’t say exactly that. Maybe. **Protip:** I said to check out what offers have worked for others sending to your partner’s email list or what offers your partner is sending out themselves. But if you’re looking for more inspiration, I don’t suggest checking out other SaaS providers (most aren’t good at this), but instead look to B2C email lists where this is their core business model, like [Scoutmob](http://scoutmob.com/), [UbanDaddy](http://www.urbandaddy.com/), [Thrillist](http://www.thrillist.com/), etc. There’s definitely a lot more to crafting the perfect offer than I can put in this post, but this should guide you in the right direction. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Growth Hack: Warm-Up Your Leads Before You Email Them *October 16, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-growth-hacking-email/ When it comes to SaaS growth hacking, an email address is a powerful thing. If you have a list of email addresses – house lists, scraped, or bought – you can do some “pre-targeting” to increase the likelihood of engagement (that they’ll open, read your email, and click a link) before you ever send them a message. For example… think about the list of people that signed-up for your Free Trial but didn’t convert and how these tactics might help warm them back up before you send the “give us another try” email. Doing these things before emailing your list will not guarantee success with your cold outreach email, but it will improve your chances by being  a bit less cold. Here are some ideas… ## How to Get a List of Email Addresses There are tons of posts out there about how to create a massive opt-in subscriber list. From tips, techniques, and tools, you can easily find blog after blog telling you how to organically generate your own list. Or you can buy lists, as this report called [“The Dark Art of Buying Customer Data”](https://www.slideshare.net/lincolnmurphy/dark-artofbuyingcustomerdata) outlines. Use it wisely. Once you have a list of emails, you can do all sorts of magical things with them before you ever use the email address for what it was designed for. ## Facebook Pre-Targeting - Use the list as a [“custom audience” to run Facebook ads](https://www.facebook.com/help/459892990722543/). These ads will only be displayed to those people who used the email address you have for them on Facebook. Run ads for 3-5 days prior to emailing them to be sure they see it. - To save money on the ads (if you do PPC), don’t encourage clicking on the ads by simply leaving off any Call to Action (CTA); they are simply for “branding” (the opposite of most ads you’d want to run at this stage). - You could even do something clever like a countdown and then a “check your email” CTA… - Though if they do click, ensure the ad goes to a good landing page on your site and not to your Facebook page… ## LinkedIn Pre-Targeting - You, your sales people, biz dev, and others connect with those on the mailing list on LinkedIn. You can bulk upload a list to LinkedIn and ask them to connect. - If they agree to connect, they’ve opted-in to hearing from you and will see your updates… and you can also message them directly (but don’t over-do it… this tends to irritate more than engage). - Once connected, you can then see what groups they’re a part of and infiltrate those, too! - Make sure your profile doesn’t say “sales” … CEO, customer success, even biz dev are all fine; much less threatening than “sales” for sure… Remember, everything you do is marketing and the details are very important. - Even better than doing a bulk add (because you’ll get the generic “I’d like to add you to my professional network” message), you can install [Rapportive](http://rapportive.com/) in Gmail, dump 20 or so emails at a time into the “to:” field in a new email (do NOT hit send), mouse over each name, see if they’re on LinkedIn and hit “connect” from there. You can write a personal message that way. - Your chances of connecting are much higher and you’ll be memorable so when you send your email later they’ll be more likely to open it. - And you can export the contact information for your connections from LinkedIn and use that to do other email-address-based pre-targeting. Neat! ## Twitter Pre-Targeting - In September 2014, Twitter announced [direct email-address targeting](https://blog.twitter.com/2014/an-update-to-tailored-audiences-introducing-new-audience-list-upload-audience-manager-and) This now functions like Facebook custom audiences, without a 3rd party needed, so you can upload a list of emails directly to Twitter and target them with ads. - In January 2014, [Twitter announced that email-address targeting](https://blog.twitter.com/2014/new-ways-to-create-and-use-tailored-audiences) is now possible the rest of the items here are also valid, but this is definitely a short cut! - You can do multiple methods of promotion on Twitter - Use an appending solution like [FullContact](http://www.fullcontact.com/developer/person-api/) to find Twitter accounts associated with those email addresses on your list - Follow them on Twitter for a direct connection - or you can see who they follow and look for patterns then run Ads on Twitter against those @usernames that they follow - Even Promoted Tweets are blocked by AdBlock on the web UI so if you know your audience probably uses an AdBlock-type system, you will be wasting money! ## CRM Retargeting - Basically, you upload a mailing list to a CRM Retargeting provider like [LiveRamp](http://liveramp.com/) and they’ll work their magic and start showing your ads on sites where people registered with that email address show up or – where that’s not possible – places they “might” go based on demographic information - This is a very new method so the jury is out on its effectiveness, but if it makes sense from a cost perspective, and your list is big enough, this could be a fantastic pre-targeting method. ## GMail AdWords This isn’t something you can do with your email list, but it is email related so I’ll put it on this list. Original version: Tabbed Inbox version: You can [target only users of GMail with an AdWords campaign](https://support.google.com/adwords/answer/2404243?hl=en). You can show ads based on keywords your target customers and segments are talking about (now that’s entering the conversation they’re actually having) or based on keywords in your competitors marketing/transaction messages. Again, this isn’t so much to get them to take action, though action is great, it is more to get your company name and what you do in front of them right there in the inbox window. GMail ads at the top of the screen are almost subliminal reminders of something They can be generic and even product-centric because it’s more about “branding” since your email follow-up will be specific to them ## Third-party Mailing Lists This is another tactic that isn’t directly related to your possession of the email list itself, but that could be useful in pre-targeting. You can do a “drop” on another mailing list that we think they might be on. The goal of that drop isn’t so much to get a reaction (a click, a download/opt-in, etc.) but to get them to see your name. Just plant the seed. What are some mailing lists that your targets might also be on? It is probably not IT-specific (ThinkStrategies comes to mind) unless one of the segments you’re targeting are the IT managers, in which case that would be quite helpful. If possible – it never hurts to ask – drop a retargeting pixel in the email so when someone opens that message that trusted third party they’ll start seeing your ads around the web. If they’ll do the mailing for you but it will be as if you’re sending it (so they can protect their emails), doing other advertising and even a “sponsored” email from them under their brand before you send your dedicated drop would be another way to get your name in their head so it’s less “cold” when your dedicated email goes out. Probably asking the people on this email list to try or buy now isn’t the right CTA; offer them something so they’ll opt-in with their email address ### Email Lists / Newsletters to Advertise in Aside from simply knowing who the people are in your industry with lists that contain your target audience, here are some other places to find newsletters to “do a drop,” get a “Solo Ad” (meaning a dedicated email), or place an ad in: - [http://www.webpronews.com/advertising](http://www.webpronews.com/advertising) - [http://www.smartbrief.com/index.php](http://www.smartbrief.com/index.php) - [http://www.fiercemarkets.com/](http://www.fiercemarkets.com/) - [http://www.newsletterdirectory.co/](http://www.newsletterdirectory.co/) - [http://www.launchbit.com/](http://www.launchbit.com/) - [http://www.targetoptincustomers.com](http://www.targetoptincustomers.com) - [http://lists.nextmark.com](http://lists.nextmark.com) - [http://www.dedicatedemails.com/](http://www.dedicatedemails.com/) - [http://www.idglist.com/listManagement/b-to-b-email-lists.html](http://www.idglist.com/listManagement/b-to-b-email-lists.html) - [http://www.soloaddirectory.com](http://www.soloaddirectory.com) - [http://www.safe-swaps.com](http://www.safe-swaps.com) ## Concluding Thoughts At the end of the day, using email is all about leverage, and to get the leverage you want, you have to follow the process. The more you trust and work the process, continually refine and avoid rushing it, the more leverage you’ll have. Don’t fall into the trap of rushing things by saying “I don’t need to pre-target” and just send a blind, cold email. You’ll burn your list and not get the results you want or need. It’s a process – just like everything else in marketing – and you need to work the process to get the desired results. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # When Customers Go Dark: Customer Success to fight the Zombies *October 12, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-customer-success-zombie-customers/ So I got this email the other day asking me a SaaS Customer Success question that’s really more about ethics and karma than running a SaaS business. The gist of the email was what to do if a customer has been paying for 6 months but never started using the SaaS product…. these are what I call Zombie Customers. I’ve attempted to answer the question in a meaningful way, but I am the first to acknowledge that there is a lot more to it than just what I talked about in this post. That said, it’s a pretty straightforward question with a pretty straightforward answer… that you will completely disagree with! Here we go… Here’s Susan’s question: *Hi Lincoln. You talk a lot about on-boarding and getting customers engaged and using your app quickly. We have a couple of customers that have been customers for 6 months or more that haven’t done anything in our software except pay us every month. I don’t like taking their money if they’re not using our software but I don’t want to say anything that might cause them to cancel. Thoughts? – Susan* Here’s my answer: Hmmm… this is pretty simple, it only has two parts. Ideally, these two parts should be executed in parallel. ## Part One: Operationalizing Customer Success Re-engineer your on-boarding process to get people quickly engaged and then work to drive continual engagement over the the entire customer lifetime. Do not let this scenario occur in the first place… or at least ever again. Some ideas to consider: - [Customer Success: The Definitive Guide](https://sixteenventures.com/customer-success-definition) - [Desired Outcome drives Customer Success](https://sixteenventures.com/customer-success-desired-outcome-understanding) - [The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding) ## Part Two: Do the Right Thing For your customers that have been inactive for 1 – 6 months, reach out directly and get them on-board…. See step one above for some ideas on doing that now (specifically the ‘concierge’ idea). But for those who have been paying but inactive for > 6 months – aka Zombie Customers – follow these steps precisely for each of them: - Stop billing them and freeze/hibernate their account - Get the actual customer name and mailing address <== you might have to call them or do manual research - Write a check for what the customer has paid you for the 6 months (or more) of not using your system. Do not take out CC fees, admin fees, or anything else that makes you look petty… consider those goodwill costs. - Write a nice note  and say something like: “Thanks for being our customer for the past 6 months! That’s awesome. But we saw that you haven’t used your account since you signed-up, and we just can’t take your money if you’re not going to use our app. Enclosed is a refund check for the past 6 months in the amount of $x,xxx. We’ve hibernated your account and stopped processing payments. However, when you’re ready to come back to [our SaaS] just let us know and we’ll restart everything for you. Please let me know if you have any questions. – Susan Lastname, CEO” <== be sure to include your direct contact info - Put the check and the letter in a FedEx (or equivalent) envelope - Send the FedEx envelope - The day the package is supposed to arrive, send them an email or call them and let ’em know there’s a FedEx envelope coming their way and to be on the lookout for it - Smile. You did the right thing - Go check on the progress of Part One so this never happens again - Only ask them why they never got started if they reach out to thank you for the proactive refund… otherwise just let ’em go. It’s the right thing to do and a tasty way to do it, though I am interested in how people will disagree with me on this. I bet I know a couple of ways… ## Cool Story Bro… But Who’s Actually Done This? Inevitably I’m asked for an example whenever I post ideas like this. A case study. A reference. Everyone wants to know who’s done this before. Why? I’m not sure… maybe it’s some form of validation for what they already perceive to be a good idea. I mean… if you didn’t think this was a good idea, you probably wouldn’t even ask who’s done it before, right? You’d just move on. But if you think it’s a good idea, but apparently don’t trust your own instincts enough to act on this good idea, then you need to know that someone smarter and more successful than you has already done it. What if – and believe me this is a hypothetical – but what if no one in the entire history of all the multiverse incarnations out there has ever done this before? What if I made up the response to Susan because I just thought it was a good idea? What now? Does this purportedly good idea – your words not mine – go untested because someone who’s Twitter-famous didn’t say it first? Or because someone who runs an “accelerator” didn’t twerk about it in a Vine post? Maybe start doing things because you feel like they’re the right thing – for business, ethically, etc. – even if you can’t find an example of anyone else doing it, ever. That’d be a little bit innovative, huh? That said, the answer is yes… I’ve done this before and it had the desired effect (but I won’t tell you which of my clients did this). On the other hand, I’ve also suggested it several times and had it fall on deaf ears… ears that belonged to a head with a mouth that already expressed remorse for taking people’s money without providing value. Look… I can’t make you do the right thing, I can only suggest it. ## Ideology vs. Reality But you have to know that I’m not some ideolog spewing “advice” without taking into consideration the potential consequences of an action. I’m fully aware that this will ding your cash flow. If that will cause you to go out of business, then perhaps doing this is not the right move, right now. Everything is relative… use your good judgement. If you can’t do this because it will cause you to go out of business, harm your family, etc. then just go work on Step One above so this never happens again. Understand though, that if you can’t do the right thing because it will hurt your cash flow and possibly cause you to go out of business… then you’ve built a business on doing the wrong thing. Think about that for a minute. That said, if a majority of your customers are paying you and not using your app, you’ll probably not want to do Option Two from above… but you should do something, and quick. ## The Gym Membership Model According to data from the fitness center industry itself, [67% of all gym memberships go unused](http://www.statisticbrain.com/gym-membership-statistics/). We all know that the best members of a Fitness Center are the ones that don’t show up, right, but wow… 67% is insane. If gyms gave members their money back for not showing up, there would simply be NO gym industry. They’d be better off giving people their money back FOR showing up. It would be cheaper. So how do we reconcile this gym membership data with that of a SaaS business? First… I have some ties with the fitness industry and those with whom I work do everything they can to encourage use. Their “unused membership” numbers are exponentially lower than the national average. Second… we don’t. This is SaaS… not gym memberships. Anecdotal evidence suggests people actually do get value from having a gym membership and not going… it’s psychological. They feel better about themselves. They might even feel healthier. And that might even make them actually healthier. That probably doesn’t translate to your Project Management app… but it might?!?! ## Inactively Recognizing Value You have to know your customers. Hiding from them doesn’t allow you to do that. If you find that your inactive customer rates jibe with those of the Fitness industry, on the surface that seems bad so it’s time to do some digging. Pick up a phone or punch some numbers into a soft-phone and call your customers. Find out why they pay you but don’t use your app. Maybe there’s a really good reason. Maybe. But I don’t like maybes. Find out for sure or your business could be sitting on a house of cards (there’s probably a credit-card pun here… but I’ll refrain). But there could be some legit reasons for such a large swath of inactive users. For instance, I have clients that have me on retainer… they might not talk to me for a couple of months but when they need me, I’m there for them. So are they getting value from me even when we aren’t working together directly? Yes…. because I’m there for them when they need me. Consultants, Lawyers, and other professionals all have some type of retainer relationship with their clients that are designed around inactivity. Are your inactive customers paying you the equivalent of a retainer fee? Are they worried their current solution is going to break, go away, or otherwise be inaccessible? Are you just there if they need you? Or maybe it’s something else… Is there a seasonal element in your industry you didn’t know about and they’re about to start using it? Is there a budgetary issue you weren’t privy too that forces people in your industry to make purchases at certain times of the year even though they don’t need the thing they’re buying right then. That if they think they might need it, they need to jump on it? I don’t know… and you won’t either until you talk to your customers. ## Zombies Feed On Your Reputation The bottom line is, Zombie Customers are bad because every once in a while they come back to life and get super-pissed that they were paying you for 6 months and not getting anything from it. If anything, these customers that are paying you, that aren’t getting value from your service… that you’re hiding from… they’re a [massive churn threat](https://sixteenventures.com/saas-churn-threats). They WILL realize they’re paying you for something they’re not using some day… and they will leave. And they will likely be quite upset with you. And they will tell others not to use you, but it’ll be for made-up negative reasons so they don’t have to admit they paid for something they didn’t use! Do the right thing and just add value. Period. If you’re not adding value stop what you’re doing. Simple. Oh, and if good karma isn’t enough…. how likely is it that a picture of the refund check, your letter, and the FedEx envelope will end up on Instagram or Twitter with the hashtag #awesomecustomerservice along with your name? [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Customer Success: Best Practices for Unplanned Outages *October 2, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-customer-success-unplanned-outages/ So I got an email recently about best practices for dealing with unplanned outages from a SaaS Customer Success standpoint. I’ve attempted to answer the question in a meaningful way, but I am the first to acknowledge that there is a lot more to it than just what I talked about in this post. That said, I think my answer provides a great way to think about Customer Success and unplanned outages by taking full advantage of the SaaS business model architecture. Check it out…. Here’s David’s question: *Lincoln, I’m hoping you can help me with a quick question on SaaS best practices. I lead the support structure for a company whose applications are all provided in a SaaS environment and I’m looking to create clear guidelines for when we should notify customers/users when there are unplanned outages. * *Meaning if the application is down x minutes we do nothing, if its down y minutes we email all users, etc. Any thoughts you have on this would be helpful. – David* Here’s my answer: David, that might be a quick question to ask, but it’s not a quick question to answer. ## Trust Trumps Everything The main thing to remember is that Trust is Paramount in SaaS. In B2B Software-as-a-Service, trust is absolutely king. Trust that your product does what it says it will do. Trust that you won’t lose data. Trust that you’ll keep their data secure. Trust that you won’t rip them off, steal their credit card numbers, share their IP out the backdoor with China. And trust begins and ends with communication. That means you have to decide not to hide from your customers and be transparent with them to the level they need and/or expect. ## Don’t Hide from Customers Outage. Hiccup. Glitch. Issue. Problem. Downtime. Crash. Whatever you want to call it… if it is something other than the norm and it affects customer-facing areas of your app, you can’t hide from it. Yes, if backend processes bounce but that has no ill effects on customers and the customers wouldn’t even know it happened, that might be okay to not talk about. But when there’s an issue – and especially if customers experienced it – you can’t hide. ## Situation Impact Okay, so when there is a problem, there are several ways to handle it, but here’s why it’s difficult to give a general answer to what to do (IMHO)… …the reaction depends not so much on the amount of time of the outage… but the impact. In the early days of a SaaS company’s life, it’s very likely that your app could go down completely for minutes at a time (maybe even days!) and no one would notice. However, those that are impacted could suffer greatly if the app is a core part of their business. On the other hand, at scale, a 1 second “blip” in just one “area” of your app could literally affect millions of transactions. But those “transactions” might be low-value, non-core-businesss functions that the users – or your system – will just try again. No harm no foul. So to say “it depends” on how to react is an understatement. Outside of SLAs – which are an interesting thing in the SaaS world, especially for vendors who’ve built their apps on top of layers of infrastructure and services that they don’t own, control, or even know where it is physically. Given that, I’m not going to get into SLAs here except to say that how you react to an “outage” in a general sense and how you react to – and even define – and outage when SLAs are involved are two very different things. Remember this… ## People Use your App I know sometimes it’s hard to remember this, but your customers – even your free(loading) users – are people. Because of this fact, a good rule of thumb is to remember that while the problem with your app affected millions of transactions and thousands or millions of individual users and customers, each customer was affected individually. This means that your users don’t cry for the masses that lost their work and they certainly don’t care about how this is affecting you and how that’s affecting your relationship with your cat. They care about themselves, even if they’re generally good, caring, giving people in real life. It’s good to remember that “they” aren’t your customer base… “They” aren’t your user base… They are individual people that trust(ed) you and have expectations of a certain level of service. Of course their expectations around the level of service to expect or what is realistic could very well be incorrect, but that’s your fault for mismanaging those expectations in the first place. Anyway… Even though the fan – and the room – is now covered in the fallout from this mess, and it might be panic-inducing to have thousands or millions (or even just tens) of unhappy users out there frustrated with why they can’t finish their work or communicate with their customers or post their next blog post or check on their campaign… …and even though they’re out there complaining on Twitter and posting “y u no work?” memes on Reddit… … you need to keep in mind that each one of them is experiencing the outage individually, not as a cohort of unhappy customers. Who cares, Lincoln? Why is that important? Context. ## Context is King First I have to say that Jason Lemkin, former CEO of EchoSign, has a great post on [scaling your Customer Success team](http://saastr.com/2013/10/01/the-2-million-dollar-man-woman-how-to-think-about-scaling-your-customer-success-team/) which should shed some light on how you might reach out to your various customer types, so I won’t go into that detail here. But suffice it to say that when you reach out to your customers and users – people (as we’ve established) – you need to keep in mind that you’re reaching out to a human being experiencing an issue and feeling quite helpless (as we all have when a cloud service just disappears). They’re angry – probably pissed – but not for the self-centered reason you think (this is where context comes in): - They’re embarrassed in front of a customer for using your system to store the artwork that their customer cannot access now - They’re embarrassed in front of co-workers because they championed your system in their company over other competitive products – they invested social capital with you – and now this failure is blowing back on them - They’re frightened that they’ve lost work and remember that “work” means sunk costs, time and materials, ideas they’ll forget, hours they’ve invested, etc. - They fear the worst… catastrophic data loss, hackers from a tiny country they’ve never heard of outside of, well, news about hackers In other words, they’re feeling something about this situation that isn’t strictly technical or – honestly – even about your app. Just like marketing, this isn’t about you or your SaaS app… it’s about your customer. - They aren’t upset that they can’t get in and see your super-slick UI elements. - They aren’t kicking their trashcan across the office because they can’t see your elegant sentiment-analysis algorithm at work. - They aren’t yelling obscenities at their cat because they can’t access your super-cool implementation of Node.js and CouchDB… Get the point? They’re all people, so treat them that way. ## Rage is a Gauge The irony is that the more passionate and urgent the reaction to your outage is – probably – is an indication of how important your SaaS app is to your customers, at least in a B2B environment. So while you’re in the midst of this mess, keep in mind that those horrible emails, phone calls, and tweets you’re getting indicate that you’ve found an audience. It’s not all bad, even though it probably sucks right then. In fact, if you’re a startup wondering if you have reached Product / Market Fit, don’t survey your users and ask if they’d be unhappy if your service went away… … unplug your service on Monday morning and see what the reaction is. If the response is crickets, you probably aren’t there yet. Disclaimer: Don’t do that. (But it would prove the point) (But don’t do that). So back to the question at hand… ## How do you React to an Unplanned Outage? Don’t. Don’t react. That’s not how SaaS providers think… you’re better than that! Get Proactive. Remember, you’re a SaaS vendor… you have visibility into what’s going on in your system in ways legacy software vendors simply did (do) not. In the old days – I’m telling’ my stories kids, so pay attention – when software was installed at a customer location (yes, this actually used to happen), support would only know about a problem when the customer called. Often, the customer only called after trying everything they could possibly do on their end to fix it first because talking to “support” was such an awful, brain-squenching experience. When they finally did contact the vendor’s support team, and after the requisite “did you reboot the server?” question – then they might get started actually helping the customer fix the issue. Maybe. But you’re better than that, right? You’re a SaaS vendor and you should be able to see what your customers are doing and interacting with inside of your app (at a high-level at least… maybe not exactly what data they’re working with). If you don’t have this visibility, that’s a problem far beyond the context of this post and means that you’re not taking full advantage of the SaaS business model architecture. Being a SaaS vendor means that you have the ability to be proactive and not wait until people contact you with a problem. And this is especially true when you notice something that is affecting a large swath of users across all of the layers and “areas” of your application. ## What to Say What level of detail do you provide? Whatever is necessary. What level of transparency is required? Whatever your customers need. What might your customers be thinking? Put yourself in their shoes. You have to know your customers. If your customers are software developers, DevOps, or other technical folks, you might need to provide some low-level details… and doing so might even endear you to that crowd. But if your customers are SMBs or Department managers in larger companies, they probably don’t need such a level of detail.. and in fact, providing that might alienate them. If it’s something out of your control – an integration partner’s API was down, your cloud infrastructure provider went away briefly, etc. – don’t just pass the blame, but explain that the problem was out of your hands… …and then tell your customers (in the level of detail congruent with the audience) how you’re going to fix this problem so it doesn’t happen again. I say it is 100% legitimate to blame Amazon Web Services when they go down and take your service with ’em… … however, it’s incompetent to blame them a second time for the same exact issue! Ultimately, the depth and frequency of your transparency and updates about an outage depends entirely upon who your customers are and your importance to their business. Once you know what level of detail to provide, you need to… ## Get Proactive! I hate to even give tactical advice here because it varies so much, but this might get you thinking about what is possible as a SaaS vendor. Here’s some super-generic advice for a minor “blip” (whatever that means in your situation). Since this is SaaS we should be able to see who was using the system when the problem occurred, which means you should be able to notify them – probably via email or other outside-the-app means – if there’s even a possibility they were affected. Easy enough, but what if you know that while 500 users were logged-in at the time of the “blip,” that the issue would have caused people to not be able to log-in or access your app at all? Well… that very much depends. If the time was 12AM Pacific on a Saturday and those logged-in users were from the handful of customers in Europe, you might be able to safely assume that few people in the US – where the vast majority of your customers reside – were not affected. However, if the time was 8AM Pacific on a non-holiday Monday… you might have only had 500 logged-in and active at the time, but could have had 10k people trying to access your service right then (possibly contributing to excess downtime… inadvertent DDOS attack!). It should be easy to pull up some historical data to see that from 8:00 to 8:03AM on a non-holiday Monday, your system goes from 500 users to 10,500 active users… which means you need to not just reach out to those who were logged in and potentially directly affected, but probably to everyone. If it’s a prolonged outage – and you don’t know when it’ll be back up or you do but it will be a while (whatever a while is) – reach out to everyone and perhaps point them to a status blog or Twitter account where they can get updates on the outage. Again, it is 100% unique to your situation, but hopefully that gets you thinking in the right direction. I hope this helps a bit… even if it doesn’t directly answer the question. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Pricing: Multi Currency Support *October 1, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-multi-currency/ I was asked a question recently about creating SaaS pricing models that include multi currency support. I’ve attempted to answer the question in a meaningful way, but I am the first to acknowledge that there is a lot more to it than just what I talked about in this post. But it’s a great jumping off point if you’re considering selling your SaaS offering in multiple regions where different currencies are used. Read on… Here’s Clint’s question… *Hey Lincoln, I’m trying to get line of sight on best practices regarding pricing/currency discussions for SaaS solutions – e.g. is it acceptable to do everything in USD – show pricing plans in USD but allow transactions in multi-currency, show plans in multi-currency. Etc. Also wondering about pricing uplift in various regions or since it is the Web do you see people sticking to one price and just account for exchange rates? – Clint* Here’s my answer for Clint (and you)… You could do everything in USD, but if you can, you should support local currencies. While I realize it adds overhead on the backend, it greatly simplifies things on the customer side and ultimately that’s what really matters. Also – know your customer and their regional issues – some people can’t or won’t do business outside of their local currency… either due to personal bias, company policy, or their payment method. Certainly the easiest way to do this in a transparent pricing model is to display a price – say $50/mo – and simply allow someone to select (or select for them based on their current location) GBP – for example – and have it translate from US$50 based on today’s or real-time exchange rates to GBP30.85. Here’s an example from [CustomerSure](http://www.customersure.com/), based in UK, going from USD to NZD: [](http://www.customersure.com/) [Stripe](https://stripe.com/), [Recurly](http://recurly.com/), and [Zuora](http://www.zuora.com/) (three recurring / subscription payment systems at varying market positions) all have multi-currency support built-in, so from a technical perspective this is easy. So while it’s not difficult to implement multi-currency support for your SaaS app these days the key is to know WHY you’re doing it. If you’re doing business in the US, Canada, EU, and Australia, you’re probably okay with the exchange method. However, if you’re looking at going to India or China or another country / region where they are potentially more cost-conscious and / or where you might offer different packaging – perhaps to rapidly gain marketshare, then I suggest showing those folks – based on geo location info, region- or campaign-specific landing pages / micro sites / domains, etc. – whatever they need to see and nothing more. There’s no reason for a potential customer in India to see that folks in London are paying GBP30.85/mo for the service when I’m selling the product in India for a one-time fee of US$10 or 625 INR via SMS rather than credit card. And the folks in London don’t need to see what I’m selling the product for in India, either. Of course some regions aren’t going to be price-sensitive but could find additional value in what you’re offering above and beyond what those in the US/EU might find, allowing for a premium price to be put on their region-specific packaging. And this different packaging, plus regional IP restrictions and language barriers will keep the vast majority of people from doing an apples-to-apples comparison of your pricing across regions. So, just like everything else, when considering multi-currency support for your SaaS app, you have to know your market, your customers, how they buy, how they value what you’re offering, why you’re going into that market, etc. There’s a lot more to it, but that should get you going in the right direction. Now, how you deal with Revenue Recognition, exchange rates, and all that fun stuff on the backend… man, that’s what CFOs, accountants, and lawyers are for. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How to Create an Affiliate Program for your SaaS *September 13, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/affiliate-marketing/ The CEO of a vertical-specific SaaS vendor with a relatively high priced offering emailed me the other day with a question about creating an Affiliate Marketing program to accelerate growth. I gave him a fairly detailed answer and I thought I’d elaborate on that answer even more and share it with you… enjoy. *“Hey Lincoln, we’re thinking of starting an affiliate marketing program for our SaaS company to help accelerate growth.* *From what I’ve read and the examples I’ve seen they’re commonly offered by lower priced SaaS apps, sub $200/mo, but our app is higher priced at $1k, $5k, or $10k/mo.* *I’m thinking of offering an affiliate commission of 1 month of Monthly Recurring Revenue (MRR) after month 2 for all converted referrals. And maybe double that for an annual subscription.* *I know you’ve talked about [Affiliate Marketing for SaaS apps](https://sixteenventures.com/video-interview-saas-affiliate-marketing) before, but do you know of any successful B2B SaaS affiliate programs with similar subscription prices?”* Below is my significantly-elaborated response… I’ll answer that, but let me work through some assumptions before I do. ## Affiliate Program Controversy Before I get started, I have to acknowledge a recent back-and-forth on VentureBeat about how [Affiliate Marketers are huge scammers](http://venturebeat.com/2013/08/12/the-big-ugly-affiliate-marketing-scam/) and [also… they’re not](http://venturebeat.com/2013/08/15/affiliate-marketing-not-bad/). Just like anything, there can be evil affiliate marketers and there can be good ones. For the most part, the less control you have over your affiliate program (i.e. the lazier you are in many cases), the more likely you’ll attract the scammers and they’ll take advantage of you. Don’t be lazy, do it right, and you will mostly likely be fine. When you’re done reading this post, if you still need some entertainment, make sure you read the comments on those VentureBeat posts. It’s gold, Jerry. Okay, so back to the question at hand. ## Affiliate vs. Reseller vs. Referral Programs First, I assume you’re talking about an affiliate program whereby independent folks out there on the web sign-up and then send you traffic through special URLs and – if that traffic results in an action (more on this later) – you pay them a commission or a fee. What’s cool about that is – even if you gave the affiliate 100% commission – the customer is still paying you… they’re still your customer, you have the relationship with them and (assuming the 100% commission is limited to the initial sale) you can up- or cross-sell them so you actually make money off of ’em later. Nice. That model of 100% commission up front + backend continuity revenue is a model many companies use, but to execute that in a SaaS business takes a bit of finesse; there are probably better ways (I’ll show you some later). But the bottom line is, with an affiliate program, the customer is your customer directly regardless of what you pay your affiliates… and that’s a very, very good thing. Now… what you’re NOT talking about is a Reseller / Value-Added Reseller / Representative model where you have a much more tightly-coupled relationship with your partner and where – in a lot of cases – they own the relationship with the customer. White-labeling and even outsourced sales forces could fall into this category. BTW… Most people (even today in 2014) that are talking about Affiliate Marketing in SaaS are speaking from this POV since the reseller model is typical in Enterprise Software and with Enterprise SaaS… but it’s not affiliate marketing like we’re talking about here, so be careful the person you’re learning from is talking about what you think they’re talking about. Okay, and just so we’re on the same page… both of those models are very different (well, the latter isn’t just one model but several different types all grouped together) and they differ from yet another thing… … referral programs. Referral programs are generally for your existing users and customers to help you spread the word about your SaaS app and when they do, often both the referring user and the new user will be rewarded. Referral programs can offer a monetary reward, but generally do so in the form of app credits (even if those are pegged to dollars) rather than actual cash. While seemingly similar – including at the technology level – [Affiliate and Referral programs are very different in execution](http://visualoop.tumblr.com/post/57896661371/affiliate-vs-referral-marketing). You need to know your customers and market well to understand which to choose. Dropbox – during it’s famous “[14 months to an epiphany](https://www.slideshare.net/gueste94e4c/dropbox-startup-lessons-learned-3836587)” replaced it’s Affiliate program with a Referral program because they learned their early users weren’t motivated by monetary compensation. When they switched to offering more storage for both the referring user and the new user (among several other things) their growth accelerated. In fact, there are certain market segments that might want the cash for referring people – the more traditional affiliate model – but would be afraid that others would think they *need* the money, so they would be unwilling to spread the word lest their friends and colleagues think they’re poor. #truth Also, technology early adopter types most likely valued storage and functionality over money anyway. On the other hand, some people are motivated by cash and aren’t ashamed of it so a full-on affiliate program is likely the best bet in that market. A nice little rule of thumb is that if there are more people out there that might be willing to shill for you than use your product, the affiliate model is probably the best place to put your energy than building out a referral program. In fact, affiliate marketers are very (most?) often NOT customers of the products and services they promote. They might be users of the product or get free access or preview versions so they’re actually promoting something they know and understand (though not always), but being an affiliate does not equate to being a customer. Whereas in the referral model, those referring others to your product or service are generally users (though they might not be paying customers, but that’s okay assuming they refer people who will pay you). Okay… so now that *that’s* clear as mud, let me clarify something about Affiliate Marketing and high-priced SaaS products. ## SaaS Products are Often Cheap To your point about affiliate programs and low-priced SaaS offerings, here’s my take. First, I think it’s fair to say that most (most… not all) SaaS companies have prices that are less than $200/mo which is why there aren’t too many higher-priced offerings that also have affiliate programs. Overall, only a small percentage of SaaS providers have affiliate programs and only a fraction of those have prices over $200/mo (at any level), so there you go. Also, lower-end SaaS companies generally have a low/no-touch e-commerce style sales model that makes affiliate marketing a more natural extension of the sales funnel vs. those with higher prices and higher-touch offerings. Of course high-price != high-touch… but far too often SaaS == low-price. That said, most SaaS companies that have tried affiliate programs have found very little success… IMHO not because affiliate marketing doesn’t work, but because for most vendors it’s just another [random act of marketing](https://sixteenventures.com/random-saas-marketing). And frankly… one of the biggest struggles for SaaS vendors is marketing… so why would affiliate marketing be any different for them? ## Speaking of Marketing… Before you start recruiting affiliates, make sure you can sell your stuff, that you have a sales funnel that converts, etc. Ah, but there’s the rub: If you can sell your stuff, why do you need affiliates? Assuming that’s a legitimate question, the answers are scale and distribution. Look… I have worked with companies before that had affiliate programs where the affiliates were much better at driving traffic to their site than they were. Their affiliates came up with ads and sales copy that captured the value prop of the offering and targeted the right customers better than the vendor did. The affiliates did that because they were motivated by large payouts. Logical, right? Sure, but those fizzled out quickly because even if they can effectively convince people to click on a link to go to your site, it’s up to you on your site, with your landing pages, sign-up & on-boarding processes, engagement, follow-up, etc. to turn the visitor – even a super-hot, ready-to-go lead – into a customer. And if you don’t have that part optimized – or even semi-effective – your affiliates will soon stop promoting your stuff. Seriously… who wants to work hard to send people to a site that doesn’t convert customers? In fact, one of the things vendors competing for the same affiliates will use to try to get someone to promote their offer over a competitor is to talk about their conversion rates. All things being equal (high payout, low refunds, etc.), if I’m an affiliate, I’m going to send my audience / traffic / clicks to the offer that converts better. Makes sense, right? So you – yes YOU – have to have a Sales Funnel that converts (I can help you with this BTW – whether you have an affiliate program or not) if you want to keep the affiliates you recruited engaged and promoting your stuff. Wild… the same stuff that matters for your customers – engagement – matters for your affiliates. What a world we live in. ## Affiliate Marketing Requires Product / Market Fit If you’re a startup and you’re reading this, you must reach product / market fit before you bring affiliates into the mix. Don’t try to get affiliates to sell for you until you can sell your product yourself to people other than early adopters… and until you’ve reached Product / Market Fit it’s unlikely you can do that. Don’t think you can rely on your affiliates to figure out what you’re selling for you and then integrate their hard work back into your marketing. As I said recently, if your site doesn’t convert, your affiliates will quickly stop promoting your stuff no matter what the promised payout is… since they’ll never get it because your site doesn’t convert. Affiliate Marketing is for scale and distribution… it is not a replacement for your lack of marketing ability and hope that you won’t have to develop it. That all said, it’s your job to continue to optimize the customer experience during the sign-up, on-boarding, and engagement processes, provide new and continuously tested and updated landing pages for your affiliates to send customers to, and to develop optimized creatives, sales copy, email swipes, etc. for your affiliates to use. But something more than marketing is required… ## The Correct Mindset is Critical So many of the things that hold SaaS vendors back – and I know you hate it when I talk about this stuff – is mindset. It’s not your tactics, your tools, or even your strategy… it’s the mindset you go into the planning, development, and execution of those things with that is limiting your success. #truth Here’s an example of mindset getting in the way of success. Most vendors – SaaS or otherwise – who have tried and failed (or been less-than-successful) with affiliate marketing start with this overarching premise: “What’s the least I can pay my affiliates and maybe still keep ’em interested?” That’s a pretty limiting statement that reveals the true nature of where the vendor (or the marketing genius behind this tactic) is coming from. That’s what someone like Tony Robbins might refer to as a scarcity mindset. And I just lost you because I invoked the name of the Mighty Robbins. Now, on the flip-side, companies – again, SaaS or otherwise – that have succeeded or thrived with Affiliate Marketing think: “What’s the MOST I can afford to pay my affiliates?” Obviously the longer your customer lifetime – and the more likely you are to grow Lifetime Value (LTV) through expansion revenue – the more you can afford to pay out up-front or on a recurring basis (or both). When you have this attitude, a lot of the necessary things will start to fall into place for Affiliate Marketing success. Of course, this mindset will help you when you’re… ## Designing Affiliate Payout Schemes I see questions like this all the time: “What’s the industry standard compensation model for affiliates in SaaS?” Good news… there’s not one! You actually get to be creative. Neat. When talking about how you pay your affiliates, there are two main things to consider… and they’re huge and 100% specific to your offer, your goals, your customers, and… your affiliates. First, do you offer a one-time payment or recurring payment (or both)? The common misconception with SaaS vendors is that since we’re dealing with recurring revenue we need to pay out in a recurring fashion. Of course this fits nicely with the vendors model and seems less risky because we only pay our affiliates when we get paid. And of course this way they won’t rip us off and we won’t lose out… ah, scarcity mindset again! Here’s a little secret you’ll argue with me about but one you’ll probably find to be true if you actually do the research, talk to potential affiliates, etc. Some affiliate marketers actually prefer one-time payments over recurring payments. WHA!?!?!? That’s crazy, Lincoln. I like you, but you’re crazy. It’s true and this flies directly in the face of the people giving advice who’ve never implemented affiliate programs and just talk out of their ass-umptions all the time. But as I like to say all the time… …your logical thinking means nothing compared to actual customer (or affiliate, in this case) behavior! So yes, even if the recurring payments over the entire customer lifetime would equal more over time, when it comes to gettin’ paid, as the saying goes, a bird in the hand is better than two birds in a tree or something like that. Whatever. Also, if your Affiliate program is new (which it probably is when you first start), potential affiliates don’t know, like, and trust you yet… so they’ll want their money as fast as possible; again, even if it’s considerably less than they’d make over time. Time Value of Money, Opportunity Costs, etc. But take the time to actually get to know your affiliates (this will seem like a step you can just avoid because – c’mon… having affiliates is supposed to help you scale quickly, right? This seems like work. Bleh. No thanks.) so you’ll know going into this. Or your affiliates might love recurring revenue. I don’t know. But you need to know that some don’t and if those make up your pool of potential affiliates… good luck if you go the opposite route with your payouts. But… ## Payout for What, Though? Well, second, when considering how to compensate your affiliates, you have to know what you are going to pay them for. You can pay them for a new customer, you can pay them for a lead, for a new Free Trial sign-up, for an opt-in (single or double… double is probably best) to your mailing list or email course, etc. Most affiliate programs pay out based on the affiliate sending the vendor a customer, but that is mostly because they don’t know what’s possible and/or haven’t really thought it through. This is the Cost Per Action (CPA) model, though you will sometimes see it broken down further to Cost Per Lead (CPL) or whatever. It all falls under the CPA model, though. Or you can pay for all of those things, compensating the affiliate as the engagement with the prospect grows, though this can get complex and I’d advise you not to over think it at first. BTW, you may see other terms out there like CPM (Cost Per Mille… mille means “Thousand” in Latin) where you pay for getting your offer in front of people (impressions) or Cost Per Click (CPC) where you pay simply for clicks, but those are more specific to advertising (AdWords, email marketing, etc.) than affiliate marketing, though they may figure in somewhere. Good to know what they are at least. Okay… So How do you Pay your Affiliates? ## Affiliate Payment Metrics Are you going to Pay for Leads, Actions, or Customers? I can’t tell you what you should pay for in this post because I don’t know you, your product, your market, your affiliates, etc. If you want me to tell you how to compensate your affiliates, you’ll have to work with me one-on-one so I can really understand what’s going on in your business, market, etc. That’s fair, right? That said, I’m happy to show you what some other companies – SaaS or otherwise – are doing so you can use that for inspiration (PLEASE DO NOT COPY THEM!): ***Infusionsoft*** [Infusionsoft](http://www.infusionsoft.com/partners/affiliate-partners) is one of the original SaaS companies to have a substantial affiliate business, and this makes sense due to it’s close proximity to the Internet Marketing niche. In fact, Infusionsoft itself is used by some of the biggest, most successful private affiliate programs out there so they (probably) know a thing or two about affiliate marketing. Now, while their prices are not in the multi-thousand/mo range like in the original question I was asked (unless you do a lot of add-ons and have a ton of contacts), they’re not “cheap” either. And while they are a recurring revenue business, they have a one-time payout for new customers. ***freewebsite.com*** Like a lot of SaaS companies, web hosting providers have a self-service model and will often pay for new customers rather than other actions. According to their presentation at the Traffic & Conversion Summit back in January in San Francisco, the guys at freewebsite.com did around $60M in revenue in their first 24 months in business with about 98% of revenue [coming in from affiliates](http://www.freewebsite.com/affiliates/). The other 2% was generated through their own efforts so they could pass the learning onto affiliates! They caused major disruption in the retail hosting game – an industry that is incredibly saturated – by [being deliberate with their marketing](https://sixteenventures.com/saas-marketing-lazy-deliberate) and aggressive with their affiliate payouts and affiliate recruitment tactics. ***WPEngine*** Hosting companies – like the guys above as well as managed hosting companies like [WPEngine](http://wpengine.com/affiliate/) – know they’ll likely have a super-long lifetime if they can just get people in the door and on-boarded. It’s hard and/or annoying to switch hosting providers, so once you’re in, you’re in for a while until something catastrophic happens, probably. WPEngine goes a step further and actually has a two-tier affiliate model where they reward affiliates for referring other affiliates. Since it is only two-tiers it stops short of being a pyramid scheme, but this can drive up your affiliate numbers big time (or you can have affiliates canabalizing each other and hurting some of the benefits we’ve talked bout… know your audience!). Also, WordPress powers like 19% of the interweb now, so there are a lot of people blogging about it, developing for it, etc…. lots of potential affiliates out there. Not every company has such a massive potential affiliate base… though it’s not always quantity as much as quality that matters. ***Hubspot*** When you have a higher-priced offering, you do generally have a more complex sales process. Not always, but often. The cool thing about affiliates is – in theory – they’re making the sale for you, which is why you reward them. They basically send you a customer. But when there’s a more complex sales process involved, it might be unrealistic to expect your affiliates to make the sale for you… but they could send you really warm leads all day long. In that scenario you could just pay them for the lead as Hubspot does… they pay $10 per lead and tout offers that convert at 30-50% (because that’s important for a potential affiliate to know!) Honestly, $10 is probably much cheaper than an AdWords click to an opt-in landing page (and in this case they only pay if they get the lead… and not just per click) and – because the affiliate is likely a person the lead trusts – the likelihood of conversion from this form of lead gen is probably much higher… and the resulting payouts for the affiliates, while probably not that Maroon5 money, probably buys lunch a couple times a week. ***HasOffers*** While HasOffers – a SaaS platform for managing your own affiliate programs – indicates that you can [pay for various actions throughout the engagement process](http://www.hasoffers.com/blog/affiliate-programs-for-saas/) – and their system makes that relatively easy to implement – I don’t personally know anyone that does that in practice, though I’m sure someone has tried it. ***Loop11*** Loop11 [does both CPL & CPC](http://www.loop11.com/affiliate-program/), whereby they pay $1 for every new trial sign-up you send ’em as well as 25% of the sale price (one time) for new customers, so there’s that. ***Other Examples*** Now… Just to be fair, some SaaS companies do pay out on a recurring basis: - [Visual Website Optimizer](http://visualwebsiteoptimizer.com/affiliates.php) (ugh… for all the greatness that is VWO, look at the limiting language they use to ‘motivate’ affiliates… maybe they’re killing it with affiliates… maybe they could double-kill it with better copy. They should test that. ) - [Shopify](http://www.shopify.com/partners/referral) – they offer either an up-front or recurring commission… not both - [HighWire](http://www.highwire.com/partners) – 25% recurring for the life of the customer I’m just trying to give you some ideas about what to look for and how to do it right… not how to copy what other people are doing. Got it? Cool. Okay, but… ## Okay, So How Much Do you Pay Affiliates? You see these questions on [Quora](http://www.quora.com/How-are-SaaS-companies-compensating-their-affiliates) all the time and what makes my brain want to explode is you also see… answers. As if it’s possible to give a legitimate answer without knowing all the stuff we just talked about (and a lot more). Also, I really, really, really hope people aren’t taking what people say on Quora – or even on this blog – as the gospel, going to Starbucks, whipping out their Macbook Air and changing things up… even though I 100% know that is EXACTLY what people are doing. Like I tell people all the time… my best stuff isn’t on this blog! If you want me to help you, talk to me directly… don’t just take what I write here as a replacement for actual consulting. That said, if I am forced to answer the question, my response is more nuanced… …it depends. I know… I know… not cool. Look, it’s true and that’s actually the way it should be. What you payout to affiliates, how its structured, etc. should be specific to your situation. But to bring it back around, as you can see from the examples I’ve given, affiliate payouts can range from $10 for a lead to 25% of recurring revenue in perpetuity to a one-time $1,500 payment for a new customer… and everything in between. But other than your goals, your customers, your market, your product, your offer, etc. what other inputs should you consider when building an affiliate compensation model. Well, this is SaaS and I know Customer Acquisition Cost (CAC) is on your mind. ## Does Affiliate Marketing Lower CAC? That’s probably the #1 question I get from SaaS providers and – again – it’s the wrong approach. Can Affiliate programs lower CAC? Perhaps. Should an Affiliate program lower CAC? Not necessarily, and here’s why. I said the goal of an Affiliate program should be scale and distribution. Distribution to new audiences / market segments that you might otherwise not reach. Scale because you can reach more of those audiences / market segments faster and consistently. Neither of those goals necessarily have anything to do with lowering CAC, rather they are all about accelerated growth. Sure, right now you might have a CAC of $100, but how efficient is that spend? It might take 10,000 impressions on your AdWords ad before 100 people click through to your landing page at $1 per click for you to finally get 1 customer. Or you can pay an affiliate $100 to just send you a customer. Even if you have only a 25% conversion rate, for every 4 people they send to you get a customer. I’d say that’s still rather efficient compared to the AdWords example, right? And in the time it takes you to pay the $100 to AdWords – meaning the time it takes to get the 10k impressions, 100 clicks, and 1 new customer… you might get 5 new customers from affiliates. Or 50. Or 500. So you can also add Efficiency to Scale and Distribution as the goals of an Affiliate program. One concern using the logic above is that if you pay $100 for a new customer and you get too many of those too fast, you’re going to exhaust your bank account. That’s a good problem to have in some ways, but also something to keep in mind. Obviously you need some safeguards in place and payout policies, timeframes, rules about holding funds for a few days to cover refunds, chargebacks, etc. And while you want that be as much in favor of the affiliate as is reasonable, you also don’t want to be foolish. CYA, y’all. Speaking of being foolish, don’t be when it comes to… ## Going Negative When you payout more than you’ve taken in, that’s considered going negative. It’s only bad when you payout more than you WILL take in over the customer lifetime or if it takes too long to finally payback what you’ve paid out (correlates to CAC payback period). I’m not going to lie… going negative is not without risk. But to me, “throwing money at AdWords” every month with nonexistent results is also super risky. Just know your LTV so you don’t accidentally pay out $1000 if you’ll only get $500 from the customer. And if you’re a new company that doesn’t know your LTV yet for sure because you don’t know the average lifetime of a customer, how do you come up with a number? Like a lot of what you do as an entrepreneur, you gather as much intel as you can, mix it with your gut feeling, then place a bet on being right. For specific industries – or specific categories of SaaS – you might be able to find average customer lifetimes. Remember, though, this is not across SaaS as a whole because SaaS IS NOT A MARKET… just across your product category like project management, CRM, etc. I’d even go a step further and look for even tighter analogs than just product category… like price level, target market, etc. Those will definitely have an impact on customer lifetime, LTV, and CAC. Now, if you were to use industry data and basically make an educated guess, to hedge that bet you placed on yourself being right, you can limit those negative payouts to a certain number of deals and see how they work out before doing that on an unlimited number of transactions. If you do that, be clear with your affiliates about your plans to limit the number of deals… but if you do things right, keep your affiliate program private, maintain control and communication with your affiliates, etc. this shouldn’t be a problem. But just to reiterate the reason companies “go negative” and offer a big chunk up front to their partners rather than paying out on a recurring percentage basis is that it simply gets the affiliates more interested and willing to promote their stuff. Like I said before, affiliates see $50 today as a lot better than $3/mo for 36 months, even though the latter represents $108 total. ## Empower Your Affiliates and they’ll Enrich You Remember, companies who have successful affiliate programs work hard to help affiliates make sales… they have a funnel that converts, they keep an eye on what tactics & creatives are working – and what aren’t – and communicate that back to their affiliates. And they pay their affiliates on time, every time, without fail. But that goes back to putting your affiliates on a pedestal vs. seeing them as leaches and scammers. And just like any other marketing initiative, you can’t just create an Affiliate program, put it out there, and expect it to be effective. It’s work… but work that will add Scale, Distribution, and Efficiency to your Customer Acquisition efforts. ## Non-SaaS Affiliate Examples Here are some other examples to check out, though they’re not all SaaS. This is good, BTW, as your affiliates probably aren’t just going to sell SaaS products so you need to know what else they sell and how they’re thinking about their business: - [http://www.plus500.com/](http://www.plus500.com/) - [http://www.500affiliates.com/](http://www.500affiliates.com/) <== a dedicated affiliate site for plus500 - [https://www.onesky.com/affiliates/index.cfm](https://www.onesky.com/affiliates/index.cfm) <== private jet charters - [http://www.jetcharters.com/affiliates/](http://www.jetcharters.com/affiliates/) <== more jet charters - [http://www.highpayingaffiliateprograms.com/](http://www.highpayingaffiliateprograms.com/) <== lot’s of high-paying affiliate programs to study ## Soul Searching and Naval Gazing To be successful with an affiliate program – and to set it up the right way for your affiliates (who cares what other SaaS vendors do, this is about your affiliates, your customers, and you), you’ll need to do some research and planning. Some questions you need to consider are: - What can you afford to pay out? What are your hard costs, what’s the contribution margin for each customer at full retail price, etc. - Who are your potential affiliates? What other products and services do they promote? - Are they straight-up affiliate marketers or are these people that work with your potential customers in a trusted advisor capacity? - What will your potential affiliates want – one-time payout or recurring? - Will you have an open, anyone can join affiliate program or will you keep it private and vet potential affiliates? ## Public vs. Private Affiliate Programs The only thing I can say for sure without knowing anything about your situation is, at first, I’d keep your Affiliate Program private, small, and invite-only or qualification-based and work closely with your affiliates to learn what works, what doesn’t, etc. Private Affiliate programs are ones you control completely, from who you let be an affiliate, to the logistics of clicks, payouts, refunds, etc. and you can leverage a service like HasOffers for that. Public Affiliate Programs use networks like [ShareASale](http://www.shareasale.com/), [Commission Junction](http://www.cj.com/), [Clickbank](http://www.clickbank.com/), or [JVZoo](http://www.jvzoo.com/) and – while you may have some control over who can promote your offers – think of these networks as having built-in distribution (they’re a two-sided marketplace model), but it’s distribution that is one-step removed from your control. For that simple reason, you probably don’t want to start there. Once you run your limited, private Affiliate Program for a bit you’ll figure out from quickly if you want to roll it out to the public, keep it private but expand it, change it completely, or kill it. As for the specifics of your payout scheme… without knowing more about your situation, I can’t give you an answer other than it depends, though I’m happy to help you figure that out. Since I published this, I received another email saying this: > “I could go with an affiliate network like shareasale or CJ where you get put in front of power marketers…” I would challenge you on the fact that you don’t get in front of power marketers without using a network. Super Affiliates and the like might promote things that use JVZoo or Clickbank – often because they trust the inner workings of the network to protect their commissions rather than leaving it up to the vendor who they might not trust yet – but I guarantee you, 110%, that the initial connections to big-time, power affiliates happen outside the network. It happens at events, through introductions and mutual friends / JVs (this is primarily how this works), emails, etc. People talking to people IRL. Now, this could vary from niche to niche, of course, but in my experience top-tier affiliate marketers don’t promote stuff based solely on what they see on CB… …in fact, things that drive the long-tail on ClickBank – take their “gravity” metric – is most often highly-orchestrated through JVs with super-affiliates just so the “retail” affiliates will start promoting their stuff. If I were in your shoes, I’d get my stuff converting well, run my own program initially, actively recruit folks I’d like to sell for me (those who I think would do well and be a boon to my brand), work with them and learn from them, then rinse and repeat from there. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing: 21 Growth Hacks to Test Today *August 29, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-marketing-growth-hacks/ [](https://sixteenventures.com/saas-marketing-growth-hacks#toc)Below are 21 SaaS marketing growth hacks you could test right now. Of course, these are tactics and while everyone loves tactics, if they don’t make sense within your very well thought-out SaaS marketing strategy, you should probably not implement them, right? In fact, you should also probably make sure you have a well-thought-out SaaS marketing strategy, too. Now, some of these “hacks” I’ve used and have seen a big impact… others are just ideas I haven’t implemented yet but might if the occasion arises… and some are just crazy ideas that I think would work if the situation is right. Guess what? I’m not gonna tell you which ones are which so use your imagination and a good bit of caution. I’m also not going to show you live examples of what I’ve implemented or share results. You see, I’ve helped my clients with these tactics and they’d like a little bit more time out in front of you, thank you very much. The goal here is to get you thinking in the right direction, that’s all. Fair enough? BTW… this list of 21 “hacks” is in addition to the [43 Ways to Drive Traffic to Your Website](https://sixteenventures.com/traffic-hacking) and the [100+ places](https://sixteenventures.com/50-places-to-promote-your-app) to [promote your SaaS app](https://sixteenventures.com/50-more-places-to-promote-your-saas-or-web-app) that I’ve talked about before. Okay, have fun… ## Table of Contents - [Back Fill Data for Fun and Profit](#1) - [Dedicated Widget Landing Pages](#2) - [Powered By… Ego!](#3) - [Aggressive Widgets](#4) - [Retargeting Widget?](#5) - [Thank You for Missing Opportunities](#6) - [Tweetactional Messages?](#7) - [Help Them Help You](#8) - [We’ll Do it For You… For a Fee](#9) - [Break Stuff!](#10) - [Orchestrated Virality](#11) - [Turn Negatives into Positives](#12) - [Eliminate Dead Ends](#13) - [Personal Follow-up](#14) - [Reactivation Nation!](#15) - [Capitalize on Understanding Social Capital](#16) - [IRL Gifts](#17) - [Stop Wasting Real Estate](#18) - [Help Page Offer](#19) - [Project-Thinking is Hurting your LTV](#20) - [Dynamic Entry Points](#21) - [(Bonus!) Use your imagination!](#22) - [Let’s Grow Your SaaS Company](#cta) ## 1. Back Fill Data for Fun and Profit This is 2013 and [data is more pervasive and easier to get than ever before](http://www.fullcontact.com/). Why not auto-fill as much as possible for your customers – surprise them with how easy things are for them to get going. Auto-fill and then let them correct/update/etc. Not doing this in this day and age is just lazy… - Ask only for Company Name & State… grab the rest and then ask them to verify - Ask just for their Website… what can you grab just from a URL? Tons! - What if an invoicing SaaS company auto-builds customer data for their customers (easier with US-based companies, obviously) to make it super easy to add customers and get paid! BTW, this is even easier once their customers are using your app ([see #11](#11) below). - What about a CRM that automatically [adds demographic information](http://www.rapleaf.com/) to customers as they’re added. - Think about a shopping cart service that subscribes to credit card updater services to help their merchants never deal with expired cards. - What other data and services can you subscribe to and provide for your customers automagically? I know, I know… it won’t work for you because of a million different excuses. [|Back to Table of Contents|](#toc) ## 2. Dedicated Widget Landing Pages What if you thought of your widget as a viral marketing campaign? What if you thought real hard about how you could leverage that logic payload as the truly viral marketing scheme that it is? Well, first you might treat it like an actual marketing campaign, meaning you would send people to a dedicated landing page from your widget. Tons of SaaS companies have widgets that their customers embed on their websites, and most of those have links back to their sites, right? Okay…. Well, the problem is most companies just link back to their main marketing site. I mean, would you do that for AdWords, email marketing, or Facebook ad campaigns? Yes, statistically speaking you probably would. But you shouldn’t! Instead, send traffic to a page congruent with what the person clicking on the link is looking for. Think about this for a second… who’s clicking on the link in your widget? Why are they clicking? Maybe they’re a competitor of the company with this crazy widget installed. Maybe they’re interested in knowing why that guy has it and they don’t. Maybe they’d like to have this for their own site. Maybe you should work to capture value from that interest. Maybe. [|Back to Table of Contents|](#toc) ## 3. Powered By… Ego! I’m sorry, but “powered by” is just stupid… it’s time to get a real Call to Action (CTA). “Powered by” is all about ego… it’s all about you… Make it about them. Maybe in 2003 “Powered by”  was fine because technology was all “ooh… neato….” but now it’s like “WTF is in it for me?” Seriously, even the grand-daddy of ’em all Hotmail, [way back in 1996](http://www.dfj.com/news/article_26.shtml), had an actual CTA: “Get your free email at Hotmail” It’s time to get over yourself… and get your own free survey here! <== isn’t that a better CTA than “Powered by Cloud:Survey” In fact, here’s a case study on GrowthHackers.com that shows a [500% conversion increase by switching away from “Powered By”](http://www.growthhackers.com/hacks/powered-by-test-increases-signups-by-474/) [|Back to Table of Contents|](#toc) ## 4. Aggressive Widgets I’ve been thinking… what if we really, really… really used the Widgets to our advantage!?!? What could we do. Well, how about instead of sending people who click on “Powered by…” to a landing page (you won’t do that, right? [See #3](#3) above), get ’em to sign-up or learn more right there in the widget. Maybe don’t do this with your paying customers (or do… I dunno), but if the idea behind all these people out there using your stuff for free is “viral expansion” and “spreading the word,” then it’s up to you to make that happen. I’d put a sign-up form in the widget so when they click on “get your own free survey here!” they don’t go to a landing page, they can sign-up (or start the process) right there. In fact, once they’ve filled out the survey, that’s a great time to present them with a killer CTA to sign-up or learn more. Put that expensive, over-produced explainer video right there, in-widget. I’d go more aggressive than you’re comfortable with at first and back off from there if necessary. Be sure to measure actual results vs. irritated users… you don’t want too many of the latter, but some coupled with big results might be okay. That’s up to you. [|Back to Table of Contents|](#toc) ## 5. Retargeting Widget? Maybe put a retargeting pixel in the widget. Too much? Okay, put it on the landing page or in the sign-up/more info screen in the widget ([see #2](#2) and [#4 above](#4))… if they showed interest, don’t let ’em go that easy! [|Back to Table of Contents|](#toc) ## 6. Thank You for Missing Opportunities We know that businesses that have a mailing list and let folks opt-in to that list often miss the opportunity presented by the “thank you” page. They don’t generally customize this or use it for up- or cross-sells or to engage further. Unfortunately, the opportunity missing also happens with the Email Marketing companies themselves. Are you being aggressive enough on default “Please Confirm” pages and emails to ensure that the person signing-up for the list knows they can – and should – sign-up for your Email Marketing app? Make sure you have a CTA to sign-up or switch to your platform… since most people in a B2B environment certainly need some type of email marketing solution, this could be a pretty wild opportunity. How could that apply to you? [|Back to Table of Contents|](#toc) ## 7. Tweetactional Messages? Due to [GMail’s recent changes](https://sixteenventures.com/saas-marketing-gmail-tabbed-inbox), something to test is taking their Email Address, finding their Twitter Handle (several ways to do this), and then tweeting transactional messages / reports to them as well as sending them an email. Of course, you could also ask them for their Twitter handle or get them to login via Twitter, too. Whatever. This way, if they’re logged in to your app, when they click the link it’ll show them the report… if they aren’t logged in (or if someone else clicks the link because they see it in their timeline), it goes to a super-engaging sign-up screen. Or, if you’d like to be less aggressive, you could simply use Twitter to remind them to check their email because you sent them their weekly activity report! [|Back to Table of Contents|](#toc) ## 8. Help Them Help You I bet you’re missing the point. It’s great to make your users stuff go viral, but don’t miss the opportunity for your app. If you push content to 3rd party sites – let’s say you make it super easy to share videos from your app via YouTube – optimize that output to send traffic back to your site and to be found via search. Remember, Youtube is basically the 2nd largest search engine out there, but even more, since it’s a Google property, videos show up in Google search engine result pages (SERPs). So even if people aren’t searching directly on Youtube, they might be searching on Google, find the video, see your URL in the description or annotation, click the link to hit your landing page, sign-up for your app, and pay you. That’s a lot of maybes, but… if you’re already pushing content to Youtube, why not optimize for those maybes? Seriously… take 2 hours and optimize whatever content you’re sending out to drive traffic back to your app. Also, if it’s a video created by a user in your app and distributed through YouTube, that also acts as Social Proof by saying “This user created this video with XYZ Silly Cat app… and you can, too. Download it here:” But how does that apply to your Project Management software? Hmm… [|Back to Table of Contents|](#toc) ## 9. We’ll Do it For You… For a Fee After your users do a few things by hand, show ’em an offer to do it for them. Take [FriendOrFollow](http://friendorfollow.com/) for example, I can either click individual followers to unfollow them or I can subscribe to their service and unfollow everyone in one fell swoop. Since most people will opt to do stuff by hand at first to save money, here’s something they – and you – should try. Once the user has unfollowed 25 people by hand, for example, remind them that they can easily and quickly unfollow everyone that doesn’t follow them back with just ONE click for only $9.99! [|Back to Table of Contents|](#toc) ## 10. Break Stuff! The Customer Success movement and [using Support as a Marketing](http://www.johnfdoherty.com/talking-marketing-leo-widrich-buffer/) like Buffer did makes something like what I’m about to say both credible and controversial. If you figure out that most people that become paying customers have at least one interaction with your Customer Support team, it might make sense to get more people to interact with your support team, right? But how do you do that? Well… you could cause a “problem” that requires them to contact support. You can either let them contact support or you can use that to reach out proactively and fix the problem. It might help to do this after they’ve reached a certain milestone or [CCA during the Free Trial](https://sixteenventures.com/free-trial-metrics). But then again this is just a crazy idea that never, ever actually happens in reality, right? [|Back to Table of Contents|](#toc) ## 11. Orchestrated Virality If you think viral expansion has no place in B2B SaaS apps and they can’t “go viral” that’s fine. Disagreeing with me, in this case, doesn’t hurt me, it hurts you. Need I point to super-successful companies like Box and Yammer that have proven that internal, highly-orchestrated virality is not just possible but the key to infiltrating and locking-down Fortune 500 – very B2B – customers? Let’s get this straight, though… virality doesn’t mean your app will be popular in the way a video of a stuntman risking life and limb might bounce around the web like a beach ball at a Nickelback concert. But it does mean that you can – and should – build in viral expansion loops that make sense within the context of your target market. Consider internal virality that can be orchestrated inside of companies (peer to peer, up and down the chain of command, etc.), between trading partners, from customer to vendor and vice versa, etc. And consider how this virality can not just lead to more sign-ups and activations of your app, but also increased usage per account and increased stickiness of the app… even by those who don’t actively use the app. Hmmm… what does that last one mean? My clients know what I’m talking about, but I’ll give you a bit more… think “internal report distribution.” But just like everything else, the key to internal, B2B virality is that you must orchestrate it. I hear from companies all the time – SaaS and otherwise – our top customer acquisition method is “word of mouth.” When I press a bit, though, I find out there is little going on to enable or help the word of mouth process along. So on the one hand, it’s great that – in spite of your efforts – people still spread the word for you. But on the other hand, how much growth have you left on the table because you didn’t orchestrate the process of spreading the word for you. You didn’t make it super easy for people to help you… … but you can and should. [|Back to Table of Contents|](#toc) ## 12. Turn Negatives into Positives Tell your users and customers something in a positive way rather than your typical negative speak. Instead of “18 people unsubscribed from this campaign” maybe say something like “You had 82% subscriber retention on this campaign.” Be nice to people. In fact, since I originally posted this, Buffer has changed their messaging from negative to positive recently (early 2014). Here’s the before… And here’s the after… Food for thought, huh? [|Back to Table of Contents|](#toc) ## 13. Eliminate Dead Ends But don’t just tell people something, though. Tell them what to do next. Tell them why this information you’re giving them matters. “You had 82% subscriber retention on this campaign. Click here to find out how to keep even more subscribers next time!” Ask this about everything you send to your users / customers right now: “what can they easily do with this information?” If it’s not obvious – or easy – fix that. This topic is something I’ve [talked about in more detail before](https://sixteenventures.com/saas-customer-success-eliminate-dead-ends), but it’s something you’re probably messing up right now so I included it in this list. [|Back to Table of Contents|](#toc) ## 14. Personal Follow-up This is simple… when someone signs-up for your app, send ’em an email and say that you saw they signed-up and ask them an open-ended question to start a conversation. [But there’s more to it if you want to get it right.](https://sixteenventures.com/personal-emails) You can do this by hand or it can be automagical… but it can result in a huge boost in engagement and conversions. Some people don’t like to do this with automation, but I say automation isn’t meant to replace human interaction, it just allows you to do what you’d do by hand if you had unlimited time and resources. Of course, once they reply and the conversation starts, that’s where automation – at least in the content of the messages – stops. We’re not talking about a chat bot here. And I’ve seen crazy engagement numbers with this method, like upwards of 80% of those contacted with a personal follow-up email shortly after sign-up reply and start a conversation. You’ll have to test the best amount of time to wait, the best way to reach out, etc. My clients get access to my proven methods, though. The worst response I’ve seen is somewhere around 50% engagement… which is still a big-time number…. so this is probably worth looking into. [|Back to Table of Contents|](#toc) ## 15. Reactivation Nation! In addition to simply sending an email to try to get customers to come back and try your stuff again, you can reactivate Free Trials that didn’t convert – as well as former / deactivated users – with email [pre-targeting](http://500.co/2013/07/16/facebook-custom-audiences-101/) and [retargeting](http://liveramp.com/). My clients know that, done right, this can have pretty amazing results. [|Back to Table of Contents|](#toc) ## 16. Capitalize on Understanding Social Capital The reality is… most apps ask people to share the app with their friends way too early in their relationship. People don’t know, like, and trust you yet, and you’re asking them on step 3 of your Free Trial sign-up to share your app with their colleagues. Let’s talk about Social Capital and you’ll understand why that doesn’t work. People on Facebook will share things with friends and family that make them look silly or even stupid. Social Capital with family and friends… and even strangers… is plentiful. In fact, doing something stupid in front of your friends might even make your Social Capital rise. But at work, things are different. People are actually LESS likely (my own observations) in a B2B setting to do things they know make themselves look stupid. And if they aren’t sure how something is going to make them look – good or bad – guess what? They’re going to err on the side of caution. If you understand this, you can take advantage of that. One of the simplest things you can do is remove the “invite a colleague” thing from the initial engagement process in your Free Trial. Then, [once they’ve reached a milestone or CCA](https://sixteenventures.com/free-trial-metrics) that indicates they’re sufficiently engaged and that they know enough about your app, you can ask them to invite colleagues. But then, you might make a suggestion to invite a couple of colleagues, maybe even suggest the titles that most people invite, like Project Manager and Marketing Coordinator, and keep the invite form to just two names. Or you can just let them upload their Outlook address book on screen 2 of the Free Trial sign-up process… whatever. [|Back to Table of Contents|](#toc) ## 17. IRL Gifts Yeah, send ’em something in real life… a gift; ideally something that helps them do more with your product, faster. But know the difference between a gift and a reward. A gift is delightful and unexpected. A reward is a quid pro quo like “sign-up and activate your account and we’ll send you a t-shirt”… rewards have their place, but gifts mean more. - Welcome Packet – maybe it’s less of a neat gift, but this could help drive engagement; especially if FedEx’d overnight even for Free Trial users. Throwing a t-shirt in there wouldn’t hurt, either. - Book – Especially if you wrote the book on whatever subject your app is a productization of expertise in… throwing a book in the mail (and including that as part of your CAC) would go a long way in helping drive home that your app is the best one out there. - T-Shirt – Everyone loves a t-shirt, but it helps if you sell to an industry where people would actually wear your shirt. In public. Ideally to conferences with other potential customers. BTW, in a complex sale, one way to “hack” the technical folks is to include a t-shirt with the explanation of why your API won’t break their app, security, regulations, etc. - iPad stand if you make POS software - Cookies or Pizza - Something cool that’s sourced Locally or sent via FedEx / UPS… Know your market and include this in your CAC calculations. The chances of someone taking a picture of what you sent and sharing it socially is pretty good… you don’t even have to ask for that, though you might seed social networks with pictures of the gifts from a handful of “customers” and a hashtag… you know, to get the ball rolling. [|Back to Table of Contents|](#toc) ## 18. Stop Wasting Real Estate There’s an epidemic of “wasted” real estate in SaaS apps that could be used to drive conversions, viral expansion, etc. Think about post-signup / login pages, introducing interstitials into the mix, various screens in-app, forgot your password pages… even the post-Logout Page. [|Back to Table of Contents|](#toc) ## 19. Help Page Offer If you have a survey at the end of your help page, when someone says “yes, this was helpful” have a CTA for a One Time Offer (OTO) or to spread the word. If you “power” (yuck… don’t do that, [see #3](#3) above) help pages/systems for SaaS vendors, consider helping them make this happen. You instantly become MUCH more valuable in the process. [|Back to Table of Contents|](#toc) ## 20. Project-Thinking is Hurting your LTV LTV is Customer Lifetime Value and it is the amount of revenue your customer will pay you while they’re a customer. The longer the customer lifetime, the higher the LTV. Makes sense, right? Well… if your customers come in for short-term projects, they might not stay that long, giving you a low LTV. So, if you have a project-oriented customer-base – maybe you have a Project Management system – you have to educate them on *other* ways to use your SaaS so they’ll continue to beyond the project they came in for. Otherwise, they might churn out when they’re done with that project they originally came in for. This is also applicable to seasonal or event-based customers… and probably others. Use your imagination! [|Back to Table of Contents|](#toc) ## 21. Dynamic Entry Points Web Apps haven’t changed much ([see #1](#1) above) since they were created. No, really. No matter how awesome the apps get, how modern and cool the UI elements get, use of new languages, frameworks, and infrastructure… …the reality is, at the core, most SaaS apps are just web-centric, modern-looking pieces of software. Few are truly taking advantage of what that web-centricity (network effect) really means. So many companies – especially developers – are like “look at how dynamic our screens can be” how “configurable” or “mutable” or blah blah blah. Okay, great. If your app is so freakin’ dynamic, how come everyone who enters your app for the first time comes in through the same process? They have the same experience, even though they came in with different intent, from different sources, etc. Your “dynamic” web app is doing nothing to serve the dynamic nature of your audience. Let’s say you have an Accounting app that also does Payroll and Invoicing. You might have 3 different PPC campaigns setup for those three different functions of your app. You might even do it right ([see #2](#2) above) and have dedicated landing pages for those campaigns. But when they sign-up for your app, they all go to through the same “funnel” into the app and have the same in-app experience. If I’m looking for Invoicing, I probably should start there, right? Maybe customize the messaging in-app for Invoicing. Or what if I launch a WordPress plugin for my app? I get coverage about this new plugin, I add it to the WordPress plugin directory, etc. Someone comes from that directory to my app, they sign-up, and then what? They get dumped into the app just like everyone else and…. mention of WordPress integration is nowhere to be found. Instead, info on configuring the WordPress plugin is like 15 screens away. So I leave. I leave your app and I deactivate and delete the plugin. Why? Because you don’t get it. When I come in from a WordPress Plugin source, make that information – what I need to see in order to activate that plugin – front and center. Do I need an API key? Did I come from WordPress.org? That’s the first thing I see after sign-up and *maybe* some basic account info. If I have to give you anything, fine, just tell me I’m “x steps from activating my WordPress Plugin”. What about time of day? If someone searches at night (local time) and sees a specific AdWords ad (did you know you can show different ads based on the time of day!?!?!?) and goes to a landing page specific to that time of day, what they see in the app maybe should be different, right? Think about someone searching for a Project Management app at 11PM local time. Why? Why are they doing that? Maybe they’re fed-up with what they have? Maybe the first thing you show them is an import utility from their existing solution. Take advantage of that late-night frustration right then. During the day, they may need to go through more stuff to get to know, like, and trust your product before they import their existing stuff. But late at night (and based on frustration intent) they’re not evaluating… they’re looking for a way to switch. Now. Give it to ’em! Anyway, game designers have a metric for this called Entry Event Distribution (EED) that breaks down the first actions users perform when they come into your game. We should apply that thinking to SaaS apps. [|Back to Table of Contents|](#toc) ## 22. (Bonus!) Use your imagination! What we call Growth Hacking today, and what it’s been forever and what it’ll be later – Marketing – isn’t just about tactics. Tactics change. Tactics are different for every situation. No, it’s about a mindset of understanding customer and user behavior as well as market dynamics and what’s technically possible – or should be – and using your imagination to make it happen. There are no rules here… just a way of thinking about stuff. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Sales Funnel: Stop Optimizing for the Wrong Customers *August 8, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-sales-funnel/ “OMG… That’s not who’s signing up for my app!” exclaimed Jerry, after we discovered who his ideal customers are and that he’s been optimizing his Sales Funnel for the wrong customers. You see, Jerry owns a custom software dev shop that spun-out a web app they used internally for managing parts of their business as SaaS. He was stressed – to say the least – since his SaaS product hadn’t taken off like he wanted. In fact… to say he was completely frustrated with his progress would be an understatement. I mean he was fed up, man… the original “had it up to here.” But we figured out what was wrong, and now Jerry is a happy man. ## A Broken, Leaky SaaS Sales Funnel Jerry told me that he didn’t know what was wrong… …he kept “optimizing” the marketing site, the on-boarding and engagement process, kept running and testing new ads on BuySellAds, he even created an email course for those who weren’t ready to buy yet so he could nurture them. He was doing everything he’s supposed to do, right? So where are the freakin’ paying customers!?!?! It turns out he wasn’t without “traction”… people were signing up for his Free Trial, and some were even becoming “active” users. But no paid conversions. Nothing. Nathin. Nada. In fact, because of that, whenever he would get a sign-up for his Free Trial it was more frustrating than something to celebrate. All of these people trying his stuff and not converting to paying customers… that’s it! ## Punishing Prospects Won’t Help Conversions! Jerry told me that he was done messing around and it was time to get serious with his Free Trial conversions. First… no more 30-day free trials for you… he was going to take it down to 7 days! Oh… and you have the audacity to want to evaluate his software without a credit card? No way, son. Not anymore! Time to put up that Credit Card wall! Yep, he basically wanted to trap people and make them have to actively cancel the subscription and payments if they wanted out. > Knee-jerk reaction to low Free Trial-to-paid conversions: reduce trial time & require a Credit Card to start. You sure that's the best move? - Lincoln Murphy (@lincolnmurphy) [August 1, 2013](https://twitter.com/lincolnmurphy/status/363075945118588928?ref_src=twsrc%5Etfw) So I let him vent a bit, get a lot of stuff off his chest, then I told him those were [100% the wrong things to do](https://sixteenventures.com/shorter-free-trials) and would likely result in even fewer people trying his product (there wasn’t a whole lot of downward potential, but it was there). Okay… so he’s calm. But where do we go from here? ## Who’s Your Ideal Customer? I’ve talked at length before about [the need to define an ideal customer](https://sixteenventures.com/ideal-customer), but it often falls on ears that don’t want to hear that you need to do that, and Jerry was exactly like everyone else. But I asked him to just humor me for a minute and talk about who he thought his ideal customer for this SaaS app was. And by Ideal Customer, I mean the type of customer who would immediately see the value in this product and who – once they started – would quickly start to realize value from the offering. It was amazing… Jerry went from frustrated to speaking passionately as he described who would benefit from this product. He said his Ideal Customer was just like his software development company: a specific range of employees, adherence to certain methodologies, working with certain types of customers in certain ways, etc. That criteria would yield a customer that instantly understood the value of the SaaS app, would quickly realize value once they started using it, and would continue to realize value for years to come. Oh, and it didn’t hurt that he figured these would also be the most profitable customers, stay the longest, etc. What really helped this process along though, was another exercise… ## Who’s the Wrong Customer? - Who won’t see the value in your offering? - Who won’t recognize value quickly once they are in the app? - Who will need lots of help and support? - Who is the functionality and feature set  – current and planned – of this offering simply not a good fit for? And then it hit him like a ton of bricks… ## The Wrong Customers are Signing-Up! He realized as he was describing his ‘wrong customers’ that those are exactly the people that are signing up for his product! Even more, he realized that those are the ones he’s been targeting inadvertently with his advertising. And since his marketing site doesn’t clearly state who the product is for – and in the process who it isn’t for – it isn’t until they get into the app that they realize it isn’t for them… … and then – of course – they don’t convert. Putting up a Credit Card wall or reducing the Free Trial length to 7 days would not fix that. In fact, the CC-wall would probably just irritate people who thought it was for them and quickly realized it wasn’t. Ugh… and for those who got charged – forced continuity – this would leave a very bad taste in their mouth, right? Due to this exercise, he realized that he’s actively attracting people from the “wrong customer” bucket and those in the “ideal customer” category, well, they’re nowhere to be found! He was like “wow… so much time and money wasted!” But I quickly steered us back on track; who cares what’s happened in the past… all we can do is move forward. And to do that, we’ll… ## Optimize the SaaS Sales Funnel the Right Way Moving forward for Jerry means keeping his “ideal customer” definition in mind in as he develops every aspect of his SaaS sales funnel. It also meant that – with his “Ideal Customer” definition in mind – I could review his Sales Funnel and look for the bottlenecks, barriers, and other blunders that are going to hinder his customer acquisition efforts. Having the additional context of his ideal customers and their expected or known behaviors helps me look at the Sales Funnel from the correct POV and not just mine as a “SaaS expert.” [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Freemium Customer Acquisition Costs *July 25, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/freemium-customer-acquisition-costs/ I got an email the other day asking about Freemium Customer Acquisition Costs (CAC) and whether or not to include the cost of supporting and marketing to free users in the cost of acquiring paying customers. Here’s my quick answer and some other resources for you to check out. ## The Question about Freemium Customer Acquisition Costs > *“Question for you – do you feel that all costs of supporting the free users should be included in the cost of acquisition of a customer? Further, when calculating the CAC should we consider the average lifetime of a free user and multiply that by the monthly cost of supporting a free user? An example would be support, hosting and banking integration fees (in our case).* > *“For example, the lifetime of a free user is 12 months. The monthly cost of supporting the free user is $2. Therefore the lifetime cost of supporting the average user is $24 – regardless of whether or not they convert to a customer.”* ## My Answer on calculating Freemium Customer Acquisition Costs Generally, you would include all of the support and marketing costs for the free users in the CAC. I say generally because it depends on many factors, not the least of which are your CFO and investor’s points of view on this subject. But generally, yes. That means if it costs $24 per free user per year to support them (assuming that is also inclusive of whatever marketing costs are required to get the free user to the site, get ’em signed-up and on-boarded, etc.), then it would cost $2,400/year to support 100 free users. If you have a 3% conversion rate on an annual cohort of 100 users (that’s somewhere near the typical conversion rate for the BEST Freemium companies, BTW), that would be a total of $2400 to support them, and the CAC based on the 3 that become customers would be $800. If the Life time Value (LTV) of a paying customer is < $800, that’s probably not good. If the LTV of a paying customer is > $800, that’s at least heading in the right direction. Now, there are obviously other things to consider here – this is hardly a well crafted financial model – but the idea is there. And of course if you’re using other methods to monetize the free users – advertising, network effect data aggregation, etc. –  then this becomes even more convoluted. But – generally – you’re on the right track. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # No More Email from Your SaaS App? Introducing GMail Tabbed Inbox and Categories *July 24, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-marketing-gmail-tabbed-inbox/ **Attention SaaS Providers: If you use email in any way to communicate with your users, customers, and prospects, you should care about GMail’s recent additions: Tabbed Inbox and Categories.** As a SaaS provider, you leverage email for marketing with things like your newsletters and your Free Trial follow-up sequence. But you also send [transactional messages](https://sixteenventures.com/saas-transactional-email) like activity reports, password reset notices, and dunning messages. So yeah, even in 2013, email a major communications channel between you and your customers, users, and prospects. And since GMail has roughly 450,000,000 users with 5,000,000 Google Apps for Business users, chances are – especially if you sell to the SMB market, startups, entrepreneurs, freelancers, oh, and governments and schools – a non-trivial portion of your audience is probably using GMail. If you’ve seen your open and click-through rates go down recently, it could very well be due to these changes. If you haven’t experience that, consider that you might as Google rolls out Tabbed Inbox and Categories to their Business users. So, again, if you use email for anything, since a large portion of your audience is likely using GMail… you should absolutely care about these recent changes, what they mean for the future, and how to work around and with them. Since I posted this, I’ve had a lot of feedback and some time to think about things… ***(Update #4: August 14, 2013 @ 11:30AM Central)*** So it’s been a couple of weeks since I first published this post and it finally dawned on me why Google added Tabs to GMail. Some of you are ahead of me. I was so caught up in the still very real issue of “Crap! My emails aren’t gonna get read…” that I didn’t take any time to think about why Google did this. But over the last few days lot of people have been complaining about ads showing up in the different tabs in GMail that look like emails, only you can’t unsubscribe (because they’re not emails… they’re what allow you to use GMail for free; you’re the product.) Some people are saying this violates the CAN-SPAM rules, but they clearly haven’t read the rules so who cares what they say. However… listening to all of that made me realize exactly why Google did this… more tabs = more ads displayed. Duh. Sorry I didn’t catch that one earlier. So whether its a faux email that’s just a sponsored post in your “email feed” or something that looks more akin to traditional GMail ads, this is why Google did this. The more tabs you have, the more ads you’ll see (and maybe click) in one GMail session. Genius. Love it. But they’re still messing with my email engagement rates and for that reason, I still hate this change. But it’s genius. ***(UPDATE #3)*** From [@the_neil on Twitter](https://twitter.com/lincolnmurphy/status/360463997239164928):“In Google Apps w/o Tabbed Inbox, the categories are filters not separate folders. All mail still goes to inbox.” My response was “hmm… not for me and others I’ve heard from. Good to know it works okay for you though.” To elaborate on that a bit… It seems that how you’ve been interacting with the senders of email that would be marked Social, Updates, or Promotions prior to the rollout of these features will dictate whether they are tagged with “inbox” in addition to the other tags. For instance, I get emails from several people and companies that I never open, but I like to see what they’re talking about, how often they send, etc. Since I never “interacted” with those messages in the past – or rarely did – they seem to end up in Promotions without the “inbox” tag, and therefor do not show up in my inbox. My hypothesis is, then, if you get someone to subscribe to your list or sign-up for your app for the first time, you need to get them to open, click, and reply to your emails (as I say in the video) so that they will continue to show up in your inbox. What we don’t know is this: will emails to your new subscribers show up (consistently) in the inbox as well as the other categories at first and then stop going to the inbox when “interaction” goes down? Dunno yet… but that’s a great reason to drive engagement with those emails! ***(UPDATE #2)*** Another piece of feedback I got is this: *“Categories and the new inbox view don’t affect desktop mail clients and iOS mail clients, only people that use Official Google web/html client.”* Unfortunately, that seems to not be accurate – at least the iOS part – as I just checked my Promotions category, and there are emails in there that did not make their way to my iPhone. As I note in the video below, I don’t have tabs enabled in my primary GMail account, but categories are still there, and if you don’t have tabs… you would forever miss those emails. This is not cool! ***(UPDATE #1)*** I posted one piece of feedback – and my response – about whether or not the node.js script I included here will find 100% of GMail users (spoiler alert: it won’t… but don’t ignore it, either). You can read that in the [Code section below](#code). Okay, so I created several resources on this topic and I’ve embedded or linked to them all below. - There’s a [video to watch](#video) - You can get the slides [on Slideshare](#slides). - You can get my [node.js script](#code) that takes email addresses and determines if they’re using GMail ## Video: How gmail Tabbed Inbox and Categories Can Hurt Your SaaS Business… and what to do about it. ## Slides from the video presentation ** [How gmail Tabbed Inbox and Categories Can Hurt Your SaaS Business… and what to do about it.](https://www.slideshare.net/lincolnmurphy/saas-providers-how-gmail) ** from **[Lincoln Murphy](https://www.slideshare.net/lincolnmurphy)** ## Code: node.js script to check if an email address uses GMail After I published this, I got this feedback: *“BTW, you can’t be 100% sure that you will know if the recipients are on GMail by checking the MX records and the @gmail. For example, my company – several of us including me – use the free Gmail but we don’t have Gmail in our MX record and we also don’t have @gmail.com. We’ve set GMail to hit our mail server and grab the emails. I’m not sure what percentage of folks do this.”* I hope I never said this was a 100% fool-proof solution… it’s a hack… a smoke test; at least the code part (below). The bigger idea of paying attention to – and reacting appropriately – to GMail changes is not a hack and is the much bigger point here. Remember, developers and vendors (you and me included) often have weird, convoluted setups… but that’s just us. It’s quite likely you aren’t your customer. (unless you are, then that’s fine… just know the difference). Contrast that with ‘normal people’ who just follow the rules. And the rules state, when you add a custom domain to GMail, the default way is to [use the MX records I’m looking for in the script below](http://support.google.com/a/bin/answer.py?hl=en&answer=174125). There will always be exceptions, edge cases, etc…. but the rules will generally be enough to show if this is an issue or not. Okay, [here’s the code](https://gist.github.com/lincolnmurphy/6066175)… [](https://gist.github.com/lincolnmurphy/6066175) Oh, and when I ran my script on my mailing list, it told me that well over 50% of those with their own domain name actually use GMail; while your mileage may vary, that’s an awful lot of folks that might not get my emails, so I’m concerned. You should be, too. For immediate consultation and advice on how to deal with GMail tabbed inbox or email marketing in general, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing: Are you Lazy or Deliberate? *July 21, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-marketing-lazy-deliberate/ When it comes to SaaS marketing, we know that [Random Effort Yields Random Results](https://sixteenventures.com/random-saas-marketing)… but it gets worse. The problem I see too often – and the catalyst for this epic post – isn’t Random Marketing, but what I call Lazy Marketing. And lazy marketing is perhaps a more insidious form of marketing, if for no other reason than the fact that it looks like its working.[](http://dsc.discovery.com/tv-shows/fast-n-loud) It’s not until you take a step back and examine what’s really going on – the actual results – that you see it is not only not working… … but it’s killing your business. It’s time to stop being lazy and get deliberate with your marketing. ## Marketing Lessons from Reality TV? When I got home from NYC the other day, I decided to see what was on the ol’ DVR…. and – of course – I can’t just enjoy TV; I have to look for business lessons! It turns out I had recorded an episode of Fast-N-Loud – a show on the Discovery Channel about fixing up and selling old cars that happens to be filmed at the Gas Monkey Garage here in Dallas. On this episode (like every episode), the owner needed some fast cash. He wanted a quick way to sell his cars and he thought taking them to an auction in Tulsa, Oklahoma was just the ticket. Now, I can’t remember the exact amounts, but I think he needed $15k and $30k to break even on the two cars respectively. To ensure the cars sold, he did them without a reserve… … and sold the first one for $10k and the other for $15k. He lost $20k for the privilege of making a quick sale! And it got me thinking… If he had taken the time it took to drive from Dallas to Tulsa (about 4 hours) and instead used it to do some or all of these: - Place ads online - Do some forum marketing - Email his in-house list - Make calls to collectors he’s sold to before - Called some auto brokers - Put the car on ebay (still an auction, but a much large potential customer base) I bet he could have sold those cars for at least what he was into ’em for…. and maybe even made a profit. If he had simply taken the time to go out and find his own customers and be deliberate with his marketing, he likely wouldn’t have lost so much money. Sure, it might not have made for such good TV – who wants to watch someone do forum marketing other than me – but it would have been a better option than the auction. Instead, he got desperate, needed some cash, and rather than doing the right thing and going out and marketing the cars deliberately, he took the easy way out… … and it cost him. Now, I know it’s TV and is possibly/probably contrived, but the lesson stands. However… that show got me thinking about other businesses that act the same way. ## Lazy Marketing Attracts Bad Customers I’ve got two fitness businesses and a yoga center in my life that have all – at one time or another – turned to Groupon for “customers.” These businesses are run by subject matter experts who are absolutely, 100% dedicated to – and passionate about – their craft and the success of their clients… … but who full-on refuse to learn about marketing (or don’t think they can). They run on the narrowest of margins (often on the wrong side of breaking even) and they frequently get desperate for revenue. And since “real marketing” costs money, they turn to things like Groupon that are “free” – i.e. don’t require upfront money but ***COST YOU DEARLY*** in the end – and of course, they immediately regret the decision (“if only there was another way…”). Much like the car guy on TV, they get desperate, need the cash, and take the easy way out, selling yoga classes or fitness boot camp sessions for literally $0.50ea w/ 53% going to Groupon. But, they sell a bunch and eventually get a couple thousand bucks from Groupon to keep the lights on… for now. Of course Groupon doesn’t bring in real customers, just deal-seekers that will move on to the next deal somewhere else once their Groupon expires, meaning they obviously aren’t candidates for up-sells or to become long-term customers. Basically, if I asked “who’s your ideal customer?” to these business owners and then compared the answer to who comes in through Groupon, it would be like comparing apples to… something that isn’t an apple. I don’t know. A brick? Oh, and these new “customers” are the ones most likely to complain, not adhere to proper etiquette and other rules, and – because there are so many of them and they’re typically unruly – these folks chase away the loyal, full-rate-paying clients that have always been there and ARE their “ideal customer.” And this brings me to a discussion I had with my buddy Alex the other day. ## You Need Professional Help… Alex’s wife is a Psychiatrist with a private practice and she doesn’t take insurance; just cash or Square… that’s it. Other doctors have told her that she should take insurance because “she’ll always have a steady flow of patients.” But Alex said – and I agree – if she takes insurance, since she’d only get paid a fraction of what she get’s today per patient (at least a month later, too!), she’d have to work at least three-times as much to make the exact same money she does today! More work, longer hours, more overhead (paperwork, staff, etc.), more headaches, longer to get paid, etc. She would have to change her lifestyle and basically run a different kind of business, all for the privilege of “not having to worry about getting customers.” Or… she could devise a marketing strategy, execute on that consistently and be in control of her own destiny. And let me be clear… in her case this “marketing strategy” would literally be as simple as weekly personal outreach to current and potential referral partners (other doctors, basically), thus ensuring a steady stream of ***HIGH VALUE***, ideal customers. And Alex even suggested she take their son who’s just a few months old with her as an ice breaker! Talk about an effective weapon in getting past so-called gate keepers… a cute little baby boy! ## Lazy Marketing Opportunities Are Everywhere Look, every industry / market / niche has several methods to “quickly and easily” get low-value customers. Every company has the option to use some type of “lazy” marketing. Every business has the ability to rely on others to bring them low-value customers. But just because you can, doesn’t mean you should. Successful companies engage in deliberate marketing, find their own customers, and control their own destiny! ## How SaaS Companies use Lazy Marketing In SaaS, examples of lazy marketing are: - Hope (you built it… so where are they?) - [Copying Others](https://sixteenventures.com/saas-marketing-plan-growth-copyists) (get Original! h/t to [Anthony Nygren](http://www.linkedin.com/pub/anthony-nygren/2/57/b91/) for this addition) - AdWords… doing it poorly and hoping it works - Using coupon codes and deep discounts (esp. annuals that kill LTV!) - Trying to be the low-price leader - Using free to “lower the barrier to entry” w/ no real way of converting - Piggybacking off of those who’ve built a following of deal-seekers (like AppSumo, MightyDeals, etc.) I could go on and on… but you get the picture. Now, I’m not saying don’t participate in Joint Venture deals or offer coupon codes… I’m saying don’t rely on these as the main method of customer acquisition. You have to know the parameters of your situation and work accordingly. ## Deliberate Marketing Takes Various Forms I know a new company that did $60M in revenue in the last year with almost 100% of that coming through affiliates. Am I saying they were wrong for using others to send them customers? That they weren’t doing “deliberate” marketing because they relied on affiliates? No way… Not at all… In fact, they decided early on to be ***VERY*** deliberate in their marketing… to the affiliates themselves! They knew that it was going to be virtually impossible to disrupt the industry they were entering by going directly to the end-customer; too much time and money would be required. So they decided to go to those who had the end-users as their customers already. In fact, they went to people who were already top affiliates for their competitors’ products… and made them a ***BETTER*** deal. So even though they used intermediaries, they were deliberate about it. They knew who they were and went after them aggressively. They didn’t just stick an Affiliates link at the bottom of their page that went to ShareASale or some other low-end Affiliate network where you dump your product out there and hope people sell it for you… … only to determine a week later that “Affiliate Marketing doesn’t work.” No, they were deliberate. They knew who the end customers were and worked deliberately and aggressively to find people who had relationships with those people already. And they didn’t stop once they signed-up the affiliates like most people do. They worked with them, learned from them, and shared back to everyone what they found out was working, what wasn’t, etc. The more successful they could make their affiliates, the more successful they would be. Simple. Not easy… but simple. ## Is Your Lazy Marketing Paying Off? Look, [you have to know who your ideal customer is](https://sixteenventures.com/ideal-customer) and go after them… and that will look very different for you vs. some other SaaS offering; even in your same product category and at a competitive price. Here’s a quick exercise for you: figure out who your ideal customer is and then compare that to who comes in from each of your marketing methods. Are those who come in from your “lazy” marketing channels your “ideal customer?” If not, that’s a problem. That’s very likely why your churn rate is high, your sign-ups are low, and your Free Trial has a horrible conversion rate. Remember… anybody can sell cheap stuff… and anybody can sell your stuff at an unsustainable discount. Anybody can take the easy way out… and anybody can help you take the easy way out! Anybody can go the route of not having to think… and lot’s of people will offer to help you not have to think! But there’s a high tax on “not having to think.” There’s a high cost to taking the easy way out. You need to understand and appreciate how being in control of your own marketing – getting your own customers on your own terms – is the key to longevity, scale, and ultimately… success. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Churn: Measure Revenue or Customer Retention? *July 15, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-churn-revenue-customer/ Okay, this is it… finally, my definitive answer on measuring SaaS churn! I’ve heard it all before… things like “Lincoln, you talk about churn a lot, but you don’t ever say anything!” First, that’s just hurtful. Second, all of these “how do I measure the success of a SaaS business?” questions depend on so many different factors, it’s super-hard to generalize. Wait… let me re-phrase that. It’s super-easy to generalize; it’s just hard if you care about sending the wrong message. And I don’t want to send the wrong message, so I’ve laid it out as simply as I can. ## All SaaS Churn is Not Created Equal The reality is, the “rules” for B2B SaaS apply – if they even do – very differently to B2C SaaS. And within B2B SaaS, the things that work for low-touch, self-service apps (departmental, productivity, line of business) are often quite different than for “enterprise” B2B SaaS (which looks an awful lot like the enterprise software business). You can have three companies that are “Software-as-a-Service” that all leverage the SaaS Business Architecture and they could all be completely different in their goals, their customers, the stage of the company, their funding, their target market, their price, their sales process, etc. Oh, and ALL three of those could be Project Management products! So with that backdrop, it should be easy to understand how things like how you calculate – and the value you put on – your churn metrics might vary a bit from company to company, right? But I know you want that definitive answer, so here’s my best attempt (chocked full of weasel words). In a business where your goal is to generate revenue, measuring revenue churn or Dollar Revenue Retention (DRR) is probably the way to go. Maybe. ## A New SaaS Churn Metric: Dollar Revenue Retention Let me take a moment to further clarify Dollar Revenue Retention or DRR. DRR is basically revenue renewal values – the dollars that renew – and is generally measured on an annual and/or cohort basis. It doesn’t take into consideration – nor does it care about – the number of *customers* retained/renewed… just the number of Dollars (or Euros, Yen, Krona, etc.). So, if you use up-sells, cross-sells, and otherwise charge more for additional/expanded use of your SaaS product, you very well could have lost customers, but had your DRR stay constant or – ideally – grow! On the flip side, you could keep all of your customers – have 100% customer renewal or 0% customer churn – but lose revenue and have a DRR less than 100% due to down-sells, discounts, refunds, credits, or a reduction in use by your customers. Now, if you’re reporting these numbers to your board of directors and investors, as Nick Mehta, CEO of [Gainsight](http://gainsight.com) and who’s also on several boards told me, they actually like to see existing DRR separated from growth/up-sell. This way – Nick explained – they can clearly see the “headwind” of customers not renewing or downgrading and not have it hidden by up-sells. In general, you might see DRR used like this on a cohort basis: “Annual DRR for those that signed-up in January was 95%, but for those that signed-up in Feb it was 137% … let’s get more customers like the ones we got in Feb.” If DRR is 100%, that simply means the company renewed 100% of the revenue from last year… nice, but not up and to the right like the board would really like to see, right? ## Enterprise SaaS Churn: Where the Big Boys Play If your company is Enterprise B2B SaaS, many VCs are saying that DRR of 110% per year is ideal and the more meaningful “churn” metric for companies like yours. In fact, those same VCs ([top firms like Bessemer, Sequoia, Battery, etc.](http://www.gainsight.com/blog/vcs-want-you-take-customer-success-seriously)) say that even if you lose 5% of your customers per year (95% customer/logo retention being ideal for E-B2B SaaS companies according to those VCs), if your DRR is 110% – meaning you grew revenue over last year in-spite of losing customers – you’re doing great. One company I talked to the other day had 137% DRR. Not bad, right? But what about non-Enterprise B2B SaaS companies? What about B2C SaaS? Those that use one of the 7 different flavors of Freemium? There aren’t benchmarks that I know of (that matter) because within those different “categories” you have so many variables it’s crazy… …which is why most research firms aggregate and generalize and why I find it difficult to put much stock in those reports even though it’s tempting. But, again, if you’re in a business where your goal is to generate revenue, DRR is probably your go-to metric when measuring churn or retention. Possibly. ## Venture Capitalists are Driving DRR Use BTW, if you haven’t seen the term DRR before, that’s because it’s a relatively new term – well, it could’ve been around 1,000 years, but it’s relatively new in the SaaS biz AFAIK – so if you aren’t familiar with it, it’s just another way of saying “negative churn due to expansion revenue.” That all said… keep in mind where it’s coming from… Venture Capital firms. VCs primarily have a financial interest in the companies they invest in, so DRR becomes a nice, clean number to report progress (or lack thereof) to them with respect to churn. And since everyone listens to VCs (they have your money in their pocket, right? Of course you’ll listen to them!), things like DRR will instantly become the only thing we care about. But is this a good idea? Is DRR the end-all, be-all when it comes to churn? ## Is DRR the Only SaaS Churn Metric that Matters? No, I don’t think we should completely dismiss customer churn, even if DRR becomes the go-to standard for measuring churn. Why? Simple… if you’re losing customers (even if you’re growing revenue with the remaining customers), something is wrong. It might be that you are: - attracting the wrong audience in the first place - mis-spending on customer acquisition (likely over-spending) - without an “ideal customer” definition - wasting time / effort / energy dealing with low-value customers - messing things up at different parts of the customer lifecycle and causing some cohort to not engage / dis-engage and leave I could go on, but you get the picture. Even if you actively jettison “bad” customers, eventually that should level off as you clear those guys out, so that shouldn’t factor into your customer churn metrics on an ongoing basis, right? Can we agree that after you fire your low-value customers, if you *still* have customer churn, something is wrong? Okay, good. So right now DRR looks good, but if Customer Retention is getting worse, your DRR could eventually be affected and… … profitability could start to be negatively impacted. ## Losing Customers is Bad… Fix It So while Revenue is the key metric to pay attention to vis-a-vis churn, profit is the key indicator of your overall business success, right? (theoretically at least) Where DRR is >100% per year, those individual customers might be quite profitable, and if DRR in aggregate is >100% per year, things might look really good. But the customers that churn out – even if their lost revenue is offset by expansion revenue from other customers – will still have a cost associated with them: they still have an acquisition cost (CAC), they still have a support cost, and they are likely a drag on growth and a drain on resources in many other ways. I just can’t see how turning-and-burning low-value customers does anything to positively affect bottom-line profit so, while revenue churn is the thing to focus on, that doesn’t mean you can let overall customer churn go unchecked. So – definitively – what the key churn metric should be for an Enterprise SaaS company vs. a non-Enterprise B2B SaaS provider vs. a B2C SaaS… vs. Freemium vs. Free vs whatever is… unfortunately,… it depends. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing: Random Effort Yields Random Results *July 3, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/random-saas-marketing/ Never is it more clear that random effort yields random results than when you look at the “marketing” of far too many SaaS companies…. maybe even yours. Take a look at a SaaS company that’s stagnating or failing to reach their goals, and you almost always find this random hodgepodge of tactics that they “tried” at one time or another. Search for their company name on Google and you’ll see ’em listed in a few app directories, you’ll find a press release or two, and maybe you’ll see a guest post from them on a third-party blog. Then look at their site and you’ll find Analytics and A/B testing code, and even a newsletter subscription box, chat widget, or micro-survey embedded (often all of those!). But if you explore behind the curtain, you’ll see that those aren’t really used the right way… if they’re used at all. You’ll also find that they have a few PPC campaigns in their AdWords account, though they’re probably paused right now… …but they activate ’em every once in a while (without changes) and throw a few hundred bucks at it just to see if the ads work this time. (spoiler alert: they won’t) Each of those things – these marketing tactics – were “tried” and when they didn’t yield extraordinarily massive results instantly, they were deemed a failure and the company moved onto the next thing. Now, this either means that these tactics simply never work (which is obviously not true)… …or we can say that these companies don’t have a clear strategy within which to execute said tactics, setting themselves up for failure or at least sub-optimal results from the outset. The latter is more like it and exactly why I say… ***Random effort yields random results.*** If you’re honest, you’ll admit that clearly, very successful companies don’t just throw stuff at the wall to see what sticks, right? Right… there’s a method to their madness. And yes, while they often “try stuff” to see what works, even then it’s a hypothesis based around known or expected customer behavior and market knowledge… …not a random bit of hope. In fact, successful companies are always trying new things – including growth hacking – because they understand that it takes a mixture of tactics that each work well to reach any level of real scale. Rarely is the hockey stick growth you seek the result of one simple tactic. Just as rarely does that hockey stick growth come from random tactics thrown at the market to see what sticks. Successful companies constantly level-set so they know where they are. And they constantly reevaluate their goals so they know where they want to go. And they create a map to get there. That map, my friend, is their marketing plan. They have a plan – a living, breathing, constantly evolving one – because they know that… ***Random effort yields random results.*** And they also know that you can’t scale random. So remember… it’s probably not the individual tactics that aren’t producing the results you seek… …it’s your lack of an overall marketing strategy. ***Random effort yields random results.*** Isn’t it time you had predictable growth from intentional effort? [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Growth Hacking: An Interview with Lincoln Murphy *July 1, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-growth-hacking/ After I published “[Rise of the Growth Copyists](https://sixteenventures.com/saas-marketing-plan-growth-copyists)” where I said that really successful SaaS growth hacking is creative and that most just copy others, the guys over at [GrowthHacker.tv](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4) reached out to me and wanted to setup an interview with me. Definitely check it out… a good time was had by all…. ***but before you do, read the rest of this post!*** [](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4) During the[ 75-minute video interview](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4), we deep-dive on such questions as: - What should a SaaS company be thinking about or doing before they start production, to set themselves up for success? - How do smart SaaS companies role out a beta product and what are they trying to achieve? - How should a SaaS company price their offerings? What about freemium? - What is an acceptable churn rate in your experience and what are some ways to lower churn and increase retention? - What are the biggest mistakes that you see SaaS companies make during your consulting? - How did Lincoln Murphy get started working with SaaS companies? <== you probably don’t know this story! But don’t just [go watch the video](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4) yet… there are a couple of things to look out for. ## A Lesson in SaaS Growth Hacking While you’re [watching the video](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4), pay close attention to what growth hacking the Growth Hacker TV (GHtv) guys are doing. For starters, I’m writing about them and [giving you a link watch my video on their site](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4). However, to watch other videos, you’ll have to pay them. Oh, I don’t get anything for sending traffic their way (no affiliate links here; in fact, offering a kickback to those on their interview list would have likely turned them off), but I’m happy to do it since being interviewed by a third-party like this gives me all sorts of street cred. They have 78 interviews up as I type this – with a bunch more in the hopper –  and that means 78 people telling their followers, friends, mailing lists, etc. to go to GHtv and watch their stuff… and some percentage will want to watch other stuff. And those 78 people who they’ve interviewed so far have the audience that GHtv is looking for and who they think they can get to become customers. In fact, most of who they’ve interviewed have a very large audience… and that audience knows, likes, and trusts them. And there’s a lot of overlap in those audiences, from interviewee to interviewee. Those who follow me likely follow Sean Ellis, for example. We’re both on there, we both send traffic there. The level of trust the traffic sent by the interviewees already has ***BEFORE*** they ever get to GHtv is amazing. GHtv must capitalize on that, because it isn’t just getting other people to send traffic their way… it’s what they do with it once it’s there. ## Traffic Means Nothing if You Can’t Capture Value From It They immediately give first-time visitors a one-time-offer to sign-up and get a free month. [](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4) Since it’s a one-hour offer, it’ll be there during the entire time you’re watching most interviews. When you’re done consuming your first interview, you take advantage of that offer. Simple; though my interview is 75 mins, so they might need to tweak the offer a bit. Also, before you click play you’ll see a piece of social proof that says “Warning: 1 out of 29 people who click play become members.” [](https://www.growthhacker.tv/?v=85&sp=422d70bf954ca83db9c4) That little blurb does a lot! It sets the tone that there is a “membership” and thus manages expectations that you will – at some point – likely need to sign-up. It also says that other people – just like you – also become members once a certain action is taken… the latter acts as a simple seed planted in your brain that makes you think you should be consistent with others like you.” Maybe 1 out of 29 isn’t a lot… but it says “the smart ones become members…”and that Growth Hackers are still an elite crowd. So it actually invokes at least two of Robert Cialdini’s Principles of Persuasion: Social Proof + Consistency… maybe a little Scarcity thrown in there, too. And then there’s the orchestrated viral expansion, the further CTAs where they ask for the sale, etc. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Engagement is the key to lowering SaaS Churn *June 22, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-churn-podcast/ If you’re dealing with a high SaaS churn rate,  a lack of customer engagement could be the reason. Customer retention – or conversely customer churn – is a common struggle for expansion-stage SaaS companies, and while some of it may come as “growing pains,” there may be other causes… customer engagement may be the biggest reason. I sat down with the fine folks over at OpenView Partners for this podcast, where we discuss reasons you might be falling into high churn rates and I offered a bunch of tips and tactics for retaining high-quality (high-yield) customers. ## Key Takeaways to Reduce SaaS Churn Head over to the awesome OpenView Partners Sales Lab blog to listen to the Podcast or read the transcript… when you do, these are the key points you’ll take away from it (but I encourage you to still listen!): - ***What is SaaS churn?*** It’s the amount of customers and in turn, revenue, you lose within a timeframe. [0:50] - ***Customer quality over quantity***: It’s natural for an expansion company to have a high churn rate at first. Focus on what you can control: Retaining high-quality customers. [2:10] - ***Engagement is key***. Often times, a high churn rate is the result of poor customer engagement. [6:30] - ***Develop a customer success map***. Successful engagement varies from company to company. Sit down and pinpoint what success means to a customer. [15:00] - ***The seeds of churn are often planted early***. Mismanaging expectations during the sales process leads to a high churn rate later on. [9:15] - ***Keep the conversation going***. Even an unsatisfied customer can offer valuable insight into your product and service. [11:20] Seriously, head over to the awesome OpenView Partners Sales Lab blog to listen to the Podcast or read the transcript. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing: Rise of the Growth Copyists? *May 17, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-marketing-plan-growth-copyists/ Let’s be clear… when it comes to your SaaS marketing plan, finding inspiration in the work of others is very different from copying them outright. The American playwright Wilson Mizner famously said: “If you copy from one author, it’s plagiarism. If you copy from two, it’s research.” So as a SaaS provider, if you copy the pricing pages, free trial sign-up form, viral expansion loops, and follow-up email sequence from several different SaaS vendors, you’re not plagiarizing them… you did “research” and now you’re implementing your learnings, right? I call shenanigans on that… and here’s why. ## SaaS Marketing Plan Best Practices… aren’t always best! Some would consider you a fool to ignore best practices, but if a particular tactic seems like the right thing to do to engage or convert the customer – and is also in the customer’s best interest – then you do it, best practices be damned! That means looking deep and longingly into your customer’s eyes and understanding what’s going on behind those baby blues. What is the customer thinking? What do they need? What’s In It For Them (WIIFT)? This is much easier when you [know who your ideal customer](https://sixteenventures.com/ideal-customer) is in the first place, BTW. But c’mon… that’s hard… so you just copy others. I mean, if it works for other SaaS companies – even if they aren’t in your product category or market position, even if they serve completely different customers than you do – it just *has* to work for you, right? So you find companies that are successful, look at their site, read their follow-up emails, maybe watch some interviews with their founders, and then you full-on rip them off… often word-for-word and very often pixel-for-pixel! ## Imitation is the sincerest form of flattery… and the quickest path to mediocrity Look, there are reasons lots of SaaS providers copy companies like 37 Signals, Dropbox, KISSMetrics, Yammer, and Workday… … and that’s *because those companies didn’t copy* what other SaaS providers were doing! > SaaS Marketing: Imitation is the sincerest form of flattery… and the quickest path to mediocrity [http://t.co/1yEyfX7bpg](http://t.co/1yEyfX7bpg) - Lincoln Murphy (@lincolnmurphy) [May 18, 2013](https://twitter.com/lincolnmurphy/status/335547050227810304?ref_src=twsrc%5Etfw) Instead, those companies thought about the customer and the goals they wanted to achieve and made it happen. They did things that were innovative not just to be innovative, but to achieve their goals. They realized that to grow significantly, they had to think not “outside the box,” but rather inside their customer’s head. Those companies looked to what the customer needed, wanted, and would do to spread the word, and built around that, even if it meant trying something no other SaaS provider had done before! ## Growth Hacker or Growth Copyist? In fact, there’s a fairly noticeable pattern in this business… one SaaS company takes a chance with a different pricing page layout, sales model, new types of viral expansion or a different email follow-up sequence, that chance pays off… and then everyone else starts doing the same thing. Then, while everyone else is busy copying that thing or trying to “learn” more about it or debate its merits on Quora or [GrowthHackers.com](http://growthhackers.com/), that company moves on to the next thing that will catapult them further forward… and the next thing… and the next thing. I wonder how many companies consider themselves to be innovative, but won’t do something unless someone Twitter-famous has already tried it? These companies don’t employ “growth hackers” but rather “growth copyists.” Companies that are copied are copied for a reason… and the companies that copy, well… there’s a reason no one copies them, right? Copying shows that you aren’t thinking about your customer and building the process around them… and that’s a recipe for mediocrity. And you didn’t set out to be mediocre, right? [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Free Trial: Require a Credit Card to begin? *April 25, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-credit-card/ So, should you require a Credit Card to get started in your SaaS Free Trial? ***TL:DR*** – By asking for a Credit Card up front, you will get fewer prospects into your Free Trial with no guarantee of converting more paying customers. Now, if you’d like to know why that is, read on… ## Should We Ask for a Credit Card To Begin a SaaS Free Trial? Okay, so I get questions like this a lot: “*Hi Lincoln what are your thoughts on requiring a Credit Card from new Trial users?* *Right now, we do not require a credit card from folks who are signing up for our 14-Day Trial but I am beginning to rethink that strategy.* *What are your thoughts? Should we or should we not?*“ Without even asking them, I know that this SaaS provider is frustrated by the lack of conversions from Free Trial sign-ups to paying customers and they think requiring a Credit Card up front is the magic bullet that’ll fix everything instantly. It won’t, and apparently I haven’t been clear enough in the past, so let me clarify my stance on this. Asking for a credit card up front (an “opt-out SaaS Free Trial”) does little to help conversions and this is backed up by the fact that I routinely see SaaS vendors with < 20% conversion rates that ask for a credit card up front. Even a 50% conversion rate isn’t great if – as you’ll read below – the overall numbers are terrible. Clearly, asking for a credit card up-front is not a guarantee that you’ll get more customers. ## It’s about Conversions… Not Conversion Rate The only thing I can guarantee with an Opt-Out SaaS Free Trial is that you’ll get less prospective customers into your Free Trial than if you didn’t require a credit card to start. Sure, you might raise your “conversion rate” – the percentage of those who start a trial that become customers – but you will end up with less actual new customers off the same amount of traffic to your site. At least that’s what I’ve seen in my experience. *Conversion Rate* can easily become a vanity metric if you’re not careful. But you know what? It isn’t about whether you ask for the Credit Card up front or not… …it’s about everything that happens after they sign-up. ## You’ve got to Trust the SaaS Free Trial Process Most SaaS providers treat the Free Trial like a black box… literally, a box on a flow chart of the sales process. They look at the Free Trial like this: “free users” enter and 5-10% magically appear 31-days later as paying customers. That’s a stupid, silly, misguided, growth-limiting, and several-other-NSFW-words-way of thinking. First, instead of “free users” consider those who enter your Free Trial to be… prospective customers. That’s [a difficult mindset shift](https://sixteenventures.com/b2b-saas-lies), but one that’s required if you wish to dramatically improve the number of customers your Free Trial produces. Yes, the Free Trial is part of the overall sales process, but the trial itself must be looked at as a process. The first step is getting them to sign-up (with or without the credit card)… but that’s just one step in a process. From there, the Free Trial process must be designed to get the prospect engaged and then to convert them to a paying customer. Read [this post about SaaS trials](https://sixteenventures.com/one-dollar-trial), especially the part about TRUST. Then watch this quick video where I talk about how [whether to ask for a Credit Card is a red herring](https://sixteenventures.com/free-trial-success-secret-should-ask-for-credit-card) issue that distracts us from the real issues. And then watch this somewhat-longer presentation I put together on [a Free Trial metric designed to increase conversions](https://sixteenventures.com/free-trial-metrics). And of course… ## Design Your Product As If You Actually Want Customers You either want customers and to grow your business or you don’t; if you’re the latter, I can’t help you. But if you’re the former, then pay attention. If people can’t figure out how to get started once they’re in your SaaS Free Trial – easily – they won’t. And it’s not because they’re stupid… it’s because they’re super busy and you’ve made them have to work to figure out how to use your product…. which, as I’ve already said, they won’t. Or at least they won’t at scale. Sure, some early adopters might take the time to figure out how your product can help them – in spite of your efforts to the contrary – but this won’t fly at scale. You must have a process that’s repeatable and predictable if you want to scale your business… even if – no, *especially* if – there are Outbound Sales and Professional Services involved! That’s why it must be ***SUPER EASY*** to get them started, to get them to take the second, and third steps, and so on… …otherwise they’ll go back to doing things the way they always have, even if that is less than ideal. Seriously… ## Don’t Confuse Complex with Valuable The status quo is hard to disrupt and your overly-complicated product isn’t helping things. “But our product does so-many things, is so complex, requires multiple people, legacy data seeding, blah blah blah…” everything can be broken down into smaller steps and the process around that simplified (it’s a relative term, I get that). Read about what happens when [people are confused by your product](https://sixteenventures.com/saas-free-trial-engagement) and how that affects their ability to experience all those great features you want them to see. Then take a step back from “functional on-boarding” [and think “engagement”](https://sixteenventures.com/improve-saas-churn-rate-engagement)… Then take “engagement” and [break it down into quick wins](https://sixteenventures.com/saas-customer-success-quick-wins). ## Requiring a Credit Card Can Lead to Higher Churn David Rowley, CTO at [Get Satisfaction](https://getsatisfaction.com/corp/), said in the comments on this post that in his experience, requiring a credit card at the beginning of the SaaS free trial might result in more conversions, but some of those “conversion” might be accidental; the forced continuity and negative option ideas that I talked about in [this post on why $1 trials are a bad idea](https://sixteenventures.com/one-dollar-trial). David said that in his experience, requiring a credit card to start a trial “yields higher churn from ‘accidental’ conversions that later cancel” resulting in more churn, as those accidental conversions figure things out and cancel their subscription. When I saw David’s comment, I assumed I’d covered this somewhere, but after scouring several posts I realize I only hinted at what David said, so it’s great that he brought that up and I thought it warranted an update to this post. This is yet another reason why I often say “the seeds of churn are planted early.” So, whenever I work with a SaaS provider that requires a credit card to start their trial, among other things, I look at retention past the first 60 or 90 days, as well as refunds & chargebacks. Generally, the latter is high and the former is low. That’s why I advise my clients that require a credit card up front to only consider a “conversion” an actual conversion after at least 60 days… and for some, 90 days. That’s 1 or 2 billing cycles beyond the first one when the trial ended and should indicate clear sailing from there. Consider this when figuring out compensation/payouts for sales people and affiliates, too. More than anything, that in itself is yet another reason to not require the credit card to start the trial! But the… ## Biggest SaaS Free Trial Fail? Not Asking for the Sale Yeah… this is kind of important… you must ask for the sale! Remind people that they have only x days left (but be cognizant of “trial countdown blindness”) to increase the sense of urgency. Then make it super obvious and easy for them to become a customer in a way that’s [congruent with the way they want / need to buy](https://sixteenventures.com/develop-pricing-strategy). Many SaaS providers forget to ask for the sale or they don’t want to seem to “salesy” or too aggressive… and that’s why most aren’t as successful as they should be. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Who’s your ideal customer? *April 15, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/ideal-customer/ Over the years I’ve helped hundreds and hundreds of SaaS providers from around the world rapidly accelerate customer acquisition and reduce their SaaS churn rates. And in just about every instance I found myself asking them the same questions. The fact that these questions were not easily answered or – if they were – that the answers were ignored, often shed light on the underlying cause of several different problems my SaaS provider clients faced. From stagnating growth, to unacceptable churn, to a less-than-acceptable ROI on AdWords and other paid traffic spend, it became clear to me that we have a problem. And this problem isn’t small or to be ignored. To the contrary, it is resulting in SaaS provider executives – just like you – going back to their investors and board with less-than-stellar results, for Founders and CEOs of SaaS companies who know they have the best product out there pulling their hair out at the lack of new customers or the super-high churn rates. And for the SaaS CMO and Marketing teams who have implemented rigorous A/B testing programs that are functioning properly but not resulting in statistically significant lift, the crisis is mounting. What is going on here?!?!?! Simple… you’re attracting the wrong audience and here’s why. ## Attracting Your Ideal Customer Is Not an Accident We know that attracting the right customers is critical to growing your SaaS business, and this includes [reducing your SaaS churn rate](https://sixteenventures.com/saas-churn-rate-attract-right-customers). The reality is, you’re not attracting your Ideal Customers, at least in the numbers you’d like, because you either haven’t identified your Ideal Customers or you have, but choose to ignore that fact and continue trying to be all things to everyone so you “don’t miss any opportunities.” But you also know that’s wrong and goes against everything we know to be true in marketing, right? And the rules apply to you just like everyone else, right? Okay. So, to ensure that you’re attracting the right customers, take some time with your team and answer these questions. - [Who’s your ideal customer?](https://sixteenventures.com/ideal-customer-profile) - Would they know they’re your ideal customer if they looked at your marketing site? - Of your current customer base, what percentage does your ideal customer represent? Question #3 is a super-interesting metric that few SaaS companies actually monitor (but should). In fact, when I go through this exercise with a SaaS provider who is struggling to achieve the results they’re looking for, the answer is generally less than 10%, indicating that 90% of their customer base is made up of customers outside the “ideal” spectrum. BTW, I’m very interested to see your answers (especially #3) so [email them to me](mailto:lincoln.murphy@sixteenventures.com) when you’re done. ## Ugh… language! Look… when you don’t know who your ideal customer is, you can’t talk to them using their language. Whether on your marketing site, your ad campaigns, inside your app, through your email follow-up, or even your sales conversations, if you don’t know who you’re talking to you’re in trouble. When you don’t know who your ideal customer is – or aren’t willing to focus on just them to, you know, avoid missing all those other opportunities – you can’t speak the language of that particular audience. We can agree that HR Pros use different words than Chefs who use different words than Attorneys and so on, right? Maybe different tones, formalities, etc. Perhaps they even want different things, have different needs, desires, and so forth, right? Sure. Well, when you try to speak to everyone, you can’t use the words of the HR Pro or the Chef or the Attorney… … instead, you have to drop to the lowest common denominator among every potential customer, which means you aren’t saying anything of value to anyone! Said another way: > People don't buy from you because they understand what you do… they buy from you because you understand what they do. - Lincoln Murphy (@lincolnmurphy) [March 20, 2013](https://twitter.com/lincolnmurphy/status/314346350869356544?ref_src=twsrc%5Etfw) Oh… but the language issue that comes from not speaking to an ideal customer gets even worse for SaaS companies! Because most SaaS companies don’t see themselves as “services” and instead hold on tightly to their technology pedigree, you often won’t stop at “lowest common denominator” language… … nope, you drop even lower and stop talking about the customer at all, instead focusing 100% on your product, features, technology, APIs, and all the other stuff that doesn’t matter when you’re trying to connect with your potential customers (beyond early adopters). And because you should [extend your marketing/sales funnel into your app](https://sixteenventures.com/sell-itself) knowing who you’re attracting will help you create an in-app experience congruent with their needs/desires/expectations. ## Zuora Puts Their Customers Front and Center Look, I can tell when a SaaS company hasn’t identified (or chooses to ignore) their ideal customer before I ever talk to ’em… … because their marketing is all about their product! Which means I’m not surprised when I talk to those same SaaS providers and hear that their business is stagnating, their churn is high, etc. So it’s refreshing to see a company like [Zuora](http://zuora.com) take the opposite tack and really put their customers front & center: [](http://zuora.com) Now, I’m not saying you have to go that far, but what a great example of using your (best) customers to help you resonate with more customers ***LIKE*** them. And something to note here is that [Zuora isn’t a small](http://www.crunchbase.com/company/zuora), vertical-specific company; anyone that fits into the “subscription economy” is a potential customer of theirs. But they know who their Ideal Customers would be and they’re actively marketing to them so they (the ideal customer) will ***KNOW*** that they’re Zuora’s ideal customer, too. Other customers who may not fit into the “ideal” mold aren’t prevented from doing business with Zuora, but by drawing a line in the sand Zuora is saying “these are the types of companies we most want to do business with.” And, frankly (these are my words… Zuora hasn’t been and isn’t a client), Zuora is – by identifying with certain customer types – also subtly pushing less-than-ideal customers away. Zuora, without saying it directly, is indicating that early stage startups and smaller companies might be a better fit for less-complex billing solutions like [Chargify](http://chargify.com/) or [Stripe](https://stripe.com/). But I also happen to know that some companies are starting to outgrow those smaller billing solutions and, as one of the companies I’m working with recently said about Zuora, “we want to be a $250M/ARR company, so we want to use the systems a $250M/ARR SaaS provider would use.” That’s what I call an aspirational customer. So just because you draw a line in the sand and actively try to resonate with your ideal customers, doesn’t mean you won’t get customers from outside that ideal spectrum… it just means you’ll ***DEFINITELY*** get customers within that spectrum, predictably, which is probably different than what you’re experiencing now. ## Get Crystal Clear and Take Action So we know a picture is worth a thousand words, right? Well that product screen shot on your main marketing page is speaking to me loud and clear… you don’t know who your Ideal Customer is or you’re unwilling to draw that line in the sand. And it should be speaking to you, too… but are you listening? You can make some quick changes by simply taking your existing product-centric “sales copy” and replacing it with customer-centric, value-based, actual sales copy. Remember… What’s In It For Them (***WIIFT***)? What will your ideal customer get from your offering? Make that your headline and bullet list, instead of you-centric messaging and lists of features. Then you can evolve from there and spread that messaging throughout the rest of your sales funnel. But it’s at least better than what you have today… …of course, to do that means you have to know who your ideal customer is! So… Who’s your ideal customer? That’s one of the most powerful questions you probably don’t have a clear answer to. It’s time to get clear. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Customer Success: Eliminate ‘Dead Ends’ to Drive Engagement *March 30, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-customer-success-eliminate-dead-ends/ What if I said there was something you were doing right now that was actively reducing your SaaS customer success? What if that thing you’re doing was standing in the way of driving higher levels of engagement and was reducing the amount of expansion revenue you’re generating while potentially increasing churn? What if I said there’s a very good chance you’re doing it right now and don’t even know it? What if I said that it’s easy to fix if you just keep reading? ## Eliminate ‘Dead Ends’ and Improve Engagement Why do I think you’re doing this thing? Because every SaaS provider I’ve worked with has been guilty of creating “dead ends” for their customers… so you probably are, too. Whether it was during the Free Trial, the on-boarding and engagement (first-use or first in-app experience) phase, or during regular use, “dead ends” were everywhere. A “dead end” is anytime you tell a user something – a status update or a metric – but don’t tell them what to do next to improve or capitalize on what you told them. + You had 25 less views this week than last. + Your last campaign resulted in 19 unsubscribes from your mailing list. + You made 5 more sales this week than you did last week. Okay, but now what? Whether it’s good news or bad, don’t just tell them something happened… tell them what to do with the information you’re giving them so they can improve their position… even if their position is good. ## Help them Improve Their Position What if your [email](https://sixteenventures.com/saas-email-marketing) or in-app message said: + You made 5 more sales this week than you did last week.==> Activate the XYZ module and double your sales next week Even if they got a great result this week, that’s a pretty compelling next step (and up-sell opportunity; though only promise what you can deliver, obviously). ## Actively Drive SaaS Customer Success If you can help your customer achieve better results (they don’t have to be sick to get better), they’re more likely to continue to use – and [expand their use of](https://sixteenventures.com/negative-saas-churn-rate) – your SaaS. I originally sent this to my mailing list (you should sign-up and get exclusive SaaS Growth Strategies content before everyone else) and one of the SaaS providers on the list sent me this: *Great advice, as usual. What you wrote below really struck a chord so I had to drop you a note of thanks.* *My team and I were just fawning over [HelloBar’s](http://www.hellobar.com/) performance update emails and considering the same approach – let customers know how they are doing. * *As if it would be some sort of ‘crack’ that would make them want to do better and engage more with the [Friendbuy](http://www.friendbuy.com/) platform. In light of the article below, our copycat strategy would have been a bit idiotic. Your version – to give customers some idea about what they could do with that information – is much more enlightened.* Dead ends hurt engagement and lack of engagement is the number one reason customers leave; eliminate dead ends and watch your business grow! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Customer Success: Start with Quick Wins *March 23, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-customer-success-quick-wins/ SaaS Customer Success starts by orchestrating “Quick Wins” for your customers, helping them bypass their natural tendency to seek out reasons not to use your service! I was in Silicon Valley recently and I found myself talking about this idea of “Quick Wins” several times within the context of SaaS Customer Success and I wanted to share this idea with you, too. This idea of “Quick Wins” is really just an evolution of the [Common Conversion Activity (CCA) metric](https://sixteenventures.com/free-trial-metrics), but adapted for use beyond Free Trials and presented in a way that’s more palatable to… just about everyone, really. ## Kickstart SaaS Customer Success with Quick Wins So the “Quick Wins” idea is a simple concept, but like most simple concepts, it isn’t easy to figure out how it – or in many cases even that it – applies to you. The need for “Quick Wins” is predicated on the idea that you need to get your (prospective) customer to [realize value from your SaaS as quickly as possible](https://sixteenventures.com/saas-customer-onboarding-email), whether it’s their post-sales initial use or during the Free Trial. To do that, think about “Quick Wins” – positive results – that your customers can quickly achieve by using your SaaS. You’ll probably struggle with the idea of “Quick Wins” at first, as you grapple with just how much your SaaS can do, and how much [onboarding](https://sixteenventures.com/customer-onboarding), seeding of data, or integration is required for full adoption across the client enterprise. The first thing to note is that “Quick” is a relative term, so if it normally takes 2-months before your customer gets a “Win” what could you do to get them a “Win” in the relatively “Quick” time of 2-weeks? If it takes 2 days normally, what could they do in 2 hours? ## SaaS Customer Success from the Customer POV So, as you think about how to come up with “Quick Wins” do so from the customer standpoint – not yours or your product’s. Using this perspective, you should be able to come up with a few bite-sized actions your customers can take that will result in a fast, positive outcome for them. For instance, do you really need end-to-end adoption out of the gate or can you activate usage of just one module and give them immediate value? And think about this even if they bought the whole package; this isn’t about how little you can sell them! Or, perhaps your SaaS can integrate with and pull data from their on-premises ERP to produce forecasts for the next 7 years. That’s great, and probably what is needed long-term, but could you get an immediately positive result by using a small, user-generated dataset instead? ## The Psychology of SaaS Customer Success To come up with these “Quick Wins,” think about customer segments based on different use cases, buyer personas, or even pricing levels. [](http://www.influenceatwork.com/)Lincoln Murphy and Dr. Robert Cialdini at a Principles of Persuasion Workshop in Arizona (March 2013) We know all customers aren’t created equal, so the “Quick Wins” for one customer segment might be different than for other segments. And of course, once they get one win, you move them to another, then another [until they’re fully engaged](https://sixteenventures.com/improve-saas-churn-rate-engagement)… it’s a process and you should ensure it is fully orchestrated. There is some real psychology involved with this “Quick Wins” method, including the activation of several of the [Principles of Persuasion](http://www.influenceatwork.com/) put forth by Dr. Robert Cialdini: Reciprocity, Liking, and Consistency. But where Psychology is the reason to employ this “Quick Wins” strategy, the data should be the catalyst, as it generally shows that customers who realize value quickly are the ones that stick around the longest. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Churn Threats: Identify and Retain At-Risk Customers *March 4, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-churn-threats/ Now that you are [attracting the right customers](https://sixteenventures.com/saas-churn-rate-attract-right-customers) and [monitoring for and driving engagement](https://sixteenventures.com/improve-saas-churn-rate-engagement) to lower your SaaS Churn Rate, you need to start monitoring and getting proactive on Churn Threats. SaaS churn threats aren’t just a signal that you have an at-risk customer; these are literally threats to your business, your revenue, your valuation & your ability to grow and they should be taken very seriously. And since churn is a customer lifecycle issue, not just something that happens at the end of the customer lifetime, the seeds of churn are often planted early and they actually start to sprout over the course of the customer lifetime. If you aren’t looking for it, you could miss that your customers are telling you that they’re going to stop paying you at some point very soon. They’re telegraphing their next move and it’s up to you to read the signals and jump into action. ## Get Proactive on SaaS Churn Threats The beauty of the SaaS business model is that you have visibility into the behaviors of your customers… and you should use this to reduce your SaaS churn rate. Specifically, you should be looking for signs that your customer is getting ready to leave and then do something to stop it. However, what you do to stop it – and how you do it – depends entirely on your relationship (or the relationship you ***should*** have) with your customer. If your customer (segment) requires high-touch – perhaps you sell into a relationship-driven market – then make how you reach out to deal with a SaaS churn threat high-touch. You could use a system like [Woopra](http://www.woopra.com/) and set it up to ping your Customer Success team when certain behaviors are detected so they can pick up the phone, move the customer onto a path of realizing value again, and maybe even [get the up-sell to expand revenue](https://sixteenventures.com/negative-saas-churn-rate)! On the other hand, if your customers – or certain customer segments – prefer a self-service model, then how you reach out can be automated… trigger an email to get them to take a particular action – roll your own, use [Vero](http://www.getvero.com/) or [USERcycle](http://usercycle.com/), or use [Intercom’s in-app messaging](https://www.intercom.io/) to communicate directly with the customer inside your SaaS. Continuing the theme from the last post on [monitoring, measuring, and encouraging Customer Engagement](https://sixteenventures.com/improve-saas-churn-rate-engagement), you can see that everything from the high-level strategy around SaaS churn reduction to the low-level tactics we use are all customer-driven. In fact, keeping a customer-centric approach to everything you do will eliminate… ## The Biggest SaaS Churn Threat The biggest churn threat you can monitor for is when your customers are not fully-engaged with your SaaS.[](https://sixteenventures.com/improve-saas-churn-rate-engagement) My definition of engagement is “[when your customer is realizing value from your SaaS](https://sixteenventures.com/improve-saas-churn-rate-engagement)‘ so in my book, the biggest SaaS Churn Threat is lack of engagement at any point in the customer lifecycle. No matter where they are in the customer lifecycle – during their Free Trial, in their first 90 days when they’re just getting started, on day 366, or on day 578 – when your customer fails to realize value from your service – when they aren’t engaged – they’re actions are telling you they probably won’t be sticking around much longer. But if you don’t know what Engagement looks like for your customer or that it is 100% unique to your customer at their specific point in the lifecycle of using your service and aren’t proactively monitoring for that, you might miss it and lose a customer when you really didn’t have to. So [lack of engagement is the absolute top priority Churn Threat](https://sixteenventures.com/improve-saas-churn-rate-engagement) to monitor for and take action against to move your customer back on a path to value recognition. Once you’re monitoring for – and reacting to – the biggest SaaS churn threat of them all, you can expand your Customer Retention campaign to include monitoring for these… ## Common SaaS Churn Threats While Engagement is 100% specific to your customer, your SaaS, and their position within their lifecycle as your customer, there are some common threats to your company that every SaaS provider should monitor for and react to. Now, in addition to some of the more well-known churn threats – like customer-wide usage drop-off  or low scores on a Net Promoter System (NPS) survey – here are four examples of common churn threats to monitor for: **1. Gaming the System** – If you charge for storage (way to commoditize your valuable service, BTW) and people start deleting files, records or other objects to keep from moving to a more expensive pricing tier, they’re likely just buying time until they can find a better solution (perhaps one that *gets* them better than you do)… Sure, you didn’t get your pricing right to begin with, but maybe you can still salvage this customer by reaching out and getting them on the path to value realization. **2. Downloading their Data** – They might be backing their stuff up… or they might be packing up and heading out of town… you should probably find out what’s going on. Might be worth a phone call. **3. Credit Cards Expiring** – Far too many SaaS companies – especially those dealing with SMB customers – get a substantial amount of churn from expired credit cards. Many times the SaaS provider doesn’t want to “bother” the customer (read: wants to hide from the customer) to let them know the card is going to expire. Some might try to salvage the deal after the card expires… but even more will just let the customer go without ever “bothering” them. Others might try offering a substantial discount to get customers on an annual plan, but fail to realize this just cuts their Customer Lifetime Value (CLV) down substantially and prolongs the inevitable (the card will probably be expired when you try to run it 12 months from now, too…) Bottom line, once the card is expired the chances of getting ’em back is much worse than getting them to update the card ahead of time. It’s a big psychological difference… once they aren’t a customer anymore they have to make the decision to once again become a customer rather than just updating some information. So start communicating 60-days out, letting them know the card is going to expire. Call ’em, email ’em, put a notice on their invoice or receipt… include a notice in every email you send out to them – both marketing and transactional – that their card will expire soon. Do something – anything – to keep the card from expiring… unless you don’t care about saving the customer. If you can, subscribe to – or [use a payment processor like Braintree](https://www.braintreepayments.com/) that offers – credit card updater services (Visa/MC/Discover offer these – Amex just does it for you)  and where you can’t – get proactive with your communication. Some cards can’t be updated because they didn’t just (or only) expire… they were cancelled. Those will have to be dealt with manually for sure, but how great would it be to only have to deal with those and not all of the other expired accounts? Look, this is all very simple and there is simply ***NO EXCUSE*** for not at least trying to get the card info updated before it expires. **4. Visiting the Cancel page** – If they get to your cancel page but don’t take action that’s a reason to reach out… did they accidentally get there or were they foreshadowing a future action? Step up and reach out or next time they might hit the cancel button and it’ll be too late. Sure, you can always make that last-ditch phone call to try to save an account (usually by providing some type of discount) after they cancel, but by recognizing behavior early and stepping in to help move your customer to a position of value recognition, you save the customer before they even become a serious churn threat. Okay, those are interesting and could probably save several customers every month if you only implemented those four ideas…  but what about some super-ninja, data-driven, but… ## Less-Common(ly Monitored) SaaS Churn Threats These are SaaS churn threats that are less commonly monitored for, but are fairly common (depending upon product category & market position) and just as detrimental to your customer retention rate and bottom line. **1. Trigger Events**  – The worth of a specific customer to you – either on a monthly basis or over their lifetime – will dictate how much you want or need to invest in this type of thing, but you should at least keep this type of customer intelligence gathering in mind.  It’s often said that the only acceptable churn is when a customer goes out of business or is acquired. Well, acquisitions aren’t always the kiss of death for your relationship with your customer, but M&A activity often requires you to work hard to stay in the mix and that means getting in early. If the first time you hear that your customer is being acquired is when they give that reason for canceling their account, it’s probably too late and that’s your fault. You had options. Look to something like [Dow Jones Factiva Companies & Executives](http://www.dowjones.com/factiva/fce/index.asp) to actively monitor Company-level activity, M&A, good news and bad – they can feed that directly into your CRM or you can hook in via API – to give your Customer Success team a heads-up on what’s going on with your best customers. Or your worst customers so you can just let them go! **2. Your Users Leave the Company** – Factiva will show you when a high-level executive is moving to a different company, but what about the lower-level executives or departmental heads. While those departures are not likely to make news, they are more likely to directly affect your relationship with that company. The person that brought your SaaS into the company might leave, or your internal champion could move on and you are now at risk of being ousted by the person that takes over… they might have a favorite SaaS and that isn’t yours. The problem is you don’t know this because the new person takes over for the person that left and is using their account! But if you leverage a service like [FullContact](http://www.fullcontact.com/), [InsideView](http://www.insideview.com/), or [NetProspex](http://www.netprospex.com/) you can be notified when a person associated with a customer account changes companies. If Sarah is now at ABC Company and her account is still being used at XYZ Company, now’s the time to reach out to XYZ and see what’s going on. Oh, and ABC Company is now an opportunity because Sarah – a longtime user of your SaaS – is now your foot in the door at ABC, right? **3. Account Owners / Administrators Change** – This is different than #2 above because it is a transparent event that takes place completely within your SaaS. And it could be nothing or it could be bad. Does the new owner/admin have experience with your service? Are they an existing user that was promoted to admin or a new addition? Do they have the same level of passion and trust for your service as the last person or are they going to start looking to bring in the SaaS that they’re used to using? How you handle a situation like this could dictate your future with that customer… no matter what, never forget you sell to people – human beings – even in Fortune 500 companies. Oh, and if you see that the person that was replaced is now at a different company because you are using one of the services I mentioned in #2 above… there’s also a new opportunity for you to pursue! **4. Widget Removal** – Many SaaS providers have some type of widget or logic payload that their customers can embed in their site – chat, surveys, opt-in forms, pop-overs, bars, analytics/tracking objects, etc. – and almost all require that this is completed to get to 100% in the on-boarding process. And for many of these companies, this is their entire business model… if a customer deactivates or removes the code from their site, the customer is no longer realizing value from the service and is definitely a churn threat. But few of these companies actively monitor to see if their widget/code is still being served and the ones that do rarely do anything with that knowledge. Don’t miss out on taking action on this super-obvious churn threat. And of course you can take it further by seeing what – if anything – they replaced you with by either directly checking or using something like [BuiltWith](http://builtwith.com/). If they did that before they canceled your account, you’d have more intelligence to leverage to save the account when you talk to them. And if they’re too far gone, well… knowing what they replaced your SaaS with would certainly add some much needed context to their exit survey responses, right? I hope I opened your eyes to some of the things you can look for if you’re really interested in keeping your customers. Of course, if they are determined to leave,  you have to let ’em… but successful SaaS companies create [Cancel Flows](https://sixteenventures.com/growth-hacking-retention#12) to extract value from their departure. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Churn Rate Improvement: Monitor and Drive Engagement *February 25, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/improve-saas-churn-rate-engagement/ In my last post I shared some [actual ways to reduce your SaaS Churn Rate](https://sixteenventures.com/saas-churn-rate-attract-right-customers), including attracting the right customer and managing expectations. In this post, I’m going to go deeper, and share some awesome methods for improving customer retention by leveraging the power of the SaaS business model, specifically the ability of the provider to monitor for and drive Customer Engagement. ## Engagement is Key to Reducing Your SaaS Churn Rate While [this post by Help Scout](https://www.helpscout.net/blog/customer-retention-strategies-that-work/) has some pretty great Customer Retention Strategies – including some links to awesome customer psychology research – it is somewhat typical of churn reduction posts. Everything Help Scout said in that post was awesome and true… I just want to dig deeper into what it really takes to retain a SaaS customer. First of all, you want customers that will actually use your SaaS… this isn’t a gym; the best SaaS customers actually show up and use your service! And successful SaaS providers want ultra-engaged customers and users… …but what is “***engagement***” in the first place? ## Define: Engagement Engagement is a term that get’s thrown around a lot these days in the context of SaaS customer success, but if you ask 10 people to define it you’ll likely get 10 different definitions. While I don’t expect everyone to agree with me, I want you to know how *I* define Engagement so you know where I’m coming from. Engagement is when your customer is realizing value from your SaaS. When you look at engagement that way, it completely changes everything because you look at everything differently. Instead of thinking about engagement as a “product” issue, you can see that it is actually a customer issue. This is what I mean when I say functional on-boarding and “engagement” aren’t the same thing; on-boarding doesn’t require engagement, but engagement probably requires functional on-boarding; it’s required but it’s not enough. Going through the motions and taking some specific actions might be what is functionally required for the customer, but if it isn’t congruent with your customer’s success map (I’ll touch on this later), you don’t have engagement – you have a functionally on-board churn threat – and you’re in trouble! Also, instead of thinking that engagement is this one solitary event, you can see how the customer will change what the value they realize from your service will be over time and you can adjust your “engagement process” over time, too. It makes sense that engagement in a Free Trial is different than engagement after 6-months as a customer, right? So once you understand what engagement is, now you need to… ## Measure Engagement to Improve Your SaaS Churn Rate Now, to measure engagement means understanding what will make the customer find success with your SaaS and ensuring they’re moving along a path that is aligned with their definition of “success” both initially and over the course of their lifetime as a customer. While we might still measure “they did this action” or “they used this feature” at a functional level, if we look at engagement from the customer value realization standpoint, we know *why* they’re doing those things and that tells us whether or not they are engaged. Just as we look at customer segments and [perform cohort analysis to attract the right customers](https://sixteenventures.com/saas-churn-rate-attract-right-customers) through the best channels, we need to segment customers at this stage, too, so we can accurately measure engagement. But remember, not all customers are created equal, so what “engagement” is for one type of customer may not be the same for your other customers; it’s up to you to clearly understand the differences between customer segments! When you look at it that way, you can see that a login, for example, is not engagement. ## Engagement as a Metric to Reduce your SaaS Churn Rate All of this means that the number of logins – often floated as a measure of “engagement”- probably isn’t a meaningful measure of engagement, right? Well, it means that engagement might include 3 logins, but without the context of the customer’s success in mind, we can’t look at individual user activities and say that’s “engagement” or not. In fact, with context, you might discover that 3 logins with no other activity is a potential churn threat (or a potential customer that’s not going to convert) and likely means the user wants to –  but can’t figure out how to – get started!  This is probably a good time to reach out or as a trigger for an email or in-app message that can help them get started. But if you think number of logins itself – as many do but might not admit after reading this – is the same as engagement, you’d overlook a big churn threat and an opportunity to move the customer on a path to realizing value and you’d lose the customer. And that would happen while you think that everything is fine, but still wonder why customers churn out after a short amount of time! But just measuring engagement isn’t enough, you need to… ## Drive Engagement with a Customer Success Map The key take away from everything I’m saying here should be to focus on the customer and not your product, functionality, features, etc. That means the way to figure out what true customer engagement looks like – and what you need to monitor, measure, and encourage – is to map out the path(s) that your customer will take during their Free Trial, over the first 30, 60, 90 days, and continue to map it out from there, keeping it tightly aligned with your customer’s idea of success. And take it further out from there… 6-months, 1-year, etc. No, it’s not supposed to be easy. Yes, it will require a lot of work, including digging through historical data if you’ve been in-market long enough and/or talking to customers, prospects, etc. to glean this information. Look, if you have an estimated (or hopeful) Customer Lifetime of 36 months, how do you expect to get there in a predictable manner at scale (rather than by accident and in-spite of your efforts) if you don’t know what success looks like for your customer 35-months into their subscription? It makes sense, right? If you don’t know (or can’t even make a realistic hypothesis about) how your customer defines – and will define – success over time, how can you actually monitor, measure, and encourage it? You can’t, so you end up looking at events that mean nothing or have no meaningful context and trying to “improve” the process – or just ignoring it and hoping they’ll stay – all while you continue to wonder why your SaaS churn rate isn’t getting any better. ## Tools to Drive Engagement: the Build vs. Buy Question The decision to build your own system in-house to manage the process of measuring, monitoring, and encouraging engagement across the customer lifecycle vs. leveraging a third-party commercial offering depends on many factors: your available resources, the time you want to invest, what methods of communication your customers will want/respond to (email, in-app messaging, etc.), to name a few. The beauty of third-party systems is that they get you to a live, actionable system faster; the downside is that you often have to rework your requirements to fit what is available…. but the latter is becoming less of a problem as more and more commercial offerings hit the market to tackle this opportunity. I’m sure there are others out there – feel free to let me know what they are in the comments – but these are the providers I’m familiar with either because I’ve used them or I’ve gotten to know the company on my own to better understand what they offer. - [USERcycle](http://usercycle.com/) - [Woopra](http://www.woopra.com/) - [Mixpanel](https://mixpanel.com) - [Intercom.io](https://www.intercom.io/) - [Totango](http://www.totango.com/) - [Evergage](http://www.evergage.com/) - [Klaviyo](http://www.klaviyo.com/) - [Userfox](http://www.userfox.com/) - [Customer.io](http://customer.io/) - [Vero](http://www.getvero.com/) - [Sailthru](https://www.sailthru.com/) - [Gainsight](https://www.gainsight.com/) So you have commercial options – or you can build your own – but here’s the absolute reality… You can spend all the time, effort, and money in the world instrumenting your SaaS, hooking into third-party APIs to report on engagement, or building your own from scratch, but if you don’t have a clear picture of what actual engagement is *for your customers in your SaaS* and how it should change over time, it’s all for naught. Get clear on your customer’s Success Map and then figure out what the right solution is to measure, monitor, and encourage engagement. Then, once you’re measuring and driving engagement, you need to monitor and get proactive on Churn Threats… which I talk about in great detail in this post titled [SaaS Churn Threats: Identify and Retain At-Risk Customers](https://sixteenventures.com/saas-churn-threats). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Churn Rate Reduction Starts with Attracting the Right Customers *February 19, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-churn-rate-attract-right-customers/ Customer churn can have a devastating effect across your entire SaaS company. From the negative impact on your company valuation because your SaaS churn rate is too high, to the drag on growth you feel when you have to replace lost customers or revenue before you can make forward progress… churn is bad news. Over the next several posts I’ll outline five methods for churn reduction and customer retention that fully embrace the power of the SaaS business model…. let’s get started. > If you think you’re doing a good job acquiring customers, but know you’re not doing a good job keeping them, revisit that first assumption. > - Lincoln Murphy (@lincolnmurphy) [March 3, 2014](https://twitter.com/lincolnmurphy/statuses/440370001174749184)   ## The Fallout from a High SaaS Churn Rate When most people [write about reducing churn](http://venturebeat.com/2013/02/01/saas-churn/) in a SaaS company, it seems they’ve never actually had to deal with customer retention issues. It seems they’ve never been frustrated by increasing customer acquisition spend, but finding year-over-year revenue stagnating because too many customers are leaving out the back door. Or they’ve never been in a board meeting with investors ripping them a new one encouraging them to fix their freakin’ churn problem. Or they’ve never tried to raise a series B round only to find valuations are a bit less than they (and their original investors) would like because their churn is too high. Oh, and they certainly haven’t been there when the executive team returns from those meetings! That’s why I get tired of reading the same old churn reduction stuff… talk to your customers, create good FAQs and content, do better demos, blah blah blah. And while the actual number of SaaS companies with a real churn “problem” varies depending upon the data source and how they determine “[acceptable SaaS churn rate](https://sixteenventures.com/saas-churn-rate)” new data is always coming out to help us get a clearer picture. OPEXEngine just published [some churn numbers on Sandhill.com](http://sandhill.com/article/opexengine-benchmarks-interpreting-saas-churn-metrics/) that shows the average churn (from their 2011 survey) was 22% annual customer and 13% annual revenue churn (though some of the top companies did have [negative revenue churn](https://sixteenventures.com/negative-saas-churn-rate), which is cool). I see the findings of OPEXEngine as further indication that the average SaaS churn rate among private companies is higher than the 5-7% annual churn [Bessemer Venture Partners](http://www.bvp.com/blog/bessemer-cloud-computing-law-5-play-moneyball-5-c%E2%80%99s) says is acceptable (investors understand the financial impact high churn can have on a company very well) and that churn is still very much a problem that needs to be addressed. Which is why I put together several posts that contain… ## Actual, from-the-trenches Methods to Reduce SaaS Churn But before I get started, I need to set the tone. First… churn is a customer lifecycle problem, not a problem to be addressed only at the end as the customer leaves. Second… churn is *your* problem, not a customer problem. If you want to blame your customers because they don’t “get” your software or blame the universe for conspiring against you… stop reading right now because I can’t help you. Moving on,… if you want to improve your SaaS business (and it’s valuation), then you need to… ## Attract Better Customers to Reduce your SaaS Churn Rate Customers rarely wake up one morning and decide to leave you… in fact, chances are the seeds of their churn were planted before they were even a customer. In my experience, churn is often correlated to things that happen early in the sales process… and this starts with attracting the wrong customers. SaaS CEOs that bring me in to help fix their churn problem are always surprised when we start going through the customer acquisition process… but that’s where many churn issues begin! You hear this all the time, but you have to know who your ideal customer is so you know how to reach them, what they need or want, how to position your offering for them, etc. But it goes deeper than just being able to write better sales copy to convince them to use your SaaS. It means understanding what a successful Free Trial is for them, [how they procure services](https://sixteenventures.com/develop-pricing-strategy), who all is involved in the sale, what functional on-boarding really means, and how to get them to start realizing value as quickly as possible. Knowing your ideal customer isn’t marketing fluff… it’s at the core of building a successful SaaS company, and it actually starts with customer segmentation. Customer segmentation allows you to not just know who your best customers are based on their profitability, (estimated) lifetime, characteristics, actions, demographics, etc. but allows you to perform further cohort analysis to determine factors at play when they signed-up, what channel they came in from, etc. I frequently find that the ideal customer for a SaaS provider makes up a small portion of the overall customer base, but because we can look at customers at a cohort level through advanced segmentation, we can get a better idea of who they are, where they came from, etc. and ramp up the acquisition machine with them in mind. Oh, and a great side-effect of knowing exactly who your ideal customer is, is that you also have some idea of who your less-than-ideal customer is (these are the ones that complain a lot, don’t pay much, feel entitled, and don’t generate any profit) and where they came from, so we can work to push them away rather than attract ’em. So, get the good customers in – the ones who’ll be profitable and stick around a long time – and work to keep the bad customers out, and many of your churn problems will get resolved before they’re actually churn problems. But, even if you attract the right customers in the first place, you still need to… ## Manage Expectations to Improve Your SaaS Churn Rate I can’t say every problem you’ll experience in your SaaS business is because of mis-managed customer expectations… but I’m confident 92.7% of them are! When you incorrectly manage a new customer’s expectations during the sales process – like an email provider who promises “you send an email, you’ll make money!” and that doesn’t pan out – sure, you’ll sign-up new customers, but they’ll quickly find out you were straight-up lying and leave… probably telling their friends and colleagues on the way out. But if you said “grow your business over time by nurturing your customer base through strategic email marketing,” you wouldn’t have customers expecting that each “email blast” will result in a bunch of immediate sales and being super disappointed when that doesn’t happen. Over-selling and under-delivering is not a recipe for long-term success and is a huge reason for high churn rates among B2B SaaS providers even though it might not rear its ugly head for a few months after the initial sale; though when it does, there are some interesting ways to correlate that churn back to a promise… I’ll cover that in a future post. Now, once you have the right customer with the correct expectations in your SaaS, you need to monitor and manage Customer Engagement… … which I cover in this post called [SaaS Churn Rate Improvement: Monitor and Drive Engagement](https://sixteenventures.com/improve-saas-churn-rate-engagement). [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Churn Rate: Go Negative with Expansion Revenue *February 11, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/negative-saas-churn-rate/ ***Updated July 2026.** This 2013 piece is where I first made expansion revenue the counterweight to churn: the negative churn argument. The math still holds, and the vocabulary grew up. What I called expansion revenue here is the engine behind what I now call [latent revenue](https://ltvmax.com/posts/latent-revenue), and the churn side of the argument got a [doctrine revision](/the-churn-doctrine-revised/) of its own. Original text below, dates and all.*I mentioned, “Expansion Revenue” and “Negative Churn” in my post [SaaS Churn Rate: What’s Acceptable?](https://sixteenventures.com/saas-churn-rate) and I wanted to expand on those concepts a bit. But first… UPDATE 1 : Dollar Revenue Retention – DRR – is the latest [SaaS churn rate metric](https://sixteenventures.com/saas-churn-revenue-customer) you need to know about (after you read this post, of course). UPDATE 2: Actually, DRR isn’t the best metric. Net Revenue Retention – NRR – is. NRR is the “net” revenue left over from an existing cohort of customers, less any revenue churn (caused by customers leaving totally or staying, but paying less for the privilege), plus any expansion revenue from upsells, cross-sells, etc. UPDATE 3: I’m so over the term “Negative churn.” Can we agree to call it [Account Expansion](https://sixteenventures.com/customer-success-drives-company-valuation)? > "Negative Churn" is a term that needs to die. - Lincoln Murphy (@lincolnmurphy) [May 13, 2016](https://twitter.com/lincolnmurphy/status/731180242321149953?ref_src=twsrc%5Etfw) Okay, so back to the original points of this 2013 post – Expansion Revenue and “Negative Churn” (ugh, see above)… I honestly believe that fully grasping the power of these two concepts could change your SaaS business forever. No pressure… but you might want to read this post carefully. First, as far as I know, David Skok of venture capital firm Matrix Partners popularized the term “negative churn” in one of his fantastic [SaaS metrics posts](http://www.forentrepreneurs.com/why-churn-is-critical-in-saas/). In that same post, David used the term “expansion revenue” to quickly identify any revenue generated in excess of the initial selling (or sign-up or contract) price. And since Expansion Revenue is the key to Negative Churn, I’ll start there… ## Offset SaaS Churn Rate with Expansion Revenue As I said above, any revenue generated in excess of the initial selling (or sign-up or contract) price is considered Expansion Revenue. Expansion revenue should be something you consider – and strive for – at every stage of your sales process, the Free Trial, during and immediately post-conversion, during on-boarding, and of course as the customer continues to use your service. Remember, it’s a lot easier to get more money from a customer who’s happy *and already paying you* than it is to get money for the first time from non-customers. #fact Whereas far too many SaaS marketers think “can I get someone to sign-up for a year in advance at a 50% discount” I would advise you to think more like “can I get someone who was going to sign-up at the $20/mo level to instead convert at the $30 or $40/mo level?” In addition, consider how quickly you can get someone who converted at $50/mo to move up to the $100/mo level and be clear on what the path to that expansion revenue looks like. BTW, at a high level, that path is: engagement ==> investment ==> offer ==> conversion ==> rinse & repeat. ## Expansion Revenue Examples When a customer initially signs-up at the $100/mo level but at the beginning of the second month of the subscription moves up to the $200/mo level, you now have $100 in expansion revenue every month. And using that example, over the next 35 months of their 36-month estimated lifetime (eLT) would equal $3,500 in expansion revenue in addition to the $3,600 in base revenue for a gross Customer Lifetime Value (CLV) of $7,100. That is unless you move them to the $300/mo level in month 6 as you have mapped out, right? Look at what email marketing provider GetResponse shows when I logged-in to the dashboard… an up-sell for a 30-day trial of their $15/month Landing Page creator add-on. [](http://www.getresponse.com/features/landing-page-creator.html) For [GetResponse](http://www.getresponse.com/features/landing-page-creator.html), this add-on is worth an extra $180/year and is congruent with the needs of their customers (you need to send clicks from emails somewhere, right?). But wait… it gets better. By providing a tool for their customers to create high-converting landing pages, the hypothesis would be that GetResponse customers will get more out of the core email service because their emails will be more effective, which also means they will stay around longer (reducing SaaS churn rate and resulting in a longer Customer Lifetime). This success will also encourage the customers to actively grow their email lists (which is what the core GetResponse pricing model is based on), resulting in significantly expanded revenue and an increasing Customer Lifetime Value (CLV). Nice. Other things to consider about expansion revenue… If a customer enters your Free Trial having selected the $30/mo plan but converts at the $50/mo plan 14 days later, I would consider that expansion revenue from the beginning. Since the higher initial selling price is directly attributable to your efforts to drive engagement and investment during the trial – making the up-sell compelling enough for the customer to take action – considering this expansion revenue makes total sense. This, by the way, is just *one* reason why you should link every free trial sign-up to a pricing tier. Of course expansion revenue doesn’t have to be recurring revenue. For instance, if you offer a done-for-you report for $500 and the customer buys it, but remains at the $100/mo level, the expansion revenue is $500 and that figures into their total CLV. What else could you offer that is beyond the core service to expand revenue? That all said, let me be clear… Expansion Revenue isn’t necessarily free money – there may be a cost, perhaps a substantial one – to create and deliver the additional service, but as long as the desired margins are there, not having a plan to expand revenue is quite simply a wasted opportunity. However, expansion revenue – done correctly – can be very high-margin revenue because it’s just an up-sell to a higher priced tier that itself has a low cost to deliver. So expansion revenue is awesome and should be the goal every step of the way. In fact, expansion revenue is so awesome it can even lead to what is called “Negative Churn.” ## Achieve a Negative SaaS Churn Rate So having a Negative SaaS churn rate might seem like a confusing – almost counterintuitive – idea but it makes sense if you really understand what it is… which I hope you will after I’m through with you. First, to get to the concept of Negative Churn we have to move from customer or “logo” churn – counting the number of customers that leave – to revenue churn, counting the number of dollars that leave. I know the next question you’re going to ask… which is best to measure, revenue churn or customer churn? I’ll cover that in another post, but since revenue is always a key indicator of the health (along with profit) of your company, revenue churn should always be measured. And as you’ll see in a minute, dropping logos might be a way to restart a stagnating business! Another distinction we need to make is gross vs. net churn, and it’s simple, too. The number of dollars you lose – without regard for new, reactivated or expansion revenue – for a time period or cohort would be referred to as gross churn. Net churn is the amount of dollars lost after taking into consideration new, reactivated, or expansion revenue for the same time period or cohort. A great way to think of this is if you lose $100 through customer attrition and non-renewals (gross churn), but you gain $150 for the same period or cohort through expansion revenue (up-sells, cross-sells, higher usage, etc.) you have *negative* (net) churn of $50. On a customer-basis (but still considering revenue), if out of 100 customers, you lose 10 (gross), but you are able to up-sell, cross-sell or drive additional usage from the 90 customers that are still there allowing you to generate more revenue from the 90 than you did the original 100, you have a negative net SaaS churn rate. So even though you have churn, your revenue goes up. This is very good. ## An Interesting Negative Churn Scenario Here’s a scenario where Gross Churn is high but your overall SaaS Churn Rate is Negative… and it’s all orchestrated. I frequently work with SaaS providers that don’t know who their ideal customer is… but they’re pretty sure none of their current customers fit that bill. Typically these SaaS providers used the “everyone is our potential customer,” product-centric approach to marketing that for some reason is popular with SaaS providers. Consequently, they’ve achieved the results that come from having no real plan; they’re not failing, but they’re not growing, either. A little more bluntly… whatever growth they’ve achieved thus far is in-spite of their efforts rather than because! So when they bring me in to help, the first thing we do is figure out a way to flip the script on that. Initially, their “marketing strategy” attracted the wrong audience (low-end customers) and that isn’t good for anyone. So after we’d do some buyer persona development and empathy mapping work and have a clear picture of their ideal customer, we’d change pricing to align with the value perception of the higher-end customers, change the sales funnel to match the way the ideal customer tries and buys, etc. Then we’d figure out a way to market to the ideal customer correctly (this really is so much easier when you know who your potential customer is!) – even if in a smaller niche – and lo and behold we’d start getting “good” customers. And since we know the customers better than they know themselves at this point, creating expansion revenue maps to move customers up the revenue ladder is much, much easier. Now, depending on how “bad” the original customers were, we might actively jettison them or just allow natural attrition to occur with the initial less-than-ideal customers. In this scenario – which may last a few months or more – you may find a substantial amount of gross churn (which you could even be promoting), but because you’re actively bringing on new customers at higher price levels and doing up-sells and cross-sells (where appropriate) early in the customer lifetime this expansion revenue will substantially offset the loss of revenue from the churn. One note though before we move on… non-orchestrated churn is almost always bad. The ideas I’m putting forth here – especially around Expansion Revenue – are *even more powerful* if you have a low gross SaaS churn rate! Okay, so this is all interesting… but what about Negative Churn in everyday operations? ## Common Negative Churn Scenarios First, the good news… The most successful SaaS providers out there operate with a negative SaaS churn rate. But let’s be absolutely clear… these companies have a low gross churn rate to begin with… the [best companies operate in with less than 7% annual churn](https://sixteenventures.com/saas-churn-rate). Their negative churn comes from their aggressive methods of getting customers engaged & invested in their service, driving initial use and expanding internal adoption. [Yammer](https://www.yammer.com/) is a great example of  well orchestrated “internal corporate virality” and [Huddle](http://www.huddle.com/this-is-huddle/adoption-guarantee/) is an example of a company that works hard to drive internal adoption and backs that up with a “100% Adoption in 90-Days” guarantee. [](http://www.huddle.com/this-is-huddle/adoption-guarantee/) A Negative SaaS churn rate for these companies is possible because they’re really good at promoting additional use that requires more resources or additional functionality which expands revenue, as well as using up-sells and cross-sells to grow per-customer revenue. [Salesforce.com](http://www.salesforce.com/) is a great example of a SaaS provider that scales its feature set with customer success and effectively cross-sells adjacent products and services like [Data.com](http://www.data.com/products/salesforce/index.jsp). Okay, now the bad news… In my experience, since SaaS providers with high churn rates simply don’t do the things necessary to reduce churn in the first place, they rarely do things necessary to expand revenue at all, let alone enough to overcome what is lost through churn. From what I’ve seen, providers with an unacceptable SaaS churn rate don’t know how to – or for whatever reason simply choose not to – leverage up-sell, cross-sell, or even down-sell opportunities, *so their churn rate is rarely offset by expansion revenue*. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Customer Onboarding: 3 Steps to a Successful Welcome Email *February 7, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-customer-onboarding-email/ For many SaaS and Cloud providers, email will be the main fuel for your Engagement Engine that you use to drive potential customers through your Free Trial to conversion or to drive new customers to become deeply invested in your service. SaaS customer onboarding starts with the welcome email, so when I saw this great post over on the Vero blog called [5 Conversion Optimization Experts Weigh In On An Email Remarketing Campaign](http://blog.getvero.com/5-conversion-optimization-experts-email-remarketing-campaign-hipchat/) I was excited to see people talking about this important – and often overlooked – element. In the post, 5 copywriters – arguably the best in the business – analyze and offer suggestions to the welcome email of [HipChat](https://www.hipchat.com/). I agree with just about everything the panel of experts said, but I think they missed a couple of points. While [Sasha Gilberg from 2xconversion.com](http://www.2xconversion.com/) touched on a couple of these, I think the panel missed these points not because they don’t understand email marketing and copywriting, but because these points are fairly specific to SaaS and Cloud providers – like HipChat. If you don’t think the way I do – or the way those companies I’ve worked with do – you might overlook these things, too. Since I don’t want that to happen, I decided to outline how to create an effective welcome email to kickoff the SaaS customer onboarding process. ## Email Marketing Best Practices First and foremost, the welcome email must be built off of best practices and should be expected by the prospect or new customer. Be sure to tell ’em after they sign-up that they’ll get an email, what the subject is and who it’s from so they’ll be sure to look for it and open it. From there, the welcome message should speak to the reader (direct marketing), be personalized, have a compelling subject (headline) & copy, from a real person (as opposed to “noreply@” – I like what [Peep Laja from ConversionXL](http://conversionxl.com/) said… “PleaseReply@” might be better), etc. For more on these best practices absolutely read the post on the Vero blog and checkout my [5 Tips for SaaS Providers to Successfully Use Email](https://sixteenventures.com/saas-email-marketing) post. ## SaaS Customer Onboarding: Create a Successful Welcome Email Now, once you have a clear understanding of the core requirements for any SaaS marketing or transactional email message, you can apply these ideas specifically to your welcome email. ### 1. The Email Must Be Part of a Well-Defined Process Remember… while engagement includes onboarding (the welcome message would be the first step in the SaaS customer onboarding process)… onboarding doesn’t necessarily *require* engagement. But when you’re bringing a new customer or prospect into the fold, you’re shooting for deep engagement here… not just functional onboarding. Why? Because Engagement leads to Investment (time, resources, energy, data, etc.) and Investment leads to Conversion and long-term Retention. I developed the [Common Conversion Activities (CCA) set of metrics](https://sixteenventures.com/free-trial-metrics) as a way of developing a path to drive conversions through Free Trials that allows you to accurately measure engagement in a meaningful way. Whether you use CCAs or not, just ensure you have a specific goal (conversion, perhaps) and a map for your customer to get there. The welcome email should get them to do the first thing on the map… get them to take the first step in your CCAs. And that’s all! If you adhere to this approach you keep your message clear and eliminate confusion for your prospective or new customer (because [confused minds don’t buy… they bounce!](https://sixteenventures.com/saas-free-trial-engagement)) Applying this approach means you will not have a “create a project” link and also a “download our iPhone app” and “Upload your logo” CTAs, too. Those things might also need to happen, but at the right time and in the right sequence. Also, I would caution that “add coworker” (and other “viral expansion”) steps are likely best moved to at least a little later in the process (create a hypothesis around this and test, of course) because at first you have a fragile relationship that your prospect or customer might not be willing to bet their social capital on. If you have a product – like HipChat – that is social in nature and really doesn’t allow someone to recognize value from it until they bring in coworkers, figure out steps they can do to become engaged, invested, and comfortable with the service before they invite others. Maybe even suggest they bring in just a couple of other folks to help setup the network. You might need to put on your creative thinking cap to come up with what they need to do, but it could be a very worthwhile thought experiment. Also, as Sasha says, the follow-up to the welcome message ideally is a triggered message based on the action the customer or prospect took. ### 2. There Should Be a Single, Clear CTA Your welcome email (often sent separately from an email containing login credentials, but not always) should have one Call to Action (CTA)… one singular goal to get the prospective or new customer back into the app to do the first thing they need to do. Multiple links are okay (though as [Paras Chopra from Visual Website Optimizer](http://visualwebsiteoptimizer.com/) says, there is such as thing as too many links), but the links should all go to the same place. And while these can be both links and a “Big Orange Button” as Sasha called it in the Vero post, the design doesn’t matter if everything else is wrong… once you get the structure right you can enhance it with a compelling design. I’ve seen a lot of very pretty – but very ineffective – designs used by overly clever SaaS providers. Tear it down to the basics, get that right, then start designing around that. Now, just to be clear, you can include other links – perhaps to support and of course to unsubscribe (which should lead to a page that warns them about doing so, perhaps provides options to throttle messages, but ultimately allows them opt out) – but I suggest you keep those below the closing and keep the body (and PS:) for the main CTA. ### 3. Link Directly Into Your App The single CTA should lead them directly to the thing they need to do inside the app. If you have a Getting Started PDF they should read… well, you shouldn’t. Your App should walk them through the process of getting started. No excuses there. Though if you still have that pesky PDF, don’t link directly to it.. link back to the app and let them download and read it from there… but you need to get away from that [if you want your app to sell itself](https://sixteenventures.com/sell-itself). You should build your URL & redirect structure in a way that allows you to link directly into your app from both marketing & transactional messages and, this is key, if they are logged-out, allow them to login and redirect them to the original destination. So let’s say I have a CCA – Create a Project – that I want to get my prospective customer to do. I’ll craft a compelling email and the CTA will be to Create a Project. That CTA will link to this: http://myapp.com/project.new So when they click on that link it takes them into the app to the Project Creation area (which is hopefully super-intuitive, easy to use, and walks them through the process). But what if they aren’t logged-in? Well, the app should redirect them to a login screen that, once they log-in, should redirect them to their original destination. Password recovery/reset should do the same thing upon successful completion and login. This is so much better than explaining in an email “Go to this site, login, click on ‘Dashboard’ and then click on ‘New Project’.” You need to make it ***AS EASY AS POSSIBLE*** for your potential and new customers to get moving in the right direction as possible. And since email will likely be a large part of your Engagement Engine, allowing deep linking directly into the app so your customer can take action is required. Of course,… if your app isn’t built to handle this, then do the “login, select ‘New Project’” stuff because that is all you can do right now… but work on fixing the problem ASAP! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Market Positioning: How to Compete in Crowded Markets *January 29, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-competition/ **Welcome to 2013 2014 2015 (still applies!)… it’s now time to figure out why your SaaS company even exists and what your market positioning is!** If you’re a SaaS or Cloud provider in the Email Marketing, CRM, Project Management, File Sharing, Collaboration, Marketing Automation, Analytics,… or frankly most horizontal product categories… it’s time to do some deep soul searching, market analysis, and customer development to figure out why you exist and what your market positioning is. [](http://www.amazon.com/gp/product/0071373586/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=0071373586&linkCode=as2&tag=ilocom08-20) Not just why ***YOU*** want to be in the market you’re in, but why do you exist in the eyes of your potential – and current – customers. What position do you hold in the mind of your target market? If you haven’t, I highly suggest you read the books Positioning: The Battle For Your Mind and All Marketers Are Liars Tell Stories by Seth Godin. Both of those books help you look at things from your customer’s Point of View so you can know why you really exist! Why is it so important to know why you exist? Well, things have changed… this isn’t 2008 where SaaS was novel and unique and maybe even cool. In 2013 SaaS just is. It’s the norm. It’s the expected model. Cloud is mainstream. Being a SaaS company in 2013 does not give you a competitive advantage; it allows you to be in the game. It’s just the starting point… now you have to do the work to cut through the noise, get in your customer’s head, and differentiate. If we’re honest, there are probably 19 other companies in your category ***JUST LIKE YOURS*** (with feature parity, the same value proposition, similar pricing, etc.)… now you have to figure out why you’re unique so you can get – and *keep* – more market share. So you have to ask yourself the tough question… why would your customer choose you when there are 19 other options out there? And just as important… why would they *stay* with you? If you say they’ll stay “because it’s hard to take their data with them” – while I commend your attempt at vendor lock-in – that’s the wrong answer. Lock-in doesn’t make you unique… it makes you frustrating to deal with. Frustrating situations often inspire determined creativity to resolve… and that resolution is your pissed off customer leaving you for your competitor who put themselves in a better position in your customer’s brain than you…. and has a nice little import tool for your hard-to-get data. Get real on this if you want to grow… customer retention isn’t about lock-in. It’s about getting your customers to [continually realize value](https://sixteenventures.com/customer-retention-continual-realization-value) from your service. If you fail to do that, your customers will leave… and they’ll go to one of the other 19 options in your market. You might as well serve ’em up to your competitors on a silver platter. Speaking of your competitors… Of the 19 other vendors in your category, 17 are probably just “me too” products that do nothing but make noise and fragment the market. Many of these could be ripe for acquisition. Do some analysis and see if you can acquire one or more of your competitors simply for their customers. Often, smaller SaaS providers are either a side project for a dev shop or aren’t making the progress they’d like. And while they have some customers, they’re stagnating due to it being a side project, bad or no marketing, a focus on features rather than the customer, etc. See if you can buy ’em and you’ll get new customers, eliminate some of the noise in the category, create PR and buzz, intimidate other providers, generate new acquisition deal flow, generate new lead flow (customers want to be with successful companies, right?) and eliminate a competitor all in one fell swoop. Nice. Rinse and repeat. Now, in most established horizontal categories – like CRM – you’ll also have 1 of the 19 other competitors as the incumbent leader, the first to market, the big dog, the 800lb gorilla… like Salesforce.com in the CRM category. This market leader is like the sun, the category is the solar system, and you and your competitors are planets that just revolve around that market leader. Sometimes a customer comes your way from the market leader – thrown off like a solar flare – and sometimes you lose a customer to the behemoth’s gravity (plus their strong brand, momentum, and proactive sales force; you didn’t lose ’em BTW… they probably actively stole your customer!) Within your category, right now, at least one company – hopefully your’s – is making big plans, raising money, etc. not to acquire some of those 19 other competitors (though that could be part of the plan)… but to full-on steal the customers out from under the competition! Think of this competitor – or yourself – as the rogue planet about to disrupt things in the solar system! Now, to be super-disruptive, you need to go back to the top and answer the big question… why do you exist? Much of the answer, by the way, will come from the market segment you target… your position in the mind of one segment will be different from the position you hold in another segment, so go where the best chance of massive success is. Once you have that figured out, you need a plan and… well…  that plan varies so much based on your category, competitive landscape, why you exist, the target market segment, etc. that I don’t even know how to touch on that in a meaningful way. But I’ll throw some ideas out there to get your brain spinning… ## Enter: Growth Hacking Of course you could leverage a disruptive model like Freemium, but that’s unlikely to be as disruptive as you might hope for in *most* categories in 2013. Aside from a disruptive business model, if all I had were the answers to those big questions above, and I wanted to help you steal your competitor’s customers, I’d just pull some tricks out of my hat like these… [](http://www.alexa.com/siteinfo/service-now.com) Depending upon how your competitor is setup, I might do some research to see who’s using their product via [BuiltWith](http://trends.builtwith.com/websitelist/Optimizely) or I’d spy on your competitor’s subdomains to find a list of their customers with [Alexa](http://www.alexa.com/siteinfo/service-now.com) (pictured), or do a quick “powered by…” Google search if they include that as part of their “viral expansion loop.” Then I’d direct my marketing magic at those newly discovered customers of your competitors and suck ’em in like a tractor beam. Barring that… maybe I’d just straight-up [buy a list of my competitors’ customers](http://www.listmunk.com/technology-installs) if it’s available, do some data cleansing, add some context through primary and secondary research, and then throw some marketing magic directly at ’em. Oh… I might use GMail AdWords targeting, email Retargeting to take over 3rd party support sites… the list goes on and on, just not here (I share all of my marketing secrets with my clients, including how to use those research and ‘bought list’ methods to do cold outreach… the right way!). Look, it’s time to realize that the days of one big happy SaaS family are over. No longer are “we” trying to displace legacy Enterprise software products in the market or to disrupt the status quo (what we commonly think of as home-grown solutions, Excel spreadsheets, etc.). Nope, the reality on the ground today is that when your customers leave, they go to your competitor, not back to the way it was. The way it was is gone… they went to the CRM startup down the road… or back to the Big Dog market leader. That should hurt – twice – since not only did you lose a customer – and dropped your average customer Lifetime Value (LTV), your Monthly and Annual Recurring Revenue (MRR & ARR), and hurt your company valuation – but your competitor gained a customer, gained MRR & ARR, and bumped their valuation a bit. That’s not cool. So, are you ready to compete in this new reality of SaaS? You should be… and I can help you. I help SaaS providers like yours Acquire and Retain customers… two things you ***REALLY*** need to get right if you want to thrive now and in the future. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing Plan: 5 Ways to Get your App to Sell Itself *January 7, 2013 · by Lincoln Murphy* Source: https://sixteenventures.com/sell-itself/ When creating your SaaS marketing plan, you must understand that your business model of choice is a fully-integrated architecture where all aspects of the business – product, support, revenue model, and marketing – are tightly-coupled. Deviation from that model and understanding will affect growth, and most deviation occurs as a rift between marketing and product. “*The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.*” – Peter Drucker What Drucker says is even more powerful when you consider your product to be part of your SaaS marketing plan. And in SaaS, your marketing / promotion / customer acquisition methods must extend into the product in order to get the product to “sell itself.” ## SaaS Marketing Plan Goal: Scale Your Sales Process In fact, you need to think this way whether you have a $10/mo product where the economic buyer is also the end user… or if you have a product that is $500 per user per month, is a complex sale with multiple buyer types, and your average deal size is 1,000 users. Getting your product to “sell itself” will allow you to scale your sales process efficiently no matter what that sales process looks like! But, to get your product to sell itself, you have to spend as much time, energy, resources, and/or money on the Customer Acquisition, Retention, and Viral Expansion processes as you do on the core functionality of your product. Blasphemy to many…. the gospel to the successful! That said, here are 5 things (of many, but we’ll start here) that you should do to get your app to “sell itself.” ## 1. Attract the Right Audience I recently published three posts on promoting your SaaS product and generating relevant traffic… you should read them and watch the video presentation on traffic generation: - [Ideal Customer Profile Framework](https://sixteenventures.com/ideal-customer-profile) - [SaaS Sales Funnel: Stop Optimizing for the Wrong Customers](https://sixteenventures.com/saas-sales-funnel) - [100 Places to Promote your SaaS or Web App (Part 1)](https://sixteenventures.com/50-places-to-promote-your-app) - [100 Places to Promote your SaaS or Web App (Part 2)](https://sixteenventures.com/50-more-places-to-promote-your-saas-or-web-app) - [43 ways to get quality prospects to your marketing site](https://sixteenventures.com/traffic-hacking) It’s pretty simple, really… nothing else you do matters (conversion rate optimization, Free Trial optimization, better sales people, etc.) if you fail to attract the right audience in the first place. Make sure you know who you need to be targeting (if you’re going to say “but everyone is a potential customer” save it for the bankruptcy judge) and use this to formulate your advertising and promotion campaigns, your overall look and feel, and even the way your product is designed. Whether it is in the keywords you target with your SEO, the sites you write guest-posts for, or the sales copy you write, if you’re not speaking to the audience who will likely become your customer, then you are wasting your time, energy, effort, resources… and money. But assuming you attract the right audience, you need to make sure you… ## 2. Properly Manage Expectations This couldn’t be simpler but so many SaaS providers fail miserably at this. They work diligently to get people to sign-up for Free but fail to let them know that they’re signing up for a limited version, a time-limited Trial, or that at some point there’s a premium version they have to or should pay for later. If you have a non-refundable setup fee… say that. If you require a credit card to start your trial (but bury that in step 3…), say “valid credit card required” up front. Many times the mis-management of expectations is reflective of the founder or executive team behind the SaaS company trying to avoid selling, hoping that once the user signs-up and experiences the awesomeness of the product, they’ll just trip over themselves to pay for the product (newsflash: they won’t, at least not after the early adopters). Other times it’s an unscrupulous owner or executive team that’s trying to trick someone into signing-up for free, not telling them that they’ll have to pay later, and hoping that get’s ’em to become a customer. Most of the time it isn’t either of those but that the SaaS provider simply doesn’t understand psychology or look at things from the Point of View (POV) of the customer… if you think something is free to use forever and then get hit with a pay wall or an upgrade/nag screen or some artificial feature/usage ceiling – and this is incongruent with expectations – you wouldn’t react favorably by pulling out your credit card… you’d leave, right? So why would you expect any different from the customers who pay your salary, pay your bills, and are going to make you rich? You shouldn’t… and not understanding these things will hurt your customers, hurt your ability to pay those bills, and keep you from getting rich! Oh.. and what about sales people calling right after your prospect signs-up for a trial or downloads a white paper? Look at this from their POV. If you don’t manage expectations that someone is going to call, and they go through what appears to be a self-service process to try your product for 30 days, your prospect will likely ***NOT*** enjoy receiving that call the next day. Now, if you’re going to ask for their phone number because you’re going to call… tell ’em that Steve, their Account Success Rep, is going to call tomorrow around 10AM. Be bold but be honest. Okay, assuming you properly manage expectations, then you need to… ## 3. Remove Barriers to Sign-up People like to think that the more hoops someone has to jump through to sign-up for your product, the more likely they are to become a paying customer, right? If you say yes, save it for the bankruptcy… oh, I already said that. NO! Supposed “qualification barriers”, artificial friction, [even requiring Credit Cards to sign-up for a Free Trial](https://sixteenventures.com/one-dollar-trial#trust) do nothing but keep potential customers out. The evidence – the data – clearly shows that [reducing the number of fields on your sign-up form](http://www.quicksprout.com/2012/06/25/5-ways-to-improve-your-contact-form-conversion-rate/) can have a dramatic effect on getting people in the door. Here are some examples of companies that have reduced the ***FIRST STEP*** to just a couple of data points… often just a single one! *Please note… looking at pretty pictures of sign-up forms without knowing whether or not 1) this is is the failing part of an a/b or multivariate test or 2) seeing the actual metrics derived from this form can be hazardous to the health of your business. In other words, don’t copy others; observe their behavior and test it for yourself.* [Freshbooks](http://freshbooks.com) continues to refine their sign-up form and are down to just two data points as I write this – email and company name. I assume “company name” is there as a reminder that this is really for businesses (even small ones) and, of course, they use that to personalize the next screen, set the subdomain, etc.: [LessNeglect](http://lessneglect.com) knows their audience and even lets people sign-up for their beta via API: [Woopra](http://woopra.com) understands that they can get you started with just your URL because they know the psychological principle that Dr. Robert Cialdini, in his book [*Influence*](http://www.amazon.com/gp/product/006124189X/ref=as_li_ss_tl?ie=UTF8&tag=ilocom08-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=006124189X), calls the rule of Commitment & Consistency. They know that rule will lead to a large number of folks continuing the sign-up process on the next screen since they’ve taken an action and are more likely to take a second action. [](http://woopra.com) That same principal is behind this Billion Dollar sign-up form from [Yammer](http://yammer.com):[](http://yammer.com) Someday I’ll talk about how Yammer built a $1B+ business (Microsoft acquired them in 2012 for $1.2B) with only a single data point required to get started. In the meantime, consider that fact the next time you think talking about your sign-up form is just for the “web people” and isn’t relevant to building a real business! Okay, so I showed you some good examples of companies lowering the barrier to get started… what about bad ones? They’re everywhere! There are tons of bad examples… you can find them pretty much anywhere. You’ll recognize them instantly… they have long initial sign-up forms, they ask for information the vendor will not actually use, etc. You know what I’m talking about… in fact, you probably have one. One rule of thumb I use is this… don’t mark fields as required… If a field is not required, remove it from the initial sign-up form. You can ask for it later in the engagement process. In fact, only ask for data points up front that are truly required (do you have to call ’em to get started? No? Why ask for the phone number up front, then? Remember, [you can build a customer profile over time](https://sixteenventures.com/free-trial-customer-qualification) (the beauty of a SaaS and a data-driven engagement process). Whatever you do, my advice is to spend your time and energy getting people into your app and using the service… …not looking for ways to keep people out or from getting engaged with the service as fast as possible. In fact, your app should actively… ## 4. Drive Engagement & Investment This is the opposite of letting people kick the tires and fend for themselves; or the “strategy” employed by far too many SaaS providers. Engagement actually starts before they sign-up by getting them excited to use your SaaS product. I know, I know… marketing fluff, right? Wrong… that’s the attitude of failure! There are some great ideas for driving engagement & investment in the [SaaS Marketing: 21 Growth Hacks to Test Today](https://sixteenventures.com/saas-marketing-growth-hacks) guide. Marketing is the most important thing to your success… but marketing isn’t advertising, it isn’t a fancy slogan or neat graphics… it’s really everything that you put out from your business to your customers – including your product! So getting them excited up front is just one part of the puzzle… everything that happens from there is super important, too. In most cases, as soon as the potential customer – who is now excited to try out the app – hits the sign-up form… the momentum slows (see “remove barriers to sign-up” above). And it just gets worse from there. They finally get into your product after a long sign-up form, a trip to their inbox to validate their email address, and another login form… and they’re met with something that looks like these (all branding removed to protect the guilty): or this…  or this… Your first in-app experience shouldn’t cause your potential customer or your new customer (if they bought without trying first) to go “I’m in… so, what do I do now?” Here’s a good one from [MailJet](http://mailjet.com)… [](http://mailjet.com) Or this one from [PadiAct](http://padiact.com/)… [](http://padiact.com) I know… those are Wizard-y, huh? You don’t like Wizards? So? Are you the customer? Will it help the customer? Get out of your own way, then, and do what needs to be done. Now, that said, you have to know your audience… some products need to get out of the way (seemingly) and let the user just poke around… consider products like [Twilio](http://www.twilio.com/) that appeal to developers… they “get out of your way” but in a way that still produces a lot of engagement and investment. On the other hand, a product that is targeting non-technical SMBs… you should probably hold their hand the entire way. I know that a natural reaction to hearing what I just said is “but if we use a ‘wizard’ the user won’t see all the cool features we offer’ to which I would remind you to read the [SaaS rule of Engagement: Confused Minds don’t Buy… they Bounce!](https://sixteenventures.com/saas-free-trial-engagement) Whatever you do, you must engineer and design the process to take them from sign-up to first in-app experience to engaged user to invested user to paying customer – the entire process, not just part of it – if you want to succeed at scale. Engagement (something [leveraging Common Conversion Activities (CCAs)](https://sixteenventures.com/free-trial-metrics) can help you actually measure and improve upon) is the goal, whether in a Free Trial, for a new paid customer, or a Freemium user. Some people call the engagement phase “on-boarding,” but I think that term takes the customer out of the equation and focuses on functionally getting them started. Engagement requires on-boarding, but on-boarding does not require (or guarantee) engagement. Let me be 100% clear… it is up to you to drive engagement using whatever channels make sense. This means using email (sorry kids, this is still super-relevant even today LOL), in-app messaging, account reps, or whatever makes sense to get them into (or back into) the app and using it. And of course, once you have them Engaged, the goal is to drive Investment in your service; investment in the form of time, effort, energy, resources, data, etc… not necessarily money, especially if we’re talking about Free Trials or the free-side of Freemium… Getting them Invested makes conversion to your premium offering a no-brainer. And from their POV, converting should be a no-brainer when you… ## 5. Make it Easy to Buy I can’t tell you how often in a Free Trial it is easier to submit a feature request than it is to become a paying customer! It’s as if the SaaS provider doesn’t actually want my money. That speaks ***VOLUMES*** about the mindset of the people behind the SaaS product, right? Remember, unlike the old days of software, the sales process (or funnel) isn’t decoupled from the app… with SaaS, they are one in the same. Your app needs to actively sell itself to the customer as much as the marketing site, your sales people, etc. Conversion must be engineered into the product and you have to be willing to ask for the sale. And don’t forget… you don’t have to wait until the end of a Free Trial to ask for the sale. In fact you should ask for the sale as soon as the prospective customer (not trialist, not user, but ***PROSPECTIVE CUSTOMER***) [completes their CCAs](https://sixteenventures.com/free-trial-metrics). And of course, you have to [sell how your customers buy](https://sixteenventures.com/develop-pricing-strategy) so consider that when making it “easy to buy” within the app! ## Bonus: Make it Easy to Share Viral Expansion Loops – both internal within an organization/account and external with distributors, trading partners, colleagues, friends, family, social networks, etc. – are critical to getting a product to “sell itself.” I included [“Orchestrated Virality”](https://sixteenventures.com/saas-marketing-growth-hacks#11) as one of the 21 Growth Hacks that you could test today. Or check out this article about [optimizing your Referral / Invite a Friend](https://sixteenventures.com/invite-hacks) system. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Common Conversion Activities (CCA): SaaS Free Trial Metric *December 21, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-metrics/ Before you read this article – which is really for companies that already have a good amount of customer data – I suggest reading a much more recent article “[The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding)” which gives a much better perspective on how to design an onboarding (including Free Trial) flow. Once you’ve read that, come back to this article and consume with that context. Okay, so most discussions about SaaS Metrics are some retelling of [Bessemer Venture Partners’ Top 10 Rules of Cloud Computing and SaaS.”](http://www.bvp.com/cloud) The metrics that BVP talks about – CMRR, CAC, etc. are absolutely the core metrics to monitor at the high-level, I’m just not sure how many more posts we need telling us that. What is often lacking – because the authors don’t actually know or they don’t want to share their secrets – in posts about SaaS metrics, is what you’re supposed to do with the metric once you have it… how can those things actually help you increase your free trial conversion rate? It’s great that I know what my CAC is… now what? I know what the Average Selling Price is, what do I do now? I know that my churn rate is high… how do I stop it?[](#watch) Unfortunately, most posts don’t go much further than the generally accepted SaaS metrics out there… and the reality is, to make the leaps forward that we all want, you have to go further. ## A New Metric to Increase Your Free Trial Conversion Rate So, one of my specialities is helping SaaS providers optimize their Free Trial for conversions. For many SaaS and Cloud providers, 100% of their customers go through the Free Trial as part of the self-service sales process, and yet for many providers, the Free Trial is barely an afterthought ([even though it kicks out 97% of the potential customers that sign-up](https://sixteenventures.com/b2b-saas-lies)). In most cases, when creating their “funnel” – perhaps in a product like KISSMetrics – a SaaS provider will analyze these steps: Visited Site ==> Trial Sign-Up ==> Activation ==> Logged-In ==> Billed At a super-high level this might mean something, but for practical purposes this doesn’t really help, and things like “number of logins” generally means very little without additional context. So a few years ago I came up with a set of metrics that I called Common Conversion Activities – or CCA – that I defined as “The things that all or most paying customers do during their trial.” It was a way to look at historical data and find patterns like “everyone who became a customer in the last 12 months did X, Y, and Z before they converted.” Or where that historical data was not available – either for a pre-launch startup or if that level of granularity was simply not there – we could use our understanding of the customer to create a hypothesis that “every customer will likely need to do X, Y, and Z before they convert.” While not definitive or guaranteed to lead to conversions, CCA definitions gave us a much better place to start the optimization process than the “let ’em come in, kick the tires, cross our fingers and hope” Free Trial philosophy employed by most SaaS providers. Now, for me and my clients, having the CCA metric completely changed everything… we now had a way of talking about this approach that made sense and – most importantly – put the emphasis of the Free Trial on the prospective customer and on the goal of converting them to a paying customer during the trial. As I write this, it hit me that I’m not sure how well the CCA metric will be accepted to the SaaS industry, though I honestly don’t care if the “industry” adopts it… But I hope you do, though, so you’ll be as successful as possible. The barriers to wide adoption at the industry level are that CCA isn’t a financial metric and it isn’t in any way standard across SaaS providers since it is unique to the customer experience of the provider… but again, that’s not why I came up with it or am publishing it. Oh, and CCAs can – and should – be applied to Freemium offerings, with a couple of caveats: 1) Free Trials & Freemium are very different psychologically so make sure with Freemium you manage expectations with the free users that there is a Premium or Paid version and 2) the time to conversion could be much, much longer than the typical 30-day free trial due to the psychology mentioned in 1, but implementing CCAs should lower the time to conversion substantially, all else being equal. Okay, so back in July 2012 I gave a 54-minute presentation where I introduced the next version of this ever-evolving set of metrics for measuring Free Trial success, the CCA, and I want to share that with you now. Wait… *you don’t actually know about CCAs yet*… make sure you watch the video and grab the slides! ## How To Increase your Free Trial Conversion Rate: Video & Slides ***DISCLAIMER:*** *The CCA approach to Free Trial Optimization is unlike any other approach I’ve ever heard of or seen regarding measuring success during Free Trials and moving prospects toward the goal of conversion (and then retention). I ask that you go into this with that realization as well as an open mind… this could significantly change your entire business!* While CCAs are a potential game-changer for you – and implementing CCAs in your Free Trial  could easily allow you to ***DOUBLE*** your conversion rate in 30 days – there’s a lot more that needs to go into an optimized Free Trial. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # 5 Rules for SaaS Email Marketing and Transactional Messages *December 20, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-email-marketing/ **SaaS providers should use email to drive Engagement, Conversion, and Retention, but to achieve those goals, some rules should be followed.** UPDATED FOR 2015! Regardless of the type of email – [Transactional](https://sixteenventures.com/saas-transactional-email) or Marketing – your email has to: - [Get Delivered](#getDelivered) - [Get to the Inbox](#getInbox) - [Get Opened](#getOpened) - [Get Read](#getRead) - [Get ‘Em to Take Action](#getClicked) - [Bonus: What tools to use?](#useTools) *The implementation of the tactics required to reach those goals vary from absolutely required (in the first two) to suggestions of what seems to work but you’ll want to test (the last three). I encourage you to know your customer and focus on them before creating any type of email marketing campaigns, follow-up sequences, etc.* ## Get Delivered One day I was working with a SaaS vendor with a super-low free-trial-to-paid conversion rate. As I was going through their metrics, I saw that over 50% of the people that signed-up for their Free Trial never clicked the link in the activation email. After some investigation, it turned out that they had a delivery problem that was causing the email delivery to fail… they worked hard to get people to sign-up for their Free Trial and **INSTANTLY** turned away at least 50% of their prospects because they didn’t get the activation email! Don’t be like that… get your emails delivered using these tips - Sending through your own SMTP servers is a bad idea - Use a credible delivery service (see “[How to keep App-generated Email from Being Marked Spam](https://sixteenventures.com/saas-transactional-email)“) - Use whatever you can (and that makes sense) to authenticate your domain DomainKey Identified Mail ([DKIM](http://en.wikipedia.org/wiki/DomainKeys_Identified_Mail)) - Sender Policy Framework ([SPF](http://en.wikipedia.org/wiki/Sender_Policy_Framework)) - [Return Path Certification](http://www.returnpath.com/solution-content/return-path-certification/) // this is a commercial (not free) offering and only if you qualify - A few years ago, 37 Signals [published a post](http://37signals.com/svn/posts/3096-giving-away-the-secrets-of-993-email-delivery) on how they handle outbound transactional email themselves and get a 99.3% delivery rate… and their post shows you exactly why you should avoid doing this yourself (it takes a lot of effort!) at least at first. - Honestly, there is a lot of stuff going on behind the scenes  with the email infrastructure – and it’s always changing – and my opinion is that you don’t need to focus on that right now… or probably ever. Generally, improving the chances of delivery is accomplished by using some combination of SPF and DKIM (as mentioned above) to basically show the email infrastructure gods that the system you’re sending from is an authorized agent for the domain you’re representing vs. some random machine out there sending “on behalf of.” This is accomplished at the DNS level in conjunction with some settings with the provider you’re using. Before you choose a solution, make sure they offer this level of authentication. Also ensure that you have the ability to do this on your end (you have to make changes to your DNS settings). Most modern outbound prospecting systems do since they’re usually built on top of [Mandrill](https://mandrill.com/), [Mailjet](https://www.mailjet.com/), or [Sendgrid](https://sendgrid.com/). And any modern systems built in the last few years – even from scratch – are going to support that. You can also use [Yesware](http://www.yesware.com/) or [Hubspot Sidekick](http://www.getsidekick.com/) inside of GMail or Outlook and just leverage your existing email setup. This works really well, but in [GMail you have to be cognizant of send limits](https://support.google.com/a/answer/166852?hl=en)… While there are behind-the-scenes reasons for signing and authenticating your emails, there is also something that’s receiver-facing that could erode trust if not taken care of. If you’ve ever seen “sent on behalf of” or “sent via” in the from part of an email – especially in GMail – it was caused by an unsigned/authenticated email. This is most often the case when third-party systems send email for you. These include Email Marketing systems to CRMs to reminder services. And this is a problem because it looks like the email comes from a third-party system… it’s obvious that your “personal email” was sent through an email marketing system and therefore is automated. Not a good way to start a trusting relationship, right? ## Get to the Inbox Google is continuing to make changes to GMail and their changes – as they should be – are for the users of GMail (and the advertisers that pay them to get access to the inbox UI). Some of these changes – from the addition of the [Tabbed Inbox](https://sixteenventures.com/saas-marketing-gmail-tabbed-inbox) to the image caching/proxy announcement of late 2013 – have the potential to massively disrupt email marketers and the way we’ve done business for years. Of course, how substantially you’ll be affected by these – and future GMail changes – depends on the amount of your audience that uses GMail. One thing we can assume, however, is if GMail does something and it seems like a good idea, then other Email providers – web-based or otherwise – may start to include those, too. That said, there are still things we can – and should – to increase engagement with your audience regardless of what changes GMail has mad: - Ask the potential customer immediately after giving you their email address to: whitelist you - add your contact info to their address book - check the spam filter / folder for the email message - Manage Expectations that they’ll be getting this – and other – emails from you - Provide a visual for them - Whether they do any of that or not you’re guiding them to a better experience Asana is awesome because they have a todo list (which is what they are) that indicates you should check your email (though they still need to say who its from and to check your spam filter…) - Folks in the Internet Marketing business know that getting the email opened and validated is the most important thing right then so do whatever you can to make that happen. - You should look at it the same way. - Send both HTML & text versions as email systems that identify a piece of bulk mail but fail to see both versions will often see that as SPAM. - Make sure you’re [CAN-SPAM](http://business.ftc.gov/documents/bus61-can-spam-act-compliance-guide-business) compliant – address, unsubscribes ## Get Opened - Open Rate is a vanity metric… don’t be so concerned about this (unless it is going down!) - Who the email is from is very important - Manage expectations after they sign-up “you’ll get an email from…” - Humanize the from Joe @ XYZ App or Joe Smith (the former allows for instant recognition, be careful w/ length) - noreply@ or donotreply@ = missed opportunity and shows you don’t want to hear from them - Allow people to respond to your emails and engage - Here’s a great post that also talks about [the problem of email “from:” fields and SaaS / Web Apps](http://blog.jazzychad.net/2012/03/24/startups-fix-your-from-field.html)…. - The email subject is super important - It is the Headline of your email - Headlines have one job – get people to read your ad or your article - The Email Subject has one job – get people to open your email - Some people recommend spending as much time writing the subject as you do the email itself - The subject line is what get’s people to open the email - If the subject isn’t compelling, they won’t open it - One place where Open Rate can be used is in testing the subject lines - Some systems make it easy to A/B test subjects; sometimes you’ll have to manually test - See which subject line – even in transactional emails – results in the most opens. - Where possible, try to correlate that with Clicks ([see below in the “Positive Action” section](#getClicked)) because a subject line that results in opens (overall, a vanity metric) could be misleading and therefore result in a lower CTR, meaning the email ultimately failed to do what it was supposed to do. - It should be CAN-SPAM compliant - Even more… it should be common-sense compliant - Make it something you’d open (or not you… but your customer) - Don’t waste space by including your name in the subject - Prefix in the subject is acceptable, but keep it short (like [FTD]) - But test longer subjects… they might work well for your market. - Use the pre-header as a sort of subheadline to get people to open the email - Don’t forget that the plain-text pre-header can be used to provide that subheadline goodness where the HTML version might have the “view on the web” stuff put in by your template. ## Get Read - Write emails your audience would like to – and can (on their preferred device) – read - Know your audience - Speak their language - Use the right tone - Speak to the person reading the email…. you might send 100k emails, but each one goes to 1 person… use direct language - Don’t say “hi everybody” just say “hi”… massive difference - Don’t make it all about you… your product, service, features, etc. Make it about them, about their problems (and how you’ll solve it), about their opportunities, etc. - Remember, it is email ***MARKETING*** and marketing should be all about the customer. - Create for their consuming device (see my Mailchimp stats below where ~56% of my audience reads the emails I send on an iPhone) - HTML layouts are fine, but it is the content & Call to Action (CTA) that is most important. - A pretty design w/ bad copy & no or too many CTAs is bad ## Get ‘Em to Take Action - CTR – Click Through Rate (Clicks in Mailchimp or Aweber) is what you’re after here - Sometimes the click will lead to a marketing / sales page, sometimes (many times) it will lead back into the app (there are ways to do this in mobile apps, too) - Always send them back into the app if possible - For example – even if for pre-sales indoctrination – don’t send them to a PDF directly or attach it to the email. Instead, take the content and put it in an area of the site or app and allow them to download the PDF from there, surrounded by additional CTAs. Those CTAs should be to drive them to the next step; use the app, sign-up for the trial, attend a webinar, etc. - All roads lead back to the app and they all end up at conversion! - That means sometimes you can just ask for the sale (while reminding the reader why they should convert) or you can make them an offer to sign-up right now. - Always write with a singular purpose – if you currently have emails with 7 different things in them, that could be fodder for 7 different emails… and each individual one is likely to be more effective on its own - Don’t waste people’s time - Have a single reason for writing - Confused minds don’t [???]… whatever it is you want them to do if there are too many options - Include a phone number in a conspicuous place - Which also means Reduce Negative Actions (like unsubscribes) - Always deliver value so they won’t want to unsubscribe - Remind them that unsubscribing means they’ll miss out… put some copy above the opt-out link that reminds them that opting-out is permanent and that you really value their membership and to contact you if they have ideas on how to improve the messages they receive - If they want to opt-out, send them to a page that explains why they shouldn’t opt-out for marketing, encourage them to change preferences to a different email address rather than fully opt-out - Ideally, provide granular settings so they can reduce the number of messages they get - which is why even transactional messages to include a CTA (yes, even a pitch) ## What SaaS Email Marketing / Engagement tools to use? For transactional email, there is a list of resources in this post called “[How to keep App-generated Email from Being Marked Spam](https://sixteenventures.com/saas-transactional-email)“ For email marketing, Free Trial follow-up, etc. you can use a variety of techniques. Option 1 might be to roll your own follow-up process where you tag events in your app to send email via API through one of the [vendors listed here](https://sixteenventures.com/saas-transactional-email). Option 2 might use a more traditional Email Marketing service with an auto-responder (not triggered or behavior-based, but better than nothing!). Option 3 could be to use one of the relatively new SaaS providers designed specifically for “lifecycle” email marketing. Here are some potential vendors to checkout for Options 1 and 2: ## Traditional SaaS Email Marketing / Newsletter / Auto-responder Vendors - [Sendloop](http://sendloop.com/) - [GetResponse](http://www.getresponse.com/) - [Benchmark](http://www.benchmarkemail.com/) - [Mailchimp](http://mailchimp.com/) - [Aweber](http://www.aweber.com/) - [Infusionsoft](http://www.infusionsoft.com/) *There are tons of email marketing providers, but those are the six that I have direct experience with, though I recommend you do your homework when selecting any vendor.* ## SaaS Lifecycle Marketing Vendors - [Klaviyo](http://www.klaviyo.com/) - [Userfox](http://www.userfox.com/) - [Customer.io](http://customer.io/) - [Vero](http://www.getvero.com/) - [Sailthru](https://www.sailthru.com/) - [Autosend](http://autosend.io/) *These are more focused on in-app messaging and heavier on the back-end analytics* - [Intercom.io](https://www.intercom.io/) - [USERcycle](http://usercycle.com/) *There are tons of other “marketing automation” tools out there like Hubspot or Pardot… but that’s beyond the scope of this narrowly focused post. And many of those tools don’t do what some of these I’ve listed do.* Well, there you have it… no guarantees that all of that will help you, but I bet it will. I know for most SaaS providers, the time it took to read this was more time than they spent on their entire email marketing & follow-up strategy! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # List of SaaS and Cloud Consultants and Analysts *December 20, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/cloud-consultants/ Sixteen Ventures is a SaaS consulting company and I’m a consultant. I help SaaS / Web App / Cloud providers go to market, acquire and retain customers, and grow. I don’t consider myself a SaaS or Cloud industry analyst; I actually spend more time analyzing other models outside of SaaS to see what’s working there; e-commerce, retail, subscription / membership sites, etc. My clients have their greatest success when we don’t think about what’s working in “SaaS” but instead focus on how to be successful in the Project Management, Health Care, or Commercial Real Estate, or whatever actual market they’re serving. Too many SaaS providers still think like Software companies and that’s holding them back… not a model I wish to replicate. For immediate consultation and advice on all things SaaS Business Model, Marketing, or Customer Retention-related, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. Since I look at [SaaS as a Business Model](https://sixteenventures.com/saas-business-architecture-resource-guide) or Business Architecture, I say that all SaaS providers share certain characteristics, but ultimately, what works for one SaaS company, means very little to a SaaS provider in a different market with a different sales process, revenue model, pricing strategy, etc. Yes, there are patterns and some degree of “best practices” to consider, but to roll all SaaS companies up under one set of “industry” metrics basically renders the information meaningless in most cases. That said, sometimes I’m asked to provide SaaS industry benchmarks, usually by companies seeking funding (trying to justify to investors why they should pick them, and of course, this is the wrong approach), but most often by large, Legacy Software vendors that want to justify the investment in “going” SaaS (again, the wrong approach). So when I’m asked to provide that kind of information, I usually give some version of the above disclaimer and the list of Cloud Analysts and SaaS Consultants below… and now I’m giving it to you. I’ve split the list into two groups: those who are Cloud / SaaS Specific (though they might be analysts, consultants, or both) and those with a more general Information Technology / Enterprise Software Analysis focus. *Some of these firms I’ve worked with or for, others I know well, and still others I’ve never interacted with at all. Just do your own homework before selecting a vendor… but you know that.* ## SaaS / Cloud Specific Analysts and Consultants - [Montclare Advisors](http://montclare.com/) – Kevin Dobbs, Managing Partner – Kevin also created and sells the SaaS Top 250 List, a Comprehensive list of all 250 public and private SaaS companies with analysis - [SoftLetter](http://www.softletter.com/) – Rick Chapman, Managing Editor and Publisher – Rick just published a new book called “SaaS Entrepreneur: The Definitive Guide to Succeeding in Your Cloud Application Business” and it’s available on the Softletter site. - [ThinkStrategies](http://thinkstrategies.com) – Jeff Kaplan, Managing Director – Jeff also created and operates the [Cloud Showplace](http://www.cloudshowplace.com/),  which is on my list of [100 places to promote your SaaS offering](https://sixteenventures.com/50-places-to-promote-your-app). - [SaaS Marketing Strategy Advisors](http://saasmarketingstrategy.com/) – Peter Cohen, Managing Partner - [KJR Associates](http://kjrassociates.com/) – Ken Rutsky, President - [On-Demand Advisors](http://www.ondemandadvisors.com/) – Robert Jurkowski, Founding Partner - [Saugatuck Technology](http://saugatucktechnology.com/) – Bill McNee, CEO - [OpexEngine](http://www.opexengine.com/) – Lauren Kelley, Founder and CEO – OpexEngine runs an annual survey – open from Feb – March – and if you participate you get access to some of the results *These next two are the only other pricing consultants out there that I know of who actually understand SaaS* - [PricingWire](http://www.pricingwire.com/) – Chris Hopf, Principal - [Software Pricing Partners](http://softwarepricing.com/) – Jim Geisman, Founder & Principal ## General IT Industry Analysts w/ SaaS or Cloud focus areas - [Altimeter Group](http://www.altimetergroup.com/) - [Constellation Research](http://www.constellationrg.com/) - [Gartner](http://www.gartner.com/technology/home.jsp) - [Forrester](http://www.forrester.com) - [IDC](http://www.idc.com/) - [451 Research](https://451research.com/) For immediate consultation and advice on all things SaaS Business Model, Marketing, or Customer Retention-related, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # Growth Hacking: 43 Ways to Drive Traffic to your Website *December 17, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/traffic-hacking/ **WARNING: In 2014 2015 2016, relying heavily on SEO to drive traffic to your website is a recipe for failure!** Okay, that might be a bit harsh… maybe SEO isn’t dead, but things have changed and you need to look beyond SEO to drive traffic to your website. If you put all your eggs in Google’s basket by focusing only on SEO to generate traffic for your SaaS app, you could end up with much less traffic – especially quality, qualified, relevant traffic – than you’d like, which means fewer trial signups, fewer customers, and less revenue! But don’t worry… there are plenty of other ways to drive traffic to your website besides SEO and I’ve put a list together just for you… So the times are changing, and when it comes to attracting the right crowd to the marketing site for your SaaS app, you need to embrace these changes. ## Rise of the Growth Hacker: Drive Traffic to your Website in creative ways In fact, there’s even a new ethos that has taken hold in Silicon Valley – that of the ‘Growth Hacker’ – and if you aren’t familiar with the term,[ Andrew Chen wrote a great piece](http://andrewchen.co/2012/04/27/how-to-be-a-growth-hacker-an-airbnbcraigslist-case-study/) and said “Growth Hacker is the new VP Marketing.” Andrew even proclaims “*No traditional marketer would have figured this out*” when talking about Airbnb’s super-slick Craigslist integration. This is why Marketing VPs everywhere this year quickly changed their business cards and LinkedIn profiles to “Growth Hacker” because, c’mon, it’s just too darn sexy to pass up… … and no one wants to be thought of as a “traditional” marketer! In today’s world (vs. yesterday’s or tomorrow’s), that action starts by thinking outside the proverbial box… …doing things that move your company forward in leaps and bounds – often with some type of Viral Expansion Loop – that are different from what everyone else is doing. Even more, it means ***REALLY*** knowing your audience (target market) and doing things to get them to take action and get invested in your product. ## Leverage Growth Hacking and Viral Expansion Loops to drive traffic to your website For Airbnb, it was finding a super cool integration that would add virality to their product ***AND*** additional exposure for their users’ properties. Another example is [HitTail](http://www.hittail.com/) – an SEO keyword tool – where this “growth hacking” (knowing your customers and doing awesome things to reach/help them) resulted in the discovery that customers churned out because they got great SEO data, but didn’t have time to write content around it… … so HitTail is doing an integration with [Textbroker’s API](http://www.textbroker.com/us/client-api.php) to allow HitTail customers to order articles/blog posts on-demand based on keyword data! ## But You Just Need to Drive More Traffic to your Website, right? But the truth is that, while these integrations are cool and can help a lot, there’s a more basic complaint I still hear time and again and that is “*We need more traffic!*“ Well, traffic is something any Growth Hacker worth their salt should be able to get in droves, right? But not just any traffic will do! A successful sales process for your SaaS app starts by attracting the right audience… … which is why I put together a presentation called “Traffic Hacking: 43 ways to get quality prospects to your site” to help you become the Growth Hacker I know you can be. Look, attracting the Right Audience in the form of a steady (or steadily increasing) flow of relevant traffic to your marketing website is absolutely ***required*** for the scalable and sustainable growth of your SaaS or Web App company… …and this one hour and 20-minute video presentation is pure, unadulterated traffic-getting awesomeness that will help you achieve that! ## SaaS Providers: How to Drive Traffic to Your Website ***WARNING***: Before you spend a lot of time or money getting traffic to your site, make sure the site – and your app – are designed to engage and convert; otherwise you’re wasting effort & money! Okay, now…  because my presentation is so awesome (IMHO) – seriously, it’s 80-minutes jam-packed with a ton of my secrets that I’ve only ever shared with my clients – I want to keep it a little bit secret still… just between you and me. So here’s what you need to do to boost the traffic to your SaaS marketing site: 1. [Download and enjoy the slides](https://s3.amazonaws.com/16v/growth-hacking-get-more-traffic-marketing.pdf) from the presentation (PDF) – 54 slides of Traffic Generating awesomeness – or you can check them out on Slideshare (below): 2. Then watch the 80-minute presentation, but please note that since I presented this back in May 2012 I’ve updated the slide deck a few times – and yes, I fixed the Pinterest spelling error (as well as a few others). 3. Profit. (No guarantees, of course… but this *should* help) [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Beta Testing & Pricing: Examples (Video) *December 16, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/beta-pricing-examples/ Before you watch this video, you should watch the 25-minute [Beta Testing & Pricing: A Hazardous Combination](https://sixteenventures.com/beta-testing-pricing) video for better context. In 2011 I pulled together this ~35 minute presentation  for a group of SaaS entrepreneurs – literally overnight – where I explore the marketing sites of around 25 SaaS & Web App startups in Beta. I show and talk about many of the things they’re doing could lead to a bad Beta exit, including the publication of prices. While I covered most of the pitfalls and problems to avoid in my [Beta Testing & Pricing video presentation](https://sixteenventures.com/beta-testing-pricing), these examples will really help you see what I was talking about. Do you prefer to listen on the go? [Download the .mp3 audio file (34MB) here](https://s3.amazonaws.com/betatestingpricing/beta-pricing-examples.mp3). Remember, you should watch the 25-minute [Beta Testing & Pricing: A Hazardous Combination](https://sixteenventures.com/beta-testing-pricing) video for better context. ## Examples Used in the Video Many of these are different now – it’s been a long time – but I wanted you to have the links anyway. Might be interesting to compare where they are now with what they were doing while in Beta. - [http://cloudmailin.com/plans](http://cloudmailin.com/plans) - [http://www.ilocator.com/](http://www.ilocator.com/) <== the page I show in the video isn’t there anymore - [https://loglineapp.com/](https://loglineapp.com) <== the page I show in the video isn’t there anymore - [http://blog.postageapp.com/2010/01/our-future-plans/](http://blog.postageapp.com/2010/01/our-future-plans/) - [https://secure.postageapp.com/register](https://secure.postageapp.com/register) - LookStat appears to be gone completely 🙁 - [http://crowdsavvy.com/plans-and-pricing](http://crowdsavvy.com/plans-and-pricing) - [http://distrify.com/pricing](http://distrify.com/pricing) - [http://hyperhour.com/plans.php](http://hyperhour.com/plans.php) - [http://creately.com/blog/creately/beta-over-creately-launches-new-plans/](http://creately.com/blog/creately/beta-over-creately-launches-new-plans/) - [http://creately.com/plans](http://creately.com/plans) - [https://insightify.com/signup/new](https://insightify.com/signup/new) - [http://www.adealy.com/](http://www.adealy.com/) <== the page I show in the video isn’t there anymore - Teamly took that blog post down about their upcoming price changes… - [http://teamly.com/plans](http://teamly.com/plans) - [http://www.mopapp.com/pricing](http://www.mopapp.com/pricing) - [http://www.briefix.com/](http://www.briefix.com/) <== closed due to ‘lack of traction’ - http://citizencrm.com/plan_pricing - [http://www.enloop.com/plans_and_pricing](http://www.enloop.com/plans_and_pricing) - [http://getprivatepractice.com/](http://getprivatepractice.com/) <== the page I show in the video isn’t there anymore - [http://www.drupalgardens.com/content/free-beta-extended-until-march-2011](http://www.drupalgardens.com/content/free-beta-extended-until-march-2011) - [http://www.drupalgardens.com/sites/default/files/02_Subscription_prelaunch.jpg](http://www.drupalgardens.com/sites/default/files/02_Subscription_prelaunch.jpg) - [http://subjectlin.es](http://subjectlin.es) I hope this helps you avoid some of the pitfalls others have encountered as you get your venture off the ground! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Beta Testing & Pricing: A Hazardous Combination (Video) *December 14, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/beta-testing-pricing/ **Learn to avoid the pitfalls of publishing your Pricing while in Beta in this video presentation** Are you in Beta and getting ready to move to production? Did you already publish your prices on your website? Or are you thinking about running an extended Beta testing period for your new app? Well, you only get ***ONE*** chance to exit Beta… don’t screw it up! Luckily – now that you have this information – you won’t screw it up! Right? Before we go any further, I have to say this… I’m not a fan of “Beta” testing beyond actual testing of the app for a short period of time before you launch. Rather, I’m a big believer in many of the Lean Startup principles, with the big one being to get a Minimum Viable Product (MVP) – one that you get paid for – to market as quickly as possible so you can start learning from real, actual paying customers. What you learn from non-paying customers will be ***VERY*** different than what you learn from customers that fork over their hard-earned money. So get there as quickly as possible. However, if you’re interested in Beta Testing and how you should deal with Pricing – that is should you announce or post your pricing during the public beta testing phase – then this Master Class I did back in 2011 on Beta Testing & Pricing is for you. In this ~25 minute presentation that I pulled together for a group of SaaS entrepreneurs literally overnight, I cover most of the pitfalls and problems to avoid; so you don’t have to figure it out on your own and hurt your business before you even get started! As you go forward, consider Public Beta as just an early marketing phase for your Web App. It might be the first marketing phase for you. Or it might be a later marketing phase, following a time of building interest and buzz, signing-up potential testers, doing the whole invite thing, etc. Like everything else you do, “Beta Testing” as we do in SaaS these days is less about testing the product, and more about customer development and MARKETING… here you go! Do you prefer to listen on the go? [Download the .mp3 audio file (24MB) here](https://s3.amazonaws.com/betatestingpricing/beta-pricing-slides.mp3). Want to see the example sites I was talking about? Watch the ~35 minute [Beta Testing & Pricing: Examples](https://sixteenventures.com/beta-pricing-examples) presentation video. Here is the PDF of the slides: [](https://s3.amazonaws.com/betatestingpricing/beta-pricing-pub.pdf) I hope this helps you avoid some of the pitfalls others have encountered as you get your venture off the ground! [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing Plan: 100 Places to Promote Your App (Part 2) *December 14, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/50-more-places-to-promote-your-saas-or-web-app/ You need to develop a robust SaaS marketing plan – but sometimes you just need to do some quick tactical things to get the ball rolling. First, see the first part of this series *[SaaS Marketing Plan: 100 Places to Promote your App (Part 1)](https://sixteenventures.com/50-places-to-promote-your-app)…* and then read this post. BTW, here’s a great post on some [inexpensive places to Advertise](http://onstartups.com/tabid/3339/bid/43774/The-5-Minute-Guide-To-Cheap-Startup-Advertising.aspx) (text, display, etc.) your product, which is different from what I talk about below. Below are even more places / methods to get your product out in the wild. ## SaaS Marketing Plan: Daily Deal / Bundle / Discount Sites Most of these are really targeted at the tech / startup crowd, but there might be something like this for your market (if not, maybe that is an opportunity for you, too). Also consider the potential impact of being associated with a “discount” service like this. AppSumo has built up a great following and positions their offers in a way that takes away the “discount” feel. But if you offer a premium service for a premium, niche crowd, these are likely not for you. - AppSumo <== the biggest and the best, so far. - MightyDeals - Others have come and gone… so far those two are the only that have found a scalable and sustainable business model ## What is a SaaS Marketplace? Go where the money is. And go there often. If you know of a place where lots of shoppers are – like the Mall – you want to be there, too. This is the idea behind SaaS & App marketplaces, at least from the SaaS vendor perspective. These marketplaces allow you to reach audiences you probably won’t be able to on your own, at least not economically. Not all of these will apply to you, some will take more work than others to integrate with, some are worth it, some aren’t… do your homework but there are probably ways to do this and it could be a big boost! Something to keep in mind is what I call the ‘*psychology of intermediaries*‘ on your customers. If you are using Affiliate Marketing (and it is very likely that you should at some point), you have to understand that they send you *customers*. Whether you pay them for leads, Free Trial sign-ups, or only when they become a paying customer, the fact is, the customer buys directly from you. Even if you give the affiliate a 100% commission on the first month, or 6 months… the customer doesn’t know that. All they know is that they’re buying directly from you. On the flip-side, marketplaces (often) sell on your behalf; customers buy from the marketplace and then use your product. Your relationship with the customer is different and you need to be aware of that. This isn’t a bad thing necessarily, just something to be aware of. You also need to fully understand the scope of the financial relationship with the marketplace partner to know whether they’ll take a cut of your upsells, downsells, or cross-sells, and plan accordingly. But also plan for the fact that the customer is not yours (psychology again), but is your marketplace partner’s. ## SaaS Marketing Plan: Marketplaces / App Stores - Google App Marketplace - Chrome Store - Intuit App Center - AppDirect - Appia - SaaSMax - Clickbank – a marketplace that enables Affiliate Marketing, too! - JVZoo – Relatively new; similar to Clickbank but some unique features - SaaSMarkets - Jamcracker - Quixey - Microsoft Azure SaaS Marketplace - Serchen - And others coming online all the time Of course Mobile app stores are a huge (and often required) part of the distribution of your device native apps, but that’s outside the scope of this post. Just remember if you have a native mobile app that is an extension of your paid SaaS, but the app is free, to manage expectations properly or you could [end up like OfficeDrop… forced to go Freemium!](https://sixteenventures.com/video-interview-why-officedrop-went-freemium) ## SaaS Marketing Plan: 3rd Party Integrations Lots of independent web apps are creating APIs and their own directories of integration partners; what we would refer to as an *ecosystem play*. These app or vendor-specific marketplaces can be a great alternative to the mass-appeal, horizontal, noise-filled marketplaces like Google Apps Marketplace. (Google Apps Marketplace could actually be placed in this category, but I put it under marketplace simply due to its reach) Your time and resources might be better spent focused on integrating with a smaller app where you’re more likely to be discovered than with integrating with Google Apps, for example, where there is a lot more competition. Some companies, like Evernote, only allow their integration partners to advertise in-app to their users. This makes sense; only give access to their user base to companies that will INCREASE the usage of their system by driving people back to Evernote. By the way, several of my clients are integrated with – and advertise with – Evernote and I’ve heard only good things about the results so far. The key is to know your customers and know what adjacent products they already use… and go there. Here are a handful of links to get you started…. *You might have to dig to find where to sign-up or to become an integration partner.* - Amazon Web Services - Buffer - Eventbrite - Zendesk - Basecamp - Campfire - Shopify - Constant Contact - Skype - Highrise - Wufoo - iContact - Formstack - Yammer - Zoho - Mailchimp - Hubspot - Stocktwits - Mite - Helpscout - Evernote - GetSatisfaction - Box - SEOMoz - Salesforce.com - Freshbooks - Infusionsoft - Aweber - GetResponse - Marketo - Hootsuite - Unbounce The secret to using integrations with other apps – aside from going where you target audience already exists – is to create a marketing campaign around that integration. Work with the other vendor to ensure you get visibility in their marketing, do joint or co-promotion, send people to a specific landing page on your site that references the vendor you’re partnering with, etc. Just like any worthwhile initiative, these integrations require work… but they can be quite lucrative if done correctly. ## SaaS Marketing Plan: Cloud Connectors / API Aggregators There are several companies building ways for SaaS / Cloud Apps to talk to each other as well as on-premises Software. Don’t look at those as simply providers of functionality… look at those as distribution opportunities for your app! - Zapier - CloudWork - IFTTT - Singly - Mashape - Snaplogic - Cazoomi Syncapps - ProgrammableWeb (API Listing) - Busyflow ## Joint Ventures w/ Adjacent / Complimentary products These are just some ideas of how to work with other – complementary Apps – outside of formal “integrations” as a way of getting your name in front of the right crowd. - Get a link during their sign-up process (and give a link, too) - Get mentioned during email campaigns, post-signup activation, etc. - Do cross-promotions / bundles / cross-sells - Find someone to mail out for you… someone who is a trusted advisor to your target market ## Mailing Lists / Blogs / Expert “Endorsements” - Get mentioned by users / customers on social networks being awesome - Give incentives to mention you (credits, cash, awards, etc.) - Get on Mixergy.com by being awesome (applies to founders, mostly; and get someone else to pitch for you!) - Get a guest post on KISSMetrics by being awesome - Get mentioned by top analysts – both horizontal and in your vertical – by helping them - Offer to be a case study for the analysts - It might be worth buying a strategy or coaching session with someone and then offering to be a case study / testimonial for them if it gets you access to their crowd***Analyst Reminder:*** Remember that this only matters if their audience is ***YOUR*** audience, too! - Get mentioned or featured in industry rags by being awesome and connecting with industry insiders Industry magazines are still very prevalent, and many still employ an offline – print – component that are read by the people you want to sell your product to. Don’t assume since you’re an online business that working with an “old school” tree-killing publication is counter-intuitive. You go where your audience is. When you watch TV you see ads for web business. Listen to the radio, same thing. Print magazines have URLs for you to type in or QR codes… Now I know, you probably don’t have a TV, only listen to Spotify and NPR online and only consume your daily news on your iPad. Awesome. Go back and read the part about how you’re not your customer! Look, there are still industry rags that are very influential. Talk to folks in your target market(s) and find out what the trusted pubs are that they read and then reach out to write an article for them. If they won’t let you because they don’t know you, find a highly-respected person in the industry and see if you can create an article jointly / attach their name to it. The same publication might want/require you to advertise in the magazine, which isn’t bad. This just reinforces the brand elsewhere in the magazine. You can probably extend that ad to their website and sponsor events. Then you can leverage other industry pubs/websites for ads. Then use retargeting if possible to show your ad as those people browse around – reinforcing your brand even more. Now you’ve built your brand from the ground up within that industry and you’ve become respected and trusted along the way. Super simple, right? 😉 This obviously takes time, money, money, and resources – and money – since repetition is key, but the content/expertise part of this strategy will shorten it and make your brand stronger if done correctly. So… how do you “be awesome?”… think about your Customer and WIIFT – ***What’s In It For Them***. How can you help them somehow? Make that happen. ## My Awesome Disclaimer There are only a few of these sites that I am really familiar with, and even then I’m just giving you the links, not vouching for them. Use them at your own risk and read their Terms of Service & Privacy policies really well (probably always a good idea). There are a few links above that are affiliate links… meaning if you give them money for something – a listing, a book, etc. – I’ll get a cut. But all that means is that I am more confident in their abilities or the content of the book, program, etc. as I would never promote for a fee anything I don’t believe in. Still, you should do your homework and make your decisions based on your own due diligence. Cool? Also, you should look into creating an affiliate program so people will promote your stuff for you. See my post on [Affiliate Marketing for SaaS & Web Apps](https://sixteenventures.com/affiliate-marketing) for more info. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Marketing Plan: 100 Places to Promote Your App (Part 1) *December 14, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/50-places-to-promote-your-app/ *This is Part 1 in the series… here is [SaaS Marketing Plan: 100 Places to Promote Your App (Part 2)](https://sixteenventures.com/50-more-places-to-promote-your-saas-or-web-app) if you want to jump ahead.* Marketing isn’t just advertising… it’s really the totality of your SaaS business: Product, Price, Promotion, and Place (Distribution)… Okay, so you’ve got the product covered, right? If not, here are three books to get you started: Nail It then Scale It by by Nathan Furr and Paul Ahlstrom (my new favorite book, btw), “The Lean Startup” by Eric Ries and “The Entrepreneur’s Guide to Customer Development” by Patrick Vlaskovits & Brant Cooper. In fact, whether you’re “there” yet or not, go read those books… 3 times each. And of course you know how to price your app, right? If not, be sure to check out the [SaaS Pricing Strategy Resource Guide](https://sixteenventures.com/saas-web-app-pricing-resource-guide). So let’s cover one aspect of Promotion today; promoting your App in SaaS / Web App directories. ## SaaS Marketing Plan and The Four P’s By the way, Place (Distribution) and Promotion can be the same when you leverage distribution channels; definitely a topic for another day. Some caveats to this method of promoting your App: - You have to get your marketing right or massive distribution of your message won’t help… and could actually hurt by attracting the wrong audience. - You have to help these directories help you by making sure you have your ducks in a row, a good call to action (CTA), and the ability to capitalize on that CTA on the back-end (conversion rate optimization in your sales process!) - Where possible / a good idea, get to know the people behind the directories and see if there are ways to make your app stand-out from the noise (hint: it might cost you some money) - Getting “found” means little if you can’t convert them or capture contact info (see #2) - This is NOT a replacement for a marketing strategy, of any kind, but certainly not for one specific to your target market (segments)… this is very much a subset of one set of tactics of a complete Marketing Strategy. Got it? But, while this isn’t a complete marketing strategy, why not make sure you’re in every horizontal App directory and recommendation engine/service as well as going after more specific promotional opportunities within your market / niche / etc? Cool. So, here’s a list of sites where you can list your App… - Some of these are free. - Some are paid. - Some are vertical. - Some are horizontal. - Some of these might have high Google PageRank and give you “dofollow” awesome inbound links that help with your SEO, but that isn’t the best part. - Some of these sites will extend your reach – i.e. put your value prop in front of audiences that you might not be able to reach on your own. - Some will either directly bring you new leads or simply reinforce your brand by allowing you to “be everywhere.” Once you’ve done all of that, then you need to go figure out where the real money is… and that is where people aren’t just looking for “Apps” in a horizontal directory somewhere, but where they’re looking for immediate solutions to their very real and specific business problems! ***Protip:*** Even if you have a horizontal app – like File Sharing – figure out some specific use cases and the target market behind those, then find out where those customers hang out, and go there. And those might be – and probably are – places that have nothing to do with technology, SaaS, Cloud, or anything like that. Find those places and you’ve really found your online gold mine. But in the mean time, here’s a good list to start from (whether you’re a startup or have been around for a while… most of these apply to you) ***Protip:*** Just going through the process of completing 50+ submission forms will probably help you refine your value prop. By the end, you might have seen – and plugged – any holes in it! ## SaaS Marketing Plan: App Directories / Lists Some of these cost money, some are free, some have specific criteria, some are big, others are not… use your judgement. Where possible I linked directly to the “submit your App / startup” page. - GetApp - TrustRadius - DreamSimplicty - SaaS Showplace - Mashape - App Appeal - WebAppRater - Appmit - Software Advice - Museum of The Modern Beta - Go2web20.net - On The App - The Startup Pitch - Web App Heaven - You Noodle - Cloudbase3 - FeedMyApp - Killer Startups - CloudSurfing - AppStorm - SaaSMarkets - Comparz - Emily Chang Ehub - AppUseful - Listio - cnet’s Download.com (Yep, they include SaaS apps – but they call it ‘webware’) - Submit Startup - Generation-Y Startup - TechPluto - Netted - CrunchBase - AngelList - CloudBook - StartupTunes - BetaLi.st - Capterra - BestVendor - Cloudfindr - VentureBeat - BoogarLists - BSDB – The Business Software Database - CloudXL - TopAlternatives.com - Mevvy Below are are some basic listing sites, and some places you might not have thought about. Or, if you have a LinkedIn or CrunchBase profile, consider whether it is used to its fullest. ## Business Listing - LinkedIn - Facebook - Google+ Pages - Biznik - Yahoo! Local - Bing ***Protip:*** Setup a “local” listing for your physical location or mailing address even if you’re a ‘virtual’ company; more data in the search engines can’t be a bad thing! ## Old School - DMOZ - LittleWebDirectory – I drilled down to the “Internet” category for you - BusinessSeek Still need more? Here’s[ 50+ MORE Places to Promote and Distribute your SaaS or Web App in Part 2](https://sixteenventures.com/50-more-places-to-promote-your-saas-or-web-app) of this series. Good luck out there! ## My Awesome Disclaimer There are only a few of these sites that I am really familiar with, and even then I’m just giving you the links, not vouching for them. Use them at your own risk and read their Terms of Service & Privacy policies really well (probably always a good idea). There are a few links above that are affiliate links… meaning if you give them money for something – a listing, a book, etc. – I’ll get a cut. But all that means is that I am more confident in their abilities or the content of the book, program, etc. as I would never promote for a fee anything I don’t believe in. Still, you should do your homework and make your decisions based on your own due diligence. Cool? Also, you should have an affiliate program so people will promote your stuff for you without you knowing! See my interview with Jack Born about [Affiliate Marketing for SaaS & Web Apps](https://sixteenventures.com/video-interview-saas-affiliate-marketing) for more info. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Conversion Rate Lies: 97% won’t become customers, anyway *December 5, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/b2b-saas-lies/ I’m going to expose one of the biggest lies B2B SaaS Executives, Entrepreneurs, and Marketers tell themselves and their team about their SaaS conversion rate… and if this hits a nerve, it is probably because you’ve told yourself – or have been told by your team – this very same lie! “*We have a 5% conversion rate from free to paid, but that’s okay because those 95% that don’t convert wouldn’t have been customers anyway.*”or… “*Sure, only 3% of the visitors that hit the sign-up page where we ask for the credit card to start their trial actually sign-up, but that’s okay since the other 97% who didn’t sign-up weren’t potential customers anyway.*” Whatever makes you sleep better at night, but it sounds like you’re trying to justify your poor SaaS conversion rate rather than looking to fix the problem! ## Your Sales Process is Driving Down Your SaaS Conversion Rate Unfortunately, it’s easy to justify poor performing conversion funnels like that because it feels better than saying your promotion, sign-up, engagement / on-boarding, and conversion processes are so bad that as a whole it literally drives away 97% of the ***POTENTIAL CUSTOMERS*** that came to your site because they *thought* what you have might be a solution to their problem. In fact, stop calling people that sign-up for your SaaS Free Trial ‘trialers’ or ‘trialists’ or ‘free users’ … they are ***POTENTIAL CUSTOMERS*** and should be treated as such if you want to improve your SaaS conversion rate. Now, if they really aren’t potential customers, then this means that all of your PPC ads, PR, SEO, and other marketing spend has been a big waste because you’re attracting the wrong audience… 97 out of every 100 visitors to your site was the result of a failed marketing strategy! Which also means you were lucky that the 3 who converted found your site. So no one should be able to hide behind the “97% of the people that come to our site wouldn’t be customers anyway” excuse since that’s a failure, too! But, rather than admit to those things, you just change your perception of reality to make yourself feel better; that they weren’t really ever going to be customers in the first place… and your warped perception is killing – or severely limiting – your SaaS business. ## Your Low SaaS Conversion Rate – Stop Blaming your Potential Customers Here’s the deal… if you are attracting the right audience and 97% of those people aren’t engaging in some meaningful way with your site, it isn’t their fault… it is yours. Before you spend another dollar on AdWords, or give an SEO company another penny… fix your on-site and in-app engagement and conversion process. If you aren’t attracting the right audience, stop what you’re doing, go back to the drawing board, and be absolutely clear on who you should be going after and make sure your marketing strategy includes reaching and attracting primarily ***THAT*** audience. It’s time to stop making excuses and start making progress! So… what’s a good conversion rate if 3% or 5% is low? Well, at this point, anything better than what you have right now is “good” so let’s shoot for that. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # How to Develop your SaaS Pricing Model *November 1, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/develop-pricing-strategy/ **Developing your SaaS Pricing Model isn’t Rocket Science, but even in the Rocket Science business, you need to price your work so you can sell it and make money!** This post is awesome (IMHO), but there’s an even better, more recent one that’s specific to early-stage SaaS companies: [Pricing Strategy Framework for SaaS Startups](https://sixteenventures.com/pricing-strategy) Just so we’re clear, your Pricing Strategy is so much more than your Pricing Page. It’s about far more than not leaving money on the table and making a profit; though profit is a good thing, after all, that’s why we’re in business! Your SaaS Pricing Model will help determine – among other things – your market position, whether or not your target customers can buy from you, and whether or not you can provide the level of service required by those customers. ## A Good SaaS Pricing Model has Many Inputs So when a friend of mine mentioned that SaaS vendors should think a little less about Pricing and a little more about deal size, I was confused. You see, “Deal Size” is simply one input – of many – that should be used to develop a Pricing Strategy for your SaaS or Cloud offering. So that you have a *more* complete picture of what is required to develop a Pricing Strategy, here are some of the required inputs: ## Internal / Strategic SaaS Pricing Model Questions **Quantity vs. Quality**: Do you want a massive amount of customers or fewer, potentially more profitable customers? There are pros and cons to both… **Market Position**: Do you want to be the low-end, low-price leader or Super-Premium, high-end offering targeting elite customers only? Who do you want to pick a fight with in the market that we’re entering and how will you compete? Hint: SaaS doesn’t mean Cheap! Once you have those big ideas figured out, then you move on to… ## External/ Customer-Facing SaaS Pricing Model Questions ### Who are you marketing your SaaS offering to? - First and foremost… [Who’s your ideal customer?](https://sixteenventures.com/ideal-customer-profile) If you’re new to market… who did you build your SaaS for? Who is ready, willing, and able to buy your solution today? - If you’re already in-market… look for patterns within your customer base to define market segments - If you have different segments  you’re selling to – multiple Ideal Customer profiles – then the questions below should be answered for each one ### What value will they get from your offering? - Not the features… not the benefits… what ***VALUE*** are they going to get from your offering? - The benefit of the benefit is a good way to think about this - This requires that you really understand your customer ### What will the ROI – monetary or perceived – be on that value? - This is the hard part usually… takes a lot of work to figure this out - You really have to know your customer… often better than they know themselves - [I’ve written about the 10x ROI pricing rule before…](https://sixteenventures.com/saas-pricing-strategy) ### What metric(s) will the price will be based on? - Maybe it’s a ‘seat’ (named user, concurrent user, etc.) - Maybe it’s storage (but hopefully not unless you are a storage company) - Maybe it’s functionality - This is the thing that your customer will say “yes, I need 7 of those…” and feel good about the purchase. - Basing your price on something of little value – [say a commodity item like storage](https://sixteenventures.com/saas-pricing-value-metrics)– will de-value your offering - Segmenting your pricing tiers/bundles on something of value avoids this issue and keeps people from gaming the system to avoid forced upgrades - Done right, customers will even be happy to upgrade because they’ve reached a greater level of success. ### How many will they buy? - This is the “Deal Size” that my friend talked about - How many of the metric from above? - If you sell bundles of 10 *metrics*, how many bundles of 10 will they sign-up for? - How many will they sign-up for at first? - How many will they add over their lifetime as a customer to drive Expansion Revenue? (hint: you want this number to be higher than the “at first” number) ### What is their estimated Customer Lifetime? - 3 months? 3 years? - At first, you’ll have to use your gut and any market data you can gather (taken with a grain of salt) to determine estimated Customer Lifetime - If you’re in-market, you have some history to look to… BUT… if you have a high churn rate because you haven’t done what it takes to keep customers around – but you’re going to in the future – your past Average Customer Lifetime metric could be meaningless. - This is the metric that will help drive our Acquisition spend… if a customer pays $1000/mo but only stays 2 months and you paid $3000 to acquire them, you lost $1000 + support/operating costs. This is bad. - If you think you can keep a $1000/mo customer for 36 months, and you pay $2000 to acquire them, we’ll have 34 months of profitable revenue from that customer, even if they don’t expand their use of the service (Expansion Revenue) over that time. This is good. ### What is their buying process? - This determines whether you go the e-commerce or higher-touch, human-powered route - Price doesn’t determine which model should be used - Complex products often require more human interaction - But some markets – regardless of product complexity – require a human touch - As much as you’d like to think you can drive this, this is a market-driven element of your business model unless you are so big and powerful you can change consumer behavior (be realistic here) - The only way you can choose the model you go with is by selecting the market segment you target - But who cares which model is used as long as the margins are there, right? - If the market – based on your competitors – seems to have a complex sales model with a high-touch sales force and you want to go the e-commerce route, can you? - If you come in at a lower price than your competitors, are you changing behavior or will you simply fit into a different procurement process than your higher-priced competitors reducing the sales cycle time and complexity? - Or will you still have to go through the same process, meaning you’ll wait the same amount of time as higher-priced competitors, just for less money? - If you come in cheaper will you be seen as a joke and not be taken seriously by the target market? - See “what level of service…” below for why this is more likely than you think ### What is their internal procurement process? - *This is different than – but directly impacts – their buying process!* - Who are the various players in that process? - What are the steps that need to be taken to get sign-off within their company? - How do they pay their vendors? Can they use a credit card? - Will they pay annually or monthly? - Will they pay up-front or in arrears? - Will they want a contract even though you don’t require a contract? - How long does this usually take? ### What level of service must you provide the customer? - If you’re running mission-critical apps for high-end clients, your level of service should probably be amazing; uptime guarantees with the infrastructure to support it, 24/7 phone-based customer support staff, proactive monitoring of not just critical systems but of customer use (where appropriate and accepted) to ensure a fantastic experience, etc. – this is a cost-side input in determining your price; not enough margin, you can’t provide the level of support the customers expect (and would likely pay for). - If you’re running a low-end utility-class application, uptime is probably a good thing but some hiccups might be acceptable (and not even noticed because the amount of time a customer spends in your app is probably less than the mission-critical ones), support can be asynchronous email/ticket-based, etc. - Data loss and security breaches are never tolerated so you have to ensure you have enough margin to provide that baseline level of support. - If you come in “cheap” your market might be savvy enough to know that you won’t be able to provide the level of service they require once you get more than a handful of customers and might pass because they realize you don’t “get it” yet, even though your price is lower than the other guys ## Some other things you need to consider: - Should you bundle features / functionally, include everything and charge per user, or do *a la carte*? - Will prospects want or expect a Free Trial? - What is the on-boarding process going to require? - What do your commercial competitors do? - What other things – homegrown or re-purposed software – are you displacing in the market? Then, once you have all of these questions answered – oh, and those aren’t all of them, either – you can start to put together your Pricing Strategy, including the actual price – the number – that you’ll charge for access to your SaaS or Cloud offering. So yeah, developing a SaaS Pricing Model isn’t Rocket Science… *…it’s just a super-important, high-level Strategic initiative that requires many different inputs and can ultimately determine whether your company thrives or goes out of business!* That seems kind of important to get right to me. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # Pivot to Profit: Ditch Freemium and Start Making Money *October 17, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/pivot-to-profit-ditch-freemium/ Let me be clear… I don’t hate Freemium. In fact, I don’t hate any marketing strategy, revenue model, or user acquisition method – including Freemium – I just think sometimes more thought needs to go into the selection – or subsequent ditching – of your business model. UPDATED FOR 2014! What I’ve seen in just the past six months – and what I believe is a trend that will continue to accelerate – are companies that went to market using the Freemium model, deciding that it just wasn’t working like they thought it would and ditching the model for something more appropriate. This is what I call Pivoting to Profit!For the companies I’ve worked with, the model they moved to from Freemium was the simple and super un-sexy Premium service + a Free Trial. I know, boring, right? Well… depends on what you’re looking for out of your business and how much funding you have with which to find it. ## Freemium Success Stories: The Usual Suspects Now let’s be clear… there’s a reason we (the collective we) can only point to the same handful of B2B Freemium success stories… and that’s because there are only a handful out there. And those handful of companies* have some ***MASSIVE*** – like jaw-droppingly massive when I looked at the latest updates – amounts of funding behind them or are public. Those companies are usually: - [Evernote](http://www.crunchbase.com/company/evernote) $251M funding to date (IPO in 2014?) - [Dropbox](http://www.crunchbase.com/company/dropbox) $257M in funding to date (IPO in 2014?) - [Box](http://www.crunchbase.com/company/box) $409M in funding to date (IPO in 2014?) - [LogMeIn](http://www.crunchbase.com/company/logmein) $20M funding before going public - [Yammer](http://www.crunchbase.com/company/yammer) $142M before Microsoft acquired them for $1.2B in 2012 **I’m sure there are others… I’m equally sure there are only a few others and that’s my point; for every Freemium success story there are a bunch (I don’t have stats) of Freemium failures… but something to really focus on is that for every Freemium success, there are hundreds of Premium-only success stories that you just don’t read about on Techcrunch.* By the way, to me, Yammer was the one of those that was super-relevant to the Enterprise Software market since they employed such a unique sales model and completely disrupted a legacy incumbent – Sharepoint – to the extent that Microsoft bought ’em rather than compete with ’em. And Yammer was generating revenue (not sure if they were profitable yet) so they weren’t just building a user base and hoping someone who knew how to monetize those users would buy them (like Instagram – acquired by Facebook for just shy of $1B in 2012 and with ***ZERO*** revenue – for example). ## The Rules for Freemium Success Freemium works, it just takes a ***MASSIVE*** market and ***MASSIVE*** amounts of money to give you time to: - Build the user base - Figure out how to leverage that user base to grow itself (viral coefficient) - Figure out how best to monetize that growth* **This is one of the big problems with Freemium… it’s often too late to efficiently monetize existing users because the psychology of “free forever” has already taken hold; expectations were not managed so [the “Penny Gap” issue](https://sixteenventures.com/classical-freemium-doesnt-exist-at-scale) rears its ugly head.* But for companies with less funding, those that don’t have a massive market, have a relatively high incremental cost of serving customers, or those that know they have a valuable service and can make a ton of money selling it to a smaller addressable market… Freemium might be better left to others. ## Pivot to Profit: Three Examples Three companies I’ve helped over the past six months have made this Pivot to Profit, moving away from Freemium and onto the path to profitability. **1. Qualaroo** (formerly KISSInsights, acquired by the company formerly known as CatchFree) – Sean Ellis mentions in this Wall Street Journal article titled [Freemium Isn’t for Everyone](http://blogs.wsj.com/accelerators/2013/02/28/freemium-isnt-for-everyone/) that having a Free tier for [Qualaroo](https://qualaroo.com/) was “anchoring [their] solution at a pricing point that did not support our revenue growth objectives.” The WSJ article is definitely worth a read. I did not work with them. **2. Stormpulse** – [Stormpulse](http://stormpulse.com/) had millions of visitors to their site every month, many of those were ***HUGE*** multi-national organizations that were using their ***FREE*** service to secure Billion-dollar assets, and yet they only were able to convert a few paying customers (the aforementioned psychological barriers to paying for what you already get for free). I did work with them. So they [raised their prices 10x and ditched Freemium](https://sixteenventures.com/10x-price-increase). Fast forward just *FOUR* months and now they have a $1.2M Annual Recurring Revenue (ARR) run rate and are profitable! **3. GetResponse** – This company was started in a garage 10 years ago and moved on to become a huge success story in their country, but that success came at a price. Where many SaaS companies can say that adding new customers – aside from Customer Acquisition Costs (CAC) and other on-boarding expenses – has very little actual incremental cost associated with it, this company wasn’t so lucky. Being in the email marketing space there is a cost associated with letting people use your service, and supporting free users was causing the company that – revenue-wise seemed to be doing well – to generate less and less profit over time. And, in this case, the free users were often the ones that would do the things that required the company to spend more to defend or otherwise work around their actions ***AND*** were less likely to help spread the word about the company. This company was “Freemium” before “Freemium” was a term and did a lot of things right, but found that the quid pro quo with the free users required for Freemium success wasn’t there…. so their CEO decided enough was enough. They switched to a Premium-only offering with a Free Trial and are now producing ***PROFITABLE*** revenue. I’m helping the CEO curb a relatively high churn rate right now [which will help them profitably grow at a faster rate](https://sixteenventures.com/customer-retention-growth-accelerator). (Update: Cancellations are down 15% because of our work together). **4. Docebo** – This company currently offers an on-premises, installed LMS product that is doing quite well – including use by top Italian brands – and boasts customer lifetimes of 5+ years. To scale the business and take advantage of the wider market not accessible with only the legacy LMS product, they created an on-demand, Cloud-based offering This company originally took their Cloud service to market by leveraging the Freemium model; however, after 7,000 sign-ups for the free version resulted in zero free-to-paid conversions, they moved away from Freemium to a try-before-you-buy Free Trial strategy and are now acquiring actual, paying customers. The CEO of the company was so excited when we went over the numbers in our last meeting because he now feels there is a market for their Cloud offering and that the investment in creating the offering was justified. **5. Many Others in 2014** – [SugarSync, Dopplr, and Mailstrom](http://gigaom.com/2014/01/03/are-we-starting-to-see-the-end-of-the-free-file-sharing/) all have – or will be – pivoting away from Freemium according to GigaOm. It’ll be interesting to see what success these companies have in this pivot. Dopplr (and probably others) simply plan to move all free users to a 30-day trial and force churn the ones that don’t convert after 30 days. While they may come out the other side okay, based on an understanding of human behavior, psychology, and what history tells us, there could be a lot of noise from the freeloaders. I hope they’re ready for the onslaught, because it could get ugly (though I hope it isn’t). Remember, hooking someone with “free forever” and then trying to get money from them for the thing you said they could use for free forever is hard to do. Even if they love what you’re offering, you mismanaged expectations and now you have to overcome the psychological barrier that is known as the “penny gap.” ## The Allure of Freemium; Resist the Siren Song! One thing I have to note here is that Enterprise or Traditional Software companies that are considering moving to the Cloud often find the allure of Freemium and the ability to quickly build a “user base” very compelling. In fact, I can’t think of one time in the last couple of years that I’ve been asked to help a Software company transition to the Cloud that Freemium wasn’t at least floated as a valid Go-to-Market strategy… … and [for some large, legacy software vendors Freemium might just work](https://sixteenventures.com/freemium-not-just-for-startups), too, though if they do Freemium, [a different approach from “Traditional Freemium”](https://sixteenventures.com/seven-types-of-freemium) is likely the best strategy. [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Customer Retention is the key to Long-term Profitability *October 16, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-retention-profitability/ Profitability is one goal that most of the SaaS CEOs who ask me for help all share, and SaaS customer retention is the key to achieving that goal. Though, while they’re all focused on achieving profitability, how that is measured varies from company to company, for the sake of this post we’ll consider profitability to be achieved once the Customer Acquisition Costs (CAC) have been paid back and the ongoing contribution margin is positive. So the reality around Customer Churn is that for every customer you lose through attrition, cancellations, or non-renewals – you have to acquire one new customer just to break even… and that’s a tough way to grow! > If you think you’re doing a good job acquiring customers, but know you’re not doing a good job keeping them, revisit that first assumption. > - Lincoln Murphy (@lincolnmurphy) [March 3, 2014](https://twitter.com/lincolnmurphy/statuses/440370001174749184)   ## SaaS Customer Retention Math Consequently, if you want to grow, you need to acquire TWO new customers just to grow by ONE net new customer. ***1-1+1=1*** You’ll recognize that as the the anti-growth math from my post about how [Customer Churn can absolutely kill the Growth of your business but Customer Retention is a Growth Accelerator](https://sixteenventures.com/customer-retention-growth-accelerator). Clearly, a growth strategy where you have to continually work to replace former customers with two new customers to come out with one net new customer isn’t really ideal. So in addition to Churn being the enemy of growth and Customer Retention being the Growth Accelerator… …Customer Retention is also the Profit Accelerator. Retaining customers for a longer period of time – in Software-as-a-Service (SaaS) we often see 3 – 5 year customer lifetimes (and those are getting longer, not shorter) – dramatically increases the customer Lifetime Value (LTV) for that customer and improves your average LTV. ## Beware of Profit-Draining Customers You have to be aware that some customers can actually cost you money, like those who churn out too early and didn’t stay long to even cover their acquisition or on-boarding costs. It’s one thing to work hard, spend a lot of money, create efficient methods of attracting prospective customers to your service and otherwise creating an efficient customer acquisition process. It’s quite another to get your customers on-boarded and fully adopting your service in a timely manner. The data shows that the faster you get your prospects started in your Free Trial, the more likely they are to convert to a paying customer. Likewise, the faster you get them on-boarded and your service adopted within their organzation after becoming a customer, the more likely they are to stay a customer… for a long time. This is why a company like Huddle offers “100% user adoption across the enterprise in 90 days or your money back”… it’s a risk reversal tactic that helps the customer feel better about the decision, sure, but [Huddle](http://www.huddle.com/) – who’s been in market for a while – has likely looked at the data and determined that if they get customers engaged fully within the first 90 days they’re likely to stay on for the full Estimated Lifetime (eLT) in our plans… maybe 3-5 years. [](http://www.huddle.com/) And Huddle probably saw in their data that customers who aren’t fully engaged after 90 days don’t stay customers very long… perhaps not even long-enough to pay back what it cost to acquire them in the first place. So the real formula that matters here is this: ## SaaS Customer Retention + Expansion Revenue = Profit Acceleration On the flip side, retaining customers for a longer period of time increases the profitability of that customer, but not just by keeping them paying the same thing for the entire lifetime. No, customers who stay longer are more likely to not just stay a customer, but to pay you more – above the sales price they originally signed-on at – as they continue to use more and more of your SaaS application – what’s called Expansion Revenue. Simply put, it’s easier to promote cross-sells and up-sells to existing, happy customers who are realizing value from your service than those that have churned out (obvious) or those that are a churn threat (less obvious). In fact, customers who are a churn threat or who do churn out – likely spent – or will spend – less money with you reducing your profitability and making them a drag on your overall LTV metric (which could have a significant negative drag on your overall company valuation). It’s up to you to ensure that you are keeping your customers happy – that is, continually [ensuring they are Realizing Value from your service](https://sixteenventures.com/customer-retention-continual-realization-value) – so that they not only stick around but pay you more and more to use your service. ## Your Long-Term Profitability Plan So your long-term profitability plan for your SaaS company should look something like this: - Create efficient and scalable methods of acquiring customers that reduces CAC over time (including ‘viral’ elements) - Design and Engineer an engagement and on-boarding process that quickly allows the customer to realize value (including your Free Trial) - Provide your customer the continual realization of value they require to stick around for a long time by creating an environment both in-app and through your operations that ensures this happens - Design and Engineer a method of triggered up-selling and cross-selling that drives your customers toward expanded usage of your service and expanded revenue – and profitability – for you [](https://www.customergrowthlab.com/maximizing-lifetime-value-book-early-access) --- # SaaS Churn kills Growth; Customer Retention is a Growth Accelerator *October 15, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-retention-growth-accelerator/ **SaaS Churn Kills Growth, Profit, and ultimately your SaaS Business… together we can end *Retention Deficit Disorder* today!** Very often when I’m asked to help grow a Software-as-a-Service (SaaS) business, the CEO is often focused on Customer Acquisition strategies… the “how can we get more people into the top of the funnel?” issue. But when I start to help a CEO get their SaaS company to profitable growth, I always dig a little deeper to see what’s ***REALLY*** going on… beyond what they ***THINK*** is happening. Very often I find that – while ramping customer acquisition is most likely ***PART*** of the solution – the company isn’t hitting their proposed growth numbers because they aren’t keeping enough customers. This means that a lot of their current Customer Acquisition effort (and spend) is being used to simply replace churned-out customers… making it ***VERY*** hard to grow at the rate they’d like. Which is why I say that Customer Churn is the vile enemy of Growth while Customer Retention is a Growth Accelerator. ## Anti-Growth Math: 1-1+1=1 Think about it… for every customer that churns out – that you lose through attrition, cancellations, and non-renewals – you have to Acquire a brand new customer just to break even… … and if you want to grow your business, you need to acquire ***TWO*** new customers just to grow by ***ONE*** new customer. When you have strong Customer Retention and low Churn (low attrition or low cancellation) rates, it means your Customer Acquisition budget is spent acquiring net new customers; not filling a void left by customers who churned out! ## You Just Need More Wind! Let’s say you have a goal you want to reach – a distant port – but the old sail boat you’re in has massive holes in the bottom and keeps taking on water. In order to move forward you need to keep bailing the water out, but that takes time, energy, and effort to do and keeps you from focusing on your goal of moving the boat forward. It even sends you off-course occasionally as you try to find creative solutions to reach your goal as your sail boat continues to take on water. There are only two actual solutions to this problem. You either need more wind to move you through the water faster, though you’ll still take on water and you’ll need to keep bailing. And while the new burst of wind will help you move forward, it’ll be slower than you’d like because the water you take on makes the boat heavy and the drag caused by the holes keeps you from skimming the water as you should. … or you can plug the holes. Plug the holes! ## Some Putty and a Jet Engine for your Skiff I’ll stop with that boat analogy now, but clearly, before ramping Customer Acquisition… we need to plug the holes in your business that are letting customers fall out. Once you’ve done that, you’ll see that it gets even better when Customer Retention becomes a Growth Accelerator! Customers who you retain are more likely to add additional users within their organization to expand their usage of your service. They’re also more likely to invite other customers – new customers external to their organization. Both of those improve your Viral Coefficient and lower your Customer Acquisition Costs (CAC); two key metrics in the growth – and valuation – of your SaaS business. On the flip side, customers that churn out are more likely to actively ***NOT*** recommend your service, causing you not only to have to work harder (and spend more money) to fill the void they left but to also overcome the bad publicity and negative word of mouth they cause. It really comes down to this, though: ## Clear Metrics of Growth When I work with CEOs of SaaS companies, we very quickly get to what ***EXACTLY*** “growth” means to them… does it mean Revenue Expansion? Number of customers? Growth in registered users? Growth in Daily/Monthly Active Users? Something else? Every company is different and each CEO has their own goals – and reasons for those goals – so we need to know what to measure to know if we’re on the right path to reaching those goals or not. There is no right or wrong way to measure growth; the metrics of growth should be based on the company’s goals set forth by the CEO. Now, assuming you’re looking at Customer Lifetime Value (CLV) as the definition of growth in your SaaS company, then retaining customers for a longer period of time increases the CLV for that customer and – obviously – improves your average CLV. Clearly, customers who churn out have a lower CLV themselves and also bring down your average CLV. Retaining customers for a longer period of time increases the profitability of that customer, too, which might be your measure of growth. The longer they stay after what it cost to acquire them is paid back – and especially if you get more efficient at providing your service to them over time – the more profitable they are as a customer. Customers who churn out or do not renew are less profitable over all and if they churn out too early – perhaps they didn’t stay long enough to even cover their acquisition or on-boarding cost – they could actually cost you money! Customers who stay longer are also more likely to not just stay a customer, but to pay you more as they continue to use your SaaS application – what’s called Expansion Revenue – as it’s easier to promote cross-sells and up-sells to existing, happy customers. There’s no trick to keeping customers for a long time, just remember this… ## Continual Realization of Value is the Key to Reduce SaaS Churn You know it’s not enough to just work to Acquire customers… once you have them, you need to work just as hard – or harder – to keep the customer and [ensure they continue to Realize Value from your service](https://sixteenventures.com/customer-retention-continual-realization-value). ## Let’s Improve your SaaS Customer Retention For immediate consultation and advice on improving Customer Retention, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Customer Retention Requires Ongoing Realization of Value *October 15, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-retention-continual-realization-value/ **Improve SaaS Customer Retention by helping your customers Continually Realize Value** When we buy something without trying it first, this is based on what I call “Perception of Value.” When we buy something after trying it, this purchase is based on our “Realization of Value” during the trial. Makes sense, right? But what about Customer Retention? Well, as it turns out… real, long-term Customer Retention – the kind we’re looking for – is based on the ***CONTINUAL*** Realization of Value by your customer. When Realization of Value stops, that customer is a serious churn threat. ## Identify Threats to SaaS Customer Retention They will drive up your [SaaS churn rate](https://sixteenventures.com/saas-churn-rate) when they leave – stop paying you, decide not to renew, etc. – if they continue to fail to Realize Value from your service. They might leave immediately or they could leave as soon as a “reason” – legit or not – comes up. And the biggest problem is that you didn’t see it coming… but you could’ve. No… you should’ve seen it coming! Look… a good User Experience only goes so far. A fancy UI or slick UX is great and might get the customer excited and initially engaged, but that only goes so far, too. It is the continued Realization of Value that is absolutely the key to retaining customers for a long time. And the kind of Retention I’m talking about isn’t just about keeping customers paying… …it’s about ensuring they continue to get value from their use of your service so they’ll actually keep paying for a long time and – over time – pay you **MORE** for the privilege of using your service. ## Long-term Success Requires Long-term SaaS Customer Retention So, when a customer stops giving you their money, that means they’ve stopped receiving value from your service. Of course, failure to get value from your service didn’t just happen right before they churned out… when they quit using your service and stopped paying you money. Quite the opposite, actually… it’s probably been happening for a while; they’ve been realizing less and less value from your service over time and you just didn’t recognize it and – even worse – did nothing to change their experience. Now they aren’t your customer anymore. So the big questions are: - Is there anything we could have done to keep this from happening? - Could we have known the customer wasn’t getting value earlier and taken action to remedy the situation before it was too late? - Could we have done more to better manage expectations about the type of value they would receive from the service? - Could we have figured out sooner that the customer was likely to leave based on their activity? - What if we knew that they never really got started using our service and could correlate that to others who also churned out? - What if we could categorize customers into specific groups – called cohorts – so that when some decide to leave, we just let ’em… but when others start to leave or are a churn threat – perhaps those that spent or will spend a lot of money with us – we can react quickly to ensure they stick around? What if, indeed. ## Let’s Improve your SaaS Customer Retention For immediate consultation and advice on improving Customer Retention, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Free Trials: Not just for Startups or toy Web Apps *October 3, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trials-not-just-for-startups/ I am frequently asked to help SaaS, Web App, and Cloud companies on strategies to Accelerate Profitable Growth. One way we frequently achieve rapid and long-lasting results is by Accelerating Customer Acquisition through the Optimization of their Free Trial Strategy. To get started you need to understand that a Free Trial isn’t required. But… ## A Free Trial isn’t required, but… While it isn’t required that B2B SaaS companies offer a Free Trial, in my experience, a Free Trial is either: *1) Expected by the market to the extent that not offering a Free Trial is a non-starter.* In markets like this, if you even want to get a prospect into your sales funnel, you’ll need to offer a Free Trial or they won’t even engage with you. However, done correctly, your Free Trial could actually be a competitive advantage in this type of market by engaging the prospect from the beginning, getting them so invested in your product that they convert to a paying customer and don’t even evaluate the other competitive products. *2) Not expected by the market but could be a competitive advantage against incumbent legacy software competitors.* This is very true in more staid niches or verticals where the incumbents are old, comfortable, they set the rules, and where they don’t really listen to the customers / prospects (they know best, right?) about how they’d like to evaluate and procure technology products and services. There is a very real opportunity to offer a Free Trial as a way to disrupt the status quo and gain rapid market penetration. On the other hand , of course, a poorly executed Free Trial strategy – even in this type of market – could backfire and drive customers away from your offering and back to the incumbents, so you’ll want to make sure you do it right. ## OK, but Free Trials aren’t for ‘Real’ Products, right? I just described two scenarios where Free Trials could be a competitive advantage and in one of those scenarios not offering a Free Trial would be a non-starter for any level of real penetration in the market. Given that, I find it interesting that there are still many CEOs and executives within some SaaS companies – and certainly within many of the traditional software companies that I help with their Cloud Strategy – that feel their product is too “big” to offer Free Trials. The pushback I get from these – often large – companies is that “Free Trials are for toy apps, not for our ‘real’ product.” Those same CEOs and SaaS executives are surprised when I tell them that [many of the companies I help ](https://sixteenventures.com/what-others-say) are organizations with annual revenue in excess of US$1 Billion, have a Global reach, are *very* successful and have strong brand recognition in and even outside of their given market. Hardly startups and hardly little companies with toy apps, right? And even they realized that… ## Free Trials can Rapidly Accelerate Customer Acquisition! Even though they have large and successful product lines or services, the SaaS company executives I help all realize – admittadly after I’ve had the same conversation with them – that Free Trials can be used to accelerate Customer Acquisition while reducing the cost to acquire those customers. Even more, they recognize that when done correctly, a Free Trial can be leveraged to not just convert more customers, faster, but to convert those customers at a higher Average Selling Price (ASP) than the prospect originally thought they would convert at. A major goal of all SaaS vendors is (or should be) to expand revenue and grow Customer Lifetime Value (CLV). Done right, a Free Trial can begin that expansion from the very beginning of their lifetime as a customer! But surely I must only help the CEOs and executives of companies that sell to individual users online with a credit card, right? First of all, there are some very big businesses out there that generate massive amounts of very profitable revenue “just” selling to individual users with a credit card; don’t downplay that to your peril. ## Free Trials provide your sales force with Leverage That said, you might be surprised to learn that – while I do help the CEOs and Executives of many SaaS companies that have a completely e-commerce, self-service, credit-card based sales process – many of the companies that I work with also have a very talented and extensive Global sales force and pre-sales engineering organization that interact  and help their prospective customers through the sales process. These companies, rather than shunning Free Trials for being only for “smaller, toy apps” have figured out how to leverage well-designed Free Trials with their various product lines – SaaS and even some legacy, on-premises software – to effectively and efficiently scale that sales and pre-sales engineering force while delivering a great pre-sales, conversion, and post-sales on-boarding experience for their customers. So, the next time you start thinking “we’re too big/complex/enterprise to offer a Free Trial” stop what you’re doing, call me, and setup a meeting to discuss how to Accelerate your Profitable Growth… and that might be by offering a Free Trial. – [Lincoln ](mailto:lincoln.murphy@sixteenventures.com)(972) 200-9317 --- # Why $1 Trials are a REALLY Bad Idea *September 22, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/one-dollar-trial/ It is well-known that I help B2B SaaS and Cloud companies achieve Profitable Growth, often by accelerating Customer Acquisition, improving SaaS conversion rates, and optimizing Free Trials. Because of that, I am often asked for my opinion or advice in public forums, like recently when [I was asked about $1 Trials on Quora.](http://www.quora.com/Startup-Advice-and-Strategy/What-do-you-think-about-the-1-trial-period) At first, I didn’t think I had much to say on the topic… but it turns out that I do. ## Don’t Forget to Keep it Sleazy First, you don’t see $1 trials in B2B that much… there’s probably a reason for that, right? Second, when you do – other than being offered by a very misguided company (I’ll tackle this in much more detail shortly) – $1 trials are offered when a vendor uses a payment processor/gateway that doesn’t allow $0 trials (like PayPal in the very recent past), where vendors try to avoid the “negative option” that many payment processors frown upon (zero $ trials, followed by forced continuity after 30 days) or when they already got slapped for “negative option” violations. Let’s get real for a second… many vendors intentionally make it difficult to cancel service during the trial, resulting in at least one charge before the ‘customer’ is able to cancel. Sure, this makes their SaaS conversion rates high… but increases the negative metrics as well! Ultimately, this is one of the main – often less-than-public and super-sleazy – arguments for asking for payment information up-front… charging $1 instead of zero makes them think this avoids the sleaziness because, hey, at least, they “paid something, right?” I’ll just say this so we’re on the same page; if you need to get customers through forced continuity or by offering a “low barrier to entry*” and hoping they forget to cancel their trial, please don’t contact me to help you improve your conversion rate… you’re not my type. ** as you’ll read below, what you think is a “low barrier to entry” isn’t… * ## SaaS Conversion Rates: Trust is Key in B2B Let’s get back to the reason you offer a Free Trial in the first place: so prospective customers can get to know your offering before paying for it… … remember, they don’t already know, like, or trust your company or product. In B2B especially, trust is huge… trust that your product does what you say it does, trust that you’ll support your customers, trust that you won’t rip them off, etc. So… if that’s the case, how does asking them to provide a credit card simply to try your product help build trust? Right, it doesn’t. ## Attention Prospective Customers… Keep Out! The reality is if you put up a credit card wall, many prospective customers that don’t already know, like, and ***TRUST*** you enough to give you their payment information will leave before you even know who they are. And if asking for a credit card upfront meant that everyone who signed up for your trial became a customer, then I wouldn’t see super-low (sub-20% conversion rates; my experience, your mileage may vary) all the time for companies that put up CC-walls… …in fact, those people from whom you got payment information but who don’t convert have to actively opt-out of becoming your customer… that should sting ***A LOT!*** So clearly, the CC-wall just keeps out people who aren’t ready to give you their payment details and does little to convert a real, long-term customer. What you need to know is that it’s the stuff that happens ***AFTER*** someone signs-up for your trial – with a CC or not – that matters. The stuff you do to engage them, to get them to use your product, to get to know it, to realize value… to become so invested in time, resources, and energy in your product during their trial that conversion becomes a no-brainer. If you do that, you’ll convert more customers. ## Mr. SaaS CEO… tear down that wall! Once you’ve optimized for conversion within the trial, then you can tear down that CC-wall, get more prospective customers into the trial, and convert more to customers. More people into a trial that’s designed to convert customers means more paying customers coming out the other end. Simple. In my experience, far too many companies – SaaS, Web App, Cloud… or any subscription business for that matter – put up a CC-wall to keep the riff raff out and to prevent abuse. My thoughts on that: - If you have “riff raff” entering your trial, you’re attracting the wrong crowd (that’s your fault*) or you’re thinking of the people that your system failed to convert as “riff-raff” instead of “lost customers and revenue” and are blaming the wrong people - If your system is abusable, fix your system; a CC-wall doesn’t prevent abuse, it just lets fewer people in so you have less abuse (and fewer customers; again, your fault)… oh, abuse points = value points… you’re just doing it all wrong! - For B2B, most people that sign-up for your trial aren’t doing so just to mess with you or for fun… they’re signing up because they thought your product would solve a problem for them or let them take advantage of an opportunity. If they didn’t convert, don’t blame them… you failed to convert them and asking for their CC up-front wouldn’t have helped. - Many of the SaaS and Web App pros and Executives I talk to say “We have a 10% conversion rate, but that’s okay because that 90% that doesn’t convert wouldn’t have been customers anyway” or “we get 3% of the visitors to the sign-up page where we ask for the credit card to join the trial, the other 97% who didn’t sign-up weren’t potential customers anyway” … whatever makes you sleep better at night, but it sounds like you’re trying to justify your poor performance by blaming everyone but you. **It’s good to know when something is your fault… because that means you can fix it!* So in summary; putting up a CC-wall doesn’t make a lot of sense most of the time; it is often used to cover up things that should be fixed or because you don’t believe that your Free Trial is setup to convert customers (which it probably isn’t). ## A Bad Idea Made Worse So, back to the $1 trial idea… why are you looking for ways to keep ***MORE*** people out of your trial? Asking for the CC up-front will reduce the number of people that sign-up for your trial vs. not asking for a CC… moving from Free to $1 would – in my most humble of opinions – reduce the number of people that sign-up even more. I suggest you look for ways to get ***MORE*** people into your trial… and work hard to convert more of that increased flow of prospects into paying customers. I know the logic here… it’s easier to get money from a customer that already has given you money so asking for just $1 (or 1 GBP or 1 Euro… whatever) will make it easier for them to give you money later. I also think Cialdini’s rule of Consistency and Commitment could come into play here… … but I believe that ***TRUST*** trumps all and if they don’t trust you enough to give you their CC in the first place, asking for even $1 is going to be a problem. So the $1 trial just seems like an added barrier for your prospects to overcome. ## $1 Trials: the gift that keeps on giving (or taking) No, wait… It. Gets. Better. By asking for $1 to try the product, you could actually seriously devalue your offering, doing a lot of damage to your value proposition by equating your product with a low price. I know, I know… it’s just the trial that’s $1… but if there’s a chance your potential customer allows that to skew their perception of your product overall then it isn’t worth the risk. Right? A couple of things… first, if you have price transparency – a pricing page – then hopefully your customer is aware of the price of your offering. In that case, those prices or the price of the bundle they chose to try becomes the anchor price… the reference for their buying decisions and value perception. But what if they see the $1 trial first? This is psychology… brain stuff that we don’t control. Put $1 in there and that could set the tone. Second, unlike Freemium where the use of ‘free’ could actually hurt your value prop, a Free Trial can help improve your value prop by allowing the realization of value to boost your value proposition and make the transition from prospect to customer – even at a really high price – the no-brainer I spoke about earlier. I’m also sure that you will be able to cite at least one exception to everything I’ve just said… but don’t do it to convince me… and if you’re just trying to convince yourself that I’m wrong… well, I’ll let you figure that one out. Most people will tell you to “just test $1 trials and see if they work for you”… like somehow A/B testing is going to magically transform a bad idea into something that just might work. Look, you can test tactics like this all you want, but before you do, understand the reality – the potential upside and downside – behind the tactics and save yourself a lot of time, energy, lost profit, and heartache. But I personally won’t be recommending that my clients even test $1 trials. Rather, we’re going to focus on converting prospects to customers and not preventing them from signing up in the first place. --- # SaaS Pricing Model: How a 10x Price Increase lead to Happier Customers *August 22, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/10x-price-increase/ **Stormpulse adjusted their SaaS pricing model by raising their prices 10x… and getting happier customers in the process.** So I just had a Progress Check and Planning meeting with a retainer client, Matt from [Stormpulse](http://stormpulse.com/), who told me since they moved away from Freemium just 4 months ago to a Premium-only SaaS offering with a Free Trial they are now profitable and are on track to do ***$100,000*** in revenue this month! That is absolutely amazing for a company with just a couple of employees. Interestingly, I was looking through some older emails after my conversation with Matt and I found this one he sent me after they had made a massive change to their pricing. Like many SaaS companies, Stormpulse seriously under-priced their offering… where they differ from most is that they realized they under-priced and decided to do something about it! Raising prices was the step before they dropped Freemium altogether and this email is super-interesting to read, especially with the additional context of where they’re at today, and it gives insights into how the founder and CEO of a SaaS company should think about Pricing Model (though earlier in the company lifecycle is ideal, but better late than never, right?) This is from Matt… ======================================= “*Lincoln – You mentioned raising prices recently.* *Just wanted to tell you that Stormpulsehas raised its base price from $8.95/mo / $24.95 for 6 months / $49.95 per year to $499 per year with no monthly option… a 10x increase!* *We are seeing businesses renewing no questions asked at even higher prices (alt. configurations) like $690 per year or $990 per year when they paid us only $24.95 or $49.95 last year. Amazing, eh?* *That’s how much we were leaving on the table by being consumer focused instead of B2B.* *I would clarify that by saying that we were focused on a low-stakes versus high-stakes segment … i.e. for some of our buyers, Stormpulse was like Sunday NFL Ticket, nice to have and fun and entertaining, but how much is that worth versus alternatives? Can’t you find entertainment for $0.99 on your iPhone these days?* *For other buyers, Stormpulse was helping them determine when to fly and when to ground multi-million dollar aircraft, when to shut down operations at a manufacturing plant, etc. Much bigger deal with much bigger consequences if you are going to use an inferior alternative.* *This is basically restating my latest realization–there are different kinds of value: entertainment is one kind, security is another, etc. You need to know which kind you are dishing out, and price accordingly. But you know that already. 🙂* *This shift also required us killing off our personal edition. We did this by making almost all of the personal edition features free (the ones that most consumers were after) and then taking away the beloved full-screen view option, which is what businesses can’t live without.* *Sure, we’re getting some consumer backlash but we are looking forward to a much more stable business model with happier customers that have even fewer needs (support issues) than the individual consumers.*” ======================================= Pretty interesting stuff, right? To me, there are a number of amazing take-aways from Matt in that email. 1. I know that Matt and the rest of Stormpulse didn’t come to this conclusion from their own assumptions. They took a deep look at the ***VALUE*** that the big (***MASSIVE***) companies who were using their product derive from that use and knew that even if they raised their prices 10x, their customers would ***STILL*** derive ***AT LEAST*** [another 10x value from it](https://sixteenventures.com/saas-pricing-strategy). How many ***HUGE*** companies are using your product right now and paying you $8/mo? 2. By not recognizing the value the customers are getting from their product, Stormpulse would have left ***HUGE*** amounts of money on the table and put their business in jeopardy in the process. If you aren’t in business anymore, you can’t help anyone, right? 3. Stormpulse made a strategic decision to alienate the low-end users of their product in an effort to save – and grow – their business. Sometimes you have to ***FIRE*** your low-end customers that are too burdensome for your company to continue to support. 4. They had to acknowledge the actual size of their company now, but also where they wanted to be in the future. Is supporting low-end customers keeping you from focusing on the big picture and moving the company forward? Do you want to be an organization that must support low-end users of your product or do you want to focus on larger, more profitable customers? It might be time to ***FIRE*** the low-end customers. If you doubled your prices and lost 50% of your customers, you’d be at the same revenue level with less headaches and better customers, right? 5. Let me be clear… you will get pushback from the firing of low-end customers (in fact, they are often the loudest), but done properly it is manageable. Don’t keep from making a strategic decision that is required to take your business to the next level – or save it – because you don’t want to make some people mad. People will get mad anyway. So just be up front, as transparent as possible, communicate well (for example, you probably shoulnd’t state publicly that you’re firing your low-end customers), and manage expectations. Remember, in everything you do – including raising pricies – it is ***ALL ABOUT THE CUSTOMER*** and when you announce it, it has to be framed that way. Changing your SaaS pricing model is not something to do on a whim, but if you’ve done a value-based assessment of your model – with the customer at the center of that analysis – and feel you’re leaving money on the table and could still deliver 10x the value if you raised your prices, it might be time to look at doing that. If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Pricing Strategy – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition and profitability. – [Lincoln ](mailto:lincoln.murphy@sixteenventures.com)(972) 200-9317 --- # Free Trial Frustrations from a SaaS CEO *August 22, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-frustration/ ## Have you ever wondered why people who sign-up for your Free Trial don’t turn into customers? Well, I got an email from the CEO of a SaaS document management company the other day and she was at her wits’ end wondering the same thing! She wrote me to vent her frustrations about her Free Trial process and to get some guidance on how to fix it. Below is part of my response to her – I put my answers after excerpts from her initial email – because I want you to see my answers in context. I changed her name and took out her company info because this isn’t about her anymore… it’s about you… I want to wake you up and snap you out of your Free Trial Frustration, too! Here we go… =========================== Sarah, here are some thoughts, and I might be a little too honest here, but it seems like you’re having some big issues so I want to help: *> We have web leads that come in but go nowhere i.e. trial signups,* * > whitepaper downloads, demo signups, newsletter signups etc. They may engage* * > initially but most of the leads from the web do not close.* I think you probably need to redefine “engage” as filling out a form and going away is hardly “engagement.” And most of the time this is your fault as the vendor, not theirs! So we need to figure out what is causing them to not become more engaged. From what I saw after looking at your site, signing up for a free trial, and downloading a White Paper, there doesn’t seem to be a cohesive strategy to move someone from a visitor, to a lead, to a customer. Obviously I haven’t seen all of the emails in whatever sequences I was added to, but the initial emails I got do not really pull me in. The Free Trial process is also likely quite off-putting because of the mis-managed expectations for the person signing-up and a lack of understanding about the psychology involved in getting them engaged on your part. *> We stopped the auto set up of their trial signups until they engage* * > with us to qualify* Was this a reaction to the fact that most who started the Free Trial didn’t convert? How has this helped? I’d guess it probably hasn’t helped much and if that’s the case, it points to a lack of an overall strategy. SaaS & Web App vendors routinely put up “qualification barriers” – like what you did, requiring a Credit Card to get started, etc. – because they think that makes up for lacking a cohesive strategy to convert prospects. It rarely does. *> We changed from a 30 day to a 14 day Free Trial* Why? From the customer prospective it would seem that with a product that is more complex and “enterprise” than Dropbox or Box.net that they’d need longer to properly evaluate it (regardless of whether they do or not). Length of a trial [is just a marketing tool](https://sixteenventures.com/free-trial-success-secret-perfect-length) and the length should be based on customer expectations and how you want to position your product. A 14 day trial might turn people off who think they need more time. BTW, did this do anything positive? *[it didn’t]* *> Regarding our application; as you know we have an application that* * > can be a simple or a complex solution depending on the prospects needs. As* * > it stands if the prospect is in a trial situation the app does not reach out* * > and grab them telling them what to do.* It should reach out and grab them, telling them what to do. If it is complex, [look for ways to simplify the process](https://sixteenventures.com/saas-free-trial-engagement) of becoming engaged in the product. =========================== There were some pretty valuable points in there that I hope she – and you – picked up on. My goal in my response to her was to very clearly point out that she made decisions that weren’t based on anything except her current mindset and that if she didn’t snap out of that, nothing was going to get better; in fact, it could get much worse! Her mindset was getting in the way of creating – and executing on – a real and effective Free Trial strategy. I want Sarah – and you – to be as successful as possible and that is going to take getting out of this mindset that causes Free Trial Frustration. Just offering a Free Trial isn’t enough; you need to know how they work, why they work when they do, how to take advantage of the opportunity a Free Trial offers you, how to incorporate the Free Trial into your overall marketing and sales strategy, what tactics to use and when, what metrics to measure and what metrics don’t matter, etc… … in other words, you need to take your Free Trial as seriously as you do the rest of your SaaS business. If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Free Trial – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln ](mailto:lincoln.murphy@sixteenventures.com)(972) 200-9317 --- # SaaS Free Trial: How Self-Service fits with a High-Touch Sales Process *August 22, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/self-service-free-trial/ **How do you determine whether a self-service SaaS Free Trial is appropriate for your otherwise high-touch sales process?** A SaaS Free Trial is an integral part of the sales process and not something separate… never forget that. So, whether you have a 100% automated, self-service sales model, a high-touch sales process, or a hybrid (many companies fall into this category), a Free Trial can be a super-effective part of the process. If executed correctly, a Free Trial should not only raise the conversion rate of prospects to customers, but raise average sales price and Customer Lifetime Value (CLV), while at the same time reducing Customer Acquisition Costs (CAC) and the length of the overall sales cycle. But before considering how the Free Trial fits in, you have to determine whether a self-service sales model is even the appropriate model to begin with. To do that requires two main inputs: - The market’s willingness to accept a self-service sales model - The complexity of the product (i.e. how easy it is to get started under a self-service model) There are other inputs, but they don’t matter if the market wants a high-touch experience and/or the product is too complex to be sold this way. One caveat to the “it’s too complex” issue is this: very often complex products are lead by a core piece of functionality that is really only a portion of the overall product; a self-service Free Trial strategy can be constructed around just that part to work past the “too complex” issue and still get prospects adequately Engaged and Invested in the product. Anyway, since the Free Trial is an extension – a very important and often neglected extension – of your sales process, that will determine how “high touch” your Free Trial process will be. ## High-Touch: Defined But let me be very clear… “high touch” doesn’t mean every “touch” is a one-off, human-powered touch… no way. With the idea that “[high tech allows for high touch](https://sixteenventures.com/free-trial-customer-qualification)” in mind, as much should be “automated” or rolled into the in-app experience as possible for scalability. High-touch isn’t what it used to be, don’tcha know. But, and I know it sounds funny, there are markets that actually want high-touch, human-powered experiences and will shun the pure self-service model. The thing is, we need to be clear on what is meant by “want” in this context. When I ran my Mail Center Management SaaS company, I found that the expectation in my target market was anything but self-service. In my case, it was likely the timing since SaaS was new and not widely accepted yet, but there were also some strong drivers in the market that resulted in a mentality that was anything but self-service. In fact, a current client has switched from a traditional, Enterprise Software model to SaaS and is dealing with the question of how to introduce self-service into a market not accustomed to working this way. And while it is becoming more accepted, there are still plenty of markets where they expect a more hands-on, human-centric sales approach… …your goal is to figure out how to mix self-service with lifecycle marketing automation and actual high-touch, human-powered sales. ## Know Your Market All of this is good to know if you’re coming into disrupt the market – to do something different like self-service – because you might be in for a bit of a shock when they don’t accept your methods right away (can you afford to wait out a re-education of the market?). To you it might seem like the most logical thing (“take control”, “do it yourself”, etc.), but to them – and ***they*** are the only thing that matters in this equation – it is different than what they’re used to, and they’ll fight it. This is where you have to remind yourself that you aren’t your customer and consider WIIFT – What’s In It For Them – and look for ways to work around and within the confines of those market expectations. Remember… self-service in the Free Trial is different than an entirely self-service sales process… you can mix and match where appropriate. The reality is that a Self-Service Free Trial can be part of any strategy – even in markets with a high-touch, human-powered sales process requirement. This is done by automating as much of that “high-touch” part of the process as possible, moving support into the app, improving the Engagement process of the application during the Free Trial, adequately managing expectations, etc. to reduce the burdon on the sales team to allow for scale… … all the while giving your customers the impression that they are being worked with in the high-touch way they expect and require. But all of this comes down to one major requirement: you have to know your customers and work within their wants and needs. And probably don’t guess what those are… you should be sure. ## Let’s Optimize your Free Trial Conversion Rate There is only one of me, so I can only help a limited number of SaaS providers at any one time. But if you’re serious about finally turning your SaaS Free Trial into a customer-acquisition machine, email me with the details of your situation and I’ll get back to you to setup a meeting. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Simply Offering a SaaS Free Trial Increases Conversions *August 14, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-increase-conversions/ For those companies who’ve offered a SaaS Free Trial and had it fail, it is hard to see how it could ever work. For those who’ve never offered a Free Trial, the idea of adding an extra 30 or 60 days to the sales cycle seems like a bad idea; they’re doing just fine, thank you very much. Of course, if the Free Trial didn’t “work” (help them acquire more customers), maybe they just didn’t do it right. And for those who don’t currently offer a Free Trial, how many prospects do they not even engage with simply because they don’t offer a Free Trial? What if the SaaS vendor realized, though, that a 30 or 60 day Free Trial doesn’t actually have to add that much time to the sales cycle? Or what if having a Free Trial actually reduces the cost of acquiring customers sufficient to offset the hit Customer Lifetime Value might take with the delayed start… …or what if having a Free Trial could even reduce the sales cycle ***AND*** help convert customers at a higher Average Selling Price so CLV actually expands? ## High-Converting SaaS Free Trials are No Accident SaaS and Web App companies who have figured out how to effectively use a Free Trial to get more customers know those things and understand that not having a Free Trial would literally kill their business. So clearly, Free Trials work sometimes and don’t work other times… unfortunately the majority of SaaS and Web App vendors fall into the latter category… … but it doesn’t have to be that way! I’ve said it many times – I’ll say it a million more times I’m sure – if your Free Trial is failing to convert prospects to customers, it is probably doing what it was *designed* to do. High-converting Free Trials are not an accident… they are designed and engineered with one goal in mind; convert customers! ## How to know if a SaaS Free Trial actually *increases* conversions To really know if a Free Trial increases conversions, we have to know what it is “increasing” from… and for the purposes of this post I suppose that would be not offering a Free Trial at all. If you currently offer a Free Trial, you can actually test that – replace your Free Trial sign-up with a “buy now” button and see what happens and you’ll have your answer… (we do know putting both a Buy Now and a Try Now button [has yielded very interesting results](http://visualwebsiteoptimizer.com/split-testing-blog/a-b-testing-free-trial-button/)). It is very likely only offering only a “buy now” button will result in fewer sign-ups overall because you’re asking people to buy based on the perception of value. Big brands or well-known companies even in smaller niches can get away with this easily since they are already known and trusted in the market place. You can have affiliates send traffic to a page with a buy now button rather than a Free Trial sign-up since affiliates are likely to be trusted advisors by the customer and the link they provide to your marketing site comes with implied trust. But… if someone doesn’t already know, like, and trust you, getting them to buy from you on perceived value, especially in a B2B SaaS setting where trust is super-duper important, is going to be a hard sell. For some vendors, this means having a strong Indoctrination process that gets the market to know, like, and trust them so buying becomes easier… many times this is required even to get prospects to sign-up for the Free Trial! For other vendors, offering a Free Trial allows prospective customers to try the product and that enables the prospect to get to know, like, and trust’em in the context of evaluating the product, which then makes it easier to buy from that vendor. And if your target market expects a Free Trial from the vendors in your space, then you probably should offer a Free Trial because not having a Free Trial would be a non-starter. In this case, even with a low conversion rate, a Free Trial probably would “increase” conversions over not having one! Of course, if you understand how to take people that think they’re just “evaluating” your product and get them using it and hooked on it, they’ll buy your product and not even evaluate the others! ## SaaS Free Trial as a Competitive Advantage Now, if your competition doesn’t offer a Free Trial to your Target Market, then offering a Free Trial could be a competitive differentiator, especially against large, legacy, slow, or entrenched competitors. Imagine what you would have to do to get someone in that market to pay you before using your product if you’re new to them… it would be almost impossible because “no one ever got fired for buying [the big vendor’s product in your market].” But if they can try it first (and you do it right and get’em hooked on and actually using your product during the trial) then displacing the legacy player might be a realistic possibility even for a small, bootstrapped vendor… your Free Trial goes from being just a competitive differentiator to a Competitive Advantage! There are many other factors that go into whether you should offer a Free Trial in the first place… …and the factors start with your market/customers, their expectations/requirements, how they buy the type of product you’re selling, how they evaluate products, who you can reach (buyers vs. influencers) with your marketing, etc. And of course some factors include vendor-side issues such as what you can support technically, the resources available to build the Free Trial, budget or expertise to acquire or build a marketing automation/lifecycle messaging engine, building or procuring your subscription management, metering, and billing solution, etc. But by far the most important factor on the vendor’s side is the company or team’s willingness to put in the effort to learn what a real Free Trial strategy is, to plan it, and to execute it. I can’t emphasize how important it is to know how to plan, build, and execute on a real Free Trial strategy. ## Strategy before Tools Look… you can [instrument](https://mixpanel.com/) your app with the latest and greatest Customer Success technologies , you can have CRM integration, you can use the fanciest lifecycle messaging or [in-app messaging platform](https://www.intercom.io/), you can integrate with the most sophisticated metering and billing solution… …and you can ***STILL*** have a Free Trial with low conversion rates! Tools on their own are of little value… knowing how to use them is key. Put a different way, you can use the fanciest marketing automation tool and still automate a *crappy* marketing strategy. So just going through the motions, having a marketing page that leads to a sign-up form that sends an email that has a link that you click to validate the address that lands you in the app and 30 days later bills your Credit Card or asks for payment info and being able to monitor each of those activities isn’t a Free Trial strategy. Don’t get me wrong, you’ll probably do most or all of those, but if that was all that was required in a Free Trial strategy, every SaaS company that offers a Free Trial with that workflow would have high conversion rates. And most don’t… …something like [66% of SaaS vendors](https://sixteenventures.com/average-free-trial-conversion-rate) have a conversion rate from free to paid of less than 25%. So if for the majority of SaaS vendors, their Free Trial causes greater than 75% of the people that sign-up for the trial to ***NOT*** sign-up, then we could safely say that overall, Free Trials don’t work, right? Well, I also think it is safe to say – presumably with a few exceptions that all should be market-driven – that even though we’re talking about an an average conversion rate of less than 25% on their Free Trials, that probably results in more sales than if they didn’t offer a Free Trial. But you don’t want to settle for low conversion rates when – with a clear understanding of Free Trial Strategy, a little work, and some perseverance – you could have ***HIGH*** conversion rates! ## The Reason for Low-Converting SaaS Free Trials So I’ll let you in on the secret behind most Free Trials with low conversion rates… [they fail to engage the prospect](https://sixteenventures.com/saas-free-trial-engagement). Most Free Trials are built to further the “perceived value” concept… an extension of the brochure marketing site they created… maybe an “active” demo at best. When I ask what a successful trial looks like for the prospect, most vendors answer with something like “the customer is able to see the difference our app will make to their business.” Hmm… doesn’t that sound exactly the same as the goal of the marketing site? Or the feature list? Or the demo? ## The Secret to High-Converting SaaS Free Trials A really effective Free Trial strategy is one that moves the prospect from where they perceive value to where they ***REALIZE VALUE***… and when they realize value, conversion from free-to-paid is a no-brainer. So for SaaS vendors that understand the difference between perceived value and realized value – like the SaaS vendors I help – Free Trials increase conversions in a big way. But just having a Free Trial doesn’t guarantee anything. ## Let’s Optimize your Free Trial Conversion Rate For immediate consultation and advice on improving Free Trial conversion rates, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Free Trial: Your Customer Qualification Machine *August 14, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-customer-qualification/ I believe in the saying “high-tech allows for high-touch” and that we can use the self-service nature of the web – including your SaaS Free Trial – to not eliminate the human-powered sales force, but to scale it efficiently to let each salesperson work better leads and close more sales. In my experience, SaaS Free Trials are not used strategically – or even effectively – by most SaaS providers… with or without a sales force. As you know, I’ve worked with 100’s of SaaS and Web App vendors of all shapes and sizes and from around the world on Accelerating Customer Acquisition through Free Trial Optimization… so I’ve seen what works and what doesn’t. ## Progressive Profiling: The Secret Reason for Free Trials In Marketing Automation circles this concept is called Progressive Profiling, and by starting with and extending this process over the course of the Free Trial, I’ve seen extraordinarily results for SaaS companies that have a human sales force.  Think of the Free Trial process itself as a Customer Qualification Machine. This strategy leverages the Free Trial process (and often the pre-trial “indoctrination” process) to build a customer profile over time and, once a certain threshold in that customer profile is met, the sales person becomes active in the process, but not before. Essentially, this is done by front-loading the sales process with automation and self-service to cover the general, repeatable things a sales person would have to do with every prospect and only engage the sales team when the prospect has identified themselves – through their actions and information – as someone worth reaching out to. Done correctly, from the prospect’s standpoint, they may have had multiple interactions with the sales person before the sales person actually becomes involved! ## High-Tech allows for High Touch …remember that. It’s not one or the other, but one enables the other at scale. Now, I said most SaaS vendors don’t use their Free Trials strategically or even correctly… and I stand by that. I’ve had more than a few SaaS vendors tell me they (want to) call every prospect that signs-up for their Free Trial…. this is not scalable nor practical. In fact, it is counter to why you offer a self-service sales process and Free Trial in the first place and many times the prospect won’t appreciate being called because that is counter to their expectations. This is a symptom of the SaaS vendor not really understanding how to use a Free Trial effectively and a sales organization that is very likely threatened by the Free Trial or sees it as a “lead generation” process (akin to signing up for a webinar or to download a whitepaper) and not what it really is… a Customer Qualification Machine! ## Here’s how to do it Engineer a Free Trial process that takes the prospect from the marketing site, though the sign-up process, and into your App in a way that engages them and moves them through certain milestones. As the prospect does things – downloads a whitepaper, signs-up for the Free Trial, etc. – a customer profile is built and updated based on their actions and 3rd party data from [InsideView](http://www.insideview.com/), [Data.com](http://www.data.com/), or even [LinkedIn](http://www.linkedin.com/in/lincolnmurphy). Then, once they are in the Free Trial they are moved through milestones (I call them [CCAs: Common Conversion Activities](https://sixteenventures.com/free-trial-metrics)) and when certain milestones are met, the sales person is notified that the customer is ready to be contacted. Boom… the Free Trial process just delivered to the salesperson a prospect that has self-qualified through their own actions and inputs ***AND*** (if you designed your Free Trial correctly) has become Engaged and Invested in your app in such a way that conversion to a paying customer is a no-brainer! Look… the reality is, some industries or SaaS types still require human interaction to close the sale and this might not change anytime soon… but this doesn’t mean self-service sales processes or Free Trials are irrelevant in these markets. It also means self-service Free Trials are not a way to eliminate the sales person from the equation, but can be used to scale the sales force efficiently by having them focus their attention on appropriate prospects. Imagine if your sales people could work 5x the number of leads (because they don’t have to do so much of the mundane, repeatable work) and if those leads had already self-qualified as real prospects! --- # SaaS Free Trial Optimization: When to start? *August 3, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/when-to-optimize-free-trial/ Before you start Optimizing your SaaS Free Trial to improve free-to-paid Conversions, learn the 5 things that must be done first… Here are five things that are required before optimization really makes a lot of sense. You don’t want to spend a lot of time optimizing your Free Trial if these aren’t already in place. On the flip side, going through the steps that we talk about – going through the process of optimization – will actually force you to take a look at some of these things. ## 1. Have a Product that solves a real problem Number one, you have to have a product that solves a real problem. That should be a no-brainer for us, right? Well, occasionally we run into situations where the problem is something that doesn’t really exist outside of maybe our office or our computer or our world. We build a great product, but it doesn’t actually solve a real problem that anyone else has, or would be willing to pay for. ## 2. Sell to a Market that knows they have a problem More often than not, it’s not the product that’s the problem, it’s that the problem that you’re trying to solve isn’t one that your market knows about. They don’t know that they have a problem. It’s really hard and expensive and time consuming to try to get people to know that they have a problem. Then, once they know they have the problem, then to convince them that you have the solution to that problem. A lot of folks that are start-up entrepreneurs in the web space are programmers by trade or at heart or however we want to say it, and they can build a really great product. Then they can go out and find scaleable ways to reach an audience, but the problem is, if the audience doesn’t know they have a problem, that’s going to be difficult. ## 3. Have a scalable, sustainable, and repeatable way to reach that market So, you need a product that solves a real problem, and you need to have a market that ideally already knows that they have a problem.  Got that. But then, number three, you have to have a scaleable, sustainable, and repeatable way to reach that market. So I’m talking about distribution, personas, understanding who the different buyers are, and all those different things. For many SaaS companies, this means being able to maintain a steady (or steadily increasing) flow of relevant traffic to their marketing website. Look, if you have a product that solves a real problem and the market knows they have a problem, but it requires you to go out in person to meet with each and every potential customer, but the price your customers are willing to pay is too low, then there may not be an economically viable opportunity there. High-touch, high-cost sales are not counter to SaaS (see the Salesforce.com example below), but for a low-priced product, that might not work. And let’s be very clear… there are situations where you might have a product that solves a real problem and a scaleable and sustainable way to reach them… but if they don’t ***know*** they have a problem, that’s going to be your biggest hurdle. ## 4. Ensure your product conforms to User Experience and User Interface best practices Somebody said to me, “Hey, Lincoln, you don’t cover usability in this program.” I said, “Well, there’s a lot of stuff I don’t cover in this program. It’s very focused on free trials. Sorry. I can’t do everything.” But he said, “You should cover that.” So I just shared an article with my clients called “Usability Matters for Conversion.” It’s a list of resources for best practices. But I have to admit that I took for granted that we were creating products that were usable and that conformed to usability best practices. But I don’t want to take things for granted anymore. If your product is not usable, that’s a problem. If your product looks like an enterprise product and you’re trying to come to market in a way that’s new and agile and all these new buzz words, and your product looks like this old-timey software, that could be a problem, especially if everything else, all the adjacent products in your market are modern looking and cool. On the flip side, you can go too modern and too cool for your market, and you have to be careful. I would say, and I give this warning in that post that I just put up, that you have to be careful of falling into the trap of best practices for software design, when what we’re selling is something different than “software.” So learn usability from a software standpoint, sure, but don’t forget that this doesn’t have to be a software interface. It can be something that looks like a webpage, something that’s a little bit more friendly. ## 5. Offer a way for your customers to buy the way they want to/can buy If you have everything else on this list in place, that’s great. But you have to have a way for your customers to buy the way they want to or can buy. One of the biggest problems I see, especially with companies that are coming from the enterprise or installed software world to SaaS or the Cloud is that, “Well, we’re going to take credit cards. We’re going to charge $19.95 a month,” or whatever it is, “and take your credit card.” The reality is, just because you changed your model or just because you’re coming to market with a certain model doesn’t mean that your market is ready for that. They might still require invoices and pay by check or pay by ACH or whatever it is. So you have to present your solution in a way that your audience can actually consume it. So you need to think about it from a price standpoint. You always hear this OpEx versus CapEx in terms of SaaS, one of the big value propositions for SaaS or Cloud or whatever. That’s fine and we understand that. We can say that capital expenditures for large enterprise software installations are a thing of the past. That we need to come in and charge on a monthly basis or recurring basis so that we’re in the operating expense. But there are situations where that might not be what needs to happen. Salesforce.com just announced a few weeks ago that they closed a multi-year $100M deal. That’s not on a credit card. That’s not a per month price. It was a very big deal for the #1 SaaS company in the world – a very big deal – and very much an enterprise sale. If they only accepted Credit Cards and only had a self-service sales model, they might have left a substantial amount of money on the table! So we have to take those things into consideration. Just because we have the SaaS business architecture doesn’t mean we’re going to be able to change, necessarily, the way our customers buy. Now, if you have a large enough brand, if you’ve been in the market long enough, if you have a large enough market penetration, at some point you may be able to influence the way your customers buy. But that might not be the way it is right out of the gate. If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Free Trial – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # 7 Tips for Software Vendors Moving to the Cloud *July 26, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/cloud-magic/ As a Strategic Consultant, I have worked with the Executive Teams of many Enterprise Software and Independent Software Vendors (ISV) to develop strategies for becoming Software-as-a-Service (SaaS) and Cloud Services vendors. …and I must say that I’ve come to what I consider to be a shocking conclusion: ***Far too many people think the Cloud is magic.*** In fact, I came up with this list of **7 ways Cloud Services are not a Magical Success Machine** based on my recent experiences… feel free to disagree with me or give me other ways the cloud is not magic in the comments. Here we go. ## 7. Moving to the Cloud does not magically result in faster time to market I know… crazy, right? That’s one of the big reasons to “go Cloud” isn’t it? Look, I know plenty of people, companies, startups, etc. with products that they’ve been working on for years and are “just a few months away” from going live… and these are pure-play, from scratch, “cloud native” products/companies – often actually leveraging “cloud” technology like AWS, Azure, etc. – and they are certainly not getting to market fast. Here’s the thing… the Cloud itself does not result in faster time to market… it simply allows you to get a production-ready product to a point that is immediately consumable by customers, faster. Of course you then have to find the people who should want to use your product and convince them to use it… the Cloud doesn’t change that. But… IMHO (remember, this is all just my opinion, something I AM an expert in), faster time to market isn’t the part that really matters, anyway. What really matters is that once in-market, the Cloud allows you to get feedback from actual product use faster, so you can iterate on that knowledge and make your product better, faster. So it isn’t (just) the speed to market that the Cloud offers that matters… its the speed of iterations through the “build-measure-learn” loop and the “validated learning” velocity that matters. BTW, those are core Lean Startup principles and if you aren’t familiar with all-things Lean Startup, I suggest you become so post haste… and don’t let the name fool you, “Lean Startup” is for anyone looking to bring a new product to market, whether in a brand new company or an existing enterprise. “The Cloud” – if you’ll take advantage of what it has to offer – can help you leverage those Lean Startup principles in ways never before possible… again, if you’ll take full advantage of it. And one of the ways to take full advantage of what the cloud offers in terms of speed of iterations through the “build-measure-learn” loop is by adopting a faster, more *agile* product development methodology, but…. ## 6. Becoming a Cloud Services provider does not magically transform your software development process into agile So you have 12-month release cycles, provide infrequent, monolithic updates to users, and use a waterfall software development methodology today. Tomorrow you decide to “go to the cloud.” The next day you’re a full-blown Agile Scrum eXtreme Programming shop with pair programming desks, sophisticated unit testing frameworks in place, and continuous integration adopted across your entire software development team, right? Wrong. It doesn’t work that way. The Cloud doesn’t magically transform your software development methods or team, product development methods or team, marketing organization, sales organization, management, or executives. In fact, it is often these teams and methodologies and the “legacy baggage” (which frequently results in a “that won’t work here” mindset) that comes with those teams that hinder a traditional software vendor from fully embracing what the Cloud **OFFERS** in terms of flexibility and agility. To fully embrace the Cloud and take advantage of what it offers requires a shift in thinking that must permeate the entire organization… which is why many legacy companies that want to “move to the cloud” often buy pure-play Cloud / SaaS / Web App providers (often after failed in-house efforts) so they can “absorb their ‘cloud’ DNA” because they realize that making such a shift internally is going to be difficult. I often suggest to Enterprise or Traditional Software vendors that rather than treating it as just another product, that they instead treat their Cloud offering as a separate business unit (or new company) with a new brand and dedicated resources… different software development, different marketing, different sales, different ops to combat this “legacy baggage” problem. But the “legacy baggage” doesn’t stop at the organizational level; this is product-level, too, and… ## 5. Moving to the Cloud does not magically happen without some code changes Most Enterprise or Traditional software vendors that I run into who are looking to “go to the Cloud” have at one time or another considered this a valid strategy: - Take our existing product as-is - Spin up an instance of it on AWS or Azure for each customer - Profit It appears we have to once again get into the [ASP (Application Service Provider) vs. SaaS](https://sixteenventures.com/difference-between-asp-and-saas) argument from 7 years ago. Unfortunately, today it’s much harder to make the argument against ASP from a cost/tech scale standpoint when “all you have to do is spin up some VMs on Amazon… write some code against their API and you’ve got a ‘scalable’ business model, man.” Ultimately, the argument comes down to Multi-Tenancy…. oh no, the [Single vs. Multi-tenant SaaS](https://sixteenventures.com/saas-multi-tenancy) argument of 4 years ago rears its ugly head once again. Here’s how I see it (in run-on sentence rant format): **Single-Tenant ASP model** using VMs on AWS/Azure as an Enterprise Software Vendors “Cloud” strategy = safe, comfortable, doesn’t require much or any change both technically or organizationally, it’s a short cut, it is risk-avoidance, it speaks to a lack of market opportunity vision and a complete mis-understanding of the business model/revenue streams available with Multi-Tenant SaaS; it is not scalable at the business model level (companies that fail rarely do so because of technology issues… remember that! **SaaS Business Architecture w/ Multi-Tenancy** as the “Cloud strategy” = it’s hard, it requires building a business from the ground up, it is completely unfamiliar to traditional software vendors, it is at least perceived to be very high-risk since it requires changes at pretty much every level of the business, though it allows for massive scalability at all levels of the business, it offers unprecedented visibility into user behavior and therefore offers the ability to provided targeted up-sell and cross-sells and allows a vendor to offer proactive customer support both resulting in reduced churn (or higher retention) and higher customer lifetime value; ultimately it requires a compelling market opportunity to justify the upfront investment. So if you want to go to the “Cloud” – to do it right means you probably aren’t going to be able to take your existing product and slap it on Amazon or Azure as-is. You’re going to have to not only build a new product but engineer a new business… in SaaS, the business is the product and vice-versa. But wait… there’s good news. When you recognize what the Cloud really offers, you’ll recognize that you don’t have to build everything yourself. In fact, at first – yes, even for (or especially for) large Enterprise Software companies – you can focus the effort and attention in your new Cloud offering on your core product… the secret sauce, the thing that makes your product special… and leverage other cloud providers for everything else. I say especially Enterprise Software vendors because they are often far removed from things like metering, billing, lifecycle marketing, or even running/managing their own public-facing infrastructure. By leveraging the Cloud to its fullest, you can use tightly or loosely-coupled ecosystem partners to help you get to market faster by avoiding reinventing the wheel… or a complex metering and billing system, single sign-on, analytics system, etc. So yes, you will have to re-engineer (or build from scratch) your new product to take full advantage of the “Cloud” – but by taking full advantage of the Cloud you won’t have to build everything from scratch. But just like the upfront investment to go to the cloud the right way, there’s an ongoing investment by you and your customers which means… ## 4. Becoming a Cloud Services provider does not magically result in cost savings for your customer The cloud comes with the promise of “economies of scale” (EoS) – the more there is, the less it costs. As a SaaS vendor you get to benefit from the EoS of your infrastructure provider and your customer gets to benefit from shared infrastructure assuming you leverage multi-tenancy within your app. If you spin-up an instance for each new customer, your customers will benefit from EoS at the infra layer in a pass-through fashion, but at your level that won’t be achieved. Bleh… Who cares. Here’s the deal… the cloud won’t – by default – save your customer money. Put another way… the cloud shouldn’t – by default – result in a cost savings for your customer. Think about it… if you take on support in the app for your customers rather than having them run it in their own data center or coat closet, you’ll probably spend more on infrastructure than you ever thought about today. Which is why you should probably charge more for access to the app (over the estimated Lifetime Time of the customer). Now, net net the customer might pay less since your app, which might cost more in the cloud over 3 years vs. a straight purchase of the software + maintenance for 3 years, doesn’t come with on-premises support, hardware, and utility costs. But the “software” amortized over 3 years vs. 3 years of subscriptions might have the SaaS version being more expensive. Or at least – in many cases – it should. It just makes sense… charge ***more*** for your cloud offering because you will likely spend more to support your customers and they are certainly getting a benefit in excess of just the software “license” you used to sell, right? Unfortunately, few companies think this way… “cloud” = cheap(er) to them. They don’t take into consideration the extra costs of supporting and delivering a cloud offering and they – even more importantly – don’t take into consideration the extra value delivered to their customers in this model. I’ve only ever run into one company who said “we’ll save money by managing the infra for our clients since we already bundle support and supporting on-premises installs is a nightmare.” Bottom line is… don’t undervalue your offering by thinking “cloud = cheap”… And if your customers already believe that, then you probably shouldn’t lead with “our Cloud offering” in your marketing! So if you’re convinced that there is a real business opportunity for you in “the cloud,” how do you make money? Well, first you need to know that… ## 3. Moving to the Cloud does not magically change your revenue model to monthly, recurring payments I’ve said it for years… SaaS != Monthly Recurring Payments. But most people say “SaaS” and mean exactly that… monthly payments. I’ve met a few Enterprise Software companies recently that offer their software – their installed, on-premises, behind-the-firewall, legacy software product – on a monthly, recurring revenue basis. Is that SaaS? I doubt anyone would say it is. Many times the vendor simply amortizes the cost of the software + maintenance fees over some expected lifetime, say 3-5 years, and calls it a subscription. Cool. But it’s not SaaS. It’s certainly not “cloud.” On the flip side, just because you put or build your app in the cloud does not mean you’ll sell it on a monthly, recurring subscription basis. You likely won’t sell a perpetual license to the software, since the customer isn’t actually buying software but rather a complete service, but aside from that, just about anything goes in terms of how you can make money with your cloud offering. Like everything else you do, you must consider your market… sell your product how your customers can/will buy. Which leads to the next point…. ## 2. Becoming a Cloud Services provider does not magically change the way your customers buy What is your ideal customer’s procurement process like? When you “go to the cloud” will their procurement process change? Yes, it could… if you offer a monthly subscription and can now bypass the traditional procurement process because individual employees within an organization can subscribe to your product with their company credit card or your fee is low enough to be reimbursed by the company, then you could change they way they buy stuff from you (not to nitpick here, but you aren’t changing the way they buy; you’re fitting into a different buying process). But what if you don’t want to offer a low-priced product that employees can expense, or you aren’t offering a departmental or utility product and your product is more “mission critical” or just “bigger” like ERP, HCM, Warehouse Management / Inventory, etc. Simply because you offer a “cloud” product, does the procurement process for those products change? Probably not. You’re looking at the CapEx vs. OpEx argument and saying “of course they’d like to pay monthly… duh” … but is that how your customer thinks or what you think? Right… this isn’t about “Cloud” or you… its about your customer. It’s always about your customer…. Cloud or no Cloud. And unless you’re the market leader, not just in terms of your type of software but literally, your target market looks to you for the decisions they make, you’ll be hard pressed to change the way your customers buy simply because you now offer self-service, auto-provisioning software they can pay for with a credit card. Look at Workday… they are a 100%, from-the-ground-up, pure-play SaaS (Cloud… whatever) HCM vendor with a high-touch sales process, no self-service e-commerce model, doing 6 and 7-figure, multi-year deals the old-fashioned way because that is how their market buys. They could go down-market and be more “SaaS-like” right… more like Basecamp… or they could keep killing it with 6, 7, and 8-figure multi-year deals by selling how their customers buy. Maybe their customers will change how they buy in the future (I’m sure they’re buying other stuff on the web both in their business and certainly personally) but for now… when it comes to procuring an HCM system, the Cloud didn’t magically change the way customers buy. How they get **TO** the buying decision in Workday’s favor… well, that’s a completely different story for another day and it has to do with Workday taking **FULL** advantage of what the Cloud offers in terms of marketing. But… ## 1. Moving to the Cloud does not magically create a new market for you Recently, I was tasked with helping a traditional software company map out the Go-to-Market strategy for their cloud offering. But when I joined them they didn’t have a cloud offering identified yet, let alone one ready to plan a G2M around. They had some ideas, but that was all. So first things first, we had to figure out which idea to focus on. Do they bring their current offering to the cloud, do they build a Minimum Viable Product (MVP) based on some subset of current functionality and use that to enter a different market or go after a different market segment, do they create a different product that complements their current offering but is in the cloud, or do they create an add-on to their on-premises product that is “in the cloud” so they can say they have a “cloud” offering. Lots of options – and they had thought about all of them – but we needed to figure out what the best option was. Before I could start the process of helping them identify the best opportunity for their cloud offering, one of their team members pulled out a spreadsheet to “evaluate” the opportunities. And I watched in awe (horror?) when they used only inward-facing things to evaluate their “cloud opportunities”… not once did they mention any external market drivers. Basically, they wanted to “be in the cloud” and they wanted to choose whatever opportunity was most likely to get the okay of the CEO, not the one that was truly an “opportunity” by market-demand standards. To which I had to remind them: don’t just “move to the cloud” to move to the cloud… have a reason… the Cloud is not magic and won’t make a market appear. It seems we’re back to “if we build it, they will come.” Which they probably won’t. This is one of my favorite tweets from Aaron Levie, CEO of Box: > Remember: Existence of a Problem != Existence of a Good Business Opportunity > - Aaron Levie (@levie) [May 3, 2012](https://twitter.com/levie/status/197854352235446272?ref_src=twsrc%5Etfw) My take on it is: ***Remember: Existence of the Cloud != Existence of a Good Business Opportunity*** Don’t go to the “cloud” just to go to the cloud… know why you’re doing it (it should probably be market-focused) and remember that the cloud isn’t a Magical Success Machine! ## Let’s Work Together to Transition You to the Cloud For immediate consultation and advice on transitioning your software business to the cloud, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln ](mailto:lincoln.murphy@sixteenventures.com)(972) 200-9317 --- # How to keep App-generated Email from Being Marked Spam *July 26, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-transactional-email/ The most concise definition of [Transactional Email](http://www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/gv00333.html) I could find (after a 7 second Google search) is: *Email primarily containing information about current or prior business dealings, such as confirmation of a sale, a registration number, an invoice, or an opt-in or opt-out confirmation. Contrast this with “marketing email.”* UPDATED FOR 2014! Transactional emails are those created by the application – based off of a template setup by a human, of course – and this differs from marketing emails – like newsletters and auto-responders – that you’d send with tools like [Sendloop](http://sendloop.com) or [GetResponse](http://getresponse.com). For SaaS & Web App vendors, transactional email often contains project status updates, analysis results, login credentials, etc. and can be sent on-demand or scheduled to send weekly, daily, or even multiple times per day. As a SaaS vendor, you know these emails are super important for you to communicate with your customers and drive further engagement with your app. What you may not know – or hadn’t thought about before – is that they are good for two other **SUPER IMPORTANT** things: - **Get ’em back into the app (often)** – Here’s a super-ninja secret for you… don’t tell ’em everything in the email and make the main Call-to-Action (CTA) a link into the app to see and/or take action on the reason for sending the email. For example, an analysis report… don’t send it in the email, give a synopsis and link to the report in the app. - **Market to them** – yes, even in Transactional Messages, [according to the CAN-SPAM act](http://business.ftc.gov/documents/bus61-can-spam-act-compliance-guide-business/) in the United States, a Transactional Message can contain marketing/sales language or creatives if the primary purpose of the email is to communicate the “relationship” information. So when sending the analysis report synopsis to your Free Trial users, remember to include a CTA at the bottom of the email that presents an offer to become a paying customer, too. This post was inspired by the following tweet where Stu expressed frustration with his Transactional Email messages getting marked as spam: > [@stulogy](https://twitter.com/stulogy?ref_src=twsrc%5Etfw) might indicate your emails aren't wanted. Ensure they're EXPECTED by & valuable to users, have clear CTA & can be turned off in app > - Lincoln Murphy (@lincolnmurphy) [July 25, 2012](https://twitter.com/lincolnmurphy/status/228206967045378048?ref_src=twsrc%5Etfw) My response was a bit terse so I thought I’d expand on it a bit. First, read my post called [5 Rules for SaaS Email Marketing and Transactional Messages](https://sixteenventures.com/saas-email-marketing) as it will lay the foundation for creating an email infrastructure designed for success. Now… ## Here’s how to keep your Transactional Email from being marked spam Okay, before going any further, I have to say there are some prerequisites for the following to make a difference; you have to get your email delivered. [37 Signals built their own infrastructure and got 99.3% delivery](http://37signals.com/svn/posts/3096-giving-away-the-secrets-of-993-email-delivery), but most sane SaaS & Web App companies leverage a credible email delivery service like one of these: - [SendGrid](http://sendgrid.com/) - [MailJet](http://www.mailjet.com/) - [MailGun](http://www.mailgun.com/) - [Postmark](http://postmarkapp.com/) - [Amazon Simple Email Service](http://aws.amazon.com/ses/) - [Mandrill (by Mailchimp)](http://mandrill.com/) ## Here’s why it’s so important… For instance, a company that came to me for help improving their Free Trial conversion rates had only 50% deliverability (and thus far fewer than 50% of their Free Trial signups activated!) and it was due 100% to them sending through their own poorly managed SMTP server; that changed overnight by moving to a qualified transactional email service provider. Okay, so assuming your messages are actually making it to the recipients’ email system, it is very likely your Transactional Email messages are being marked as spam because your customers/users don’t want or need them. That might mean that you’re sending emails about things that – quite simply – they don’t care about, don’t need, didn’t expect, or frankly don’t want. **So, know why you’re sending the emails.** The is always the first question I’d ask in this situation; why are you sending the messages you’re sending? What is the customer story-driven hypothesis that you’re testing? Getting them marked as spam is probably a good indication that you should mark that hypothesis as false and pivot. A good place to start is to assume your customers/users just don’t want the emails you are sending. So, ask them what they want and how frequently they want them. Yes, some will lie to you or say “I hate all email, ever… everything email is spam and I love Inbox Zero”… cool. Cool. Don’t listen to people like that. Listen to the normal people – paying customers. Use good Customer Development techniques here and create emails that your customers / users actually want. **Let ’em know they’ll get emails from you.** Don’t hide it or surprise them. If you fail to let them know they’ll get emails from you, best case, some won’t get the emails because their system will mark them as spam for them. Worst case, the customer won’t expect it and mark them as spam themselves. Not properly managing expectations of users and customers is the #1 failure of just about every SaaS or Web App company in the world. This goes far beyond just email, too. But in this context, just tell ’em they’ll get emails from you daily (or whatever) and that those will contain something awesome for them. Make them look forward to those emails. But just telling them they’ll get email from you might keep your messages out of the spam trap. **Give them control.** While I want everyone to get the Transactional Emails generated by my awesome app, it’s true that I’d rather have a few customers / users turn off their daily notifications than have them mark them as spam and bring down my sender score. If I’ve done my job, the vast majority will still want – and look forward to – the frequent updates because they’re super valuable. But let’s be clear, those who opt-out of the “daily update” style Transactional Email messages will still need to receive receipts/invoices, security, credential resets, etc. so as they’re “opting-out” of those other messages, make it clear that they’ll still get some email from you, though infrequently. ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Free Trial: Confused Minds Don’t Buy *July 25, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-engagement/ **When it comes to your SaaS free trial, complicated isn’t cool…it kills conversions!** Confused minds don’t buy… they bounce, and take the money that you spent to get them to your site and their lifetime value as a customer with ’em! Look at your SaaS sales funnel, your Free Trial sign-up process, their first in-app experience, etc. If anything in there isn’t 100%, absolutely clear – and you happen to rely on an e-commerce/self-service signup process for your web app – you’re losing sales. Period. Look, it doesn’t matter if your product does 3,574 things… pick the absolute minimum number of things required to get your prospective customer using – then *invested* in – your product and create an experience that moves prospects in that direction. If you’re afraid people won’t see all 3,574 awesome features when they come in to “kick the tires” or “evaluate” your SaaS offering if you guide them through just a small subset of those things, let me assure you… … if you let them fend for themselves in some elaborate dashboard with zero guidance, they won’t see all 3,574 things… in fact, they won’t see any because they’ll get confused or overwhelmed, leave … and never come back! So how do you avoid this problem and increase Engagement with your Free Trial user (prospect) so they’ll convert? ## Create the Shortest Distance to Actual Usage in your SaaS Free Trial - What do they ***NEED*** to do to start to use the app (i.e. one time setup, config, etc.) - What do they ***NEED*** to do to become ***ENGAGED*** in the app? (i.e. create a project, write an email, upload a video, embed a widget, etc.) - What do they ***NEED*** to do to become ***INVESTED*** in the app? (invite colleagues, setup clients, connect social networks, etc.) Once you have the list of activities that leads the prospect from sign-up to Investment (remember, once they’re invested – time, resources, etc. – converting to a paying customer is a no-brainer), continue to refine the number of steps/amount of time required to become invested downward. Once you have it well refined (and after another refinement pass or two), all of your effort should be to move the user through the required steps to become invested. If they quit before finishing those steps, send emails to encourage the completion of those steps (do it right; make it about them, not just completing some arbitrary step you’d like them to do). Or when they log back into your App, don’t take them back to a generic “dashboard” – take them to the step they need to finish. If they can still click back to the dashboard, put a visual reminder that stays with them at all times reminding them that they need to finish that step (but remind them **WHY** they should do it by making it a value-based message that is all about them!). You are in full control of the Free Trial and first in-app experience of your users… if they are confused, don’t get it, can’t make it work, or bounce… … it’s all your fault. But since it is your fault, you can fix it! --- # SaaS Free Trial Users are a Vanity Metric *July 6, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-users/ **There is no such thing as an “inactive user” in a SaaS free trial.** You can’t be a “user” if you aren’t “using,” right? Makes sense. I think we get confused because in software the “user” connotation comes from the fact that a user is literally someone for whom an access account has been created. Even for SaaS vendors, when the person signs-up for our app, they technically become a USER within our system through provisioning. So, instead of saying all “users” aren’t created equal, I just don’t consider someone who only created an account to be a user. Problem solved. But that kind of shoots down your “we signed up 100 users today!” vanity metric, huh? Look, of course you need to track how many people sign-up for your Free Trial, but you must do it in context… … and that context is in the entire sales process. 100 people sign-up for your Free Trial, 95 convert to paying customers… cool. 100 people sign-up for your Free Trial, 5 convert to paying customers… something is wrong. So, the number of Free Trial sign-ups clearly doesn’t matter on it’s own… it’s what’s happening between the sign-up and conversion steps that the real context lies. In the context of a Free Trial, we cannot consider anyone who is not actively using the system to be a user. They’re either using, or not. If they aren’t actively using, they’re not trying your product. They aren’t [engaged](https://sixteenventures.com/improve-saas-churn-rate-engagement). They aren’t investing their time, effort, and resources in your product. Those who aren’t active users are wasted advertising money… you paid to get them to your site and get them signed-up, only to lose them. Those who aren’t active users are wasted resources… at the very least, you built an app you’d like people to pay to use, right? Those who aren’t active users are wasted effort… see above. Even worse – because of the effect it can have on your strategy – is that those who are not active users are the source of mis-placed enthusiasm and optimism (“look how many signed-up today!”). But how do you define an active user? Well, at the most basic level a User is someone who is actively *using* something… in this case, that something is your product. If they aren’t using it, they aren’t a user… I already said that. This is an important perspective / mindset to embrace, but we need to go further. There are different levels of use that you need to measure to ensure proper engagement in your Free Trial. Proper Engagement in your Free Trial is what leads a user to convert to a paid customer. Here’s a post where I talk about [Engagement in Free Trials](https://sixteenventures.com/why-free-trials-fail) and how the lack of engagement kills Free Trial success. So, an Engaged User is what you should be focused on developing in your Free Trial… …that’s a metric that will be directly correlated with revenue, which is what we want. But just like all Users aren’t created equal, non-users also aren’t created equal. Two types of “non-users” that you need to be aware of are: ## SaaS Free Trial User Type: Bouncers - Someone who sign-ups but never logs-in - Someone who logs-in once but didn’t do anything and never came back Do you know how many people sign-up but never login? Do you know how many people sign-up, login once, but never come back? The question is… why do they bounce so quick? We can’t assume every single sign-up was just messing with you, right? ## SaaS Free Trial User Type: Wannabes - Someone who logs-in more than once but never does anything (hmm… these are interesting!) Maybe they know your product can do something… maybe they’re sure your product can do something… but they can’t figure it out, so they leave. Then they might come back later to try again, can’t figure it out, and leave again. Yeah, they bounce, but it will be after a few attempts. They “wannabe” a customer of yours but you didn’t design your Free Trial experience to make that happen. That’s your fault (luckily you can fix it, though). So, do you know how many people login more than once but don’t do anything? You might want to keep track of that. Now there are lots of ways to deal with these types of non-users and I’m happy to setup a time to discuss the ways that make sense for you and your SaaS product. No matter what, from now on, when someone signs-up for your Free Trial, remember… that’s just the beginning! Celebrate that your front-end conversion is working, ring a bell, self-high five, whatever you need to do, but quickly move on to engage them, because the work has just started, my friend. But keep in mind that your Free Trial is the one – and often *only* – part of the “sales funnel” that you have any real control over. Wield that control like the mighty sword that it is! --- # SaaS Pricing Page Design: Highest Price on the Left? *May 20, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/pricing-page-design-high-to-low/ SaaS pricing page design is always evolving, and when I created the Pricing Page Success Formula for SaaS and Web Apps in 2009, the jury (me) was still out on whether placing the high priced version of your product on the left and moving lower to the right really mattered. I knew that technically this should matter (more on that later), but I wasn’t seeing it in practice. After a few more years and tighter analysis, I see why that is and what was muddying the waters. ## SaaS Pricing Page Design is Constantly Evolving So first, let’s be clear that placing the highest price on the left side of your SaaS pricing page is not a Universally accepted practice, yet. [FreshBooks](http://www.freshbooks.com/) doesn’t do it…   But [CrazyEgg](http://www.crazyegg.com) does…   So what gives? Which one is best? Well, it turns out, all things being equal (and equally good), the left to right, high to low approach seems to provide a statistically significant lift every time. ## SaaS Pricing Page Design Fundamentals Don’t Change Before I get into why that is, let me be very clear…. left to right or right to left, if your B2B Pricing Page lacks the key elements of Success – Value Messaging, Trust Factors, Social Proof, Value Differentiators in the Pricing Bundles/Versions, etc. – then your Pricing Page will fail to convert customers at the optimal rate. However, if you get the “other stuff” right, it seems that the highest-price-on-the-left approach works best. And guess who we have to thank for helping understand why that is? Yep, [Robert Cialdini and his amazing book *Influence*](http://www.amazon.com/gp/product/006124189X/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=006124189X&linkCode=as2&tag=ilocom08-20). ## SaaS Pricing Page Design Influences Customer Action In the book, Cialdini describes at length how the “rejection-then-retreat” (also referred to as the “larger-then-smaller-request”) technique can be used to systematically present options to clients/customers in a way that will consistently result in higher sales. To hammer home the effectiveness of this technique, Cialdini cites a powerful study from a report in Sales Management magazine, reprinted in the January 1975 Consumer Reports: “*If you were a billiard–table dealer, which would you advertise – the $329 model or the $3,000 model? The chances are you would promote the low-priced item and hope to trade the customer up when he comes to buy. But G. Warren Kelley, new business promotion manager at Brunswick, says you could be wrong….To prove his point, Kelley has actual sales figures from a representative store….During the first week, customers … were shown the low end of the line … and then encouraged to consider more expensive models – the traditional trading-up approach…. The average table sale that week was $550….However, during the second week, customers…were led instantly to a $3,000 table, regardless of what they wanted to see…and then allowed to shop the rest of the line, in declining order of price and quality. The result of selling down was an average sale of over $1,000.*” This is pretty exciting stuff as it won’t just help you convert more customers, but by “selling down” as opposed to “selling up,” it will allow you to convert more at a higher Average Selling Price (ASP). And we know, for Recurring Revenue products, a slight bump in the ASP can have a profound effect on the Customer Lifetime Value (LTV)! By starting with your highest price products first, people are more likely to end up somewhere in the middle. Conversely, by starting your selling process at the low end, you are more likely to end up with average sales prices that are near the low end. Again, just creating 3 different bundles and slapping a price on them hoping this technique will help raise your ASP is wrong-headed thinking. You have to have value differentiators between the bundles and have a clear understanding of your customer, their value perceptions, etc. Where this tactic might not help – but is always worth testing – is when you have bundles or versions that appeal to different types of customers. Take [Bidsketch](http://www.bidsketch.com/) for example: The plans that Bidsketch offers – Freelancer, Studio, and Agency – each appeal to a different market segment rather than the different levels of customer within the same market segment. In this scenario the different types of customers aren’t really comparing the different pricing plans but are likely to select the version they self-identify with, making the “rejection-then-retreat” method a non-starter; right, left, or middle if I’m a Freelancer, I’m probably going to choose the Freelancer plan. But, again, all things being equally good, left to right seems to be the right way to go. And by “right way to go” I mean “it is something to A/B test!” ## Let’s Optimize Your SaaS Pricing Page Design If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Pricing Strategy – email me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Conversion Rate: A Simple Trick to DOUBLE Your Revenue *April 15, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-revenue-double/ When your Free Trial fails to convert customers, it drives down your SaaS conversion rate by doing exactly what it was designed to do. Think about that for a second. There I was working on a ‘Optimizing SaaS Conversions’ presentation and I wrote this statement: ***For many SaaS & Web App vendors, 100% of sales come through your Free Trial.*** Which took me down this path… But what if ***ONLY*** 10% of the people that enter your Free Trial convert to customers? That means that 90% of the people that enter your Free Trial leave and don’t become customers! This isn’t very complicated math, but I think that means ***ONLY*** 10 out of every 100 people that enter your Free Trial become a customer. But again, ***FULLY*** 100% of your sales are from people that went through your Free Trial and converted. Oddly, your attention and dollars go to getting more people into your Free Trial through advertising, content marketing, outbound and inbound sales, affiliate programs, marketplaces, or more likely… adding features because that’ll get’em! ## SaaS Conversion Rate Trick This makes no sense when you consider this little “trick.” If 100% of your customers come through the Free Trial, but your Free Trial is squeezing out 90% of the potential customers, and you were able to take your Free Trial from converting ***ONLY*** 10% to converting ***JUST*** 20% of the prospects to paying customers… ***YOU’LL DOUBLE YOUR REVENUE!*** In fact, a company I helped recently with their SaaS conversion rate – [Project Bubble](http://projectbubble.com/) – did just that when they increased free-to-paid conversions from their Free Trial by 240% in JUST 30 days and more than ***DOUBLED REVENUE!*** Oh, and just like Project Bubble, if you optimize your Free Trial conversion process, you’ll double your revenue without spending a dime more on getting or buying additional site traffic, making more sales calls, etc… the potential customers are ***ALREADY IN YOUR FUNNEL***… you’re just not converting them! So focusing some attention on improving your Free Trial conversion rate is a quick way to Double Revenue while cutting Customer Acquisition Costs by 50%, too. (if you spent $10 to get 10 prospects, and 1 converted, that is $10 CAC. If you get 2 conversions, that is $5 CAC.) Not bad, huh? ## Let’s Optimize your SaaS Sales Funnel For immediate consultation and advice on optimizing your Sales Funnel by improving Free Trial conversions, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Pricing Strategy: The 10x Rule *March 26, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-strategy/ **First thing to clearly understand when developing your SaaS pricing strategy; pricing is a function of Marketing.** If you think creating your SaaS pricing strategy is a function of Finance, Accounting, Operations, or even Sales… you’re doing it wrong. That means anyone who comes up with a price for their app (or for your app) as the result of a spreadsheet function is doing it wrong. The spreadsheet shouldn’t tell you what your price is… your price should be something you put into the spreadsheet that will determine revenue and allow you to calculate future growth, profitability, etc. ## Price should be an input, not a result, on a spreadsheet. Second thing to clearly understand: No one knows what the best price for your SaaS offering should be. This is why most ‘*Pricing experts*‘ like to deal with companies that sell commodity products – including traditional software – in markets driven (downward) by pricing. Value Pricing a SaaS offering, on the other hand, is a completely different beast where you’re often dealing with a completely new and/or heavily differentiated value proposition and very often – with entirely new categories of service offerings! All we can do is get it ***AS RIGHT AS POSSIBLE*** out of the gate and understand that pricing is not a “set it and forget it” function, but – just as your overall Marketing Strategy is ever-evolving and changing with market forces, market feedback, etc. Now there are techniques, tricks, voodoo dances, and smoke-n-mirror performances one can employ while coming up with your initial price that can help you get closer to that ‘getting it as right as possible.’ ## SaaS Pricing Strategy: Consider the Customer First But let me be very clear; any techniques/strategies that don’t take the ***CUSTOMER*** into consideration as the ***main input*** when developing a price is not going to get you close to where you need to be. There are so many ways to mess up pricing that the chances of you getting it close to right are not in your favor, even if you employ many of the tricks of the trade. Fortunately, I don’t employ many of the tricks of the trade… I think ‘*the trade*’ gets most things wrong so why would I employ their tricks? But I want to help you get your pricing as right as possible so you don’t leave money on the table… or not too much, at first. ## Lead with Value for a profitable SaaS Pricing Strategy Look, it’s easy to sell cheap stuff… higher prices actually require you to know your customer better! Remember that customers generally care ***ONLY*** about their [Desired Outcome](https://sixteenventures.com/desired-outcome) and how it affects them (at least when they are searching for a solution). This means – at first – don’t emphasize features; emphasize ***OUTCOMES. RESULTS. SUCCESS***. So the definition of Value Pricing is: Applying a price to a service that is congruent with the value derived from the service rather than the underlying cost to create and deliver the SaaS, market prices, specific margins, etc. Which makes Value Pricing the most effective method of pricing for SaaS and Web Apps… something like cost+margin just doesn’t make sense. The key to Value Pricing is knowing the, well, *value* of your service as perceived by your target market AND/OR market segments (not all are alike). ## Value is the “What’s In it For Them?” – WIIFT – of your SaaS. It is the *benefit of the benefit of the features*… or the *emotional* benefit. It’s their Desired Outcome. So a very good way to determine your price – because it requires you to really understand the customer – is to follow the 10x Rule. “*We charge this much because our customers get at least 10x that much value.*” If I sell something for $100, I want to provide at least $1,000 in value to them… at least. Even better is if the “value” isn’t something that is ‘ROI-able,’ but rather something intangible that they cannot directly quantify. You do this by understanding your customer’s Desired Outcome, goals, opportunities, problems, etc. You do this by offering Price Anchors that are not competitive services, but what it would take to replicate this in-house, with low-efficiency, high-cost human beings, what you (or the industry) has paid to create this solution, or the fear of not meeting some level of compliance and the costs associated with that. And you can remind them – maybe not in so many words – that you must charge a premium price so you have a large enough margin to provide an extraordinary value & experience! But don’t just remind ***THEM*** of that… remember that yourself… charge a premium so you can offer truly ***PREMIUM*** service! Using this method to determine a price will become clear quickly, and you’ll see that delivering a 10x ROI – even if simply perceived by the customer – is rather easy. In fact, once you start doing this, you’ll see how it can be true that if you charge too little, a 10x ROI isn’t that exciting and how a low price could actually reduce your credibility in the market. --- # Display a Phone Number to Increase Conversions? *March 26, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/phone-number-increase-conversions/ ## Does displaying a Phone Number on your website Increase Conversions? I’ve been talking about Trust Factors and their effects for years and as I’ve done more work in this area others have taken an interest, too. For instance, [LessAccounting got a 2% lift in paid conversions](http://lesseverything.com/blog/archives/2011/02/17/adding-a-phone-number-to-lessaccounting-increased-our-paid-user-base/) they were able to correlated directly to adding a phone number to their marketing pages. 10 little characters added to their site bumped conversions 2%. But what about [Flowr’s non-result as documented in this KISSMetrics post](https://blog.kissmetrics.com/results-from-flowr/)? Well, it’s simple… if you have a Free Trial that isn’t designed to convert prospects to customers, simply adding a phone number will probably not help increase conversions directly. Just to be sure, I signed-up for Flowr, went through the whole process, and it is missing some key elements that are present in high-converting Free Trials. So, if you have a product that is bad, not wanted, or otherwise positioned or promoted wrong, adding a phone number will probably not help increase conversions directly. But… if everything else is good, a phone number – certainly in B2B, and especially where the SaaS or Web App vendor will be a major part of the customer’s business, will require integration, etc. – can really help. In fact, this question of whether to add a phone number to your marketing website came up – interestingly – with a telco API company. Being primarily an API company and selling to software developers means that most/all of their customers will heavily integrate with them and that means having a prominent phone number will certainly help. That said, where I’ve seen a phone numbers help the most isn’t by increasing conversions directly, but by the conversations that occur when people call you. I know for many companies, especially small ones or early-stage startups, the last thing you want to do is talk to a bunch of potential customers,… I’m sorry, but there’s your first problem. Anyway, some of the people who call will be ready to buy or almost ready and talking to you – a real person – might just close the deal. Score. But… most of the people that call might not even be interested (yet) in becoming a customer, but what they’ll tell you is what’s not clear on your site. They’ll ask questions that you didn’t even think about, they’ll tell you they thought your product did x, y or z, and it will blow you away. Those will be *super-valuable* conversations from which you’ll learn what to fix on your market site that ***WILL*** lift your conversion rate over time. At least right now, and especially in B2B, some of your potential-customers will be more willing to pick up the phone and call you than to email (because you might spam them) or do the on-site chat thing. So give them the opportunity to do that by putting a phone number on your site. Here’s a quick hack, especially if you aren’t in the U.S. but want a U.S. number: just get a Google Voice number and have it go straight to voice mail at first (be sure to manage expectations and follow-up promptly). Later you can switch to something more substantial, or use an answering service (you can just forward Google calls to that service when you aren’t in the office). The reality is, most people won’t call, but it will give peace of mind to many. But some will call and they’ll teach you things you never knew! And as for where to put it on your site… while there are no standards, a phone number prominently displayed in the upper right corner of your site (in a header graphic or menu bar) seems to work well. And do it on every page, too… you might have some information on a page that you don’t think is as “important” as the main page, pricing page, etc. but when your prospect is on that “non-important” page and something is confusing, having a phone number right there for them to see and take action is a good thing. But definitely display the phone number above the fold and make it very easy to see… To me, this is one of the things that might have contributed to Flowr’s non-result; it was above the fold but very small and hard to read! --- # SaaS Affiliate Marketing: How-To Supercharge Your Growth *March 26, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-affiliate-marketing/ I’ve been asked if you can “quick start” a new venture or reinvigorate an existing offering with SaaS affiliate marketing? Here’s the answer I generally give… “it depends.” Okay, let me dig in a little deeper. SaaS affiliate marketing can really super-charge your growth, ***BUT*** if you don’t have everything in alignment (or your ducks in a row), you won’t super-charge anything! Think of it like this… if you have a super-charger and no engine to put it on, the super-charger doesn’t really help, right? For [SaaS affiliate marketing](https://sixteenventures.com/video-interview-saas-affiliate-marketing) to work, you have to: - Be clear about your target audience - Have your value prop super-powerful and targeted to that audience. - Ensure the rest of your marketing is on target for that audience - Make sure your Free Trial is optimized, especially to keep affiliates interested if you pay only on conversions! Not to mention your Pricing Strategy, landing pages, sign-up process, etc. Plus you have to have a way to manage and communicate with your affiliates, keep them excited and above all… ensure they get paid for  what they bring and get paid on time… every time. ## The SaaS Affiliate Marketing Catch-22 The pushback I often get from that is “if I do all that, I might not need affiliates”… which is correct. You don’t *need* a super-charger on your engine – the engine will get you down the road – but the super-charger makes you go ***FASTER***… which is awesome. I suppose that analogy could play out fast, but the bottom line is, you can waste a lot of time/money/resources chasing affiliate marketing too early when your time might be better spent optimizing your base first. Put another way… if *you* don’t know what you’re selling or to whom, it will be hard for others to sell it for you! Curious how we could Accelerate your Profitable Growth – including by creating or optimizing an Affiliate Program for you? Contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # 9 Ways to Instantly Improve Your PPC Results *March 25, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/improve-ppc-results/ ## The success of your Free Trial in converting customers is directly tied to the quality of prospects that enter the trial in the first place. That’s something I tell the [Free Trial Dominator Premium Members](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps) all the time…. you’re success depends on your ability to attract the right audience. So this means that the Attention Phase of a your Free Trial is ***SUPER*** important, and for many SaaS and Web App vendors – perhaps you included – PPC campaigns (Google Adwords, Facebook Ads, etc.) are a major part of that phase. This week the [Free Trial Dominator weekly Group Coaching call](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps) is focused on the “Attention Phase” of your Free Trial and we have special guest Coach Brent Gaynor joining us to talk about the ***9 Ways to Instantly Improve Your PPC Results***. I invited Brent to speak to the [Free Trial Dominator Premium Members](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps) after I sat down with him for breakfast in Dallas and he ***BLEW MY MIND*** with the things he was saying about PPC marketing… things I’ve never heard before, that you need to know. After his presentation, Brent will stick around for Q&A and to help coach the Free Trial Dominator Premium Members [(join today!](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps)) on how to improve their PPC campaigns. Let me tell you a bit more about Brent and why you should listen to him… Brent Gaynor is a passionate Internet marketer that thrives on getting product market fit and user experience right before spending senseless PPC and SEO dollars. With over 15 years of product marketing background positioning mobile, online retail, software, and cloud based services; Brent brings vast experience and innovation to tuning products to customer needs – meeting customer perception with product reality. SEO and PPC marketing have been critical to promoting Brent’s businesses’ well-tuned products and he has used both tools extensively with multi-million dollar marketing budgets since 2004. In 2011, Brent captured his PPC knowledge, authoring an Adwords PPC Secrets book sharing the strategies he used to grow his business over 900% in the software market – one of the top 5 most competitive in PPC. During this time, Brent became an Adwords certified partner and gained over “15 million clicks of experience.” Outside of Internet marketing, Brent is involved in hyperlocal advertising, location-based mobile apps, application design, branding, options trading and various sports. Brent is in the midst of launching Quad10 Marketing to provide his unique blend of product and internet marketing insights to others. Needless to say, this is going to be an awesome “Attention Phase” Group Coaching session and I hope you’ll [join Brent, the Free Trial Dominator Premium Members, and me this Wednesday @ Noon Eastern](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps) and learn how to instantly improve your PPC campaigns! So just [become a Free Trial Dominator Premium Member today](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps) and join us Wednesday @ Noon Eastern to learn the 9 Ways to Instantly Improve Your PPC Results… and you’ll get access to [everything else Free Trial Dominator Premium Members get access to](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps)! Have a great week! – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 ***PS***: This ***ONE*** Group Coaching session with Brent will be worth 10x the Free Trial Dominator monthly fee… and it’s just the tip of the iceberg of everything that you get as a Member. [Go here to learn more about the Free Trial Dominator and to sign-up](https://sixteenventures.com/free-trial-dominator-for-saas-web-apps)… see you Wednesday @ Noon Eastern for Group Coaching with special guest Coach Brent Gaynor! --- # Why SaaS Free Trial Optimization is So Important *March 20, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-optimization/ Over the years I’ve been called on by the CEOs and Executive Leadership of several hundred SaaS and Web App companies around the world to help them achieve Profitable Growth. In that time, I’ve learned a thing or two about the importance of Free Trials. For instance, I know that if you offer a Free Trial for your SaaS or Web App, chances are that every single customer you get comes through that Free Trial. And from my experience working with companies ranging in size/maturity from smaller, early-stage companies to those with more than $1B/year in revenue, I can bet that ***LESS THAN 25%*** of the prospects that enter *your* Free Trial actually become customers. But even though more than 75% of your potential customers – customers you worked hard and paid a lot to get into your trial – are getting squeezed out by your Free Trial, you were probably thinking it’s something else that’s causing low conversion rates, not your Free Trial. While you’re spending tons of money to get traffic to your site (even if that is on writers for your inbound marketing), and you spent money and time on design, A/B testing, and copywriting to get them to sign-up for your trial once they’re on your site, your ineffective Free Trial negates all of that hard work and expense by failing to do its singular job; create customers! Look, the first thing you need to do is accept that your Free Trial, with its < 25% conversion rate, could – and should – be converting more customers. You have to remember that this isn’t Freemium I’m talking about, where the top companies are getting in the mid single-digits (after $100M in VC money on average). I’m talking about Free Trials… where SaaS and Web App companies I’ve worked with that use a Proactive approach (rather than reactive) have Free Trial conversion rates of better than 80%! Now, once you’ve accepted that your trial isn’t just *not converting customers*, but is actively pushing potential customers out, your Free Trial Optimization journey can truly begin. But let’s take a step back for a second… what does ‘Optimization’ actually mean? I mean c’mon… the word Optimization is getting thrown around a lot lately… Conversion Rate Optimization, Search Engine Optmization, and now Free Trial Optimization… what does it really mean? Optimization is, at the core, achieving the highest and best use of something… time, investment, processes, whatever. So, when you optimize your Free Trial, you are taking full advantage of the awesome potential of a Free Trial to create customers! Unfortunately, you can’t actually optimize something until you know what its highest and best use is! And frankly, since most SaaS & Web App companies don’t really understand all of the elements that make-up a successful Free Trial strategy, those who think they’re “optimizing” their Free Trials… aren’t! If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Free Trial Strategy – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # SaaS Free Trial: The #1 Reason You Fail to Convert Customers *March 19, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/why-free-trials-fail/ The #1 reason your SaaS free trial is failing to convert customers is simple… Right after a prospective customer signs-up for your Free Trial, ***you fail to engage them***. Data shows that prospects active in the first 3 days of a SaaS Free Trial – regardless of trial length – convert at a significantly higher rate than those that are not active. But you have to design your Free Trial with this in mind… design it to get them (and keep them) [active and engaged](https://sixteenventures.com/improve-saas-churn-rate-engagement). And with statistics and experience on my side, I can safely assume that you dump your new-found (or newly paid-for) prospects into your app’s “Dashboard” without any guidance, letting them fend for themselves. And then you wonder why > 90% of the people who sign-up for your free trial leave, never to login again. ***DO THIS RIGHT NOW***: Go look at the first screen someone will see right after they sign-up for your Free Trial… do it right now… is that going to really engage your potential customer? In fact… take a screen shot of that first screen your potential customer sees right after they login for the first time. Send it around your company and ask everybody if that is going to fully engage your customer. In fact, r[equest at least a 15-minute call on Clarity](https://calendly.com/lincolnmurphy/clarity) with me and let’s figure out how to make your SaaS Free Trial a Customer-Acquisition Machine! Whatever you do, just make sure to look at that screen cap closely… that’s the thing that’s either going to hook’em and get them to start using your product as if they are already in production making conversion from a free user to a paying customer a no-brainer… …or the thing that’s going to drive them away. One young company that I worked with recently had the latter… a staggering 99% of the prospects that signed-up for their Free Trial logged-in just one solitary time and then ***NEVER CAME BACK!!!!*** They thought they just needed to buy more traffic (they already spent $4k/month on AdWords, too!) but they didn’t – yet… … what they needed was to fix their Engagement problem (which we did, BTW). But maybe you’re thinking “*yeah, but my product does so many things and I want them to see what all it can do… I don’t want to keep them from seeing all of my app’s goodness.*” The reality is they won’t see it all; they’ll just leave. Confused minds don’t try (or buy)… they leave… and they never come back. You must engage your prospects and help your product “sell itself” whether you have a low-touch or high-touch sales process. --- # Switch from a Reactive to Proactive SaaS Free Trial *March 13, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/switch-from-reactive-free-trial/ There are two types of SaaS Free Trials: Reactive and Proactive; you want to be one of the latter because they will convert more prospects to customers. Period. ## Reactive SaaS Free Trials Most SaaS & Web App vendors fall into this category, and their mindset about Free Trials is something like this: - Get them to sign-up for the trial - Get their Credit Card number up front to keep the riff raff out - Think that [free trial sign-ups](https://sixteenventures.com/free-trial-users) is a good metric to keep track of - Send them their login info via email but otherwise we don’t want to bother them. - Give them access to the app, but let them do their thing - Toward the end of the trial remind them that the trial is ending - Then try to keep the trial from ending without ever asking for the sale - Offer to extend the trial - Try to get them to convert after the trial has ended by finally asking for the sale (maybe) - Then, if they don’t convert, stop communicating with them altogether - Maybe send a holiday or birthday greeting with no call to action once a year… that goes right to spam or gets deleted/ignored because, really… once a year? C’mon! ## Proactive SaaS Free Trial Strategy But, when you’re proactive, you know the purpose of a Free Trial is to create a customer and you create your strategy with that goal in mind. You indoctrinate them – buyers and influencers – before they sign-up because you know they might not find you at the right point in their buying cycle and you need to be top of mind when they’re ready. You get the right audience to sign-up for the trial by creating a strong value proposition around the product and yet asking for as little information as required to get started. You can [ask for a credit card or not](https://sixteenventures.com/saas-free-trial-credit-card), but you realize that isn’t the important part of the process; it is just one part that still requires everything else. You understand the rules of Consistency and Commitment and combine those with the need to get them engaged and using the app as quickly as possible for a powerful on-boarding process. And you ask for the sale early (even before the trial, you offer them a way to “Buy Now”). You work hard to get them invested and moved toward Common Conversion Activities (CCAs) through a combination of in-app marketing, email marketing, other marketing tactics, personal outreach, etc. And you ask for the sale. And you work to get them invested further. And you ask for the sale. If the trial goes on – if they don’t convert early – you see if they’re moving toward CCAs If they aren’t, you do something to get them to take another action to reinforce the rule of Commitment and Consistency – attend a webinar/training, download a paper, setup a coaching call, etc. If they are moving toward CCAs, ask for the sale again, perhaps adding an incentive to convert, using strategic discounting to entice, etc. If they don’t convert and the trial ends, make them an irresistable offer. If they don’t convert, offer a downsell. If they don’t convert, continue to indoctrinate. A few weeks later – while continuing to indoctrinate – find a reason to offer a second free trial (new features, new training, case study with new use case, etc.) Never stop communicating and never stop indoctrinating! Never wait and hope; always be agressive. There’s a fine line between over-the-top agressive and not doing enough… find that line and walk it like a madman (or madwoman… madperson?). Ride that line and just when you think you’ve done too much, do a little more. I hope this helps you… if you actually do this stuff, I know it will! --- # SaaS Free Trials: The Shorter the Better? *March 12, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/shorter-free-trials/ **Most people don’t realize that the length of a SaaS Free Trial is just a marketing gimmick designed to get prospects into the trial.** Sure, 30-day Free Trials are the *de facto* standard for SaaS apps, but whether it’s 7, 14, 15, or 30-days, few providers can say ***WHY*** they came up with that length. So, those who *can* say how they come up with their Free Trial length, often cite the wrong driver for that decision (i.e. something other than the customer or market). ## What’s the Perfect SaaS Free Trial Length? The answer is the one that gets the most people to sign-up for your SaaS free trial in the first place! There are tons of questions on Quora, LinkedIn, and Hacker News where people ask what the perfect Free Trial length is as if there’s a number of days – 60, 30, 14, 15, 7 – that will magically increase conversions. The reality is that Free Trial length is nothing more than a Marketing Gimmick designed to get prospects to sign-up for the trial by making them think that the time offered is adequate to fully evaluate the product without being rushed. However, it’s the way you as the vendor approach the Free Trial length *internally* – as part of the sales process – that will dictate your success converting customers, not the number of days in the trial period. Unfortunately, too many vendors don’t understand this and believe that a 30-day SaaS Free Trial means they have to wait until the whole 30 days is up to convert customers. ## Will You Shorten Your Sales Cycle with a Shorter SaaS Free Trial? This belief drives many SaaS vendors who want to decrease the sales cycle to [shorten their trial period – like Kasfhlow just did](http://www.kashflow.com/blog/shorter-trial-periods/) – because they feel the customer has no sense of urgency to convert. They believe the SaaS free trial length actually means something beyond just getting them into the trial. But they’re wrong! The length of the SaaS Free Trial only serves to get the prospect to sign-up in the first place! It’s what you do after the prospect signs-up for your SaaS Free Trial that determines whether they convert quickly, wait until the end of the trial (however long it is), or don’t convert at all (the most common outcome and something I’m on a mission to change!). ## Do Shorter SaaS Free Trials Increase Conversion Rates? Okay, so what happens when a provider shortens their SaaS Free Trial length? Very often, the conversion ***RATE*** (the percentage of Free Trial sign-ups that become customers) goes up. So we should conclude that short Free Trial lengths must mean more conversions, right? Not so fast. This is how Causation vs. Correlation in Free Trials can cause all sorts of confusion and ultimately hurt you. Recently I was talking to a new client about how having a 30-Day trial might attract more signups than the 14-day trial that they currently had. But they said that they actually used to have a 30-Day trial and it didn’t work at all, so they shortened it to 14-days and guess what… they had more success! Clearly to them, a 14-Day Free Trial was better than a 30-Day trial, from a conversion ***RATE*** standpoint. And this is where Causation vs. Correlation starts to muddy the water. It turns out that when they shortened the trial to 14 days, they realized ***THEY*** had less time to convert customers so ***THEY*** worked harder to get the sale! ## From Reactive to Proactive: The Key to More Customers! They moved from Reactive to Proactive, which is awesome. They worked to engage the prospect quickly and became less hesitant to ask for the sale! My homework for them was to consider these two things…. 1. How many prospects simply aren’t signing-up because they don’t feel 14 days is “enough” to evaluate the product? This change might have resulted in a higher conversion rate, but could cause lower-than-possible conversion totals and – most importantly – lower revenue? It makes sense, right? The fewer people in the top of the funnel, the [less that will become customers](https://sixteenventures.com/saas-free-trial-credit-card). 2. What if you went back with a customer-facing 30-Day trial – so the perception by the customer is that they have longer to evaluate the solution – which might cause more people to signup – but *internally* you still work to convert in 14 days or less? ## So Longer Free Trials are better, right? Remember, the length of the free trial must be long-enough for the prospect to feel like they’ll be able to adequately evaluate the product and not feel rushed. If you have a simple product and you want to position it that way, a short trial might make sense. If you have complex product and you want to position it that way, a longer trial might make sense. Or, if you know your prospective customer really well, you can use free trial length to lower barriers to entry. An example of longer SaaS free trials is the 60-day trial [Constant Contact](https://www.constantcontact.com/index.jsp) offers. They know the prospect is “busy” and they realize their offering is a nice-to-have or even a required-but-reluctantly-used service, like email marketing for super-small businesses. They know that the extra-long 60-day trial really does reduce the barrier to entry for that type of customer – the single-person shop, the side-business entrepreneur – who needs what the SaaS provider offers but everyone knows they’ll take forever to get started. They know that their prospective customer is going to find it difficult to carve out time to get started with their service, so giving them 60-days to try it takes the pressure off of them. They know these prospects aren’t really evaluating their offering, let alone other offerings, but are likely choosing a solution they’ll be with for many years… so they “give them plenty of time” to get to know the service and become comfortable with it. But Constant Contact knows that once they get ’em in the trial that they need to get that prospect on-board and engaged as quickly as possible if they want to convert ’em to a paying customer. The time-crunch isn’t on the prospect… it’s on the SaaS provider in this case! It should be whether it’s a 7-day trial or a 60-day trial, by the way. I don’t know of any empirical evidence to support this, but my experience is that 30-days is a good trial length most of the time, unless you have specific intel that indicates otherwise. It’s easy to understand since we tend to work in month timeframes (14 days would be good if we still thought in terms of a “fortnight”… but we don’t), 30 days *seems* like long enough, etc. So if I’m saying 30-day trials are the way to go, why didn’t I just post that and move on? Because I want you to understand what all needs to go into this thinking and that – sometimes – 30 days isn’t right. I will say again – in my experience, your mileage may vary – that shorter trials are almost always used by companies that don’t fully understand the way Free Trials work and want to “rush” the process, not realizing they’re keeping people from signing-up. That said, if you do decide to go with a super-long trial, just remember that you’ll take the pressure off of them from a time-scarcity standpoint and when you do, you should move away from loss-aversion (“I have to hurry or I’ll miss out…” to [gain-oriented messaging](http://blogs.hbr.org/cs/2013/05/how_to_get_customers_to_value_you.html) that get’s them to take action based on what they’ll get from doing so. Only toward the end of the trial will the loss-aversion messaging need to kick in. But whether it’s a 7-day trial or a 60-day trial, like I said above, it is your job as the provider to orchestrate the entire process and pull the prospect through the trial in such a way that conversion to a paying customer is the high-percentage result. Even on a 60-day Free Trial, I’d work diligently to figure out how to convert ’em to a paying customer in the first 7-14 days. ## How about an Unlimited Free Trial? Now, I know someone is going to think “well, if a 60-day trial is good… what about an unlimited trial?” Well, that’s where you get into  the [Freemium vs. Free Trial](https://sixteenventures.com/free-trial-success-secret-3-stop-confusing-freemium) discussion, and you need to know that the biggest difference, psychologically-speaking, between those is that Free Trials have a time-limit and Freemium does not. In fact, I’ve identified [seven types of Freemium](https://sixteenventures.com/seven-types-of-freemium) and one of those amounts to an “unlimited free trial” but it’s still Freemium. As a SaaS provider, don’t forget what the Free Trial length really is, and don’t let it dictate how quickly you convert your prospects to paying customers! ## Let’s Grow Your SaaS Business Together For immediate consultation and advice on optimizing your SaaS Free Trial or otherwise growing your SaaS business, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Pricing Models Resource Guide *February 27, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-web-app-pricing-resource-guide/ When developing your Value Pricing Strategy you can leverage a variety of SaaS Pricing Models. From transparent pricing on your pricing page to Enterprise pricing that’s quoted behind the scenes, you must know your options. I put together this list of my best resources to help you get your SaaS Pricing Models right and grow your SaaS business. ## SaaS Pricing Models Strategy - [How to Price Your SaaS or Web App: the Basics (15 Minute Video)](https://sixteenventures.com/how-to-price-your-saas-or-web-app-the-basics) - [How to Price Your SaaS or Web App: the Advanced Stuff (15 Minute Video)](https://sixteenventures.com/how-to-price-your-saas-or-web-app-advanced) - [How to develop your SaaS Pricing Model](https://sixteenventures.com/develop-pricing-strategy) - [Both Pay-as-you-go and Subscription Pricing for SaaS?](https://www.linkedin.com/today/post/article/20140512065424-7018284-both-pay-as-you-go-and-subscription-pricing-for-saas) - [Should you Offer Multi Currency Support?](https://sixteenventures.com/saas-multi-currency) - [5 SaaS Pricing Mistakes to Avoid](https://sixteenventures.com/pricing-mistakes) - [Beta Testing & Pricing: A Hazardous Combination (Video)](https://sixteenventures.com/beta-testing-pricing) - [Beta Testing & Pricing: Examples (Video)](https://sixteenventures.com/beta-pricing-examples) - [SaaS Pricing Model: Mo’ Money, Mo’ Problems](https://sixteenventures.com/saas-pricing-complexity) - [How to Charge for Your Web App? Value Metrics Are Key](https://sixteenventures.com/pricing-value-metrics) - [SaaS Pricing Strategy: The 10x Rule](https://sixteenventures.com/saas-pricing-strategy) - [Assistly Marketing VP Tells You Why They Dropped Tiered Pricing and Picked Up Freemium](https://sixteenventures.com/assistly-pricing-change-freemium) - [10x Price Increase and Happier Customers](https://sixteenventures.com/10x-price-increase) - [For Web Apps the SECRET to $1Million is 9 Customers…](https://sixteenventures.com/saas-secret-to-one-million-dollars) - [Price Objections are Value Objections](https://sixteenventures.com/price-objections-are-value-objections) - [Competitor Pricing… Does It Matter?](https://sixteenventures.com/saas-apps-competitor-pricing) - [Stop Obsessing About Your Competitors](https://sixteenventures.com/stop-obsessing-over-saas-competition) - Are Your Customers THIS excited to Buy from You? - [Web App Pricing: How To Avoid the Commodity Trap](https://sixteenventures.com/web-app-pricing-how-to-avoid-commodity-trap) - [Web App Sales Funnel: 2 Questions You MUST Answer](https://sixteenventures.com/web-app-sales-funnel-metrics) - [37Signals Caught Treating SaaS Pricing Page like a Marketing Page](https://sixteenventures.com/37signals-caught-treating-saas-pricing-page-like-a-marketing-page) - [Why $1 Trials are bad for SaaS Apps](https://sixteenventures.com/one-dollar-trial) - [The 7 SaaS Revenue Streams Report (PDF)](https://s3.amazonaws.com/16v/7+SaaS+Revenue+Streams+with+Details.pdf) ## SaaS Pricing Models Tactics and Design - [Web App Pricing Page Review: Salesforce.com](https://sixteenventures.com/saas-marketing-web-app-pricing-page-review-salesforcecom) - [Pricing Page Design: Highest Price on the Left?](https://sixteenventures.com/pricing-page-design-high-to-low) - [Does Goldilocks Pricing Work for Web Apps?](https://sixteenventures.com/goldilocks-pricing) - [SaaS Vendors: How To Communicate Value to Your Web App Customers](https://sixteenventures.com/how-to-communicate-value) ## Let’s Improve your SaaS Pricing Models For immediate consultation and advice on all things SaaS, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # SaaS Pricing: The Advanced Stuff *February 27, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-price-your-saas-or-web-app-advanced/ ## Let’s Improve your SaaS Pricing For immediate consultation and advice on all things SaaS, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # SaaS Pricing: The Basics *February 27, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-price-your-saas-or-web-app-the-basics/ ## Let’s Improve your SaaS Pricing For immediate consultation and advice on all things SaaS, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # SaaS and Web Apps: Increase Your Free Trial Conversion Rate *February 20, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-dominator-for-saas-web-apps/ # **Introducing *Lincoln Murphy’s* Virtual Consulting program focused on Free Trial Optimization for your SaaS or Web App and *100% Guaranteed*** to help Increase your free-to-paid Conversion Rate! Do you ever wonder why, even though you offer an amazing SaaS or Web App that meets a real market need, you’re not reaching your sales and revenue goals? Stu from Project Bubble did, too, and within 30 Days of joining Free Trial Dominator he ***increased his free-to-paid conversions a MASSIVE 240%***… and he even shared with us exactly what he did to achieve such a massive conversion rate boost so quickly… and you’ll get full access to his presentation when you become a Premium Member! Look, you aren’t alone if you feel like – even though you worked hard, created amazing content, made a bunch of cold calls, and bought a bunch of traffic – you’re just not hitting your sales numbers you thought you would! I know it’s killing you that even though you’ve spent time, money, and resources on SEO and on-site conversions to get people to sign-up to try out your product for 15 or 30 days (or longer!), you ***STILL*** aren’t making the sales you need to be making! ## The fact is, your SaaS or Web App is Failing to Convert Free Trial Users to Paying Customers because you didn’t **DESIGN** it to Convert Customers… but you can fix that… and I’ll show you how! What would happen to your Revenue (and Profit!) if you lifted your Free Trial Conversion Rate by just 5%? How about by 15%? What about by 400%? **A 400% Conversion Rate Increase!** “*Lincoln says to always ask for the sale through the entire process… and for us, this advice resulted in an almost IMMEDIATE conversion rate bump of 400% and a 70% drop in Customer Acquisition Costs. To put this in financial terms, we were spending around $20 per signup before and that just dropped to about $6. That is huge huge huge.*” **Nick Friend, CEO, Iconosites** And what would happen to Customer Lifetime Value if you lifted the Average Selling Price, shortened the sales cycle, and ***REDUCED*** Customer Acquisition Costs while you increased your Conversion Rate? Well, whether you know it or not, a low overall conversion rate almost always points to your Free Trial as the culprit… but together we can fix that! I’ll show you exactly what Nick – and other successful SaaS and Web App vendors – used to get such amazing results when you when you become a Free Trial Dominator Premium Member! In fact, as a Free Trial Dominator Premium Member, you’ll have access to the strategies and tactics I developed after spending literally 1000’s of hours working with the SaaS, Web App, Cloud, and Software companies from around the world – from Billion-dollar, multi-national corporations to the earliest startups. Become a Free Trial Dominator Premium Member today and join companies like Freshdesk, SERPS.com, ClientSpot, Thoughtbot, WORKetc, Bidsketch, Iconosites, Crowd.fm, ProProfs, KISSMetrics, and many others in turning your Free Trial into a Customer-Acquisition Machine! ## Stop Hunting for Answers; Start Converting Customers! I realize that the DIY spirit is alive and well among SaaS and Web App founders, entrepreneurs, and pros. I get that this DIY way of thinking doesn’t just include the building of your app, the creation of your marketing site, etc… it also includes pulling together the information on how to do those things. But that is a waste of time; a waste of time that is costing you money right now! I also know that you aren’t used to getting your information the way that I present it in the Free Trial Dominator and that in ‘this industry’ things aren’t done like this; I get that, but I don’t care… I’m changing it up! Isn’t it interesting that, while Free Trials are hardly new and every SaaS or Web App vendor offers one, finding out what has worked for others, pulling together industry best practices (that don’t seem to exist), and then – if you actually find something – trying to figure out how to apply that to your situation isn’t easy? The harsh reality is this… even if you did go looking for answers; they aren’t out there! I know, I’ve looked. And so have every single one of the Free Trial Dominator Premium Members before they joined! Don’t think of me as a ‘Consultant’… I hate that moniker too… just think of me as someone that’s done the heavy-lifting for you. I’ve found the answers you’re looking for to help you improve your Free Trial conversion rates and made them available to you when you become a Free Trial Dominator Premium Member. ## See Exactly what You get as a Free Trial Dominator Member I put together this short video to show you ***EXACTLY*** what’s behind the paywall that you’ll get access to as a Free Trial Dominator Premium Member: As you can see, the Free Trial Dominator content is ***NOT*** just a bunch of generic ideas with no actionable substance. Nope, I’m giving you full access to the “Secret Sauce” that I’ve previously only shared with my private clients. In fact, during the LIVE Group Coaching sessions (I’ll tell you more about that in a minute) I work directly with Free Trial Dominator Premium Members to coach them through the process ***EXACTLY*** as I would someone paying me 100x the cost of this program. In addition to the Group Coaching, as I showed in the video, the Free Trial Dominator program has 2 other parts and as a Premium Member, you get access to everything. ## 7-Step Guide to get you Started with Free Trial Optimization When you become a Free Trial Dominator member, the first thing you do is go through the “Getting Started” guide. This is where I introduce you to the core concepts behind Free Trial Optimization, get you to build your Free Trial Profile, and then work to analyze and troubleshoot your Free Trial to see where the bottlenecks are (and then fix’em!). If you’re a pre-launch or early-stage startup, this guide is *super-important* to you since it shows what data you need to be collecting so you can actually measure and manage Free Trial conversion performance once you’re in-market. The “Getting Started Guide” is made up of videos (or .mp3 audio files if you’d like to listen on the go), text, and spreadsheets to get you on the path to Free Trial Optimization with these steps: - Gather Baseline Data - Understand the Context of the Baseline Data - Map Out Your Existing Free Trial Sign-up Process - Map Out Your Existing Conversion Process - Analyze Your Baseline Data - Create The Domination Plan - Go Deep and become a true Free Trial Dominator! Step 7 is where you bust out on your own and at your own pace looking to Dominate your Free Trials! This is where you start to tackle the bottlenecks in your Free Trials by learning the deeper meaning behind Free Trials, the Strategies and mindset required for Free Trial super-success, and the tactics to take you from a Free Trial Optimizer to a true Dominator! Become a Premium Member today! ## Advanced Content that’ll turn You into a real Free Trial Dominator! The content that you’ll have access to as a Free Trial Dominator Premium Member is super-actionable, value-packed, and (very) Frequently Updated. Most of all, it is all about on how to make your Free Trial successful! Check out what some current Free Trial Dominators say about the content alone: **150 New Leads per Month (up from ZERO)!** “*What I really like about the Free Trial Dominator program is the email marketing tactics section that resulted in 150 new high-value leads per month… that worked great for us! Lincoln, you challenge the status quo and you’ve made our Free Trial more effective!*” – **Jim Schultz, President AES Education** “*The things I really like about the Free Trial Dominator program are Lincoln’s insights and the content library! The ability to go to website and watch all the videos, including the Group Coaching sessions I missed while I was on travel. Now I can go in catch up! It has made me realize a lot of things that need to be done!*” – **Sameer Bhatia, CEO ProProfs** “*I love the insights that have made me to think differently about free trials. There were several things that I hadn’t even considered before (or heard anyone talk about). The content is awesome and I like the delivery of it (both video and text).” * – ***Ruben Gamez, Bidsketch*** “*I am recommending my team view the content because its one of the few resources that provides a reliable insight into how to improve the trial sign up process.*” **Mathew Meyers, CEO Vision6 / Co-Founder OfferedLocal** Here is a detailed look at the content you get access to as a Free Trial Dominator Premium Member: ### ***Free Trial Strategy*** Right now, there are about 50 (epic) posts, nearly 5 hours of streaming video / .mp3 files to download, and great insights from FTD members arcoss these 5 categories (including the Four Phases of a Free Trial). - **The Free Trial Mindset Shift** – Shifting from Reactive to Proactive - **Attention Phase** – A successful Free Trial starts with attracting the right crowd, and that’s what this phase is all about - **Engagement Phase** – Here we talk about how to get people to use your app; tons of examples and more added all the time as FTD members share their updates with the group. - **Investment Phase** – The goal is to get your Free Trial users to become so invested that conversion is a no-brainer; and this section – and interviews with / presentations by – FTD members and successful SaaS & Web app vendors shows exactly how to do that. - **Conversion Phase** – Free Trials have one job to do: convert customers to paying customers. This section covers all the ways to ask for and get the sale. ### ***Free Trial Domination Tactics*** **300% Price Increase – No Lost Sign-ups!** “*By implementing Lincoln’s Pricing Page recommendations, we were able to raise our prices by 300% without any negative impact on the rate of sign-ups!”*” – **Daniel Barnett, CEO, WORKetc** It is one thing to have a high-level overview of Free Trials… but once you have that, it’s time to take action; and you take action with Tactics. These tactics use those in the Strategy section (that were there mostly to illustrate high-level points) as the jumping-off point and take you DEEP into the inner workings of some of the core elements of SaaS & Web App marketing. - **Pricing Page / Marketing Page / Sign-up Form Design** – This is an extension of the Attention phase and in addition to Free Trial Dominator-specific content includes the FULL, COMPLETE, and UPDATED Pricing Page Success Formula product I used to sell on its own for $497! I also threw in the Beta Testing & Pricing Master Class videos. - **Traffic Generation / Distribution Methods**  – From an exclusive interview with the world’s best AdWords guy Perry Marshall to a guide of ~100 places to market your Web App, if you don’t see a spike in traffic, you’re not taking action! - **Email Marketing for Free Trial Success** – This is the most complete Email Marketing Guide for SaaS & Web Apps anywhere on the planet (it should be a stand-alone product). It covers everything from how to reach out to potential customers, cold but at scale, and covers how to create a Free Trial sequence ***AND*** transactional email messages that convert! This stuff simply doesn’t exist anywhere else! - **Super Ninja Tactics** – Where I have awesome tactics that don’t fit a category or transcend a specific category, I put them here. ### ***Plus…*** - **Additional Resources and Tools** –  Tons of links to articles that I’ve found to be helpful, spreadsheets, books, and other stuff that I think can help you. - **Complete Group Coaching Call Video Archive** – Over 20 hours of video, and growing, but I try to break out individual coaching sections and link to them from the sections they best fit (for example, if we talk about email marketing, I’ll link to that section in the Email Marketing category) but you can find the complete archive here. Most have streaming video and .mp3 versions. The streaming videos in the Free Trial Dominator program can play on any device – including iPhone and iPad thanks to Wistia (also a FTD member, BTW) – and are accompanied by a .mp3 audio version, notes, screen caps, examples, links, and ongoing updates after the videos were published and where it makes sense. I’m going to go out on a limb and say you simply cannot find anything else like this anywhere, period. But the content is just one piece of what makes being a Free Trial Dominator Premium Member such a competitive advantage for you. ## Be Part of a Community of Success-Focused SaaS & Web App CEOs, owners, pros, & entrepreneurs “*Having other folks in the same boat is a nice change (versus the typical “startup” group with a bunch of un-launched products, no customers, etc.).*” – **Dave Churchville, CEO, ClientSpot** “*I get to hear what like minded people are up to as it gives me ideas for my product.*” – **Mark Wilson, The Test Factory** You’ll join an active Community of real-life SaaS & Web App pros, executives, and owners from around the world who share their experiences in our Private, Members-Only Discussion List. The community is active and talks about anything to do with running and marketing a SaaS or Web App business. From topics like “Do you require a credit card to start a trial?” to “Should you put a phone number on your website?” to “What tools do you use to run your SaaS business?” the topics are great and the details that your peers are willing to share is amazing. So many great SaaS & Web App companies at different stages sharing what works, what doesn’t, and giving insight to Founders, Executives, and SaaS Pros that previously was unavailable. As I’ve heard from several Free Trial Dominator Premium Members… “As a single founder, I’m not alone anymore!” And you don’t have to be alone either when you become a Free Trial Dominator Premium Member today. But it isn’t just the Community that keeps you from being alone; the live Group Coaching fills that need nicely! ## Participate in LIVE Group Coaching Sessions **100% Increase in Conversions!** “*Since we implemented Lincoln’s suggestions, our conversions are up 100%+!*” – **Clint Wilson, Founder & CEO Cazoomi** “*What I really like about the Free Trial Dominator program is the sharing of real world examples in the webinars and the opportunity to network with and learn from others in the forum. It works really well when some are ahead of and some are behind where we are. I’ve already been helped and helped others in side conversations.*” – **Steven Mallows, GroupQuality** “*Your Group Coaching sessions are also great, because it is more like scheduled “Staff Meetings”, which makes it great reason to attend and learn and share, even if we have had a good or bad week, minimum or maximum progress.*” – **Kevin Shahbazi** “*The interactivity and feedback are great. I work pretty much solo on my business, so getting advice, guidance and honest feedback is extremely useful for me. I’ve found it incredibly useful and think others working on a SaaS product would too.*” – **Tekin Suleyman, Crowd.fm** “*I like that we meet frequently. You hold your course really easy to understand. Especially for me this is very good because I am from Austria and speak german. But I can follow you very easy. 10 Points out of 10! I will recommend you to a friend of mine who also started to build a SaaS! I’ll tell him that he will loose a lot of money if he won’t join your program!*” – **Norbert Strappler** It’s very simple… as a Free Trial Dominator Premium Member you are invited to attend the ***LIVE*** Group Coaching Call one or two Wednesdays @ Noon Eastern each month via GoToWebinar. And if you want to be a “coachee,” on the call, you simply sign-up to secure your spot… or you can just attend live and see others get their coaching. ### Be a ‘Coachee’ and learn from Me… and Your Peers Each Group Coaching session is dedicated to a specific Phase of the Free Trial: Attention, Engagement, Investment, or Conversion. For example, if your issue is that you aren’t getting enough traffic to your site for example, as a Free Trial Dominator Premium Member, you can sign-up to be a coachee when the topic is “Attention Phase.” When you attend the Group Coaching session as a coachee, I will work with you to review your current website, to troubleshoot your sign-up process, to review mock-ups for your new in-app engagement, or to talk about your Pricing Page or Sign-up Page design… whatever issue your dealing with at the time we can work on. ### Special Guest Coaches Add Amazing Value But it isn’t always just me sharing knowledge and coaching you. As [a Free Trial Dominator Premium Member](#signup) you’ll learn from awesome Guest Coaches that will share their knowledge on the topic of the day with you. Sometimes it will be SaaS or Web App vendors that are crushing it and getting massive conversion rates, other times it will be domain experts on subjects that will help you.. and other times we’ll have vendors who will share with you how they help their customers increase traffic, engagement, or conversions. ### Get Value even if you just Lurk I get it… some people don’t want to share what they think are their trade secrets with the group. So even if you don’t think you’ll ever sign-up as a coachee, as a Free Trial Dominator Premium Member you can still join each session to see what others are struggling with and hear the the suggested fixes, or just to learn how other SaaS and Web App vendors have solved a problem or taken advantage of an opportunity and are crushing it… from the vendor themselves (not just me!) But don’t let your not wanting to share keep you from joining in! Remember, you can provide feedback to the coachees, too! What you know might just help someone else avoid the problems you’ve encountered in the past! ## Here’s the Not-So-Typical Risk Reversal Section This is the section of the sales letter where I try to get past any last defenses you’ve put up by offering to Reverse the Risk. ### 100% Guaranteed to help Increase Conversions… or your Money Back! First, I am probably required to tell you that the results you see from other Premium Members of Free Trial Dominator on this page aren’t typical. Or when I show case studies or tell stories of success, those aren’t typical, either. Those results aren’t typical because – frankly – most people don’t take action; they don’t actually do what they know will work. So I can’t make any guarantees or claims that you’ll increase conversions if you don’t take action. What I can say is this: if you actually take the time to understand the strategies and tactics I show you in Free Trial Dominator, you implement what I show you and you fail to increase free-to-paid conversions, I’ll give you your money back! All I ask is that you show me what you tried first, okay? Once I see what you did or didn’t do that caused the failure, I’ll either help you fix what didn’t work or, if you’d prefer, I’ll give you your money back. Your choice, but I’d rather see you succeed than get a few bucks back. Either way, no hassles from me. ### No Contracts… Cancel Anytime! Here’s the terms & conditions for Free Trial Dominator; There is no contract and no commitment; you just pay month-to-month in advance and you can cancel anytime no questions asked. Easy. Simple. Transparent. Now we move into the Social Proof section where I remind you in a big way that you’re not alone and not the first one to take the leap of faith and invest in Free Trial Dominator. – ## As a Free Trial Dominator Member, You’ll be in *GREAT* Company… ## “How Do I Sign Up?” you ask… It’s simple… [email me](mailto:lincoln.murphy@sixteenventures.com) or give me a call at (972) 200-9317 and let’s get to know each other. I want to make sure that you’re a good fit for Free Trial Dominator and I’m sure you have some questions for me. If we feel good about moving forward, I’ll send you a link to sign-up… it’s that easy. ## Wait… why is there no *Free Trial* of Free Trial Dominator? Ah yes… the fact that I don’t offer a “Free Trial” is the great irony, right? Well… not really, if you think about it. While the psychology of Free Trials is the same regardless of the business offering the Free Trial, there’s a big difference between content/consumption and SaaS/production businesses. I never recommend free trials for content unless the system is setup to “drip” or otherwise limit access to content and since my system isn’t built that way – you actually get access to everything instantly – I offer a discounted paid trial rather than a free one. If you have questions that I didn’t answer here, please feel free to email or call me anytime! – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 Thanks! --- # SaaS Free Trial Conversion Rate Optimization Resource Guide *February 18, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-resource-guide/ If you’re like a typical SaaS provider, a substantial amount of your sales are online which means your SaaS Free Trial Conversion Rates are directly correlated with revenue. A poor performing Free Trial means you have lower revenue than you should… and that’s a problem. I put together this list of my best resources to help you improve your SaaS Free Trial Conversion Rates and grow your business. - [The Best SaaS Free Trial Length](https://sixteenventures.com/saas-free-trial-length) - [SaaS Free Trial Extension Requests are a Bad Sign](https://sixteenventures.com/saas-free-trial-extensions) - [SaaS Free Trial: Requiring a Credit Card is Shortsighted](https://sixteenventures.com/saas-free-trial) - [Freemium or Free Trial? Ask a Better Question](https://sixteenventures.com/freemium-or-free-trial) - [A SaaS Metric designed to Increase Free Trial Conversions](https://sixteenventures.com/free-trial-metrics) - [The Secret to Successful Customer Onboarding](https://sixteenventures.com/customer-onboarding) - [SaaS Customer Onboarding: 3 Steps to a Successful Welcome Email](https://sixteenventures.com/saas-customer-onboarding-email) - [How-to Avoid SaaS Free Trial Abuse](https://sixteenventures.com/free-trial-abuse) - [B2B SaaS lies: 97% weren’t going to become customers, anyway](https://sixteenventures.com/b2b-saas-lies) - [Does just offering a Free Trial increase conversions?](https://sixteenventures.com/free-trial-increase-conversions) - [Turn your Free Trial into a Customer Qualification Machine](https://sixteenventures.com/free-trial-customer-qualification) - [SaaS Marketing Strategy – How to Quickly Double Your Revenue](https://sixteenventures.com/saas-revenue-double) - [Why Free Trial Optimization is So Important](https://sixteenventures.com/free-trial-optimization) - [When Should You Start Optimizing Your SaaS Free Trial? (Video)](https://sixteenventures.com/when-to-optimize-free-trial) - [The 7 Secrets to Free Trial Success – Secret #1: No More Evaluations](https://sixteenventures.com/free-trial-success-secret-1-no-more-evaluations) - [The 7 Secrets to Free Trial Success – Secret #2: Get Your Product to Sell Itself](https://sixteenventures.com/free-trial-success-secret-2-get-your-product-to-sell-itself) - [The 7 Secrets to Free Trial Success – Secret #3: Stop Confusing Freemium and Free Trials](https://sixteenventures.com/free-trial-success-secret-3-stop-confusing-freemium) - [The 7 Secrets to Free Trial Success – Secret #4: Measure the Right Things](https://sixteenventures.com/free-trial-success-secret-4-measure-the-right-things) - [The 7 Secrets to Free Trial Success – Secret #5: Credit Cards are a Red Herring](https://sixteenventures.com/free-trial-success-secret-should-ask-for-credit-card) - [The 7 Secrets to Free Trial Success – Secret #6: The Perfect Free Trial Length](https://sixteenventures.com/free-trial-success-secret-perfect-length) - [The 7 Secrets to Free Trial Success – Secret #7: The Four Phases of a Free Trial](https://sixteenventures.com/free-trial-success-secret-7-four-phases) - [Does a Self-Service SaaS Free Trial fit into a High-Touch Sales Process?](https://sixteenventures.com/self-service-free-trial) - [Free Trial Frustrations from a SaaS CEO](https://sixteenventures.com/saas-free-trial-frustration) - [Free Trial Rules of Engagement: Confused Minds Don’t Buy](https://sixteenventures.com/saas-free-trial-engagement) - [Do Shorter Web App Free Trials Perform Better?](https://sixteenventures.com/shorter-free-trials) - [Key to Free Trial Success? Switch from Reactive to Proactive](https://sixteenventures.com/switch-from-reactive-free-trial) - [Free Trial Users are a Vanity Metric](https://sixteenventures.com/free-trial-users) - [The #1 Reason Your Free Trial Fails to Convert Customers](https://sixteenventures.com/why-free-trials-fail) - [Can You Answer These 15 Questions About Your Free Trial?](https://sixteenventures.com/saas-free-trial-questions) - [Assistly Marketing VP Tells You Why They Dropped Tiered Pricing and Picked Up Freemium](https://sixteenventures.com/assistly-pricing-change-freemium) - [SaaS Vendors: How To Communicate Value to Your Web App Customers](https://sixteenventures.com/how-to-communicate-value) - [Why OfficeDrop Went Freemium… and how Mobile Apps forced their hand](https://sixteenventures.com/video-interview-why-officedrop-went-freemium) - [Your Signup Form is Hurting Your Free Trial Conversions!](https://sixteenventures.com/improve-free-trial-conversions) - [How to Handle Freemium and Free Trials?](https://sixteenventures.com/freemium-free-trials) - [Secret to Increasing Free Trial Conversions is the Secret to Reducing Churn](https://sixteenventures.com/secret-to-reducing-churn) - [Average Free Trial Conversion Rates… and why they don’t matter](https://sixteenventures.com/average-free-trial-conversion-rate) - [There are 7 Types of Freemium… and why that matters to you](https://sixteenventures.com/seven-types-of-freemium) - [Wait… You Actually WANT to Be Average?](https://sixteenventures.com/free-trial-average-conversion-rate) - [Offer a Free Trial of your Web App? Don’t EVER do this…](https://sixteenventures.com/saas-free-trial-mistakes) - [For Web Apps the SECRET to $1Million is 9 Customers…](https://sixteenventures.com/saas-secret-to-one-million-dollars) - [SaaS Free Trial: Feature or Time-Limited?](https://sixteenventures.com/saas-free-trial-feature-or-time-limited) - [Why $1 Trials are a bad idea for SaaS apps](https://sixteenventures.com/one-dollar-trial) ## Let’s Optimize your SaaS Free Trial Conversion Rates For immediate consultation and advice on all things SaaS, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # Where is Your Ideal Customer on the Awareness Ladder? *February 3, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-communicate-value/ I recently gave my clients some interesting questions to ask themselves… and I thought you might want to ask yourself these questions, too. - If someone looks at your marketing site – main page, pricing page, sign-up page, whatever – for 5 seconds, what will they think your app does? - If your [ideal customer](https://sixteenventures.com/ideal-customer-profile) looks at your site – for 5 seconds or even 5 minutes – will they know they’re your ideal customer? - Are you reaching your ideal customers where they are in their Buying Cycle and doing so with an appropriate call to action? - Are you reaching your ideal customers where they are on the Awareness Ladder and doing so with an appropriate call to action? In case you aren’t familiar with the “Awareness Ladder” concept, it comes from the amazing book [“Breakthrough Advertising” by Eugene Schwartz](http://rcm.amazon.com/e/cm?lt1=_blank&bc1=000000&IS2=1&bg1=FFFFFF&fc1=000000&lc1=0000FF&t=ilocom08-20&o=1&p=8&l=as4&m=amazon&f=ifr&ref=ss_til&asins=0887232981), first published in 1966 (a book, BTW, that I keep by me all the time; it is even ***MORE*** relevant today!). The ladder looks like this, from the top rung to the bottom one: You need to know where the people in your market are on the Awareness Ladder so you can speak to them where they’re at and provide the appropriate call to action. If they don’t even know they have a problem, you probably shouldn’t try to close them. If they are convinced, you probably don’t need to get them to understand your benefits. Understanding where your market is on the Awareness Ladder can absolutely transform your sales pipeline from a weak trickle to a powerful deluge! ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # What’s the biggest issue you’re dealing with right now? *January 26, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/your-biggest-issue-saas-web-app/ I do what I do for one reason… to help SaaS & Web App vendors be more successful. Period. If I’m not doing that, I’m not doing my job. Some I will help be more successful by working with them 1-on-1 or through programs like the Free Trial Dominator (which is awesome, IMHO). But others – like you – I will help through my blog posts. So… what’s the biggest issue you’re dealing with right now? If I can’t help you because your issue is outside of my expertise… I’ll find someone that can and we’ll help you together! So take 30 seconds and post in the comments below what you’re dealing with – a problem you need to fix or an opportunity you want to take advantage of – and I’ll try to help. Thanks! – Lincoln (972) 200-9317 --- # Your Signup Form is Hurting Your Free Trial Conversions! *January 10, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/improve-free-trial-conversions/ I had a SaaS vendor ask me the following question when I mentioned “average” Free Trial conversion rates: *When we look at broad Free Trial conversion ratios, I would assume some of the variances may depend on how much information is required to sign up for a free trial.* *For example, there are a number of sites that require very little, if any, prospect information (i.e., just an email).* *Others required name, phone, email, address, and some other information.* *These are two approaches to pre-qualification.* *I would expect the former will allow the casual less-than-curious person to take a peak, many of which may not be a fit for long term use.* *They wouldn’t buy regardless. In the second model, these “non-prospects” would steer away and not even become a statistic in the conversion ratios.* *It would be very interesting to hear you opinion and experience on the data capture sign up approaches.* *– Paul* And my response to him was: Paul, I’d say variances are more likely tied to the sources of the data. Consider whether it makes real sense to lump together a light-weight Project Management App like 37Signals’ Basecamp, a vertical-specific vendor like RecruiterBox, and an Enterprise HCM product like Workday when looking for “average” conversion rates… or “average” anything to do with SaaS for that matter? But you bring up something that is rarely talked about or generally glossed over: Free Trial sign-up forms, and their importance in the overall Sales Process for a SaaS or Web App vendor. I’ll start with your point about pre-qualification. The way I look at it, pre-qualification should start long before the sign-up process. How you position your product, the sales copy you use, the imagery and social proof, and even what you do to engage with your prospects before they sign-up (webinars, whitepapers, etc.) will all help in the pre-qualification / self-selecting process. I really can’t see how asking for a phone number or title on a sign-up form qualifies or disqualifies a prospects. It does add data points, but qualification based simply on the existence of that information is a stretch. On the other hand, there is a massive body of evidence from years of testing in the e-commerce and Internet Marketing industries that indicates asking for too much information on a form will reduce the number of people that fill out the form or in this case, sign-up. Yes, a longer Free Trial sign-up form with good marketing (sales copy, social proof, imagery, etc.) might get more people to complete it than a short one with no marketing, but what about a shorter sign-up form ***WITH*** improved marketing? So I always ask for the bare minimum – which will vary from vendor to vendor and can be as little as just the email address – on the first sign-up form – surrounded by all of the afore mentioned marketing elements. Then I rely on a strong Free Trial strategy backed-up by psychological factors – such as the rules of Commitment and Consistency put forth by Robert Cialdini in his book [Influence: The Psychology of Persuasion](http://www.amazon.com/gp/product/006124189X/ref=as_li_ss_tl?ie=UTF8&tag=ilocom08-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=006124189X) – to complete the prospect profile in the post-signup & in-app engagement process. The rule of Commitment and Consistency basically says that people are much more willing to give you information ***AFTER*** they’ve made a commitment – even if very small, like entering their email address – than up-front without any previous commitment. But it isn’t just collecting the information from them, it is ***HOW*** you do it. It should be done in a way that allows them to provide information not so you can sell or pitch them, but instead to improve their in-app experience and help them complete the evaluation of the product in a timely and efficient manner. But this requires a completely different approach to Free Trials than most SaaS & Web App vendors take – one that gets away from “evaluation” as the basis for the trial and moves toward Engagement. ## Let’s Optimize your Free Trial Conversion Rate For immediate consultation and advice on improving Free Trial conversion rates, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # How to Offer Both Freemium and Free Trials *January 9, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/freemium-free-trials/ I got this question from a SaaS vendor about offering both Freemium and Free Trial options and I wanted to share my response to him with you. UPDATED FOR 2015! *Our current app has two pricing tiers – free and paid. Simple pricing has its advantages!* *We’re coming out with a major redesign of the product (plus new features) in early 2012 and need to decide how many pricing levels to have. So far, the discussion is free plus two pricing levels.* *I have also questioned whether we should continue to have both Free and Freemium, as this combination seems to be the minority case.* And here was my response to him… Steve… thanks for the question. You’re right that having a Freemium version and paid version w/ Free Trials is not common, and while I have seen it more lately, only 7% of those I’ve surveyed report having both Freemium & Premium w/ Free Trials, so it is pretty rare. That doesn’t mean it is a good or a bad thing, though… just that it is rare. But to make it work, there are a couple things you need to make sure you do if you continue going down that path: - Clearly understand the psychological differences [between Freemium – free forever – and Free Trials](https://sixteenventures.com/freemium-or-free-trial). - Have a clear path to conversion for ***BOTH*** Free Trial users and Freemium users. Where most companies fall short with Freemium is the same place people fall short in everything else… they fail to map out how – once you have someone’s attention – you can move them through to becoming a customer. Whether that takes 14 days in a Free Trial or 6 months as a Freemium user, you need to know what that path looks like and actively move the user closer to becoming a customer every day. And if you have a Free Trial that ‘downgrades’ to the Freemium version if they don’t convert – which is what most vendors with this hybrid approach do – you need to have a clear idea of how to move them back to becoming a customer again, or how to get them to spread the word for you, or how to monetize / leverage / productize them in other ways. Otherwise, why just let them hang out as a free user – after they didn’t become a customer the first time around – and waste resources? What’s the *quid pro quo* for on-going free use of your product? But you should also work diligently to get those in your Free Trial to convert rather than failing to convert and falling back to the Freemium level. ## Should You Pivot to Profit and ditch Freemium? For immediate consultation and advice on pivoting away from – or otherwise optimizing – your Freemium model, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Customer Retention: The Secret to Reducing your Churn Rate *January 4, 2012 · by Lincoln Murphy* Source: https://sixteenventures.com/secret-to-reducing-churn/ When it comes to SaaS Customer Retention, I get questions like this frequently: *Hi Lincoln, I’d like to hear your perspective on minimizing churn, especially in an industry with steadily declining prices, Adding more value with a better customer experience and more product functionality to mitigate price erosion and churn helps. Better segmentation. What else?* Churn happens for many reasons, but especially when people think your product doesn’t do something they need it to do (especially if they thought it would), if it doesn’t do that thing as easy as it should, or if the experience is incongruent with the price paid. ## SaaS Customer Retention: The Seeds of Churn Are Planted Early Clearly these are just a few of the reasons for Churn… but in many ways, these are the basis for the things you might be more likely to hear or see, like Customer Service problems or post-sale price sensitivity. So, up-front price sensitivity often results from directly comparing your product to a cheap competitor’s product… when 12 different products seem to be identical, price becomes the main differentiator and the lowest price “wins.” (Does anyone really win the race to the bottom?) What is really interesting to me is that Increasing Retention (or Reducing Churn) and Converting Prospects into paying customers share many of the same requirements. It starts with attracting the right crowd and managing expectations properly early in the process. ## Improve SaaS Customer Retention by Adding Value Before the Sign-Up It is easy to say “add value” so you can charge more, but what does that mean? Where I’ve seen success in “adding value” is in what I call pre-sale or pre-signup Indoctrination. How you position your product, the sales copy you use, the imagery and social proof, and even what you do to engage with your prospects before they sign-up (webinars, whitepapers, etc.) will all help in that Indoctrination process. And it will help better prepare your prospects and customers for the post-signup experience, allowing them to become more Engaged – faster – thus leading to a deeper level of Investment and, of course Conversion. So the goal of pre-sales lead nurturing / Indoctrination is to get them engaged, then get them invested in the product. Customer Retention / Prospect Conversion are the same in that respect… Get them and keep them engaged, then get and keep them invested in the product. And never stop doing that. You can also leverage some of my ideas and tactics from this other post on [Churn Reduction / Customer Retention](https://sixteenventures.com/how-to-reduce-churn-saas). ## SaaS Customer Retention is a Process So yes, a great User Experience, managing expectations, Engagement, Investment (time, energy, resources, etc.) are all part of the conversion – and the retention – process. But the secret to both is having a plan for conversion and revenue expansion. When someone enters your Free Trial or becomes a lead in any other way, you need to have a specific conversion path that they get on as soon as they sign-up (or hopefully before they sign-up). Now everything you do should lead them down that path, never letting them fend for themselves or virtually wander around. Well, the same thing should happen after they become a customer, too… you want to up-sell, move them to a more expensive version or incorporate add-ons into their current plan, etc. To keep converting customers, expanding revenue, and growing Customer Lifetime Value (CLV) requires a clearly defined path and you should guide your customers down that path in everything you do. And, of course, if you’re constantly moving them down that path, then you know you’re engaging them and they aren’t a churn threat. ## Let’s Optimize your Free Trial Conversion Rate There is only one of me, so I can only help a limited number of SaaS providers at any one time. But if you’re serious about finally turning your SaaS Free Trial into a customer-acquisition machine, email me with the details of your situation and I’ll get back to you to setup a meeting. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # What’s Your Biggest Challenge in 2012? *December 30, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-vendor-challenges-2012/ I believe in moving forward, not looking back. So my question as we go into 2012 is this: What’s Your Biggest Challenge as a SaaS or Web App Vendor in 2012? Is it making your Free Trials more effective at creating customers? Coming up with the right Pricing? How to handle Competition? Whether to go Freemium? Overall Business Model issues? How to handle Accounting? How to Manage Recurring Revenue? How to keep Churn to a minimum? Or something else? I’d love to hear from you – whatever the challenge – in the comments below. Next week I’ll aggregate your comments, responses from those on my mailing list, and insights from Free Trial Dominator members to give you an idea of what your peers consider to be challenges in 2012. Happy New Year! – Lincoln (972) 200-9317 ***PS***: If your challenge in 2012 is how to turn your Free Trial into a Customer-Creating Machine, the solution is to become a Member in my Free Trial Dominator program. *That’s a Paypal link, by the way, but you only need a valid Credit Card to make it work.* And when you join the Free Trial Dominator, you’ll get access to all of this: - Core Free Trial Dominator modules – Rethinking the ‘Free Trial’ – Attention Phase – Engagement Phase – Investment Phase – Conversion Phase - Free Trial Resources and Tools - My Super Ninja Free Trial Tactics - Pricing Page Success Formula videos (the full 5-hour series that was priced at $397 by itself!) - Master Class on Beta Testing & Pricing (60-minutes / $97 value) - Complete Group Coaching Call Archive - Private, Members-Only Discussion List where we talk about all-things SaaS & Web App Marketing ***PLUS***… you’ll get to join us for our Weekly Group Coaching Calls – every Wednesday @ Noon Eastern Don’t wait… Join the Free Trial Dominator program today! --- # Average Free Trial Conversion Rates… and why they don’t matter *December 28, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/average-free-trial-conversion-rate/ I get asked what the average Free Trial conversion rate is or “what’s a good conversion rate” all the time. But since I’m not an analyst or researcher I don’t have industry-wide data, but even if I did, well… you’ll see. Softletter (the SaaS University folks) on the other hand collects and publishes this type of information, so we’ll look at their stuff. A brief disclaimer: I don’t like this kind of survey data because it lumps all SaaS & Web App vendors together and – other than a shared business architecture – they offer different types of products with different use cases that serve different industries, verticals, niches, and markets that all behave very differently from one another… but, this is what we have to work with so it’ll have to do for now. What Softletter published indicates that 66% of SaaS vendors report Free Trial conversion rates of 25% or less. That means that for most SaaS vendors – 66% of them – at least 75 out of every 100 sign-ups they get for their Free Trial ***DO NOT BECOME CUSTOMERS***. 75% of the time, it fails every time. Even more interesting – or frightening – is that 41% of SaaS vendors reported <10% conversions to Softletter! So let me once again point out the obvious… for 41% of SaaS vendors, >90% of the people that sign-up for their Free Trials ***DO NOT CONVERT TO PAYING CUSTOMERS***. In real numbers, for 41% of the SaaS vendors Softletter talked to, 90 out of every 100 free trial sign-ups does not result in a paying customer. And this < 10% number is closer to the reality that I’ve seen when folks first contact me to help them improve their Free Trials. And frankly… that sucks. (Ugh… *language*) I’m sorry, but all of these numbers suck… even the 25% conversion rate. But the thing I hate about “averages” or data like this is it might make someone with a 26% conversion rate think “WOW! We’re doing great!” I literally had someone tell me the other day “we have a 29% conversion rate so we must be doing good…” to which I said nothing and simply shed a solitary tear. Like it or not, when average numbers are put out by industry experts, analysts, researchers or pundits… people make those numbers their goal. They shoot for the average. They plan and strategize around the average numbers they put in their spreadsheets! Now when someone tells me 29% is a good conversion rate for a SaaS Free Trial – and if I’m not rendered speechless – I gently remind them that they’re still losing 71% of their sign-ups. Yes, at a 29% conversion rate – what someone might consider good – for every 100 sign-ups you get, 71 will be squeezed out of your sales process. 71 out of 100. To me, that represents wasted ad spend, marketing costs, support and infrastructure resources, and lost potential revenue. Yeah, you know what?  Forget the costs; this is money left on the table! So 71% of your Free Trial sign-ups opting not to give you their money when you had their attention in the ***ONLY PART*** of the sales process you have any real control over is a* **FAILURE***, even if you are doing better then everyone else. Unfortunately, Softletter published the data in their newsletter and don’t have the archives available to the public so I can’t link directly to it. Maybe you can find it on their site somewhere. Softletter also noted that 15% of the SaaS vendors reported 70% or better conversion rates, which sounds great on the surface. But then they followed that up by saying these are what most people would refer to as “enterprise” sales cycles and “a great deal of personal interaction takes place and in many cases a trial program is not launched unless a great deal of pre-sales qualification has taken place.” One of the goals of a Free Trial strategy should be to reduce the amount of human interaction required to make a sale, even if there is a customer-side requirement for a “higher-touch” sales process, which – by the way – is often just a customer perception requirement. You can do things within the Free Trial process to streamline and create a more scalable (read: leverage through proper Free Trial strategy) sales process as a whole. But to do that – whether with a low-touch, self-service, e-commerce-based sales model or high-touch, human-centric sales model – you really need to understand the true nature of a Free Trial, the four phases – Attention, Engagement, Investment, and Conversion, and know how to create and execute a strategy around your Free Trial. --- # What’s the Ideal SaaS Free Trial Length? *December 27, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/ideal-free-trial-length/ So, what’s the ideal Free Trial period is for SaaS and Web Apps? As you can imagine, I get asked that a lot. Sure, the 30-day Free Trial is common among B2B SaaS & Web App vendors, but there aren’t any rules. And with everything from 14-day to 60-day (and longer) trials appearing frequently I understand why this the question persists. So, the short answer to what the ideal Free Trial period is “there isn’t one, but…” The longer answer – one that will actually help you make smart decisions with your SaaS Free Trial strategy – requires some setup and a going a little deeper into what Free Trials are really all about. First, you need to understand that Free Trials – from the vendor standpoint – are not there for the user to evaluate the product. Nope, Free Trials have one job and that is to create a customer. A well-designed Free Trial strategy should create an efficient, scalable and cost-effective method of customer acquisition. One of the key psychological elements of a Free Trial is its time-limited nature. Paradoxically then, the quest for the mythical “ideal Free Trial length” is a red herring. Look, when it comes to the length of a Free Trial, many people want to believe there is a magic number – 7, 14, 15, 30, 45, 60, 90; like playing the lottery – that when applied to their Free Trial will skyrocket conversions. And of course the flipside of that way of thinking is that if the Free Trial isn’t converting customers, it must be the length that is the culprit. But very rarely – never in my direct experience – does the length of the trial have a major impact on conversions. From the customer side, if the trial is perceived to be too short, they might feel rushed and not get started. Even worse, they might not sign-up in the first place. So it can cause a problem in the Attention Phase of the Free Trial. And there are examples of using shorter trial periods to position a product or a version as simple; like how [Salesforce.com](http://www.salesforce.com/crm/editions-pricing.jsp) has a 7-day trial on their simple Contact Management product vs. a 30-day trial on their “Enterprise” product. But without the immediate version differentiation or an “anchor” trial length for comparison against, a short trial length may actually do massive damage up front. Now, from your standpoint as the vendor, you want to get them into the trial and convert’em ***ASAP***. Yes, ***ASAP***! That means not waiting until the end of the trial to convert, but leveraging the Free Trial experience, and using a strategic view of the Free Trial, as a way to accelerate customer acquisition! In my experience, the average time from sign-up to conversion with a 30-Day Free Trial is… 31 days. That’s because SaaS and Web App vendors like you simply don’t understand how to use a Free Trial to efficiently create customers. You think Free Trials are for “evaluation” or that your product will sell itself once they get in there. Let’em poke around and they’ll see just how awesome your app is, right? So you just let people in and hope they convert when the trial is up. Or you [require a credit card up front](https://sixteenventures.com/saas-free-trial-credit-card) and just bill them on day 31 (which has its own potential pitfalls). Maybe you send an email reminding them that their trial is expiring soon and hope the user will be like “oh, yeah… my trial is expiring, I guess I better sign-up!” Right… *good luck with that*. Look, the ideal Free Trial length from the customer standpoint – what you use in your marketing – is one that gives the perception of being long enough to adequately evaluate the product and not feel rushed. From your side – the vendor side – however, the ideal Free Trial length is as short as possible! And to make it as short as possible, you really need to understand the true nature of a Free Trial, the four phases – Attention, Engagement, Investment, and Conversion, and know how to create and execute a strategy around your Free Trial. ## Let’s Optimize your SaaS Marketing Funnel For immediate consultation and advice on optimizing your Marketing Funnel and improving Free Trial conversions, schedule a 60-minute meeting with me[via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you,[email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Year-End Free Trial Conversion Ideas *December 26, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-conversion-ideas/ Today is December 26, 2011. You have 6 days – including today – until the year 2011 is over and done with. So what are you doing to convert those currently in your Free Trial to customers in 2011? It isn’t too late to convert them! I’m willing to bet that you have some users in your Free Trial that signed-up at a point in December 2011 who, if they convert on the last day of their trial, will convert well into 2012. Now I’m no accountant, and there are different ways to book revenue, but a trial started in 2011 that converts in 2012 doesn’t usually count toward 2011 revenue. And since you spent the money in 2011 to get them to your site and to sign-up for the trial in the first place, wouldn’t it be great to get some money from them this year? I want to convert them in 2011 to maximize my revenue for this year ***AND*** I want to start off 2012 with ***THAT MUCH MORE*** recurring revenue! So… what if you could take some small action that would result in the conversion of 10% of your current prospects to customers in 2011? 25%? 50%? Well, have you thought about simply asking for the sale right now? Today? This really shouldn’t be as wild of an idea as it is, but far too many SaaS and Web App vendors think that their product will magically sell itself, I guess. You’d think that the super-low conversion rates most vendors get from their Free Trials would be the first indication that this strategy is failing. So ask for the sale. And here are two ideas on how to do just that. Sit down and craft an email that is written by a human for a human, keeping in mind that a real person will read your email. Make the email more about them and their needs than you and your product. And make them an offer to convert right now. Give them one thing to do in the email – click a link – and send them to a page to enter payment information and become a customer. Make sure that page is a marketing page that reminds them why they should convert today, and includes trust factors, social proof, etc. – in other words not just an info-collecting page. Now… if you know what version, bundle, or tier they signed-up to try out, we can get fancy and come up with a truly irresistible offer… a discount on the next level up. This is one of my super-secret Ninja techniques that works like crazy all day long. Consider this… if they signed-up for the trial at the $20/mo level, and the next level up is $40/mo… offer them the $40 level for only $30/mo for the first 6 months. Of course, that assumes you created pricing tiers differentiated on value-based metrics/features/benefits and you’re able to make that next level up sound really cool or valuable, that you tied your trials to the different tiers, etc. but you get the idea, right? Honestly, there are a lot of ways to convert prospects to paying customers, and many of those are especially applicable right now at the end of the year. I cover all of that – and a lot more – in the Free Trial Dominator program. *That’s a Paypal link, by the way, but you only need a valid Credit Card to make it work.* And when you join the Free Trial Dominator, you’ll get access to all of this: - Core Free Trial Dominator modules – Rethinking the ‘Free Trial’ – Attention Phase – Engagement Phase – Investment Phase – Conversion Phase - Free Trial Resources and Tools - My Super Ninja Free Trial Tactics - Pricing Page Success Formula videos (the full 5-hour series that was priced at $397 by itself!) - Master Class on Beta Testing & Pricing (60-minutes / $97 value) - Complete Group Coaching Call Archive - Private, Members-Only Discussion List where we talk about all-things SaaS & Web App Marketing ***PLUS***… you’ll get to join us for our Weekly Group Coaching Calls – every Wednesday @ Noon Eastern – Lincoln (972) 200-9317 --- # Freemium isn’t just for “Startups with Nothing to Lose” *December 25, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/freemium-not-just-for-startups/ A common misconception about Freemium is that it is just for startups with nothing to lose. This myth is perpetuated by many of the Freemium advocates whose backgrounds – and current experience – are limited to early-stage, venture-funded startups. Unfortunately, this misconception really misses the point. Freemium is a marketing strategy – or quite often a tactic – and used most often to disrupt markets, competitors, etc. So, since when is disrupting markets relegated to startups? It is a bad idea to be focused only on the near-term and to miss the big, longer-term picture because of it. ***NOTE***: I originally published this paper in late 2010 exclusively for subscribers to my Mailing List. Below is the original paper, published in it’s entirety. I’ve provided updates to the numbers I cited at the bottom of this post. While startups are often the first to market or the first to try new and risky things when it comes to marketing, if something works – or could be made to work by exploring lessons learned by failed startups – often the larger more established companies will come around. And when they do, that could be a big problem for the early-stage startups whose only real value proposition is that they are free. No matter how you slice it, to really disrupt a market – the odd vendor that got lucky notwithstanding – requires significant capital regardless of whether Freemium is leveraged as the marketing strategy or not. But isn’t it interesting that for a startup to gain significant market penetration and traction using Freemium within the large markets required for the numbers game to work, it must raise significant capital for infrastructure and customer acquisition? Hmmm. It would seem Freemium is quite expensive for the vendor. Here are some of the popular case studies in Freemium and how much equity capital they have raised to date (in late 2010): Evernote $45M YouSendIt $53M Box.net $30M Pandora $56M Xobni $32M So, who cares that you have to raise so much money to get a Freemium business to work? You should. The myth is that the built-in virality of the network effect enabled by Freemium is enough. Obviously it is not. Freemium is almost always associated with low Customer Acquisition Costs – CAC – through word of mouth, viral and game mechanics, social networking, etc. On top of that, with open source stacks and cloud infrastructure the cost – as you often hear – to support a free user is “near zero?” But support costs are just one expense usually not added to the actual CAC even though “near zero” support costs in aggregate at scale often result in something with “near many zeros.” As was shown in the original “The Reality of Freemium in SaaS” the CAC metric must take into account all of the expenses required to land a paying customer. The true definition of CAC is the aggregate costs associated with discovering, reaching and getting the attention of a potential customer, getting them to your site or calling on them, converting them to a user, serving them (marketing, technology, human services) during the non-paying period, and then converting them to a paying customer. In a Freemium scenario, you will have on average 97 free users for every 3 paying customers. If you have 10,000 users in the system, on average, 300 will be paying customers. That means, the aggregate CAC for each of those 300 is not what it costs only to attract and convert each of those 300, but what it also costs to attract and support the other 9,700 users while they wait to become customers. And of course, none of this is static so the 9,700 at a given time could include any number that churned out over time. Some have argued that if you know 95% of your users will never convert then they aren’t customers and should not be figured into the CAC. Whatever it takes to justify your position, do what you will, but know that if you spent $100 on AdWords and got 100 people to come to the site, and converted 3, it was not a CAC of $3… it was a CAC of $100, or just about $33/customer. You have to get real. If you are in a very small niche where you provide a significant amount of value to your business customers, Freemium should probably be the furthest thing from your mind. There are so many very targeted methods of reaching your customers in ways that add value and raise the value perception of your offering that you don’t need to worry about brand building or market making. Just tell people how you’ll solve their problems or help them take care of new opportunities, charge them for the privilege, and you will likely have a great deal of success. In large, horizontal markets – especially in B2B – much of the cost associated with Freemium at a large scale is in market-making and brand building. That is, orchestrating the “organic” viral campaigns, greasing the palms of pundits, traditional PR… wait? What? None of that sounds like the Freemium we all know and love, right? The build it, make it free, and let the product sell itself. Yeah, that doesn’t work. Even if the only costs associated with customer acquisition are the result of directly pulling in users and converting them to paying customers, few companies will look at the CAC correctly – at best forgetting to figure in “user acquisition,” too. But we know – as previously mentioned – the bulk of the expense is not in the highly-targed direct acquisition – a Google AdWords campaign – of Users or Customers. No, for most, the cost is from the indirect acquisition methods (i.e brand building, PR, market making, etc.) and that is harder to keep in check. In fact, it is too often not calculated properly in the actual CAC and is relegated to other marketing, S&OP, etc. expenses. How does the specific issue of Customer Acquisition Cost tie to whether Freemium is only for startups with nothing to lose or not? Well, its simple really. The problem with the way most companies leverage Freemium is that CAC goes UP simply because of the way they use it. They emphasize the FREE version rather than the PAID version in order to get “traction.” This simple marketing decision can be the death of a company or the point at which they thrive. No one ever said you MUST go through the free version to get to the paid version. Yet, most startups are looking to get “traction” and are therefore pushing to get as many free users in the door as possible. Established companies used to generating revenue will be more likely to use Freemium as the marketing method it is but push heavily, from the moment the would-be customer lands on their website, the premium version. Free was what got you to the site, but the value of the premium product is what will get you to stay and pay. SocialText – [founded in 2002, $19M in VC funding over 6 rounds](http://www.crunchbase.com/company/socialtext) – hardly a startup – is an example of a company that has created a Free version of their service but is not putting all their eggs in the Freemium basket. For instance, they do not emphasize the Free version on their pricing page. In fact, it is not found on their pricing page at all but is instead a special program they have created to be leveraged in other ways. SocialText can be considered Freemium, and will use that to get traffic to their site, but will de-emphasize the Free tier outside of those specific marketing campaigns. That is – if you come to the SocialText marketing website directly and not via a search for Free or Freemium or not through their carefully orchestrated campaign, Freemium landing pages, etc. then you will not be presented with that opportunity. But is SocialText really benefitting from Freemium in the way that their competitor Yammer (founded 2008/$15M funding) is? Are they getting the press, the traction, etc. associated with Freemium in the way that Yammer is? It is hard to tell without any level of transparency, but the answer would seem to be no. So in SocialText’s de-emphasizing of Freemium, they are likely not seeing the same level of “traction” that Yammer is. The big question is then – is that a problem? SocialText by all accounts has a thriving Premium offering and perhaps they are using Freemium to win over customers who bring up Yammer in sales calls. Perhaps it is something more. The interesting thing here is that they HAVE a Freemium offering and could be waiting to unleash it on the market. Yammer – who claims penetration in “80% of Fortune 100” companies as of October 2010 – has an interesting Freemium strategy that will be covered in a separate article. So, while Freemium startups are out trying to make noise and get the market or industry to notice them, incumbents can leverage the same Freemium tactics of market penetration as the new kids on the block, but without the need to build a brand from scratch. Whereas Freemium startups think they’ll come in and disrupt the status quo with Free and knock the stodgy old-school monoliths off their pedestal, some are being beaten at their own game. Guess what? If Free is your only claim to fame, that is all you’ll get – fame – as you enter the deadpool. Yes, large established companies are slower to pull the trigger on things like Freemium – many will never attempt it – but for others this “slow and steady wins the race” mentality is because they want to fully think it through. They need to fully understand what happens if it the strategy fails. How will it affect their market position, the brand value, etc. What happens if it is successful? How will it affect their market position, the brand value, etc. There is a very real issue around protecting their brand from the potential of “free = zero value.” Wherever possible, established companies will look to existing products or services that they’ve already invested in the development or acquisition of but that are new or have yet to establish a strong market presence to experiment with Freemium. Due to the inherent risks of Freemium, this is a great way for a company to try Freemium without damaging an established product line, brand, etc. If you are a startup or are in a market where larger competitors have acquired smaller companies or if you know companies have invested in IP that directly competes with your Freemium offering but they have not yet begun to market it, that should be considered a direct threat. There are many pitfalls that established vendors will want to overcome, but when they do figure it out, look out. If you see an established company leveraging Freemium, it is likely that they have figured out a specific opportunity to go after, a market segment adjacent to their current position that they want to penetrate, or they might just want to stop competitors in their tracks. And as established brands with a lot of money in the bank, they might just be able to do that. Amazon Web Services (AWS) would hardly be considered a “startup with nothing to lose” but they recently “[went Freemium.](http://aws.amazon.com/free/)” This is a perfect example of a company that is very successful – not a startup – deciding to use “Free” to disrupt their competition and gain even more new market share. While the bulk of the noise in the industry was around their 1-year free trial for their core services – EC2, S3, EBS, ELB – the real news was around a real Freemium offering for their proprietary ancillary services like Queueing, Notifications, and Non-Relational Datastore. Those services are unique to Amazon and once you are using them – which requires deep integration into your application – you are effectively locked-into AWS at some level. You can always move your app from EC2 to your own data center, you can move your objects from S3 to another file host, but the *services* that AWS provides in those ancillary offerings you cannot (easily) move. Brilliant and very disruptive to other “cloud computing” players. Another great example of a successful and established company “going Freemium” is Mailchimp. It is true, many people think of Mailchimp as an overnight success since Freemium did its job – it got them noticed. However, the company has been around since 2001 and did not get into Freemium until they had been a successful company for nine years. Mailchimp was looking for a boost – a way to disrupt the status quo in the email marketing industry and knock the leaders down a peg or two. Freemium was the method they chose. The key to the success of Mailchimp’s Freemium strategy was the fact that they had so much time in-market that they could anticipate and plan for the additional support burden – and system abuse – associated with a surge in free users of an email marketing system. Where they didn’t or couldn’t anticipate challenges, it was that time in-market and experience that allowed them to roll with the punches and make adjustments along the way to make Freemium work. Startups should take note of that – the additional support and ABUSE that free users would bring was the major challenge with Freemium for Mailchimp. This is where existing companies will have an edge over startups in Freemium – they know what the early-stage companies don’t yet understand. For young companies hanging their hat on Freemium, they need to be very aware of this threat. ## UPDATES Since I published this in late 2010, some things have changed… - [Yammer is up to $57 Million in funding](http://www.crunchbase.com/company/yammer) - [Evernote is up to $95.5 Million in funding](http://www.crunchbase.com/company/evernote) - [Box.net is up to a whopping $209 Million in funding](http://www.crunchbase.com/company/box-net) - [Pandora went public and raised $235 Million on the IPO](http://www.wired.com/epicenter/2011/06/pandora-ipo/) My suggestion to any SaaS or Web App company considering Freemium is simple: Make sure you’re targeting a large enough market that would actually want to use your product (B2B or B2C) and then seek out Venture Capital firms that have funded ***OTHER*** successful Freemium ventures. Don’t try to do it on your own, bootstrapped. Freemium requires ***MASSIVE AMOUNTS OF MONEY*** and a large enough audience. Without both, Freemium is unlikely to work for you. --- # Classical Freemium Doesn’t Exist At Scale *December 25, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/classical-freemium-doesnt-exist-at-scale/ “Classical Freemium” is the marketing tactic where a SaaS or Web App vendor offers a Free-in-Perpetuity version of a product or service, often feature- or usage-limited, as well as a version of the same product or service with less limitations to which the vendor will attempt to up-sell the user. ***NOTE***:  I originally published this paper in late 2010 exclusively for subscribers to my Mailing List. Below is the original paper, published in it’s entirety. I’ve provided updates to the numbers I cited at the bottom of this post. This form of Freemium is actually on the decline as the primary go-to-market method for a number of valid reasons. Aside from the notion of the “Penny Gap” being a very real idea – the idea that trying to charge people *anything*, even a penny, for what they already get for free is a major hurdle – other realities are becoming apparent. The concept of “near zero” support costs have been found to be “near untrue,” most find it difficult to justify and continue to support a 3-5% conversion rate, and most are realizing what Freemium really is – a marketing tactic and not a business model. Freemium is evolving, however, so there are other types of Freemium that are on the rise which will be covered in a separate article. There is yet another reason Classical Freemium as the only method of customer acquisition is falling out of favor; many SaaS and Web App companies are realizing that the true motivation behind the Freemium companies they look up to has little to do with revenue generation by converting free users to paid subscribers and everything to do with building a user base as fast as possible without consideration for a sustainable monetization strategies. These companies are instead looking to make money through M&A or IPO activity. If they stumble into a way to make money along the way, great, but that is not the primary motivation. Twitter is a great example of this. Twitter is a company that continues to raise money ($160M in disclosed VC funding through 5 rounds to date) and spend money to acquire more and more users but still lacks a fully defined monetization strategy. But they are changing the world so we can forgive that, right? The motivation is clearly not to generate revenue but to gain traction and grow the user base. Twitter continues to experiment with different ways to make money such as selling the tweet “firehouse” to Google, Bing, and through data aggregation providers like gnip, or promoted tweets which reportedly pull in $100k a pop, and the recently announced analytics which may or may not be a revenue source. None of these, however, have emerged as the revenue model they’ll hang the future of the business on. Also of note; all of the revenue streams they have attempted to tap required the critical mass they had already achieved by having a 100% free service. Without the massive funding – and perfect timing and luck – required to get Twitter to the point it is in terms of “market penetration,” the monetization methods they are exploring would not be viable in the first place. The founders of Twitter have likely already made millions of dollars through private stock sales and the company will likely be able to acquire several additional funding rounds as needed to ensure they stay around long enough to be acquired for billions. In other words, there is a very good chance the founders of Twitter will have built the company and made hundreds of millions for themselves and their investors all while having generated little actual revenue – let alone profit – along the way. Is this bad business? Certainly not. If you are building a business to generate revenue is it a model you will want to copy? Probably not. Twitter has used a risky strategy, to say the least and while it might seem counter intuitive, Twitter is successful probably because there was not a strategy there in the first place; you just couldn’t plan for what they’ve done. Using Twitter as an example is a double-edged sword since it is an anomaly and difficult to categorize as B2B or B2C. But Twitter is such a pervasive technology service in today’s world that it is a great company to examine from the perspective of Freemium. But if you have a niche or vertical B2B SaaS or Web App, is Twitter really an appropriate analog? Obviously not. But it is a great example of a company being built around Free with little motivation to generate revenue or create profit. It is this piece of the puzzle that could be missing when companies look to Freemium as the go-to marketing method; they don’t fully understand the real motivations behind many of the companies employing Freemium. This is why it very important to know that Classical Freemium does not exist at scale! You need to know that few companies are able to build a real, sustainable business off of the 3% conversions that most Freemium companies see. Evernote seems to be one of the few, but they are in a great position to play the numbers game required by Freemium. First, they aren’t B2B only; business customers can use the service, but so can anyone else. In fact, Evernote is one of the few companies to say – and mean – that anyone with an Internet-connected device is a potential user / customer. Most companies being honest with themselves cannot say that. So in the B2B world, building a sustainable business off of 3% conversions just doesn’t happen. Freemium is a marketing method for getting users, for sure. But it is also a marketing method for getting a foot in the door, generating buzz or brand awareness, entering more price-sensitive market segments, or disrupting competitors. These are the scenarios where Freemium is going to flourish in the coming years for most business that leverage it. Few will be pure-play Classical Freemium and have any real success. To date, no B2B company has built and scaled a business through pure-play Classical Freemium – that is, one product line that has a free-in-perpetuity component and one or more premium versions of the same product for the same market segment. All companies at some point must start generating revenue to remain viable. For many Freemium companies this occurs after they’ve reached some level of scale and either have new investors to answer to (especially post-IPO) or have otherwise reached a critical mass of adoption and now can begin to generate revenue. The thing to take note of is that many companies do not rely on converting free users to paying subscribers but instead rely on other revenue streams than premium versions of the free subscriptions to monetize. You must have a clear path to monetization regardless of whether you will use Freemium or not and if you do choose it, you must do so on the applicability to your goals, your market, etc. and not because another company is doing it “successfully.” It is necessary to really and fully understand how so-called “Freemium companies” evolve over time. If you are considering using Freemium as your go-to-market strategy, you must understand this before you choose to employ Freemium in your company. You cannot build your business based on what you see on the outside of these other “Freemium companies”. You don’t know what is going on behind closed doors. From first hand experience, anecdotal accounts, and publicly-disclosed accounts, it is clear that its not what you think! Freemium seems to work best when the goal is simply to get people into the system and not as part of a monetization or sales strategy. If you create a free product for people to use and not as part of a sales process or what appears to be a free trial with no expiration – Freemium seems to work well. But what does it work well for? Getting users. Not generating revenue. However, if it is obvious that the free product is simply a free trial with no expiration or is limited in ways that ultimately makes it unusable without paying, it will fail to gain traction meaning it won’t even help you get users. People aren’t that stupid. This is why the most successful and profitable methods of monetization right now in B2C revolve around an entirely free product with monetization through credits, virtual currency, product sales, or add-ons; think Facebook or Zynga. This is why over one-third of the top grossing iPhone apps are are Free, but offer in-app purchases for add-ons (additional levels, characters, chapters, etc.). Back in the B2B world, we can look to a company like Helpstream, founded in 2004 and having raised just under $10M in VC funding as an example of a company where Classical Freemium failed and took the company with it in early 2010. While it is terrible that they failed, some transparency by the former CEO, Bob Warfield, helped shed some light on what happened. The main takeaway from [Warfield’s post mortem](http://smoothspan.wordpress.com/2010/03/25/freemiums-for-saas/) was that Helpstream didn’t attract the right kind of users; the kind of users that would convert to paying customers. He said they were able to get 200 free users and convert 5 of those to paying customers; a conversion rate of 2.5% – just under the standard 3% conversion rate. The biggest problem it would seem based on Warfield’s post is that they simply didn’t have enough traction to make the numbers game work. 200 users is simply not enough. Consider the numbers game here – they would have needed 100x the amount of free users they had to get just 500 paying customers if the conversion rate held. We don’t know what number of customers would have resulted in a sustainable business for the company, though. The real tragedy with Helpstream seems to be that they didn’t make Warfield CEO earlier. His ideas about market segmentation, having the Freemium version be only for smaller businesses by putting upper limits on it (50 users in their case), and having only a free trial for larger businesses – those who are more likely to become customers anyway seem to be spot-on all things considered. Unfortunately this realization – the realization that basing their entire business on Classical Freemium was a recipe for failure – was just too little, too late; they had already ran out of money! What is frightening interesting is that some companies are actually developing their pricing and building their business around a goal of 3-5% conversions. A fascinating post from Hootsuite – a builder of social networking tools for B2B marketers with just under $4M in VC funding – where they claim to want to build a business off of 5% conversions are hopefully putting up a smokescreen to the real revenue streams at scale. This quote is from [a post clarifying their pricing](http://blog.hootsuite.com/freemium-plans-clarifications/) after they initially released pricing that did not sit well with their customers: *“To determine the pricing levels, we analyzed data from active customers to ensure that 95% of current users would remain free based on current patterns”* Without deviating from the point of this article too much, only looking at usage data to determine pricing is not ideal. It speaks volumes when a company justifies its pricing decision based on data analysis to its users who are upset by the pricing announcement / change. Clearly, the company is not listening to what its users and customers want, but is instead looking at data that doesn’t tell the whole story to find the answers. In this case, they are using data to back into a Freemium Strategy and Pricing Model where 5% of their users will want or need to pay to use the service? Best of luck to them, but this seems like a very bad idea. What Hootsuite seems to be failing to realize is that companies leveraging Freemium that have a 3-5% conversion rate from free to paid ***are not happy with that***. They want higher conversions, it just seems to be that the nature of Free and the Penny Gap keep that from happening. Some do achieve higher than 3-5% and that should be the goal. Backing into a pricing strategy with a specific conversion rate in mind is a bad idea – and severely limiting. This is why pure-play Classical Freemium does not exist at scale in B2B SaaS; no B2B SaaS company actually sets out to build a system where 97% of the users of their system do not pay. It would seem that Hootsuite might be falling into the trap of building a business around a marketing strategy employed by those that have no real interest in revenue generation on the product for which they’ve used Freemium. It must be noted Hootsuite has begun to use market segmentation within their marketing website and pricing and Freemium strategy by offering regular customer and Enterprise customers different options. Perhaps they quickly saw the err of their ways. Here’s the dirty little secret about externally-funded Freemium companies and ***you must understand this***. Most are not out to generate revenue – only grow the user base. Generating revenue and growing a free user base are two very different things and in many cases, doing both well is very difficult in B2B SaaS. For most companies using Free or Freemium, it is as a way to get a large number of users and build an audience. Many of these companies have no intention of getting money from those users – ever. This is so critical for bootstrapped companies or those with just a little external funding. Freemium is a Marketing Strategy used to get a lot of users fast – “hyper scale” as some people have put it. if you don’t have the money to support hyper scaling of a huge free user base, you should not attempt Freemium. This is hard for the bootstrapped startups with a couple of founders simply looking to replace their corporate income with a SaaS or Web App to wrap their heads around. Why would you do something in your business that is not going to immediately result in revenue – even if it is only 5% of those people that pay? For the founders of companies employing a strategy that does not include revenue generation they will make money in other ways – ways that might even be counter to the longevity of the business as a stand-alone entity. There is often a tipping point where you start to see products being more aligned with market segments, different versions being created specifically for revenue generation, you might see acquisitions of smaller-yet-profitable businesses, etc. Generating revenue is ***very different*** than acquiring users. Many of the entrepreneurs standing behind Freemium made their money not from revenue generated by the services they worked for but by the sale of those companies or the IPO. Is this a bad thing? No… its great and we should all be so lucky. But it speaks to the underlying fact that Freemium is not about revenue generation as much as interest generation by others – acquirers, investors, or an ***ecosystem***. Now the latter of those three – ecosystem – is very exciting and a very real, sustainable, viable and profitable business can be built around that – M&A or IPO be damned. But do not for one second forget that it takes a ***substantial amount of funding*** to get to this point. All of this comes down to the fact that Freemium is itself not just one thing. There are five types of Freemium in use today (covered in a separate article) and the type of Freemium to employ must be based on many factors, including the time-line to reach goals. Freemium strategies are either short- or long-term. Short-term Freemium strategies are used for market disruption, to get a foot in the door, crush an upstart competitor, etc. and is often used on existing product lines or new alternative products (as detailed in the original “The Reality of Freemium in SaaS” under Alternative Product Strategies). Long-term Freemium strategies are employed by those businesses built from the ground-up to leverage this pervasive go-to-market strategy and is where the idea that Freemium is a “business model” comes from. These companies basically put all their eggs in the Freemium basket and if it doesn’t work, it often leads to complete failure. For short-term strategies, monetization occurs through more traditional methods often using the free version as a foot in the door for a brand to up- or cross-sell to more established products to new customers, market segments, etc. Aside from M&A or IPO as the method of “making money”, long-term Freemium strategies are designed to monetize in ways only possible at scale by tapping into the network effect, ecosystem, or ancillary revenue streams made possible only after “critical mass” (which is relative) is achieved. Consider companies that build an audience and monetize through ads – critical mass occurs when they have enough eyeballs to get the advertisers attention. For some companies, like Spiceworks (founded in 2006 with $29M in funding so far), they’ve been able to monetize not only the eyeballs of their 1.2 million users, but the activity of those users by selling network effect data to the advertisers. Spiceworks has 1.2 million free users, but only around 200 customers – the advertisers – and is a perfect example of the notion “if you aren’t paying for the product, you aren’t a customer, you are the product.” Over time, Spiceworks – who is really in the advertising business not the IT management business – has used network effects generated by their 1.2 million users to add more value to the offering for advertisers. Spiceworks is technically Freemium since users can pay a monthly fee to turn off the ads, but this is not promoted as they see advertising – not subscriptions – as their primary and most scalable revenue stream. Again, Classical Freemium is not present in a company many consider to be one of the most successful B2B “Freemium companies” around. Evernote is another example of a company building a big enough audience to get the attention of those that will pay to have access to that service in other ways. Evernote has been the poster-child for Freemium over the last few years and while they are not an analog for most B2B SaaS companies, it is definitely an interesting study in how to leverage engagement or “investment” in your product to produce conversions. We should all be thankful to CEO of Evernote Phil Libin’s frank and open discussions of Evernote’s growth and even revenue. Evernote, founded in 2005 and having raised $45.5 Million over 3 VC rounds, worked hard to build an immense user base. Libin has shared that many users and customers alike access the Evernote service from multiple devices, therefore as the service grows, makers of devices that could access Evernote are taking note. As of May 2010, the poster-child for Freemium was making $500k per year – a not-insignificant amount – from licensing (the ecosystem revenue stream) by mobile carriers and device manufacturers to pre-load the Evernote app for their customers. Carriers and device manufacturers want to attract the attention of the vast – and dedicated – user and customer base of Evernote to sell more devices or network access. If Evernote had charged for access to their service from day one, not only would they not have reached the scale they have and arguably the amount of subscription revenue due to the aforementioned engagement-based conversions, the reduced scale would not have attracted the attention of those that want to buy access to – in the form of licensing – that user base. Evernote clearly has a long-term Freemium strategy that employs Classical Freemium, but they are not pure-play Classical Freemium since they also employ other revenue streams. Also remember that it takes millions of dollars – $45.5 million so far – to get to this point. The moral of this story is – for the companies that saw success from a revenue standpoint with Classical Freemium, that success was achieved by raising a lot of money and using that to build a large base of free users. Once they reached a certain level of scale, they had to branch out – or finally could branch out – to other, more lucrative revenue streams. When we can literally point to just a handful of “successful” Freemium companies with few of those employing pure-play Classical Freemium at scale or even in a very long time, it is at best difficult to consider Freemium a successful “Business Model.” For some heavily-funded narrowband horizontal SaaS companies, Freemium and Free have been the key to gaining critical mass before employing monetization strategies outside the scope of Classical Freemium. ## UPDATES Since I published this in late 2010, some things have changed… - [Twitter is up to $1.6B  in funding](http://www.crunchbase.com/company/twitter) (yes… Billion… with a ‘B’) - [88% of the top grossing iOS apps are Freemium](http://www.intomobile.com/2011/12/22/freemium-apps-continue-flourishing-2012/) - [Spiceworks is up to $54 Million in funding](http://www.crunchbase.com/company/spiceworks) - [Evernote is up to $95.5 Million in funding](http://www.crunchbase.com/company/evernote) --- # SaaS Free Trials: Common Problems with Sign-up Forms *December 22, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-signup-form-common-problems/ I just posted the video from the 12/21 Group Coaching call to the Free Trial Dominator site. I started by showing an email sent by 37Signals to former prospects as a way to get them to come back. It used the “updated feature” method. I reviewed the marketing sites – from the marketing site, to the Free Trial sign-up process, and first in-app experience – of these five Free Trial Dominator members: - [https://crowd.fm/](https://crowd.fm/) - [http://www.myclientspot.com/](http://www.myclientspot.com/) - [http://www.freeagent.com/](http://www.freeagent.com/) - [http://www.groupquality.com/](http://www.groupquality.com/) - [http://worketc.com/](http://worketc.com/) We covered these topics (and more) today: - Common problems with Free Trial Sign-up Forms - Managing in-trial and post-trial expectations during the sign-up process - How having too many data points can have a negative impact on sign-ups - Client Side Validation of form fields - Only having absolutely required fields on the first sign-up form. - How moving optional or less-important (i.e. fields that won’t let you contact the potential customer later) to later in the sign-up process - How even if all fields are required they should be marked as such - The pervasive use of Subdomains in apps and how this can negatively impact sign-ups - Call to Action on Main Site and Sign-up form - Free Trial Tie-in to Pricing Page / Bundles - An overall lack of Sales Copy & Trust Factors (like Phone Numbers) on sign-up forms - How to reduce the number of steps it takes someone to sign-up and start using your App - What “Engagement” means and how to avoid dumping a prospect into your app to fend for themselves. Huh… No wonder today’s session went a little long! Free Trial Dominator members can [watch the Group Coaching Call video here](http://www.freetrialdominator.com/dec2011-week-4-group-coaching-video/). You might need to login again to view the video and I also linked to it from the Dashboard page. If you aren’t a Free Trial Dominator member, you can join the Free Trial Dominator program here! I’ll talk to you next Wednesday @ Noon Eastern for our next Free Trial Dominator Group Coaching call. Take care, Lincoln (972) 200-9317 ***PS***: Have a ***GREAT*** Holiday, whatever it is you celebrate! --- # Focus on People, not Features, in 2012 (Happy Holidays!) *December 21, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-vendors-focus-on-people-not-features/ For a lot of us, the holidays are a time of reflection. Looking back on 2011, I’d say this has been one wild and crazy year! I’ve spent a ton of time working with the best SaaS & Web App companies on the planet to get them more customers. Save for the occasional social network that gets funding from a Saudi prince, businesses need customers. Even the cool kids out there are looking for customers. So what makes some SaaS and Web App companies get customers easier than others? Here’s the secret…. it’s the way they think about the customer internally. And the way they think about the customer internally manifests itself in everything they do externally (market-facing). Whether it’s pricing, revenue modeling, Freemium, or (what I’m focused on in 2012) Free Trials, this holds true. And the best companies out there – the companies that are really killing it even when they have the same or even a lesser feature-set than you – are doing the same thing. They treat their customers and would-be customers like human beings. They’ve figured out the “voice” they want to use based on their goal market position and everything they do – promotion, sales copy, service, training, etc. – revolves around the customer or user as a human being. From marketing to User Experience, they understand that they’re selling a product not just to a real-life person, but for a real-life person to use. They don’t write emails that sound like one robot wrote it to another robot. They take the time to understand how their customer will use the product on a daily basis and strive to make it easier to use every day. They use direct-response sales copy to connect with the person reading the message, even if they’re selling to Fortune 100 companies. Pop quiz: Fortune 100 companies are made up of what? You guessed it. People! You must speak the language of your target market and do so in a way that is congruent with their expectations. Some markets require you to be more ‘professional’ than others. But all markets are made up of humans, so speak, write, and interact like one. This “human-centric” approach must go all the way through your pricing, market segmentation, and of course, in your Free Trials. One of the really interesting things I’ve found is that the most successful companies don’t think in terms of “users” and instead think of their customers as “members” of their community. This is a huge mindset-shift that once made, can change everything about your business. Think about the potential effect on Customer Lifetime Value (CLV) that a shift from user-centric to member-centric thinking, messaging, design, etc. might cause. When you came up with your pricing versions, for example, were you focused on ‘features’ or were you focused the people that would be buying your product? You aren’t alone! Unfortunately, so many of the underlying concepts that SaaS / Web App vendors pull – and make decisions – from carry over from traditional software, even going into 2012. 6 or 7 years after the term SaaS was coined, we’re still doing things like “software” companies. That makes sense, I guess, since most of the pundits, analysts and “thought leaders” in SaaS come from traditional software backgrounds. But to really be successful, you need to shift your thinking. Look beyond software and traditional SaaS to non-software analogs such as subscription services, membership sites, and other recurring / continuity models for inspiration. When coming up with your pricing, for example, these are the wrong things to think about: - Pricing Tier, Version or Bundle - Subscription Level - Features Think instead about: - Logical groupings of customers - Cohorts - Levels of experience Think of them as Membership levels instead of Pricing levels. This can have a profound effect, but that is just a pricing example. Think about how this might work in every other part of your business? How did American Express differentiate itself from traditional Credit or Charge Cards? Membership. Membership has it’s privileges, right? So, this is the wrong approach: I’m going to give access to these features at this pricing level. This is a better approach: This group of customers will benefit from these features in these ways Wrong way = Product / Feature Focused Right way = People / use-case focused So in 2012, I want you to consider changing your focus from “users” to “members” and see what amazing things can happen. That is my plan, too. In fact, I’m changing the Free Trial Dominator program to a Membership program with monthly payments for 2012 right now. I hope you have a wonderful holiday, whatever it is you celebrate. I’m a Festivus kinda guy, so our family will bust out the aluminum pole and air our grievances in a couple of days. Take care, Lincoln (972) 200-9317 --- # The Free Trial Secrets of 100’s of SaaS vendors… just for you *December 20, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-secrets/ Peter Drucker famously said “The purpose of a business is to create a customer.” I say “The purpose of a Free Trial is to create a customer.” If you believe my version, then the Free Trial Dominator is for you. I’m capping Charter Memberships at the first 10 members and I’ll close it down as soon as I hit that number. I’m so excited about the the Free Trial Dominator because it’s a manifestation of my years of helping SaaS & Web App companies get more customers and generate more revenue. I’ve literally helped 100’s of companies around the world, from super-tiny, bootstrapped Web App startups to the biggest names in SaaS (KISSMetrics, Zendesk, Hubspot, Constant Contact, to name a few). And I saw the Free Trial – something all B2B SaaS & Web Apps have – as the major bottleneck in customer acquisition. It doesn’t matter if it’s a no-touch, self-service sales process or if ahigher-touch, human-powered sales process is involved. In my experience, most of the time if a Web App or SaaS vendor has a Free Trial, the vast majority of those who signed-up for the trial do not buy; recent research by Softletter and my daily conversations back that up as fact. So in 2011… I set out to fix that. Look, I consider the Free Trial Dominator to be your shortcut to turning your Free Trial into a Customer-Creating Machine. I don’t know how to say it less bombastically… sometimes, the truth is just ***THAT AWESOME***. I mean, in the Group Coaching sessions in December (you’ll have access to the archived recordings when you sign-up to become a Charter Member today) we’ve already covered topics like: - Pre-signup Indoctrination - Calls to Action, Sales Copy, and Microcopy - Sign-up form optimization - Engagement Processes do’s and don’ts - How to move from Engagement to Investment - How to use Email follow-up sequences effectively during a Free Trial - Using Transactional Emails to drive conversions - Designing for conversion and for your audience, not for your peers or ego - And a bunch more. Oh, and that is in addition to what is included in the Core Free Trial Dominator modules! Look, what the Free Trial Dominator means to you and your company is very simple: No more trying to figure this stuff out on your own! No more turning to LinkedIn Groups or Quora for “the answers” when all you get is generic advice and consultants who don’t know what their talking about shilling their services. Let me be very clear so there aren’t any misunderstandings. The Free Trial Dominator ***IS NOT*** a lead-in for my consulting services. In point of fact, it is a ***REPLACEMENT*** for my consulting services. A better way to say it is that the Free Trial Dominator is the ***RESULT OF*** my consulting services. I know what I know because I’ve been exposed to what has worked (and continues to work) – and what hasn’t and doesn’t work – in 100’s of SaaS & Web App vendors worldwide. I even worked with some traditional – and massive – Software vendors in 2011 to improve their Free Trial results. And I’ve boiled that knowledge down, synthesized it, and put it together for you so you don’t have to go through the same trial & error everyone else does. Until now, I’ve charged upwards of $2000 to be a part of the Free Trial Dominator program. And many have paid to join, understanding the value they’d receive not from the program, but as a result of the program and the increase in conversions and revenue. But because there are two inputs to pricing – willingness to pay & ability to pay – I realized the one-time payment option was not right for everybody. So I’m gonna make it even more accessible in 2012 by offering a monthly payment option of ***ONLY*** $99 or what amounts to $1188/year. But I’m not offering that just yet… that’ll come in 1Q 2012. Right now, I’m looking for a handful of Charter Members to join the existing group of Early Adopters. This is a $594 value if you do the math: 6 months x $99/mo. This is limited to 10 Charter Members and once I hit that number, that’s it… no more Charter Members. Oh, and if you get in now, you can join the last ***LIVE*** Group Coaching Session of 2011 on Wednesday 12/28 @ Noon Eastern. ## What You Get When You Join the Free Trial Dominator Program When you become a Free Trial Dominator member you get what I call the 3 C’s: Content, Consulting & Conversation Membership provides you access to this ever-evolving and updated Content: - Core Free Trial Dominator modules – Rethinking the ‘Free Trial’ -Attention Phase -Engagement Phase -Investment Phase -Conversion Phase - Free Trial Resources and Tools - My Super Ninja Free Trial Tactics - Pricing Page Success Formula videos (the full 5-hour series! last sold for $397!) - Master Class on Beta Testing & Pricing (60-minutes / $97 value) - Complete Group Coaching Call Archive ***PLUS*** you get *consulting & conversation* in the form of weekly ***LIVE*** Group Coaching web meetings that you and all other members can participate in (ask questions, review your sites or workflows, help with copywriting and design, etc.). Occasionally we’ll even have special guests join to share what is working for them, like when Wistia or OfficeDrop stopped by to share how they get their massive conversion rates. And of course, I’ll record each session and post to the private site for you to watch over-and-over (or if you couldn’t be there live!). This is limited to the first 10 Charter Members; I’m closing this down as soon as I hit that number. Remember, join today and you can be on the Group Coaching web meeting – Wednesday 12/28 – at Noon Eastern. See you then. – Lincoln (972) 200-9317 --- # SaaS & Web Apps: Optimize Your Pricing Page for 2012 *December 18, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-page-optimization/ Your Pricing Page is the most important marketing page on your site. Don’t believe me? Think about this… if 100% of your sales come from the Pricing Page, then you better believe that it’s the most important page on your site! And it better be designed to convert! There are some very specific things that must be present (or not!) – especially in B2B – for a Pricing Page to be as successful as possible at converting viewers to customers. And I show you what those are in the Pricing Page Success Formula. I want you to have a super-successful 2012 and optimizing your Pricing Page to make more low-touch sales is the best way to do that. Don’t spend more money getting traffic to your site if your Pricing Page isn’t designed to convert! I’ve been selling the Pricing Page Success Formula for $397 and I’ve helped a bunch of SaaS & Web App vendors around the world increase their sales. Some you might have heard of: KISSMetrics Zendesk Hubspot Rypple Constant Contact ooVoo Big Contacts Endicia Cazoomi Runa Knoodle And 100’s more that you ***WILL*** hear about! Look, I’ve literally changed the way an entire industry thinks about Pricing & Pricing Page design. But I’m not as interested in that as I am about changing the way ***YOU*** think about Pricing & Pricing Page design. After the first of the year, the Pricing Page Success Formula won’t be available anymore on its own since I’m rolling it into the Free Trial Dominator program. But I want to get the Pricing Page Success Formula into your hands right now so you can start planning for 2012. So here’s the deal… you can [buy the Pricing Page Success Formula right now for ***ONLY*** $97](https://sixteenventures.wufoo.com/forms/pricing-page-success-formula-for-saas-web-apps/) for the next few days. And when you buy, I’ll throw in the *Master Class on Beta Testing & Pricing* (itself a $97 value)! So take advantage of this great offer and make 2012 the fantastic year it should be! Have a great week, Lincoln (972) 200-9317 ***PS***: If you want to turn your Pricing Page into a conversion-machine, the Pricing Page Success Formula is the answer. But hurry… you can [get it right now for ***ONLY*** $97](https://sixteenventures.wufoo.com/forms/pricing-page-success-formula-for-saas-web-apps/)! Starting January 1… you can only get it if you are in the Free Trial Dominator program! --- # SaaS Customer Success Experts Resource Guide *November 20, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/retention-churn-reduction-resource-guide/ To efficiently scale your business, you must keep your SaaS churn rate low and constantly strive to improve Customer Success, reduce churn, improve customer retention, and growth Customer Lifetime Value (LTV). I put together this list of my best resources to help you keep your customers and grow your SaaS business. ## SaaS Churn and it’s Effect on Growth and Profitability A SaaS business – or any company that leverages a recurring revenue business model – has the benefit of making a sale one time and generating revenue from that one-time sale for some time to come in the future. Many B2B SaaS companies have customer lifetimes of 24 months, 36 months,… and beyond. Those successful SaaS companies don’t get customers to stick around for years by accident… they work hard to reduce SaaS churn and  understand customer retention is key to the success of their chosen business model. Here are some posts that talk about why it is required to keep your SaaS churn rate to a minimum. - [Customer Success: The Definitive Guide](https://sixteenventures.com/customer-success-definition) - [In Customer Success: Context. Is. Everything.](https://www.linkedin.com/today/post/article/20140613060150-7018284-in-customer-success-context-is-everything) - [5 Ways to Drive Subscription Growth By Focusing On Customer Success](http://blogs.salesforce.com/company/2014/05/subscription-growth-focus-on-customer-success-gp.html) - [Measure Revenue or Customer Retention?](https://sixteenventures.com/saas-churn-revenue-customer) - [SaaS Churn Rate: What’s Acceptable?](https://sixteenventures.com/saas-churn-rate) - [SaaS Churn Rate: Go Negative with Expansion Revenue](https://sixteenventures.com/negative-saas-churn-rate) - [SaaS Providers: Growth Requires Proactive Customer Retention](http://sandhill.com/article/saas-providers-growth-requires-proactive-customer-retention/) - [Ongoing Realization of Value is the Key to SaaS Customer Retention](https://sixteenventures.com/customer-retention-continual-realization-value) - [Churn kills Growth; Customer Retention is a Growth Accelerator](https://sixteenventures.com/customer-retention-growth-accelerator) - [For SaaS Companies, Customer Retention is the key to Long-term Profitability](https://sixteenventures.com/customer-retention-profitability) ## Tactical Methods of Reducing SaaS Churn It’s all well and good to know why you need to keep SaaS churn to a minimum… but how do you do it? These posts go into the tactics that I’ve found successful in helping SaaS companies drive down their SaaS churn rate and improve their customer retention. I can’t tell you if these ideas are directly applicable to your SaaS business – we should probably talk about that – but these posts will hopefully get you thinking and start moving you in the right direction. - [Do the Right Thing (and fight the Zombies)](https://sixteenventures.com/saas-customer-success-zombie-customers) - [22 Ways to Reduce Churn with Growth Hacking](https://sixteenventures.com/growth-hacking-retention) - [Best Practices for Dealing with Unplanned Outages](https://sixteenventures.com/saas-customer-success-unplanned-outages) - [Engagement is the key to lowering SaaS Churn](https://sixteenventures.com/saas-churn-podcast) - [SaaS Churn Threats: Identify and Retain At-Risk Customers](https://sixteenventures.com/saas-churn-threats) - [SaaS Churn Rate Reduction Starts with Attracting the Right Customers](https://sixteenventures.com/saas-churn-rate-attract-right-customers) - [SaaS Churn Rate Improvement: Monitor and Drive Engagement](https://sixteenventures.com/improve-saas-churn-rate-engagement) - [My EVIL Method to Improve Customer Retention](https://sixteenventures.com/how-to-reduce-churn-saas) - [The Secret to Improving Customer Retention](https://sixteenventures.com/secret-to-reducing-churn) - [Use Customer Support to Increase Revenue](https://sixteenventures.com/customer-support-revenue-driver) ## Let’s Improve your SaaS Churn Rate For immediate consultation and advice on all things SaaS, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # SaaS Freemium Model Resource Guide *November 20, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/freemium-resource-guide/ I put together this list of my ***BEST*** SaaS Freemium posts just for you. I hope it helps! - [Freemium or Free Trial? Ask a Better Question](https://sixteenventures.com/freemium-or-free-trial) - [State of B2B Freemium 2013](https://www.slideshare.net/lincolnmurphy/the-state-of-b2b-freemium-2013) (Slides from my presentation) - [Pivot to Profit: Ditch Freemium and Start Making Money](https://sixteenventures.com/pivot-to-profit-ditch-freemium) - [SaaS Freemium Customer Acquisition Costs](https://sixteenventures.com/freemium-customer-acquisition-costs) - [There are 7 Types of Freemium and Why That Matters…](https://sixteenventures.com/seven-types-of-freemium) - [How to Offer Both Freemium and Free Trials](https://sixteenventures.com/freemium-free-trials) - [Freemium isn’t just for “Startups with Nothing to Lose”](https://sixteenventures.com/freemium-not-just-for-startups) - [Classical Freemium Doesn’t Exist At Scale](https://sixteenventures.com/classical-freemium-doesnt-exist-at-scale) - [Free Trial Success Secret #3: Stop Confusing Freemium and Free Trials](https://sixteenventures.com/free-trial-success-secret-3-stop-confusing-freemium) - [The Reality of Freemium in SaaS](https://sixteenventures.com/freemium-paper) (the 2009 paper that started it all!) - [Why OfficeDrop Went Freemium… and how Mobile Apps forced their hand](https://sixteenventures.com/video-interview-why-officedrop-went-freemium) - [Desk.com – then Assistly – Dropped Tiered Pricing and Picked Up Freemium](https://sixteenventures.com/assistly-pricing-change-freemium) - [The 7 SaaS Revenue Streams Report (PDF)](https://s3.amazonaws.com/16v/7+SaaS+Revenue+Streams+with+Details.pdf) If you’re curious how I help SaaS and Web App vendors increase conversions and improve retention / reduce churn, [you can learn more and contact me here](https://sixteenventures.com/start-here). --- # The 7 Secrets to DOMINATING Your Free Trials *November 11, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-improve-free-trial-conversion-rates/ In addition to the years I’ve been working with SaaS & Web App vendors, I’ve spent 2011 totally immersed in the business of free and have helped dozens of companies – from super early startups to ***MASSIVE*** $B/year companies – completely ***DOMINATE*** their free trials. Nothing else I’ve done has produced such ***AWESOME*** results – so fast – for so many SaaS & Web App and traditional software companies. Yep… turns out my stuff works for non-SaaS companies too! So I figured it was time to share my findings with you in another one of my free webinars. This time I covered… ## The 7 Secrets to ***DOMINATING*** Your Free Trials #1 Metrics S’metrics #2 Sales Funnel Fallacy #3 The Product Won’t Sell Itself #4 Freemium vs. Free Trials #5 The Credit Card Wall #6 The Perfect Free Trial Length #7 No More Evaluations I decided to post the video from the webinar so if you missed it live, or want to watch it again, just fill out the form below and you’ll get ***INSTANT ACCESS*** to the ~65-minute video. Thanks! --- # Web App Pricing: How To Avoid the Commodity Trap *October 10, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/web-app-pricing-how-to-avoid-commodity-trap/ ## SaaS vendors who know their customers know what they don’t value and avoid building a pricing strategy around those elements. A client of mine – an established SaaS company in the HR space – wanted to pass on the storage costs associated with the use of the system to their end-customer. I told them that their best bet was not to do that as it could put the focus of the customer on the wrong metric. Instead of continuing to ensure their value proposition was aligned with the value perception of the customer, this move would put the focus of the customer on a commodity metric with little real value. Here’s the deal… a quick search on Google shows you can buy a 500GB hard drive for $60, or about $0.12 per GB. Anyone can do that search and probably a lot of people have. Even more, they probably weren’t happy when they did the search (few people buy a new hard drive because it’s fun). Even if they haven’t actively sought pricing on a new hard drive, they know that a GB is super cheap these days. So when you sit down to develop your pricing strategy for your SaaS or web service, and the pricing page to go along with it, you need to figure out if really makes sense to charge your customers an extra $20/month – or $240/year for an extra GB of storage space; something both you and they know they can get for $0.12. Wait! “That argument doesn’t make sense” you say. “We add value on top of the storage;” you manage that data for them, you do backups and have a disaster recovery plan, your data center is SAS70 certified… ***STOP***… *it doesn’t matter any more*. Whether you like it or not, your customer just did an apples to apples ROI comparison between two things that have absolutely nothing to do with each other; your complex web service and a commodity, desktop hard drive. And it is all your fault. So now, the customer either won’t step-up to the next tier (holding back on usage or deleting objects) or they will because they have to but won’t be happy about especially since they “know” the huge profit margin you’re getting off of them. More importantly is that even though they moved up, they might be *actively looking for a way out*. You see, knowing that you add value is not enough; you need to tell the customer about the value you add and sell them on it. Unless they’re buying a storage system (S3, online backups, etc.), at best focusing on “storage” is simply not aligned with the customer. At worst, it takes their minds off of the true value you add and focuses it on some metric that they associate with a super-cheap commodity. A great example of a company that did this well is Apple with the iPod. When they decided to sell an digital audio player to compete with MP3 players on the market, they chose to sell a device with 5GB of storage. But they didn’t promote it that way. Instead, Steve Jobs knew that a storage metric – even in 2001 – did not have a lot of value with it. If anything, it didn’t mean anything to the customer. So, Jobs announced the 5GB iPod as a way to put “1,000 songs in your pocket.” This means so much more to consumers and takes the focus off of the commodity metric and puts it where the value is derived. So, how can you do that with your SaaS or Web App? Not sure how to price your app, how to be more aligned with the customer’s value perception, and how to avoid the “Commodity Trap?” Check out my [SaaS and Web App Pricing Resource Guide](https://sixteenventures.com/saas-web-app-pricing-resource-guide) here. Onward, upward, and to the right! – Lincoln (972) 200-9317 --- # Can You Answer These 15 Questions About Your Free Trial? *October 4, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-questions/ ## SaaS & Web App Vendors: These are 15 Questions About Your Free Trials That You Should Be Able to Easily Answer - What are you doing to engage customers ***BEFORE*** they sign-up for your Free Trial? - How many of your Free Trial sign-ups become active users? - What are you doing to increase the number of active users of your Free Trial? - What is your current conversion rate from Free Trial user to paid? - What is your current conversion rate from active Free Trial user to paid? - What are you doing to increase the number of active users of your Free Trial to paid customers? - What’s the average time from Free Trial sign-up to paying customer? - What is the percentage of sign-ups that bypass the free trial and go right to paid? - What are you doing to increase the Average Selling Price (ASP) at which Free Trial users convert to paid customers? - What if you don’t know the answers to these questions and don’t take action soon? - What If You Don’t Make Any Changes to your Free Trials? - Will your Free Trial results be the same or worse than they are right now? - Will your Free Trial results be better than they are right now? - What if you increased the number of actives who convert to paid customers? - What if you increased the amount of money many of those who convert to customers pay you every month? Too many SaaS & Web App vendors – very possibly you – don’t know or don’t have readily available the answers to these questions. But that’s not a good thing! --- # Stop Obsessing About Your Competitors *September 28, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/stop-obsessing-over-saas-competition/ ## Focus on Your Customers and How Your Web App Solves Their Problems First. I wanted to continue with the [Competitive Pricing](https://sixteenventures.com/saas-apps-competitor-pricing) theme of the last post. You know when you go to the marketing site for a SaaS app and there is a “how we compare to our competitors grid?” How often do you discover a new competitor of theirs that you hadn’t seen before, or realize that one of their competitors has a feature you didn’t know about? I think too often as Web App vendors we assume our potential customers already know our competitors and are actively comparing the features of our product and the other guys. This occurs because we are both paranoid about the competition and ***WE*** are focused on our competition so we assume everyone else is. While some SaaS startups say “we have no competition” – which is a major problem – an even greater number can tell you every single competitor, SaaS or not, even down to the smallest open source project or tiny piece of shareware that hasn’t been updated since 2004. So it just makes sense that we need to show everyone a chart of how we compare with those other guys, right? Sure, and in the process you’ll ***INTRODUCE*** the the potential customer to a competitor they didn’t even know about! You might get them to start second-guessing their choice to use your app. So, know what your competitors are doing, but leave it at that… don’t help your audience find new alternatives to your offering that they didn’t already know about. Just help them solve their problems! But what if they ask “how do you compare to XYZ App?” Well, it all comes down to positioning and promotion. Both of those come down to one thing… knowing your customer. What problem does your customer have and how can you solve it faster and better than what you’re displacing. The keyword there is “***displacing***.” If what you are displacing is an entrenched market leader; that might require a differentiation campaign where you lead with features (but maybe not, too). If what you are displacing is a low-tech, high cost (labor, perhaps) solution… you probably don’t need to mention competitors, right? Just some food for thought. BTW… the folks on my mailing list got to benefit from this article a few months ago. Make sure you get on the list so I can send you awesome messages like this. --- # Competitor Pricing… Does It Matter? *September 19, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-apps-competitor-pricing/ ## “Wait… what about competitor pricing?” you ask. I recently published a post where I had the audacity to suggest that [value pricing required only two inputs](https://sixteenventures.com/price-objections-are-value-objections): - The Customer’s Willingness to pay (value perception) - The Customer’s Ability to pay (how, when, why, where, how) Since I got a number of emails with the same question – “how does competitor pricing figure in?” – I thought I would let you know… well… how competitor pricing fits in. Now I believe I said there were about a million variables that go into those two inputs to come up with a pricing model for your SaaS or Web App, so I stand by my simplification of Value Pricing. What competitors are doing is just one of those million variables. The key thing to remember is that competitor pricing is ***NOT*** a main input; it is just a variable. Value Pricing, which I talk about at length in the two ***FREE*** [How to Price Your SaaS or Web App: Basics](https://sixteenventures.com/how-to-price-your-saas-or-web-app-the-basics) and [Advanced](https://sixteenventures.com/how-to-price-your-saas-or-web-app-advanced) videos, is all about the customer. ::Period:: That means that when you’re gathering info to develop those main inputs, what comes out the other end might differ greatly from the what the competition is doing. Does that mean you shouldn’t do it, then? Of course not! But you have to know what your competitors are charging, how they’re charging, etc. You have to know if the customers already have a certain bias; an expectation due to market forces on what pricing to ***EXPECT***. If you are going up against an entrenched market leader or if there is no clear leader but everyone in the market has the same pricing model and similar prices, you will need to know what everyone else is doing so you can defend your different model ***IF*** asked. I say ***IF*** because if you’ve done a good job aligning your pricing with the value perception of the audience, creating a high willingness to pay, they won’t question it since it just makes sense. And it might make ***MORE*** sense than the nonsense they’ve had to deal with for decades in their industry. You might be the first to come along who “gets it” and is willing to upset the status quo. Or you might find that your pricing model is right in-line with everyone else and that your pricing will have to be similar to what is there. In that case I would challenge you to figure out how to differentiate up-market (hopefully) to set yourself apart. Why just create another me-to product? I hope this helps clarify a bit where “competitors” fit in when developing your pricing – and marketing in general. Focus on your customers, add tons of value, and move forward. Don’t focus on your competition. Cool? BTW… the folks on my mailing list got to benefit from this article a few months ago. Make sure you get on the list so I can send you awesome messages like this. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Price Objections are Value Objections *September 14, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/price-objections-are-value-objections/ ## It’s not your price that they object to… it’s the value they don’t like. [](http://www.flickr.com/photos/scubabrett22/6650947323/) There are times where the price – the number – is so out of whack with the reality of the market that no matter how valuable you make your offering seem, they simply cannot afford it. Like promoting the value of a Lamborghini to Middle Class families in the United States. They will 100% agree with you that a Lamborghini is worth every penny asked, but the price – the actual dollar amount asked for the vehicle – is so far outside of what they can afford it’s a non-starter. It’s almost a joke. But… if your number is within a realistic range for your market – even if that number is stretching those boundaries a bit – and they say “no,” then they aren’t objecting to the price – the number – itself. In this case, the Price Objection is a Value Objection! And just so we’re on the same page, I say any attempt to argue with that is likely an attempt to justify a bad decision you made or are about to make. Now how’s that for a statement? So, the other day I was talking to the founder of a company who wasn’t acquiring the number of customers he thought he should be at this stage, so he wanted to lower prices since – clearly – his prices were too high, right? So I asked him this simple question… “who’s your ideal customer?” … and he couldn’t answer that! Lowering prices is often the response I see when your product isn’t flying off the shelves as you thought – or hoped – it would. But lowering prices is probably the wrong response! Especially when you can’t tell me who your ideal customer is! So I’m going to try to boil this issue down to the main elements… Please understand that this is a simplification, but I hope it gets you thinking (that is all I can do here). First and foremost ***YOU MUST KNOW WHO YOUR [IDEAL CUSTOMER](https://sixteenventures.com/ideal-customer-profile) IS***. Sorry for yelling, but c’mon… why are you creating a product if you don’t know who is going to buy it? Are you bored and looking for something to do? Get a hobby! Are you hoping that what you build will magically be successful on its own? Get real! Look, if you don’t know who – by name – will buy and use your product, then at the very least you should know who – by industry, company type, size, use cases, etc. will give you money in exchange for what you’re offering. I know, I know… that isn’t as fun as building a product and putting it out there and waiting for it to just go viral. But, this is Realityland,… and if this is your first time here, welcome. 🙂 There are basically two things you need to know about creating a Value Pricing Strategy, or pricing your product or service based on the value the customer receives rather than going for a specific (often limited) margin. You need to know the customer’s: - Willingness to pay (value perception) - Ability to pay (how, when, why, where, how) Boom! That’s it. Now, there are about a million variables that need to go in there, too, but if you know your customer you should be able to figure this stuff out. Willingness to Pay is tied to their Value Perception of your offering… or the value that ***THEY THINK** *they will get by using your product. If what you are offering is not perceived to be of high value, then they won’t pay what you’re asking. Why would you lower your price to meet their perceived value when you could improve your value proposition and therefore raise the perceived value of your offering to meet the price you have already set? Yeah, I know that lowering your prices is just easier than doing the work necessary to raise your value perception… but in the long-term it could significantly harm your business; from hurting your market position to literally causing you to close your doors because you don’t generate enough margin. When you look at it this way – that the customers’ willingness to pay is directly tied to the perceived value – then it makes sense that if you don’t know your customer, you will probably get this wrong. So when someone says your price is too high, most likely – unless you are beyond reality with your prices – they aren’t telling you the price is too high… … they’re telling you that you’ve done a terrible job aligning your price with the value they’ll receive. So in addition to knowing the customer’s willingness to pay, you also need to understand their ability to pay. You can have the greatest price in the world, but if you aren’t equipped to take payment how the ***CUSTOMER*** wants to provide it, you won’t sell anything. If you sell to the Federal government, for example, and only take Credit Cards, good luck getting payment. If you only want to bill monthly but your target market budgets for and procures services on an annual basis, you either do it their way or go out of business. Few companies can truly dictate terms, procurement processes, etc. to their customers… you aren’t Walmart so assume – for now – that you’ll need to conform to the way your market operates rather than the other way around. Oh, and here’s a fun fact to keep in mind… people – individuals within a company – will make what seem like bad economic decisions to fit a product they deem of high-value into their buying ability… i.e. they can’t pay the annual fee at a 50% discount, but are happy to pay monthly even though it results in an annual price that is 200% your paid-up-front fee (before discount)! In this case, knowing their ability to pay gives you a Customer Lifetime Value (LTV) of more than 2 times what it would have been if you forced them to pay on an annual basis. Or… they could have bypassed your offering altogether because they simply couldn’t pay the way you wanted them to! So sometimes it isn’t the price or the value, it is that they simply can’t buy from you. Assuming you provide the ability to pay the way they want/need to, and they object to the price, it’s *almost always a value perception problem and not that price – number – is too high!* Maybe you just aren’t clearly articulating your value proposition in a way that resonates with your potential customers. Pop quiz: [who’s your ideal customer?](https://sixteenventures.com/ideal-customer-profile) --- # Wait… You Actually WANT to Be Average? *September 6, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-average-conversion-rate/ ## What’s the average conversion rate for free trials, pricing pages, or Freemium with SaaS or Web Apps? There are some fundamental problems with “average conversion rate” which is why people rarely like my standard answer of: “It depends” or my more direct answer of “why, so you can be average?” Look, if you have a 1% conversion rate right now, 2% should be looking pretty darn good to you, right? If you have a 25% conversion rate, 26% might not be that exciting. 30% might be though! Or if you have a 25% conversion rate, maybe 5% is what we’ll shoot for because we want more cold traffic coming through and will expect a lower rate for a little bit until we figure things out, right? The number that Joe’s SaaS company is getting vs. Claire’s Web App doesn’t matter, regardless of what the people that have surveyed 327 “SaaS” companies to get aggregate data without context want you to believe. We don’t even know what metric companies are basing their “average conversion rate” on and we can assume most people who talk about their numbers talk about the ones that make them look good! But, we have been trained as an industry to look to average numbers for guidance. So let me ask you… how can looking to averages lead to anything but average results? When we look to average numbers to plan our businesses around, aren’t we planning on being average? Did you create your web app just to be average? Did you go to work for Giant SaaS Co. and seek out resources like I’ve put together so you could just be average? Here is why “average” is damaging, aside from the whole “shoot for the middle” mediocrity problem it brings with it. Average lacks context. If I told you the average conversion rate for Free Trials in SaaS was 10% (and I am ***NOT*** telling you that, BTW), you’d aim for that, right? And 10% would be a nice goal if you were currently at 5% I suppose. But if you have an 85% conversion rate, 10% just wouldn’t make sense, right? Even worse, it could make you think you’re doing really, really good with your 85% conversion rate and could keep you from taking corrective action. Maybe you’d just go spend a lot to get more traffic before you realize that 85% conversion rate was an anomaly based on early-adopters and doesn’t hold-up against cold, mainstream traffic. Look, “average” is a pointless number for so many reasons, not the least of which is…. well, that it is “average.” You see… context is usually missing which is what the folks with the 85% conversion rate that I helped out needed to know to figure out where they really stood (and it wasn’t as good as an 85% conversion rate sounds!) Here’s the simple way to move forward. Figure out where you are today – something most people (including you, I bet) don’t actually know – and then figure out how to make it better. This works whether you’re a one-person, bootstrapped shop or a tiger-team w/ buckets of VC money. Don’t worry about what others are doing. But then again I don’t make money selling survey results so that’s easy for me to say, right? Look, if you’re at a 1% conversion rate, let’s shoot for 2% and DOUBLE where you are today. Remember, that is a 100% increase over what you have now… Isn’t a 100% increase in conversion rates hard enough to do without trying to meet some number that an analyst came up with that probably doesn’t even directly apply to your business and certainly lacks context? You can reach 2% from 1%, right? Easy. But if you see 25% sitting in front of you as your immediate goal – because that is the average conversion rate (it is NOT!) – that might be discouraging. On the flip side if you have an 85% conversion rate and you feel that something is off, dig in and figure out the context. A super-high conversion rate is fantastic, but only in context. Here’s a hint… the most important “context” for most real companies is revenue. So the next time you pull up Google, or Quora, or LinkedIn to look for “average conversion rates” stop for a second and think about what you’re doing. Don’t be average. By the way, I ***KNOW*** someone is going to say “Lincoln, that makes total sense. I get it for sure. But, hey, so what is a good conversion rate number to put in the business plan?”… which is why business plans are pretty much irrelevant most of the time! --- # Offer a Free Trial of your Web App? Don’t EVER do this… *August 31, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-mistakes/ Are conversions from Free Trial to Paid Customer not as high as you’d like? You work hard at Conversion Rate Optimization (CRO) on the front end (including your Pricing Page), you pay a lot to get people into your Free Trial through advertising, and you just can’t seem to convert enough of them into paying customers. Or you do all of that CRO & advertising and then put up artificial barriers-to-entry that cost you the sale before they ever get to try your product. Some of you get a bunch of people into your Free Trial just to have them leave right after signing-up, never to return. The majority who stick around don’t make it to the end of the trial as active users and few ever convert. Most SaaS & Web App vendors I talk to are simply looking at their Free Trial strategy wrong; tactical changes are not the answer. … many times the change starts with mindset. The biggest problem is that you just don’t know what works and what to try because the information is simply not available. Unless you’ve gone through – or are willing to go through – many rounds of trial and error, how are you supposed to know what really works to make Free Trials more effective at doing the thing it is designed to do: creating ***CUSTOMERS***? I’ve got to show you what one of the Free Trials I recently signed-up for did as an example of what not to do. What actually started out as a great thing – a vendor sending a follow-up email to me the day after I started the trial – took a terrible turn. You must know that email follow-up is a ***HUGE*** part of the Free Trial process that most SaaS or Web App vendors either don’t do… or absolutely screw up. Once I opened the email I saw it was the latter and was frankly shocked at what I saw… please, ***NEVER DO THIS***: That is 100% legit – I promise. I’m keeping their name secret simply to not embarrass them. But OMG… really? “Need any help with your [app] account?” “Have you ‘figured out our product yet?'” “Doesn’t always make sense at first glance” Seriously… don’t send me an email like that when you are supposed to be selling me on your app (remember… I haven’t paid yet). If your app is hard to use AND YOU KNOW IT then fix it. If it doesn’t always make sense at first glance, fix it! Don’t put the burden on me to figure it out because – ***NEWS FLASH*** – I won’t. And don’t make me have to talk to you just to figure out how to get started using your product if you have provided me with a self-service sign-up process. “But our product is really complex…” then you need to make sure your product is actually a good candidate for a self-service sales process. “But our product does SO MUCH STUFF…” then figure out what the first things someone needs to do to use your product… if that is loading tons of legacy data, setting up tons of business rules, creating an extensive user/privilege matrix… again, maybe this isn’t a candidate app for self-service. “But our product is too cheap to allow for high-touch sales”… topic for another day, sorry. Now let me be clear… there’s a difference between holding someone’s hand through a technical on-boarding and using marketing – in-product and otherwise – to guide their use of the product in a way that efficiently and effectively gets them heavily invested in your product before they even buy. Clearly the vendor that sent that email doesn’t understand this difference. I imagine that vendor has what I call a deceitful conversion rate, too. They might get enough people that have figured out on their own that they need that product AND are willing to figure things out on their own when they sign-up AND who eventually convert when the trial expires – despite the vendor’s best efforts to turn them away – to make it seem okay. This vendor probably just figures they need ***MORE*** visitors since “it’s just a numbers game, right?” They just accept – like most SaaS & Web App companies I talk to about Free Trials – that 95% of the folks who try your product actually have no intention of ever paying for or using their product. Really? 95% of the ***BUSINESS*** people that sign-up for the Free Trial of your B2B SaaS app are there to waste their time and give you their contact information for fun? Really? Think about that. Free Trials aren’t Freemium, folks. Big huge ***MASSIVE*** difference. “But they’re evaluating our app along with several others” … and? They intend to buy ***SOMETHING*** right? Why not your app? There is a lot more to a successful Free Trial strategy that only the ***MOST SUCCESSFUL*** SaaS & Web App vendors consider… but this is a good start! If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Free Trial – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # The SECRET to $1M ARR in 6 Months is 9 Customers *August 30, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-secret-to-one-million-dollars/ ## It’s easier than you think to get to $1M in annual revenue with your SaaS app. To have a $1,000,000 per year run rate, you need to bring in $2740 per day… roughly. Pardon me if my math is off a bit… this is just one of those posts to get you thinking… your mileage will vary! I prefer to plan from the bottom up most of the time, especially when looking to employ a short-term strategy and the tactics to execute on that strategy. Bottom-up in this case simply means we figure out a goal for the business… let’s say $1M in annual recurring revenue… and figure out what it would take to get there. Rather than the top-down approach of saying there are 12 Billion people in that country and if we could just get 1% of the market we’d have a $7 Trillion business. So, for our goal today we’ll set it at $1M in Annual Recurring Revenue (ARR). I know… a Million isn’t as cool as a Billion anymore (thanks Hollywood’s version of Facebook) but its better than a slap in the face. Even cooler than a slap in the face, is that getting to $1M ARR isn’t as daunting as it might seem initially. First of all, the cool thing is you don’t have to sell $1,000,000 worth of subscriptions, only $83,000! Yep, because it is monthly ***RECURRING*** – or continuity – revenue, you only need to get to $83,000 in monthly recurring revenue to equal $1M ARR! Once you reach $83k/mo in recurring revenue, the next 12 months will equal $1M without making another sale! And this is clearly without figuring in churn, expansion revenue, etc. Okay, so $83k in sales is a lot less daunting than $1M, isn’t it? So what would it take for your company to get to $83k in monthly recurring revenue (MRR)? If you have $50 Average Revenue Per Customer (ARPC) then you need to get 1660 customers on board. Hmmm… 1660 might seem like a lot of customers if you are just starting out and in a smaller B2B niche. So this is where you ask yourself the very real and pointed question of “are there actually 1660 customers in my target market that I can land?” If you want to build a $1M/year business, you need to have a market that will support you at the price you’ve chosen. If that isn’t the case, find a bigger market (segment) or work to increase the perceived value of your offering so you can charge more. But, if you set a goal to reach $83k in MRR in 6 months (180 days), then that would only be **9 new customers per day** for the next 6 months. WOW! Seriously, only 9 new customers per day for the next 6 months will get you to $1M in annual sales! Just 9… That is pretty cool, and would seem to be totally realistic… that is of course with *zero* context about your business/market here. These numbers are for illustrative purposes only, cool? Now… here’s a secret that will speed things up for you if you use a Free Trial. Convert customers faster and at a higher-price! Uh, okay… but how? Well, here’s an example. For the first 6 months, give everyone that signs-up for a Free Trial a crazy-awesome deal – call it an “introductory” offer or something and do it behind the scenes (not on your public Pricing Page). But the catch is that the special isn’t a discount on the entry-level bundle or even the bundle they selected when they signed-up for the trial… it is for the next level up in price – or even an unadvertised bundle. This way you aren’t lowering the price on the version that they were going to buy! This is main part of the secret. So if we go with the example price of $50, and the next level up is the $99 plan, then you’d offer say a 40% off deal on the $99 plan, which would be $59/mo. This would ***ONLY*** be a $9/mo bump from where they were ***GOING TO*** sign-up, but that is an extra $108/year for you. Clearly the deal has to be presented properly with a clear value proposition… but you get the picture. Now here’s the great part… while you’d need 1660 customers to reach $83k/mo at $50/mo ARPC, at $59/mo ARPC you’d only need 1407 customers… 253 LESS customers needed to reach your goal! Instead of 9 customers per day, you’d only need 8. That means you need less traffic to your site, which takes some of the burden off of your traffic-generating resources and reduces some of the customer acquisition expense. OR… You could get the same number of customers and simply get to $83k/MRR or $1M/ARR that much faster… in this example it would be nearly a month faster to get to a $1,000,000 ARR! Of course not everyone will take you up on the offer, and a more realistic option might be to only offer the upgrade temporarily and/or to limit it to 6-months, but this exercise is simply meant to get you thinking. But I hope you see why this is so important to consider! Either way, 8 or 9 new customers, that is all you need each day for the next 6 months to get to $1,000,000 in Annual Recurring Revenue. Pretty cool, huh? ## Let’s Grow Your SaaS Business For immediate consultation and advice on optimizing your growth strategy, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # My EVIL Method to Reduce SaaS Churn *August 26, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-reduce-churn-saas/ Want to know how to ***TRICK*** your customers into wanting to keep using your product so you can reduce your SaaS churn rate? Well, I’ll tell you exactly what ***TRICK*** to use, though… spoiler alert… it’s not really a “trick.” Just keep reading. BTW, what I’m going to tell you got GetResponse an almost instant 15% drop in cancellations pretty much overnight. This is powerful stuff. Okay, so someone asked me what I thought about SaaS companies that don’t let you cancel your subscription with the push of a button on the site. Here’s my take on the issue of making someone jump through hoops to cancel their subscription. ## Understand the Rules First of all, anyone that puts up significant barriers to exit – even just requiring a phone call to cancel their subscription when the vendor didn’t require a phone call to sign-up – could be violating the forced continuity rules of their credit card companies / merchant accounts / Federal Trade Commission (FTC). I suggest you learn what rules apply to you and follow those to the letter. But to me a good rule of thumb is this… if you are doing something you think *might* violate forced continuity rules, it probably violates some *ethical* rule first so just stop right there. ## Lock ’em In with Awesomeness… not Contracts If you’ve followed me for a while, you know I don’t like to lock customers into contracts. Rather, I like to keep them around for 3 – 5 years on average by delivering amazing service and helping them solve their problems or take advantage of opportunities. Here’s why… customers who want out will get out one way or another, and unless you let them out easily they might complain publicly (from annoying to massively damaging), they could force a chargeback through their credit card company (too many of these and you’re in trouble), and / or file a complaint with some entity, possibly a government one, that is more powerful than you. Uh, okay… so why are there vendors that require you to call them to cancel? ## One Call Stops ’em All (But is that Actually Good?) Easy… some companies think they can salvage a deal by requiring the person to call to cancel and trying to persuade them to stay. Other companies know that simply requiring a call to cancel – even if they don’t do anything but say “thanks for calling, you’re done here” and don’t try to down-sell, cross-sell, or persuade will keep a statistically significant amount of people from making the effort to cancel in the first place. Is it possible some even use less-than-ethical means to frustrate or stall a customer so they can’t cancel when they finally decide to call in? I’m going to go out on a limb and say yes, but I’ll leave it at that. While some will say the call is used to get more insight into why the customer is leaving, I say just let them go and call’em a day later to see why they left. But the point about causing people to not cancel because they have to make a call works on number of different psychological levels. In fact, Robert Cialdini outlines why this is the case in his book “Influence: The Psychology of Persuasion” where he talks about “Commitment and Consistency.” Essentially, the phone call is a big deterrent to stopping a subscription to a service we use since – as humans – don’t want to admit to another human being with our voice that we wish to stop something we’ve already commited to. ## One Button Reduces SaaS Churn A button on a website, or even via email, takes a lot of that “commitment” out of it… but when we have to tell another person that we’d like to quit, it’s hard. The other reason requiring a phone call to cancel works in the vendors’ favor is that… well… we’re lazy. If it isn’t a big button on a page that we can push, we simply are less likely to do it. Sorry, you might run 15 miles per day, but we’re still lazy. The flaw with that logic is that some people are lazy ***UNTIL*** some faceless corporation irritates them. Then they take to the blogs, Twitter, the Facebook… and never let it go until we… well until see another shiny object I guess. But the damage is probably done by then. (BTW, that is one reason to not be a “*faceless corporation*” and be authentic… more on that another day) ## Let ’em Go. Let ’em Go! Like I said… just let’em go because at that point, it is too late; you already failed. And the little artificial barriers to exit only make people mad. Honestly, you should have been proactive in seeing the potential for churn and working to keep that customer successful ***BEFORE*** it got to that point (kinda one of the cool things about being a SaaS vendor over, say, a traditional software vendor: ***VISIBILITY*** into user behavior). To comply with the forced continuity rules and to keep customers on track toward success, I recommend to my clients that use a self-service sales process (read: most of them) that they also have the same for leaving the service. ## Make It Easy to Cancel, but… Make it easy for the customer to cancel, but here’s the catch… and this is the part that is so ***EVIL*** that to continue on means you assume all risk. Here we go… MUHAHAHAHA (evil laughter)  👿 Just like you must sell them on the value of your offering upon sign-up, you must do this on exit, too. Remind them of why they signed-up, and what they’ll lose – not just the saved data but their investment in the product to this point – if they cancel. Remind them a couple of times, too, because if they actually cancel, all is lost. Make them have to re-consider whether that is the decision they want to make right then or not. But also have a big button that will let them cancel right then. ## Reduce SaaS Churn By Doing This When we’ve employed this strategy, complaints, chargebacks, etc. are *unchanged*, but churn rates by folks who got to that point *went way down*. Okay, that ***ISN’T EVIL AT ALL***, but it’s super freakin’ effective. But I have to say this again: if they get to the point where they were thinking about bailing on you, you’ve failed in other areas. If you are monitoring for this type of behavior, now is the time to re-engage (in a value-added way) those folks who thought about canceling, but didn’t. Those who did cancel, follow-up and see why they left and ask them how you can help. Can you recommend a different service for them? Leave them with a great experience. For those who haven’t tried to leave yet, now you have to go back and figure out how to proactively monitor for churn threats, make sure they are fully engaged, and above all… make sure they are achieving success with your product. Successful customers are good customers who stay around longer. Now go make [your customers successful.](http://customersuccess.gainsight.com/customer-success-not-happy/) --- # SaaS Affiliate Marketing: Your Virtual Salesforce *August 24, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/video-interview-saas-affiliate-marketing/ **One benefit of SaaS Affiliate Marketing is knowing exactly what your Customer Acquisition Cost (CAC) will be!** Whether you’ve considered creating an [affiliate marketing](http://www.affiliatesaleschannel.com/16) program for your SaaS or Web App – or not – or even if you currently have one, you ***NEED*** to watch my interview with Jack Born. BTW, here are three vendors that will allow you to easily offer and manage an affiliate program for your SaaS or Web App: - [Ambassador](https://getambassador.com/) - [HasOffers](http://www.hasoffers.com/) - [iDevDirect](http://idevdirect.com/) ## Leveraging a massive SaaS Affiliate Marketing salesforce Do you prefer to listen on the go? [Download the .mp3 audio file (29.1MB) here.](https://s3.amazonaws.com/16v/jack-born-affiliate-marketing-interview.mp3) The awesome folks at Wistia hooked me up with premium [business video hosting](https://wistia.com)! ## Think of SaaS Affiliate Marketing as Leverage I’ve wanted to get Jack in front of you for… well, since I met him because what he knows about Affiliate Marketing can absolutely change your SaaS or Web App business. Jack is the king of Affiliate Marketing and he shares a ***TON*** of awesome information with us about how to get a ***MASSIVE*** online Salesforce working to send you customers. Did you know companies like AWeber, Evernote, Loop11, BigCommerce, SuccessFactors, LessAccounting, SurveyGizmo, and Unbounce are leveraging the power of the affiliate sales channel to accelerate sales right now? So there’s got to be something to it, right? But in my experience, far too many SaaS and Web App companies haven’t even considered affiliate marketing as many equate it with “Internet Marketing” and write it off as “it won’t work here.” But that isn’t the case and I hope my conversation with Jack Born not only changes your view on Affiliate Marketing and how it relates to B2B SaaS & Web Apps, but takes it a step further and fires you up. Jack is the go to guy that many of the top marketers turn to for finding and recruiting an affiliate salesforce. For example, he is the affiliate manager for World-Renowned Google Adwords expert, Perry Marshall. Jack earned the nickname “The Alchemist” for his ability to transform average promotions into six figure campaigns. Jack also pioneered the Tactical Triangle concept for rapidly growing conversion, traffic and profits. We talk about the Tactical Triangle concept during our conversation. Once your done watching this video, head over to Jack’s site – [Affiliate Sales Channel](http://www.affiliatesaleschannel.com/16) – and download his Tactical Triangle Marketing report. When you do that you’ll also be notified of the webinar he and I are going to do that goes into specifics on the ideas we cover in this ***AMAZING*** conversation. Curious how we could Accelerate your Profitable Growth – including by creating or optimizing an Affiliate Program for you? Contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # There are 7 Types of Freemium and Why That Matters… *August 23, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/seven-types-of-freemium/ You think you know Freemium in SaaS? Think again! In 2009 I released the version of “[The Reality of Freemium in SaaS](https://s3.amazonaws.com/16v/The-Reality-of-Freemium-in-SaaS.pdf)” PDF and since then the “Freemium” landscape in SaaS has continued to evolve rapidly. Freemium use in B2B technology / software / SaaS / Web Apps / Cloud (whatever) is evolving and I wanted to take note of where we are at today… where we’ll be tomorrow I can’t tell you, but I guarantee it will be different. I wanted to also call attention to the fact that the use of “Classical Freemium” – the idea of a free version of a premium product – is losing popularity as the go-to method for adopting Freemium, with other types of Freemium coming into play. This is with both pure-play startups and established companies moving to Freemium. I’ve made a list of the 7 different types of Freemium below, but this isn’t meant to be an exhaustive list… if you have other ideas, please share them in the comments. Further, few companies will tell you they conform to any of these, which is great… they shouldn’t be trying to conform to these “types” but instead do what is best for their market, users, customers and their company. I even had a hard time deciding where to put certain companies – like Evernote and SolarWinds – because they don’t nicely fit in one “type”. But I don’t think that makes these “types” any less relevant. In fact, many of these “types” of Freemium aren’t exclusive within a single company. The most successful models use a hybrid approach, for instance using the Freeware 2.0 & Ecosystem models together. What I’ve tried to do here – more than anything – is indicate that there isn’t just one way of doing “Freemium” and maybe to a larger extent show the term “Freemium” is used even when there isn’t a clear Free > Premium path. Pretty much, if there is a “free” component to a marketing strategy these days, it is called “Freemium.” Where most companies go wrong is when they confuse “Free Trials” with “Freemium.” If you think Freemium is just an extended “try before you buy”… you’re in for a serious rude awakening. There are ***MASSIVE*** psychological differences between “Free Trials” and “Freemium” that you need to understand. But for now, just understand what I am listing here are “Freemium” and not “Free Trials” and that confusing the two will cause massive issues and probably not give you the results you’re looking for. ## The 7 Types of Freemium ### 1. Traditional/Classical Freemium - Free-forever feature-limited-but-usable version of a premium product - The one that started it all - The one that most people know - The one with the major penny-gap issues - Expectations that most users will never buy – by both the vendor AND user ***Examples:*** OfficeDrop, Dropbox, LogMeIn ***Notes:*** Read “[***Classical Freemium Doesn’t Exist at Scale***](https://sixteenventures.com/classical-freemium-doesnt-exist-at-scale)” where I tell you why this type of Freemium rarely exists beyond early-stage (and heavily-funded) startups. ### 2. Land & Expand - The up-and-coming model - Free to acquire by users - Monetization at organization level - Adopters & Users are often kept out of buying process - Where the user & buyer are the same, the model uses a lock-in model to gain a foothold within an organization - Expectation by vendor is after x users in an org, they’ll pay ***Examples:*** Yammer (Acquired by Microsoft in 2012 or $1.2B), Xobni, Amazon Web Services ***Notes:*** Yammer is the most successful example of this model within pure-play Freemium organizations. Xobni uses this model to push their Enterprise-focused products. AWS uses this model a bit differently, offering their proprietary technologies as Freemium in an effort to get companies to invest in integration and thus make switching costs too high. ### 3. Unlimited “Free Trial” - Not really a “Free Trial” – the vendor likely doesn’t understand the true dynamics of Freemium (which will likely come back to haunt them) - Free-forever feature/usage/UX-crippled version of a premium product - Expectations by vendor are that they user will convert/upgrade - Expectations by user is continued-forever use for free - This seems like a risky type of Freemium to adopt since it is mixing the elements of a Free Trial with the psychological aspects of Freemium. ***Examples:*** Echosign, Basecamp ***Notes:*** WHAT? Basecamp is an Unlimited Free Trial? But they’re Freemium. Or maybe you said ” Yeah, they’re ‘Freemium’ but they hide their free plan.” Whatever… the idea is that their Free plan is so limited it just doesn’t make sense to even use it, and as Jason Fried has said many times, most of their paying customers ***STARTED*** as paying customers. Think about that for a second. Now go back to the idea of why you would even have a FREE plan if you can just have a FREE TRIAL when you know ***MOST*** of your customers – those who pay – start out paying. I’m not even sure why they keep the free plan around except to appease those who would rip them to shreds on the interwebs if they ever got rid of it. As for Echosign and others that have a very low usage-cap on their Freemium plan, this can work or it can cause work-arounds. You have to be very careful how you design your app and in-app marketing experience to draw users in and get them to use the product, selling them the whole way so when they hit that usage gap they’re ready to convert to paying today… rather than trying to game the system or put off some signatures for a few days to get into the next “billing cycle”… ### 4. Freeware 2.0 - Free-forever, fully-functional product - This is their main product or a completely new stand-alone product line within a larger organization - No expectations of  conversion/cross-sell by MOST free users - Monetization is through add-ons for the free product created by the company itself ***Examples:*** Evernote, Skype, AVG ***Notes:*** I know someone will say Skype or Evernote are Freemium, not Freeware… and they are. All of these are examples of Freemium. I’m breaking down the different types of Freemium here. And why I say Evernote, for example, is Freeware 2.0 is that is 100% usable for free, forever, and the expectation – as noted by CEO Phil Libin – is that most people won’t pay. Same goes for Skype. When they do pay they are paying for extra storage and additional features/add-ons, but the base product is good-enough that few people percentage-wise will pay. Virus software, screen-sharing, video chat, etc. are also sectors made up of Freeware 2.0 plays. ### 5. Alternative Product Strategy - Similar to Freeware 2.0, but from a company with an existing premium product-line of which this is a discrete subset. - A Free-forever product with no direct up-sell path to “premium” version - Often used as a foot-in-the-door strategy - Goal is to cross-sell other offerings from the company ***Examples:*** Autodesk’s SketchBook Pro for iPad, join.me (a product of LogMeIn), SolarWinds ***Notes:*** This is actually where many SaaS / Web App vendors are turning to Mobile apps for a distribution channel to new customers. Make sure you watch my interview with Healy Jones from OfficeDrop about their experiences extending their Web App with Mobile apps and how they were basically [forced to go Freemium](https://sixteenventures.com/video-interview-why-officedrop-went-freemium). This can be awesome, but it can also have unexpected consequences. I also wrote extensively about Alternative Product Strategy in my 2009 work “***The Reality of Freemium in SaaS***” (PDF) which you can download for free. ### 6. Ecosystem - Free-forever base product - Monetization occurs through revenue share with 3rd parties, like add-ons by 3rd party developers ***Examples:*** iTunes, Google Apps, many commercial open source vendors leverage this plus professional services for monetization ***Notes:*** I mentioned iTunes because the software is free creating the base-platform which you can use forever to manage your own music without ever giving Apple a dime. Monetization occurs via a marketplace rev-share with 3rd party content creators. I didn’t mention the Apple AppStore because the base product – an iOS or MacOS device – is not free. Make sense? Google Apps has a premium version, but monetization around the free version occurs through its ecosystem play. ### 7. Network Effect - Monetize eyeballs, aggregate behavioral data, etc. - This is the idea – to whom I cannot find original attribution – that if you aren’t paying for the product, then you ARE the product. Or you’re creating the product through your use of the system. ***Examples:*** Wave, Spiceworks, Google (advertising), Mint.com (revenue share from offers) ***Notes:*** Spiceworks currently has 1.6M users, but only really has around 200 customers… those customers are the advertisers! For immediate consultation and advice on leveraging Freemium in your SaaS business, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Why OfficeDrop Went Freemium… and how Mobile Apps forced their hand *August 19, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/video-interview-why-officedrop-went-freemium/ ## Was OfficeDrop forced into Freemium at phone-point? Healy Jones, VP Marketing at OfficeDrop, told me exactly how leveraging mobile apps made Freemium the right strategy for them. Do you prefer to listen on the go? [Download the .mp3 audio file (33.7MB) here.](https://s3.amazonaws.com/16v/healy-jones-officedrop-freemium-interview.mp3) Wistia has kindly donated [business video hosting](https://wistia.com) to me, which pretty much makes them awesome! If you aren’t familiar with OfficeDrop, it is a really cool SaaS startup out of Boston that started out with the ethos of “web only”… no installed software. Healy ([@healyhoops](http://twitter.com/healyhoops) on Twitter) goes into great detail about how they eventually started to use installed software on PCs and Macs to extend their cloud service – they have to integrate with peripherals like document scanners – and then moved into mobile device-native apps. And that was what ***CHANGED EVERYTHING***! They realized mobile apps weren’t just an extension of the product functionality, but also a distribution channel to new customers. While that sounds great, what they found forced them to make some massive changes… including adopting the Freemium model. Healy also goes into detail on how they avoid commoditization in their pricing – especially around storage – and the surprising results they saw when they added a Free plan to their pricing page… it was not what they expected to happen. Then we round out this amazingly awesome and mind-blowing conversation with some ideas on how to fire up your Free Trial conversion rates. This is an awesome interview that you will learn a ***SUPER HUGE TON*** from and I can’t wait for you to watch it. Tell me and Healy what you think in the comments… --- # Copywriting for Geeks Author Marc-Andre Cournoyer Teaches You How to Sell Your App *August 16, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/video-interview-copywriting-for-geeks-author-marc-andre-cournoyer/ ## Is Writing Good Sales Copy still Important? For SaaS & Web App companies it is *EVEN MORE IMPORTANT* today than ever before! Wistia has kindly donated [business video hosting](https://wistia.com) to me, which pretty much makes them awesome! This is why I interviewed Marc-Andre Cournoyer, author of “[Copywriting for Geeks](http://www.copywritingforgeeks.com)” and have shared it with you here: With all of the noise out there, the better your sales copy the more likely you are to stand out from the crowd. The ability to write good sales copy ***NEVER*** goes out of style… the medium will change, but the fundamentals don’t. I discovered this awesome, ***FREE*** e-book called “Copywriting for Geeks” by Marc-Andre Cournoyer. The thing that Marc-Andre did that struck me as particularly cool was that he didn’t just put out yet another book on writing Sales Copy… he did it with a very specific audience in mind: technical entrepreneurs. Now whether those technical entrepreneurs are selling software, online courses, e-books, etc. he wants more “geeks” to not just learn to sell, but to embrace the art of selling. I run into technical founders all the time that are not comfortable with “selling” at all… and place writing sales copy on the same level as teasing babies, wearing a coat made of puppies, and other cartoon-villian evil shenanigans. But even if you aren’t a “geek” I ***HIGHLY*** recommend you watch this awesome interview. We can all use more help in selling our stuff, right? Even if you’re killing it, I bet there is still room for improvement. I suggest that – after you watch my interview with Marc-Andre – you download his e-book and join his mailing list by visiting the “[Copywriting for Geeks](http://www.copywritingforgeeks.com)” site. ### What do we cover in the interview? In this interview Marc-Andre talks about how to get into a sales-oriented mindset, why “geeks” – or more technical-oriented folks – might not immediately gravitate toward wanting to “sell” their stuff… and why that is absolutely critical if you want any level of success with the products you build. Marc-Andre goes on to talk about how good Sales Copy can help sell your products, exactly how he found out the importance of writing good copy and how it basically ***CHANGED HIS LIFE***. From reading his book, I know that Marc-Andre is as big a fan of Robert Cialdini’s book “Influence: The Psychology of Persuasion” (he does a great job of breaking down Cialdini’s work and making it applicable to web copywriting in his Copywriting for Geeks book) as I am. So during our discussion I asked him to give us an example of something you can do right now to improve your sales processes using some of the “Weapons of Influence” from Cialdini’s book. Marc-Andre takes the ball and runs with it, focusing on the Social Proof “weapon” and even shares some techniques to get that BEFORE you launch your product or service. ### Join my mailing list and I’ll give you a special bonus! Once Marc-Andre and I closed the interview, we didn’t stop talking… and I didn’t stop recording! We discussed a couple of ***VERY*** interesting ways to get your audience to know, like, and trust you… which is a precursor to them buying from you. You can watch that extra conversation for ***FREE*** when you join my mailing list. I hope you enjoy – and learn from – the conversation I had with Marc-Andre as much as I enjoyed – and learned from – having it. Please comment below and let me know what you think. --- # Assistly Marketing VP Tells You Why They Dropped Tiered Pricing and Picked Up Freemium *August 11, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/assistly-pricing-change-freemium/ UPDATE: Assistly was acquired by Salesforce.com shortly after we did this interview… they are now Desk.com. I sat down and chatted with Assistly’s SVP of Marketing Matt Trifiro via Video Skype and he spilled his guts for you about why Assistly changed their pricing, adopted Freemium, and set out to disrupt the market… all at the same time. The conversation is about 40 minutes… Check it out: Do you prefer to listen on the go? [Download the .mp3 audio file (36.3MB) here.](https://s3.amazonaws.com/16v/matt-trifiro-assistly-interview.mp3) Wistia has kindly donated [business video hosting](https://wistia.com) to me, which pretty much makes them awesome! Recently SaaS startup Assistly changed their pricing strategy and included Freemium at the same time, and it made a huge splash with the industry news outlets. This is just another reminder that Pricing is Marketing that we should all pay attention to. While this change was covered by a ton of different media outlets – Matt and I were even interviewed for the same article – none of the articles went into the depth that I wanted on what is a pretty ***MASSIVE*** change. So I reached out to Matt and asked him if we could talk about it and record it for you. He thought that was an awesome idea, too, and we made it happen… just for you! Some of the things you’ll learn: - Is Assistly just trying to acquire free users to sell to a company that will monetize them or are they using Freemium to drive revenue? - What the #1 metric SaaS vendors must focus on for long-term success - How to use behavior-driven In-App Marketing to effectively segment customers rather than up-front self-selecting market segmentation - Why SaaS companies shouldn’t look at Amazon Web Services as the sales model, but at Amazon.com e-commerce - How to create a system for pulling users into the app deeper to grow Customer Lifetime Value (CLV) - Why they moved away from tiered pricing - How Assistly moved the pricing / buying decisions to further in the app and extended the “funnel” into the product - And a TON more! I hope you enjoy – and learn from – the conversation I had with Matt as much as I enjoyed – and learned from – having it. Please comment below and let me know what you think. Thanks! – Lincoln --- # Web App Sales Funnel: 2 Questions You MUST Answer *February 17, 2011 · by Lincoln Murphy* Source: https://sixteenventures.com/web-app-sales-funnel-metrics/ ## SaaS and Web App companies must manage marketing metrics, but before diving in too deep, answer these two questions. What if I told you there are two questions that you probably don’t immediately know the answer to but if you did would **absolutely change your view of your self-service “sales funnel?”** Would you want to know what those questions are? What if I told you that answering these two simple questions could lead to **massive improvements in sales and conversions**? There is a good chance you’d want to know what those questions are, right? And what if I told you that **you probably *already* have the answers** to these questions? Now you’d want want to find out what the questions are even more, huh? Okay, okay… so the first question is “What is the ranking of your pricing page on your marketing site?” Why is that such an important question to ask? How is it “critical?” Well, I’ve seen firsthand and heard anecdotally (I’d love to hear from you in the comments) – across different markets and app types – that the Pricing Page is often the #2 most visited page on the marketing site of SaaS & Web Apps. ”After our home page, the pricing page is the second most visited page of the site” – Duane Jackson, CEO of Kashflow That’s right… after the main page of the marketing site, the Pricing Page is the **#2 MOST VISITED** page on a SaaS or Web App vendors web site! And yet, the Pricing Page is often the **MOST NEGLECTED** page on a SaaS or Web App vendor’s site.  That doesn’t add up, right? In fact, take *Duane Jackson, CEO of Kashflow* who told me “after our home page, the pricing page is the second most visited page of the site” … and this was a surprise to him. He hadn’t thought about it until I told him to check it out. I’m just not sure I can convince you that the Pricing Page is important – but maybe your customers can. I want you to go figure out where your pricing page ranks on your marketing site so you can get a feel for how important **YOUR CUSTOMERS** think the pricing page is… after you’ve read this entire blog post, of course. In fact, look at how many people go to the pricing page right after the first page and then look at how many convert to paying customers. Hmm… not as many as you’d like, right? Why is that… Okay, the second question is “What percentage of visitors to your site enter for the first time through your Pricing Page?” You have to be aware that some visitors – more and more each day – are bypassing traditional entrance points to marketing websites and are going straight to the Pricing Page of SaaS & Web App vendors. I’m not talking about those that enter through landing pages associated with campaigns, either. I mean those that literally hit your Pricing Page first whether that is from reviews on other blogs, affiliates, coupon code sites, organic search results, or Google Sitelinks – the direct links to pages within your site that you don’t control! Of course, as you add more and more value messaging to your Pricing Page – a top recommendation to improve the conversion rate of your pricing page – the more your pricing page will become an entry point via organic search results. Which is a good thing, but… This is why you must think of your Pricing Page as if it were a stand-alone **LANDING PAGE**. What happens when someone sees your pricing page without any other context? Ask yourself this very candid question… **Can people even tell what your company or SaaS does by looking ONLY at your pricing page?** Yikes! What if that is how people enter your site? Is your pricing page a good first impression? An actionable first impression? Your goal is to convert visitors to customers… period. Are you going to do that with your pricing page as it is today? So, if you don’t know what percentage of your first time visitors enter your marketing site through the Pricing Page, then you need to go find out as soon as you finish reading this entire post. Overall what this bypassing of “traditional” entry points means is that your “sales funnel” – the Main Site to Features Page to Servcie Tour to Pricing Page to Sign-up to ***REVENUE*** funnel that you so carefully orchestrated – might ***NOT*** be the way your customers choose to move through the “funnel.” You must be aware of this – where do they enter from and if they don’t bounce from the Pricing Page (leave the site without going anywhere else) where do they go? If you have a 100% conversion rate from those that land on your Pricing Page for the first time and also sign-up for a premium plan, than you don’t have to listen to me. Everyone else… you probably should. Even your customers are telling you that you should listen to me. So, the two questions you absolutely ***MUST*** ask yourself now, and on an ongoing basis are: - What is the ranking of your pricing page on your marketing site? - What percentage of visitors to your site enter for the first time through your Pricing Page? This isn’t measuring metrics as much as understanding behaviors. I don’t care if you get 7 or 7000 first-time visitors hitting your pricing page, what I care about is where they go from there. If they hit the main page first, where do they go from there? If it is the Pricing Page that they hit second, why are you neglecting it? Why won’t you put a concerted effort to make it as powerful a marketing page as possible? Why won’t you turn your Pricing Page into a First Time Conversion Machine? This all holds true 10-fold if the pricing page is the entry point for any statistically significant number of first-time visitors. I can’t force you to understand how much money it could be costing you as you continue to neglect the ***#2 MOST VISITED*** page on your site – the Pricing Page. I can’t force you to understand how some simple but powerful changes to your pricing page that you could implement ***TODAY*** with minimal effort or cost could boost conversions and help you make more money. It is up to you to come to this conclusion. **Are you ready to admit that your Pricing Page is important and deserves more attention than you’re giving it?** Cool… go watch a ***FREE*** video on the Basics of Pricing your SaaS or Web App (available in the [SaaS & Web App Pricing Resource Guide](https://sixteenventures.com/saas-web-app-pricing-resource-guide)). This is a 15-minute video that will change your ideas about pricing… forever. If you’re curious how we could improve your Customer Acquisition process – including your Pricing Strategy, Pricing Page, etc. – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # SaaS Customer Success: Technology Will Fail, but Service Must Never *December 20, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-customer-success-fail/ As a SaaS  company focusing on Customer Success, you are in a unique position to offer proactive support to your customers; anything less is unacceptable! Alternate title: **SaaS Vendors Should Learn What NOT To Do from Citrix** So, I’m not sure if you heard (you probably did if you [follow me on Twitter](http://twitter.com/lincolnmurphy)!), but the SaaS Pricing Page workshop scheduled for earlier this month didn’t happen due to technical difficulties. Some people have attempted to point out the irony of a “SaaS workshop” failing due to a problem with “the cloud.” I don’t think that is ironic – technology fails, though trying to keep that to a minimum is obviously the goal, ultimately **it is how you handle that failure that matters**. In this case the vendor – Citrix – failed, not SaaS, the cloud, etc. The workshop played out like this. Twenty minutes past the scheduled start of the workshop, and after scrambling around, switching computers, moving from VOIP to the regular telephone, shutting down and restarting the webinar, etc. much to our collective frustration (the 30+ attendees and me), technical issues with the audio portion of Citrix’ GoToWebinar service kept us from progressing. **The really bad part was that it was not clear what the problem was while all of this was going on!** The webinar itself seemed to be up-and-running, but there was no sound – and no errors, feedback, or anything indicating something was not working (except the absence of sound). As far as anyone knew (myself included), it was operator error. Yep, to the attendees it just said I was muted. So why couldn’t I just “unmute” myself, right? Now, let me be clear, I take fully responsibility for this since it was my webinar and I had no backup plan. Well, I sent the slides in PDF form to the attendees ahead of time just in case we lost video – which has happened before – but didn’t take into consideration the failure of audio. I will no longer have a single point of failure for webinars and workshops and I would recommend the same to you. I guess it was a tiny bit of relief though that it turned out – thanks to an attendee for sending a link to the not-so-obviously-placed status page (what good is it if you can’t get to it or don’t know about it) a little later – that Citrix was having issues with their audio service at the time of the scheduled webinar. So, you know, its all good.. Wait, they were WHAT? **OMG WTF?!?! Are you serious!?!?** So lets take a step back and analyze this situation with a clear head… It would seem that Citrix knew the following: - I had a webinar scheduled for 3:00PM Eastern. - They sent an email reminding me that I had a webinar scheduled for 3:00PM Eastern - I had OPTED IN to using their integrated audio service for the webinar - They were having issues with their Audio Service before and during the scheduled webinar So, knowing all of that and obviously having the capabilities to email me, why did they let me move forward with the webinar? What compelling reason is there for a user to be able – without warnings along the way – to continue to use a service when it is down? Why would the vendor not tell me? This is simply incompetence – not knowing their proper roll as a cloud vendor. Perhaps this is a legacy mentality shining through. This is a perfect example of a company that is network-centric but has yet to embrace modern SaaS or cloud methods. Whatever it is, Citrix’ competitors would be wise to understand that **you are Software-as-a-Service providers, with an emphasis on SERVICE**. Let me lay it out as clear as possible: as a SERVICE provider, you owe it to your clients to be proactive in support – anything less is inexcusable and** will hurt your business**! In fact, I wrote a post back in 2009 about Netflix and their proactive customer service titled “SaaS Vendors Should Learn from Netflix”. Its an oldy but a goody and is still – if not more – relevant today. As a SaaS/Cloud company, you are in a unique position of having visibility into both system status and the user operations within your offering. While we can consider options for integrating status API calls into a native client like GoToWebinar uses, or loading UI frameworks from separate networks while pulling in status messages for web UIs, its simpler than that. Don’t over think this. It doesn’t have to be that complicated, and you can implement something like this **RIGHT NOW**. Think about it… Citrix could have sent an email 15 minutes before the scheduled webinar saying “we see you have a webinar scheduled in 15 minutes but we wanted to let you know that as of right now, we’re having problems; here are your options.” Yes, one of those options might have been to cancel and reschedule, but that is proactive. That would have saved the attendees frustration and time, saved me embarrassment and revenue, and possibly saved Citrix at least one customer – maybe more. Remember, this was a workshop with many participants – a lot of folks saw Citrix’ GoToWebinar fail miserably that day. Needless to say, I immediately cancelled my account with Citrix and they were kind enough to give me a full refund. Sure, the $90 Citrix returned to me did little to cover the lost revenue (since I immediately offered refunds to the workshop attendees) or the potential damage to my reputation, but it gave even further proof of their reactionary, legacy customer “service” model. Horror stories aside, because of the time of year it is impossible to reschedule the workshop, but I still want you to be able to prepare for a successful 2011. So I’ve put together an amazing package deal for you. ## Let’s Improve your SaaS Customer Success For immediate consultation and advice on SaaS Customer Success, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Business Model Resource Guide *December 18, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-business-architecture-resource-guide/ I put together this list of my ***BEST*** SaaS Business Model & Architecture resources just for you. I hope it helps! - [Software Vendors: The Cloud is Not Magic (but it can be very Profitable!)](https://sixteenventures.com/cloud-magic) - [SaaS Business Architecture Overview (PDF)](https://s3.amazonaws.com/16v/SaaS+Business+Architecture+-+Definition+update+1.pdf) - [The 7 SaaS Revenue Streams Report (PDF)](https://s3.amazonaws.com/16v/7+SaaS+Revenue+Streams+with+Details.pdf) - [Think You’re Ready for SaaS? Think Again! (PDF)](https://s3.amazonaws.com/16v/Think+Youre+Ready+for+SaaS+-+Think+Again.pdf) - [SaaS Companies Should Exploit Network Effect Data](https://sixteenventures.com/network-effect-data) - [SaaS Success Requires Dropping the Legacy Baggage](https://sixteenventures.com/legacy-baggage) - [The SaaS Single-Tenancy vs. Multi-Tenancy Debate](https://sixteenventures.com/saas-multi-tenancy) - [SaaS vs. ASP: What’s the difference?](https://sixteenventures.com/difference-between-asp-and-saas) - [Actionable Business Intelligence at your fingertips](https://sixteenventures.com/actionable-business-intelligence) - [List of SaaS and Cloud Consultants and Analysts](https://sixteenventures.com/cloud-consultants) - [Cloud Acquisitions Create New Opportunities](https://sixteenventures.com/cloud-acquisitions) If you’re curious how I help SaaS and Web App vendors grow their businesses – and how I can help you grow yours – [you can learn more and contact me here](https://sixteenventures.com/start-here). --- # SaaS Distribution and Promotion Resource Guide *December 18, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/distribution-promotion-resource-guide/ I put together this list of my ***BEST*** SaaS Distribution & Promotion posts just for you. I hope it helps! - [How to Get in Front of your Ideal Customers](https://sixteenventures.com/distribution-channels) - [Traffic Hacking: 43 ways to get quality prospects to your site](https://sixteenventures.com/traffic-hacking) - [100 Places to Promote Your SaaS or Web App (Part 1)](https://sixteenventures.com/50-places-to-promote-your-app) - [100 Places to Promote Your SaaS or Web App (Part 2)](https://sixteenventures.com/50-more-places-to-promote-your-saas-or-web-app) - [How to Create an Affiliate Program for your SaaS App](https://sixteenventures.com/affiliate-marketing) - [Can you ‘Super Charge’ a New Web App’s Go-to-Market with Affiliate Marketing?](https://sixteenventures.com/saas-affiliate-marketing) - [Jack Born Tells You How Affiliate Marketing Helps SaaS & Web Apps](https://sixteenventures.com/video-interview-saas-affiliate-marketing) - [SaaS Distribution: Time to Change the Channel](https://sixteenventures.com/saas-channels) - [Do you know where Your Market is on the Awareness Ladder?](https://sixteenventures.com/how-to-communicate-value) If you’re curious how I help SaaS and Web App vendors grow their businesses – and how I can help you grow yours – [you can learn more and contact me here](https://sixteenventures.com/start-here). --- # SaaS Pricing Model: Value Metrics Are Key *December 7, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/pricing-value-metrics/ ***Updated July 2026.** This is the oldest post in this lineage, from 2010: price on the value metric that matters to the customer. Sixteen years later it's question three of the six: [what's each item worth, per customer, per moment](https://ltvmax.com/posts/expansion-value-per-item). Original text below.***Your SaaS Pricing Model should be built around what the customer values, which probably means staying away from “commodity” metrics like storage.** I find most articles about “SaaS Pricing Model” to be less-than-helpful because they almost always fail to take into consideration the **WIIFT** of the customer – the **What’s In It For Them**. Most articles usually talk about connecting pricing with the sales model rather than the value perception of the market – a potentially costly mistake. People who try to correlate specific price to distribution methods / sales models with few or no other inputs are making a big mistake. ## Your SaaS Pricing Model Starts with the Customer **Price is always tied to the market’s willingness to pay**, at all levels, commodity or luxury. Nobody cares what sales model you need to support internally, nobody cares what your costs are, **all they care about is what is in it for them**. In case you haven’t figure it out yet, this is what you should care about, too. For SaaS, Web Apps or other information services with mostly front-loaded manufacturing costs, price is tied more than anything to how you market and position your product/service, since that will dictate value perception and willingness to pay. This is in contrast to physical goods where supply and demand can affect the price or where manufacturing & distribution add significant cost to each order. I’m talking about SaaS here, not truck tires. The key to pricing is simple: **the better you understand your market the easier it will be to create an offering that they perceive to be high value**, meaning more revenue and profit for you. But understanding your market is hard, it takes work, effort, some thought, etc. So you might as well just pull a number out of thin air (or somewhere else), multiply x 3 (as they say, its easier to lower, than raise prices), and hope for the best, right? **You’ll need a strong table to hold all that money you’re leaving on it!** The fact is, the price , or price ranges, for tiers / bundles is not often the issue when our clients come to us; well, not the first issue. For many, it is the pricing metrics that are used that is the real issue and once that problem is fixed, it usually renders the first problem irrelevant. Pricing metrics are those little things we base our prices on – and ultimately our entire business – all of us, even us consultant types. The de facto standard pricing metric in SaaS is per user, per month. As the markets and vendors mature, this is changing and could be anything from packages shipped to number of transactions completed. These are the real keys to value pricing in SaaS and are not talked about as often; either because people don’t really understand this aspect of pricing or because it is too difficult; maybe both. Unfortunately we see and hear from companies all the time that have built systems or leveraged metering/billing systems that are tied specifically to per user, per month or other legacy metrics. In SaaS, **pricing is marketing, but it is also tightly coupled to the underlying technology**. You know that truck tire I mentioned earlier? You can change the price, the price metric, distribution for that truck tire – and legacy software – all day long and the tire (or software) stays the same. With SaaS, not so much. Be careful that you listen to people that don’t just understand pricing, but the SaaS Business Architecture, too. ## SaaS Pricing Model: WIIFT? So, work with me here. If pricing is marketing, and pricing is where value perception (the market’s idea of WIIFT) and value proposition (what you think the WIIFT is) intersect, then the pricing metric is what ties all of that together. If you were to boil down the value perception to one element, it would be the pricing metrics. And yet few ever speak of these outside of pointing out what the typical metrics are. Why is this so important? This is really a very large topic, but the idea is simple; if you base your pricing on something people find no value in, your value proposition will not be aligned with their value perception. If people don’t care about the number of users, for example, if you charge per-user you could run into the “shelfware perception.” The idea behind shelfware comes from the old days when software came on a disk and in a box that you could actually put on your self. The saying comes from the fact that you bought too many copies of a piece of software and rather than using productively, it was “installed” on the shelf in the managers office. So, if you have a situation where two users – Meg and Brian – are paying for the “lite” version (a bad name and a topic for another day) and want to add Glenn to the system, but to do so requires that they upgrade to the “pro” version which includes up to 10 users, they’ll be paying for 7 users that they don’t need – Shelfware 2.0? So, what’s the problem? Don’t we always want people at the low-end of the next tier up? Aren’t they the most profitable customers? Yes, but we need them to want to be there. The idea in B2B SaaS that seems to apply almost across the board (your mileage may vary so please do your homework), is that scaling pricing based on the complexity of the companies that are using your product/service is a good idea. This ensures that your price is tied to value perceived at every tier. Which is why I hate this quote by Paul Graham: “[You’ve found market price when buyers complain but still pay.](http://twitter.com/#!/paulg/status/22576762202)” I don’t care who said it, its wrong. That quote simply flies in the face of “value pricing,” customer-centricity, marketing, etc. and can hurt your Customer Lifetime Value (LTV). Complaining customers aren’t happy and **it is hard to upgrade, up-sell, or cross-sell unhappy customers**. If they are not happy, as soon as they find a suitable substitute, they will leave. And in the meantime, they’ll game the system, sharing users and logins, or they’ll stop using the system as much. It is true, you can’t please everyone so some might complain about pricing, which is fine. At some level **people will complain that they have to pay anything** – this is especially true when you’ve been giving it away for free at first. You have to be able to figure out if the complaining is because of that, or if it is real push-back. **The better you understand your market, the easier that distinction will be to make**. The goal should be to g**et those who do pay to do so happily so that we can get more money from them over their lifetime as a customer**. Ideally, you’ve done the work necessary to focus your offering to those that will perceive value removing complainers from the equation. But there is another aspect of pricing metrics besides keeping Shelfware perceptions at bay; its about **aligning with value perceptions to grow LTV**. As I’ve said a number of times before, one of the problems with Freemium – for example – is that people promote the free version over the premium versions, ensuring that all customers will go through being a user first; which is why conversions are so low and time to profitable revenue so long. If they would promote the paid version from day one, give incentives to sign-up for the premium version, etc. they would get the money from their customers faster, meaning that an increased LTV. The same principal holds true in value pricing for SaaS vendors. The SaaS Pricing Page is a perfect jumping off point for most discussions of pricing with SaaS vendors because it is generally where they start anyway. SaaS & Web App vendors who have opted for price transparency will quite often sit down to develop their pricing strategy by laying out a pricing page first. **Who cares if this is the right way to do it, it is the way its done.** So we use the pricing page as the visual manifestation of a SaaS vendor’s pricing strategy and start from there. So when you lay out your pricing tiers or bundles, there is a good chance there will be three versions – small, medium, and large – and that it will be based on number of users. You need to ask yourself if that is the right metric. Not only could “users” be a metric that has no value to the market, but by basing pricing on that metric, you’ve basically told your customers to start small, then move to medium, and then to large. Have you provided any incentive – other than number of users – for someone to start with the large bundle out of the gate? What if they only have 3 users (rather than the 25+ in the large bundle) but would find value in some of the features of that bundle? Do they even know they could find value in those features or were you too busy pushing the fact that they the large bundle has 25+ users and 10GB storage? Look, **your pricing today affects the overall LTV** – don’t worry about too high or too low – worry about aligning with value as the customer grows/changes. This is what I mean when I say once we figure out the right metrics, what you originally had price-wise is probably irrelevant. When we figure out the right way to charge based on value-oriented metrics, the price might go up significantly. Or it might not, but the migration to higher-priced tiers early on means a greater LTV, more profit, and a business that is worth more in acquisition or IPO. Yeah, IPO – this stuff doesn’t just apply to startups and small Web App companies – this is a lesson for all SaaS companies of any size. ## Let’s Fix Your SaaS Pricing Model For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Marketing – Web App Pricing Page Review: Salesforce.com *November 15, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-marketing-web-app-pricing-page-review-salesforcecom/ ## A look at Salesforce.com’s pricing page to see if the SaaS leader views it as a Marketing page. I asked – both on Twitter and this blog – for people to send in what they thought were well-designed SaaS Pricing Pages. Someone that follows me on Twitter asked what I thought of Salesforce.com’s Pricing Page. Well, why not? Let’s check out the pricing page of the top pure-play SaaS company in the world! This is an ~8 minute video where we’ll see if Salesforce.com treats their pricing page as a marketing page, whether there is value messaging, a strong call to action, a good use of Free, trust factors, etc. Cool… now go watch a ***FREE*** video on the Basics of Pricing your SaaS or Web App (available in the [SaaS & Web App Pricing Resource Guide](https://sixteenventures.com/saas-web-app-pricing-resource-guide)). This is a 15-minute video that will change your ideas about pricing… forever. --- # Your Revenue Crutch is Killing Your SaaS Startup *November 12, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/revenue-crutch/ ## Web Apps and Software-as-a-Service that comes from consulting companies or other service businesses can be lucrative but can be held back by non-scalable revenue streams. Do you have a less-scalable revenue stream that you rely on even though it is holding your business back? We’ll call this a Revenue Crutch. It is something you keep turning to because it is “easier money” even though it is negatively affecting the growth of your business. While I thought I coined the term “revenue crutch,” Google says otherwise. So, I will be the one to popularize it! What if you drew a line in the sand today and said “no more revenue from that crutch revenue stream!” what would your primary revenue stream be instead? For SaaS and Web App companies, quite often we see “crutch revenue” as Professional Services, On-boarding, Consulting, Custom Programming, Installation, etc. These are things that are often human-powered; that is, they don’t scale efficiently since humans don’t scale well. If you need to do more of any of these services, you have to add humans and therefore significant cost. It makes it difficult to reach those “economies of scale” that makes true SaaS so attractive as a Business Architecture. For SaaS companies, **these “revenue crutches” might not kill your business, but they could keep the business from growing**. “But wait, aren’t these under the ‘Services’ category of the 7 SaaS Revenue Streams?” you might ask if you have read the [revenue modeling report](https://sixteenventures.com/saas-web-app-pricing-resource-guide). Yes, by the way, they are. And there are ways to leverage each of those services listed above in more scalable ways – mostly by moving as much of the “repeatable” processes into the app. But for SaaS companies, those should likely not be the primary revenue streams. **For many early-stage – especially bootstrapped – startups, the crutch revenue is often the primary revenue stream!** Rather than focusing on more scalable revenue streams – even if recurring revenue from subscriptions is what they want to be the primary revenue stream – they often go back to their comfort zone. This often comes from many founders having regular jobs or being consultants before they founded their new company. They aren’t used to generating revenue in ways that don’t include trading hours for dollars and have a hard time separating themselves from the service they are building Think of Crutch Revenue as “easier money” – sometimes it is actually full-on “easy money” – but it holds back your overall growth as a company. Instead of “crutch” maybe it could be considered **“comfort zone revenue”** – that is, you always go back to what you know, what is comfortable, etc. For many businesses these crutch or comfort zone revenue streams are really the “go to” revenue streams – or legacy revenue streams – that keep us from moving forward. You know how comfort food – at least in the United States – is full of sugar, cholesterol, fat and other things that are terrible for us but we still gravitate to that when we get down and need a food hug? Think of comfort-zone revenue in the same way… every once in a while its okay, but **if you eat it all the time you’ll probably feel really bad until you finally die an early death**. Get it? Consider also that for many entrepreneurs, their day job is their crutch – or comfort zone – revenue… easy money, but it could be holding them back in life. When I [said that on Twitter](http://twitter.com/#!/lincolnmurphy/status/2895737494962176), I received a comment that said “[or how to pay the bills while creating next new thing](http://twitter.com/#!/RichMironov/status/2895938490212352)” – but that, to me, is the wrong attitude. I tweeted back to him that the ideas around the Lean Startup movement can really help here – especially in boostrapped startups. Here’s the plan: Do Customer Development, run some smoke tests, then build a Minimum Viable Product (MVP) that meets a real business need, sell it – for money – **to the customers who have already told you they’d pay  for it (or ideally have ALREADY paid you), get to profitable revenue quickly** then quit your day job! Staying in your comfort zone while you “build the next big thing” is a recipe for a lot of wasted time “moonlighting” as a “startup guy” rather than building a business. So, regardless of your stage, funding, etc. what if you took a chance & pulled the plug on that crutch revenue stream – you know the one I’m talking about – and put your effort elsewhere; what would happen? How would your business change? Would it be good or bad? What if your primary revenue stream is your crutch revenue stream? What will you do? So, are you ready to say screw it and rip out your reliance on “crutch revenue” to grow your business or are you going to continue to hedge your bets? If you think you’ll raise external money from professional or sophisticated investors for your SaaS idea while continuing to hedge your bets… think again. Rich Uncle Joe might give you some money, but real investors won’t! So call it a pivot, a shift, whatever… are you ready to take your business to the next level or are you going to stay in your comfort zone? If you’re curious how we could help you move beyond your comfort zone, contact me and we’ll setup a time to chat about it… – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # 37Signals Caught Treating SaaS Pricing Page like a Marketing Page *November 1, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/37signals-caught-treating-saas-pricing-page-like-a-marketing-page/ ## The popular Web App company actively tests their pricing page layout. I was asked over the weekend if I saw the noise about 37Signals raising their prices. I had not so it was very nice to hear from colleagues looking for my opinion on the matter. So, here’s my opinion on the 37Signals price-raising uber-scandal; **there’s nothing to see here, move along.** **WAIT!** Don’t move along yet… there actually is something to see here, and its pretty cool. But it isn’t a trainwreck or fiasco… its a lesson in marketing. So, last week [37Signals was caught experimenting with their pricing page layout](http://www.cloudave.com/7205/did-37signals-increase-basecamp-price-or-not-the-backdoor-experiment/) for [Basecamp](http://basecamphq.com). Apparently [some people wanted to make a big deal out of this](http://www.cloudave.com/7208/can-you-stfu-your-customers-in-the-saas-era/), with some folks even going as far as saying “37Signals doubled their Price without any warning!” – but they didn’t. You see, apparently 37Signals considers their pricing page a marketing page and we could all learn a lesson from them. Just a lesson – don’t copy them! It appears that 37Signals – as any good SaaS or Web App company should be doing – is experimenting with different layouts, messaging, etc. on their pricing page in an effort to drive up sales. Oh, right, that last part of course is the sticking point for many – how dare they attempt to make more money? But, in the real world, this is what we actually want to do. So it is great to see 37Signals – who many look up to – being caught treating their pricing page as a marketing page! According to comments made by 37Signals’ Jason Fried, they’ve learned that “too many plans confuses people, and suggestion is powerful.” Indeed, these are key points. In fact, these are covered – as well as what you should and shouldn’t test on your pricing pages – in the [Pricing Page Success Formula](https://sixteenventures.com/how-to-price-your-saas-or-web-app-the-basics) video series. Fried went on to say “We’re experimenting with different combinations and words and layouts to see what we can learn. **It’s basic business stuff**.” <== HA! Basic business stuff, to be sure… kind of a reminder to the author of the post he was commenting on. Well played, sir. The biggest issue people had (if they really had one) was that in one experiment the entry-level (low-end) pricing tier was removed from the pricing page. This made the entry-level tier now ***TWICE*** as much as the entry-level tier before. But as Mr. Fried retorts “If we removed the Max plan, would people be saying we dropped our prices 50%? That would be equally silly.” Nice. So what is the lesson here? Simple… the Pricing Page is a ***MARKETING*** page – I think **one of the most important marketing pages on your website**. When you live or die by online sales of your service – automated, self-service, etc. – then your P**ricing Page is the MOST important marketing page on your site**. If you are not always testing, tweaking, optimizing, and refining your Pricing Page then you are leaving money on the table. Frankly, most companies don’t realize that the Pricing Page is a marketing page and instead treat it as a one-time price list or feature comparison grid. The CEO of one of the companies that wanted their pricing page reviewed live during our last SaaS Pricing Page Design workshop sent me this amazing confession, which I’ll keep anonymous to protect the guilty: > “Now looking back at our history, I think we spent too little time on our pricing page (as you can tell) and our pricing structure (we copied our competitors).” **WOW!** The first step to recovery is admitting you have a problem. Hopefully this makes things a bit clearer; when I tell people not to copy other companies’ pricing pages it is not something I’m making up just to get attention… **people actually copy the pricing and pricing pages of other companies!** As an industry, rather than trying to find fiascos, train wrecks and controversy every time (there are plenty of examples of real ones and we should call them out on it) we should celebrate companies like 37Signals – who get it – and encourage them and others to do what has to be done to increase sales and generate profit. For once, I’d say maybe you should copy 37Signals. Just copy the way they think, not their actual pricing page or pricing, okay? --- # SaaS Growth Hacking Experts Resource Guide *October 5, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/growth-hacking-resources/ Growth Hacking isn’t a set of tactics or just about getting cheap traffic to your website… Growth Hacking is a mindset. It’s not just about getting traffic on the cheap; it’s about understanding and exploiting customer behavior, technology, and distribution. Real Growth Hackers use their imagination to pull all of that together to drive growth, however growth is defined (revenue, users, etc.). It’s nice to finally have a term for what I’ve been doing since 2006 for SaaS vendors – Growth Hacking. I put together this list of my best Growth Hacking resources to help grow your SaaS business and reach your goals. ## Growth Hacking Resources for SaaS Vendors You’ll note that some of these are focused on customer acquisition and some are focused on retaining customers. Growth Hacking can – and should – be applied across the entire customer lifecycle. - [5 Rules for Successful Growth Hacking](https://sixteenventures.com/growth-hacking-rules) <== read this first! - [CCAs: The In-App CRO Metric Specific to SaaS](https://sixteenventures.com/free-trial-metrics) - [Engagement: Start With Quick Wins](https://sixteenventures.com/saas-customer-success-quick-wins) - [Eliminate Dead Ends to Drive Engagement](https://sixteenventures.com/saas-customer-success-eliminate-dead-ends) - [5 Ways to Get your App to Sell Itself](https://sixteenventures.com/sell-itself) - [21 Growth Hacks to Test Today](https://sixteenventures.com/saas-marketing-growth-hacks) - [22 Ways to Reduce Churn with Growth Hacking](https://sixteenventures.com/growth-hacking-retention) - [Use Partner Offers to Quickly Grow Your Business](https://sixteenventures.com/saas-marketing-partner-offer) - [Identify and Retain At-Risk Customers](https://sixteenventures.com/saas-churn-threats) - [Monitor and Drive Customer Engagement](https://sixteenventures.com/improve-saas-churn-rate-engagement) - [3 Steps to a Successful Welcome Email](https://sixteenventures.com/saas-customer-onboarding-email) - [Market Positioning: How to Compete in Crowded Markets](https://sixteenventures.com/saas-competition) - [Email Address Pre-Targeting](https://sixteenventures.com/saas-growth-hacking-email) - [43 Ways to Drive Traffic to your Website](https://sixteenventures.com/traffic-hacking) - [Rise of the Growth Copyists?](https://sixteenventures.com/saas-marketing-plan-growth-copyists) - [My EVIL Method to Improve Customer Retention](https://sixteenventures.com/how-to-reduce-churn-saas) - [Confused Minds Don’t Buy… they leave](https://sixteenventures.com/saas-free-trial-engagement) - [A Simple Trick to DOUBLE Your Revenue](https://sixteenventures.com/saas-revenue-double) - (Podcast) [‘Hacking’ Your Way to Growth](http://readitfor.me/blog/2013/09/hacking-your-way-to-growth/) via ReadItFor.me - (Podcast) Identifying and Marketing to Your Ideal Customer via OpenView Labs - (Video Interview)  [SaaS Growth Hacking w/ Lincoln Murphy via GrowthHacker.tv](https://sixteenventures.com/saas-growth-hacking) - (Video Interview) [Becoming an Industry Authority via SocialHubsite](http://socialhubsite.com/2013/09/16/interview-becoming-an-industry-authority-with-lincoln-murphy/) ## Let’s Grow your SaaS Business For immediate consultation and advice on leveraging Growth Hacking to scale your SaaS business, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # SaaS Free Trial: Feature or Time-Limited? *October 5, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-free-trial-feature-or-time-limited/ ## Freemium is free-forever, Free Trials have time limits and the psychology of the two COULDN’T BE MORE DIFFERENT! I got this question from some random person and I thought you might be interested in in my response. Feel free to comment if you have similar experiences and would like to weigh in. ***Q***. What are the pros and cons of offering a trial version that is time limited vs. feature limited? ***A***. It depends on your overall goals as a company. It really is that big of a decision. Once you have a strategic direction in place for the company, it should be clear what you’ll be doing with your “Use of Free.” There is a ***HUGE*** difference between “free trial” and “free in perpetuity” – the latter being “Freemium.” I see a lot of companies lately offering both a free trial and a free-in-perpetuity version. Essentially, they’ll offer a free trial of any of the tiers or bundles – which is great – and at the end of that trial, you can pay, close your account, or downgrade to the free. This is not new, obviously, but it is something I’m seeing a lot more lately. How it is playing out is debatable, though, and it is because people don’t clearly understand what they’ve gotten themselves into. Many people don’t realize that by offering a feature-limited version of their service that doesn’t expire they are now in the Freemium game and that the dynamics and mechanics (read: psychology) of Freemium now apply. That is a subject all its own but just be aware that if you have a free trial that has no time-limit, but has limitations on features, usage, etc. that you fall into the Freemium trap and if you don’t know what your doing, you could have major conversion issues. Also consider the fact that the people you have placed in the “free” version have already tried and decided **NOT TO BUY** your premium product. You need to be very clear as to why you still want them around. How are you going to monetize them in other ways or clearly understand how to generate revenue from them in the long-run? If you don’t know, then why do you want them around? What is the quid pro quo for their free use of your product? If you don’t know what it is, or don’t fully understand how you’ll get them to some day be interested in moving to the premium product, perhaps a free-in-perpetuity offering is not for you. On the flip side, a time-limited trial – with or without feature limitations – is a different animal completely. The expectations by the customer are different, your expectations as a vendor are different, its easier to plan a sales cycle around a time-limited trial, etc. Free, time-limited trials are meant to allow a user – from there perspective – to kick the tires before they sign-up and become a customer. And by the way, this is absolutely expected in B2B SaaS. But there is a secret to time limits… and if you want to know what the BEST length of a Free Trial, you can find it here in my [Free Trial Resource Guide](https://sixteenventures.com/free-trial-resource-guide)! So, pros vs. cons… that isn’t the right way to look at it. Its all about your overall strategy and aligning with the market… If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – including your use of Freemium or a Free Trial – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # Web Apps use Customer Support to Increase Revenue *October 4, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/customer-support-revenue-driver/ ## SaaS vendors know getting the sale is just the first step; keeping the customer means keeping them happy and that a happy customer will generate more revenue over time! A client that I am working with on their Pricing Strategy just sent me the following question ([you can send me questions, too](mailto:lincoln.murphy@sixteenventures.com)): > Lincoln – This isn’t a pricing question, however I think you may have some relevant experience in your agile mind on this one. How many people would it take to support each 1000 users of our SaaS business solution? As you can imagine the numbers will no doubt provide some economies of scale as we move through 100, 1000, 10,000 to 100,000 users – but it will not be an unsupported environment like a social site or free consumer offer. The users will be entering their own key business data… as well as dealing with glitches and submitting suggestions, etc. So the question is, do you have any knowledge of SaaS industry averages in customer support staff? – or have you direct experience on how to make a good estimate? Here is my answer to him – I thought you might benefit from it, too… > This is a great question and I think you hit on a key point – you will have economies of scale to lower the cost over time. However, since there really is not a “SaaS Market” if you look at averages – and I’m sure someone has this data – it is likely a meaningless or highly misleading statistic. Why? Because support costs are 100% tied to your company and your market. Interestingly, you say this is a non-pricing issue – but after reading this you might think differently. > First, **what does “support’ mean**? For planning purposes you need to be very clear as to the level of support given, to whom, when, how frequently, and why they would need it, etc. You need to clearly break down all of that for each support area: > (Pre-)Sales Support – You’ll want to automate as much as possible to reach those economies of scale, but what is included pre-sales. Will you differentiate the level of pre-sales support for different market segments? Will some be able to move through the sales funnel on their own in an automated fashion, to a Pricing Page, then into the app,  while others will require more hands-on support? Who are those that fit into each of those categories? > On-Boarding Support – Once they are in the Free Trial or when they become a paying customer, what will you need to do for them or help them with? Will they need to seed the system with existing, legacy data? Will you need to help them customize the user experience, integrate with existing systems, etc.? Will some need this while others won’t? Is there a correlation to the types of users that can use the self-service sales process vs. those that need human interaction? How much of this could be revenue generating professional services? What is *expected* to be included with the fee and what is expected to be extra – by the different customer segments? > Initial Customer Support – Once they are on-board, what level of support will be required to get them going? For the automated/self-service folks, will a series of videos/screencasts be sufficient? Will you need a more guided, hand-held process for the other folks? What does that look like? Will there be an on-site consultation / training? Will you do this or will you build an ecosystem of trainers / consultants to handle this? What will those relationships look like? > (Ongoing) Technical Support – What does this mean? First level phone support, use of GetSatisfaction for community support, roadmap ideas, etc. Will you need different support levels for different customer types? Will a certain level be included but a higher level of support be extra? What is the expectation in the market? You can dictate much of this – its all about ensuring you align your value proposition with their value perception. > (Ongoing) Customer Support / Success – Training, Communications, Proactive Sales Support / Anti-Churn Activities, etc. What does this look like? Are there different customer segments that will have more needs in this area? Can you bundle any of this together for larger clients to 1) offset your costs and 2) add revenue (and hopefully profit) directly? What should be included in the base level to keep churn at bay? How can you leverage this to grow Monthly Recurring Revenue (MRR) and therefore Customer Lifetime Value (CLV)? For the purposes of planning, it might make sense to do so, but to be really successful and **because we understand that the SaaS Business Architecture is a tightly-coupled machine – no silos here – Tech & Customer support should not be treated as separate!** > Okay, so I’m not sure if I answered your question directly, but I hopefully got you thinking about this in the right way… yes, economies of scale do exist and over time you will be able to take advantage of those. Even in areas where its very high-touch, you’ll see that probably 80% of what you do is the same for each customer. Strive to automate that 80% – build it into the app, even if it is your “support” staff that is doing the work. That way, the 20% that is unique to the customer is of higher value and **you can charge more for it.** If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – including by increasing your Customer Retention – contact me and we’ll setup a time to discuss your options for moving your company forward. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # Does Goldilocks Pricing Work for SaaS? *September 15, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/goldilocks-pricing/ ## A Pricing Strategy for SaaS built for the sole purpose of nudging customers away from a decoy price to the middle version can work. I was asked for my thoughts on [this question someone posted on Quora](http://qr.ae/UL7): “Based on your real-world experiences, does Hal Varian’s ‘Goldilocks pricing’ result in most buyers choosing the middle option?” Essentially, this is the notion of having a low, medium, and high price to – theoretically – force people to the medium pricing tier / bundle. I decided to explore this from a value-based pricing perspective. Following is my response… This is a great question / topic. I’m not sure anyone has data to support or dispute this at scale. Anecdotal and first hand experiences, though certainly not in aggregate, will be the best you can expect most likely and I will do my part to spread the word to get some of that input. My experience is also only in Software-as-a-Service (SaaS) and Web / Cloud Apps. While most of what I deal with could be extrapolated to include other industries, markets, etc. I just wanted to put that out there. If you’re selling brake pads, what I have to say might not work. That all said I wanted to weigh in here with some guidance around “Goldilocks” pricing. My interpretation of Varian’s paper is that the differences between pricing tiers should be value-based, not just tiered without giving thought to the value perception at each level. This is certainly how we recommend our clients create their pricing strategy – if they go with tiers. “If” is key to that last statement. The fact is most new SaaS and Web App companies assume they must have tiered pricing. For the most part this is due to following companies that are already in the market. They will assume since ABC SaaS app has 5 pricing levels that they should, too. What they fail to consider is that ABC has been in the market for 7 years and has the intelligence – market, behavioral, etc. – to be able to identify the proper value differentiators for each tier. Or maybe they don’t and even 7 years on they are still guessing. That is the problem with looking at other’s pricing pages – especially those not in direct competition with you – there is a serious lack of context! So the key is that you should not do tiered pricing or bundles for the sake of having a “pricing grid” on your pricing page. For early-stage SaaS or web app companies it adds complexity, even if you leverage a light-weight subscription management solution like [Recurly](http://recurly.com) or [Chargify](http://chargify.com). The reality is there is extra management overhead, expense, etc. and if you are brand new, right out of the gate you might not have the intel to know how to segment based on value yet. **You could even turn away prospects or upset clients by using the wrong value differentiators in your pricing “bundles.”** We recommend that SaaS and Web App vendors work through a process to figure out what the value-based differentiators should be for their bundles. We put them through a value perception matrix to ensure their value proposition intercepts appropriately with what they know the market will want, but no matter how you do it, it should be done. This means, if you are considering “differentiating” bundles based on storage, for example, do your best to ensure that “storage” is a metric that is valuable enough to your customers that they want to move up to – or start out with – the next tier up. Otherwise you could cause them to feel like they are paying for something they aren’t using or alter behavior to keep from upgrading – while looking for an alternative product or service that understands them. The other thing is, even with tiered pricing, regardless of whether you do the “Goldilocks” thing or simply have multiple tiers, it is generally unwise to attempt to have pricing that is all things to everybody if you cover a wide range of target markets or segments. Instead, you’ll need to employ market segmentation and then leverage tiered pricing within each segment. This is why you will see some SaaS apps with 7 or 9 pricing levels… everyone from tiny 1-person companies to Fortune 100 companies are represented on that one page. **This is not advised.** This should make sense – what is valuable to one market segment will not be (or will not be the same as) for another and will require messaging around the pricing to convey the value to the segment. Healthcare users of your horizontal solution will speak a different language than Aerospace, just as small businesses will consume your messaging differently than Fortune 100 companies. The product might be the same (the great thing about SaaS and web apps), but how you convey the message – including pricing – is key. But the point of “extremeness aversion” put forth by Varian is something legitimate to consider. But I would again look to that strategy in a value-oriented way. Why create a pricing tier that is your “hail mary” price (as I’ve seen some write about a high-priced version you “hope” someone chooses) if there is no real value? Do you create a high reference price so the “recommended” one looks like a bargain? Yes, but if the “high price” is not accompanied by some perception of value and appears to simply be a high price, **it could throw off the entire value perception of your offering**. That is the danger of just pulling prices out of thin air (or somewhere else) and failing to work through a proper strategy. So yes, “Goldilocks” can and does work, but only when in the confines of true value-based pricing. Varian often refers to the “premium” product (tier) – **premium doesn’t just mean more expensive, but more valuable**. How it works, how often customers are “nudged” the middle tier, is hard to say in any conclusive way. In fact, you’ll note that most SaaS or Web Apps that have a “recommended” tier offer no reason for that, and it is quite often in the middle of 4 or more tiers, completely throwing off the “Goldilocks” nature of the experiment. While the goal is always to get pricing as right as possible out of the gate, early stage companies are at a disadvantage due to lack of time in market. Understanding the true nature of value-based pricing, and that **pricing IS marketing**, can greatly improve the results of any pricing strategy. So, is “Goldilocks” a good base for your pricing strategy? It can be, but there is a lot more to it. I recommend going back to Varian’s paper ([download the PDF here](http://bit.ly/9qjWgU)) and reading with with a focus on”value-based” pricing. Where he says “quality” substitute “value” and “What’s in it for them?” If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Pricing Strategy – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # As SaaS Matures, so will SaaS Pricing *June 21, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-evolves/ ## The common SaaS per-user, per-month subscription revenue model is rapidly evolving. From time to time I feel I must remind everyone – buyers, sellers, pundits, commentators, & analysts – that **SaaS is not a pricing model or pricing strategy**. From the vendor side, Software-as-a-Service (SaaS) is a unique Software Business Architecture where service is the focus over the technology. From the consumer side, SaaS is on-demand functionality that solves business problems, putting the focus more on the “service” aspect than the “software” SaaS might displace. So, the notion that if you have a web-based, multi-tenant software product you must adhere to the same pricing tactics employed by every other vendor has come and gone. Just as SaaS vendors have created some amazingly sophisticated products that are a far cry from the simple web-based CRUD apps put out five years ago – not just because the technology has improved but the expectations of the market have matured and evolved as well – the pricing strategies employed by the vendors have evolved as well. And this is a great thing! The impetus of this post came from an article on ZDNet by Larry Dignan the other day titled “[SaaS pricing evolves: Should we be worried?](http://www.zdnet.com/blog/btl/saas-pricing-evolves-should-we-be-worried/35757)” In that article Dignan discusses changes in SaaS pricing, especially around the “open secret” that some companies are signing multi-year contracts with SaaS vendors which prompts him to ask the question “**Is this really SaaS pricing as initially conceived?**“ As should be very obvious, SaaS itself has matured since the term was coined back in 2004 and now represents every functional area legacy software did. SaaS has moved beyond the small vertical, niche or departmental apps or less “mission critical” horizontal products – [Salesforce.com](http://salesforce.com), [YouSendIt](http://yousendit.com), [Yammer](http://yammer.com) for example. In 2010 you can run your entire business in the cloud with real SaaS products including wide-band horizontal products that a few years ago pundits questioned whether they were a fit for pure-play, multi-tenant SaaS. These include such “not fit for SaaS” products as: Human Capital Management (HCM) from [Workday](http://www.workday.com/) and Enterprise Resource Planning (ERP) from [Plex](http://www.plex.com/) to Material Requirements Planning (MRP) from [Rootstock](http://www.rootstocksoftware.com/) or Supply Chain Management (SCM) from [SPS Commerce](http://www.spscommerce.com/). So as the complexity of what is available as SaaS and the requirements around the solutions (customization, on-boarding, training, etc.) evolve, **it only makes sense that the pricing must evolve**, too. But it isn’t just the increased complexity of the products that has caused an evolution in SaaS pricing. SaaS vendors now realize that they are bringing value to a market specific to their product, and the problems it solves, and they need to be aligned with the customers in that market. This means they should not worry about what Salesforce.com is doing if they aren’t a CRM product and aren’t competing with SFDC. Not all understand this yet – we work with clients to change their thinking on this every day – but savvy SaaS vendors are realizing that they are still competing with legacy software vendors, they might compete with other SaaS vendors, and even more important – they compete with the status quo – whatever that might be; an Excel spreadsheet, a clip board, or a home-grown software solution. I think the crux of Dignan’s question is that the evolution of SaaS pricing has steered further and further away from “utility” pricing or this idea of only paying for what you use in the truest sense (paying in arrears, being billed by small usage metrics, etc.). The reality is that “utility pricing” has only seemingly come to fruition at the Infrastructure-as-a-Service (IaaS) portion of “cloud computing.” Amazon’s EC2 product in their Web Services line is a perfect analogy for utility-style computing. With EC2, you spin up a compute instance (virtual machine), it does some work, and when it is done it spins down – like a toaster where the power company only charges you for the kWh used while making breakfast. Except that even Amazon has long-running charges for storing your VM image on S3, persisting data between sessions, etc. But you still only pay for what you use. Predictable recurring revenue that grows over time (increases CLV) is still the goal, even for “utility computing” companies like Amazon. But sorry, **SaaS is not utility computing** – though because it is not a pricing strategy itself if that is aligned with your market, you could certainly price that way. It is critical to understand why SaaS is not a “utility.” This list is not complete, but just remember that a great deal of the value derived from SaaS happens outside of direct use of the product. Whether that is continuous improvement to the software itself, constant vigilance by the vendor to ensure business rules are up to date (tax laws, industry requirements, etc.), infrastructure upgrades, support systems, backups, etc. These are elements that you as an end-customer would have had to support in the past. But now, you do not. Even more important are the Network Effects – the fact that a system becomes more valuable to everyone as more users join. From improving the user experience, to populating the system with actionable information not available to users of legacy software,** SaaS is different** and that is relevant to everyone, from the vendor to the end-customer. So yes, SaaS Pricing has evolved – and will continue to evolve – and this is a great thing. It means SaaS is entering new markets with new value propositions and also indicates an **increasing level of maturity among the vendors**. For those who were only interested in SaaS because of the promise of “utility computing,” sorry to disappoint. But for those who understand the incredible value that SaaS can bring to the end-customer, the notion of better alignment in pricing to those customers means a greater adoption rate for SaaS and less barriers to acceptance by the customers. ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # 5 SaaS Pricing Mistakes to Avoid *June 11, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/pricing-mistakes/ ## For SaaS & Web App companies, Subscription Revenue is a no-brainer, but doing it right is not! There are many pitfalls Web App & SaaS companies need to look out for when it comes to pricing. If you keep the **“Pricing is Marketing”** mantra running through your head and **“What’s In It For Them?”** (them being your customers) as the framework for that marketing, you will avoid many of these mistakes, As you read this, keep in mind this isn’t a “Top 5” list; these aren’t in any particular order and the list is certainly not complete – 5 seems like a nice odd-number – but these are five things that SaaS & Web App companies (not just Startups) should look out for and try to avoid. What are others? Have you done any of these and had a good or bad experience? Please share your experience in the comments. ## 5. Don’t Under Value Your Offering An issue I see very often is that SaaS & Web App companies completely undervalue their offering. This is not limited to startups, and certainly not limited to SaaS or Web Apps. But with a web app and the pedigree of being a “cheap” alternative to traditional or legacy software (which is misguided and wrong-headed thinking), this is pervasive. This way of thinking simply boggles my mind since the vendor takes on all the infrastructure burden for the clients, updates the software powering the SaaS app on a daily – or more frequent – basis, reacts quickly to market changes, customer requests, etc.  And yet, SaaS vendors in many cases put a low price on their offering. Why? The reasons are many and varied but from what I see is a twofold problem. For starters, many SaaS and Web App companies are started by technologists. These technologists often feel “burnt” by legacy software and want to invoke change and completely undercut the “competition” – not understanding that they actually solve the problem better or more efficiently and could offer a *lower* price and undercut the legacy players but don’t need to do so in such dramatic fashion. In many cases, the opportunity is there to offer exponentially more value that they could actually charge more for; to have a low price-point on this makes no sense. For many technical founders – and the thing that drives nontechnical people crazy – is that building the product is often relatively easy. The notion of “that’s just a CRUD app with some filters and a couple of calls to a third-party API” to a super talented developer might be the difference between a supplier to Walmart adhering to their latest mandate or losing a product line with their biggest customer. Get it? Easy for you (which is great) might have tremendous value to your customers. Of course, the biggest reason for Under Valuing their offering comes from the SaaS vendor failing to clearly understand the use cases or the potential of the product.  Who is the customer? Why should they care? What’s in it for them? Or more precisely… what is the Value Perception of the customers? Here’s the hint, outside of IT/Infrastructure stuff, it is generally not the technology! Just as with the other problems of under valuing, when a company’s executive team – or startup founders – are highly technical, they tend to focus on the “hard stuff” that they had to do, or that the application / service does and forget about the real value the customer would find in the product. And of course, there are other problems with Undervaluing your Offering and they range from not charging enough to cover the cost of delivering the quality of service your customers expect/demand to coming in with such a low price that your market rejects you as a ‘toy’ for being too cheap. Yes, that happens. The bottom line is that you need to get out of your own head and focus on “What’s in it for them?” – or what your customers get out of the service. This will change your game. If you under value and thus under price, you might have to raise prices later and unlike Mr. Ashworth’s experience above, it could end disastrously – so try to avoid undervaluing and get it as right as possible first. ## 4. Don’t Focus on a Specific Margin When I see margin-driven pricing it is generally for one of two reasons. 1) Trying to match what was in your investor pitch or 2) to meet what you think is a “good margin” (based on the net margin of publicly traded SaaS companies, perhaps?). If you consider** “Pricing is Marketing”** for even a second, you can understand that those two reasons as a driver of Pricing Strategy **will lead to failure**. Besides, backing into a price based on an investor pitch is a great way to make that entire pitch a wasted effort… investors aren’t as dumb as you think. That is good to remember, too. Inside-out or Bottom-Up pricing, where you take what it costs you to land and support a client plus some type of margin, is irrelevant. If your costs are high (support, infrastructure, customer acquisition, etc.) your market doesn’t care. There is a price range they will support **based on the current value proposition** and if you can’t cover your costs within that price range, too bad. You either need to figure out a way to lower your costs, figure out a way to get them to pay more, or accept that the market opportunity you thought was there, and your ability to capitalize on it, isn’t. Of course, the best way to deal with this is to figure out a way to **improve the value perception of the market** (“What’s In It For Them?”) so that they will pay more for the product or service. But wait… doesn’t pricing have something to do with finance? Something to do with accounting? Aren’t profit margins kind of important? Of course, but once you’ve covered your costs, everything above that is marketing. Remember that your price should be an input on a spreadsheet, not the output of a formula! Here’s the reality… if you can’t cover your costs with the price that the market is willing to pay, and you can’t position your product or service so that the market will pay more, then you have not found a ***COMMERCIAL*** product / market fit. The market doesn’t care what margin you want or what your cost of doing business is; they only know what they’ll pay for the perceived value that your product or service delivers. Pricing is so much more than just some numbers in a spreadsheet or on a Pricing Page. Most of the time it’s more about the presentation and structure of the marketing around pricing **than the pricing – the actual numbers – itself**. ## 3. Don’t Just Guess Ask 100 startups to answer honestly how they came up with their pricing and you are likely to find a statistically significant number that will say they just guessed. And not an educated guess, either. For many SaaS and Web startups, thin-air is the **second** most popular place to pull pricing from. The problem with freshly minted startups is that they lack time in the market so they don’t understand customer behavior, buying patterns, etc. Of course, time in the market is of little use, though, if there is not data to go along with it. SaaS & Web Apps that leverage an automated sales process have the ability to capture a great deal of the information associated with sales, churn, and usage unlike other businesses that require secondary systems to and processes to “capture” that data. This doesn’t happen magically, though, so it is up to the company to ensure that they actually build-in the ability to capture that data – something to consider when architecting your SaaS & Web Apps, for sure. But even when there isn’t time in market, and where there aren’t many competitors to look at, or when the competitors are not leveraging the same revenue model, you still shouldn’t guess! When I help startups in this position with pricing, I use proxies or analogs (sometimes called benchmarks) which are companies that aren’t in the same market or don’t do the same thing but have a similar model. I apply a great deal of scientific as well as experience-driven processes to that data in an effort to try to get it as right as possible out of the gate. But… **none of this matters** – analysis of historical sales data, proxies, etc. – if there is not a Pricing Strategy in place first. It is critical that SaaS & Web App companies come up with a pricing strategy that is part of their marketing strategy if they want to develop pricing that is aligned with their goals and the market’s value perception. Collect data, analyze it along with other market information, and make sure you have a Pricing Strategy in place and you’ll be much closer to getting it right out of the gate. ## 2. Absolutely Don’t Copy Others For those that didn’t guess, under value, or focus on margins, copying another company’s pricing is the logical option, right? **No!** Whether it is another company’s Pricing Page or the pricing itself, don’t copy. Ever. Do the work required to ensure your pricing comes from a pricing strategy that is part of your overall marketing strategy. (Is there a theme here?). But I have seen companies, startups and later stage alike, that copy competitors pricing exactly. I guess this makes more sense than copying companies that aren’t even in the same industry/vertical/niche, which I’ve also seen. For instance, an Oil Industry company providing a super-powerful vertical expertise & data product said to me recently “but what about how 37 Signals or Salesforce.com does it?”… craziness. Look… you absolutely should know how the competition charges (what revenue metrics they use, billing cycles, etc.) and what their pricing is – but only so you know how you are different.If they are the market leader and have set the tone for years, and you come in with a different model because you have a deeper understanding of the market, you will need to know how to position that different pricing in the eyes of your market. Even if you know this is how the market really wants to pay, what they want to pay, etc. But let’s look at the topic of “copying others pricing” from a different angle. Did you copy everything else your competitors do? Probably not. In fact, you are in business because you thought you could do it better, more innovative, more aligned with what the market wants, right? So why would you copy their pricing? Oh, because you think they got the pricing right? **That could be a seriously costly assumption!** ## 1. Don’t Avoid Pricing Altogether Finally, the other big mistake I see are companies who want to avoid pricing altogether. Whether this is by offering the product for free or using Ads, this happens. Of course you could do Freemium, but that isn’t a way to avoid pricing since the “premium” portion of the service requires a price, right? Nope, I often see companies launching their product with absolutely no revenue model at first just to “get traction” to gauge interest. First, let’s be very clear… this is no indicator of “interest” in a paid service – only interest in a free product. Next, without a very well-thought-out plan for how to move from Free to a paid service, this could seriously backfire – this includes more than just a Pricing Strategy, but a strategy for ensuring you don’t alienate the free user base. Further, for companies that have a free service but use advertising as the primary revenue stream, here is an interesting insight – even ads have prices! Look at a company like [Spiceworks](http://www.spiceworks.com/), a B2B SaaS company that has around 1.5M users and who’s primary revenue stream is ads. They really only have ~250 customers – their advertisers – and you better believe they have a strong pricing strategy around those ads. **You cannot avoid pricing unless you avoid doing business altogether.** Pricing is a critical piece of doing business  – whatever the business. For SaaS & Web Apps that leverage an automated sales process, where the customer goes to the marketing website, to the pricing page, through the buying process, and then uses the product – without any human intervention – **pricing is critical**. There is no sales person or consultant there to answer objections or read body language. No one to offer discounts rather than lose the sale. For this reason alone, it is critical to get your pricing – and marketing around your pricing – as right as possible out of the gate. To do this requires ***work*** and avoiding the 5 mistakes above. If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Pricing Strategy– contact me and we’ll setup a time to discuss your options for moving your company forward. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # SaaS Pricing: Please Learn From the Zendesk Fiasco *May 18, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-zendesk-fiasco/ It is time for SaaS & Web App startups to sit up and pay attention. **SaaS Pricing is very important to your venture** but not just to ensure you make a profit or cover expenses. It is so much more than that and you should seek to get it as right as possible out of the gate. Too many SaaS and Web App companies, startups or not, think that they’ll just throw some numbers together, put it on a pricing page and that is the end of it.  If they are leaving too much on the table, they’ll just raise prices until people stop buying and then lower it a notch. Simple. **They would be wrong.** **Pricing is marketing**. We say it all of the time, but what does it really mean? Well, look at Zendesk, [a growing startup with $6.5M](http://www.crunchbase.com/company/zendesk) in funding and, until this morning, very well-liked. They decided to raise their prices and did so in a way that has [caused an enormous amount of negative backlash](http://techcrunch.com/2010/05/18/zendesk-pricing/). In some cases, customers are reporting a 300% increase in what they’ll pay to use Zendesk. From the outside, this seems to be indicative of no real pricing strategy (as a part of marketing) and certainly no or at least very poor tactical planning around the price increase. Some simple polling on Twitter shows that Zendesk did not actively engage their customers in the process prior to raising prices. My immediate reaction on Twitter to the backlash: > When you need to raise prices, there are two options: engage your user/customer base or alienate them. Its your choice. [#zendesk](https://twitter.com/hashtag/zendesk?src=hash&ref_src=twsrc%5Etfw) > - Lincoln Murphy (@lincolnmurphy) [May 18, 2010](https://twitter.com/lincolnmurphy/status/14235417178?ref_src=twsrc%5Etfw) Did the price increase correlate to an increase in perceived value by the end customer? How is their market position now? How have they helped the competition? Look at this random tweet I grabbed when searching for #zendesk… this is why pricing is marketing! > Anyone got any recommendations for someone considering dumping [#zendesk](https://twitter.com/hashtag/zendesk?src=hash&ref_src=twsrc%5Etfw) after their crazy stupid level price increase > - Adam Bartlett (@abartlett) [May 18, 2010](https://twitter.com/abartlett/status/14234949544?ref_src=twsrc%5Etfw) We will do a post-mortem on the Zendesk Pricing Fiasco of 2010 later, after more details emerge and the dust settles, but It is very obvious the planning around their price increase was either poor or was **executed poorly**. Just to be clear, Zendesk did not reach out to Sixteen Ventures for help with their pricing nor with the execution of the price increase, but they should have. **This is something we help companies with all the time.** Whether its a price increase, moving from beta to production, or from Free to a Paid or Freemium offering, Sixteen Ventures can help you. **Please don’t wait until its too late**, though we have been known to clean up some messes… We have always preached the message that Pricing and Revenue Modeling are vitally important for SaaS & Web App companies, startups or not. Unfortunately, this kind of thing happens a lot, and when the company is lower-profile than Zendesk, it doesn’t get this kind of coverage. But it happens more than it should and that is because the message that Pricing is Marketing and vitally important to your business just isn’t being absorbed. ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Cloud Acquisitions Create New Opportunities *May 12, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/cloud-acquisitions/ ## So you’ve built a killer SaaS product and [Google or Oracle or Microsoft or…] just bought your big competitor; is this good or bad for you? ***NOTE:*** This post is originally from May 2010, but the last two years have been full of Legacy Software vendors snapping up SaaS and Cloud providers. From SAP buying SuccessFactors in 2011 to Microsoft buying Yammer and Oracle buying Taleo & Eloqua in 2012, things are going to continue to get interesting… but what does this mean for you? A lot… so read on. Merger & Acquisition (M&A) activity around SaaS and Cloud seems to be heating up. Legacy Software, network and hardware infrastructure, and even Web 1.0 companies are are gobbling up SaaS pure-plays left and right these days. For every Salesforce.com buys Jigsaw (a SaaS company buying a Web 1.0-turned-2.0 company) or SuccessFactors buys CubeTree (SaaS buys Enterprise 2.0 firm) there are more deals where a legacy software company buys a SaaS / Cloud / Next Generation whatever company. Some deals are small and fly under the radar, like EZFacility buys eFit Financial. Others are larger and really shake up an industry, like the announcement this week by Warehouse Management System (WMS) firm [Red Prairie that they acquired SaaS WMS Smart Turn](http://www.theferrarigroup.com/blog1/2010/05/11/wms-and-inventory-management-provider-smartturn-acquired-by-redprairie/). This uptick in M&A activity, which really started to heat up in 2009 at the tail end of the steep downturn when prices were low and SaaS companies that needed out wanted out, prompted Evangelos Simoudis from Trident Capital to [write a great post](http://blog.tridentcap.com/2010/05/time-for-saas-ma.html) detailing why now is a great time for M&A activity around SaaS. It makes sense for him to really understand this aspect of the “SaaS Market” since his firm has a large portfolio of SaaS investments and it is in the best interest of his investors for many of those companies to find a big exit. But what is the real motivation for these acquisitions from the buy side? For SaaS, Cloud, or Web companies, the acquisitions seem to be a head start to certain functionality more than anything else. Salesforce.com could have built their own crowdsourced Rolodex, but instead used their massive cash reserves to just buy one in Jigsaw. SuccessFactors bought CubeTree to give it a head start in enterprise social networking likely as a hedge against SFDC’s Chatter. So what is the motivation for Legacy Software companies to buy SaaS companies? Likely its not to add features since there is a technology disconnect. Is it the recurring revenue? Yes. Is it the existing customer base that they can cross-sell their existing (or future) products / services to? Yes. Is it the jump start on a path to SaaS? Yes. Is it the “SaaS DNA” that their organization might be lacking? Absolutely yes! Evangelos in his post on M&A activity in SaaS thinks it will be mid to late 2011 before legacy companies really ramp their acquisitions of SaaS firms. We saw an uptick in activity starting in mid-2009 with some major legacy vendors brining us in to help vet SaaS companies for acquisition, but I think it was just the tip of the iceberg. As he states, the ramp will happen when vendors realize that doing it themselves is harder than just buying a company; and it will likely be due to their lack of “SaaS DNA.” Whenever Sixteen Ventures is involved in due diligence or market intel work for a legacy company seeking to acquire a SaaS firm, a lot of effort is spent in understanding that **“DNA”** that makes up the target firm. Legacy companies still don’t “get” SaaS so they think by acquiring or **“injecting”** SaaS DNA into their firm, the entire organization will overnight become a “SaaS company.” In theory that is nice, but in practice I’m not so sure. SaaS is often fundamentally different than the core business of a Legacy Software company. It just is. And while the **“SaaS DNA”** that they brought in could be beneficial, it is usually the acquiring company that is unwilling to change that causes the acquired DNA to whither away and die; the host is rejecting the transplanted material. There are numerous examples where even a progressive web company like Google buys a company and the founders leave as soon as they are allowed to by contract and the product dies on the vine. While something companies don’t often admit to, there are times where acquisitions occur specifically to kill a threatening competitor and lock-down the executives in tight non-competes for a few years. But this isn’t all doom and gloom! In fact, it is actually good news as it shows that every time a legacy company acquires a SaaS firm,  **a new opportunity is born** in that space. For instance, if you have a SaaS WMS solution,  you might have looked at Smart Turn being bought by Red Prairie as a death knell for your firm. A well funded market leader, possibly going IPO, just got acquired by a legacy market leader and now they’ll eat your lunch. But there are other potential outcomes. First, if the company that acquires your competitor has their own [Legacy Baggage](https://sixteenventures.com/legacy-baggage) (negative market sentiment, a distrust of their practices, over priced, etc.) that baggage will spill over nicely to their “new On-Demand product.”  Plus, the new company will likely cave to pressure to do one-off installs and customizations of their product since they don’t really understand SaaS, leading to the same negative market sentiment that befell the acquiring company. In some cases, we recommend that firms start a new company from scratch or continue to operate the acquired company as a wholly owned subsidiary to keep from commingling the two. Trust is a **HUGE** factor in SaaS and many legacy software companies do not have the trust of their customers. The customers are happy to use their software if they get to run it themselves but would never want the vendor to run it for them. How can you take advantage of their newfound baggage? Just as interesting is the serious likelihood that both companies have used negative marketing campaigns against each other or their delivery methods/business architectures (SaaS is insecure, legacy software is antiquated and broken) and now they are one. How do they position their products now? This can create **an amazing amount of market confusion** for another vendor to take advantage of. Finally, there is always the possibility that the acquired company will die on the vine, never having a chance to really take off under the direction of their new owners. Perhaps the acquired company will linger in the purgatory that is a “hybrid” organization (both On-Premises and SaaS) while the executives, with strong non-competes in that space, wait out their prison sentence. This creates **amazing market opportunities** for savvy and strategic SaaS vendors. Sixteen Ventures can help you perform market intelligence or due diligence on SaaS or Cloud acquisition targets, help you take full advantage of those strategic acquisitions and that new “SaaS DNA,” or help you **exploit** the opportunities created by the acquisition of your competitor. If you would like to discuss retaining our services, [contact us to get started today](https://sixteenventures.com/start-here). If you’re an executive in an Enterprise Software or ISV company and you’re curious how we could accelerate your move to the cloud – including developing your Go-To-Market strategy – contact me and we’ll setup a time to discuss your options for making a profitable move to the Cloud. – [Lincoln ](mailto:lincoln.murphy@sixteenventures.com)(972) 200-9317 --- # SaaS Distribution: Time to Change the Channel *May 12, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-channels/ ## Do SaaS products require, or can they benefit from, distribution through a 3rd party? I’ve written in the past about SaaS channels and how most people are doing it wrong, and there seems to be renewed interest in this topic. Unfortunately, things haven’t changed much. Since this is “software” as-a-service, people cannot get away from looking at things from a legacy software channel point of view. The recent heat-up seems have been pushed over the edge by the announcement earlier this month by Salesforce.com of their partnership with VMWare (and their subsequent acquisition of Gemstone) to introduce VMForce. This partnership will supposedly provide the ability to run native Java server applications on the Force.com platform, in addition to apps written in SFDC’s proprietary Apex language. This seems to be similar to other PaaS offerings, like Heroku, that use “open” languages and technologies, but have proprietary functions, data stores, and services to interact with. Just to be clear, I’m not talking about integration by one SaaS application with other SaaS or On-Premises applications through open APIs and custom code or via 3rd party services such as Boomi or connectors like [Cazoomi Snaps](http://cazoomi.com/). This type of integration is absolutely critical if the vendor wants to become an integral part of the ecosystem its customer-base is building. Lack of integration options by SaaS vendors will be their downfall as companies move to “the cloud” and want one version of the truth, single-sign-on, etc. But integration is not a channel issue or a SaaS issue; it’s just **an issue**. This is why IBM just bought Cast Iron Systems. But I digress… The thing that has analysts and pundits excited by things like VMForce is that now the “channel has something to do”… as if the only reason for a channel is to build on or extend a platform. Extending an application, and essentially building a platform, a la SFDC’s Force.com and AppExchange can be a fantastic opportunity for the core vendor and the surrounding ecosystem; but its exactly that – an ecosystem. This has very little correlation to traditional channels and more closely resembles developer programs in legacy software companies, but that analog doesn’t do it justice. Further, the notion of a true ecosystem is an opportunity **quite unique to SaaS** or other single-instance, multi-tenant “cloud” applications or platforms. Celebrating that technology VARs finally might be able to add value to SaaS or Cloud apps is not progress. In fact, its a rerun from legacy software and an attempt to justify the existence of VARs. There has always been a **HUGE** opportunity for SaaS and the channel that only a few companies are really taking advantage of. The reason? Other than the lack of industry support and promotion of these opportunities, it requires the SaaS or Cloud (or whatever) company to stop thinking like a “software” company and start understanding just what they have at their fingertips. They are **service** companies who can provide tremendous value not only to the end-customer but to intermediaries that help the SaaS vendor reach those customers. In some cases, its possible to directly monetize the relationship the SaaS vendor has with the intermediary. Of course, progress isn’t helped along by the traditional channel consultants or former VP Channes at XYZ Legacy Software Corp who wants to get into SaaS or “Cloud” trying to force their traditional channel management best practices square peg into the round hole that is SaaS. There is so much [Legacy Baggage](https://sixteenventures.com/legacy-baggage)  coming into SaaS and Cloud (due to bandwagon-jumping) that it is really bogging down the substantial progress that seemed to be happening in terms of next-generation channels, network effect, ecosystem, etc. Announcements like VMForce that are actually **quite revolutionary** unfortunately don’t help because they can so easily be twisted to fit nicely into that legacy baggage being drug along by “industry insiders” At Sixteen Ventures, we have always looked at SaaS as something far beyond “software” delivered over the web. Whether its SaaS or Web Apps, if there is multi-tenancy and you’re solving a business problem, the opportunities for channels, specifically distribution via Trusted Advisors, is significant. Forget traditional VARs, **the real opportunities** are in understanding who the end-customer is, who they trust, and giving tools to everyone that sits between the vendor and the end-customer so that all involved can add, and extract, value. If there is a third party involved at the “technology level”, they aren’t a traditional VAR; likely they’re an integrator using the services or tools from above. Think of the relationship between SaaS vendor, intermediaries, and end-customers as a value-chain or value-network. Look at a company like [Xero](http://www.xero.com/), with their SaaS accounting package, and how ~50% of their business is via channels; specifically CPA and Accounting firms. They work through the trusted advisors to get to the end-customers they want to use their products. But Xero isn’t just giving spiffs or a cut of revenue to those professional firms; that would be **misaligned with the business of their channel partners.** Xero actually helps the trusted advisors do more of their **CORE** business by giving them tools, insight, visibility, etc. into their end-customers’ activity, data, and operations. This is **far more valuable** to Xero’s partners than some cut of monthly revenue and much more aligned with the business model of their partners. Would CPAs or Accounting firms want to touch installed software? Some have in the past, including affiliations with products like QuickBooks, Great Plains, etc. because it made sense on paper; they shared the same end-customer. But the logistics didn’t work. Few non-technical companies want to get involved in “software;” so Xero simply provides a service. And everyone in the value-chain wins. It is great that VARs finally have something to do with “the Cloud,” but for SaaS vendors, the message being sent by the “industry” is still off-point. Just because you don’t have some technical layer that will allow you to engage technology VARs doesn’t mean that channels are not available to you. On the contrary. There are likely **far more lucrative channels** out there if you understand how to find them; look for Trusted Advisors that share the same end-customer with you and figure out how to help them do more of their **CORE** business while also helping the end-customer. ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS, Web Apps, or Just ‘Apps’? *April 20, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-or-apps/ On my last trip to San Francisco I sat down with Matt Childs of DreamSimplicity to talk about the state of SaaS. We shot some video as we talked about how Google & Apple have changed the distribution landscape for SaaS & Mobile making App Stores & Marketplaces a new reality for SaaS vendors and their distribution strategies. The conversation also focused a lot on how the term “SaaS” is not found, at least prominently, in the Google Apps Marketplace and whether or not this means anything for SaaS vendors or if it is reflective of a lack of resonance by “App Vendors” – web or otherwise – with the term SaaS. That is the topic of this video, embedded below: What was potentially more interesting, and not caught on camera, was later conversation about whether or not the term “SaaS” even matters any more. Perhaps another way to frame that thought is this: True Software-as-a-Service (SaaS) leverages the [SaaS Business Architecture (SBA)](saas-and-integrated-business-architectures.html) where you have a multi-tenant, network-centric commingling of Marketing, Intellectual Property, Technology, and Revenue Model. But, the SBA applies equally to SaaS, Web Apps, Cloud, PaaS, IaaS (some flavors and vendors) and even Mobile. This then begs the question: since the main thing is the SBA, not the consuming market, not the type of device or even method of consumption of the service, is the term “SaaS” as many have defined it simply too limiting? Further, have large companies like Salesforce.com, with its $11B market cap, inadvertently associated the term “SaaS” with a certain company scale that bootstrapped startups simply do not associate themselves with? Are we SaaS industry insiders keeping our message of SBA and the associated Revenue Model, Distribution, & Pricing Strategy best practices out of the hands of the very companies that need to hear the message most because we insist on using a term that does not resonate outside of our small “community?” This is certainly an interesting topic for discussion. There are many of us that have always believed 1) there has to be a better name than “Software-as-a-Service” and 2) at some point this technology, delivery method, business model – whatever you use to refer to it – will cross the chasm into mainstream and at that point it would likely just revert back to “software.” But things seem to be accelerating at a faster pace vis a vi mainstream adoption and with Google and Apple behind the term, Apps seems to be the term likely to replace SaaS. What are your thoughts? ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Pricing: Commodity Metrics and the $240 GB *March 31, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-value-metrics/ SaaS pricing strategies that use low-value commodity metrics – like storage – to differentiate tiers force customers to make price comparisons that shouldn’t be made. Updated for 2014 This topic came up with a client who wanted to pass on the storage costs associated with the use of the system to their end-customer. We quickly moved past that idea, but I wanted to bring it up to a greater audience so I decided to finish and share a post that I’ve had queued up for a while. Your feedback is welcome, of course. A quick search on Google shows you can buy a 500GB hard drive for $60, or about $0.12 per GB. Anyone can do that search and probably a lot of people have; most probably weren’t happy when they did, either. Even if they haven’t actively sought pricing on a new hard drive, they know that a GB is super cheap these days. Yet when you sat down to develop your pricing strategy for your SaaS or web service, you decided it was a good idea to charge your customers an extra $20/month or $240/year for an extra GB of storage space; something both you and they know they can get for $0.12. ## SaaS Pricing and Accidental Anchoring **Wait!** “That argument doesn’t make sense” you say. “We add value on top of the storage;” you manage that data for them, you do backups and have a disaster recovery plan, your data center is SAS70/SSAE16 certified… stop! … it just doesn’t matter. See, whether you like it or not, your customer just did an apples to apples ROI comparison between two things that **have absolutely nothing** to do with each other: your complex web service and a commodity, desktop hard drive. And** its all your fault!** So now,  either they won’t step-up to the next SaaS pricing tier (holding back on usage or deleting objects) or they will because they have to, but won’t actually be happy about it since they “know” the insane profit margin you’re getting off of them. And even though they moved up one tier, they might be actively looking for a way out. You see, knowing that you add value isn’t enough; you need to tell the customer about the value you add and sell them on it. Unless they’re buying a storage service (S3, online backups, etc.), pegging your pricing to a commodity metric like “storage” is simply not aligned with what the customer perceives to be valuable. And perception is reality. Worst case, your chosen pricing model takes their minds off of the REAL value you add to their lives and focuses it on some metric that they associate with a super-cheap commodity. ## Gaming the System is a Symptom of a Deeper Problem So as not to simply give high-level advice without any meat to it, here’s a **pro tip** if you happen to have this type of commodity-based step-up in your pricing: Go back and analyze the behavior of your subscribers right before they upgraded and look for patterns like excessively deleting objects only to finally upgrade. While being completely proactive is ideal, you may not be able to do that… one trick is to have your subscription management system trigger a process to go back and look for those odd behaviors after an upgrade and flag the account for follow-up if necessary. This is important because gaming of the system like that can be an indication that they tried their best **NOT** to upgrade but finally had to. And this type of forced, unhappy upgrade [should be considered a churn threat](https://sixteenventures.com/saas-churn-threats); they want out and rest assured, they will eventually get there. If odd behavior is found, pass that off to an inside sales person or Customer Success Manager who can talk to the customer to make sure they are happy and if not, hopefully fix it and get them to stay around longer. That tip aside, the entire mess could have been avoided if you didn’t put some type of “commodity item” as a main differentiator between SaaS pricing tiers and instead focused on value-added functionality or features as the users grow, so now it’s time to fix the glitch. I can help… ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics, including help with your SaaS pricing, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Pricing: Versioning for Market Segments *March 5, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-pricing-versioning-market-segments/ Rags Srinivasan posted a great article titled “[The Science of Optimal Versioning in SaaS](http://j.mp/a0qh5v)” to his blog that talks about SaaS pricing. In the article, Rags talks about taking apply SaaS pricing to through different bundles of features at different prices for various market segments. The whole article is great, so I encourage you to read it. I did want to ensure that the complex issues associated with SaaS and Revenue Modeling, followed by Customer-facing Pricing, were not glossed over, so I left the following comment on Rags’ blog, and since it is relevant, am posting it here as well. Since SaaS is our specialty at Sixteen Ventures, we have a lot of experience in versioning, bundling, etc.. One of the main things we tell our clients is, in SaaS, things are a little different than in other businesses, including traditional (or legacy) software. SaaS vendors need to understand all of the [underlying revenue streams](updated-7-saas-revenue-streams-report.html) they will leverage *before* they architect and build their product. This is different from other businesses where the revenue model is disconnected from the product or service itself. In SaaS pricing, you need to have a way to keep track of the metrics relevant to your immediate market (at launch) as well as have inbuilt flexibility to ensure you can support the appropriate revenue streams and metrics for ancillary markets to come. But once you have ensured you can support the appropriate revenue metrics in the application, lets say usage-based, or per-seat under the recurring revenue stream, then you can start to bundle features along with the measurement metrics and apply pricing. This is why we say you must decouple revenue model from pricing in SaaS; ultimately pricing is part of marketing, but it is all tied together. This is why SaaS is unique and if you don’t understand this, it can cause significant business scalability issues later on (often quite soon). One note, we always tell our clients to [differentiate the pricing bundles based on value-added feature](saas-pricing-scaling-with-customer-success.html)s, services, etc. and to avoid “commodity” items like storage, CPU, or even users. You have to know your market and if users are the key metric that is most aligned with the needs of the client, it would be foolish to not use that, but often, it is a metric with little perceived value. Being value-based allows vendors to charge more in many circumstances. The great thing in SaaS is, if you’ve built your product properly, you can very easily customize pricing bundles, versions, tiers, etc. to fit the appropriate market segments. Then, using the marketing website, landing pages, campaigns, etc. you can segment and direct your target market to the appropriate pricing page for them. But like you said, even when targeting a specific market segment with their own pricing, why do just one? If it makes sense and you can align different pricing with the value delivered to the different segments of that already tightly targeted market segment, why not? Of course, it all depends on so many other factors, but in the SaaS world, we have a lot of options. ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # Free Trial Success Secret #7: The Four Phases of a Free Trial *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-7-four-phases/ ## Free Trial Success Secret #7: The Four Phases of a Free Trial --- # Free Trial Success Secret #6: Perfect Free Trial Length *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-perfect-length/ ## Free Trial Success Secret #6: Perfect Free Trial Length --- # Free Trial Success Secret #5: Credit Cards are a Red Herring *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-should-ask-for-credit-card/ ## Free Trial Success Secret #5: Credit Cards are a Red Herring --- # Free Trial Success Secret #4: Measure the Right Things *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-4-measure-the-right-things/ ## Free Trial Success Secret #4: Measure the Right Things --- # Free Trial Success Secret #3: Stop Confusing Freemium and Free Trials *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-3-stop-confusing-freemium/ ## Free Trial Success Secret #3: Stop Confusing Freemium and Free Trials --- # Free Trial Success Secret #2: Get Your Product to Sell Itself *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-2-get-your-product-to-sell-itself/ ## Free Trial Success Secret #2: Get Your Product to Sell Itself --- # Free Trial Success Secret #1: No More Evaluations *February 16, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-trial-success-secret-1-no-more-evaluations/ ## Free Trial Success Secret #1: No More Evaluations --- # 7 Secrets to Increasing Conversions *February 13, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/how-to-increase-conversions/ ## When your sales process fails to convert customers, it’s probably doing ***exactly*** what it was designed to do. Which is why even though you offer an amazing SaaS or Web App that meets a real market need, you’re not making sales. Even though you worked hard, created amazing content, made a bunch of cold calls, and used strategic advertising to get plenty of traffic to your site, you’re not making sales. Even though you’ve optimized on-site conversions and are able to get people to sign-up to try out your product… you aren’t making sales. Even though people *try your product* for 30 days, you aren’t making sales! But I can help you make more sales. Look, whether you realize it or not, a low conversion rate almost always points to your Free Trial as the culprit! And that’s not just my experience talking… I’ve got industry numbers to back me up on that claim. Softletter – an industry research firm – recently published the results of their Annual SaaS Survey and their numbers jibe with my own experience: – 66% of SaaS vendors report they convert less than 25% of their Free Trial sign-ups to customers – 44% of SaaS vendors report they convert less than 10% of their Free Trial sign-ups to customers! Now, if you believe as I do that a Free Trial has one singular purpose – *to create customers* – then you’ll agree that those ‘industry’ numbers are not good. If you have anything near the industry average, I can help you make more sales. In fact, even if you think you’re doing well compared to those industry numbers, I can still help you make more sales. That’s because numbers like this can be deceiving as they might cause someone with a conversion rate of more than 25% to think that they’re actually doing good! They’re not; they’re just doing better than most. Look, if you have a 29% conversion rate, that still means *71 out of every 100* people that sign-up for your Free Trial – the ***ONE*** part of your sales process over which you have the most control – end up ***NOT*** becoming your customer! That is not good no matter how you look at it. Especially if the majority of your sales go through your Free Trial, which is the case for most SaaS and Web App vendors I’ve worked with. But I have some great news for you! You’re actually closer to making more sales than you realize and I can get you there. I’ve spent the last 6 years working with literally 100’s of SaaS & Web App companies from around the world – many names you know like KISSMetrics, Constant Contact and Zendesk, and names you don’t yet know, but will! – and I can tell you that the bottleneck in the sales process is almost always the Free Trial and it ***CAN*** be fixed! But you have to realize that seemingly small mistakes in your Free Trial process can have a huge impact on sales, causing drag and ‘trial to purchase friction.’ Unfortunately, few vendors are just making small mistakes… most are making ***MASSIVE*** mistakes that aren’t just causing friction in the conversion process; these mistakes stop the conversion process dead in its tracks! Many vendors try to overcome these problems by ‘fixing’ other problems, like trying to get more traffic to their site. Without fixing your Free Trial process though, it’s like pouring more water down a clogged drain; it still just drips out the other side! But when you actually fix your Free Trial strategy, you fix the big problems holding you back; you unclog the drain! Oddly, while Free Trials are hardly new, and every SaaS or Web App vendor offers one, finding out what has worked for others, pulling together industry best practices (that don’t seem to exist), and then – if you actually find something – trying to figure out how to apply that to your situation is not easy. While you want to increase your Free Trial conversions, the last thing you want to do – or have time to do – is hunt down answers from random sources. But even if you wanted to, that assumes you know what the right questions to ask are in the first place. Okay, but if the answer is out there – the idea that the Free Trial is the bottleneck and the ways to fix it – why has it eluded you? I can give you 6 – possibly controversial – reasons this information is hard to find: 1) The SaaS, web app, startup, cloud, and tech ‘media’ – pundits and analysts included – focus on the unusual successes; and unusual successes are unlikely to take ***YOU*** down the right path! 2) The concept of survivor bias in that ‘media’ coverage; you rarely hear how many used the same strategy and crashed and burned! 3) The very real notion of branding and momentum of newly- and heavily-funded, as well as popular companies, or those companies with a massive amount of community support external to their SaaS products (example: 37Signals created the web framework Ruby on Rails) who can make even major mistakes and still get customers; mistakes that you simply cannot make! 4) A focus on tools, metrics, measurement, instrumentation, etc. but no basis for why those metrics matter in the context of engagement & conversion. 5) Causation vs. Correlation and the power of social networks to spread 1 person’s experience as the gospel; if that person is an investor, it will spread even faster (though the fact that it’s an investor is often lost on the bootstrapped startups reading the ‘advice’). 6) The people that really know how Free Trials work and have found success keep it to themselves or within their portfolio companies because they realize that this knowledge is a ***MASSIVE*** part of their competitive advantage, the key to long-term growth in Customer Lifetime Value, and the cornerstone of a scalable customer acquisition process; even for those with a higher-touch, human-powered sales process! Luckily, I’m not going to keep what I know to myself. I’m going to show you the *7 Secrets to Increasing Conversions with Free Trials* during a Live, Free Training session to help you avoid mistakes made other by SaaS and Web App vendors and to move you toward higher conversions… and higher revenue! But I need to get real with you for a second. Too often, when you figure out that it ***IS*** your Free Trial that’s the bottleneck in your sales process, you’ll search around, not be able to find the answers you need, and just give-up. You’ll stop trying to improve the effectiveness and efficiency of your Free Trial and revert to their your old ways. But you aren’t going to do that, right? You want to actually fix your Free Trial… to unclog the drain, right? Awesome, then join me for a 100% free training session where I’ll show you exactly how to turn your Free Trial into a Customer-Creating Machine! – Lincoln Sorry, training is closed right now. Email [Lincoln Murphy](mailto:lincoln.murphy@sixteenventures.com) to get on the list for the next training session…. or check out the Free Trial Dominator and get instant access to the training on-demand! --- # [Replay] 7 Secrets to Increasing Conversions with Free Trials *January 25, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/free-training-replay/ I took the video down… thanks for stopping by, though! --- # [Replay] 7 Secrets to Increasing Conversions with Free Trials *January 22, 2010 · by Lincoln Murphy* Source: https://sixteenventures.com/replay-7-secrets-to-increasing-conversions-with-free-trials/ # Join the Free Trial Dominator Program for SaaS & Web Apps Today! The Free Trial Dominator is a private, members-only program that combines **Content, Community, and Coaching** to help you transform your underperforming SaaS & Web App Free Trial into an efficient, customer-producing, conversion machine! What you’ll have access to in the Free Trial Dominator is what I’ve developed after spending literally 1000’s of hours working with the SaaS, Web App, Cloud, and Software companies from around the world – Billion-dollar companies to the earliest startups – you might know some of them: And I don’t pull any punches, either! The Free Trial Dominator isn’t just a bunch of generic ideas and then an up-sell to consulting… nope, this is the “Secret Sauce” that I’ve previously only shared with my clients… and you get it all! To pull this information together yourself would take hundreds of man-hours and cost you easily six-figures. And hiring me to help you one-on-one starts at $5000/day! But you get all of this – for ***6 FULL MONTHS*** – for ***ONLY $297*** when you sign-up before 11:59PM tonight! In fact, check out these emails I just got from new members: So join those guys that emailed me – and the rest of the Free Trial Dominator members from around the world – as a Charter Member right now and get 6-Months access to all of this: ## Content The Free Trial Dominator content is super-actionable, value-packed, and Frequently Updated and is all about on how to make your Free Trial successful. “*Lincoln’s insights and the library! The ability to go to website and watch all old videos. I was on travel and missed a lot – now I can go in catch up! It has made me realize a lot of things that need to be done!*” – **Sameer Bhatia, CEO ProProfs** “*What I really like about the Free Trial Dominator program is the email marketing tactics… that worked great for us! Lincoln, you challenge the status quo and you’ve made our Free Trial more effective!*” – **Jim Schultz, President AES Education** “*I am recommending my team view the content because its one of the few resources that provides a reliable insight into how to improve the trial sign up process.*” **Mathew Meyers, CEO Vision6 / Co-Founder OfferedLocal** You get the following content, which, by the way, I am constantly updating or adding to: ***Getting Started*** – Geting Started Guide – Gather Baseline Data ***Free Trial Strategy*** – The Free Trial Mindset Shift – Attention Phase – Engagement Phase – Investment Phase – Conversion Phase ***Free Trial Domination Methods*** – Pricing Page Design (Over 5 HOURS of content just in this part!) – Free Trial Sign-up Form Design – Email Marketing for Free Trial Success – Super Ninja Tactics ***Plus…*** – Additional Resources and Tools (links, spreadsheets, and more!) – Complete Group Coaching Call Video Archive (~10 hours at this point) The content consists of embedded videos – like the one above – that can play on any device – including iPhone and iPad thanks to Wistia – as well as accompanying notes, screen caps, examples, links, and ongoing updates after the videos were published. You simply cannot find anything else like this anywhere, period. And if you could, you wouldn’t be able to get 6-months of access to it for ***ONLY $297***, that’s for sure! But after today, this Charter Member offer goes away and you’ll never again be able to get 6 months of access to all of this great content for ***ONLY $297***… Nope, after today, the price goes up to $540 for a 6-month membership… so don’t hesitate, Become a Charter Member right now for ***ONLY $297***! ## Community “*Having other folks in the same boat is a nice change (versus the typical “startup” group with a bunch of un-launched products, no customers, etc.).*” – **Dave Churchville, CEO, ClientSpot** “*I get to hear what like minded people are up to as it gives me ideas for my product.*” – **Mark Wilson, The Test Factory** You’ll join an active Community of real-life SaaS & Web App pros, executives, and owners from around the world who share their experiences in our Private, Members-Only Discussion List. We talk about anything to do with running and marketing a SaaS or Web App business and I post a Weekly discussion topic; this week’s topic was “Do You Offer to Extend the Free Trial?” Other topics we’ve talked about “Do you require a credit card to start a trial?” “Pre-trial Indoctrination techniques” and “Phone number on your website?” Or how about this eye-opening, non-Free Trial related topic: “What tools do you use to run your SaaS business” where a bunch of companies shared what they use to run their businesses, from payment processing, to CRM, to billing, measurement/analytics, to hosting, email marketing, and more. So many great SaaS & Web App companies at different stages sharing what works, what doesn’t, and giving insight to Founders, Executives, and SaaS Pros that previously was unavailable. As one Free Trial Dominator member put it… “As a single founder, I’m not alone anymore!” You won’t be alone anymore in your SaaS or Web App business either when you Become a Charter Member today for ***ONLY $297!*** ## Coaching “*What I really LIKE about the Free Trial Dominator program is the sharing of real world examples in the webinars and the opportunity to network with and learn from others in the forum. It works really well when some are ahead of and some are behind where we are. I’ve already been helped and helped others in side conversations.*” – **Steven Mallows, GroupQuality** “*Your weekly sessions are also great, because it is more like “Weekly Staff Meetings”, which makes it great reason to attend and learn and share, even if we have had a good or bad week, minimum or maximum progress.*” – **Kevin Shahbazi** “*The interactivity and feedback are great. I work pretty much solo on my business, so getting advice, guidance and honest feedback is extremely useful for me. I’ve found it incredibly useful and think others working on a SaaS product would too.*” – **Tekin Suleyman, Crowd.fm** “*I like that we meet every week. You hold your course really easy to understand. Especially for me this is very good because I am from Austria and speak german. But I can follow you very easy. 10 Points out of 10! I will recommend you to a friend of mine who also started to build a SaaS! I’ll tell him that he will loose a lot of money if he won’t join your program!*” – **Norbert Strappler** – ***LIVE*** Weekly Group Coaching Calls – every Wednesday @ Noon Eastern *BTW, I’m working on the logistics of adding another call to accommodate FTD members in Europe, Australia and India; that should be live in the next couple of weeks.* – Discounts on Private, One-on-One Consulting with me, Lincoln Murphy, because FTD members have a more advanced understanding of Free Trials so we can be more effective when we work together privately. This offer ends @ 11:59PM EST ***TONIGHT***… so if you want in, don’t hesitate, become a Charter Member right now for ***ONLY $297!*** – Lincoln (972) 200-9317 ***PS***: This offer ends at 11:59PM EST ***TONIGHT*** so if you want in, don’t hesitate, become a Charter Member today for ***ONLY*** $297! Thanks! --- # SaaS Network Effect: Companies Should Exploit Aggregate Data *September 21, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/network-effect-data/ **SaaS providers must understand the difference between consumers of their apps, producers of SaaS network effect data and how to monetize both.** ## ADP: A Case Study in Network Effects A quick update for 2013: ADP now processes payroll payments for 1 in 6 American workers. Because of this massive “network effect” they’ve created, ADP has unprecedented, real-time visibility into America’s workforce; the ability to find answers in a way no large-scale poll could ever hope to achieve. ADP recognized that, while there payroll processing services were valuable as a revenue stream, what made ADP super-valuable as an entity, was the network effect data and the ability to report on it in aggregate. ADP is now the [trusted source for US Employment Statistics and Trends](http://www.adpemploymentreport.com/), with Hiring Managers and HR departments, Media Outlets, and even Federal and State Governments hanging major hiring and policy decisions on what ADP says. ADP isn’t a SaaS or Cloud company… ADP is a data company, and has used that to position themselves as not just a business resource for their customers, but an INVALUABLE resource to the United States of America. Not a bad position to be in! ## To Exploit or Not Exploit… First of all, lets be very clear: its not exploitation and these revenue streams are not hidden. SaaS network effect data (AKA data exhaust, aggregate application data, etc.) is based on the position of the SaaS vendor as a proxy in a multi-tenant environment and the value that is created by the network effect data can be quite significant when leveraged correctly; both for the vendor and the ecosystem. Regarding SaaS network effect Data, as a SaaS provider, you should: - Make sure your User Agreement is up-to-date and is clear about your intentions (see your legal department) - Anonymize the data before leveraging it in aggregate - Leverage the information as soon as it becomes actionable (critical mass is relative!) - Understand that this is part of the trade-off that you get for managing infrastructure and operational burden for the clients - Add value to the ecosystem when you leverage SaaS network effect data ## The FUD of Exploitation I realize that journalists or analysts attacking providers for “exploiting” SaaS network effect data are just spreading FUD to either push a personal agenda or – more likely – as link bait. Either way, I feel that I have to defend the rights of the SaaS vendor from these negative attacks, and maybe generate a bit of link bait myself. Moreover, I also need to remind my clients, readers, and followers that these folks are just spreading FUD and that leveraging – not exploiting – SaaS network effect data, is potentially a critical piece of the value derived from being a SaaS vendor. Many SaaS and Cloud vendors I’ve worked with have had that “ah-ha” moment when they realize for the first time they aren’t a technology company or a software vendor… they’re in the Data and Information business! ## Always Add Value Finally, I need to remind the users of SaaS that a credible, trustworthy vendor will leverage the SaaS network effect data in a way that provides value to you in a way you could never have expected from Legacy Software. The problem with SaaS network effect data is that, just like SaaS itself, it is mis-understood. For example, too many SaaS vendors consider the de facto revenue model in SaaS to be monthly subscriptions, which is not only untrue, but limits the potential of the SaaS vendor substantially. ## Selling Aggregate Data is Not New In that same vein, most people think of “selling aggregate data” by a SaaS vendor as some sort of nefarious dumping of client-specific data to the highest bidder in a back-alley transaction. That is either an antiquated view, one that exemplifies the naiveté of the author, or worse… It is not only common practice, but highly accepted, to leverage SaaS network effect data in these functional areas and market verticals: - Supply Chain Management - Financial / Banking / Credit Reporting - Healthcare - Entertainment (Music, Movies, TV, etc.) - Retail - Employment / Human Resources Note the inclusion of Healthcare in there; an industry with tight privacy laws (not just industry suggestions, but laws).  All of these industries have been trading in data like this for years. As a SaaS provider, you need to ensure you comply with the proper laws and industry governance and make the right ethical decisions, but anyone who makes a blanket statement that leveraging network effect data by a SaaS vendor is “exploitative” or otherwise inappropriate is simply trying to stir the pot by being “edgy” or is, even worse, incentivized to spread FUD. ## This is so 2009 When I wrote this in 2009, most SaaS providers didn’t consider leveraging SaaS network effect data as a viable revenue stream, mostly because they didn’t understand what they had at their fingertips. Companies coming to market in 2013 not only recognize the value in network effect data, but have taken advantage of the Big Data movement to build in the proper mechanisms to fully leverage what they have. In fact, SaaS companies that came to market in 2009 (or earlier) and didn’t recognize this often failed to build into their system adequate data capture methods in the first place, which prevents them from leveraging network effect data in any meaningful way. Now in 2013 they’re struggling to retrofit their architecture to take advantage of the network-centricity they’ve had for the past 5 years. If only they would have listened to me back then. ## Embrace Network Effects Early These are things that need to be considered during the early phases of product development, even if you won’t be able to fully monetize for a long time. In fact, how long it will take to get to a point where you can derive revenue from SaaS network effect Data is something that is 100% unique to your business. When I work with clients, I leverage our proprietary SaaS Revenue Matrix to get past the false notion of “critical mass” for SaaS network effect data value and get to the real story of how you can profit – literally and figuratively – from Network Effect data. ## Let’s Grow Your SaaS Business For immediate consultation and advice on leveraging Network Effect data to scale your SaaS business, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – Lincoln --- # SaaS Business Model – You Break It, You Buy It *September 17, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-business-model-break-buy/ ## Web Apps don’t get forked without a massive payday as motivation! When you draw the line in the sand and adopt the SaaS business model, you might be tempted by people asking you to break that model. These requests could include: - A competitor wants to license your application - A client wants a copy of your product on-premises - A client wants one-off customizations & require their own instance - A client has security concerns & wants their own separate instance It was announced this week that the United States government wants to use Google Docs but had some security concerns. Google said they will overcome those concerns by building a private “cloud” to meet government requirements. This is probably a pretty good deal for Google, but it is not the way they normally operate. In fact, would they do this for a smaller customer with similar privacy or security concerns? No. They’d tell them to go find someone else who will break their model for them. The government wanted Google to break their model and to Google, the deal was big enough that it made sense. The government broke the model, and they bought it. SaaS is a Business Architecture, not just another way to deliver software; at least when implemented correctly. People will always want you to make an exception for them, [but as I posted yesterday](https://sixteenventures.com/saas-business-model-rules), SaaS is about rules, not exceptions. We’ve all seen the sign in an antique store that says “if you break it, you buy it.” As SaaS vendors, especially early-stage companies looking for any and all deals, we need to plaster this message around the office (unless you “office” at Starbucks… just make your Mac OS background say those words). When presented with an “opportunity” to do something beyond the model you have chosen, remember those words and tell anyone who will listen “If you want me to break the SaaS business model, then you will have to pay a premium for that.” As a SaaS vendor you need to cover the risk associated with the increase in overhead due to a decrease in operational efficiency, the need to maintain separate source code forks, etc. You also need to be compensated for the hit to the other revenue streams derived from the Network Effect and Ecosystem that are now not available to you by this new arrangement. The Network Effect and Ecosystem provide two of the most important Revenue Streams for a SaaS vendor and when you cannibalize these due to early mis-steps – like breaking the SaaS business model for a quick buck – you will miss out later on; potentially when it really counts. The risk to your business is too high to make these decisions on a whim. Don’t let the temptation of a large cash influx now hurt the overall growth potential of the business. Too many SaaS vendors are met with this dilemma early on. Those that make it stick to their guns and stay on course or, if pressed, set limits on the one-off deals they’ll do and of course, make those who break it pay a premium. I’ve seen many vendors get stuck supporting a handful of early one-off customers because they made some bad choices. These bad choices caused the businesses to stagnate and, in more than a few cases, fail. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Business Model is About Rules, Not Exceptions *September 16, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-business-model-rules/ ## SaaS Apps should be flexible, but never customized. For the vendor, the SaaS business model is about rules, not exceptions. Exceptions aren’t scalable. For business scalability, you must shift focus to automated, repeatable processes. For pure-play SaaS startups, this isn’t as big of deal since they are likely starting with a clean slate. For those “switching” from the legacy software model or branching out from a non-software company by exposing internal processes, products, or expertise to the market via SaaS, this can be a big challenge. Whereas much of your current revenue might come from professional services, other one-off services, customizations, etc., if you draw the line in the sand and say “we are a SaaS vendor”, then you need to do whatever it takes to derive most of your revenue from the rules, and not the exceptions. The rules in the SaaS business model are the scalable revenue streams, and the exceptions are not. To do this requires you to identify and clearly delineate the revenue streams available to you (there are 7 total) and to architect your business, including the underlying software, to drive toward the scalable revenue streams. This could also require you to completely change your business and operating environment (the technology is the easy part); are you ready? – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # SaaS Success Requires Dropping the Legacy Baggage *August 26, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/legacy-baggage/ ## Don’t try to force an on-premises, packaged software product to the cloud. Legacy software is a square peg and SaaS is a round hole. No matter how hard you try, forcing legacy, on-premises software to fit into the “SaaS model” is at worst not going to work and at best, requires cutting corners. It is critical for legacy software vendors to understand that SaaS is not an evolution of software but a new and different business architecture. If forced to choose a lineage, SaaS has more in common with the evolution of the web rather than traditional software. As vendors leveraged the web to offer more functionality to businesses, it became clear that the future of business software was on-demand, web-native, etc. Legacy software vendors that shunned the web as a toy and kept trying to move behind their clients’ firewalls, are now scrambling to play catch-up with their web-native analogs. This is, unfortunately, leading to the aforementioned shortcuts as vendors are looking for ways to “SaaS-ify” their applications through the ASP model, Virtualized Desktop, or even just a change in licensing (“pay as you go!”), etc. They are bringing their legacy baggage to the on-demand market, and calling it SaaS. Unfortunately, with these non-SaaS architectures, vendors will continue to under-serve the market as they have not fully explored and embraced the SaaS Business Architecture; they have just changed the delivery method or the billing method for the same product they have always had. To be clear, whether they put a virtualized desktop front-end on an application and host it for their clients, or re-write the application to serve the product over the web, without truly embracing the entire SaaS Business Architecture, they have missed out. Simply re-positioning functionality for the web does not make it SaaS. SaaS is unique and while analogs of legacy software can be built within the SaaS Business Architecture, and legacy software can be re-written as SaaS, this is not the future of SaaS. The future of SaaS, in our opinion, is in the productization and commercialization of expertise, internal workflows, intellectual property, etc. These will be exposed to the market through the SaaS Business Architecture in ways that have no legacy software analogs by companies that are not, and never were, software companies. The future of SaaS is in products and services that never could have existed, at least at scale, in a legacy software world; they rely on the network-centric nature of SaaS, of the network effect of a critical mass of users. SaaS is not simply a change in the way software is delivered to end-users, but offers myriad opportunities, leverage, and revenue models within its very unique business architecture. The road traveled to get to where SaaS is today is paved with failures, lessons-learned, obstacles, and ultimately success. The overnight success stories in SaaS, like Salesforce.com, have taken over a decade to come to fruition. As an “industry,” we have learned a lot of lessons that have allowed us to get to where we are in the evolution of the SaaS Business Architecture; there is no need to repeat the same mistakes again. ### Reality Check For those “migrating” from legacy software or an ASP model to SaaS, this is easier said than done. How can these vendors drop the legacy baggage when that is all they have? It’s a process. The reality is, moving from the legacy software business into SaaS is not easy and should not be taken lightly. The “switch” is far more than just a technology change such as rewriting the software to be web-native and sticking it on a server. Remember: easy and worth doing are two different things and for many vendors and their clients, regardless of the effort, making the change to SaaS is very much worth it. Make no mistake though; introducing SaaS into a legacy software company upsets not only the technology departments, but the rest of the business as well. From the marketing and sales departments, to accounting, finance, and even human resources, enterprise-wide changes must occur to adapt to the new business architecture. Every vendor is different and must decide if it is worth it in the end. If the decision is made, then you must fully embrace the SaaS Business Architecture even if it is just a goal for your company to shoot for. Even if it takes years to get there, knowing where you are going is the key to any successful venture. If you’re curious how we could accelerate your move to the cloud – including your go-to-market strategy – contact me and we’ll setup a time to discuss your options for moving to the cloud successfully. – [Lincoln ](mailto:lincoln.murphy@sixteenventures.com)(972) 200-9317 --- # SaaS Companies Should Learn from Netflix *May 19, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-should-learn-from-netflix/ ## Web Apps with Proactive Customer Service will win more – and keep more – customers than their competitors and Netflix should be the model. I often extol the virtues of the SaaS Business Architecture for vendors beyond just the typical “cost savings” and “operational efficiency” that most pundits and analysts like to talk about. I see SaaS as a way to increase Revenue for vendors, not just save money. This increase in revenue is achieved through various means, one of which is better customer service. Better customer service leads to reduced churn, more upselling opportunities, and an overall growth in Customer Lifetime Value (CLV). Many SaaS pundits and analysts tell you to look at CLV, but few tell you what that really means or an effective way to increase it. Here’s a freebie… **serve your customers better and they will stay around and buy more**. That, by the way, is not SaaS-specific. The catalyst for this post was a an entry on the [37 Signals blog](http://www.37signals.com/svn/posts/1732-ian-hall-writes-last-night-i-was-passively) about Netflix and their proactive Customer Service. In the post, the author Ian Hall indicates that he had a streaming movie on in the background and noticed a hiccup in the audio. Apparently it wasn’t a big deal to him, it must have fixed itself, and they went on with their evening. The next day, he gets an email from Netflix telling him about the problem and asking him, if he was affected, to redeem a coupon for a small discount off of his bill. There is some discussion, to put it mildly, about the amount of the discount, etc. That is missing the point. What people should gravitate to in his post is this quote: > **Now while 3% of my bill isn’t really going to add up, it makes me FEEL 100x better.** Wow! Amazing what a little customer service can do. As SaaS providers (Netflix meets the criteria for SaaS, by the way), we are in a unique position to proactively respond like this. How many actually do? Few. How many could? More, but still few since this was most likely not built into their product. If that is you, fix it. Using the Netflix streaming movie example as an analog for a B2B SaaS Vendor, consider the same analog of Blockbuster as that of a Legacy Software vendor. I’m specifically talking about the Streaming video service from Netflix, and not their DVD Rental service. The few times in the recent past that I’ve actually rented a movie from Blockbuster, the experience has been horrible. Often the DVD is so chewed up that it won’t mount. My only option is to return the movie, in person, and either get a refund and not watch the movie which is not ideal or get a replacement disc and try again. This is annoying for me, the customer. But this should be just as annoying to Blockbuster, the vendor, as they have no control or visibility into this problem. I know for a fact that I have tried to view a DVD, and when it did not work it literally sat on my coffee table for three days before I just returned it. I didn’t go back and ask for a refund because it was already late and frankly, I just didn’t want to. In fact, I believe I saw that the movie was available on demand from Dish Network and just bought it that way. This episode, by the way, ensured that it would be even longer until my next visit to a Blockbuster. Blockbuster doesn’t know that, and they have no idea it happened. This is all news to them. As a Legacy Software vendor, you are Blockbuster in this analogy. You don’t know how your customers are using your product, or even if they are. Sure, you might be getting paid now whether they use the product, but when it comes time to renew, you’re out of luck. Too many SaaS vendors operate this way, too. If you don’t know how your customers operate, what they are doing, or what problems they are encountering, you can’t help them. If you do, you can help them before they even have a chance to complain which is the ultimate in customer service. Remember, its Software-as-a-Service… Service is the keyword there. ## Let’s Grow Your SaaS Company For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule a 60-minute meeting with me [via Clarity](https://calendly.com/lincolnmurphy/clarity). If you feel a more involved engagement is required for me to help you, [email me](mailto:lincoln.murphy@sixteenventures.com) with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) --- # ASP vs SaaS – What’s the difference? *May 12, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/difference-between-asp-and-saas/ Not all Web Apps are created equal and many people don’t understand the difference between ASP vs SaaS or Software-as-a-Service. ASP vs SaaS – What’s the difference and why is ASP a failed business model? *This post was originally written in 2009 and – while still **very** relevant – I suggest you also read this post for a more up-to-date take on the Business Architecture discussion: **[Software Vendors: The Cloud is Not Magic (but it can be very Profitable!)](https://sixteenventures.com/cloud-magic)* The difference between Application Service Provider (ASP) and SaaS is quite significant, but since both are “hosted” the two models are often confused. ASP is much closer to Legacy Software than SaaS. ## ASP vs SaaS – A Living History While the Revenue Model for access to the Legacy Software delivered via ASP versus that which is deployed on-premises might be different, in either case the Revenue Model is disconnected from the software itself. So at its core, software delivered via the ASP model is generally a Single-Instance, Single-Tenant Legacy Software application. The Revenue Model is very much like renting a server with an application installed on it. ASP is a failed model because it lacks scalability for the vendor, there is too much customization, generally a single Revenue Model, no inbuilt aggregation of data, and no network effect data to collect and aggregate. Are there vendors that have found success with the ASP model? Of course, but that success has been limited due the difficulties dealing with scalability and customization between systems. Next Generation ASP, or ASP 2.0, based on Virtualization and Cloud Computing, is just as bad as its predecessor. ## This Should End the ASP vs SaaS Confusion SaaS, as an all-inclusive Business Architecture, is a Value Delivery Method rather than a Software Delivery Method. Due to its inbuilt Multi-Tenancy which allows for shared resources and shared infrastructure, SaaS is scalable and allows for the vendor to take advantage of true economies of scale, reducing overall operational costs and complexities, especially with customizations. However, the more efficient use of resources, reduced overall cost, etc., associated with SaaS is just one benefit to the Vendor. The real benefit to the Vendor, as well as the Client, comes from the SaaS Business Architecture’s inbuilt Multi-Tenancy, which can be leveraged to help Improve Customer Service and Retention, Reduce Sales Cycles and Accelerate Revenue, Gain and Maintain Competitive Advantage, Improve Strategic Planning Abilities, and even Directly Monetize Beyond the Application. A reality check is that most of the time, when an application is deployed in a Single-Tenant or ASP model, its because the core product was not built to support Multi-Tenancy and the vendor simply does not want to take the time to re-architect the product. What this also means is that the product was not properly commercialized, not thought about as a business rather than as software, and therefore revenue model support, advanced metering and billing, etc., are probably not inbuilt. Finally, the product was probably not built to adequately capture important usage and other data outside of the core product. In other words, Multi-Tenancy is often the red herring that everyone argues about. The reality is that the since Single-Tenant applications are generally not architected properly to support the Business Requirements around the SaaS Business Architecture anyway, so the argument is moot. I suggest you also read *[Software Vendors: The Cloud is Not Magic (but it can be very Profitable!)](https://sixteenventures.com/cloud-magic)* --- # The SaaS Single-Tenancy vs. Multi-Tenancy Debate *April 14, 2009 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-multi-tenancy/ Web Apps built from scratch rarely aren’t Multi-Tenant; the debate only comes up with legacy software vendors migrating to SaaS and trying to justify their cutting corners. *This post was originally written in **2009** and – while still **very** relevant – I suggest you also read this post for a more up-to-date take on the Business Architecture discussion: ****[Software Vendors: The Cloud is Not Magic (but it can be very Profitable!)](https://sixteenventures.com/cloud-magic)*** The Single-Tenant vs. Multi-Tenant debate in the world of Software-as-a-Service (SaaS) continues even though the most successful SaaS company of all time, Salesforce.com, **has a pure Multi-Tenant architecture**. This is reality, yet the argument remains. Many people argue that since a single-instance of a single-tenant application can be “spun up” for clients, on-demand, via virtualization and “the cloud”, for a very small amount of money (since hardware procurement is not necessary), the need to build a multi-tenant application is not there. ASP 2.0 anyone? Those companies opting to forgo Multi-Tenancy (for whatever limitation-justifying reasons they come up with) will never reach the levels of success with their SaaS offerings that companies such as Salesforce.com, NetSuite, or Intacct have reached. Their failure to reach the level of those companies will be **tied directly to the fact that they are not Multi-Tenant**, and yet it will have nothing to do with the technology behind the Multi-Tenant architecture, Scalability, Operational Efficiency, etc. Those that continue this argument at the technology level are missing the mark. The fact is, a well-thought-out **Multi-Tenant Business Architecture** allows a SaaS Vendor unprecedented visibility into the actual usage of the system in ways a single-tenant or on-premises application simply does not. A wise SaaS Vendor will tap into this amazing amount of information to: - Improve Customer Service and Retention - Reduce Sales Cycles and Accelerate Revenue - Gain and Maintain Competitive Advantage - Improve Strategic Planning Abilities - Directly Monetize Beyond the Application It is easy to drop to the technology level when discussing Multi-Tenancy because after all, this is still software and even if people are arguing, they all “get” the technology points. Agree or disagree, its hard to dismiss, for example, that virtualization has changed the way we think about “computers” even if we disagree on its relevance to SaaS. To ensure that your company is successful, it is critical to bring the discussion out of the technology details and start talking about the business value behind your technology decisions. Like any good technology decision, Multi-Tenancy should have business drivers behind it. No technology decision should be made in a vacuum and Multi-Tenancy for your SaaS application is no different. In fact, simply building a pure Multi-Tenant SaaS application is no guarantee of success. To be successful, it is critical that SaaS Vendors take the time to understand how to leverage the power of Multi-Tenancy. And just to be clear, all of the “technology-level” issues are still very real. Improved Scalability, Operational Efficiency, Software Development Life Cycle management, etc. are all very much a reality of a true Multi-Tenant application. But it is time that SaaS Vendors begin to look at Multi-Tenancy not as a technology solution to a technology problem, but a technology solution to a business problem. I suggest you also read *[Software Vendors: The Cloud is Not Magic (but it can be very Profitable!)](https://sixteenventures.com/cloud-magic) *and check out the [SaaS Business Architecture Resource Guide](https://sixteenventures.com/saas-business-architecture-resource-guide), too. – [Lincoln](mailto:lincoln.murphy@sixteenventures.com) (972) 200-9317 --- # Actionable Business Intelligence at your fingertips *October 18, 2007 · by Lincoln Murphy* Source: https://sixteenventures.com/actionable-business-intelligence/ ***Originally published on October 18, 2007*** You probably capture a lot of data in your web or SaaS app, but how often do you mine that data for Actionable Business Intelligence; information you can use to solve business problems, such as slumping revenue, high client turnover, etc? It might be time to stop everything else you’re doing and go write some queries. Below are some scenarios that I helped a SaaS company solve recently with information right at their fingertips. ## If you have paying customers who aren’t using your system, find out why they aren’t actively using the system and fix it. Ask them what you can do to make their experience better, what problems they are having, etc. If you do not, when their contract is up, or they get their next bill, there is a high probability they will no longer be paying customers. It is much easier and cheaper to keep these customers than it is to go find new ones. ## If the majority of your system’s usage is from non-premium users, maybe you are giving away too much. Contact those free users who are actively using the system and find out why they haven’t upgraded. If the answer is “I don’t need those premium features” then you are giving away too much. You can either reduce the feature set on the free version or introduce advertising within the free product. The former might cause some problems with your users, but the reality is it has to be done. Tell them you are scaling back on the feature set in the free version but you would be happy to upgrade them to the premium version at a discount. The latter can be implemented without making existing users too upset and would be one of the reasons someone would upgrade to the premium version; to get rid of those pesky ads. Remember, however, that if your user base is small, ads might not make up for the lost premium revenue. ## If you have multiple people from the same company using your service, perhaps you could leverage that into a corporate account. Those users may not even know the others in their office are using it. If you don’t feel you have enough users at that company for them to consider a corporate account, leverage the few users you do have to spread the word internally… give them an incentive to spread the word (free month for every new user, etc.). This will quickly get you to that magical number you’ve conjured up that would give you confidence to sell to corporate. Alternatively, you might find that you have a large, un-related user base in certain cities, and that might be a great place to go for an early-adopter round table (with free pizza!) to get their feedback and to get them to spread the word for you. ## If the usage of your system is very small or the majority of the users are not paying, perhaps you can use that data to justify reducing your overhead. Do you need all that hardware at the co-lo if you are only getting 70 hits per day or do you really care if the freeloaders have to wait a second longer for processing to occur? This is difficult for tech-founders who might have a geek crush on their servers but could be enough to save a company with low revenues. Finally, whether you are mining data or not, make sure to constantly solicit feedback from your early-adopter customers. It reminds them, and *you*, who exactly you are building your web service for. – Lincoln --- # Fallout from Enterprise SaaS Series *March 10, 2007 · by Lincoln Murphy* Source: https://sixteenventures.com/enterprise-saas-series-fallout/ ***Originally published on March 10, 2007*** I have received an amazing amount of feedback on the [Enterprise SaaS series](https://sixteenventures.com/saas-economies-of-scale); just about everyone who read it has contacted me with mostly positive comments, but usually someone has at least one concern. I am going to try to address all of their concerns at one time. ## Hybrid SaaS != Hybrid Licensing Model A couple of people have mentioned that trying to support a hybrid licensing (or business) model would be difficult at best. I couldn’t agree more. I never intended to support or even condone multiple licensing models. I re-read what I wrote, and while it makes sense to me, you really have to follow it closely otherwise you could think I am supporting multiple licensing models. In fact, my “Hybrid SaaS” model is a hybrid technology model that is supported by only one licensing model, utility pricing. What I condone is pretty much technology agnostic and relies on the system being able to “call home” to handle the pricing. I think that is the future of the software industry more so than any actual technology. That said, I think the SaaS delivery model is the future of software. I am definitely pro-SaaS, including Pureplay SaaS. This series was just to let people know that while we as technologists, entrepreneurs, and evangelists have adopted SaaS as the de facto standard for software delivery, Corporate America, as I have seen it, is not onboard with that. Are they changing? Yes. Will it get better? Absolutely. SaaS is just not ubiquitous yet and you must be prepared for that as a new SaaS start-up. In one or two years, these objections may go away completely; you still need to know your customer though. A problem with many SaaS vendors is they come in and say “we’re a SaaS vendor” like the customer cares. Do on-premises software companies come in and say “our software is written in Java” or “we distribute our software on CDs”? No. And they shouldn’t because no one cares. The caveat with SaaS is that it is actually more difficult (hence the creation of my articles), because you actually need to make sure they can support that type of delivery mechanism. But what about selling the benefits of the SaaS model? Yes, you need to do this. But it has been my experience that you must do this after you talk about solving the problems of your customers; “Not only can we solve your problems, bring you these value-adds, but also our unique delivery model can save you money…”. If your only differentiation point is the delivery method of your software, that seems rather weak. ## Source Code Escrow Questions I got this response from one reader: *“I liked the idea of setting up an escrow for the source code as an insurance policy for the customer. I suspect many will scoff at that idea since the IP can be sold at bankruptcy auction but perhaps with an expiration date on the escrow agreement it would be a good tool for start-ups to use.”* I’m not sure how widely used software escrow is, but it is certainly not a new thing. I ran into it when I was looking for a hosted supply chain solution a few years ago. I asked them what would happen if they go away and they introduced me to the concept of software escrow. Source code escrow is a very detailed process and has strict controls over the IP. It is totally up to the parties involved, but you can always specify that the beneficiary is not allowed to use the IP outside of the scope of its intended purpose, i.e. they can’t take it and commercialize it on its own or use it in their own products. Source code escrow is really only used to facilitate business continuity, not to turn over rights to use the IP as you wish. Those rights are maintained by the owners, probably the investors (or creditors) in the venture, to do with as they wish. ## SaaS *IS* Ubiquitous I have also been told that SaaS is in use in just about every Enterprise in one form or another. I would take it one step further and say that both Pureplay SaaS and Hybrid SaaS applications are both in use heavily. Pureplay SaaS in the form of HRM, CRM, SCM and Hybrid in the form of vendor-provided desktop applications such as benefits management, shipping carrier systems from UPS and FedEx, etc. If SaaS is already in Corporate America, why do I say the barrier is still there? Three reasons. 1) you are a start-up, not an existing vendor with a new (often free) product to improve the relationship (such as UPS or FedEx) or 2) you are requiring payment in excess of the unit managers expensing abilities or have requirements outside of that of a standard PC (thus drawing the attention of the IT and Finance departments) and/or 3) you are trying to differentiate your product and must sell to multiple levels, thus bringing it to the attention of the IT department and other conservative levels of management. I have been inside of multiple companies where I am getting resistance due to the nature of our product architecture, while simultaneously talking about how we are going to integrate with other systems in use that are SaaS themselves. Again, your experience may vary, and this is all based on my experiences. In my experience it is still a challenge for a vendor to sell a SaaS-delivered product in Fortune 1000 companies. Times are changing, it is getting better, and soon, SaaS will be ubiquitous. Until then, please be prepared. You *can* sell SaaS-delivered solutions to Fortune 1000 companies; it is just easier if you know what to expect when you go in there. Good luck! – Lincoln --- # Pureplay Enterprise SaaS and Vendor Sustainability – Overview and Part 4 *March 9, 2007 · by Lincoln Murphy* Source: https://sixteenventures.com/saas-economies-of-scale/ ***Originally published on March 9, 2007*** This series is to help Enterprise SaaS vendors with two potentially business-stopping problems; scalability and sustainability. I am attempting to address both the real-life objections seen in Fortune 1000 enterprises when selling a SaaS solution and some ways to work around them. This series is also meant to get SaaS vendors to really look at their delivery model and make sure they are not taking on more of the support costs than they actually need to. By knowing your target customers, you can save yourself (and your investors) a lot of money and improve your margins; you could even save your company in the long run. This series is my opinion and is based on my experience. Your experience may differ, and this is not meant to be the definitive text on the subject. I just thought I would share it. Below are links to all three parts of the series, abstracts of each part, and a fourth part addressing Economies of Scale and SaaS. [Part 1](https://sixteenventures.com/pureplay-saas-vendor-scalability) Who needs Pureplay SaaS? Why do you want to be a Pureplay SaaS vendor if you are not targeting those market segments? One of the biggest “selling points” of SaaS as a software delivery model is reduced support costs for the user. This is great, but if you are selling to a company that already has the infrastructure to support On-Premises enterprise software, why would you take on those support costs yourself? With SaaS delivered software, who supports it? More than likely it is the SaaS vendor handling all support, from first level up. Can you as the SaaS vendor really handle these support costs long-term? [Part 2](https://sixteenventures.com/enterprise-saas-vendor-scalability) Starting a software company from scratch, On-Premises or SaaS, is no small task. There are five major objections witnessed when a start-up is selling SaaS solutions to Fortune 1000-sized companies: existence, reliability, support, and scalability. These are objections faced by almost every start-up in one form or another whether they sell software or not. The list of “legacy controls” are objections witnessed that are specific to selling Pureplay SaaS in a Fortune 1000 Enterprise: Internet access blocking, locked down PCs (no ActiveX controls or Flash animations), disk space quotas, etc. [Part 3](https://sixteenventures.com/enterprise-saas-sustainability) The SaaS industry obviously agrees that SaaS is the future of software delivery, but while they still have a substantial amount of value in their existing systems left on the books, the Pureplay version of SaaS may not be needed in Fortune 1000-sized Enterprises. SaaS is often a combination of an On-Demand delivery mechanism (SaaS), and an On-Demand licensing model (Utility). First, don’t be a Pureplay SaaS vendor if your market will not accept it. Be a solution provider first, a software company second and a SaaS company third. Mention solutions to their problems. Do not get stuck on a technical solution that doesn’t fit with your customers needs. Meet the immediate needs of your customer by building in Utility Pricing to your application and/or architecting a Hybrid SaaS system. ## The Elusive Part 4 – Economies of Scale and SaaS A big selling point for SaaS is the economies of scale the hosted solution provides. This is true, especially at the data center level. I seem to have missed the boat on the economies of scale argument, or so I have been told. However, when working with Enterprise customers who do not need their software vendors taking over their infrastructure support costs, why would the SaaS vendor take on this burden? Perhaps you would be happy with 35% margins when handling all of the support costs. Your investors would throw the Economies of Scale book at you when they find out you could have been working with 60% margins by not taking on the additional support burden. – Lincoln --- # Pureplay Enterprise SaaS and Vendor Sustainability – Part 3 *March 9, 2007 · by Lincoln Murphy* Source: https://sixteenventures.com/enterprise-saas-sustainability/ ***Originally published on March 9, 2007*** After overcoming all of the objections in your control: existence, reliability, support, and scalability, you must now overcome the objections that are not in your control. These are the real show stoppers and come from not understanding your target market. The SaaS industry obviously agrees that SaaS is the future of software delivery, but while they still have a substantial amount of value in their existing systems left on the books, the Pureplay version of SaaS may not be needed in Fortune 1000-sized Enterprises. SaaS is often a combination of an On-Demand delivery mechanism (SaaS), and an On-Demand licensing model (Utility). This is a very powerful combination. The real power for Enterprise clients, at least in the near future, might be found more in the licensing model more than the software delivery model. When developing a SaaS product for the Enterprise market and faced with the “legacy controls” objections detailed in Part 2, there are three rules that should be adhered to. First, don’t be a Pureplay SaaS vendor if your market will not accept it. Be a solution provider first, a software company second and a SaaS company third. When talking to investors or other people that know about SaaS, then you should be specific. When talking to the clients, it is best not to mention technology at all. Mention solutions to their problems. Do not get stuck on a technical solution that doesn’t fit with your customers needs. Focusing on the solutions of your clients is one thing, but you also do not want to try to be all things to everybody. You need to find out what one or two solutions you need to penetrate your market, and go for it. Those customers that require something else will have to be left out. Doing one off deals at first is a great way to kill your scalability as a company and is often what keeps software companies small. They may have big clients, but might only have a handful. This is the difference between the birth of a lifestyle business and a high-growth enterprise. The second two rules focus on implementing the first rule of not being a Pureplay SaaS provider. There are two ways to work around being a Pureplay SaaS vendor, but still remain in the On-Demand market; Focus on On-Demand licensing/pricing and/or build a Hybrid SaaS system. From the business side of SaaS, the most exciting thing is the next generation licensing model. The legacy model of paying a large up front license fee for the software (or paying over time on a lease), plus annual renewals and ongoing support fees is definitely ready to be put to rest. Billing companies for their actual usage of the system is very exciting. In fact, using a company like LeCayla with their Metering and Billing Infrastructure, you can do this today with your existing On-Premises software. This is a way to leverage your existing software, but bring a different pricing model to the table. For a start-up, and that is the target of this series, a service such as LeCayla allows you to offload the processing, storage, and infrastructure support to your Enterprise customer through an On-Premises or Hybrid SaaS solution (defined below), while still offering Utility Pricing to your customer. This provides a “best of both worlds” approach, and helps you sell your product with the always popular “low sunk cost”. Coming back full-circle to “knowing your customer”, another detail in your customer intelligence gathering should be their economic focus; are they a capital or expense oriented company? In other words, do they care that they can pay over time for what they use or would they rather pay one large, up front fee? If you’ve done your homework, this won’t be a surprise. In this case you just avoid On-Demand pricing as a selling point. On the technology side, the best solution outside of simply plugging in billing software to an On-Premises application (not ideal) would be to build a Hybrid SaaS system that can support both Pureplay SaaS and On-Premises clients. To do this, the system must be architected from the ground up to support this model. The hosted system would be a single-instance, multi-tenant system. The On-Premises system acts as a remote-tenant, “calling home” and sending billing data and other “network effect” data to the single-instance data layer. If you have “network effect” features, this is a great way to tie On-Premises installations into that shared data layer. The technical implementation of this is so dependent upon the problem you are solving, the target vertical (if any), the On-Premises requirements and needs, etc. that trying to suggest an actual “remote tenant” solution would be impossible. Remember, the technology used is not important to the customer, just to you and maybe your investors. Whether it is a legacy server-based product that uses SOA to move data to the hosted system, an On-Premises “lite” version of the hosted system, or even a desktop application, the technology does not matter. What works as a SaaS vendor very much depends on your target market. Involving customers early on will save a great deal of pain down the road. This involvement must be at multiple levels as well. The line manager will give you great functional feedback, the Controller will give you reporting requirements, and the IT group will tell you what you can do, what you can’t do, and what they are willing to do. This might sound obvious, but this is mostly geared toward start-ups who might not think to pull in all of those resources. The key lesson is whether you are a SaaS or On-Premises vendor, know your customer and involve them from the beginning. You cannot develop a solution to their problem without knowing not only their problem, but the acceptable ways to solve it. --- # Pureplay Enterprise SaaS and Vendor Sustainability – Part 2 *March 7, 2007 · by Lincoln Murphy* Source: https://sixteenventures.com/enterprise-saas-vendor-scalability/ ***Originally published on March 7, 2007*** Starting a software company from scratch, on-premises or SaaS, is no small task. The barriers to entry into the Enterprise software market are significant to say the least. To top it off, there are a number of things that can hinder adoption of your solution in large corporations, putting a stop to your venture before it ever starts. Below is a list of five “issues” witnessed when selling SaaS solutions to Fortune 1000-sized companies. Assuming you have everything else in order, be prepared to address these objections… **Oh, you’re a “startup”.** Of all the issues that have come up, this is the one that you simply cannot avoid or steer around. I have always addressed it openly and to the point. “Yes, we are a startup”, I then tell them that this is something we have thought a lot about; how do we convince our client that we are the ones they should take a chance on? I always tell them that “I can’t go back in time five years and start then, I wish I could”. As much as SaaS vendors like to talk about “low sunk cost” in selling SaaS solutions or the flexibility of on-demand pricing and being able to drop the service at any time, the reality is the company who says “yes” to you isn’t just making a monetary investment in you; they are investing their time and resources in your product. They are not looking to “just switch” if they aren’t happy. Regardless of licensing or contracts, they do not want to have to find another solution. The biggest issues with a startup is that of sheer existence. Will the vendor be around beyond next week? This is a real concern to customers and, frankly, it is warranted. There is little that can be done to alleviate the chances of existing for a long time. The first is to show the customer the $20M in fresh VC money that was just deposited. That should release some of the pressure, although in reality it probably shouldn’t. Barring that kind of funding to show off, the only solution that makes sense is to take out an insurance policy for your customer. Put your source code into escrow with the beneficiary listed as your customer. This way, if your company goes away, at least the customer can take the software and continue to support, and develop it, internally. The software escrow process is actually quite extensive, as it requires both source code and binaries, installation manuals, checklists, and the developers personal contact information. After the existence hurdle comes reliability concerns. With everything running on “your network”, how can the customer be sure of 24/7 access to the system? The best bet is to partner with a reliable hosting company, preferably one that understands your business model and can provide more than just hosting space. There are companies out there called SaaS Enablers, such as OpSource, which combine everything from server hosting, on-site DBAs (who learn your schema and can offer performance improvement tips) to first level tech support for your application. OpSource also offers 100% uptime guarantees and you can have your customer’s IT staff talk to someone there if they have questions about the data center itself. This is my preferred method for launching a startup SaaS business, but there are other ways. You could build your own data center, and if you have a great deal of VC funding, perhaps that is the way to go. But being able to show 100% uptime guarantee, and back it up with referenceable accounts, is the key to overcoming this objection. Using a company like OpSource also addresses the scalability and support questions your clients will have. If you architect your product correctly, OpSource can monitor your application and scale it where needed on-demand. If you need more application server horsepower or more database storage, those resources can be allocated on-the-fly, ensuring your system maintains stability and integrity. (note… I am not a pitch man for OpSource; they just happen to be great people with a great service and they have been very helpful to me). Those objections, existence, reliability, support, and scalability, are really the most difficult to address, the first one being the hardest. Never try to skirt the issue of being a startup; explain what you are doing to alleviate the potential problems and get through it. While I have seen those as objections, I have not seen them as show stoppers. The following I have seen as show stoppers. In Part 1, the [Myth of SaaS Ubiquity](https://sixteenventures.com/pureplay-saas-vendor-scalability) was addressed and dispelled. It is simply not the case, and the following objections to your SaaS offering will make you scratch your head and ask if you are still in 1994. The first stumbling block in getting your SaaS offering in the door is going to be the antiquated corporate policies in place. These will include Internet access blocking, locked down PCs (no activeX controls or Flash animations), disk space quotas (severely limited local disk space), and more. The best bet as a SaaS vendor is to include someone from their IT department from the beginning. In fact, if you provide a line-of-business application rather than an Enterprise support product, you may be able to get the IT department to champion your product and do a SaaS pilot. If their IT personnel are exploring the blogosphere, perhaps they believe SaaS is ubiquitous and feel left out! Outside of the legacy controls still present in many large companies, there are some other factors that are present in just about every company, big or small; an internal need to justify infrastructure expenditures. If the CIO six months ago signed off on $2M worth of new server hardware, the last thing they are going to be looking for is software that does not run on it! Whether recent or not, the internal investments must see a return, and SaaS does not fit the bill. Remember, if they can’t justify that expenditure, they might not get more money down the road, and that is simply not going to happen. Finally, and perhaps the most difficult hurdle to overcome when pitching SaaS delivered software, is the job protection angle that the leader of the IT group might take. Why would the IT Manager want to give up control when that would mean less headcount, which leads to smaller budgets, which leads to smaller salary and smaller bonuses? If you are selling to the C-level, talking about reducing FTEs can be a great thing. If you are selling to line managers and Directors, this is the slippery slope theory in action. They do not want to give up control and will hold on for dear life and at all costs. What those objections have to do with Vendor Sustainability in the SaaS space is elementary. Focus on the needs of your target market. If you are set on being a Pureplay SaaS vendor in a market that does not like Pureplay SaaS vendors, you will fail. At the same time, if you are in a market that does not need Pureplay SaaS vendors, you might not fail, but you will certainly spend more money than you have to; why take on any more of the support costs than you absolutely have to? Part 3 will [focus on a couple of ways](https://sixteenventures.com/enterprise-saas-sustainability) to appease those Enterprise clients who aren’t keen on your SaaSy ways. --- # Pureplay Enterprise SaaS and Vendor Sustainability – Part 1 *March 6, 2007 · by Lincoln Murphy* Source: https://sixteenventures.com/pureplay-saas-vendor-scalability/ ***Originally published on March 6, 2007*** The definition of Pureplay SaaS is where the SaaS vendor offers a completely hosted system with the customer needing nothing more than a standard PC with normal input devices to take full advantage of the offering. If you live in the blogosphere, you might think that SaaS is ubiquitous in the Enterprise by now and that on-premises software is a thing of the past. In fact, SaaS is so ubiquitous and it is almost old news, and you are seeing more of the XaaS variants rearing their ugly heads. That is simply not true. While SaaS is certainly growing, it is not the norm yet as many pundits would have you believe. This series is to help Enterprise SaaS vendors with two potentially business-stopping problems; scalability and sustainability. I’m not sure many people are looking at these problems when planning their SaaS offerings. By examining who actually needs SaaS versus who might just want it, a bad scenario for the Enterprise SaaS vendor may be avoided. Who needs Pureplay SaaS? If you look at the major benefit that SaaS brings it makes sense that the low-hanging fruit will be in the consumer and lower-end SME markets. I’m not going to address the consumer market because it is not one that I understand well. I understand business, so I tend to only play in that arena. The market that I do understand are the SMEs. Rarely do SMEs have a well-defined technology infrastructure (and even more rarely do they want one), so a SaaS offering in the CRM, Supply Chain Management, or vertical-specific space makes sense for them. They can offload the support costs onto the SaaS vendor and allow them to focus on their core competency and just use the software. This is the way it should be. Why do you want to be a Pureplay SaaS vendor if you are not targeting those market segments? Perhaps you are caught up in the hype. If that is the reason, you need to examine a couple of things that you might not have thought of. One of the biggest “selling points” of SaaS as a software delivery model is reduced support costs for the user. This is great, but if you are selling to a company that already has the infrastructure to support on-premises enterprise software, why would you take on those support costs yourself? The fact is, as you add customers and users to your system, your support costs go up. Whether it is storage or bandwidth, you will end up paying for your success. Aside from the hard support costs of taking on all of the burden yourself, you also take on all of the tech support issues. It is the norm that on-premises software will be supported in house as much as possible. If the problem cannot be resolved internally, someone on the technical team of the organization will call the vendor and work through the problem. The technical team has a vested interest in making sure that the problem is resolved in a timely manner since they “own” it. With SaaS delivered software, who supports it? More than likely it is the SaaS vendor handling all support, from first level up. Even if you have worked out an agreement with the customer’s technical team, how do they actually support the product, even first level? Can you as the SaaS vendor really handle these support costs long-term? What is more, large-scale on-premises software is almost always accompanied by a support contract. It is much more difficult, though not impossible, to sell one of those when you have a Pureplay SaaS product? While it may be a long-term company killer to take on all of the support costs yourself, it may in fact be a company starter-killer. In some large enterprises you may find being a Pureplay SaaS vendor to actually hinder the adoption of your product. That will be addressed [in Part 2](https://sixteenventures.com/enterprise-saas-vendor-scalability).