Customer-centric Growth by Lincoln Murphy

SaaS Companies 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 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. If you feel a more involved engagement is required for me to help you, email me 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.


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