Customer-centric success milestones, how your CAC can determine your company’s fate, why customer feedback is everything
Today’s Churn Fighting Focus is about the importance of understanding your customers’ desired outcomes. Why is this so critical? Because as the mystical, metaphorical genius that is the Cheshire Cat tell us, if you don’t know where you want to go, how you get there makes no difference:
As Customer Success professionals, we spend a great deal of time time thinking about how we can make our customers successful. Unlike any other industry, in Customer Success making your customer successful often means making your customers’ customers successful. It’s customer success twice removed – and therefore twice the responsibility and twice the challenge.
For many CS teams, this thinking results in lifecycle milestones that CSMs aim to achieve with each customer, typically something like Trial > Sale > Onboarding > Use > Upsell > Renewal. And while these are clearly defined outcomes (check!), the problem is that they are your goals as a vendor, they are not the goals of your customers.
So how do we adjust our milestones to be customer-centric, to become Success Milestones? As CS thought leader Lincoln Murphy explores in this excellent post, Success Milestones are the result of understanding your customers’ ever-evolving Desired Outcomes; in short, they are steps required to reach that outcome. As he puts it, “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.” And while Murphy says that Success Milestones can be product- or customer-centric, he insists that it’s critical to know the difference between the two types of milestones and where they each fit in:
- Functional Milestones: Functional Milestones are product-centric, they are milestones that are reached/occur inside the product. Almost every technology company has such milestones defined but as Murphy reminds us, “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.” In other words, if a customer’s Desired Outcome is outside the scope of functional use of the product, functional milestones alone are not enough. So in addition, Murphy says that you must also pay attention to…
- Customer Milestones: Customer Milestones are customer-centric, they are milestones reached by the customer that may or may not take place within your product but that have a direct and influential impact on their relationship with you. As Murphy describes, “Customer milestones will include functional milestones within the product, of course, but they won’t just be activity for activity’s sake. 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.” As such, it is critical that you understand what has to happen for the customer to be successful both within your product and outside of it and then operationalize around that. This means orchestrating as much of the process as you can and holding your customers accountable for the parts that are within the scope of their responsibility.
If it’s not entirely clear why you should go to the trouble of mapping out Success Milestones, Murphy gives us three very quantifiable reasons to do so:
- Conversion Rate Optimization: There will be a point in a free trial when becoming a paying customer is the most logical next step. And while that is a big success milestone itself, as Murphy quips, “there were probably some things they needed to do before then to get to that point.” By taking the time to outline the functional and customer milestones that make the ultimate conversion so logical and obvious, you have the opportunity to optimize your conversion rate, both through product changes and customer education.
- Expansion Opportunities: Again, for many businesses there is a point at which upgrading editions, purchasing an add-on and/or buying additional seats makes perfect sense. Knowing when to deliver the right message at the right time comes from a deep understanding of what the customer is seeking to achieve; a conversation about account expansion is welcome when it naturally fits into one of the customer’s Success Milestones.
- Customer Advocacy: 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. As Murphy explains, “There are definitely going to be other data-driven times to reach out with an advocacy ask, after a strong NPS survey response, 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.”
Customer Success Around the Web
- How CAC could be the one metric that determines your company’s fate: Quick: What is your company’s Customer Acquisition Cost (CAC)? Is it increasing or decreasing? Do you know it at all? Do you know why you should? CAC is a simple but powerful metric that all too often is completely unknown, despite it being an important metric for the business as well as for potential investors. This thorough article dives into what the CAC metric means to your business, how to properly calculate it and how to meaningfully improve it, both in the short-term and long-term. A must read for anyone who couldn’t answer one or more of the questions above.
- Why customer feedback is everything: In our tech-saturated world, it turns out the the most valuable tool for a business in the 21st century is rather old-fashioned: customer feedback. As this thoughtful read puts it, “Technology has produced huge breakthroughs in design. A product can be ideated, prototyped and finalized with little more than a keyboard and code. But the ingenuity of modern design often leads to product teams neglecting the basics.” So in order to be competitive and anticipate trends before they occur, businesses need to adopt a customer-centric model that is grounded in customer feedback. Check out the full read to learn more about what it means to be customer-centric and for advice on how to effectively collect customer feedback.
- 6 questions your CS team must be able to answer: Whether you’re building a new Customer Success program from scratch, ready to start scaling your efforts or years into a strong plan, there are a few foundational questions your team should be able to answer to ensure you’re working toward the right goals. If your CS organization is to reach its full potential and set themselves on a path toward customer growth, it’s important that they are empowered to create scalable, repeatable processes, just as any other department. This quick but helpful read presents six questions will help you develop a solid foundation for your Customer Success program and allow you be more proactive in working toward customer growth.
Word to the Wise
This week’s wisdom comes from an interesting article about how Quipu, an online billing software that solves your daily administrative tasks, has maintained an enviably low churn rate of less than one percent for it’s entire four year history. While CEO Roger Dobaño offers a variety of sage customer advice in this article – including that it’s important to be in touch with your churn numbers daily, even if you measure monthly! – we found his thoughts on the importance of tracking usage patterns to be particularly interesting:
“Apart from speaking with the customers, tracking their movements and tasks inside the product is a very good way of seeing where it goes right and wrong. For example, in Quipu one of our services is managing invoices. After looking at the user movements, we now know that the retention rate is much higher if the user creates three or more invoices. With this info we’ve been able to retain more customers over the years. It’s also important to use movement trackers to contact users who are struggling, even before they complain or think about leaving.“
Knowledge is power!