Companies work hard to attract and win their customers. They spend countless hours establishing key performance metrics and enforcing the appropriate disciplines so their marketing and sales teams can bring in leads and close deals to drive revenue and growth. Yet the amount of focus that leadership places on new business revenue is disproportionate to the amount of focus placed on existing customer revenue. After the dotted line has been signed, all of sales’ and marketing’s effort is for naught if the revenue is going out the door just as quickly as it came in.
A widespread obsession with customer acquisition leaves companies blind to the pool of revenue opportunity within customer retention. Simply, it’s much easier to turn a customer into a bigger customer than it is to turn a lead into a new customer.
To explore this topic, we hosted a well-attended webinar with Kia Puhm from the DesiredPath Inc. In the webcast we discussed how to measure and monitor revenue across the entire customer lifecycle.
Kia explained how a customer-centric model is predicated on an understanding of what the customer needs to be successful, when and how. Once this “desired path” has been codified, businesses can then develop an Intelligent Framework that supports every step of the customer journey with the requisite actions and skill sets, measures the progress of customers through the journey and observes how the framework is serving or hindering customer progress.
During the webinar we also had an excellent Q&A session with Kia that we wanted to share with you here.
Presenter: Kia Puhm, Founder & CEO, DesiredPath Inc
Q: Regarding the formula you shared, is Customer Service costs simply a measurement of time x salary of humans involved in Customer Success/Customer Support interactions? Or is more involved?
A: That’s a great question. So first, start simple. What I would do, is urge companies to do a cost basis accounting of – what is the effort that they outline in their playbooks that aligns to their customer’s desired path. Now, you’ve got what the effort should be to get customers across the desired path. Then you can start to measure whether the effort to get the customers to their desired path on average, needs more effort than that, less effort that, or is on par. This is where you start to truly see whether the plays you’ve identified and the effort that you’ve aligned to the desired path, if it is enough or too much. You can then start to adjust accordingly depending on what you find.
Q: How does payback period play into this? Does reaching profitability on a particular customer acquisition change the approach at all?
A: What I find is that we are not measuring post-sales customer progress at all. And so right now it’s about instituting the model that allows you to measure and see how aligned your efforts are to that desired path. You certainly want to have other KPIs, as this is not in isolation or a replacement of those. You want to measure time to adoption, and you want to see time to value. Those are all key metrics that should be used in conjunction in your analysis.
So, if you start to measure effort and let’s say you need to do more work or less work to get customers to their desired path, but you might find that you are slowing adoption, you might want to start to analyze that. Maybe by slowing down adoption at the beginning it might ultimately result in better revenue expansion later on. Maybe you’re slowing down to what they need to get to their maturity up to allow them to adopt the usage properly and maybe you were going too fast before. So, maybe increasing that adoption time was actually a good thing.
Here’s where you have to start to look at everything in a holistic manner and on a bigger scale.
Q: How would you recommend setting those metrics to be the best representation of the situation of the customer along their journey for the first time and how do you iterate and improve on those?
A: The answer there would be to literally map out what the customer’s desired path is from your customer’s perspective. What does the journey look like to them? Not just to learn how they use your product, like what buttons they click etc. but really know what does it take for them to understand how to leverage it within their environment so that they’re getting business value. Understand what that journey looks like, understand what those activities look like to support that process.
And then what the beauty of an intelligent framework is that you can now start to validate it. You can do that by going to some customers and asking if that journey resonates with them, is that truly their journey? But then you can also start to use it in operations and begin to validate it because you’ve got this feedback and you are measuring customers going through the journey and you’re measuring your work effort. You can then start to see where there are discrepancies based on the model, and then that is the feedback that then helps you continue to look at areas within the journey that you might have had misconceptions about. It allows you to validate things, but it also allows you to change things that you might have been wrong about previously.
Q: What can a business that doesn’t really understand its customers (i.e. a startup that doesn’t have a lot of data or customers yet) do to get started? Is the framework still valid?
A: Absolutely. It’s still valid and just to my last point it’s an intelligent framework. It’s holistic, it’s intelligent, and its results driven. What that means is, if you are a startup and you might be still in the product fit phase, I would encourage you to define what you believe the hypothesis is for your customer journey. You obviously started out the company and developed a product to fit a market need and presumably you’ve got some sort of expertise within that market need, so you might be very familiar with it. You might have been in that situation yourself. And so, map out that journey of what you think it is. Map out the playbook that you think should support that journey and then start to work with your beta customers to do some market research to validate it. Because now you have something on paper that you can actually validate vs. having nothing at all and then trying to figure out, okay, how do I support customers?
So, the model works at all sizes and it probably will advance your Customer Success faster by putting that learning muscle to work for your organization and becoming customer-centric by continually observing from your customers.
Q: What are some common mistakes that companies make in trying to keep their customer revenue?
A: I talk about random acts of Customer Success often. I find that we with all the best intentions go out there and look for all the best practices. So now that Customer Success continues to mature as a disciple and becomes a little but more repeatable, we’re borrowing all of these notions of a quarterly business review or a success review or a value review or a renewal plan or we’re doing Customer Success plans, but if we’re just taking all these things and then inserting them into our organization and then doing them at the customer without understanding their desired path in the context of how and what their journey is like, we’re doing Customer Success at them and not for them. And they don’t become best practices when we do them without the context of the customer in mind.
So, I think that some of the biggest mistakes I see is when companies truly don’t understand their customers and why they purchased the products to leverage what they want to do to achieve their own business outcomes. So, what are those desired outcomes? And what’s the value they’re looking for? How do those customers internalize the change that your products or services could potentially be bringing into their organization? How do all of these things drive successful adoption and usage and expansion? So, understanding the customer and not just taking “best practices” in isolation and doing these random acts of Customer Success at your customer, but tying them up holistically by understanding that desired path then aligning them allows you to start doing things for customers and that makes a huge difference in revenue.
Thanks to Kia for the excellent presentation on how to better understand our customers’ desired path. If you would like to view the webinar on-demand you can do so here.
We hope you will be able to join us for our next webinar!
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