Who rolls their eyes every time they read a social post that shouts “Customer Success is everyone’s responsibility!”? Sure, everyone agrees that if customers aren’t successful using your widget, the business will stall or fail.
What Customer leaders are really saying is “customers are churning and growing, and for the most part, that’s out of my control”.
And that’s largely true.
Customers churn because of missing features, product reliability, bad ideal customer profile fit, unsuccessful professional services projects, product is a nice-to-have, pricing doesn’t encourage usage, competitive threats, and ultimately low value received.
Customers grow because the Product and Services teams develop new offerings, they trust your team enough to upgrade their support package, and they adopt capabilities that lead to high value received and expand their licenses or other usage levers.
Because Customer teams don’t control Sales, Product, Marketing, ProServ, or Engineering, they’ve focused on what they can control–running a more effective team. Some example annual initiatives for Customer leaders include:
The trend: all of these initiatives are internally facing. They don’t increase value delivered to customers. But what if Customer leaders could influence other parts of the organization with customer data? What if Customer leaders could drive how pricing happens, which customers are acquired, and how the product roadmap evolves? Not only is it possible, but it’s the most important role that Customer leaders can play for the next decade of SaaS.
Now, it’s time to talk about Product Market Fit (PMF).
Marc Andreessen, Founding Partner at a16z, says “When an entrepreneur identifies a need in the market and builds a solution that customers want to buy, that's product-market fit.”
But, since most companies don’t have 140%+ Net Retention Rates, it’s clear that PMF is not a one-time event. Companies constantly add new features, products, geographies, buying personas, and since new competitors spawn frequently the PMF process must be ongoing.
Jennifer Dearman, CCO at Udacity and former CCO at Pendo, says “In order to prove and continually improve your company's Product Market Fit, you must balance product usage data with actually asking customers if they've received value. Hearing directly from the customer keeps you connected to the human who is using your product.”
The core of Product Market Fit is value delivered to customers. Great companies iterate on their PMF by increasing value over time.
So more value delivered = better Product Market Fit. Now we have to explore the different ways that companies can deliver value to their customers.
Maxie Schmidt-Subramanian at Forrester shared the 4 types of value that companies can deliver:
While most companies focus on economic value, like ROI statements, the other methods of delivering value will create engaged, lasting champions and relationships.
Note: Bain published a more detailed, interactive model that shows the 40 different ways to deliver value.
Measure value delivered
A common trend today is to measure value by recording a customer’s desired outcomes. This is a long-term losing strategy because it usually leads to product usage-based outcomes. That’s a problem because product usage only measures if functional value was delivered – did the product fulfill its purpose?
Only a tiny percentage of vendors can prove that usage of the product directly impacts the customer's goals. For example, if a customer’s objective is “make employees more productive”, can Slack prove that 1000 more direct messages last week helped the customer get more work done? No. It’s even possible the customer views those 1000 messages as unproductive distractions.
But let’s imagine a scenario where a vendor could directly prove that usage of their product saved the customer 20% of their annual Customer Support costs. Did the customer receive value? Well, maybe…
The customer still may not feel that they received value for these common reasons:
So even delivering on product commitments isn’t a guarantee that value was delivered. Because the customer didn’t actually want to buy a product. They wanted to buy a solution to a problem. We’re human and that means our minds change and our emotions impact our decisions. So the thing that’s missing is a way to connect to the human who uses your product. We need to understand how their needs and feelings evolve over time.
The easiest and fastest way to do this is to take the customer’s pulse along their journey, and ask them about how their overall experience was with Sales, Marketing content, Product features and UX, Engineering product reliability, ProServ quality, Support helpfulness, etc. Are you delivering Economic, Functional, Experiential and Symbolic value?
A Pulse program is a strategy that directly asks customers about value delivered along their journey. Questions are standardized for the entire customer portfolio so they can be normalized across product lines, geographies or business segments. A basic Pulse program has these components:
A pulse question might look something like this:
As customers start responding to your pulse questions, you can create incredible visibility for your company.
Product Market Fit scorecard
When your Pulse program is set up correctly, you’re getting constant real-time feedback about value delivered across the customer journey. Your Pulse questions will uncover how each department contributes to Product Market Fit (PMF):
You become the executive that owns PMF for your business. Youl scan across the entire customer journey, and direct other departments to fix the biggest problems and chase the biggest opportunities. For example, if the Sales team is overselling, show the Sales leader the 13 customers worth $2.8M are at risk. Since this is customer-reported data, it’s difficult to ignore.
A great Pulse program leads to a great PMF scorecard that includes the following:
Maturity model
The path to Level 5 maturity is a huge undertaking. Companies can use this model to plan out the steps they’ll take to level up the way they understand and act on value delivered to customers.
We improve Product Market Fit by doing a better job as a company measuring and taking action on value delivery, as follows:
LEVEL 1: USAGE METRICS
Our first baby steps are to measure the usage of the product. This is particularly useful for identifying customer usage changes, when there’s zero usage, or when the customer isn’t using our differentiated features (the features that prevent competitors from stealing them away). As we become more sophisticated, we can use standard deviation calculations to determine how customers use the product.
LEVEL 2: STANDARD CUSTOMER METRICS
Now we added internal metrics that attempt to estimate value delivered. These include scores like NPS, CSAT, and health scores but also time-based assessments like time to value and ticket resolution time. These are useful to identify trends across the portfolio over time, but we still don’t know if the customer receives value.
LEVEL 3: MEASURE VALUE DELIVERED
Finally, we’re measuring value. It’s important to have deep relationships with customers via Customer advisory and interview programs, record the business problems that customers want to solve, and then use a Pulse program to score the value delivered across the whole portfolio, and along the entire journey.
LEVEL 4: EMBEDDED
Now that we understand where we succeed and fail delivering value, we can embed that information into how the company operates. Rather than setting goals around NRR, a selfish internal metric, the company sets goals to increase value delivered (measured via the pulse program). Cross-functional meetings are used to set major company initiatives and leaders are required to include customer value data when they make decisions.
LEVEL 5: CUSTOMER-LED GROWTH
The company is ready to pursue Customer-Led Growth, a predictable, low-cost method for driving ongoing business growth. The company’s deep understanding of how to deliver value through marketing, sales, services, product, and success allows the company to finally chase a consistent 140%+ Net Retention Rate.
PMF is your future
Delivering low value to customers leads to poor PMF, and poor PMF leads to weak Net Retention Rates (anything under 125% NRR is weak).
Value can be delivered in many ways across many touch points. Although Customer leaders don’t own most of those touch points, they’re the closest executive to the entire customer journey. Customer leaders can take advantage of this role by pulsing customers and measuring value delivered to customers at each touch point.
Today, no one on the executive team “owns” Product Market Fit. No one has stepped up for their investors, CEO, and employees. PMF is the enormous opportunity for Customer Leaders. Not reducing time to value by 10%, not optimizing health scores, not adding more product usage data, but instead scoring, analyzing, and reporting on the company’s Product Market Fit.
And better PMF will lead to better NRR, and ultimately Customer-Led Growth will provide a new channel of predictable revenue at a lower cost.
That’s the path to become the SaaS superhero of the next decade. That’s how the Customer Leader becomes the most important executive on the team.
CONTRIBUTORS
This piece was a collaborative effort by Chris Hicken (CEO at ‘nuffsaid), Nick Mehta (CEO at Gainsight), David Sakamoto (VP of Customer Success at Gitlab), Mike Lee (Dir of Customer Success at PublicInput), Kristina Valkanoff (VP of Customer Success at TIME), and Ejieme Eromosele (VP of Customer Success and Account Management at Quiq).
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