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How Startups Develop a Customer Success Strategy

Do your customers love your product or do they tolerate it? To answer that question, you have to ask one more question:

How much work do you do to make your customers successful?

You can never have too much customer success, and you can't put too much effort into making it. But to elevate your product from tolerance to love - or from "good-to-have" to "must-have" - ​​that takes more than just goodwill, friendly service, and timely support.

Customer success is the new name for a company's collection of customer onboarding, retention, and upstream strategies. It is the most important factor for development at any level, and is one of the more misunderstood and overlooked concepts in business.

Over 20 years of creating a successful product, I have spent my fair amount of time creating successful customers. Here I learned how to develop an effective customer success strategy, whether your company is just starting or you've already got a ton of "like" customers with your product.

How Startups Develop a Customer Success Strategy

What is customer success and how do you achieve it?

As I said, customer success is a collection of strategies to get customers in, retain them, and sell them more.

If you are getting cold for customer success, here is a piece I wrote recently to explain it all in about five minutes. Customer success is not a sales initiative, it is not a support initiative, but it closes the loop between those two areas. It belongs to the product, and it touches almost every sector of the company.

There is not a single best customer success strategy for your company. The best strategy is for you, and the best strategy for everyone else. How you establish customer success within your organization will depend on what your company is prepared for and how your customers interface with your company.

So when there is no magic bullet, there are guidelines, and those guidelines start with goals.

What are the goals of customer success?

As it relates to the growth of the company, the goals of customer success are:

  • Get customers to experience value more quickly.
  • Retaining customers for longer.
  • Sell ​​more products to existing customers.

This is ultimately the result of getting more revenue from your customers at a lower cost. It is the key to scale, which is the fuel for development.

Traditionally, these goals are dealt with on the fly by the sales team or support team, or both. If customer success has a goal, then take the above goals and make them repeatable, faster, and less expensive.

How does customer success achieve these goals?

There are two well-known metrics for measuring progress towards development goals: cost to achieve a customer (CAC) and customer lifetime value (LTV).

Increment = LTV - CAC.

To get the scale, you want the CAC to go down and LTV goes up.

When you integrate customer retention into your growth equation, there is an additional cost: the cost of customer withdrawal (CRC). Now your growth equation looks like this:

Development = LTV - (CAC + CRC)

When you add CRC to your costs, every dollar spent on CRC has to produce more than one dollar in LTV. Or conversely, every dollar spent on CRC must save more than one dollar on CAC.

Therefore customer success develops strategy and tactics to reduce CAC and CRC, and other strategies and tactics to increase LTV. Sometimes a strategy or tactic can do both, and that's great.

How do you build customer success in your organization?

Customer success should work in two ways: reactive and proactive.

Customer success should be reactionary in the sense that it analyzes what information comes from support, sources are weakened and presents those weaknesses to resolve or strengthen product or development. So when customer support reacts to a negative experience, customer success should prevent those negative experiences.

Many early startups will stop in this reactionary phase, and build their customer success team with customer support, as those people are on the front lines and the first responders on the weakness/solution side.

But this is only half the battle. At some point, the customer success strategy needs to evolve into something more than "stopping customers from leaving" because it is not a growth story, it is a living story.

This is where sales should become part of the strategy, as they are on the threshold of paying customers' discovery, reach, and value. This is where customer success can detect opportunities, prioritize them, test them, and uncover them, creating more revenue and higher LTVs.

You should consider an overarching strategy, and give you clues about the team.

How does customer success fit into the organization?

In my experience, the customer success team is part of the product team, but has a dotted line - or even for both sales support and customer support.

The customer success team needs to be able to train customers, train customers, support customers and motivate customers. They should have some data or technical background in the science of your particular product, so that they can build realistic blueprints to address weaknesses or use cases for opportunities.

To use a sports metaphor, the customer success teams are your "glue boys" (or "glue girls" or "glue persons" - the game isn't very good about gender neutrality). This means that they need to be able to interface with the people who design and manufacture the product, with new features and new versions planned, acting as the voice of the customer.

The customer success team also works with operations, to ensure that the structure of the company and company resources are best aligned to hit those growth goals.

What kind of data does Customer Success need?

To be effective for customer success, they need to track changes in Key Performance Indicators (KPIs) for the company. This means revenue, CAC, CRC, LTV, churn, support issue volume, delivery time, price time, and so on.

Thus, customer success should have access to all data related to both sales and support. This data should include dates and dollar values ​​whenever possible, so those deltas can be attacked - CAC and CRC can be reduced and LTV can be increased.

As your customer success strategy moves forward, you establish a more data-oriented approach to everything you do, and should be integrated with Salesforce or HubSpot or whatever makes sense for your business. Eventually, you will want to automate the capture of that data.

But it doesn't feel like your data approach needs to be out of the gate. You will refine it over time.


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