Nick Mehta is the CEO of Gainsight, the category defining and leading customer success company for SaaS businesses around the world. Nick kindly joined Notion to take part in our Pain of Scale podcast to discuss why customer success is so critical to success in recurring revenue businesses.
- CSM is about way more than churn, it’s about deep and intimate customer understanding
- Why a customer success manager should be one of your first five hires
- How customer success is evolving and driving convergence between customer success and product development.
- Why in today’s economy companies must deliver shared success
You can listen to our interview with Nick here.
Gainsight is a values driven business, something we hold very dearly. One of those values is ‘The Golden Rule’ – do unto others as you would have done to you – and for me this is critical, because it reminds us that, as a SaaS company selling customer success, we must treat our customers in the way we want to be treated by our suppliers. We are excited about building software and a business that scales, but we are even more excited about having a greater purpose and we think this is critical in today’s world and we believe critical to the entire customer success movement.
In previous economies, relationships between software businesses and their customers could be really quite transactional – you won a customer, they paid you up front and whether they used your software or not really didn’t matter – but today there has to be the concept of shared success, both parties have to receive value and if the customer doesn’t get that value they will go elsewhere. So we believe companies need to tie the success of their customers to their own success, and that changes how you think about your values and culture.
How does customer success start and scale?
Many organisations think about their business by looking in the rear view window. Customers buy software to achieve a specific goal or to solve a particular problem, and when they churn it is because they have not achieved the intended impact.
But it’s more than that. Customer success is the combination of getting customers to their desired outcome – more customers, happier employees, whatever it may be. If their customer experience is a good one, for example they are happy with the service they receive or the people they interact with, they are happy with the way they are interacting with the product.
CS = CO + CX
If you want to drive success you need to think about the outcomes AND the experience you will deliver. Then, obsess about the leading indicators, that will let you know whether or not you are delivering on those two priorities.
The outcome indicators could be many:-
- Have they fully deployed the product, if not it is unlikely they are getting the desired outcome?
- Are they actually using the product?
- How sophisticated is their use – are they using the sophisticated features, have they tied into their deal flow, are they measuring ROI?
The experience indicators are different:-
- How do they feel about your company?
- How many times have they contacted support?
- How likely are they to open your emails?
These indicators are leading indicators of whether customers will stay with you.
How early in a SaaS companies life should they think about customer success?
In the early days, customer success isn’t about retention, as you don’t have any customers. So what matters is achieving product market fit. The company needs to be obsessed about answering the question, “are you solving a problem worth solving?”, and customer success is critical. It’s sitting down with the customer and understanding their feedback, it’s seeing what they are doing and not doing, it’s figuring out how to drive more adoption and it’s about getting feedback to the product team about what needs to change to really solve the customer’s problem – to give them the outcome they want.
I live in Silicon Valley, and I know a lot of start ups where employee no.1 is the founder, employee no. 2 is an engineer, employee no. 3 is a UX person and employee no. 4 is customer success! They aren’t measured on retention or churn, they are measured on helping to find out if they are solving a problem worth solving. This changes as the company grows, but it’s all about learning in the early days.
How did Gainsight, a customer success business, create a customer success culture for itself?
We joke at Gainsight that our business is like the movie, Inception, with a dream inside a dream, inside a dream. We are a customer success business, delivering customer success, to customer success people! What’s great about that, is that we always force ourselves to think about what we do, not just for ourselves, but figuring out the playbook for the entire industry.
Customer success is not just about figuring out how to retain customers – that’s an outcome. What customers are actually trying to figure out is the value of your offering and how you help converge the product and the offering to that desired value. That’s why the customer success team has the most precious knowledge in the company – the product team may be awesome, so too the engineering team, but often they aren’t interacting with customers anywhere near as much as customer success folks – the customer success team see the day-to-day happiness and frustrations customers are experiencing and that is invaluable.
CSM is about way more than churn, it’s about deep and intimate customer understanding.
What changes as the company grows, and what stays the same?
The customer success job changes a lot as the company succeeds and grows.
In the early days it’s not about retention and churn, but about adoption and learning, those are the two key things. In the early days what you need is people who will literally do anything and everything, from learning how to do a demo for the sales people, to setting up the product and helping customers use it, to working with the customer and getting feedback. You need people who are really creative, take a lot of initiative and are willing to do lots of different things.
As you move to the growth stage, $5-$25m in revenue, the function and the roles change a lot because you now have renewal cycles and repeatable processes. As both the metrics to be measured and the roles become more defined, you might break out customer success into different pieces. For example, there might be a team responsible for inbound support, a different team responsible for onboarding customers and another team responsible for actually driving adoption and retention. So there is a real specialisation of roles in this phase.
Then when you hit the later stage growth, $25m+, you get more of a commercial orientation too.
Customer success is critical to a really big revenue number, but it’s also the source of a lot of expansion revenue. Whether the customer success team is handling this themselves or handing it back sales, they still need to be thinking about how they get the customer to do more with the company – using more products, using more services.
- In the early days it’s about adoption and learning
- In the middle years it’s about process and scale
- In the latter years it’s about commercialisation
Some CSMs are able to make that transition and in some cases, different people are needed for different phases.
How does customer success differ by customer type, for example small, medium and large enterprises?
There are three models companies can deploy. Some companies may deploy one, two or three depending on their business.
The first model is the high touch customer success model, when you are selling a complex services, with big deals, worth hundreds of thousands – or millions – of dollars per year. Typically many people are involved; there may be a professional services group, there may be a training group, a support team. Customer success in that high touch model is like the quarterback, bringing everyone together to ensure the customer experience is flawless across all of these moving pieces.
The second model is mid touch customer success, it’s not the white glove of high touch, but your customers might be spending 10’s of thousands of USD to 100k, or more. You can’t afford to be on site every day, or to have one CSM managing one client, they will be managing multiple. So, in this model, you are looking more at indicators and processes to understand which to work with today because of a particular requirement or priority. It is, in effect, a just in time model.
At the bottom of the pyramid you are selling to hundreds or thousands of customers who are spending hundreds of dollars a year. In that model you can’t even afford to have a human being talking to customers. It just doesn’t scale. Instead what you are doing is using a tech touch approach, automated emails, communication through the application and the occasional call.
Three models of CS: white glove, mid touch, tech touch.
Who is responsible for revenue expansion? Does that sit with customer success?
It’s always a balance between people having specialised roles and not having too many people contacting the customer.
So in companies selling into SME, you may have one person responsible for success and value and another responsible for retention and expansion, or indeed just one person doing the commercial and the value.
As you move up to the high end, you will often have totally distinct roles. You might have a role for renewal, a role for selling new products, a role for selling professional services and a role for simply customer success.
In the middle you may be somewhere in between, with a sales person who does the new business plus a CSM who does the onboarding, success and renewal, but brings the salesperson back for revenue expansion.
The smaller the customer, the fewer the roles. The bigger the customer, the more you can separate the value role from the commercial role.
How will customer success evolve in the coming years?
It’s unbelievable is how much CS has changed in the last 5 years.
The cutting edge companies are taking CS to the next level and incorporating CS data and learning into product strategy, sales and marketing so they can be far more targeted.
Many customers are starting to explore the customer journey from end to end, from the time a customer hits the web site, to when they buy and when they onboard, in order to create a more integrated experience.
Companies who are doing a good job on gross retention now want to look at expansion. You can only reduce churn to a certain level and at a certain point there is far more value in driving expansion than reducing unavoidable churn, so getting your good customers to do more than chasing the one last customer you can never satisfy.
Finally, the most futuristic aspect is aligning customer success with product, so building customer success processes into the product itself. For example, when I come back to a product and there is a feature I’ve never used, the product is alerting me, rather than a CSM calling me. And then of course building real time intelligence from CS – outcome and experience – to the product teams to constantly improve.
How has Gainsight changed?
In the early days, our first phase was very much as I’ve described above. We were a start up and so the people in our CS team were very agile all rounders, but as we started to scale we started to get a better sense of the resources we needed aligned to the customer lifecycle. So we specialised professional services, we specialised support, training, CMS and we came up with different customer profiles. When we serve smaller customers our CSMs have to be very knowledgeable on the product, whereas when we serve large customers our CSMs often come from a management consulting background, as change management is more important.
As you scale you have to balance multiple priorities and we talk about “success for all”, not just for our customers but also for our teammates and our investors, and we think of it as a triangle: customers, teammates, investors. You have to make those three in balance, with a healthy tension. In the early days, it was all about our customers and their success, but then as you scale you need to think from the perspective of the investor and capital efficiency, so you start asking questions such as “how many customers or ARR can a CSM manage?”, and then of course you see that your teammates are burning out, so it’s a constant balance.
Currently we are a 500 person company, and most of our focus is on teammate success, because if we have a happy, aligned and engaged team who are knowledgeable and autonomous, but with a clear sense of purpose then that’s going to drive customer success and shareholder results.
Reflecting on some of the inflection points from the last five years…
One thing that really stands out for me is the day we moved in to our first proper office. It had 3,000 square feet and we were thinking that we were never going to fill this and that we were going to be out of business before the end of the lease!
Over the years, there have been some obvious inflection points:
- Dan Steinman joining. Dan was the head of success at Marketo, so getting him from one of our customers to join was a huge step for us.
- Launching our first Pulse conference – the most recent one in the US had 5,000 people and in London over 1,000 – but the first one we had 200 people in 2013. We put ourselves out there as not just a company building software, but as a company building a community.
- We’ve raised quite a lot of money and each round allowed us to up our game.
- We, of course, wrote a book. I remember when Whiley approached us with the idea and I remember two reactions. First, I’m not sure we have anything to say and second, does anyone read printed books? But the answer to both is yes! Business books have a huge impact and ours has sold 50,000 copies and has allowed us to reach people and customers all over the world.
It’s never been that one thing happened and everything changed. It’s nice to think like that, but in reality its lots of smaller, incremental things. It’s about finding the things that work, like the Pulse Conference, and then doubling down on them every year.
All of us want to find meaning in our work, and for us the purpose is twofold. First it’s the way we run the company and treat our people and we call that “a human first culture”. In the same breath, it’s this community that we have enabled. Sure, we built software for this community but, more importantly, there is the job and the profession we helped to create and we feel we owe it to people in those roles to have great purpose and meaning in their lives.