Let’s discover the decade-long journey of Michael Boyd in customer success. From challenges to various playbooks and tactics, Michael shares his insights in this actionable discussion.
What You’ll Learn:
- How customer success differs in a security-focused environment
- How CS changed in the last decade
- Challenges in CS
- How to understand customer wants and needs
- KPIs for the customer success department
- The difference between a good CS and great one
- The impact of AI in customer success
- Budgeting for CS
- Predictions for 2024
Key insights and takeaways for CSMs based on the interview:
Process upgrades in CS: Success in the current landscape hinges on aligning closely with the customer’s journey for a seamless and efficient experience. The customer journey has become a crucial guide for both customer actions and the efforts of Customer Success teams. Advanced data analytics, particularly with cloud-based solutions, empowers CS teams to target support more effectively by gaining insights into customer interactions and providing tailored guidance based on observed behaviors.
Challenges in CS: The success of Customer Success lies in its recognition as a distinct discipline, separate from sales, support, or professional services. While acknowledging the convergence of various skills, the discipline has evolved with a focus on science over art. Despite its maturation, there’s ongoing struggle industry-wide in setting upfront expectations with customers. Many Customer Success professionals find themselves repeatedly resetting expectations, indicating a need for better communication of the customer journey to ensure mutual success.
CS team roles: Positioned within the sales organization, Customer Success is an integral part of the go-to-market team. Operating like a well-meshed engine in a high-performance car, Customer Success is the largest gear, interacting with product, marketing, pre-sales, sales, legal, and beyond. Despite diverse reporting lines, the team focuses on seamless coordination, segmented by both geography and customer size. By providing structured or high-touch services based on customer size, the team’s ultimate goal is cross-functional collaboration to deliver the right solution, expertise, and support at the right time for each customer.
KPIs for customer success: Customer success revolves around retention, measured by lagging indicators like gross retention and net growth. To proactively gauge success, leading indicators such as customer health, engagement, advocacy, and product usage become crucial. Early identification of deviations from the customer journey allows for timely interventions, and data-driven analysis by segment enables targeted efforts to address challenges and prioritize interventions where they are most needed.
Budgeting for CS: In budget decisions, SaaS companies grapple with prioritizing growth through new customer acquisition or reinforcing existing client relationships. Balancing this choice is crucial, and investing in retention, particularly tied to Net Revenue Retention (NRR), strengthens revenue foundations. Aligning spending with goals helps determine the right mix between acquiring new customers and retaining existing ones. As companies mature, a shift towards prioritizing retention and expansion over new logo acquisition prompts a reassessment of budget strategies.
Customer success in a security-focused environment
Michael, your career encompasses roles at companies like Vanta known for its innovative approach to security compliance, or security scorecard, which is a leader in cybersecurity ratings. How does customer success landscape differ in a security-focused environment compared to more traditional sectors?
Well, yeah, security—trying to talk, you know, customer success at its root is all about helping the customer reach whatever goal or objective they have. And I found being in the because I’ve been in CS roles and customer-facing roles for a while with different industries.
The cybersecurity and the IT kind of operations and security spaces are definitely a little bit different. One thing that comes to mind is speed and urgency, right? Sometimes you’re dealing with software products, and when the project gets done, the project gets done. In the cybersecurity space, there really isn’t that luxury of time; sometimes you really need to have your products and all the guidance your customer success teams give co-sales to really help the customer both stay organized and ultimately keep the organization safe. That’s the rule at the end of the day, where that’s the objective at the end of the day.
I think that one of the unique parts about it is in the cybersecurity space, we’re trying to prove it negative, right, prove that something bad didn’t happen, which is a little unique. In most other products, especially SssS products, there’s some very tangible goal; I can prove that you did X things or why things. In our case, we’re trying to prove the negative of this bad thing didn’t happen to you, or because you took these steps, your security organization. So a lot of times, we have to help the customer find that proxy or that placeholder for what good means out of it, or what success means out of it. Because they didn’t end up on the front page. They didn’t get hacked; they didn’t have, you know, their customer data all over the web somewhere. How do you prove the negative? So that’s the one wrinkle I’ve always found in customer success, specifically. And in the security space.
I think there’s also the connection proving the negative is also in customer success. You didn’t lose that customer. That customer didn’t churn. So whenever you said, prove the negative or something that didn’t happen, I made the connection with customer customer success.
No, I could, I can see that. That’s a good correlation. Although I always look at it as, at least in customer success, I can prove what we did retain, what we did win, and even what we expanded on. There’s a very clear, I guess, denominator, and a lot of the formulas and KPIs we use in customer success. Unlike maybe in the sales world, how do you prove you didn’t win? Or you did win? You know, all the prospects you had out there, right? What’s that universe of known prospects you could go after? So you know, it is my sales colleagues sometimes have their win rates, you know, of like, “Oh, we had this win rate.” I’m like, “Yeah, but I had a much bigger win rate because, you know, I had all those customers somewhat captive; I know what my denominator is.”
How customer success changed in the last decade
Your first role is a CS dates, almost a decade ago, reflecting on this period, what changed? And what remains the same in customer success?
Yeah, it’s actually probably almost a full decade now. I do often joke that I’ve been doing customer success my whole career; I just didn’t know it. So I’ve spent 20 years all in, you know, post-sales, B2B roles, customer-facing, customer-engaging, helping the customer get the most out of the product. None of that’s changed, even though now products and business models have changed along the way.
Let’s see, thinking back 10 years ago, I guess, you know, a decade ago, we weren’t as SaaS-centric, maybe as we were. There were still a lot of legacy solutions there. There were still a lot of companies building that on-premise solution or that hosted solution. And really, the software providers at the time were still very much in control. What was your journey like? What was your outcome going to be like?
I think in the last decade, we’ve really seen the customer start to take control, both from what they want to get out of the software, what their goals and objectives are, and both tailoring their software engagement and lifecycle experience, if you will, to what they need to get to their objective, whatever that goal is. And usually, the software is just a vehicle to do it. Whereas back then, the software was a much bigger initiative, right, of what they were trying to do. So that’s where I see that it’s evolved.
Process upgrades in CS
And because it did innovate, can you recall some upgrades in terms of processes, or even a different approach in customer success, because I guess it’s different. When you are talking about customer success for a software, which is on premise versus which is something which is on a SaaS business model with monthly subscriptions, there’s different approach.
I’m a huge fan of an unfiltered, firmly believe that the difference these days is we’re much more tight and aligned with the customer’s journey, right? Really thinking from the customer’s viewpoint, the customer’s point of view, because customers say they’re not going to tolerate some really bad disjointed experience where they have to go one part of the app to do something, maybe go manually out to do something else, then come back somewhere else to do something. They want that to flow smoothly; they need that to be efficient because, at the end of the day, they have a day job of whatever their business or organization is doing. Their job doesn’t have to be, “I’m going to navigate all the bad things in your software.” So I see the customer journey becoming much more important, much more of a driver of both what the customer has to do and what CS needs to do to guide them and help facilitate that customer having a good experience with your product.
I do think we’ve gotten as an industry a lot better just on data, right? The literal telemetry coming back out of the product, especially as we’ve moved to cloud-based solutions. We now have access to all of that data; we can be data-driven, we can tell where the customer has gone. There are lots of products out there that will let us look to see what the customer is doing, how they’re engaging with our products, just so that both we and even the customer can work smarter. And I think for us in CES, that helps us target better, either with advice, a solution, or specific guidance. “Hey, customer, we notice you’re stuck doing X, right?”
And I think probably the other big thing I’d say that we’ve had to change our approaches in is to really tailor the right model solution for the right type of customer, right? So I’m really talking about segmenting your customers. One size of customer success does not fit everybody. How do you give the right type of experience to whether it’s a small customer, whether it’s a midsize customer, whether it’s a big, large enterprise customer? You can’t apply the same solution to all of those, right? And I think that’s really where we’re now getting better at knowing the journey, maybe even knowing the journey is different for each segment, and then using data to target it better. So we can be better, and the customer has a better experience.
Customer success without proper tools and data
How did you use to do customer success in the past without having the proper tools and proper data?
We had to do a lot of customer engagements and workshops, right? There was, I think, we probably relied heavier on the customer-facing teams—customer success, maybe even support, education services, whoever else was touching the customer, even sales—to say, “How do I get feedback in as to where those problems are?” And that could be, you know, both reverse engineering support tickets that come in to say, “Oh, I had this problem. Where do I see patterns?” All the way through, literally as we’re sitting with them, how do we harvest the ideas of what we’re running into?
I gotta admit, I’ve always sometimes cheated and tried to find folks that were familiar with either their domain or even my products to turn them into customer success people because they really knew what should be happening from the user’s perspective. And I’ll admit, I’ve had that view my entire career. Part of it is, you know, thinking of Thanksgiving here, right? Coming up in the US as a holiday, we get together with family. And at one point in my career, my mom was a user of the software products I had for my company. And if I had a bad user experience that was in there, I would hear about it at the holiday dining room table. So, you always, I always find you need to be able to think that way. And I think we’re getting better at using data to be able to do that at scale. But there is still nothing that stops from really getting really good product sessions to understand what the user is up against and how you can help make them literally into a hero in their organization with our products.
Challenges in customer success
What are some key challenges that have been successfully addressed over the past decade, and which one persist despite the evolution of the field?
Great question. Let’s see. So I would say success is probably just the mere fact that we talk about customer success now, right? It’s not a whim; it’s not actually a real thing. It’s a discipline; it’s not sales, it’s not support, it’s not professional services; it’s really a function unique unto its own. And again, I admit, I’m a little biased. You know, I think there are elements of all of those skills in there that merge in to be a good customer success person. But I do remember, literally before I had a customer success title, I forget what title we had; it was kind of a post-sales delivery type title, and was at a conference.
And specifically, I remember Lincoln Murphy on stage, one of the founders of the CS movement, talking about customer success. And I was furiously taking pictures of every slide on screen, texting them back to the crew going, “Look, I know what we do. Now, I know what our name should be.” And that’s really how I made the leap into having a formal Customer Success title; didn’t change what we were doing. But I do think that now we recognize it’s a discipline; there’s more science than art to it at times. So I think that’s where we’re continuing to evolve, maybe not as mature as some of the other disciplines in SaaS, but definitely maturing along the way. They’re things that persist was the other half of your question, what do we still stuck with?
I still think we all still struggle with how do we get the right expectations up front with the customer, set the stage, set the expectations. All too often, this is something I’ve been moaning about with lots of other CS leaders; part of our day job as CS people is resetting expectations with the customer. So that means somewhere, we’re still failing the setup front, what is the experience they’re gonna go through? Maybe we don’t have that journey defined? Well, so we can communicate that to the customer and really get them bought into what they’re going to have to do, what we’re going to have to do to be successful.
Understanding customer wants and needs
I want to deep dive into setting up the proper expectations. And I want to ask you, how do you understand what the customer wants? And what are his objectives when they decide to enter into the journey with the company you represent?
Hopefully, we’ve got really good collaboration with our sales and pre-sales teams. Right? I think the key to doing that. But I think the real answer to your question is probably good discovery, right? Knowing for us as a software provider, in my case, being really comfortable with what our use cases, what the space is we fit or don’t fit? What can the product do or not do? Listening heavily with the customer and asking lots of good discovery questions. I’m a big fan of the five or six “whys,” right? Keep asking why. And then at some point, you flip, and you start asking.
Now, that’s very much a consultative approach. As long as we’re doing that upfront to really uncover what’s the motivation for this customer, it makes the whole rest of the customer lifecycle easy because now we have a mutually agreed-to point that the customer and we as a software provider want to get to. If we can anchor everything to that, that gives both sides a lot of power. The customers got motivation to get to their goal and their objective. And we as a CS team or even as a whole software team, we can right-size the product, define the elements that they need out of our solution set to use. Maybe they need help with partners or other services. But we can put together the solution that’s going to get them there as quickly and efficiently as possible, without having anyone waste time or get stuck along the way.
And I think I still see that sometimes as a fear with customers of the how do I get to that first, literally time-to-value part of it. And I do believe if you can do that good discovery upfront, really clarify that everyone agrees? Yep, here’s what we want to go do, then it’s pretty easy for us to recommend. Here’s the plan that you should go with. Here’s the steps you should take to get there. And, you know, here are your milestones you want to check off along the way.
CS team roles
Speaking about skills and the right people, I want to zoom into the team structure. You set a bit this stage, I know that you are now a VP of Customer Success at Vanta. How is your team organized in terms of roles and reporting lines? Who do you report to?
Okay, so we’re set up literally within the sales organization. So the whole go-to-market, we’re part of the go-to-market team. I personally report up to our CRM case. But I also, you know, need to kind of cross-functionally work with everybody. That’s part of the thing of being customer success, right? If you think of any good software company that wants to go fast and grow, I always say it’s kind of like a rare This car, right?
And for that car to work well all the gears in the engine kind of need to mesh up well, if they don’t, the company’s not gonna go fast. Now, I’ll admit I’m biased, I’m a customer success person. So to me, customer success is the biggest gear in the engine, but we touch all the other ones, right, we’ve got to touch product, we got to touch marketing, we’ve got to touch pre-sales, sales, legal, right, there’s really an unlimited amount of everyone we touch in addition to the customer.
So you know, our world is to try and make sure that that meshes together well, despite whatever the solid or dotted reporting lines are. The tip my team specifically, it’s we’re broken out by both segment and geography. So we have different touch levels, I guess you’d call it with our customers, smaller customers, there’s a, you know, they get a little more structured or standardized have a CS delivery service, versus maybe a more customized one more high-touch one for our largest customers. So that’s kind of where I. That’s how we’re organized today.
And ultimately, again, cross-functionally, it still all boils down to how we as a customer success team end up getting the right solution, the right expert, the right problem solver, for whatever that problem is at the right time for the customer.
In the different companies that you use to work was there a different setup?
So I’ve been at a few different places as a CS leader. And actually, yeah, there’s probably different models, and I think of it at all of them throughout my career. But there’s definitely some themes through them, right. You know, my prior place also heavily in security, security scorecard, where we did security ratings for the industry, we were also aligned by segments by touch model, there are a few other pieces. I’m trying to think, let’s see, when I was a titanium, we were much more of a building ces for the first time, so we kind of had to go through all of the forming, storming, norming type of roles of Team growth.
And especially because we were, we were designed at first, our first priority was customer success for very high touch enterprise customers. So we had to build that out. And we had a matrix that tied us into all the different, both technical and other business and support groups that we would engage with within the company. And then as the customer base shifted a bit, you know, we would shift different teams and groups towards more of a maybe not super high touch white glove model, but a more mid-touch or depending on, you know, right-size touch for customers as we grew and covered more and more customers with NCS team.
And back at the first place, I got a customer success title when I was with Pythian, that was a little bit of a unique space, we were actually in a monthly subscription model, right, which puts a whole different type of pressure on you. But it was, it’s not as difficult as it sounds, it was a lot more like your mobile plan, we would keep renewing you unless you said stop, right. But our teams there were organized much differently, more around technical capability, what types of products and technology you were using in your organization, so that we could mix and match again, the right subject matter experts, the right industry experts for the products and services and solutions that you needed from us.
But yeah, each one was a little bit different. But but all the themes were still around, what is the customer need? How do we line up the customer need and goals that they’re going for, with what we can provide? And as I would say in all of those roles, the customer success team, in my mind always served as that guide. I use with my teams a lot the analogy of a Sherpa, right one of those climbers out in the Himalayas, they’re the guide with the image of the pack with like, you know, 20,000 pounds of stuff on their back, it seems carrying you and guiding you up the mountain. That’s what we sometimes need to do in customer success, right, we’re we’re lugging the product, we’re lugging your goals, we’re lugging training materials, we’re lugging other enablement materials, and we’re guiding you on that path to get to whatever that pinnacle or goal you have is so to me, those are always the themes, we may just tailor it for the industry in the space you’re in.
Joining a new team as a CS leader
Whenever you are doing new team as a CS leader do you come up with a predefined playbook? Or do you tweak the setup based on what you get into into the organization?
The short answer is always to tweak or customize any playbook for whatever the organization and, more importantly, their marketplace needs your customer needs. There, I mean, I have a bunch of standards that I like. Like I have favorite dashboards that I bring along usually and say, okay, team, here’s what I need. Here are the metrics we’re gonna we need to follow. Here’s the Northstar pieces because to me, they’re proven, they’re familiar, I know how to get those to work, I know what levers I need to push on those.
So, but the actual techniques, again, high-level techniques, 20,000 foot, they’re probably all the same. But when you’re down at the 1000 foot, you know, view in the weeds trying to actually implement a task, you’re certainly going to tailor it by what both the product, the industry, and the domain kind of need. Just because that’s what’s needed to make that product successful people.
KPIs for Customer Success
Speaking about KPIs, what are your team’s KPIs? And what are the individual KPIs that you are reporting to your executives on a regular basis?
Retention, retention, retention, right? That’s always been the name of the game in customer success in my mind. But seriously, specifically? Let’s see, for lagging indicators, we use the infamous gross retention and retention, how many gross dollars did we save? How many net dollars did we grow that same customer base and over the same period. So those are the ones we primarily focus on. That’s the lagging indicator, the end result? The downside is, you can’t wait until that renewal transaction to actually measure everything. So you need some leading indicators.
Customer health, to me, is the biggest one. How do you find whatever telemetry and data that give you that indicator early on that the customer is off track, either? My favorite ones now are ones that tell me when a customer is off the customer journey. And what I mean by that is if you think the customer journey as, you know, a GPS map, as soon as the little blue dot for the customer is off the roadway or path they’re supposed to be on. And we have to start recalculating our mental GPS here, how do I flag that early enough so that I could tell the customers off, they’re an exception, they need help. That’s where we prioritize.
And then there’s a lot of other leading indicators that I’ll usually like to mix in with customer health, engagement. Are they engaged and working with us? Are they advocates for us? That, to me, is almost the pinnacle of customer success, feedback. And then some of the more tactical ones of are they using the product? Are they using the more advanced mature features in the product, which tells me they’re really adopting it versus just using it. And then I love I’m very data-driven. So I love to have the ability to slice and dice all of that by either customer segment, or product line or stage in the journey, some way where you can narrow down or triangulate down to that one cohort of customers that’s causing you the most pain. And that’s where you can then lean in.
Dashboard and reports for CS
You mentioned dashboards and having a set of favorite reports. Can you name a few? There’s a few reports and dashboards that you like to carry on in every organization that you are that you are going.
Yeah, I think my favorite is a good solid forecasting dashboard. That breaks down, gives me what’s the amount and number of logos and amount we’re going to renew at the beginning of the week during this period. Where did those renewals stand somewhere in between, we’re still talking to them to we want it or we lost it with churn. Give me the same thing for expansions. Tell me where things are. And then I mean, that’s the biggest one to make sure that you’re forecasting on a good, accurate basis. I rely on that heavily to really drill back down into how are we doing? I guess as far as end results are concerned.
Other dashboards are really then taking all that other telemetry data along the way to say how can I intercept customers well before that renewal transaction, to be able to pull things back. And it’s funny, you mentioned the dashboard part because I’ve had a couple of conversations with other CS leaders over the last few weeks. And where everyone seems to be having that problem right now as well. I do really good at the onboarding part, upfront month 1, 2, 3. It’s that middle cycle of like month four to nine, where maybe we get lost a little bit or maybe we don’t know exactly where the customer is. Or maybe the CSMs get busy on renewals or on onboarding or some other crisis of the day, and they lose track of the customer there. And that’s where we all seem to be focusing on how do we make sure that we don’t get lost in that middle period of their subscription?
What are the KPIs that you need to measure just to make sure that you don’t miss the 80% of the work 60% of the journey if you consider 20% onboarding 20% at the end. You still remain with, let’s assume 60%, where most of the things happen between onboarding and renewal. What is the trick in between just to make sure that you get a successful renewal at the end?
I’ve found it’s important in the customer lifecycle, or in the customer journey, identify what those areas, what those milestones are in those actually, in all the whole journey, but especially in those middle months, because then you can tell how far the customer is moving along. Are they making progress? Have they moved significantly month over month?
For us, Vanta, we help customers right now in being able to automate their security and compliance needs? How do I get to create my CIVA SOCK to audit report, or maybe an ISO certification or one of the privacy certifications? So for us, one of our key metrics is, we look at how far are you progressing along that journey? There are a number of tests and tasks that you need to do to get to that audit. How far have you gotten along with those? And we even joke now that we’re looking to steal ideas out of the commercial space because there’s a lot of other things that we can think of, like, I think of my utility company or my car. Why?
Because every month, they send me an email. And my electric company is great for it sends me an email, it tells me like, “Oh, here’s the amount of electricity you use this month, here’s how much your neighbors used, oh, my goodness, you’re horrible. You are burning up electricity, you know, five times more than your neighbors,” they’re giving me some comparison. But also giving me then usually in that, and I look at it through a customer success person’s lens, right? Of “Wow, this is really a value-based ROI report, telling me my monthly usage, giving me recommendations of how I can be better and more efficient at saving energy along the way, and maybe other programs they have,” okay, that’s upsells it’s really giving that communication back and looking at it from that standpoint.
So, you know, ultimately, we’re looking at that data. And I think the real key is how do you turn it around and leverage that with your customer surveys, see the same data.
The difference between a good CSM and a great one
I want to ask you, what do you think it makes the difference between a good CSM and a great one?
Well, I think it’s definitely building a team, a great team requires you to look at both the skills of the people, soft skills, domain skills. I do. Like there are times when we and we’re hiring today, at Vanta, we’re looking at candidates, there is no perfect candidate out there that has both deep CS experience, domain industry experience, and experience in your product. Right. So we often say to an attorney bet there’s a song that has that title somewhere, because chances are we’ll be searching forever. Let’s focus heavily on soft skills. Can they be a good customer success person, talk to customers, engage with customers, get the credibility and trust of customers? Do they have enough expertise around a bit of the domain so they can talk the localized language, if you will, of what the problems are in that space and understand what solution, and then we can teach them how to use the product. That’s the more straightforward skill to build together.
And some of those soft skills, like those I think trump everything else.
I always look for really strong active listening skills among the team, can you listen, engage, really understand the customer’s problem out of it? Do they also then take really the view of the customer, thinking of things from that customer’s vantage point? Not our goal of “I need to get the renewal, I need to get an expansion,” but looking at it from what does the customer need to be successful, to be a hero within their own organization personally? And then how can you narrow it down? I like CSMs that can focus on mutual goals. How do we define a mutually acceptable goal for both us (renewal, expansion, keep using the product) and the customer (whatever goal they’re trying to achieve), to be able to win over and get a commitment with the customer.
And that to me is critical because if you can get that commitment to that mutual goal, we almost get, dare I say, nagging rights over the customer. And what I mean by that is I chatted with a customer a couple of months ago, and they said, “Okay, well, they both love their CSM, they were scared of their CSM.” And of course, they were okay, tell me more. That sounds odd that you love them and you’re scared of them all at the same time. And he said what this CSM particularly does is they got us to realize here’s our goal, we all agreed on it. But then they held us accountable for meeting our part of the deal, things we needed to do in the software, things we needed to do in our organization, changes we may have needed to make to our software to help automate. So there’s a lot of manual processes we expect customers to do away with and rely on the software on, and that’s change management, that’s dealing with people, it’s invoking something new. And they were scared sometimes afraid of our CSM because they’re like, we know if we don’t show up for our next call with them to report back that we did all the stuff we committed to, we’re gonna not feel good, we’re gonna be in trouble. And they don’t want to be in trouble with the CSM. So it really was giving them that giving the CSM that authority. I jokingly call it nagging rights. Because when I promise my spouse that I’m going to take the trash out, and I don’t, she nags me, right. And that’s really what we’re doing as CSMs is we’re making a commitment to an expectation, we’re going to both do x, we’re going to get you to go why. And if we kept our part of the bargain we trained you, we gave you tools, we gave you guidance, we may be helped with something else. If you as the customer don’t bring your balance, you’re gonna feel bad. So I’d CSMs that can invoke that I think are the best.
CS tools and tech
We spoke about processes and strategies, we spoke about people. And now I want to close the loop. And I want to speak about tools and budget. And then when I asked you how crucial is choosing the right tools and technology for CS?
Immensely critical, right? You can’t go faster and scale without a good, I’ll say both a whole, both tools tech stack and process. And I’d really highlight the last part because there’s, again, there’s never going to be tools that can encompass and automate everything you want to do. And in the world, there will always be things that are going to rely on either at a minimum input from a human being or a system into that view, or some added process because again, the customer is now going to go off, they’re going to do whatever changes they’re making within their organization, maybe with their end users, their customers, your customer’s customer. So you need some type of tool to be able to organize that, do that at scale, actually think the tools are also critically important for standardizing it.
Very often, I’ve come into new CS or come into organizations as a new CS leader. And not so much that there wasn’t a tool, but there was no structure, there’s no standardization. And the good part about having a tool or a system is it really helps you standardize and enforce that. Because once you’ve got a baseline of okay, now instead of doing this same task 50 different ways across the 30 different CSMs that are here, we have the ability to have one baseline, here’s the way we’re doing it. And then from there, now you can actually start identifying gaps and improving. Now you’re improving them across the entire set of events you’re doing, versus trying to treat each one one off, right.
And if you think of like when I think improving from a standardized piece, I think back to the bigger, you know, programs like a Six Sigma program, right? A lot of manufacturers harp on why is that so powerful? Because it’s trying to take the standardized baseline and then raise that up with small incremental improvements over time. And that’s, I think that’s something we need to adopt more. And I’m not telling you all go get our Six Sigma certifications, but at least have a standardized process that we increment on versus trying to increment on 50 different unique bespoke customized processes. Because now you’ve got 50 things to do versus if I’m standardized and we have one to improve on.
How to build a business case for a CS tool
I’m curious, when your team is building a case for buying a new tool for the CSM team. What’s important for you? What do you want to see in the business case? Because I hear a lot of CSM telling me I cannot convince my boss that I need a tool for so dear economic buyer, what do you want to see in the business case? To prove it?
The first hurdle is convincing me that there’s a problem, showing me that there’s a clearly defined problem or opportunity. Many times, I’ve encountered situations where the perceived need is expressed as, “we need a tool, we need a tool, we need a tool.” Personally, I view this as an excuse. Throughout my career, there have been instances when I ran Customer Engagement Surveys (CES) in Salesforce. The platform provided enough basic CRM functions, task management, and notetaking to run operations, albeit not always efficiently or with full automation. It certainly didn’t involve delving into CSS as a language within the solution. However, the crucial aspect lies in identifying the problem at hand. What is the actual challenge you’re trying to address? This determination guides the selection of the most appropriate tool.
The question becomes: Is the need for a tool driven by a desire for a better customer view and engagement? Or is it geared towards automating repetitive tasks? Perhaps it involves managing one-to-many tasks efficiently, dealing with a cohort of customers facing similar issues or situations. Understanding the problem is the initial and fundamental step.
Additionally, part of the solution is formulating a plan to address the identified problem. How does the chosen tool contribute to the overall strategy? Does it merely enhance efficiency and speed, or does it introduce a new paradigm for approaching and engaging customers? These are the considerations I typically focus on.
Too often, I observe individuals excitedly introducing new technology or tools without addressing the core question: What problem does it solve, and how does it make us better? It’s essential to bridge the gap between the coolness factor of a technology or tool and its practical application in solving real issues.
Budget for the customer success team
Do you ever feel like marketing and sales are getting a higher share from the overall company budget? How do you defend your stake?
Well, customer success? Yeah, yeah. We’re at the end of the calendar year. Like everyone else, we’re probably working on our annual budgets. Now, I do think, and part of that, I think is the nature of our industry as SaaS companies. We’re continually looking to keep growing and bring in new logos, driving more marketing spend. More marketing dollars, right? We’re always in that battle as a software or tech company. Where do you spend your capital dollars? Is it on new logo growth and acquisition, or is it on existing clients? What’s the mix of that? I’ve been at some orgs where that difference has not just been single-digit multipliers but multi-digit, you know, 10x differences in budget. It’s understandable because, especially for growth companies, startups, and scale companies, growth is shiny and attractive. It’s what may bring in future rounds of funding and larger account opportunities. Again, this is the bias of a Customer Engagement Survey (CES) person coming out in me. I look at spending some of that money and investing in retention. Retention is your strength, where you have that recurring solid foundation of Annual Recurring Revenue (ARR) year over year.
So, it becomes a battle of growth versus retention. To me, who started my career on the finance side of the world, it’s about how you prioritize customer acquisition costs versus your cost of retention. How do you navigate it? Part of it is having good solid conversations about our goals. Is it growth, retention, or a mix of both? What’s the ratio we’re looking for? This helps direct whether we’re putting our spend and budgets in the right categories. I’m also a big fan of tying the retention portion, especially the post-sales portion, to Net Revenue Retention (NRR). How do I link the dollars we’re going to spend to some type of forecast, telling the story around the amount of growth and retention dollars that CS leaders bring in? As companies grow and mature, at some point, post-sales, retention, and expansion dollars become greater than new logo dollars. This raises the question: Why are we investing more in logo growth than retention at this point? And that’s where you can start to defend the budget accordingly.
Distributing this year’s budget
And how do you allocate the budget? How do you allocate this year’s budget? Which part goes to whom? What are your lines into the CS budget? How do you distribute it?
Well, I, at first, take off some, in most of us, yes, the budget is likely going to be for resources for your people. Then you’ve got tools and other services. First, I typically take off the top – what are some of the tools, services, the things I need across all CS? My fixed costs, if you will, if I put my accounting hat on – the things I need no matter what. For everything else, I like to allocate it by or correlate the allocation by segment. How much money am I getting, maybe from, you know, we have four big segments we break our customers up into. If I look at where my Annual Recurring Revenue (ARR) is, where the growth is going to be coming in, how do I divvy that money up by, again, that mix of existing customers and new customers I’m going to need to take on during the year. That’s typically how we divvy stuff up. So, in summary, it’s a process of first addressing essential costs and resources, then segmenting the remaining budget based on ARR and growth projections, considering the mix of existing and new customers to be acquired during the year.
I cannot go through this discussion with you without asking how is AI shaping the customer success approach, especially considering privacy and security concerns?
Yeah, and gosh, with all the latest AI news in the last four or five days here, it’s been super top of mind. Actually, AI is really top of mind for us at Advanta. We’ll have our user conference in a couple of weeks here in early December. And we’re entirely focused, or most of the content is talking about AI because, I have to admit, that’s what our customers have been talking about, and not just this week, but this whole year. It’s impacting their businesses in lots of ways.
There are bigger security concerns, especially in the security space. The question comes up: how do I safely use AI? How do I make sure that I’m not unknowingly sharing my company’s trade secrets or secret sauce out there? Employees are going to try and use AI interfaces to make their jobs easier, and it’s understandable. In tech, specifically in cybersecurity and IT operations, the jobs have become too complex for humans. At Advanta, we support well over 20 standard customized frameworks, with over a dozen products and more than 200 different integrations with backend systems. The permutations of all the combinations our customers could have is mind-boggling, way beyond what any single Customer Success Manager (CSM) human could interpret for a customer.
Regarding how we’re using AI in Customer Engagement Surveys (CES), we’re still experimenting with the best way to leverage AI to have the greatest positive impact on our customers. We’re trying to use AI to narrow down the crazy permutations of integrations, security standards, and controls to give customers a small, cohesive set of recommendations. This helps us avoid relying on humans, who can be slow and inefficient when thinking through complex scenarios. We’re also providing guidance on our websites on how customers can start thinking safely and securely about AI to ensure they’re not putting sensitive information out there.
There’s a real fear of runaway AI, but our approach is cautious. We recognize that it’s a garbage in, garbage out situation, depending on the sources put into the language model. We’re looking at AI as having a place where it can provide better answers for our customers, and we’re continuously giving guidance on how to use it safely.
Learning from mistakes
I’m a big believer that usually the biggest learnings or the most important learnings came through failure or through the mistakes that we made. So I have to I have to ask you what’s the biggest mistake you’ve made in your CS role that actually turned into a valuable learning experience?
God, you know, we all make mistakes all the time, right? If we don’t have to go back, it could be the latest—it queues up easily. Probably the more impactful mistakes, let’s call it that. Number one is probably not fully coordinating the customer story and our messaging with the customer journey, right? There are a lot of times I’ve seen where we’re telling the customer one thing; they’re clearly at a different point in their journey with your product, and they don’t understand it. It becomes noise, and they almost ignore it or discount you. Worst case, you lose some credibility.
And we didn’t recognize the disconnects. We’re not looking weak. All too often, way too many technology companies look at what I call inside out—we’re looking from our vantage point inside the company at what we see. We’re not looking at ourselves objectively from outside to say, “How does this really look to the customer?” So I think that’s one I always take away: have we looked at what we look at from the outside? I’ll admit, I always do the secret shopper thing—signing up for all my company’s communication somewhere on a separate email address. So I can actually see how good or bad we look on those things. Definitely, that someone should steal that technique—it always has helped me come back and say, “Why are we sending this?” Because it’s a big disconnect that will hurt you overall, maybe not in one fell swoop, but we’ll get there.
Um, other learnings that have been impactful, I guess, really reinforcing when we dive into, say, how do we get customers up to speed? How do we get customers educated on our products? All too often, we’ve defaulted to the, “Oh, just set up a call, I’ll go help you with it.” And we get into these very inefficient, very non-standard one-on-one type sessions. That really, I think, always undermines the CST because, in a way, you’re training the customer to not engage with all that other great material you’ve already built and put out there—all those standard, structured ways to teach someone how to do things that, again, we invested all that time and effort in, and now we’re not leveraging. And all those really smart trainers and educators—we’re not leveraging their expertise. So how do we make sure we’re doing that?
I think probably the other big takeaway I always learn from is not giving enough or recognizing that you need to have some lead time when you’re starting to do cross-functionally. In your own CS department, you can easily rally the troops and respond to something quickly—from minutes to hours to days—really get a new solution or a patch or a fix in place for something that’s broken. When you’re dealing cross-functionally and sometimes outside the organization cross-function with partners or other suppliers, you need some better lead times. And if you don’t recognize that problem early enough and plan with where you need help, it’s going to take you way too long, and you won’t be able to get that solution to the customer.
Prediction for CS in 2024
As we wrap up, I’d love to hear your thoughts on the future. And what are your predictions for the customer success industry in 2024? Are there any trends or changes you foresee that we should all be keeping an eye on?
Yeah, I do think at the highest level, customer success is still maturing as a discipline. Remember, as you pointed out at the beginning of this session, right? Maybe 10 years old as a discipline, right? So we’re still maturing, maybe at times, it’s still more art than science, right? You know, I encourage everyone to look for ways you can make it more of that repeatable science, that structured process for things. There’s also, you know, a lot of great learnings out there from a lot of great leaders. You don’t have to reinvent the wheel; someone’s already solved the problem. It’s just a matter of researching to see what could work for you.
I do think, especially with some areas of the world in different economic conditions and struggling in some areas, time to first value is critical. How do you really make that your priority on your roadmap so that the customer sees that value? You may not even have to fully deliver that value upfront. But if you can get the customer to recognize they’re on at least the path of value, not only will they continue to engage with you, they may even be open to expansion, right? So always focus on value from the start.
And I think the other trend, I guess, if you want to call it—I mentioned literally with some of the communications, but I have my marketing colleagues all going off on Account Based Marketing ABM. This is what we’re doing; we’re gonna get really tailored, really specific. We’ve got better data now; we can really target potential prospects. I would argue: Don’t forget about that for your customers, right? If we can standardize and not just standardize the answers and the approach. But to do that with some personalization, not send that, you know, “Dear customer, here’s the blah, blah, blah thing that’s changed,” but actually have some level of context. Maybe we’ll need AI to help us do that at scale. But I do see that as being a really big thing for both adding value in any of those types of communications or engagement. Especially given that there are going to be some new spam and email rules that are going to put some barriers in front of us in 2024. So how do we make sure we’ve got good efficient messaging going that’s relevant and that can, you know, not be seen as spam and get rejected so we can’t even get our message through? But I think those are the big three that I could say.
Thank you very much for your time and for the opportunity to talk to you today!
Irina thank you so much for the time what a great conversation here and certainly hope everyone gets value out of it.