How Customer Success Drives Profitability of SaaS Companies | Mikael Blaisdell

How Customer Success Drives Profitability of SaaS Companies - with Mikael Blaisdell

Gordon Johnson
Apr 1, 2020 1:51:46 PM

Let’s face it, a competitive advantage that’s based on features and functions is not sustainable. If another company has the will and the money, their developers will find a way to duplicate, and one-up your secret sauce. So what’s a SaaS company to do?

One expert who can provide that answer is Mikael Blaisdell, Executive Director of The Customer Success Association.

Mikael Blaisdell is a leading voice on the strategy, process, people and technology of customer retention and increased per-customer profitability. His ongoing research and leadership provide a unique global view of the development of the Customer Success profession and market. As Executive Director of The Customer Success Association, and Publisher of Customer Success Magazine, Mikael's vision and commentary about how companies can optimize customer relationships is read in over 160 countries around the world.

Per Blaisdell, the future of SaaS companies lies with the concept of customer success.

Subscription Models and the Rise of Customer Success

The basis of this is the perpetual license vs. subscription model. Before SaaS came along, companies sold customers a license forever. Their attitude was make the sale, take the profit. Then, if there’s a customer issue, toss it over the wall to support. No one was tasked with recurring revenue.

The subscription model ushered in strategies to incrementally increase profits over time, such as establishing multiple income streams. However, with the subscription model, the customer acquisition cost takes 18 – 24 months to recoup. If a new customer doesn’t renew, it’s a dead loss.

Now, forward-thinking SaaS companies are realizing that customer success is driving their future profitability because customers must get the value they paid for or they are not going to renew.

Blaisdell defines customer success as follows:

Customer Success is a long-term, scientifically engineered, and professionally directed strategy for maximizing customer and company sustainable proven value.

Customer success is dedicated to increasing the value customers receive from your company, which, by the way, also drives your company’s profits. Focusing on value drives the customer experience.

The scientific part of this is that it is more efficient to increase the value for the customers with the highest potential. Blaisdell adds, don’t get distracting with low potential customers.

Further:

Customer Success is an integration of functions and activities of Marketing, Sales, Professional Services, Training and Support into a new profession.

Training and support have been around forever, Mikael, observes, but within different departments with different goals and different measures. Pulling them together in the same department begins to make them co-dependent on success, the customer’s and your company’s.

About 10 years ago companies began experimenting with the idea that maybe support could take on customer success. It didn’t work. Support is reactive by definition. It is very difficult to change metrics, workflows and mindset. 

Then, the concept of customer success began to take a different tack. In Blaisell’s vision, the customer success department should own everything about the customer, including revenue.

Driving Customer Retention through Customer Success

The customer success process starts with an upfront plan that focuses on value and money, for the customer and for the company. What are the customer’s goals? Why did they buy the software? What is the schedule to get them to the realization of value, to making money with your solution?

That, in turn, drives retention. A concentration on creating and increasing value drives customer success, which in turn drives retention. Mikael offers that perhaps the customer success department should be funded by the retention budget.

Per Blaisdell, there is a natural progression of the customer success department as illustrated by the migration of titles for the department head: VP Support and Success, then VP Success and Support, then VP Success.

How Customer Training and Customer Success Go Hand-in-Hand

When asked specifically what the role and importance of customer training and a customer training platform is to customer success, Blaisdell added, “The core realization that every technology vendor needs to fully understand and integrate into their overall corporate strategy is this: every powerful technology necessarily requires that the user make an investment in learning in order to obtain the promised productivity and profitability benefits.”  

To Blaisdell, it isn’t a question of if a company will address the training requirement but when and how they will do so. Customer Success professionals understand this reality very well from their constant interactions with the customers. So do Customer Support teams, and everyone also knows that trying to deliver that training one-to-one over the phone isn’t sustainable.  

He believes to address the training requirement effectively requires a comprehensive strategy that considers every aspect of the customer journey and every interaction point. People have different learning styles, and therefore one type of training delivery will not suit all customers. The training role within the company needs to develop the tactics, the specific educational content and delivery methods, that will support the overall strategy managed by the Customer Success group.

“One of the key technologies that no company should be without is a strong Learning Management System (LMS). Especially in these days of sharply limited travel and participation in group activities due to the pandemic, the online course/content delivery system will necessarily become the primary channel for user education.”

Three Building Blocks for Customer Success

According to Blaisdell’s, there are three necessary building blocks for this emerging customer success profession: 

  • an in-depth knowledge of the customers;
  • effective expertise in the product being sold; and
  • extensive domain expertise.

An In-depth Knowledge of your Customers

Mikael states that marketing and sales, training, implementation, support, coaching – they should all be under one roof. That is how you gain an in-depth knowledge of who the customer is, what their goals are, how they are progressing and consuming, where they need help to meet their success metrics.

He feels that it makes more sense to group these disciplines organizationally. It institutionalizes the process and the expertise. Mikael adds:

“The overlap in skill sets is good. It provides more data on how the customer success plan is progressing and what steps need to be taken. You plot the growth curve by customer, by individual.”

Effective Expertise in the Product

This “effective product expertise” explains Blaisdell, implies that within the department there exists the expertise not only to market, sell, train and support, but to identify, and cross-communicate what needs to be done to achieve the customer success plan.

Support communicates with training. Training, or the customer success manager, is brought in early in the sales process, marketing learns more about the ideal customer and how they describe success.

Extensive Domain Expertise

This goes hand-in-hand with effective product expertise.

Domain expertise is your knowledge of your customer’s industry – you need to speak fluent machine shop. Domain expertise is the voice of authority. It’s how you channel product knowledge to make the customer successful.

Customer Success is SaaS Success

As Mikael mentioned earlier, one of the offshoots of a functioning customer success department is an ever-refined profile of the best, most profitable customers. This is an invaluable lens in assessing product design, marketing, sales, and more and is enabled by a modern customer training platform. Once you get a new high potential customer this becomes the model to nurture them to top tier status.

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