In the context of an initiative in Europe to bring together customer success leaders to exchange on their experiences, we’d appreciate if you could take a couple of minutes to indicate what are your current top 3 customer success challenges. You’re of course welcome to reply whether you’re in Europe or not 🙂 The results will be published afterwards.
This is Episode 3 of the “SaaS Wars Trilogy” interview with Gainsight’s CCO (and Skywalker), Dan Steinman. We look at the evangelism of customer success value in business models.
Sue: Let’s look a bit more at Gainsight now as a company. I noticed that a lot of your current clients are B2B software companies such as Box, Marketo (your previous company), Clarizen, HP, etc. What is Gainsight’s position to attract other recurring revenue model clients who are also thinking about including customer success in their organization?
Dan: Yes that’s a good question. We currently have all sized clients ranging from relatively small and medium sized clients (200 – 300 employees) to larger enterprise organizations. It’s true that we do focus on B2B and have not yet focused on B2C because the B2B market is so different from B2C. SaaS companies are the sweet spot because they are the pure subscription model and we can easily track how they use the product. However, any company doing subscription-based products and services is becoming interested in customer success and not necessarily software or technology companies. Let me give a couple of interesting examples in our customer base.
1) We have a client called Bright Horizons. They’re neither a software nor a technological company and they probably don’t even know how to spell SaaS:)
They build and manage day care centers, offering their services to very large corporations who benefit from having a day care center on site as a perk for their staff. For example companies like GE, Ford and Chevron. What’s interesting is that it’s a B2B business because they’re selling to B2B corporations on a subscription basis with annual renewals. There’s also a bunch of up sell opportunities in addition to selling the usual day care center facility: e.g. the possibility to benefit from other services such as after-hour child care, tutorial services, on site child nurses etc. So from a business model point of view, they function like a SaaS recurring revenue business.
In addition, the product can be measured to follow whether it’s being used or not. For example, how many kids are being dropped off per day and how many hours they are spending at the center. The team that manages those relationships at Bright Horizons is called the “customer success” team. That’s not just because they thought that was a cool sounding name but because they thought this term described exactly what they do.
2) Another example is a company called Fitbit. Everyone knows them as a lot of us are probably wearing one on our wrist. It is B2C for the most part but they also have a partner business activity which is B2B. They sell to large corporations who provide Fitbit watches to their employees, either free of charge or highly subsidized. The idea is that if the physical fitness and health of employees can be tracked, it might be possible to convince their insurance company to lower the rates.
So here’s another great opportunity which has all the makings of the customer success world but which is neither a SaaS nor software business. There’s a B2B relationship which needs to be managed, product usage, adoption and gains to be tracked as well as up sell opportunities with Fitbit upgrades.
Every company in the world is moving towards subscription because the market, Wall Street, the City and investors just love that model so much.
Sue: What is your elevator (I mean “lift”) pitch for Gainsight Software?
Dan: If I was in a “lift” in a London skyscraper with 30 floors, I would probably take about 2 minutes and say something like this…
Gainsight’s technologyis designed to help companies more effectively manage their customers. This has become increasingly critical in the subscription economy. Gainsight will provide actionable insights to Customer Success and Account Management teams to allow them to touch the right customers at the right time with the right intelligence, ultimately driving adoption and value. Tangible benefits of doing this will include lower churn rates and improved identification of upsell opportunities. In other words, net retention will increase. Gainsight will also allow scalability that cannot exist without automation – touching long-tail customers that otherwise would not be touched and optimizingthe time spent with high-value customers. The bottom line value proposition is critical and simple – maximize customer lifetime value.
Sue: Well I would love to see your technology for myself.
Dan: Yes, I know as a user it does live up to this description because when I was at Marketo, I was actually one of the first users of Gainsight.
Sue: It’s great to be a first-hand advocate. I read that Gainsight was rewarded with a $50 million funding at the end of last year. That’s a tremendous recognition. What are Gainsight’s short term plans?
Dan: It’s funny with your British accent that you refer to that as a reward and yes we really think we earned it:) We’re pleased that Gainsight has now raised over $100 million. This is a testament to our value proposition and which is obviously resonating with investors. We know there’s value for what we’re doing and for what we want to do.
When you raise figures that big, it’s usually associated to growth and indeed we have a growth plan with big goals for our revenue as a company. We intend to break into new markets, verticals and geographical regions. A decent percentage will also go into marketing and sales because we think we have a good product-market fit and a good execution process on the marketing and sales side.
We hope to reach the point where we can make a decision as to whether we want to be a public company or not.
Sue: What about your plans for here in Europe Dan?
Dan: Well the plans are pretty open for the time being. As you know Sue because you referred to me dressing up as Austin Powers, we did our Pulse conference in London in October last year. There were 450 very excited people who were totally energized wanting to meet, talk and learn about customer success. It was like an experiment for us as we were asking whether the timing was right. The resounding answer was “Yes it’s time”.
There’s a lot of need, interest and opportunity for customer success in Europe. Sometime this year we will officially make a move into Europe and start actively marketing and selling there with local presence as well. We haven’t specifically determined what date or month that’s going to happen but it’s definitely this year that we’re going to make a move. We’re going to need a big presence in Europe to be a good global company. So yes Sue, the Americans are coming 🙂
Sue: I’ll look forward to that. Good luck for your future evangelization events, the next Pulse event being on May 10th in Oakland. We’d love to see you here in Paris soon 🙂
Finally and as a sequel to your book, in five years time, what do you think you’ll be writing about on customer success?
Dan: The future of Customer Success is hard to see clearly (the crystal ball is cloudy) but there are some very predictable aspects of it:
1. It will continue to grow in importance and stature as the world moves to subscriptions.
2. It will expand far beyond the core SaaS market into traditional businesses and B2C (where it’s already being done under other names in many cases).
3. The power shift from vendors to customers will continue.
4. The internal power shift from Sales to Retention will continue.
5. The rise of the Chief Customer Officer will continue.
6. We’ll see more leaders of Customer Success ringing the bell on Wall Street on IPO day.
7. Customer Success experience and results will lead some of those involved into CEO roles.
8. Automation will continue to assist in making the people part of the business (which will never go away) more effective.
9. Customer Success technology will become part of the standard infrastructure of virtually all companies – CRM, Marketing Automation, ERP, CSM.
10. Customer Success will continue to be a great career choice and will continue to attract more really talented, high-quality people into the discipline.
Those who understand it and embrace it will thrive. Those who don’t will get passed by.
Sue: I’m excited about the prospect of contributing to this great “awakening force”. Thanks Dan for this awesome interview!
In the momentum around customer success, I’m pleased to share my recent interview with Dan Steinman, CCO (and Skywalker) from Gainsight. In keeping with the theme of the Oscars last weekend, this inspiring interview is split into a “SaaS Wars Trilogy” which you’re invited to follow over the next week. It also casts an avant-première at Gainsight’s new book – Customer Success – How Innovative Companies Are Reducing Churn And Increasing Revenue, to be officially published on 7th March.
1) New Hope: SaaS Wars – A New Business Model and The Growing Importance of Customer Success
2) Innovative Vendors Strike Back – Vendors Organize Themselves for Customer Success
3) Return of “The Wall Street”– Evangelism of Customer Success Value and Return on Investment
Episode 1 – New Hope: SaaS Wars
A New Business Model and The Growing Importance of Customer Success.
Sue: Thanks for accepting this interview Dan. Firstly, how do you define the role of customer success ?
Dan: I’d like to present my pictorial. Imagine that there’s a gap between what your product has the ability to do and how your customers are actually using it. Every company should have that gap. That’s because it shows that you’re innovating on your product. Customers can never keep up if you’re innovating at a good pace.
Customer success is there to narrow that gap, by bringing the bottom line closer to the top line. By getting your customers to use more of your product, this brings a direct correlation to loyalty, value and all those other wonderful things we want to happen: renewal, up sell, cross sell and advocacy…
Sue: I like the gap pictorial Dan. I know there’s a lot of momentum around customer success right now and Gainsight has even coined the so-called “Customer Success Movement”. Yourself, Nick Mehta, (CEO of Gainsight) and Lincoln Murphy have just written a book on the subject. Can you give us a little avant-première insight please? Is it going to be the “bible” of the customer success movement?
Dan: Well I would probably use the word bible pretty carefully:) Let’s say it’s the first book of the new customer success movement. The terminology of “customer success” has been used before. But in the new world order where subscriptions are king and customer success is a necessity in a subscription company, this is the kind of first book. It won’t be the last. I know of least three other people who are writing a customer success book. I’m proud that we got there first and that we’re taking on a leadership role.
The book covers different aspects. Firstly, the history of customer success and how we got here. It explains what the subscription tsunami is all about and how that turned into the customer success movement. The middle of the book deals with a lot of practical advise on how we do it, what we like to call the ten laws of customer success. At the end, we cast a look at what the next five or ten years will look like. From a tongue in cheek point of view, we think we’ll be seeing customer success droids flying around in Google self-flying cars ensuring that every customer has a customer success droid helping them do their thing. The total cost of doing customer success at the highest possible level will be around a nickel a year! So I don’t think that’s realistic but at least that is the direction that we’re trying to go in. By necessity, customer success will become more and more valuable in the subscription world that we live in.
Sue : That sounds like a wonderful futuristic world for customer success. I mentioned the bible and you talk about the ten laws of customer success:) So when will the book be published ?
Dan: Well I didn’t correlate that before and there are definitely no stone tablets provided with the book:) The book is completed. It’s on the printing press right now and available in Amazon. The official publication is March 7th so before the world runs out of paper, you can hurry up and get your copy now:)
Sue :Well I’ll definitely order my copy on Amazon and would love you to personally sign it for me*.
With all the current buzz, how do you position the role of customer success compared to more traditional roles, e.g. sales, account management, professional services, support, marketing … ?
Dan: Yes, a little history I think helps answer this question. The history has to do with the shift in the changing business model from the enterprise to the subscription economy. Let’s just use those high level terms. One of the main things that the subscription economy drives is the focus on customers.
In the enterprise economy, we used to be able to sell to a customer once and not really worry about revenue afterwards. In those days, 90% of all of the money was collected at the time of the first deal. Now that has flipped completely. Today less than 10% of all the money we’re going to collect from you is collected at the time of the first deal. The other 90% comes after that in the form of renewal, contracts and up sells. So if 90% of all the business I can potentially generate is after the first deal, we need a team of people who are going to help manage those customers to make sure they wish to renew those contracts.
It’s a little bit like taking subscription to the very basic level of magazine subscriptions. If I sell you an annual magazine subscription, I better do something which delivers value to you so that you renew your subscription. I can’t just ship you a piece of empty paper! I have to give you content, pictures and whatever exciting things you want in that magazine. The same thing is true now in the software world with a subscription recurring revenue. Customer success is not about delivering just another product but about delivering a value, an outcome and ultimately success. If I do that for you, you are likely to renew your contract. If I have more products to sell, you are likely to at least look at those and potentially buy them too.
Sue: We’re really witnessing a power shift where power is now in the hands of the client.
Dan: That’s absolutely right. There is a significant power shift from vendor to customer that has driven this customer success movement. Since you spoke about power shifts, there is another second shift inside of companies going from sales to post sales, basically from acquisition to retention.
In a SaaS company what usually happens after about four to five years of existence is that more dollars are coming from the installed base rather than coming from new acquisition sales. I like to use Salesforce as the analogy because they’re the most mature SaaS company. Next year Salesforce will be around a $10 billion company. Out of that, somewhere in the region of $8 billion will come from the installed base and not from new sales. That’s a significant power shift. So, if you’re the CFO at Salesforce, who are you talking to most about next year’s forecast, the one who has the $2B number or the one who has the $8B number?
Coming soon… Episode 2: Innovative Vendors Strike Back
*I have since ordered my copy of the book on Amazon for my Kindle….It’s a recommended read!
The rise of the subscription model has brought significant attention to the role existing customers play in generating company revenue. As one Gartner study suggests, 80% of your future profits are expected to come from 20% of existing customers. This creates a unique challenge for executives in prioritizing existing customers to maximize lifetime value.