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For the vast majority of us in the private sector, our salaries are paid by our customers. We often forget that connection but if you are running a successful, positive cash flow business, it’s your customers that are funding your operations. We need to treat each and every one of them like the lifeblood provider that they are. The problem though is many companies don’t do a particularly great job of embracing their customers across the entire customer lifecycle.
In the software as a service (SaaS) world it is actually quite easy to see the correlation between customer health and the business success of the company. It can all be summed up in two numbers; Customer Acquisition Cost (CAC) and Lifetime Value (LTV). Simply put CAC is the amount of money it takes to land a customer and LTV is the total amount of revenue you expect to get from them. The goal is obviously to have an LTV that’s considerably higher than the CAC. This varies a lot especially for early stage and fast-growing companies that may be upside down on the equation for a long time. Even so, you can still influence these numbers substantially by with a consistent customer experience strategy from Sales to Support.
So how does Customer Experience affect these numbers? Many factors impact customer acquisition costs but a significant one is deal velocity. How quickly are you able to close an opportunity from initial lead identification to a signed contract? The most important perspective here is from the buyers side. How many people in your organization need to be involved to get the customer to the finish line? Sometimes its not just individuals but entire organizations within the selling company. The prospect starts perhaps with an inside sales rep and then moves to an account rep. They might get passed to a sales engineering team for a demo or for trial initiation. They might also interact with a support team if issues arise. The key to success here is how well that prospect is passed between your company’s internal teams.
Does the customer bear the responsibility of retelling their story at every stop along the way? That gets tiring quickly and can negatively impact their overall experience with your brand. Companies are undertaking a number of different strategies to combat these issues. For instance, here at Tellwise, we've found some of our customers have deployed the same tools for both the sales and service organizations. They use roles like Customer Concierge (more often called customer success managers) that own the relationship with the customer and communicate with them using collaborative tools like Tellwise rather than just traditional email. As a result, the customer gets a more consistent experience and feels like they have a deeper connection with your brand. The benefit to the business is reduced acquisition costs because many of these tasks and handoffs are done quickly and more efficiently.
Now let’s assume that the customer does convert and become a paying subscriber. Great news but you should already be thinking about making sure that they renew at the end of their subscription period. Every SaaS business endures a certain amount of customer churn and it’s the customer churn that really defines the lifetime value (LTV). Lower churn or better yet negative churn must always be the goal. Negative churn is when you actually upsell or increase the number of subscribers within a customer over time. Beautiful stuff from a business perspective but again customer experience plays a considerable role.
For the customer to buy, you have convinced them that you can help them with a business problem -- now you have to prove it. The proof comes later in the production phase of the implementation and this is where there are always huge expectation challenges. Did you oversell the solution? Are there any misconceptions? This is where your customer concierge must continue to engage and make sure the first 90 days are a solid success. That is typically the chasm that needs to be crossed in order to make the solution stick in a more production-oriented way. Even with a yearly subscription, the decisions about renewal may come early. You have to stay plugged in with regular communications to ensure a healthy relationship.
This might sound expensive but it is far less expensive to keep an existing customer (increasing LTV) than trying to find a new one (incurring new CAC). That’s not to say it’s easy to do. It requires an unwavering commitment to the customer and sound business processes and organizational support to deliver a solid customer experience. The good news is when it’s done properly, it will deliver great business results.
Conrad Bayer is the Chief Executive Officer of Tellwise. He has almost 20 years of experience in startup and established enterprise software companies. As an experienced entrepreneur and software engineering leader, Conrad is focused on leading-edge design and solving difficult problems leading to new markets. @tellwise
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