Future-Proof Your New Business Development Strategy Part 1
As I began my first forays into the realm of Customer Success, one name that kept coming up was Lincoln Murphy, Chief Customer Evangelist of Gainsight. I had the opportunity to speak with Lincoln about how the principles of customer success extend beyond our nostalgic view. What once consisted of Support taking calls from frustrated callers now reaches through all facets of organizations.
Check out our conversation below where Lincoln explains how weaving customer success through your new business development/account management strategy can future-proof your agency through the years to come.
As someone who has dedicated a significant portion of your time to customer success, how do you feel when you hear that we are in the age of the customer?
Lincoln Murphy (LM): I cringe a little bit, honestly.
It seems that those who talk about being in the “age of the customer” cite things like self-service onboarding; e-commerce style procurement of just about anything you need; and the low switching costs which reduce the barrier of moving from vendor to vendor, as the catalyst for the customer being in charge.
And the customer being in charge means we’re now in the “age of the customer.” Which ultimately leads to: “yikes! our customer actually has power now and that scares me. How can we placate them?”
I prefer to think about it differently; we’re in business to ensure our customer achieves their Desired Outcome through all of their interactions with our company. That’s not new, but month-to-month subscription models made everyone realize that, if we want to keep our customers who aren’t locked into long-term contracts, we have to change our ways.
If we work to ensure the Customer’s Success — meaning they achieve what they need to achieve, the way they need to achieve it — then the customers will stay longer, buy more, and tell their friends. This is actually a very capitalistic, non-altruistic (and therefore actually feasible) reason for focusing on Customer Success.
The conversation around customer churn has seen a surge of elevation in recent years. Have you seen this correlate to changes in the way businesses are attracting customers?
LM: It’s absolutely true that the move toward the Subscription Economy, and the almost wholesale migration away from legacy Software business models to Software-as-a-Service (SaaS) in the technology sector, was the driving force behind this move toward churn mitigation.
As the software world shifted toward SaaS and the subscription model, companies evolving from their legacy business model and startups being founded by those with legacy software pedigrees still just focused on customer acquisition. But, in this new world of no or short-term contracts and with less sunk cost, the customers would see they weren’t getting value and leave.
This put pressure on the executives of these startups to focus on customer retention. Once they began working to keep customers from cancelling their accounts, they realized they could actually get those customers to increase the breadth and depth of their use of the product, buy add-ons, or otherwise expand what they were paying, while staying longer. That was wins all around.
But we knew we couldn’t just hope this would happen. That’s when we realized this expansion was predicated on the customer achieving their Desired Outcome, and that process needed to be orchestrated and operationalized.
That was the genesis of the Customer Success movement, and since then companies that don’t operate with a Subscription Business Model, and aren’t even technology companies, are realizing that this way of thinking is truly transformational.
How do you define a successful client from the agency’s perspective?
LM: The customer has a Desired Outcome, and when the customer reaches that — or is on track to reach that — we would consider them successful.
The client’s Desired Outcome is made up of two pieces: Required Outcome (the thing they need to achieve), and Appropriate Experience (the way they need to achieve it).
Agencies need to understand both sides of the Desired Outcome of their clients. They not only have to do what the customer needs done, but also provide the appropriate experience for the client. Even if the required outcome was met, if the overall experience is incongruent with what they need, they may not feel as if the relationship with the agency was successful.
How does customer success factor into creating profitable clients?
LM: So profitable (in unit economic terms) clients are those that pay us more than it costs to acquire and serve them over their lifecycle as a customer, right?
Well, if we focus on Customer Success, then we will only take on clients that have Success Potential — that is, given what’s going on in our world, what their requirements are, etc., they have the possibility of achieving their Desired Outcome with us.
And what is the process for identifying which clients are profitable or not?
LM: To ensure we don’t acquire a bad-fit client, we can take characteristics of past and current clients that were successful and use that to drive our sales and marketing efforts. In fact, we should make a list of the characteristics of bad-fit customers and use that to sanity check our sales and marketing to make sure we’re not inadvertently attracting those customers who don’t have success potential.
If we know the type of customer that has Success Potential, we should be able to streamline the customer acquisition process by targeting them specifically, speaking their language, and ultimately reducing the time it takes from first touch to conversion. That means it will cost less to get them as a client, which means they’ll reach profitability faster.
By actively seeking out and bringing in clients that have Success Potential, the chances of getting them to a point where our relationship has value to them (and perhaps moving them along a trajectory where they expand their consumption of our services sooner in the relationship), means they’ll likely stick around longer and pay us more over time. All the while, we’re spending less supporting the client.
Lincoln Murphy is the founder of Sixteen Ventures and Customer Success Evangelist at Gainsight. Using Customer Success to drive growth across the entire customer lifecycle, Lincoln helps companies retain their customers longer, get those customers to use and pay more over time, and turn those customers into advocates. He’s a prolific writer and international speaker on Growth and Customer Success. Follow him on Twitter @lincolnmurphy
Director of Sales and Customer Success, Function Point
A passionate leader with a proven record of sales and customer experience success across several industries. I work with talented individuals to create teams that consistently achieve or exceed targets.