SaaS vendors – or any vendor that sells on a subscription basis – know that retaining customers (CSM) is critical for growing revenues and ensuring the overall prosperity of their organization. The challenge is that historically companies have focused on the initial sale and building new relationships. Renewals were nice but not the top focus area.
Most companies have a process for closing the initial sales
Over the years, I’ve worked with lots of great sales and service organizations when they were implementing CRM systems. We spent a lot of time mapping out sales stages, defining sales activities, and building sales tools.
What was clear is that they have invested lots of time and money in creating a sales organization that knows what it is doing and can close deals. That is, they could close new deals.
But what about retaining customers?
But they don’t have a plan for what happens next
The rise of SaaS and subscription pricing means that customer renewal processes need to evolve too. SaaS vendors need to identify what needs to happen to make the customer choose to renew year after year. And they need to look at this from both their perspective and the perspective of the customer.
The image below shows the typical approach many SaaS companies take with renewals. Vendors tend to focus solely on the initial sale and then wait for the renewal period to come around. Sure, they will provide some customer support and will focus on maintaining the relationship with the buyer, but they do little to ensure the customer is getting value from the system, which is the main criterion on which customers base their renewal decisions.
And they lose a lot of customers at renewals - No CSM
The problem is this: the customer has a different renewal process.
That is, driving effective and sustainable user adoption and (therefore) getting measurable value/ROI are on the customers’ critical path for renewals.
If they don’t achieve these two things, they don’t renew. Period.
Including Customer Success Management activities after go-live is critical to renewals
Sustaining user adoption and achieving measurable ROI has always been the Achilles’ heel for IT projects. Prior to SaaS software, these problems fell 100% to the customer. Now, for the first time, the SaaS model means the vendor has a vested interest in helping customers solve these problems.
So, what is a SaaS vendor to do to help customers? Establish Customer Success Management (CSM) teams to help ensure customers achieve their goals and renew their subscription.
Quite simply, profitable SaaS vendors recognize CSM is on the critical path to customer renewals. And they must continue to provide CSM services over the life of the customer relationship; for once, a customer stops getting value from the system, and they stop renewing.