The 10 laws of customer success – the key to reducing churn and growing recurring revenue
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Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue is the full title of the book, and it talks about exactly that in rich detail. Written by Nick Mehta, Dan Steinman, and Lincoln Murphy, this book wasn’t an easy read, owing to all the information crammed into its 250+ pages.
You can watch a video review of it below.
Read on for the longer review.
The book is divided into three sections. The first part talks about what the term customer success means and how more and more businesses, especially those in the software as a service (SAAS) industry are shifting to a subscription-based business model. Often, rather than simply analyze annual revenue, a company has to look at the annual recurring revenue to get a real idea of their growth and profitability. The best way a company can maximize this is by keeping their customers happy.
I really enjoyed how the book differentiated between customer success and other related terms like customer support or customer experience. The authors’ definition of customer success was simple: it’s creating and cultivating attitudinal loyalty in customers. The distinction between attitudinal and behavioral loyalty is also pointed out. With the plethora of choice available for a customer in today’s world, your product has to stand out and make them choose you. That said, customer success has some important characteristics. It is a revenue-driven, analytics focused, pre-emptive mechanism which exists to retain your customers and give them a good experience.
The first section also speaks about why it is so vital for a subscription-based service to reduce and try to eliminate churn. The math is simple: the cost of acquiring a new customer is much higher compared to the cost of retaining an existing customer. The consequences go beyond financial. Your competitors are bound to have a field day with the negative publicity, and it may not die down soon. The book had some valuable pointers on what can help reduce your churn rates.
- Drive increased contract value for existing customers
- Improve customer experience and provide satisfaction to all customers
- Treat customer success as an organization-wide change
One more thing I liked in this section was how customers were divided into three categories. This pyramid, with high touch customers on the top, low touch ones in the middle, and tech touch ones at the base is how a lot of companies function efficiently. The book provides examples of the benefits each tier gets, as well as the subtle differences between them. For example, if a high touch customer merits a defined and personalized onboarding process, a low touch one might get a packaged one instead, while a tech touch one would experience training videos.
The second section deals with the ten laws of customer success, and this is where the book gets a little complicated for me. Each law was written by a different expert, and while each goes into detail about the how and the why, it was still occasionally jarring. That said, this section attempts to answer how one can build a thriving recurring revenue business and be awesome at customer success. Each law also gives you tips for dealing with high, low, and tech touch customers. Here are the ten laws:
- Sell to the right customer. Customer acquisition is expensive. Retention is essential. But if you’re not targeting the right audience, there is no point to any approach. So do some research, define your ‘right customer’, and figure out how to approaching them.
- Customers and vendors tend to drift apart naturally. Look for warning signs and try to establish processes which will let you know when your customer isn’t pleased.
- Customers expect you to make them wildly successful. Set a goal sheet with achievable timelines and highlight each win to your customer. Deliver value to your customers and make sure they know it. An initial milestone achieved quickly can set a positive tone for all future interactions.
- Relentlessly monitor and manage customer health: Define what customer health means to you and set indicators to gauge how happy they are with your business. Using this information, arrive at actionable insights from the metrics and set them in motion.
- You can no longer build loyalty through only personal relationships. Yes, personal interactions are still important to customer success but your product is what will win the day for you in the end. Other tips that can help improve interactions include building a community for your customers and creating a customer feedback loop.
- Product is your only scalable differentiator. Focus on making a great product and combine this with phenomenal customer experience. This law is definitely worth looking at in detail because of the sheer volume of information provided.
- Obsessively improve time-to-value. Make sure your customer understands the value of your product as quickly as possible. This means you need to know what they want to achieve with your product, define a concrete success measure (for example: create reports twice as fast if you’re selling an analytics software.), and help them get to these goals.
- Deeply understand your customer metrics: This one is a no-brainer. The best way to retain your customers is to understand what drives them as well as know the problems they face. Metrics can also help you discover issues before they pop up and provide you with insight into how you can make your product better for your customers.
- Drive customer success through hard metrics. The essential thing here is to identify the key metrics for your company, focus on business outcomes, and keep asking questions. When a customer churns, what should have been done differently? Why did this customer rank you lower in a particular survey? Always question yourself and aim to get better with each round.
- It’s a top-down, company-wide commitment. All functions of your company, be it sales, marketing, product, or finance, have to believe in customer success and must work towards it. This part of the book also tells you where to start, and is definitely worth reading through.
The last section of the book is called Chief Customer Officer, Technology, and the Future. It points out that customer success is a relatively new function and filling the role with the right person is important. Five things a merger of technology and customer success want to ideally achieve are:
- Optimize the time for customer success management.
- Increase the efficiency of each customer interaction on all levels.
- Drive scalability.
- Improve collaboration, communication, and visibility.
- Better team management.
The book ends with two great customer success management stories. One is a hypothetical timeline of a fictional company over a year, and how they successfully managed to acquire and retain a customer. The other talks about Starbucks and how they managed to build a loyal customer base by providing a phenomenal experience that is accessible and consistent across locations.
To conclude, this book was an interesting read for me because it made me understand how and why more companies and customers are looking at subscription-based revenue models and why it is important for a company to consistently prove their value to their users.
Here are my key takeaways from this book:
- Customer success is about gaining attitudinal loyalty from your customers. They are choosing you and staying with you not because of a lack of options or out of convenience, but because they see value in your product and like the way you work.
- You need to keep churn as low as possible, and empowering your customer success team is the best way to do that.
- Segregate your customers based on their value but always ensure that they are taken care of, whether through a personal touch or technology.
- Remember the ten laws of customer success.
- In today’s era, it is important for a customer success team to be able to function effectively and use technology to do it.
- Loyalty programs are a great way to incentivize and keep customers as well as gain new ones, but only if the rewards are both cost-effective and attractive.
This book is a must-read for companies that want to learn how and why customer success can take them to new heights. Have you read Customer Success? Let me know what you thought about the book and what you learned from it.
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