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At ClientSuccess, we value candid conversations with Customer Success leaders that have unique experiences and varying viewpoints on the world of Customer Success. This week, we’ll showcase one such conversation with expert Mark Pecoraro, advisor to many B2B SaaS companies all of which have cultures of Customer Success.
Since the beginning of Mark’s career, he’s been in post-Sales B2B software. Prior to working in SaaS and Customer Success, he spent 20 years building B2B enterprise support organizations, including Sybase and CommerceOne. Case in point, Mark was employee #6 at Success Factors and employee #10 at Accept Software. While both of those organizations first had a hybrid model of on-premise combined with SaaS, the leadership teams quickly found that VCs wouldn’t fund a hybrid model, so both made the shift to become 100% SaaS. Out of necessity, Mark was exposed to need for Customer Success due to the recurring revenue at stake.
Mark was quickly awakened to the fact that recurring revenue was at the heart of the subscription economy. For example, Mark’s lead Sales guy at one of his past companies came into office to talk about a big client that had a renewal coming up in later in the year. The Sales guy asked Mark how the client was doing so he could best prepare for renewal conversations. Mark had exposure to all of the data that would give him a good sense of the health of the customer: usage data, support tickets, unique log-ins into the product, performance of the system, and so on. In total, Mark guesses he had nearly 15 different feeds of data. He looked at all of the data manually and came to the conclusion that everything looked healthy and normal, which he shared with the Sales rep. Mark replicated this process for several other clients and was able to get the CEO a graphical picture of a Customer Success “radar screen”, but he realized that after hours of work pulling the different reports, that the information was out of date immediately and wasn’t scalable.
In the subscription economy, it’s a must to have that kind of deep understanding on each client, which completely shifted Mark’s thought process. He became an advisor to several companies in the Customer Success automation realm and has held several VP positions in Customer Success. Throughout all of his experience, Mark believes there’s still a wide continuum as to how Customer Success is positioned in the company and how it’s aligned with executive team.
An organization that truly puts customers first needs to have a “customers first” mantra. Most companies have some sort of mantra about their customers, but the question is what are they actually doing about it? How do they prove that customers are actually first? Mark recently spoke to a CEO that shared eventually (after much resistance), he was able to have the question “What have you done to help customers this year?” on every single performance review, regardless of job or title. That CEO demonstrated that everything across the company should have the goal of making customers successful—even UI designers and report writers that rarely (if ever) have interactions with customer directly.
Mark posed the question: “How do you cycle customer feedback and input it back into the organization?” He explained that many departments and groups across the organization need to be listening to the customer, but the product team should, perhaps, be the most engaged and connected.
Mark believes that organizations and executives leading those organizations sometimes have a disconnect between a true commitment to customers and lip service. Mark shared an example that just last week he spoke with an organization where Customer Success was viewed as a tactical function and was buried deep in the organization. Upon digging in further, he discovered that about 80% of the Customer Success team was about being reactive versus building strong and proactive relationships.
Mark authored a blog post on LinkedIn called Customer Success is NOT Customer Support. Customer Success, from Mark’s point of view, is a proactive cadence with customers who are on a long-term journey to maximize the value they get from your products / solutions. However, the ongoing journey does come with a cost. Mark explained that many CEOs think “hey we need Customer Success”, which often comes from the Board questioning renewal and retention rates. There is some sort of presence of terminal velocity in retention, he explained. “If you just release your product without having a Customer Success team in place, you’re still going to retain a certain amount of customers and you’ll lose a certain amount, too. However, maintaining that level of terminal velocity isn’t going to be good enough.”
Mark gave an example from one of his previous roles where a company missed its new business sales quota by a sizable amount. The CEO and executive team came to the realization that they could substantially get close to their target for the next year by funding Customer Success efforts and by giving Mark more resources to build his team. However, the CFO was very short-sighted and didn’t support in Customer Success enough to give Mark the resources he needed and only allowed him to hire a couple of CSMs who would be responsible for $20+ millions of dollars of renewals and upsells for a fairly complex B2B offering in the hands of 300+ customers. The equation simply couldn’t work, and the organization didn’t understand customer retention costs (CRC) and how Customer Success plays a very important role—and does require an on-going investment to nurture customer along their journey.
In two of Mark’s positions, he reported directly to the CRO. He believes that Customer Success and Sales should functionally as one team, especially when it comes to a “land and expand” strategy. He shared that in the old days of selling perpetual deals, everything led up to this thing called a “contract”. But now, the sales cadence shouldn’t stop when the contract is received since it likely represents just a small amount of business that could grow into much more. He explained that most B2B companies have a land and expand strategy where Sales and Customer Success is intertwined throughout the entire organization. “Does Customer Success own the renewal transaction? Does Customer Success own the upsell transaction? In Mark’s unique experience, he believes that Sales should own the actual transactions, but the CSM should own the relationship-building, being the “trusted advisor” to ensure that the transaction is successful when it comes time for that.
In Mark’s experience, a lot of times the company would only sell 10-20% of a customer's long-term deal potential upfront, knowing the contract could grow substantially. That’s why Customer Success and Sales need to work hand in hand to take out roadblocks that could prohibit expansion/upsell sales. For instance, a CSM should be proactive about little tips and cues to help Sales close the transaction to expand the business. “Because a CSM works with organizations as a trusted advisor, they hear things that Sales won’t necessarily hear,” Mark explained. That’s another reason Mark believes that Sales should own the transaction rather than the CSM. He shared from his experience that customers are intuitive and they know who has the quota to hit.
“The holy grail metric is retention—both numbers and dollars,” Mark explained. “You can have 10 customers and only 8 renew, that’s an 80% gross retention rate. But out of those 80%, two of those could have doubled their contracts. Now all of a sudden, you have a much bigger ARR from those 8 remaining customers. At the end of the day, it’s retention.”
He went on to share that he believes the overall health of a customer base is indicative of retention numbers, and it will be different for each company. There is no number in retention that is the “right number”. It all goes back to product and leadership.
You’ve heard the term “everyone is in Sales?” Mark asked. The same is true for Customer Success.
“Get back to macro lesson of prerequisites,” Mark shared. “Success really all comes down to leadership and product. Leadership of Customer Success starts with the CEO and permeates the entire executive team, and the Product needs to deliver tremendous value without pain and friction. Customer Success needs to be owned by the ENTIRE company.”
To Customer Success leaders in particular, Mark stressed that they need to savvy about commitment to the company and must understand what Customer Success means to that company, and what it doesn’t mean. “You need to ensure your philosophy aligns to that”, Mark stressed. “For a lot of companies, the thinking starts at the customer support level, which is very short-term, break-fix oriented. I don’t subscribe to Customer Success being a glorified reactionary group.”
The health of a SaaS business is directly tied to its ability to retain its customers and prevent churn. So along with gearing up for a big year, be sure that Customer Success is an integral part of your organization’s culture.
Learn more about how ClientSuccess can help your company develop a strong Customer Success methodology and strategy with easy-to-use Customer Success software by requesting a 30-minute demo.