gtmPRO

The End of Customer Success (as we know it)

January 14, 2024 Gary & Andy Season 1 Episode 6
gtmPRO
The End of Customer Success (as we know it)
Show Notes Transcript Chapter Markers

Have we entered a new era of Customer Success?

Welcome gtmPROs!

Join us in this episode for a candid discussion on the future of Customer Success in an era where AI and automation are making their mark. We'll talk about how technology is reshaping roles in sales and marketing and why we believe these are taking over some CS activities. More importantly, with this evolution we believe it is critical for these teams to unite to continue delivering exceptional CS experiences. Systems Thinking at it's core. We'll also touch on the role of Revenue Operations in bringing it all together. Hope you like it!

Resources:

Gary:

Welcome to the GTM Pro Podcast, your essential audio resource for mastering go-to-market discussions in the boardroom. Here we share insights for revenue leaders at B2B Software and Services companies, especially those with less than 50 million in revenue. Why? Because the challenges faced by companies of this size are unique. They are too big to be small and too small to be big. This dynamic pushes revenue leaders into executive leadership without a lot of help or support. We are here to provide that support. Your journey to boardroom excellence starts now.

Gary:

Okay, so this all started with actually, I heard it on the Top Line podcast with Jason Lemkin and then he put a post about it and there's been some, and what's interesting is it's kind of ballooned. He referenced it in passing because he'd been hearing more and more from CEOs about the value of CS. The analogy he provided was well, when 10% of your customers show up to the QBR, what the hell are we doing? We're not actually driving impact here. It's a big investment. Does it really move the needle on retention? And then he put a post about it. And then, of course, Nick Metta, who is the founder and CEO of Gainsight, who basically is the company that created the entire customer success ecosystem, was like hold the phone here. It's not the end of CS. And then, lo and behold, I see a webinar pop up several weeks later. That is Jason Lemkin and Nick Metta, who are going to talk about customer success on the Saster as a Saster webinar. So it's obviously something that is under debate.

Tiana:

I agree with the fact that not that huge teams will continue to be adapted to companies and that not huge teams of customers' success will keep working the way they did, and I know that they will cut the budget for the customer success teams and they will become smaller and smaller. I don't think they disappear at all because I feel like, as you said, annie, everything is customer success and there has to be someone that keeps an eye on it, and it's not always going to be the CEO. There has to be someone that focuses specifically on every one of the needs, like AI and automations can only go so far with efficiency without taking care of the quality of the engagements. How are we going to get to a point where people don't focus on owning financial objectives from it without diverting that human touch for actual relationships that they're building with the actual customer? I don't know.

Tiana:

I feel like it is a trend that is happening. It will definitely go down, but I don't think it would disappear. I don't think this is the end. I just really wonder how will this affect the moment of value? What will change?

Gary:

So I'll just describe this, because you can extend this to the customer lifecycle as well. The idea is that this is the acquisition engine. So, starting at the very top, if we have done a very, very good job in today's market, especially in B2B, if we have done a very good job of defining our ICP hardcore segmentation, where we know exactly the kinds of customers, companies, that we want to go after, and then we also therefore know the typical roles of the people that are involved the user buyer, the economic buyer, especially then we have what we call the known unknown universe, and the unknown universe the known unknown universe would be go to Zoom Info filter for those companies. We're not going to know the second layer, second order details that we would need, like org structure and dynamics and things like that, but you're going to at least have an idea of that and you're going to know the people that are there. Then there's another group of people and companies or dynamics that don't necessarily show up in Zoom Info, that are also part of the universe, and so we just need to figure out you know we need to—the goal then becomes how do we start a relationship with these people? And then, in doing so, the unknown becomes known. Whether you were unknown or we known, we now have a relationship with you. You are reading our content, you are newsletter. We're not trying to sell you anything, we're just starting a relationship. Then the next phase is deepening that relationship. In some way it's getting you further into. You know what that may look like and at some point in time you may enter, or have signals around entering, a buying cycle, and then it becomes about evaluation and enabling the buyer to buy.

Gary:

Then there is this magical moment when you shift in most cases unless it's pure product lead even then that's a different animal where you switch from— being quote, unquote, anonymous and doing your own research on demand to.

Gary:

I now want somebody to guide me through this, and that's when I come into the sales process, right? So then there's the whole request, a demo experience, the actual demo experience, the review period, post demo, the contract period, and then signing the contract and then activation and onboarding. At that point we've now, we can now take that same concept and follow through the journey of what does that, what does that journey look like? Then we come back and determine how can we get the buyer or the customer the information that they need when they need it to get to that moment of value. And what is the most efficient way to do that and that's why I'm saying that the marketing is eating CS is that, if you really look at what CS is doing, most of the time they are doing what marketing could do more efficiently yeah, or at least they're a conduit for the information, you know, creating that feedback loop that marketing is better at interpreting for the purposes of amplifying and broadcasting that message, which is, what are we really good at and for whom?

Andy:

and CS, like gets that information, but they don't process that information. They're doing other things one of the articles talks about. They jump on grenades all the time like they're doing that sort of thing. They're in the trenches. They're not. They're not thinking at that level to distill that up to how does this all fit? Truly customer success, like what's the bigger picture? They're getting a lot of the, the vignettes about it, but they're not so tiana.

Gary:

I, that's my. I agree with you that I'm we're not saying that and I don't know that even Jason Lemkin is saying that it's. You know, cs was a fad and it's over. But I think what he's saying is it the end of customer success as we knew it yeah right is that it needs to change.

Gary:

And if you contrast what happens in so many and in this let's be specific here as we think about customer success, we are thinking about it for companies that are in the lower middle market. They have less than fifty million dollars in revenue. They are growing somewhere between, you know, 10 and 50 percent a year less than 100% and need capital efficient growth. They they probably are close to or need to be, break even, if not profitable and trending towards you know 10 20% EBITDA margins, which is not a lot of software companies, but that's where we're headed. So then, when you think about customer success and you look at the typical allocation of resources, it's 20% plus of revenue. And if your gap, if you have gaps in marketing and you have gaps in product and you have gap like, you can't flat out afford to continue to fund CS in that manner if it's not driving that impact. So you have to find more efficient ways to get to the customer there.

Gary:

And then, if you contrast that with what happens in sales, once from a from a to your point, andy, from a feedback loop perspective, once a customer comes in or a prospective customer comes into a sales conversation and they request a demo. You are speaking to and, ideally, helping every single one of those customers. They they raise their hand and said I want to talk to you right when you get to customer success and that is if you, if you went through most customer success programs and you looked at how, outside of the first six months when we're activating, and there they want help and they're moving along. When you look at most customer success programs, the when they're talking to the customer, it's because it's in our best interest, not theirs. It's a QBR that they don't get any value from and so they stop showing up, so it's a subset.

Andy:

It we know this also, that only a subset do show up, and arguably, those that don't need you the most are the ones that are willing to even have that QBR with you. So, whether that's 20% or whatever, you're not talking. 80% of your customers, and those are the ones that you know are at risk of churning right, so there's a huge imbalance there.

Andy:

To your point, I think what it boils down to is it there is a huge efficiency problem a lot of times and there's a mismatch between you know the needs on the customer side and what is being delivered through CS yeah, I, I was referring mostly to the Dan Schneider I think it was or Schneider post in LinkedIn.

Tiana:

Forgive me for the spelling, but he said basically that if you had a product problem, then you should go to either products, people or engineering, or, and if you had, like, a problem with the depth of, with how much the customers use the depth of your product, then you should go to product marketing or webinars and and try to communicate that. That, but in some way other than CS, and that if sales spend yeah, that sales are spending, and that's also something that Jason said that sales are spending way and way more time actually trying to continue the relationship that they spent so much time building, so they're focusing on something that CS should be doing, then why, like David said, why did? Why do we even have customers access team at all? And he asked like am I right, am I wrong?

Andy:

You're frozen.

Tiana:

The HBS no again. Oh my God.

Gary:

It's okay. The question was why do we even have CS? Am I right, am I wrong?

Tiana:

Yeah, but if you haven't unified the whole commercial engine, like the HBS article.

Andy:

No, I know I was like that's music for your channel you can't even start to, that's exactly where I was going to go.

Gary:

Should we have CS? Am I wrong question? Yeah, wrong question. What is the problem you're trying to solve for your buyer and what is the most efficient way to get? Let's focus on the buyer getting value, and how do we best get them what they need? That's what creates retention and a relationship and a willingness to talk and a feedback loop and all those things. So I think that's the core of all of this is that we obviously all feel like that. We were talking about the impacts of COVID earlier. I hate to go back to that, but just that we will have to go another 10 years before we can really look back and look at the confluence of events that came together at the same time to literally create the perfect storm.

Gary:

The analogy that I provide is you know, think about the iPhone. There were predecessors to the iPhone decades before that little hunk of metal came out with glass, right, but it was simultaneously, if I can get these right simultaneously. It was the microprocessor, right, shrinking enough power into a device. It was the internet connection, like bandwidth, the ability for cellular towers to actually give you enough bandwidth to make that thing functional. And thirdly, was battery life, those things I saw in one little flavor.

Andy:

on top of that, too, it's the usability, the user interface plus the app ecosystem.

Gary:

Well, that came after right. The device itself, the app ecosystem came afterwards, but literally the device itself to have an iPhone then required. But those things it wasn't like. They just all of a sudden showed up. People had been working on battery life for decades. People had been working on bandwidth for decades. People had been working on microprocessor or Moore's Law for decades. It just happened that they all, those parallel things, all came together at the right time. That created the fertile ground for the iPhone to exist.

Andy:

Well, I Hold on, let's finish this. The iPhone is very specific because there was a lot of not also rands that had that backdrop you talked about but were not.

Gary:

Well, I mean blackberries, right, well, yeah, but yeah, they were kind of at the same time period, though, right, the analogy you can provide staying with the same company is the Newton. The Newton was a handheld device that had all of it, but it didn't have it. You know, it lacked a lot, so let's not get down on that. But my point and all that is we're going to fast forward and we're going to look at the period between 2019 and 2023. And we're going to, with the benefit of hindsight, be able to look back at some of the confluence of those events, one of which was created by, by force COVID, right, which was, all of a sudden, this stuff that even slow to transition industries were forced into the I mean just absolutely thrust into the digital era, and everybody jumped on top of that. And then you take, you know, now we have AI on top of that, and what have you? So put all of those trends together and what's happened is we have a completely different way that people are using, buying, implementing, evaluating software, and the ways that worked even just three and four years ago literally don't work anymore, and so what we haven't yet done is redesign the go-to-market engine and the organization around that reality.

Gary:

Right, we can't. Just, we've gone to the days where we have 30 SDRs just banging a list. Because it worked, we could, you know, the economics worked. It doesn't work anymore. Gone are the days when we could post clickbait blog posts seven hot tips to do your whatever and and get leads and have leads come into a demo request and then you know, turn it up and turn it up, like every day that goes by, because the law of crappy click-throughs clicks in. Everything that anybody does that works, everybody will jump on it until it doesn't work anymore. And we have, we have. So I think that is the core of this idea around. It's not about should we or should we not have CS. It is that we actually need to rethink the entire organization how the buyer consumes and needs information to be successful, and what is the most efficient way to deliver it.

Andy:

I would throw in this as support of that statement, which is it's not only drastically different, the change is even still accelerating, literally day by day. How people's manifestations of how they're doing business change so like, actually, the Gary service said one more thing too, which I think is applicable, which is why do you think people would live their work life any different from the way they live their personal life, meaning how they do business, how they transact, how they search for things? That that's, I would argue, converging, and that's why I like to hang my head and say like I think and I was just talking to my niece about this B2C is a good thing. Like she does B2C, she's in advertising, but I'm like I think that's great. Like she's like I don't know B2B, I go, actually you do, like it should be the same thing, and so it's accelerating. Like, literally, how people are searching for things and trying to get information on how something works for their situation is evolving constantly.

Andy:

What are you gonna do about it? Are you gonna throw up your hands and say, well, it's changing too fast, I can't do shit about this, or do you realize it's an arms race and you gotta be faster than the slowest person running. There's the bear, right, the bear is running after everybody, but you just gotta be faster than the slowest people, especially in your industry. True point, gary. Some things were thrust from analog into like we gotta do something here, right, that bar is lower in that situation. Like we have a friendly example of one of our clients, right, that kind of was analogous to that. So that's good. That means like you have to do less to be like top of the heap in your particular space. But so the spectrum of like the mundane to the ridiculous, if you will, the ridiculous is pretty ridiculous right now how fast things are changing.

Gary:

Yeah.

Andy:

Okay.

Gary:

But, that's all the more sorry, tiana, go ahead.

Tiana:

Oh no, I do think that we have to stick with some things from the past, but at the same time, I'll not become obsolete and just continue going with what the trend is actually saying.

Tiana:

If the trend is there, I believe businesses should actually listen to it, because it's there for a reason and more than one person has spoken about it, and I believe everybody should actually understand what's going on around the world, to be present in the moments, especially, as Andy said, because of how fast things are evolving.

Tiana:

But that doesn't mean that we should forget what has been working up until now so well. As we were saying, I don't think there is a way for customer success, like as a whole, to work for your clients from your end, if there's no such coordination between all departments and what they're expecting to receive from customer success. And I'm not talking about a team here, I'm talking about the whole company, like every department, what every department should deliver as the customer success experience. And I do think some people should be in charge of overseeing the whole operation, because it's hugely important and it means loyalty and it means bigger deals and it means longer lasting relationships. But at the same time well, david's post suggested that customer success teams are too big and sadly, the biggest teams are the ones that are actually getting the most turn, and I do think that is very much lack of coordination between everybody and that maybe huge customer success departments are taking too much responsibility that the other departments should also take.

Gary:

That's a great point. That's exactly where I was gonna go, tiana, which is that that's the whole idea, especially again, at lower middle market companies. If you think about it, we have we don't have layers and layers of people who are specialists in a particular role. Right, it's very common. We have CEO, we have somebody leading customer success, we have somebody leading marketing, somebody leading sales, maybe you have partnership, maybe a COO, obviously a CFO, vp of finance, something of that degree, and each person is then responsible for providing answers to their piece of the puzzle of the problem Challenges that it may very well be that the person who has run customer success and knows customer success as it has been run really well that that's not necessarily the right tool kit that you need to be successful with your customers go forward. So that goes back to the. We're working on this framework to help articulate this a little better.

Gary:

But the idea is that if we bring the revenue team together to determine what is it the customer needs and what is the most efficient way to get them there, and then how do we operationalize that, how do we measure that, all of those things, now we get the best of the three perspectives. Sales can be there from an expansion and account management perspective. Cs can be there from a relationship building. There may very well be some hand-to-hand combat that's required when we activate a customer, and how do we expand from the user to the economic buyer and how do we cement that relation?

Gary:

There's a lot of there's legitimate ways to think about the ways that we should think about that, and at marketing it is how do we deliver that seemingly personalized information efficiently at scale? How do we educate, how do we inform, how do we deepen that relationship on a one to many basis or one to few basis? So, collectively, we come together to solve the objective and then determine what are the best resources and departments to manage that. And I believe firmly that we are gonna continue to have a sales department, a marketing department, a CS department, hopefully all tied together with some form of a RevOps slash analytics team so that we have full, 360 degree visibility on what's happening and therefore are optimizing the system and not the pieces in the system. But those continue to be those departments. We just need to rethink how we deliver the information that needs to be delivered and who's responsible for delivering it.

Andy:

Who's responsible for figuring out what the right information is too?

Gary:

Yeah, and that's another reason we would advocate that marketing really realistically is involved in all of these things, is that if certainly customer success is going to be closer, especially when they're dealing with activity in situations where there is a lot of dialogue back and forth and they have the luxury of getting to know what's going on under the hood at the customer, that is pure gold for marketing, Because the everything, every question that they have, every obstacle they have, everything they're dealing with is what your prospects already know and are concerned about.

Gary:

And so if you can know that and you can talk through how you've been able to manage through those risks, then you're de-risking the equation and giving them more information on the front end. So that whole idea of the narrative that flows from the very beginning through the end, in my humble opinion, marketing should be plugged into all of that, if not driving it, and then we determine what's the most efficient way to deliver it. And the reality is there are probably multiple ways to deliver it. One of them is going to be marketing, one of them is going to be customer success. It may very well be a sales if it's an expansion or account management thing or win back, or whatever the case may be. So it's focused on doing the right thing and then deciding who's going to do it.

Tiana:

Yeah, and, as you said, the fixed view of what, everything, what every move should be is crucially important for everything to work.

Gary:

Yeah, I wonder too. So when you devil's in the details here, right? So when you bring it down to a department level, it comes all comes back to, was it? Charlie Munger said something like I'll have to find the quote, I'm going to butcher it, but basically, show me the incentives and I'll show you what's happening.

Gary:

Is, how do we then think about the incentivizing the various teams? Because historically, customer success has been responsible for gross revenue retention and net revenue retention and it in reality, gross revenue retention and net revenue retention is the responsibility of the entire organization. Hey, sales book me a crappy customer and guess who gets to pick up the scraps? Hey, product continue to ignore this seemingly minor but incredibly frustrating bug or lack of feature or oftentimes it's not a lack of feature, it's the incompleteness of the feature that is causing our customers to be able to adequately complete the job. Guess who gets to pick up the scraps. Hey, marketing provide inconsistent or incoherent or too much content. Guess who gets to pick up the pieces. So I think rethinking incentives is going to be a really important part of how we make this all work as well.

Andy:

Yeah, I think and Tiana touched on this right is CS having had too much thrown at them. We talk about this with sales sometimes too, like you got to come up with a value proposition and so on. But, like with CS, how to actually get a hold of a customer isn't an insignificant problem, sometimes Like they won't answer an email, they won't answer a phone call. So now what? Right? So it's the vehicle to communicate what is communicated. So I haven't been able to really touch base with them, so I don't know what their problems are. I haven't really been able to dig into their most current job to be done, so I can't put those pieces together.

Andy:

So I'm trying to figure that part out. I'm jumping on grenades all the time, like there's fires, there's people who are literally saying I'm canceling and I'm trying to save them. I'm trying to do analytics around all this to figure out where are my best opportunities, where should I just write something off? Where should I say like I have an opportunity to save this, and then meanwhile I've got regular business to conduct with people who want to talk to me, for example. So we throw a lot at them and I think that it's kind of understanding where marketing and should be helping where that feedback loop should inform the entire organization from a product perspective and so on, like where are the real hot fires versus I'm just the squeakiest wheel. It's funny because they're having a lot thrown at them and I think part of that is just the organization of how they structure. What they're saying back to the organization is a big piece of that.

Tiana:

When you said all those things, gary.

Andy:

I looked at it and I'm like they just need to be better at like structuring the feedback back to the company.

Gary:

Yeah, that's a really good point, andy, which is, I mean, the desire is if they'll just get on the phone with us, yeah, just do it. If they don't what's just doing it all? If they don't understand the value that they get out of being on the phone, then you know why would I do that. And so, as we're trying to design the information that we believe the company needs, I think well, it goes back this is another aspect that we talk about all the time is developing a always-on voice of the customer, and probably the most realistic way to do that is to absolutely have ongoing a operationalized customer interview process and recognize that product wants to do that and customer success wants to do that and marketing wants to do that. We can talk about a customer advisory board. I think those you know there's. That's probably another topic we should discuss on a different day. But the ability to use that information deep, deep, qualitative information that is only gleaned from an interview, combined with product usage data and pharmacographic data and buyer dynamic data that we understand about our customers to do almost a survey you know more of a portfolio analysis. Like this, group of people are probably feeling this pain and where they are in the process and so on and so forth, because we're not gonna be able to talk to every customer, but we certainly, done right, can anticipate what we believe their pains are or what they're dealing with and be proactive about how we deliver that. Then to your point, andy what is the? What are the various ways that the customer wants to consume that information? It doesn't necessarily mean it's an email, doesn't necessarily mean it's a webinar, doesn't necessarily mean it's a phone call. So we have to. In my mind, this is again we're talking about now.

Gary:

Marketing. Marketing faces the same problem when it has a topic that is incredibly valuable, but we know that we need to atomize it into various distribution mediums. There's a short version of it, there's a long version of it, there's a video version of it, there's a text version of it, there's an audio version of it. It's the same message, but we put it out so many different ways because we know so many. There's so many different preferences for consumption. Same is true. Those same people are now our customers. So we may be saying the same thing, but we need to be thinking, like marketing often does, in terms of distribution what is the appropriate way to distribute it, or multiple ways to distribute it?

Tiana:

When I honestly understand the buyer, when they sometimes don't really wanna talk to customer success in a way where they have built the relationship through sales. So if I'm talking to a salesperson and I buy the product, then I don't wanna talk to someone else that I don't know and that I don't have the trust that I have built so far through the sales relationship that will establish this whole relationship.

Gary:

Especially if you have to start over. That's the most frustrating thing when you're back to square one, trying to share all the nuances of your organization that you've already shared with the salesperson, that you need to now functionally retrain another person in the same organization so that they can help you implement the tool that you just bought Exactly.

Tiana:

And that's why I believe that communication is so important throughout the whole commercial engine. Because if product doesn't fix the problem and marketing doesn't communicate it well through their media and then in sales sell something that is ambiguous to the customer, then all of those problems fall down to customer success and there's no communication between any of the departments. So there's actually like the customer got. It's probably even the wrong customer because they got into the company in the wrong way. So they'll probably turn and that's probably positive.

Andy:

That happens all the time and it's surprising how small of a company that condition that you just described can manifest itself Like it happens. It happens with relatively small companies. Those silos occur and we see it all the time, with sales Sales as a great example. And to pick on them that so much is thrown at them to come up with what you just said like you gotta sell, like so I'm gonna do whatever I have to to make a sale, and sometimes that means it's absolutely the wrong customer. They came up with a wrong value prop because marketing never provided that to them for an ideal customer. They don't even know who the ideal customer is, so they're just out there looking for leads and like selling whatever they have on the shelf and it yeah, what you just said absolutely happens.

Gary:

Yeah. So I think, as I like to say, land this plane as we again. Should we have CS, should we not have CS? Wrong question, as we would advise our CEOs, clients, companies in the lower middle market, starting first with the buyer hence the buyer led growth mantra that we tout and determining what information is needed in what format is needed that is actually based on research, not opinion actually digging in. So you have to go talk to our customers and do some analysis and really understand that so that we can then design a system around that process, which is likely gonna be multiple touch points using multiple medium email video in product personal like.

Gary:

Where does it make? What is the most efficient channel to get the customer what they need? And then will you end up with the CS department? Absolutely, chances are it's probably gonna look very different than what you have today. It's not just looking at a subset of customers that well, we used to onboard everybody, but now we're gonna only onboard, we're gonna provide personal onboarding to companies that are of a certain size and everybody else is gonna get tech touch. What does that mean? Does that actually get them what they need?

Gary:

And what if your revenue strategy is to be land and expand, and now the very customer that has the ideal expansion candidate is now getting a subpar onboarding experience because they started at a low ACV. That's not necessarily the right approach, right? So I think it's coming back to that again. What is it we are trying to accomplish for the buyer? What is it they need to be successful? What's the most efficient way to deliver that? Then all of those other questions we can figure out who's gonna do it? How do we operationalize it? How do we measure it? What's the incentive structure? Those can all be answered, but it's probably not gonna be tweaks to your existing system. It's gonna require some really hard work this year.

Tiana:

Yeah, and basically just starts with marketing saying the right message, for then to sell that message, and then I believe there comes a point where, of course, customer success is gonna look way smaller. I understand the companies wanna automate most of this stuff, but there has to be someone that's overseeing as you said, a Rabops probably that's overseeing this whole operation, and that every department is just understanding each other and is actually saying the same things. A product listening to marketing and the always on voice of customer. That probably should be run by customer success so that everything works like in Army.

Gary:

Mm-hmm. Yeah, well, it's systems thinking. Yeah, we're gonna structure the company as an integrated system to deliver an outcome, instead of a series of parts that plug together to try to drive the same outcome. So, all right, lots to think about. We have some additional work that we need to get to do on some of these templates. We're excited about pulling that together so we can get that out to the world and get your feedback on it. So thanks everybody once again for listening and until next week. Bye, see you. Reflections N anecdotes. Hello and welcome back to raf. Odpow is sage. Welcome to get your PDT with debts. Make sure the yemek and you sign up every cash letter. Skills Until next time, go be a pro.

The Future of Customer Success
The Transformation of the Software Industry
The Evolution of Customer Success Strategies
Incentives and Communication in Customer Success
Reflections