Lincoln Murphy is Customer Success Evangelist at Gainsight and is driving thought-leadership in the areas of Customer Success Management, customer retention, churn mitigation, and expansion revenue. Since 2008, as Managing Director of Sixteen Ventures, Lincoln has helped 300+ SaaS companies rapidly improve customer acquisition and retention to create efficient engines of growth.
I wanted to find out how Lincoln looks at "Happiness Hacking": testing customer-service solutions and improving the product in direct response to customer feedback.
Laure Parsons [lp]: What are the best ways to test whether you are satisfying customers? Are there other metrics besides your own sales?
Lincoln Murphy [lm]:Understand what makes your customer successful and measure whether they are doing the things that lead to success.
Too many vendors focus on functional use of a product, but that does not necessarily equal success. Completing the job to be done by the customer may not be when they actually become successful within the context of your product; it’s just when they completed a task.
Vendors tend to focus on tasks, functions, features and other “things” that the customer should do. And they tend to think the “why” the customer should do those things is to, well, do them. Honestly, most vendors know this. They forget or choose to ignore this way of thinking.
Now, if you really seek to understand why the customer is doing that task - sharing a file, submitting a press release, filing a tax return - you’ll discover there’s a bigger motivation. That motivation generally equates to success for the customer.
Sharing a file is the function. Send the client their final deliverable efficiently so I can invoice them and get paid faster is the motivation. The job to be done is sharing a file, but the reason for doing that job - the result; success - is something deeper.
Submitting a press release - a document in a certain format - is the job I’m doing. But I’m doing it not to submit a press release… but to get publicity. If you can help me do that - which is what I’d consider success - and not just submitting a properly formatted document - then we both win.
Filing a tax return. I have to do this, it’s the law. Success comes not by filing it, but by filing it and feeling confident that everything was included that needed to be, that the format was correct, that the math was right, that the rules were correct, and that the IRS got the return without incident. Success in this case is a sense of relief. There are many ways to file a tax return… there are fewer ways to do it and feel good about the process. That’s success in this context.
Understand what success is for your customers in the context of your product in their life and you both win.
[lp] What are some of the ways you have seen people "Happiness Hack"; i.e. "growth hack" around customer service?
[lm] Personally reaching out and starting a conversation with your prospect/customer ideally triggered on a milestone reached/not-reached. Using my Customer Success bot method (PDF).
Use something like Olark on a screen that has been rumored to (or the data shows might) cause problems or is otherwise a bottleneck in a key process. Encourage people to reach out if they need help, especially during their trial. Most people, I believe, don’t assume they get support during a trial, but as we continue to see - both my experience and stories that keep coming out - supporting your prospective customers during the trial results in faster conversions, a higher number of conversions and customers that stay past that critical first 90-days.
[lp] What is the impact of direct communication with customers vs. pure software iteration?
[lm] This is the core of the Customer Development philosophy, and to a large degree the entire Lean Startup movement. Because of that, I won’t spend time rehashing all of the details, but I will say the main impact of this would be higher-revenue and sustainable growth!
Building products in a vacuum while assuming you know what customers want is a recipe for disaster. It’s true, if you ask a customer what they want, they may tell you about features or functionality that they don’t need (i.e. Henry Ford’s “faster horse” quote that he probably didn’t actually say).
This is why you shouldn’t ask your customers what they want but rather, what they’re trying to achieve - what success looks like for them in the context of what they’re trying to accomplish. This will allow you to build them what they actually need, and then letting them help you refine the user experience from there.
If you’re successful after having built something without working with your customers or potential users… consider yourself lucky. If you keep doing that, at some point your luck will run out!
[lp] You recently said, "Your most successful customers – those least likely to churn and more likely to buy more over time – are generally your most demanding and they never seem to be happy."
That seems counterintuitive in some ways, . Can you explain how you discovered this and what it means for SaaS companies and their approach to service?
[lm] The main thing to understand here is the distinction between “happy” and “successful.”
Happy is a feeling, successful is quantifiable. We have a goal, an ROI we’d like to reach, an outcome we need to achieve, etc. You’re either on you way to hitting that goal or not.
Whether you’re “happy” along the way isn’t the point. If you don’t reach your goal, if you aren’t successful, you may be “happy” … happily looking for a vendor that will make you successful.
Obviously - I hope - I want the people I work with - my customers - to be happy on a human level. But I know that if they don’t seem happy, are always pushing back on me, are asking for new features, for things to work differently, for more of this or that, and they never seem “happy” that this doesn’t mean they aren’t successful or on their way to being successful.
In fact, I’ve known for a long time - at least anecdotally - that customers who are engaged in multiple ways with your company are the most likely to stick around; the more touchpoints the better.
As I began to dig into this for my SaaS clients, I could see a direct connection here, even when it seemed counter to what we thought. For instance, someone that contacts support frequently - assuming they get their questions answered and issues resolve quickly (even if not with a positive result! That’s the crazy part) - everything else being equal, is more likely to renew their contract or otherwise not churn out.
This makes sense when you consider that frequent support requests means they’re becoming invested in the product and they’re likely heavy, active users and/or they use your product in ways it wasn’t designed. All good signs.
As you point out in the question, your most successful customers – those least likely to churn and more likely to buy more over time – are generally your most demanding customers and they never seem to be happy, or more likely, never satisfied; they always want more from your product.
It’s actually your “happy” customers – the ones you never hear from or interact with, the ones that never complain or contact support – that are actually the ones to be worried about, if for no other reason than you don’t know if they’re successful or not.
They’re the ones that you probably didn’t set goals with, that you don’t speak with frequently to know whether or not they’re on pace to reach whatever the successful outcome is for a given timeframe. There the ones that - according to product usage - might seem just fine, who then churn out “unexpectedly.”
If you understand that happiness isn’t your goal – success leading to loyalty is – then you won’t fall victim to wrongheaded thinking when it comes to success vs. happy and you’ll work diligently to create a health score for your customers so you can avoid these “surprises”, and a lack of touchpoints with customers is often an indicator of a low health score.
I go into more depth on this idea in my article Customer Success is not about Happy Customers.
[lp] How much is understanding customer behaviour integral to customer service? Could you just be really nice and grow based on your friendly relationships?
[lm] Nice is great. Empathetic is great. Trust is required... but at the end of the day, if your customers are not achieving success, while it’ll be a little harder to tell you because you’re so nice and you guys have such a great relationship, your customers will leave and go to a vendor that they think can make them successful.
What good is a relationship if one participant isn’t helping the other reach their goals and achieve success? The same thing applies here. I’m helping you by paying you for your product, the LEAST you can do is help me achieve success within the context of what it is your product does, right?
I think of Customer Success as the next generation, or the future, of Customer Relationship Management. If that acronym wasn’t already taken, it would be perfect for what we Customer Success really is.
It’s a real, deep, meaningful relationship between the vendor and the customer, and your job as the vendor is to management that, to make it deeper and more meaningful over time. And you do that by ensuring your customer is achieving their goals.
[lp] Are people really willing to pay more when they perceive they're getting great customer service?
[lm] Yes or no. It depends on your customer.
No, if the customer you’re selling to doesn’t value that. You may be trying to force a level of service or support onto a customer / market segment that doesn’t want or need it - and therefore doesn’t value it - and won’t pay a premium for it. Perhaps “level of service” becomes the value differentiator between pricing tiers (rather than number of users, storage, etc.).
Yes, if the customer you’re selling to values great service. If they require “great” service, then they are likely willing to pay a premium for it. In fact, as I said before, this could be the difference between your low-end offering and your high-end offering. And it could definitely be the difference between your product and other offerings, especially where there’s feature parity among vendors.
[lp] How can companies without many resources give their customers a great experience?
[lm] Simple. Focus all the scarce resources on the customer’s success. I’m not just parroting the mantra of Customer Success here. Whether it’s Lean Startup with it’s MVP idea or the art and science of Customer Development spawned by Steve Blank and taken far and wide by his disciples, the idea of working to ensure your product helps customers achieve success - not just help them perform functional tasks.
Especially where you have fewer resources, don’t waste those resources building things that aren’t making your customer successful!
[lp] How do traditional tools of customer service, like live chat or email, work with your new approach to customer success?
[lm] Since Customer Success Management is a proactive approach to ensuring customers are achieving their Desired Outcome over the life of the relationship, it differs from traditional Customer Service / Support which is typically reactive and transactional (i.e. it's all about "tickets").
In practice, you generally see the Customer Success Organization "own" and manage the relationship with the customer, while getting input from the other departments that interact with the customers for greater context into the customer's overall experience with the company.
Which means, if you want an accurate indication of your customer's Health Score (an aggregate of different metrics that helps you know whether your customer will renew, churn, buy more, etc.), it should include their interactions with Support. The Customer Success Manager doesn't need to be involved in the support interactions themselves, but does need to have visibility into how often that's happening, the outcome, etc.
So from that standpoint, traditional tools of Customer Service like live chat are just as important as they ever have been. In fact, I'd go a step further and say a service like Olark is more important today since it provides not only a record of an interaction that took place - exactly where and when the customer ran into an issue - but provides a transcript of the conversation should further analysis be required.
And being able to pull that into a larger Customer Success view of the customer is incredibly valuable.
[lp] Can you talk about what you've learned that was surprising or interesting in your work with Gainsight? Any interesting customer successes?
[lm] I joined Gainsight because I was a fan of how they approached Customer Success and how they built their product based on that approach. That approach - by the way - is a holistic view of customer health, taking into consideration both quantitative and qualitative inputs to develop a true representation of the health of a customer, whether they’re likely to renew, expand usage, or if they’re a churn threat.
This is in contrast to other products in our category that are focused primarily on product usage as the key metric. I’ve covered why that’s a bad idea on my site and on LinkedIn.
That context is important because it sets up properly where I’ve seen the most interesting things at Gainsight. When a company switches from a system (3rd party or built in-house) that was driven primarily by customer usage data and they start to see the big picture around customer health, their eyes get wide and they get excited.
All of the sudden things that used to not make sense - active customers churning, customers who contact support or perhaps initiate more Olark sessions having higher health scores, or “inactive” customers (maybe those using a fraction of the available features) renewing and buying more seats - make sense.
The context that was missing starts to fill in the gaps and close the loops.
We’ve seen this with Gild, for example, who dropped their churn from > 30% per year to less than 12% annually due to this improved visibility and the ability to systematize their Customer Success operations. In fact, by being able to have one version of truth around customer health in Gainsight, they were able to use this new context to help them identify their ideal customers and bring in customers more likely to be successful.
This isn’t unusual, by the way. Mainstay - an independent research firm - talked to our customer base and found an average of 50% Churn Rate Reduction (PDF) across the board.
As those results show, when I say focusing on Customer Success in your SaaS business - including implementing the processes and systems to make that happen - can absolutely change your business, I mean it.
How is YOUR business making customers successful? Do you agree with the approaches Lincoln lays out here or do you have other suggestions? What have other people done to make YOU more successful? Comment or tweet!
