There are so many ways businesses segment customers, and many of them are useless: demographics, location, purchasing histories, size of company, how much the customer pays, and so many more.
But there’s one method of segmentation that tends to be overlooked. And overlooking it will lead, invariably, to churn.
It’s called Appropriate Experience (AX). And I guarantee it’s not what you think.
What is Appropriate Experience?
Appropriate Experience is an extremely customer-centric idea, because it’s all about them. The customers. Their experience. But this isn’t “customer experience.” Forget CX and customer satisfaction. No, no. This is completely different.
Appropriate Experience is about how the customer needs to be treated and supported by you so they can reach their desired outcome.
But what is it really – in practice?
For SaaS, a good example of Appropriate Experience might be customers who need high-touch customer support vs. low-touch. Maybe the customer’s Appropriate Experience is self-service, because they have the expertise and technical abilities to figure out most things for themselves. Or maybe the customer’s Appropriate Experience requires some hand-holding, a designated customer-success manager and 24-7 help desk.
You see, a customer has a required outcome. A thing that they need to achieve… And they have a way that they need to achieve that Appropriate Experience. That Appropriate Experience – AX as I call it – goes across the entire customer lifecycle.
He mentions Appropriate Experience within the context of the checklist he recommends using to see whether a customer has “success potential.”
Here’s that checklist (view full descriptions on his article about success potential.)
In many ways, Appropriate Experience (aka. Experience fit) is the flip-side of Resource fit. Resource fit asks the customer if they can spare the resources to put in the time/money/manpower to succeed with the product. Experience fit asks you – the SaaS company – the same question.
The question you need to ask yourself is…
Do you have the resources to ensure that this customer has the experience they need to reach their ideal outcome?
What experience are you able and willing to provide?
You may not have the resources to serve customers who need the high-touch approach.
And that means that you can’t give that particular customer segment their Appropriate Experience, and they won’t be successful with you.
You can’t afford not to identify your customer segments by the experience they require.
Yes, that also means you can’t afford to keep customer segments to whom you can’t deliver an Appropriate Experience. Even if they’re paying you.
It sounds crazy to turn away good money, I know.
But these are people who will never be satisfied with what you offer. They won’t refer you business. They’re highly likely to leave lackluster reviews. And they will churn – after wasting a tremendous amount of your time and resources trying to make them happy when that was never gonna happen.
What happens when you segment your customers and find that a lot of them could use a different experience? Well, then it’s…
When you use Appropriate Experience as a factor in customer segmentation, you may find that a large part of your customers demand a type of experience you’re not currently providing.
You have a few options.
You might consider expanding your services and scaling to meet that need.
If this is a possibility, you’ll want to first survey that segment and ask them what experience would most help them achieve their desired outcomes. But when you do, keep Lincoln Murphy’s checklist in mind. Are these customers who have success potential, if only they had a slightly different experience?
Also keep in mind that Appropriate Experience isn’t limited to how much help a customer gets. It’s not just a high-touch/low-touch issue. If my desired outcome is to go out to dinner with my significant other for a romantic evening, there is a very specific experience I need to achieve that, and Burger King isn’t going to do the job. Think holistically.
Another option, of course, is to not scale or change the experience you provide. You could decide to focus on the customer segment whose Appropriate Experience matches what you’re prepared to offer.
Both are actually good options.
The only bad option is accepting the business of someone you can’t really serve.
More than two-thirds of the Fortune 1000 list currently use Net Promoter Score, a customer loyalty metric introduced by Fred Reichheld in a 2003 Harvard Business Review article, “The One Number You Need to Grow.”
One number. And to get to that one number, you only have to ask one question: “On a scale of 0 to 10, how likely are you to recommend this [product/brand/company/service]?”
Anyone who scores 0-6 is considered a Detractor. Passives rate 7 and 8. Promoters are those who score 9s and 10s – extremely likely to recommend.
The Net Promoter Score is calculated by subtracting Detractors from Promoters. Scores can range anywhere from -100 to 100. It couldn’t be simpler, or more powerful.
Since 2003, the popularity of that one number has grown exponentially, spawning specialty apps to track it and spurring researchers to study it. The most recent study by Temkin Group of 10,000 U.S. consumers showed a direct connection between NPS and customer loyalty across 20 industries. In 291 companies, NPS was highly correlated to the likelihood of repeat purchases from existing customers. In fact, promoters across those 20 industries were 92% more likely to make more purchases than detractors (not surprising), were 9 times more likely to try new offerings, and 5 times more likely to repurchase. Promoters were also 7 times more likely than Detractors to forgive companies if they made a mistake.
Loyalty is lucrative.
The ability to measure and improve it is imperative. And that’s where NPS comes into play.
Churn isn’t caused by sending the bill, or having a quarterly or monthly plan. You could ask subscribers “Are you still in? Want out? You sure?” every single day and if they are making real, tangible progress towards achieving their desired outcomes with your product, they’ll say “Dude, don’t be so insecure. I freakin’ love you.”
Or something to that effect.
Thing is, they’ll stay with you for one reason, and one reason only: If your product is helping them achieve their goals (and doing it better/faster than your competitors).
Now, it would be lovely if churn was as simple as that. It almost is, but there’s another component to the issue.
Do the customers who are churning have the potential to succeed in the first place?
Think of churn as a symptom, not the disease, and it’s usually caused by customers who either don’t have Success Potential or aren’t reaching their Desired Outcomes.So instead of A/B testing your plan cycle, focus on checking whether customers who are churning have success potential in the first place (Lincoln Murphy has a very handy checklist in the second article), and if they don’t, it means your marketing may be attracting the wrong people and/or your sales team may be selling to the wrong people.
If the churning customers do seem to have success potential, then you’re going to have to dig deep (ie. voice of customer data, surveys, interviews) to find out what these “ideal” customers aren’t getting from you that they need.
“As Software-as-a-Service becomes more and more commonplace throughout the world, it’s important to know who exactly is shaping the evolution of this space. In order to make this list, and evaluate everyone on a level playing field, our content team used a metric called True Reach, devised by clear, to rank all of our influencers. While that was our guiding metric, we also included their overall influencer rating (in terms of how influential they are to their own audience), total audience size, and engagement score to paint a full picture of each influencer. We hope you find this document useful, and learn whatever you can from this group of influencers.”
Most of us don’t want to admit it, but we work in silos. The product team is doing their thing and the customer success team is doing their thing. Most organizations (and most people) know this and work to some degree to minimize the separation, but it exists. These silos are evident between product teams and customer success teams. Both have good intentions and work hard to product something that a customer wants or otherwise finds useful, but in the end each team looks that what a customer needs through a different lens.
This is a problem that needs solving because customers don’t care about our lenses. They only care about their own thing…
To do this, Nichole wants us to focus on helping customers achieve their desired outcomes because often times, even though our product is designed to help a customer achieve an outcome, the customer very often does at least some work outside of your product to achieve that outcomes and maybe your product only helps with some of that work (either by design or because the customer does not know they can use your product for that).”
Onboarding is a magical time—magic in the sense that if your users don’t find what they need and get the results they want, they will magically disappear. Also, magic because of its transformational power to turn tire-kickers into loyal users.
Will your onboarding process lead to a disappearing act? Or will it enable you to build a lasting customer relationship?
It all depends on how you build customer success into your user flows.
Many onboarding user flows are designed to help the user set up their accounts and learn how to use the product. That’s all very useful. But these user flows are missing a step.
Account setup and functional learning are important, but only as much as they help the user achieve their ideal outcomes.
Your user doesn’t care about your interface. They don’t really care about your tool either. They care about achieving their ideal outcome in the simplest, easiest, fastest way possible.
That’s what your product is designed to deliver, isn’t it?
Yet, too often, we fail to include the actions that mean success for the customer into the very user flows designed to get them there!
It’s time we re-think product-centric user flows—especially in onboarding.
Image source: Image created by Yasmine Sedky (@yazsedky) for Nichole.
Improving communication between customer success and product teams involves more than creating a Slack channel, or implementing any number of systems that – on the surface – facilitate communication.
You have to give them reasons to want to communicate.
Teams tend to be insular. Data tends to get siloed. And to really bridge those gaps, there needs to be an understanding of what other teams have to offer.
Customer Success’ purpose is to ensure customers reach their ideal outcomes with the product. To do their jobs, they track a tremendous amount of user data, setting up alerts when user actions indicate the potential for churn, observing where customers fall off of onboarding or use, collecting voice of customer data on what they want and what they may not be getting.
Basically, they have all the information Product needs to do their work better.
The challenge for Customer Success is to show Product managers how their information can help Product reach their goals faster and better – and do so in language Product folks can understand. Because there is a language gap. Customer Success tends to be more touchy-feely; they’re all about creating “delight.” Product teams are all about creating… the product.
I’m not saying there aren’t wildly creative verbally-inclined Product managers with crystals on their desks, I’m just saying that bullet points with metrics are generally appreciated.
Actionable steps to improve communication between Customer Success and Product Management:
Tell Product what you have to offer. You can create a customer-centric priority list of what changes are likely to have the most impact (Dev teams typically like to do the biggest impact, easiest-to-implement fixes first).You can work together to find metrics to measure the success of proposed product improvements, changes and additions.
Give’m a break. When customer support tickets reach Product Dev, it takes away valuable time from the work they’re doing to make products better. As Customer Success, if you can proactively predict the most common issues your customers have, and address them through DIY and FAQ content, it will lighten the load of support tickets that make it to the Dev desk.
Pre-organize and think through feature requests. Dev can become a dumping ground for everyone’s “bright” ideas, and it seems like all problems become feature requests. Customer Success can help prioritize features according to which will solve pain points and bridge success gaps for their target audience. This isn’t to say that Product should take its marching orders from Customer Success – not at all. Rather that it should be a collaborative effort to prioritize projects based on user impact, effort required, and company priorities.
Essentially, we’re all working towards the same goal: Delivering the outcome that is the reason the customer bought your product in the first place. Customer Success can help Product Dev bridge that gap by sharing their understanding of what the customer wants – and sharing the successes experienced by delighted customers.
If you’re charting customer success milestones into your user flow and/or onboarding processes, congratulations! You are way ahead of those who don’t. But before I can offer the panacea statement “You’re doing everything right!” – there’s one step you might be missing.
It’s easy to miss, because it’s counter-intuitive.
It’s counter-intuitive, because, being the very good CSM that you are, you’ve done ALLTHERESEARCH on your target customer. You know what they want to do and need to get done with your product. And you are building milestones into your product to keep them on track.
But here’s the missing link.
It’s easy to assume that time to first value is the same as time to first milestone.
And understanding the difference is very… well… valuable.
We’re talking dollars and cents, make-or-break your company valuable.
First, a couple of definitions for the newly initiated:
Your Milestones: Typical milestones include trial period, sale, onboarding, product usage, upsell opportunity, renewal, etc. These are your milestones – the things you’d like your customers to accomplish so your product is successful. These are not your customer’s milestones.
Customer Success Milestones: The steps a customer has to take in order to reach their desired outcome. (Lincoln Murphy’s definition.) You can also think of them as the little successes along the way to reaching the customer’s ultimate success.
Time to first value (TTFV): Time to first value is how much time it takes for the customer to get real, tangible value from using your product. And this is “value” by their definition, not yours. This first value is probably going to be related to your value proposition – that promise that got your customers in the door in the first place.
The onboarding process, in particular, is where we really win or lose customers – and the surest way to win them is to show them value. In The Most Important SaaS Metric Nobody Talks About, RRE ventures connects the dots between the value proposition and time to first value in a nice, concise way:
“Onboarding should emphasize and reinforce the value prop that drove the user to your product in the first place. Sign-up should be frictionless and deployment should be self-service to the point where the customer is up and running in minutes and, most importantly, getting value from your product a few moments right after.”
A few moments isn’t much time to deliver value, and if your product simply can’t manage that – you’re not alone.
Lincoln Murphy has been noodling over the idea of time to first value for a while – and I particularly like what he has to say about including “quick wins” in the onboarding process. Quick wins don’t have to happen within the first “20 minutes” like the RRE Ventures article suggests, but they do need to happen fast enough to prove that your product is worth the time/money investment before the customer loses interest (or patience).
Reaching that first value quickly is easier in simpler SaaS products. But what if you have a complicated product, one which does a lot of things and has a steeper learning curve? I asked Lincoln Murphy, Founder of Sixteen Ventures to weigh in on time to first value, and what the TTFV process looks like for a more complicated product.
Time to First Value (TTFV) Podcast ft. Lincoln Murphy
Lincoln on Time to First Value
Since there’s some confusion over value versus milestones, Lincoln clears that up first.
I like TTFV because it forces us to think about value; milestones can quickly devolve into the typical inward-focused CX of just trying to get a customer to do what we want, not what they need to do.
The purpose of milestones is to get the customer closer to finding value – I might have to go through several milestones to reach first value. If a milestone isn’t value-based – if it’s not moving the customer toward their Desired Outcome – it isn’t a milestone. Or it isn’t a milestone in the context of Customer Success.
Also remember that “first value” may be actual value delivered (or received, depending upon your POV) or it could be when the value potential is first recognized by the customer outside of their interactions with sales and marketing.
More complex products often take awhile for value to be truly recognized, so the value potential is what we focus on initially.
Lincoln on First Value when it’s Complicated
Onboarding design is usually about prompting the new customer to complete “setup” tasks and/or learning how to use the product.
It’s a bit like creating a new character when you want to play your computer game – you pick a name, do some cosmetic surgery on the face, choose a species (I know I’m not the only RPG gamer here). The best games make that part fun too, because they know that fun is their customer’s desired outcome. It’s not that different for SaaS products, but with SaaS products – especially those adopted by teams and businesses, you also have to manage expectations.
Setting up the system is part of getting to first value, but you need to be prescriptive and manage expectations with them along the way, meaning you really have to understand what first value actually is [for the customer] and design a process to get them there quickly.
Structure begets trust.
The more we can help our customer set things up and manage expectations on their end, so they can plan for it accordingly, the more they’ll trust us. Often it’s the unknown that causes our customers to lose confidence in us.
The unknown is problematic because it’s confusing, hard to plan around. Sometimes, onboarding processes are even confusing on purpose.
For most vendors, the onboarding process is a total black box, at least throughout the sales process, and only then does it become more apparent that it’s… not actually that great.
You see this when vendors try to hide the details of onboarding from their customers until it’s too late for customers to back out. We need to be open, prescriptive and structured with our customers.
That said, very often, the setup, implementation, data seeding, integrations, etc., aren’t necessary to getting the customer to first value. That’s a huge idea, because vendors often don’t understand what initial value is for the customer. They think that in order for a customer to get value they have to have everything set up. The customer has to have all the implementations and integrations complete.
The reality is that’s not true.
It may be true for the customer to get ultimate value, but that’s not first value. The critical piece here is understanding the difference.
Back to my role-playing games – sometimes the setup is more fun than the game. That’s doing it right. ie. finding the first value insta-fast. But in the serious world of SaaS, product development and sales folks are so concentrated on full adoption, that they miss opportunities to identify other, in-between ways in which their customers can get closer to their ideal outcomes.
Most vendors have an idea of value for their customers and that idea usually greatly varies from the idea of value that their customers have for themselves. The vendors’ idea of value is often full adoption, full breadth and depth. Customers must use all the seats and every feature or they can’t be successful, but your customers tend to have something else in mind. They have a business outcome that they need to achieve and that may not require what *you* think success really is.
The question is: do you care about what your customer sees as success? Or do you care about what you see as success?
You have to make a decision. If it’s all about you, all about that full depth and breadth of use, that’s fine, but know that’s not the same as your customer’s definition of success.
And that’s going to be a problem.
So how do we dig deeper and find out what first values to target?
We need to ask what is their ultimate business outcome and what would first value actually be?
Is it when they first get some real tangible value, or is it the first time, outside of sales and marketing, that they see the potential for value in their relationship with us? Figure out which one it is and that’s your onboarding goal.
Now we have to engineer a process to get them to that point.
Here’s the deal: We have this ultimate business outcome, and to get there we have to achieve these smaller outcomes along the way – an initial outcome followed by logical milestones.
If they don’t achieve those first few milestones, their ultimate goals don’t really matter because they won’t get there. This is why we see so much churn and non-renewal attributed to early lifecycle issues.
It’s your job as the vendor to know what that initial outcome is and help them achieve that in the appropriate way, and you have to know what those milestones are on the way to the next logical outcome.
But because software vendors often invest millions and millions into features, they want to shove those features on customers as quickly as possible instead of understanding what the customer needs and just giving them that.
Instead, vendors tend to overwhelm their customers with too much stuff – features, tasks, integrations, enhancements, training, whatever – and the customer never gets any real value because they’re never really onboarded.
And how does timing work in this onboarding process? It’s not tied to the typical 30 days – that’s for sure!
I see a lot of vendors tie their onboarding to some artificial time frame, usually 30 days. And they say, “Well, they’ve been a customer for 30 days, check that box, they’re onboard now.” So even though they have an onboarding process, they have some arbitrary time frame, they overwhelm the customer, and then they say after that 30 days, the customer is onboard.
This makes no sense.
Then, of course, the customer complains they’re not getting any value and the vendor blames them for not finding value from this – obviously – super valuable product. There’s a mentality that has to change here.
Treat time to first value as a goal.
Every customer achieves success in their own timeline. We have to set a goal for them. We would like our customers, or at least a specific customer segment, to achieve first value either by getting actual value from their relationship with us, or, for the first time, see that real value potential in the product.
We want them to achieve that milestone in 30 days, but that’s a number we made up. It might take them 3 days, or three months. We might have to intervene, or it might be fine. It’s a goal. And we want to make sure that, if things aren’t fine, we intervene before those 30 days are up and get them back on track.
Instead of saying we have a complex product, we should start viewing it as a complex customer relationship. If they have a more complex goal, we’re going to have to work with them in various ways to help them achieve that goal. It’s not a complex product – the product is there to facilitate success through this relationship. It’s a different way to look at things.
But at the end of the day, you need to know what the ultimate value is, and you need to know what first value is, so you can design and engineer a process to meet them where they are and get them to that first value.
What other people are saying about TTV
Of course, Lincoln isn’t the only one talking about time to first value. Here’s what other SaaS industry insiders are saying.
“This is surprisingly tricky to define, because on the surface it would simply be “the amount of time it takes for someone to experience value from your product,” but HOW MUCH value is necessary for you to officially call it “finished”? Ideally, you provide some value in your product’s very first experience, but if that was also equal to all of the value someone COULD EVER get out of your product, you probably don’t have much of a product at all. Instead of coming up with a rule of thumb for when it’s “enough value to count”, I would instead focus on something like “value per minute”, wherein you focus on delivering more and more value more and more efficiently, kind of like this concept in video game design.
Of course, the people who NEVER receive value will skew that ratio way down, but, well… that’s sort of the point!”
“Are you familiar with the character Walsh on Firefly and how he uses the word “Shiny?” When I’m thinking about this in my own head, I think Time-To-Shiny. You’re looking for a combination of both a) delight and b) either demonstrably improving someone’s life or credibly demonstrating that you have the capability of doing so. Twilio, for example, has among the best Time-To-Shiny of any complicated, development-heavy software product you’ll ever use. You can credibly promise a massive improvement in folks lives as soon as their phone rings in response to code they have written; Twilio can have that happening in ~30 seconds or so for a new user if they’re being guided; perhaps ~5 minutes or so if they’re a motivated self-starter. How to improve it? One, figure out a way to track it obsessively. Two, cheat like a mofo; ruthlessly defer as much as possible about the full experience until AFTER you have achieved that one moment of concentrated joy. Exact tactics for doing this depend a lot on the product at issue; often they involve (e.g.) having fake data pre-loaded in accounts so that someone doesn’t have to do weeks of data entry prior to seeing any improvement in their lives, scripted onboarding experiences, etc.”
“Studying survival analysis taught me a great rule of thumb for this. The highest likelihood of TTV is always the moment after signing up. This is when the user is active, it’s only downhill from there. Having realized this, I’ve guided the team to really focus on onboarding well. Incorporating UX research is invaluable to get customers to TTV faster. TTV is a curve. Some reach it in seconds, other years or even never. I think of it in terms of influencing a curve rather than a discrete point. The key is using statistics to measure TTV, but qualitative UX research to guide the improvements.”
How are you building value into your product or onboarding process? Leave a comment – I’d love to hear from you!
If your SaaS company hasn’t leapt on board the Customer Success train yet, it’s likely due to “focusing on other things,” or “we don’t have the budget for that right now.” But prioritizing Customer Success pays big dividends in returning revenue – so much so that it’s gaining the reputation as the ultimate growth hack. That’s not hype – Customer Success is how SaaS businesses raise retention rates and increase referrals while paving the road for cross-sells and upsells.
If you’re focusing most of your resources on acquisition, you’re missing out on one of the greatest growth engines at your disposal.
“Customer success is where 90% of the revenue is,” – Jason Lemkin, venture capitalist and founder of SaaStr
Acquisition may get the ball rolling, but retention is where the big money is. Big, sustainable money that costs less and less to make. And, this alchemy only works when customers achieve the successes with the product or service that they’d hoped for upon signing up.
Are highly likely to consider additional products and services
Serve as enthusiastic brand advocates that reduce the Cost to Acquire new customers (CAC)
That last point, customer evangelism (aka. brand advocacy), is the most significant benefit of Customer Success and the one that leads to spending less on acquisition efforts, while acquiring more customers.
When your company understands what success means to your customers, then ensures they receive what they need to achieve it, those customers respond – on Facebook, on Twitter, on Yelp, on Linkedin, and in person. They become not just your fans, but your best salespeople, helping your company grow.
But how do you start a customer success program from scratch?
First, let’s start with what customer success really is, because any time a term becomes a “buzzword” it tends to lose its original meaning.
What we call Customer Experience (CX) is the total effect of each interaction between brand and customer over the course of the entire relationship (and it’s really all about how they feel). Positive feelings = effective CX, whether the interaction happens in a SaaS product, on a social media page, a website, over the phone, in person, or driving on the freeway.
This isn’t the same as User Experience – not at all.
Whereas UX is commonly concerned with evaluation of your product or website – a very limited scope – CX encompasses the entire experience of each customer from end-to-end, including touch points on your website, off your website, offline, on mobile, and person-to-person contact. You need both.
Optimizing CX, on the other hand, can seem like an impossibly large task.
But keep in mind: CX is the sum total of specific, concrete, controllable occurrences. You know exactly when and how your customers interact with your brand, right? (No? You should – if it happens online, it’s all trackable). Your task then becomes understanding which CX metrics to track and how to use those metrics to create unbeatable – unforgettable – customer experiences for all.