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NEW VIDEO→ We can’t rely on customers to know what to do to get results. But These 3 Things Make It Possible... 1. We are in a unique position to see how the most successful customers do it. They don’t have that same perspective, and it’s extraordinarily valuable to them. That’s why it’s so important to study our most successful customers closely. We need to understand exactly what they did to get results so we can teach it to ALL our customers. 2. We don’t need to focus on everything successful customers do, just the things that bring FIRST RESULTS. Our data shows that most churn comes from customers who achieved NO results. Therefore, helping those customers start getting their first small results is the BIG opportunity! So start by identifying and teaching the most basic initial customer behaviors that drive the first results. After that, then we can teach more advanced behaviors to continually improve their results. 3. We can demonstrate clearly how their behavior will impact the results. We are not limited to simply telling them what they have to do, but we can put it in the context of what they are trying to achieve. That's the key to motivating customer behavior change. REMEMBER: Change is hard, and showing our customers exactly what they need to do to improve their results is essential to motivate them Watch the full video:

The business world has spent the last several years literally obsessing over improving the customer experience. And the results are in… THE GOOD NEWS: Customer satisfaction has been steadily improving. Our data shows customer satisfaction increased by more than 12% between 2017 and 2020. THE BAD NEWS: These improvements have not translated into higher customer retention. For most companies, customer retention has actually gotten worse! Our data shows retention decreased overall by 22% from 2017 to 2020! → But how can this be true? WHAT’S YOUR EXPERIENCE? A lot of people think they are the only ones with this problem: You’ve worked hard to improve everything you do for your customers. Your customer success and support activities are much better than before. And your product has definitely come a long way over the past few years. Obviously, none of it is perfect - far from it - but it’s WAY BETTER than it used to be! → So, then WHY HASN’T RETENTION IMPROVED? It’s frustrating, but I can assure you that you are not alone. The problem is that the conventional way of doing things simply isn't working. That’s why I believe it’s time to call it… The Customer Experience (CX) revolution has been a flop! The data overwhelmingly undermines the core logic of Customer Experience: Happy customers do NOT stay longer than unhappy customers. and, Improving customer experience does NOT lead to higher retention. But we really should have known this already simply because virtually every company in the world has been enthusiastically applying the principles of “CX” and the results stink. IT’S TIME FOR SOMETHING DIFFERENT... The only way out of this trap is to START OVER. We need new ideas based on real data about what works rather than the same old conventional approaches that obviously don’t work. I am excited because tomorrow I will be making a big announcement that is my answer to this need. My team and I have been working on something for the past few years, and I'm thrilled with the result which I believe is what is needed to transform customer retention. I can't wait to show you what we've done!!

Change is hard! But customers don’t get results without it. So we absolutely need an answer to this question —> • Why do some customers change their behavior? • If we can understand this then we are in reach of the most powerful leverage for driving retention. But, it seems like all our customers are so different, and there are just too many reasons why customers don’t change. Except, this is an illusion... ...because there are really only two fundamental reasons customers don’t change. In this video... • I teach the two reasons customers change. • I show you the simple practice that starts customers on the pathway to results. • Finally, I reveal the THIRD LAW OF CUSTOMER RETENTION. Watch the full video:

We do everything we can for every customer we have. So why do so many customers fail to get results? The answer reveals the biggest opportunity to increase retention and reduce churn. And it shows why focusing on adoption doesn’t work. In my latest video, I share how I discovered the key to customer results and explain the Second Law of Customer Retention. Watch the full video -->

In my recent video, I reveal new research that challenges one of our most universally held business beliefs. Using our huge customer data set we tested the relationship between customer satisfaction and loyalty, and the results are stunning. Using customer Net Promoter Scores (NPS) we consistently find that there's literally no statistical correlation between NPS and how long customers stay. In fact, this result holds even when the responses are divided into the three NPS groups: "Promoters" (scores of 9 and 10), "Passives" (scores of 7 and 8), and "Detractors" (scores of 0 to 6). There is no statistically significant difference in average lifespan between the groups. In fact, the differences are so small that they amount to a few days of customer life over four years! But as I discussed in my full video, there is a significant difference that appears - not between the levels of satisfaction, but for those who didn't respond to the NPS survey at all. In fact, the average lifespan for nonrespondents is significantly less than half of those who responded! This is important because it clearly indicates that the level of customer engagement strongly correlates with customer lifespan, and points to the conclusion that customer results are the primary driver of retention. But, many have asked about how this relates to the research that has repeatedly shown companies with a high NPS tend to also have higher retention. Well, this is where it gets interesting because that's a totally different question. What we tested is the relationship between NPS and lifespan for individual customers. By contrast, those other tests instead compare the overall NPS and customer retention for the whole company. So how can there be a correlation between a company's overall NPS and retention, but that relationship vanishes when you look at individual customers? The answer is that companies that are good at producing high satisfaction tend to also be good at other things, like delivering customer results. In other words, what actually drives retention is customer results, and it should not come as a surprise that well-managed companies that are effective at this also tend to be effective at customer satisfaction. Our research supplies the key missing piece to the puzzle by proving that it is the results rather than the satisfaction that drives retention. So if customer satisfaction doesn't drive retention, then what does? The answer is clear: by far the strongest predictor of customer retention is measurable customer results. Watch my video to learn why this is and how customer results are the key to retention. Watch the full video:

Why doesn’t churn go away when we fix bad customer experiences? I share new data that will immediately change your approach to customer success. I also reveal... • two strange customer paradoxes and what they really mean • the ineffective customer activity that is wasting your time • one question that unlocks the power to make customers successful consistently • the First Law of Customer Retention I also share a transformative customer experience that every success manager will be able to relate to. CLICK TO WATCH THE FULL VIDEO-->

Powerful idea from the great Clayton Christensen: “When we buy a product, we essentially 'hire' something to get a job done. If it does the job well, when we are confronted with the same job, we hire that sa me product again. And if the product does a crummy job, we 'fire' it and look around for something else we might hire to solve the problem.” In other words... --CUSTOMER RESULTS DRIVE CUSTOMER RETENTION-- Our research indicates that customers who achieve results stay on average 5.7 times longer than customers who don't. In fact, measurable customer results are by far the BEST PREDICTOR of customer retention we've ever tested. That means our job is not to make customers HAPPY, but to make them SUCCESSFUL!

Surprising new research challenges one of the most fundamental business beliefs: that happy customers stay longer than unhappy customers. But does customer satisfaction really predict retention and churn? Are customer satisfaction surveys like NPS worthless? In this video, I reveal the answer and explore the far-reaching implications. CLICK TO WATCH FULL VIDEO --> https://www.youtube.com/watch?v=UelusM2ARCU

As long as your customer success efforts are reactive, they will never be effective. The only way to change this dynamic is to stop trying to prevent churn and start learning to predict it! The Conventional Reactive Mode Everywhere I go I see customer success teams operating in a constant state of crisis. Their entire approach and everything they do is reactive. They react when customers complain, or run into trouble, or stop using the solution, or ask for help, and even when they are happy and successful. The conventional approach to customer success is profoundly reactive. In my experience everyone knows this and wants to change but they don’t know how. First of all, it’s nearly impossible to stop reacting when there are so many things to react to. What are we going to do, stop answering our customers calls? I don’t think so. And even if you could stop reacting long enough to do something proactive, what would it be? You’ve already done everything you know: the solution has been installed and configured and the customer has been trained. What else is there? Anyone with sense has figured out long ago that merely reaching out to customers is a waste of their time, and ours. So merely establishing a customer “touch cadence” will never qualify as operating proactively. Customer retention efforts are the ultimate reactionary force. They kick into action when signs appear that a customer is in distress. Often “rescuing” the customer requires a great deal of effort and demands resources and personnel from multiple parts of the company. In many cases, there is little time so a scramble takes place. A certain level of “heroism” is often involved. Sadly most of these customers will never be saved. Even when heroic efforts result in a successful renewal, my research findings show that the majority of rescued customers will not renew again. But that’s down the road, and in the mean time any temporary wins perpetuate the illusion that reactive efforts are effective. The truth is that, aside from the celebrations and shout-outs at company meetings, there is precious little to show for your heroism in the long run. Obviously, there’s a fundamental problem with operating in this reactive mode. By the time a customer is visibly at risk, it’s usually too late to save them. The only way to escape this trap is to understand a simple truth: You can’t prevent churn if you can’t predict it. In other words, you need to stop focusing on preventing churn and start learning to predict churn! Only when you are able to predict customer risk consistently will you be able to do something meaningful about it. Success Takes Time One crucial reason predicting churn is so important is that it takes time to address the real causes of customer failure. The typical customer rescue doesn’t allow for anything but slavish compliance with the customer’s list of demands. Often you sense that these demands don’t address the true underlying cause of their troubles. The customer says, “Jump!” and you say, “How high?” when you should be saying, “That won’t solve the real problem.” This scenario is nearly universal, and things will never change until you flip the script. The only way to transform customer success is to know customers are failing even before they do. Only when you are able to see trouble coming far in advance can you intervene with a proactive approach. That way urgency and the customer’s demands don’t get in the way of pursuing the right solutions. But it goes far deeper than just ensuring there’s enough time to address risk. Learning to predict churn leads to a much more fundamental transformation in the entire organization. You can’t predict what you don’t understand Once you seriously commit to learning how to predict customer churn in advance, you run headlong into a serious challenge: in order to predict churn, you must first understand why customers fail. If the customers’ demands won’t address their real problems, then what will? What is the real underlying cause of their troubles? Answering this question is more difficult than it appears. You can often go a level deeper than the customer. But can you get all the way to the bottom of it? Do you truly know why your customers are consistently failing? The conventional approach is to look at the failing customers and their problems. But this way of thinking is a trap. As long as you are looking for what is wrong it will be easy to find plenty of things. But are those things really at the root of your customer’s troubles? This approach is fruitless because there are endless things that can go wrong, but none of them reveal the fundamental cause. The most important outcome of learning to predict churn is to finally gain a clear understanding of what is driving it. What Causes Churn? In my last article, I argued that the way we think about churn is all wrong. The key to uncovering the foundation of churn is to change the question that we ask: The essential question isn’t why do customers fail, but why do they succeed? I don’t think we can understand why customers churn until we know why they succeed. We won’t find the true cause of customer failure in all the difficulties they encounter or the complaints they lodge. Customers don’t leave because they have a reason to leave. They leave when they no longer have a compelling reason to stay. Think about your most successful customers. Haven’t they also experienced many of the same problems? Successful customers actually tend to run into more issues because they use the solution more actively and deeply. So why aren’t these customers failing? This point is demonstrated in another fascinating finding. My research shows that customers who complain are actually more likely to renew than those who don’t. The insight is powerful but counterintuitive: Problems don’t cause customer failure, and resolving problems won’t make customers successful. Now understand, I am not suggesting that resolving real customer problems is unnecessary. You must continue addressing issues and removing friction from the customer experience. But these activities won’t significantly reduce the rate of customer failure. You will never fundamentally gain power over customer churn until you understand what is really driving it. A New Hope The way out of the trap is to reverse your perspective on how you look at customer churn. The fundamental reason customers churn is that they did not achieve or perceive measurable success. So in order to understand failure, we really need to deeply understand what drives success. That’s why the most productive route we can take is to seek to understand our most successful customers. What are they doing that ensures they are getting undeniable value from our solution and that it is key to their success? I’ve been asking this question for years with dozens of leading companies and literally tens-of-thousands of customers. This is what I have consistently found: The primary difference between successful and unsuccessful customers is that successful customers change how they work to take advantage of the solution’s benefits. Understanding this truth is the gateway to a completely different, and much more powerful way of thinking and acting. It shines a light on the ineffectiveness of the conventional reactionary approach. Most importantly, it shows us the path to a much more proactive mode of operating. How To Predict Churn The key to radically improving retention is to identify the essential customer behaviors or processes employed by your most successful customers. This is more than a matter of simply asking them why they succeeded. You need to study them more deeply. What’s standing in the way is the reactive approach that focuses most of your attention on failing customers. Turn your attention instead to the most successful customers. Look beyond the limited view of what they are doing with your solution. Dig deeper as you observe their process. Why do they do it that way? Who is responsible? What other processes or systems are they using to get it done? How do they use the solution’s outputs in their broader organization? Why do they think they were successful? In addition, there is likely a significant amount of expertise already in your organization. This valuable knowledge is often underutilized. Talk to the most experienced people in your company to find out what they know. Ask this question: “Why are some of our customers so much more successful?” This is different from asking why they are successful with your solution. This is taking it one level further. Why are they better at their business, or at least in the major function that the solution supports? What are the most successful customers consistently doing that sets them apart? The answers are relevant precisely because your solution won’t succeed unless the customer does. You must understand precisely what the most successful customers are doing in their business and ensure that we are helping all of our customers to operate that way. Typically there are just a few essential customer behaviors. There may be many things they do right, but I have found that there are usually just one or two key behaviors that are responsible driving most of their superior results. Having identified the key behaviors, you can then engage with all of your customers to help them make those changes. Start early by committing customers to change their process right during the sale. Then refocus your onboarding process system configuration and training to teaching and supporting customer behavior change. Finally, implement a simple tracking system for monitoring whether customers make the essential process improvements. When they don’t, you’ll know even before they do that they are inevitably going to fail to achieve good results down the road. Now you can proactively intervene to improve their process and get them back on track. I’ve implemented this approach repeatedly for the last several years, and the outcomes have been phenomenal. Not only does it transform retention results, it also provides the methodology for aligning all activities around your company’s central purpose: driving exceptional results for customers. Here are just a few ways it radically changes how we care for customers… Finally Become Proactive The primary reason teams behave reactively is that they monitor customer risk retroactively. If you think about it, the things we typically track to identify customer risk aren’t predictive at all. Think about the major components of a typical “Health Score”. Are these leading or lagging indicators of churn? In other words, are you measuring something that happens before or after a customer has failed? Usage (utilization, adoption) is a good example. We know for sure there’s a problem when a customer stops using the solution. But is it predictive? I don’t think so. By the time usage drops meaningfully the customer is already in the later stages of distress. The warning flag goes up too late. Although this may happen before a customer cancels, it does not happen until after a customer has failed. Responding to this signal can never be truly proactive. Other things we measure are similar. The underlying principle is simple: Most warning signals of customer risk don’t appear until after the customer is already failing. This is the fundamental problem with conventional customer risk metrics. And it’s why predicting churn requires flipping the script. What we need are truly leading indicators that customers are at risk of failing. This kind of early-warning detection can only be created by identifying and tracking the customer behaviors that are essential to success. Focus Your Efforts Another benefit of learning to predict churn is that it maximizes your leverage. We all have extremely limited resources to care for our customers. As long as we are operating in a reactive mode, much of our efforts are wasted. Failing customers set the agenda, but what if they don’t know what matters most to achieve success? You must take control to steer the ship back on course. But how do you do that? The good news is that you have the perspective that the customer desperately needs. After all, you’ve seen many customers succeed and fail, and so you are in the best position to understand what really drives success and offer customers what matters most. Whether a customer is successful is primarily dependent on the degree to which they change how they work. In order to succeed, customers must change their behavior in ways that are essential to achieving good results. That’s why you need to go beyond merely training and pushing adoption. In fact, the delusion that customer adoption leads to success is one of the deadly fallacies. Instead, turn your attention to your customer’s behavior. Teaching the essential things customers need to do differently and tracking when they do is the key to operating proactively. But you can’t teach the key behaviors if you don’t know what they are. That’s why I always conduct a Success Analysis, and I’ve even posted the process I follow for you to use (download it here). The essential insights will never come from surveying failed/churned accounts. When a company fully converts to this way of operating, they discover to their delight that most customer churn is preventable. It’s only when you are in the end stages of customer failure that you feel powerless over the situation. But when you see the entire process of how customers succeed you can engineer a process that transforms retention. Love What You Do Perhaps the most surprising outcome of this transformation is that Customer Success can start to be a lot of fun! I mentioned the continual state of crisis that I see in companies everywhere. The constant drumbeat of churn and the focus on problems, complaints, and failure takes its toll and the outcome is often chronically low morale. Customer Success can be a bummer. By contrast, shifting to a focus on driving success through customer behavior change really puts the spring back in your team’s step. Operating proactively to help customers achieve their goals is inherently motivating and satisfying. And it’s exhilarating for a team to dramatically reduce churn while simultaneously increasing customer results. When done properly, customer success is the best and most rewarding role in business. Try this approach for yourself and let me know how it goes. I’m anxious to learn about your experiences so I encourage you to reach out to me with questions and ideas.

The greatest threat to companies is the failure to align around driving customer results. The solution begins with one essential question. I’m going to tell you why I think it’s so hard to figure this out, and along the way, I’ll share some new data that sheds fresh light on the challenge. Most importantly, I’m going to give you the simple process that I use with my clients to cut straight to the heart of what makes their customers successful. It all starts with asking the right questions. Questions Matter I’ve found that often the key to success is to get a clear view of the opportunity by asking the right questions. We rarely articulate and examine our questions as we work. But they are there nonetheless, implicitly framing everything we do. And getting them right is essential. It’s impossible to get the right answer if you are asking the wrong questions. Have you had the experience of working away at something diligently with little to show for it? I think that often what is underneath these frustrations are faulty questions. I believe that is exactly what has happened in the case of growth and customer success. The Questions Preventing You from Adopting a Customer-Centric Strategy In the subscription economy, there are two basic questions underlying how we think about growth: Why do customers buy? Why do customers leave? We rarely articulate these questions, but they are there just the same, framing virtually everything we do in business. We expect that solving for these two questions will naturally lead to the accumulation of customers and drive growth. It makes perfect sense: bring more customers in and reduce the number that leave, and you get growth. But it’s a trap. These are actually the wrong questions, and focusing on answering them ultimately leads to rising customer churn, falling sales, and stagnating growth. Let’s look at each of these questions to see precisely why they get us in trouble. Wrong Question 1: Why Do Customers Buy? This first question — Why do customers buy? — is the foundation for everything that we do in sales and marketing. It’s the definition of their job, and we aggressively reward them when they do it successfully. The problem is that there’s a huge flaw in this question: Not every reason to buy is equally valid. Think about your own company: there are probably a variety of reasons why customers join. Invariably some of those reasons turn out to be really compelling and those customers tend to get good results and stay for a long time, while other reasons don’t play out as well. But wait, isn’t any reason to buy valid as long as its valid to the customer? Who are we to judge their reasons to buy? Absolutely, and this is actually the heart of the matter. A recent experience illustrates why: The Case of the Disappearing Customers A SaaS company came to me recently with a puzzling situation. They had a large number of customers leaving within the first year even though these specific customers were reporting very high satisfaction with the service. The company had heard me talk about how customer happiness is not the solution to customer success, and so they thought I might be able to help them with their dilemma. I dived in and quickly discovered that one of the reasons some customers were signing-up was to meet a temporary need. These are actually successful customers that simply no longer need the service after the first several months. Looking more deeply, I found that many of these customers also have a longer-term need for the solution. But the sales executives had learned that it’s easier and faster to win customers for the temporary need. Fewer conversations and no long-term commitment translated into a more efficient sales process. The real problem is that this particular reason to buy is not also a good reason to renew. This is a really big issue since most companies don’t make money unless customers stay for a long time. And even if these short-term customers are profitable, the value of the entire enterprise is severely diminished by high customer churn rates. That’s why just selling as many new customers as possible can never be the right strategy in the subscription economy. It’s not enough to get customers to join, they have to join for the right reasons. The Wrong Reasons To Buy Meeting a temporary need is just one example of many bad reasons to buy. Other examples include: Buying for the wrong benefits (bad fit selling) Buying with the wrong expectations (overselling, underselling) Buying features rather than benefits (demo selling) Buying to “try it out” (free trials, opt-outs) Buying for a single feature (selling against competitors) Buying on a whim or emotion (relationship selling, convention selling) Buying to use up available budget (last-minute selling) Buying the lowest-cost option or for a discount (discounting) These reasons and many more demonstrate a simple truth: not all reasons to buy are equally valid if they are not also reasons to stay. Think about this from your own experience: Have you noticed that some reasons to buy are more durable or successful than others, particularly over the long run? Are you aware of particular sales behaviors, pitches, or promises that lead to higher churn? In my experience working with many different companies, this has been a consistent theme. In fact, I’ve come to the conclusion that this is the most significant factor driving long-term customer churn in many companies. What Does the Data Say? I’m the kind of person who likes to validate intuitions using hard data. My reason is simple: over many years I’ve found that our intuitions frequently turn out to be wrong. That’s why I’ve been gathering data on customer success outcomes from dozens of SaaS companies over the past few years. It’s a unique set of data that is probably the largest in the world, and continues to expand. The question I wanted to ask the data was simple: is there evidence that some reasons to buy are consistently better than others for customer outcomes? The short answer is yes. There are actually many indicators, but I will share just two examples here. 1. How you sell matters First, it is well known in the world of sales that a very small number of reps are consistently the highest performers by a wide margin. I wanted to know if this holds true when you measure sales reps by how well their accounts retain. In other words, do accounts sold by particular reps consistently renew at higher levels? My hypothesis is that this would be a clear indicator that the way in which an account is sold matters for success. To understand these differences better, I’ve spent time studying many of these reps closely. Suffice it to say that they do in fact sell differently and in ways that are consequential to long-term customer success. But that’s a subject for another article. 2. All reasons to buy are not created equal A second proof point from the data came out of a large study in which all customers were grouped by the primary reason they purchased. The results are astonishing and definitive. Some reasons to buy are clearly much better than others in the long run. It’s a powerful reminder that in the subscription business model, the act of “closing” a new customer – while essential – is not success. All we’ve done at that point is introduce that customer into the “mall”. Everything we ultimately earn from that customer will come from keeping them in the “mall” and selling them more. Your churn rates and losses are going to continue rising until you acknowledge and adapt to this truth: Not all reasons customers buy are equally valid reasons to stay. How we sell, and who we sell to, have a bigger impact on customer outcomes than anything else we do. Wrong Question 2: Why Do Customers Leave? Now let’s turn our attention to the second wrong question: Why do customers leave? Like the previous question, this also seems completely reasonable and useful. It’s the underlying logic of virtually everything we do in customer success. But once again, it’s a trap. Let me explain… I’m sure many of you have probably had a similar experience to one that I’ve had many times. In an effort to reduce churn, we go out and survey our canceled customers and ask them why they left. We gather up all those results, organize them into categories, and put them into a pie chart. Then we pick the one or two biggest reasons and go to work solving those issues. With great effort, we crush those issues down and look forward to improved retention. But what actually happens to churn? Usually not much! Certainly not in proportion to the slices of our pie. But why? I’ve personally made this mistake over and over again, and it has taken me a very long time to start to understand why this simply doesn’t work. I call it “studying failure” and it’s the reason that I don’t do exit analyses anymore. I’m convinced asking customers why they are leaving is a dead end. One hint that there’s something wrong with the logic of this approach is that it raises a question: Why aren’t the other customers leaving? Certainly, many of the customers who are renewing have also experienced the same issues as those that have canceled. In fact, it’s typical for our most successful customers to be using the solution even more deeply and therefore they tend to run into more problems rather than fewer. So why don’t they leave? Obviously, there’s something else going on here. Think about your own experience: Have you had a customer leave but on the way out, say very nice things about you or the company and how happy they were with the experience? Conversely, do you have a customer who is unhappy and complaining, but keeps renewing? What gives? Clearly, problems with the solution and bad experiences aren’t the only factors driving churn. What Does the Data Say? Naturally, I wanted to know whether this was reflected in the customer retention data. Actually, there are many indicators of this in the data, and here I will share two that demonstrate the point. 1. Customers that complain are actually more likely to renew The first data point may initially seem counterintuitive. The data consistently show that customers who complain are actually more likely on average to renew than those who don’t. When you divide customers into groups, the group that submits tickets consistently retains at a higher rate than the group that doesn’t. But how could this be true? We believe that making customers happy and providing a good customer experience is the key to long-term success. We would reasonably expect that more problems would lead directly to more churn. But this is dead wrong. As I’ve argued for years, satisfaction is not the primary driver of long-term retention, and customer issues are not, on their own, indicators of account risk. The intuition is simple: Think about what a customer is signaling when they complain. When they run into issues and go through the trouble to complain or open a ticket it is a clear signal that the solution matters to them and that they are engaged with it in a meaningful way. 2. No signal is the worst signal The second validation of this comes from a large study in which we divided customers into groups based on whether they had ever requested a change in their contract – either expansion (upsell) or reduction (downsell). The hypothesis was that these requests signal whether the solution is important to the customer. The results confirm the hypothesis and even offer a bit of a surprise. The group we naturally think of as healthy are those who don’t bother us. But this shows that they are the most at risk for churn. The next result makes a lot of sense: customers that request an expansion are very likely to retain. It’s an intuitive result: requesting more of the solution is a clear signal that it matters to them. So what about those that are asking for a reduction? This seems to be a negative signal that the account is at risk. Wrong! Actually, this group has a two-year retention rate that is the highest of all! But how do we make sense out of this? Again, think about what they are signaling when they ask for a reduction. They are certainly not communicating that the solution is irrelevant to them. In many cases, they’ve established a valid long-term use case, and now they are optimizing it to fit. Please understand, I’m not suggesting that we don’t need to improve our solutions and solve the real issues our customers experience. Of course, we should do everything we can to remove friction from the customer experience, and shame on us if we don’t. But it clearly won’t be enough to get us the results we are striving for. So here’s my rule for this … Customers don’t leave because they have a reason to leave. Customers leave when they no longer have a compelling reason to stay. Now that we know why these two questions are problematic, we can turn our attention to the search for better questions that will reliably guide us to the right set of answers. The Right Question: Why Do Customers Stay? I believe that there is actually just one ultimate question at the heart of success in the subscription economy. It’s not about why customers join, or why customers leave. The most powerful question is business is, “Why do customers stay?” This is a much better starting point. It avoids the pitfalls inherent in the wrong questions and provides absolute clarity for what it means to have a customer-centric business strategy. One particular experience changed my thinking on this. For many years I managed a very large customer that was notoriously demanding, and virtually impossible to satisfy. They were always unhappy with us, and constantly complaining about our solution and demanding changes. Dealing with them was actually rather unpleasant! (I’m sure many of you can relate to this experience!) This went on for a few years, and at one point my frustration got the better of me. Right in the middle of a meeting, I asked them, “If you are so unhappy, then why don’t you just cancel?” The customer was somewhat confused by my question and responded, “Why would we cancel when you make us so much money?” I immediately felt embarrassed. After all, why did I ever think it was about anything else? That was a profound lesson for me. There are always plenty of reasons to cancel. None of our products are perfect. Every product has friction and issues, and customers can always find reasons to be unhappy. But as I’ve been saying for years: happiness is not the panacea of customer success! Figuring Out Customers’ Reasons to Stay When we sincerely begin to seek the answer to this question — Why do customers stay? — it will lead to powerful new understanding that can finally align us with our customers, and guide all the company’s efforts to drive sustainable growth. So, what’s the answer? Why do customers stay? The answer will obviously be different depending on your product and market. But whatever you do, and regardless of what your customers are looking for, on this point the data are compelling: the customers who stay are those that succeed. Customers that produce measurable and durable results stay more than four times longer. So here’s my rule: The only valid reasons to buy are those which are also reasons to stay. The reasons to stay are always those that produce measurable and durable results. Studying Success The key to building an extremely high-growth customer engine is to identify the reasons your customers stay and use that clarity to get every part of your organization to focus its efforts on driving this dynamic: Marketing must focus its messaging and campaigns to attract and cultivate the leads with the right reasons to stay. Sales will craft customer deals aimed at the right benefits: those with the ability to drive measurable results over the long term. Customer Success can use its limited time and resources to help customers change how they work in key ways to achieve measurable results, and keep expanding them. Product will be able to envision the improvements that will drive the essential customer results, and the clarity to properly prioritize the roadmap. So, the task is clear. You must discover with more clarity than ever before precisely why your customers stay. Be prepared for some in the organization to think that they already know why your customers stay and that such an effort is unnecessary. But it’s just as certain that there is disagreement within the company about what matters most. Remember that this is something that can only be properly understood from the customer’s perspective. And, make no mistake, the negative information that tends to accumulate from customer interactions cannot be trusted as a clear signal regarding the essence of why your most successful customers stay. I have developed a simple process that I use with my clients to clarify precisely why their successful customers stay. It’s a process you can follow, and I’ll provide a brief overview here. For those who are interested in doing this in your own company, I have posted my detailed, step-by-step guide including templates and forms for you to use. You can access it here. The purpose of the Success Analysis is to answer the key question: Why do customers stay? This process will help you identify your most successful customers, conduct effective interviews, and create your Customer Bullseye. Step 1. Identify your most successful customers. The first step is to select the right customers to interview. The goal is to interview at least 5 customers, so you probably should identify at least 10 in order to account for the possibility that some customers may not be available. When you have your list, reach out to the customers to try to get at least five interviews scheduled. Identifying your happiest customers may seem like a simple matter. However, it is important to understand there is a difference between a successful customer and one that is “happy” or says nice things about you. Successful customers are those that have achieved significant results of the kind your solution promises, and are able to speak to how those results were achieved. Step 2. Interview Them To Learn Why They Stay The next step is to interview each customer to get to the heart of why they stay. You will be looking to answer three key questions: Why did the customer buy the solution in the first place? How successful has it been? What has the customer done to make it successful? It will likely take multiple questions to get complete answers. These interviews can normally be completed in 45 minutes, and it’s best to include the CSM or Account Manager to schedule the interview and introduce the interviewer to the client. Step 3. Distill The Learnings Into Your Customer Bullseye With your interviews complete, you are ready to distill the results into your Customer Bullseye. There are four key elements of a Bullseye Customer: What is their primary business objective? How do they measure success? What are their key attributes that enable these customers to succeed? What key processes are essential to their success? The Bullseye Customer document is a one-page summary where you succinctly answer each of these questions. Brevity and clarity are essential. Unless you can identify the one most important answer to each question above, your work is incomplete and the outcome will simply lead to further dissipation and misalignment. Therefore, a significant amount of judgment must be invested. The most important things will always be those that form an intersection between producing measurable results (as opposed to unmeasurable) which are mission-critical to the customer’s business, and that are common across the majority of successful customers. What’s Next? The Customer Bullseye will become the anchor point for guiding all customer activities. Start by examining your direct customer interactions in light of what you’ve learned. Identify opportunities to focus more precisely on the factors that drive their success. Where are you spending time and effort that is not precisely aligned with the Bullseye benefits, and key customer processes? Look for opportunities to replace low-leverage activities with those that drive directly to the Bullseye. Pay close attention to your onboarding process in particular. Are all activities targeted at driving the benefits identified by your customers that stay? Are you using valuable customer time merely to configure and train? Use the Bullseye to identify the activities that have the highest leverage for driving their success. Look for ways to simplify configuration through standardization, and move training to videos or webinars. This will free up precious resources to focus on helping the customer change how they work to drive their outcomes. Make sure every touchpoint is aligned to the bullseye benefits. The ultimate goal is to align the entire organization to the Customer Bullseye. You should share it with other departments and help them identify ways to incorporate key elements into their activities. The best way to start is by working across functions to answer a few key questions: Marketing: How does the Customer Bullseye impact the marketing strategy, what the key message should be, and the kinds of customers to target? Sales: What are the best reasons to buy, and how can we guide customers to give them the best chance for long-term success? What should we eliminate from our practices that jeopardize long-term customer outcomes? Onboarding: How does the Customer Bullseye change the focus of the onboarding process? What are the most important things we can do to ensure customers achieve success? Renewal: What key milestones are necessary for customers to have a compelling reason to stay? Working back from the optimal renewal outcome, what are the specific things that must happen and when? Product: How does the Customer Bullseye clarify the product roadmap? What innovations or improvements will directly drive better, and more measurable, customer results? The Customer Bullseye is the starting point on the journey to true customer-centricity. With it, you are able to establish a common set of objectives across departments, and align everyone to focus on driving the most important customer benefits.

Handoffs are at the root of too many customer problems – especially in the enterprise. Read on to find out why, and my method for making them seamless. Everybody says you’ve gotta nail the handoffs or you’ll lose customers. I couldn’t agree more. Except, I’ve never been able to do it. I’ve tried every suggestion out there. But nothing I’ve ever done to engineer the “perfect” handoff has really solved the problem. Transitioning custody of a customer between teams continues to be a major source of customer success problems — especially in the enterprise. In fact, I completely stopped doing handoffs altogether in my SaaS/B2B customer success process. It started when I discovered the specific reason why handoffs cause so much trouble. That insight was a key turning point. Once I understood the root of the problem, I could see that there will never be a perfect handoff – at least not with enterprise customers. Conversely, it also explains why many companies don’t have any trouble with handoffs, and why other companies start out fine but develop handoff problems as they grow. Based on this key insight, I’ve created a very simple technique to determine the handoff risk and the best approach which I share below. But first, it’s important to understand why handoffs cause so much trouble? The Trouble with Handoffs The reason it’s so difficult to solve the problem of handoffs in the enterprise is because it isn’t really about you — it’s mostly about the customer. Let me explain… The reason we handoff the customer between teams is because of specialization. It makes perfect sense: salespeople are devoted to selling, implementors are dedicated to onboarding, and support teams exist to address issues and questions from end-users. Likewise, the customer also hands off custody of us inside their organization. In larger companies, the decision maker usually hands off to a project manager to work through the implementation, and after that, the project manager exits and the solution goes live for the users. Here’s the problem: What is merely a handoff for us is actually a hand-down for the customer. Here’s how I drew it in my notebook… Looking at it this way, it’s instantly clear what’s wrong: in every handoff, the focus of our engagement with the customer falls, and therefore so do we. The problem is, getting back “up” in the customer and reestablishing engagement with the executive sponsor is notoriously difficult. What’s Wrong With Hand-Downs? This matters a lot in SaaS/B2B because we need the sponsor to be engaged to have any chance of success. The solution just isn’t going to succeed without support from the top. And even if we somehow miraculously get the solution to take hold with users without this support (unlikely), we are eventually going to need that person’s enthusiastic support to secure the renewal. That’s why losing engagement with this key person really is a disaster. This is usually the only person in the customer who thoroughly understands how your solution will drive their success, and that makes this person essential to your entire customer success strategy. Who else is in a position to appreciate the value you’ve created and how it specifically drives their success? Certainly not their project manager who’s focus is being on-time and on-budget. And certainly not the end-users who mostly just want things to be easy and trouble-free. On your side, the person who established “custody” of this specific relationship and the mind-meld that occurred in the purchase decision is usually the salesperson. Unfortunately, the first handoff is also the moment when they also disengage from active involvement. The Danger Zone In my experience it is often not long before the customer sponsor starts forgetting some of the details about precisely what was agreed and even exactly what success looks like. In the vacuum created by the hand-down, their grasp on the specifics of the success plan begins to fade, and they enter the “danger zone” where they become vulnerable to having their vision of success hijacked. The first time they hear any complaint about the solution, it can completely take over how they think, shifting their mentality from a business project focused on success to a technology project focused on problems and issues. This is the most common way customers lose track of the original success concept. Obviously this is bad. Now, I know very well that both the customer sponsor and the salesperson will adamantly deny that they are going to disengage. They’ll say that they are keeping tabs on the implementation and will be fully engaged when it is time to go live. But, to be fair, they both have a lot of other things to do, and far too often they won’t fully reengage, especially in larger enterprise projects, or where the implementation takes weeks or months. That is, until the inevitable moment down the road when the whole thing goes off the rails. Customer Success This is where the idea of the customer success manager (CSM) comes in to the story. The hope is that the CSM fills the vacuum at the top of my chart. But, the trouble is, the CSM usually never has a chance to reestablish engagement with the executive sponsor once it has fallen. Most of the time, the CSM is stuck dealing with someone lower down – either a “system admin” or IT person – which will never be able to appreciate the original success plan and vision. Their focus is nearly always on minimizing difficulties and user complaints – hardly a recipe for real success. In my experience this problem remains even when the CSM gets introduced right away by the salesperson at a “kickoff” meeting. This is because the problem isn’t really with your handoff, it’s with the customer’s. Once the decision maker hands-down the engagement, the CSM will be building a relationship with someone else, nearly always focused on issues other than the original success vision, and will have a lot of trouble getting the sponsor reengaged. The magnitude of this problem can be seen in the immense effort CSMs continually expend trying to “get back up” in the customer. If they don’t succeed in reestablishing full engagement with the key leader there is little chance for a long term relationship. This is one of the most important sources of avoidable churn in SaaS/B2B. The Solution: Durable Custody of the Customer That’s why a key element of my solution has been to eliminate handoffs altogether. In my experience the risk associated with hand-downs is simply too great and the effort needed to recover too costly. The way I do it is to bring the CSM directly into the sales process. If the CSM is involved in the sale, and ensures the customer sponsor remains engaged, then there really isn’t a handoff. After all, the CSM was there for the mind-meld, and they were an integral part of the success plan. In fact, I like to get the CSM deeply involved by tasking them with building the success plan and working through it with the executive sponsor to get their full buy-in prior to the sale. During the implementation, the CSM conducts a regular cadence of oversight meetings (I prefer weekly), led by the CSM requiring the executive sponsor’s participation (and preferably the salesperson as well). This is an expectation that must be clearly set and agreed prior to the sale. In this approach, there is no hand-down of responsibility and oversight in the customer. The CSM leads with the clear purpose of retaining sponsor engagement throughout that phase and beyond. This is what I call establishing “durable custody” of the customer. There are other benefits to this approach including ensuring that the salesperson remains involved enough to be an asset at critical moments down the road. It’s also the best way I’ve found to implement a real success planning process and have the continuity to ensure that the plans are implemented and achieved. Why Aren’t Handoffs a Problem For All Companies? Once I understood the problem with handoffs, I could immediately see why many companies don’t have any trouble with them. Look again at my diagram of the customer above. It’s obvious not all companies look like this. Many companies simply don’t have that many levels in their organization (what I call “organizational distance”). In fact, particularly in smaller companies, these roles are often played by the same person. In other words, the decision maker is the same person who sees the project through implementation, and this is the same person who is the ultimate end-user for the solution as well. In these customers, there is no hand-down and therefore, minimal handoff risk. In other cases, the implementation is not complex or significant enough to allow for a loss of engagement. If the solution can be provisioned in a day or two, then the risk of lost engagement is effectively zero. However, in both of these cases there must still be a very tight coupling of sales and customer success to ensure continuity with the success plan. Building good success plans in collaboration with the customer sponsor, and making them the focus of all interactions is one of the keys to maintaining sponsor engagement. This also explains why some companies experience no trouble from handoffs early on, but develop problems later. A lot of SaaS/B2B companies gain initial traction with smaller customers where there is little or no organizational distance between the decision maker and end-user. However, as these companies mature and their solution begins to take hold with larger enterprise customers, their handoffs can develop hand-down problems. I’ve seen this happen a lot in SaaS/B2B, and it’s often a source of confusion and frustration when terrific early customer success results run into trouble as they move upmarket. This is one of the reasons the enterprise requires a different approach to customer success. How To Choose The Right Approach Based on this, I use a very simple technique to determine the degree of handoff risk, and the right customer success process. I will always use the “durable custody” approach described above if: The customer will handoff ownership of your account within their organization for any reason. The implementation will take more than a few days. Your company is starting to move into the enterprise. In my experience working with SaaS/B2B companies, eliminating handoffs via the “durable custody” approach has helped eliminate a lot of problems and drive exceptionally high customer retention, expansion, and advocacy. It is one of the key things you can do to enable customer bonding. But this approach does not come without a cost. For one thing, it places much more responsibility on the CSMs to establish and maintain engagement at a high level in large enterprise accounts, and to build and deliver on specific account success plans. It therefore requires a relatively high degree of skill and competence. Finding and training the best CSMs is one of the most important things for any company to get right. Also, the relative number of accounts per CSM has to allow enough time for the high degree of engagement. Although the cost is higher, the returns can be phenomenal, measured in reduced onboarding failures, much longer retention through customer bonding, and most importantly, in continual expansion of account value through real customer success.

“It ain’t what you don’t know that gets you into trouble.  It’s what you know for sure that just ain’t so.” Mark Twain The conventional theory about SaaS customer success goes something like this: Your solution creates value for the customer. The value you create drives their success. Their Success leads them to renew their subscription. This is the chain of causality in the conventional thinking about SaaS customer success. Here’s how I drew it in my notebook: I know this looks like perfectly sound logic, but it’s not. In fact, it’s a disaster for customer success, because every part of this theory is actually dead wrong. There are some gaping holes here, and until you fill them in you will continue to struggle to achieve the results your company needs. Let me explain… Deadly Fallacy #1: SOLUTION => VALUE Truth: Your solution on it’s own will not create significant value unless the customer also changes how they work. It’s a simple as that. I’ve found this truth can be difficult for many people to grok, particularly in technology companies. Yet, pretty much everyone has experienced it. I’m talking about those customers who implement your technology but get no results, lose interest, and end up cancelling. These are the times you’ve been tempted to say, “They didn’t do it right!” And, actually you’d be onto something, because this hints at the true problem. Customers who achieve phenomenal results have invariably adapted their processes to take advantage of the way the solution works. This is why it can seem so random which customers succeed and which don’t. If you leave it entirely to the customer to understand and make the essential process changes you’ll naturally get highly variable results. The solution is simple: take ownership of your customers’ business process change. If you are not crystal clear on how customers need to change their business process, they won’t be either. As I’ve said elsewhere, the enterprise is hard because organizational change is hard. So, an essential role of the customer success manager is to be the agent of the customer’s business process change. And we won’t be effective if we don’t know how the customer does their work, and more importantly, why they do it that way. Digging-in and doing some deep learning around their processes is not optional. Reality: SOLUTION + PROCESS CHANGE => VALUE Deadly Fallacy #2: VALUE => SUCCESS Truth: The value your solution creates must align with the customer’s definition of success. The next fallacy is that the value your solution creates will automatically make your customer successful. Don’t get me wrong, it’s more likely to be true than not. After all, they signed-up because they saw a clear link to their success. But taking the link is for granted can lead to problems. It’s another major cause of the variability in customer outcomes. The most common reason why this link gets broken is simply the failure to truly understand the customer’s ultimate vision for their success. We come to every engagement with so many prior expectations as to how the value drives success,  that we often fail to examine and understand the customer’s unique way of thinking about it. My experience is that there is much more variability in the way customers frame their success then we think, both in what they hope to achieve, and also the vocabulary they use. The solution is to engage in a process of deep learning about how every customer uniquely defines success. Only then can the customer success manager work to assure the value created aligns to drive the customer’s vision of success. There are many different things that may need to be done, but the most common missing ingredient is measuring and materializing the link between the solution value and the impact on their success. Reality: VALUE + ALIGNMENT => SUCCESS Deadly Fallacy #3: SUCCESS => RENEWAL Truth: If you want to ensure the renewal, you must continually increase the customer’s success. Almost nothing in customer success is more confusing or frustrating than having one of your successful customers unexpectedly cancel their contract. Getting blind-sided like this has happened to every SaaS company. Sometimes there’s an obvious reason, such as an abrupt change in the customer’s leadership, or they got acquired. But more often it’s not clear what went wrong. The third fallacy is the idea that driving their success will be enough. This is something I go into detail elsewhere. But suffice it to say, over time, delivering the same value has a diminishing impact relative to the customer’s evolving needs, perceptions, and alternatives. That’s why value must be a dynamic thing. For every renewal there must be a story about how you are making an increasing impact on the customer’s success. I call this dynamic nature of success, “client velocity”. And it’s the reason for another counter-intuitive truth of customer success in the enterprise… Truth: Expanding the account is actually a cause of renewal, rather than it’s outcome. You’ve probably heard it before: “First let’s secure the renewal, then we’ll work on expanding the account.” This way of thinking is the essence of this fallacy. Experience has taught me that in order to continue to renew year after year, customers need to have a vision of how your solution’s impact on their success is expanding. If the account isn’t expanding, it’s dying. That’s why you have to first secure the expansion, and the renewal will be a foregone conclusion. Reality: SUCCESS + EXPANSION => RENEWAL The REAL Causal Chain of Customer Success So, here’s how I see the real chain of causality in customer success… Think of it this way… All the factors in red above (process change, alignment, and expansion) are the main activities where customer success managers should focus their efforts. To achieve phenomenal results: Drive key process changes in the customer. Ensure value is aligned with their success, and the impact is measured and materialized. Continually find ways to expand your leverage against the customer’s success. This is the formula. But wait, what about adoption? How is it possible that I haven’t mentioned driving adoption? Isn’t that a big part of customer success? Well, that’s what most people think, but it’s actually the heart of one more deadly fallacy. Bonus Fallacy: ADOPTION => SUCCESS Truth: Broad adoption inside the customer is the outcome of success rather than the cause. It’s a nearly universal belief that getting the customer’s employees to use (“adopt”) the solution is a primary driver of customer success. This is why encouraging adoption is so often a top priority, and why there’s so much focus on training the end-users. This belief is understandable because we clearly see that our most successful customers always have high adoption. The two obviously go together. But the important question is: which causes which? There’s no doubt that customers have to adopt the solution at some level to even know if it’s working. Clearly, zero adoption is death. But, what we want to know is: What causes adoption to spread broadly in some customers from that first little bit to a lot? The answer: success drives adoption. When all the elements of the causal chain lock into perfect alignment, a magic thing happens: your solution goes viral inside the customer organization. This is because there is a reinforcing loop where success drives adoption which produces more value which drives more success, and so on. It looks like this… Reality: SUCCESS => ADOPTION That’s the formula for customer success. If any of the elements are missing or out of alignment, driving adoption can feel like pushing a piece of string. You’re never going to get anywhere. When all the elements are there and aligned, success, adoption, expansion, and renewal seem to take on an energy of their own. But in the majority of cases, you need to work deliberately to ensure the pieces are all in place and aligned. That’s why customer success is so important in SaaS.