I’d be preaching to the choir if I droned on about the importance of segmenting customers to snag results. That said, in this ever-changing world it is easy to miss the boat on how to effectively do that — even for the biggest data hounds among us. It requires us all to think differently and do differently.
It’s easy to miss segmentation issues. They can often look like problems caused by a thousand different things that aren’t remotely related to segmentation. At the end of the day though, when your segmentation is on point, you won’t see customer loss and stagnated growth. So if you aren’t seeing the results you expect, it’s time to take a long hard look at how you’re segmenting your customer base.
That’s when you start thinking differently. Evaluate your analytics from new perspectives and dig deeper into them. Look at indicators like:
When you take a hard look at the overall financial value of your customer in comparison to those indicators listed in the last section, the level of customer churn risk begins to crystallize.
Even better, as you glean potential problems or rising issues, you’re then empowered to develop nurturing processes around them to course correct. Begin with three simple questions:
Answer these questions, and you can then map necessary touch points to the segments that need it most. As you do that, new metrics will emerge to track conversions and successes.
Look beyond whether users have logged in and how often they’re using your product. You need to know so much more. As a for instance, dial into:
From there, you can determine the appropriate CS approach to begin segmenting your customer base.
Everything covered above is awfully big talk. I get it. Delving in deeper, increasing your level of data analysis, and then building in added processes and touch points is enough to break the strongest of resource-strapped teams.
If you’ve been keeping up with our blog, you know our solution by now. It starts with an understanding and acceptance of the 80/20 Rule. (Read more about it in our blog post here.) To find real gains in CS, you have to be able to scale. That starts with prioritization and ends with an experienced partner.
When you have a partner who truly understands the nuances of Customer Success and microcosms that support (or hinder) the customer lifecycle, it is possible to scale without incurring additional overhead, employees and workload.
You get to continue with your hands-on service earned by your top customers while a partner *ahem like ESG* can evaluate what’s happening with those top-tier customers, determine what can and cannot be replicated for your lower tiers, and will look for meaningful opportunities to engage with even your smallest clients through a balance of tech and human touch. (Check out this white paper to learn more about that.) With an opportunity to deliver significant returns and overall cost savings, it’s a low risk/high reward proposition for any company — including yours.
Clearly there isn’t a singular segmentation formula out there that will solve everything for everybody. Each customer journey is unique to the product and business, and each business is looking for particular outcomes. So while there are similarities that can drive the process for identifying appropriate segmentation approaches, a level of customization to achieve optimal results is still required.
If this sounds familiar, you’re likely one of the many budget-strapped Customer Success (CS) leaders we talk to every day. Folks who know that to improve their bottom lines they need higher touch engagement with their customers — but don’t have the resources to make that a reality.
While attending this year’s Gainsight Pulse Conference, the significance of human-touch was made clear across the board. One case study showed that even just a minor increase in human-touch engagement resulted in increased customer software subscription renewals. Confirming what we already know: Following a strong CS model unequivocally delivers increased renewals, increased revenue from aforementioned renewals, and decreased customer churn.
We see two options:
The first option is great if a CS team has the money to bring on new hires, the track record to convince decision-makers to expand the team, a pool of qualified applicants to pull from, the resources to onboard new hires, and a proven CS model to ensure ROI.
Unfortunately, that scenario tends to better describe a CSM’s fever dream than reality. The sad truth is most companies we come across run into hurdle after hurdle when trying to extend their internal CS teams.
That’s where the cavalry, more commonly known as virtual Customer Success Managers (vCSM), comes in. vCSMs help CS teams to scale their proven, human-centric strategy across larger or lower-value tiers without the expense and stress of hiring internal resources. vCSMs provide the critical human touch that augments tech touch and bottom-tier neglect described in our blog post, 3 Customer Success Best Practices to Scale People & Automation.
A successful vCSM solution flips the “do more with less” philosophy on its head. It answers the call to reduce cost and streamline operations while delivering bigger bottom lines — a demand that typically pressurizes organizations to do more with less and a stress that automation alleviates but does not solve alone.
If you’ve been following our white papers, you know we believe most companies follow the 80/20 Rule. In short, it’s the idea that most CS teams focus on their biggest customers, typically because of limited resources. Those customers tend to make up the top 20 percent of their customer base. The other 80 percent falls in the coverage gap — a place of no return where customers experience low-touch engagement if any engagement at all.
The added bonus of vCSMs focusing on low- and middle-tier customers is that existing CSMs can stay focused on key accounts and initiatives.
In short, Customer Success as a Service (CSaaS) drives better customer experience, which unlocks more sustainable growth for you and your customers. An idea illustrated in practice by SaaS Capital, which has found that businesses prioritizing Customer Success can see a 40 percent increase in revenue and 50 percent faster growth.
Take a more in-depth look at how the right CS partner can help you have your cake and eat it too when you have champagne-level needs on a juice box-level budget in our latest white paper, Building a Business Case for More Customer Success Resources.
In a fast-paced, resource-strapped world, solving problems through automation is a no-brainer. Auto-delivering customer communications through technology can cost less and is often faster. Plus, hurried customers who just need answers love real-time, no hassle responses.
What customers don’t love is never having the option of human engagement — even when they don’t realize they’re missing it. Forcing customers to find their own way often leads to low product adoption and high churn — shorting companies of potentially loyal customers to fuel greater revenue growth over time.
A lot of that isn’t new to Customer Success (CS) leaders. They know full automation isn’t ideal, but what they don’t know is how to resolve it. That topic is a focus of our white paper, “Customer Success at Scale: To Automate or Not,” which explores how to assess automation with three key considerations for customer success best practices.
Many rely on the idea of using automation in a Customer Success program to auto-deliver value without human interaction. Yet over reliance on tech enabled touch points can negatively impact customer experience. While everyone can appreciate the time savings that technology provides, it doesn’t support a customer’s need for human-to-human contact. CSMs play an important, ‘human-centric’ role in the customer lifecycle. They build relationships that empower customers to reach their goals with your products and services.
Technology should enable the CSM to help customers achieve their outcomes faster and more efficiently. It should not be a means to handle customers the CSM doesn’t have the time or desire to talk to.
Take a look at your customer tiers when attempting to strike a balance between automated outreach and human engagement. You know your top-tier customers are experiencing top-level service. You’re ensuring success at every step of their respective lifecycles. Where things often breakdown is the mid- to low-level tiers, which for most of our clients, actually make up about 80% of their customer base — a volume many CS team structures aren’t equipped to manage.
Although it may seem difficult, extending your Customer Success strategy to these underserved segments offers many rewards. Moving customers from a tech-touch only model to a low-touch cadence with occasional, proactive phone calls from a CSM has proven to increase renewal rate and improve upsell/cross-sell within accounts.
It’s not impossible to find scalable solutions that meet your needs and don’t leave your customers out in the cold. We recommend starting with these three questions to assess your options:
After answering those questions, our clients typically find the most success by:
For a more in-depth perspective on using automation as a customer retention solution, download our white paper, Customer Success at Scale: To Automate or Not?
I traveled to Boston earlier this month for Customer SuccessCon East, along with our CEO Michael Harnum. It was a great opportunity to learn from some CS veterans, make new connections, and enjoy a killer lobster roll. There was a lot of buzz about a myriad of topics from CS operations to proving the value of your CS team to company leadership. One that resonated with me the most, however, was around segmentation. How should we be segmenting our customers?
It’s coming up a lot in conversations I’m having with CS leaders as well – they’re unsure that they’re getting segmentation right. If you’re asking yourself these questions, you’re not alone, and hopefully, some of my takeaways can help you make sense of the segmentation chaos.
Traditionally, tech companies have segmented their customers by contract value. That’s an easy way to do it, right? The customers that pay the most get put in the top customer segment and are smothered with attention. On the other hand, the customers that pay us very little receive little to no outreach. Makes sense, right? Wrong. Segmenting customers by how much they pay us is an outdated approach.
Within the last few years, we have seen Customer Success mature into a sophisticated business function. So, we must elevate the way we are thinking about segmentation as well. We have to dig deeper and understand our customer’s journey better than ever before.
A good place to start is with the customer journey. Talk to some of your best customers across all segments. Talk to your CSMs. Understand what an ideal journey looks like for different groups of customers, from start to finish. As you go through these exercises, your segments should begin to take shape.
Other factors to consider…
Whether you’re just getting started with segmentation, or are re-thinking your existing structure, I’d challenge you to think beyond contract value and dig deeper.