“We live in a subscription economy, where the economic value of a customer is realized over time, instead of upfront at the initial sale.” – Forrester, Executive Primer on Customer Success.
I recently posted my thoughts on the future of Product Management and the relationship between Product Managers and Growth Hackers. This post argues that, in a subscription economy, Product Managers need to evolve beyond understanding how to build a great product to an appreciation of what creates a great service and align themselves with the Growth Hacker’s post-sale counterpart: The Customer Success Manager.
Before the Digital Age, the software business was a racket. Driven by highly incentivised sales teams, who often dwarfed the actual engineering functions, a small number of software companies had the market sewn up. As a result, they were able to command huge upfront fees selling software that didn’t work nearly as well as they claimed it did. Any perceived problems were conveniently blamed on issues of ‘implementation’ or ‘configuration.’ This was particularly true in the enterprise space, the consumer market being much smaller in those days.
The beauty of digital is that it upends this model completely. Success in the digital era is not about one-off payments for products that decay over time and require a paid upgrade. That model is dead. Digital brands compete in the freemium era, where the market is so competitive that everyone needs to offer their product for free in order to attract any customers at all. They are then faced with the challenge of not only of convincing these freeloaders to keep using the product long-term but also of ‘converting’ them into paying customers.
This new model is great for the customer but extremely challenging for the provider and highlights the often unspoken reality that, although literally everyone is making digital products right now, almost no one (except Apple) is actually making money from them. All those apps and websites you routinely download and (woop!!) use for nothing? That’s right…someone, somewhere is paying for them and if they’re not charging you to access them they must be trying to make money somewhere else.
How they are doing this underscores the oft-quoted observation by Fjord that ‘Every Product is a Service waiting to happen.’ For the future is the subscription economy (pioneered by the sector we call Saas), and subscriptions mean repackaging products as services in order to establish a consistent revenue model. Fjord cite Nest as a case study, but this is a reality for all makers of digital products. As digital products are not themselves revenue generating, they are distributed as key touchpoints within a service model for which, over time, the provider hopes customers will eventually pay for. The lifeblood of these businesses is not purchase price but MRR (Monthly Recurring Revenue).
This is problematic for a lot of product teams and startups who are often well-staffed with great engineers and designers (and may well have built a great standalone product) but frequently overlook the multiple touchpoints that comprise the overall service they are offering to customers. Despite what you may have read on a dozen VC websites, having a great product doesn’t guarantee success.
Understanding how to design a service model and, even more important, how to convert interested prospects into loyal evangelists, is a very different challenge which most product and engineering teams are not set up to address right now. Creating a service means going beyond user-centred design; it requires intense focus on all parts of the Customer Journey. Service Blueprints are reasonably well-known but very rarely executed in my experience. Few Product Managers that I know would even admit to being familiar with a typical template. For those that are interested, one of the most popular (The Customer Journey Canvas) can be found here.
AirBnB famously realised they had a problem in 2011 when founder Brian Chessky developed a storyboard to capture the key ‘moments’ of the AirBnB customer experience after reading about the Disney animators who pioneered the use of storyboards during the creation of Snow White.
Chessky and co. storyboarded the ultimate travel experience, realising in the process that their ‘real’ product was the trip itself (rather than just the room). They also realised that much of the customer journey occurs offline…out of their immediate control. In response to this insight, Air BnB launched a number of initiatives including AirLove (to engage with and respond to feedback from hosts), Hospitality Labs (to explore and educate hosts about the nature of hospitality) and renewed investment in mobile (the main bridge between offline and online communications).
AirBnb realised that long-term digital success is about relationships. And relationships are constituted not just through products, but through services coordinated by a team focussed on Customer Success.
What exactly is a Customer Success Manager?
A Customer Success Manager, ordinarily for a SaaS business, is generally expected to own the relationship with the customer post-conversion. That conversion point could be the download of an app or someone signing up for a Free Trial. Like the Growth Hacker, the CSM is a hybrid of activities that already exist within established roles with a huge dose of data thrown in. It’s part Customer Service, part Community Manager, part Retention, part Account Manager and part Data Analyst.
In short, Customer Success Managers obsess over every interaction and every ‘wow’ moment of the Customer Journey – their mission is to ensure customers realise value from the product as quickly as possible. And by mining data continually, they make changes pro-actively before they become an issue, rather than react after a customer has reported a problem. Customer Satisfaction is therefore an important indicator for them. However, Customer Success managers live and die by the one metric that all subscription brands fear: churn. Churn is the destroyer of MRR and therefore the enemy.
Understanding the reasons for churn, and how to counter them, is becoming a science in and of itself. The first phase of engagement is known as Activation, of which Onboarding is a key component. The length of your Free Trial, for example, or the form of your Product Tour are critical tactics within this phase.
Leading digital brands have developed a sophisticated knowledge of the triggers and tipping points that underpin success during Activation and have introduced a host of product features to rapidly move new users through key moments.
By mining their data, Twitter concluded that new joiners who followed 5 or more people within the first few days of signing up were more likely to become regular users so they rearchitected their signup process to keep prodding you until you reach this magic number. Air BnB’s Jason Bosinoff has also written about how he oversaw an initiative to hack word-of-mouth via its Referral programme. Finally, Linkedin has its legendary ‘Double Viral Loop‘: the gold-standard of Activation hacks.
Conrad Wadowski has an epic deck on this topic on Slideshare. In it he quotes Ben Chow’s description of Activation:
Wadowski cites Dropbox, Uber and Square as best practice but quotes innumerable other examples. If you’re really (really) into this stuff, Samuel Hulick has reviewed almost every well known web app’s Onboarding process and generously documented them here>>.
Masterminding Activation is only one aspect of the Customer Success Manager’s role. There are many other bases to cover in their never-ending battle against churn. These include overseeing the Voice of the Customer programme, coordinating Customer Community initiatives and following up with customers who do cancel to ensure that the reasons for their departure are addressed. In fact, Lincoln Murphy lists 17 Key Elements in his summary of Customer Success.
Like Growth Hackers, Product Managers interface with Customer Success Managers in many aspects of their role. The most important nexus is undoubtedly product usage. Customers’ usage of a company’s products (or the lack of it) is the most potent early warning sign of propensity to churn. Customer Success Managers obsess over this data. Not only does it allow them to identify key customers who are ‘at risk’ and pro-actively reach out to them, it also means they can work closely with the Product Team to establish how products could be improved to drive greater adoption.
Look out for Customer Success Managers, they are likely to spread like wildfire in the future as brands wake up to the fact they are in the subscription business and start borrowing liberally from the world of SaaS. If I was a betting man, I’d wager the ‘C-suite’ of the future will comprise someone responsible for Product, someone responsible for Growth and someone who does Customer Success. Whether or not they’re known as Chief Happiness Hero? The jury’s still out on that.