Looking for practical help and advice on an operational area that may be outside your realm? Each month we spotlight one of our talented operators, who’ll share their expertise and offer insights and ideas that may help improve your own operations. This month we spoke to Gainsight CEO Nick Mehta.
You’ve been in the tech and enterprise software space for 20+ years. How has the customer success function evolved in that time?
NICK: We’ve gone through several evolutions over time:
- Phase 0 – Reactive: Nearly every company started with the old model, where clients were stuck and where the “post-sales” job was about being reactive to customers’ “support” needs.
- Phase 1 – Proactive: Most companies realized this model doesn’t work in the cloud, where customers hold the power. They established Customer Success Management teams to proactively manage the customer journey via a lifecycle of onboarding, health checks, Quarterly Business Reviews, and the like.
- Phase 2 – Outcomes: Businesses learned that clients don’t buy software products to just deploy and use them; they buy to obtain business outcomes and value. In this phase, companies redesigned their lifecycles to go from the outcomes promised in the sales cycle to those delivered post-sale.
- Phase 3 – Transformation: Over time, companies figured out that Customer Success is a gold mine of data about clients. They used this information to rethink their entire company, from product strategy to go-to-market to finance.
What about just over the past year – How has the pandemic changed customer expectations and the overall customer experience?
NICK: We’ve seen three fundamental changes. First, Customer Success is must-have because clients are much more sensitive about what is actually mission critical, and vendors must work much harder to stay “above the line” in terms of what software is kept. Second, Digital Customer Success went mainstream, since companies no longer had the ability to meet customers face-to-face. And third, the move to virtual allowed vendors to dramatically increase their engagement with clients, since they no longer had to deal with the logistics and time of business travel.
What will change for CS leaders post-COVID, and what’s here to stay?
NICK: I think we’ll see several changes. We’ll absolutely go back to seeing big clients face-to-face on an as-needed basis. We’ve also learned that we need to find a more sustainable work-life balance for our teams. That acknowledgement is a big shift from before and a welcome change.
As for things that are here to stay, I see a few. Digital-first engagement models, of course. Also Customer Success as a must for vendors, and Customer Success as a growth driver (not just a defensive mechanism).
What are some key customer metrics organizations should be tracking right now?
NICK: Generally, companies should think of 3 tiers of metrics: Lagging indicators (or your final goals), leading indicators (or metrics to track toward the lagging targets), and activity indicators (the behaviors that drive leading indicators).
The typical lagging indicators for SaaS businesses are:
- Retention – Gross Retention Rate
- Expansion – Net Retention Rate
- Advocacy – Net Promoter Score
Companies increasingly aggregate leading indicators into “health scores.” For example, companies may create “Retention Health Scores” or “Expansion Health Scores.” These are often composites of underlying indicators like:
- Support activity
- Product usage/adoption
- Stakeholder alignment/turnover
- Customer payment information
Businesses then track activities to drive toward leading indicators – like:
- Number of clients with Quarterly Business Reviews held
- Number of clients where we conducted a health check
- Number of clients where we built a value map
If you could give one piece of advice to Founders/CEOs of early-stage tech companies, what would it be?
NICK: My best advice is to identify your personal why and be transparent about it. Do you want to make money? Are you just in it for the win? Do you want to build something that creates value? Don’t adopt somebody else’s why just because it seems fashionable. Authenticity is everything.
What’s one thing senior leaders can do to foster teamwork and a sense of belonging right now?
NICK: Put your entire team through a personality test like Enneagram RHETI to help you learn about each others’ motivations. This was both eye-opening and tremendously helpful for us at Gainsight.
AOC often talks about the skills she picked up as a bartender, and others talk about what they learned working retail. What were some of those formative jobs for you?
NICK: I need a cool backstory like AOC! I had a paper route as a young boy, though I don’t know how many papers I actually delivered. I was nerdily programming for a local hospital in high school, but that won’t play well for a political career.