Hello to Canada’s SaaS Community,
Renewals and expansions are the lifeblood of a SaaS company. You Mon Tsang, founder of customer success platform ChurnZero, knows this well. Speaking with SAAS NORTH, You Mon shared more about what it takes to be data-oriented in CS as the function matures.
Key takeaways:
- Customer success professionals must understand the metrics associated with both company lifecycles and customer lifecycles.
- Understanding data in CS doesn’t require a statistics degree or machine learning.
- Data orientation means knowing what direction the data is trying to push you to.
Customer success (CS) is a rapidly maturing function that’s essential for scaling SaaS and subscription-based offerings. But winning in CS now requires analyzing ever more data to properly understand your customers and use data to drive decision-making. You Mon Tsang wants to make sure those SaaS companies—and their CS teams—are empowered for success. Speaking with SAAS NORTH, You Mon explained more about what it means to be data-oriented in customer success.
The metrics of two lifecycles
Understanding customers is the rallying cry of customer success. But that’s not all that a successful CS team needs to understand. You Mon explained that the best CS teams navigate between two different lifecycles: customer and company.
The customer lifecycle
You Mon explained that when a company first gets involved with customer success, it’s typically for onboarding and implementation support. Eventually, that moves to adoption, renewal, expansion, and advocacy, what You Mon calls the “normal path” of CS.
Within that normal path comes stage-specific metrics every CS team member needs to know:
Onboarding: typically project-based, onboarding metrics revolve around completing specific tasks and time to completion.
Adoption: this stage primarily focuses on usage, health scores (a combination of usage and communication quality), and Net Promoter Score (NPS), a score that indicates whether someone is willing to recommend your solution to friends or colleagues.
Renewal: renewal is a lagging indicator that’s all about money—did they renew, retention percentages, and Gross Revenue Retention (GRR).
Expansion: this stage focuses on money as well, particularly GRR and Net Revenue Retention (NRR).
Advocacy: a little more difficult to measure, advocacy is usually about what You Mon calls “referenceability,” meaning can you reference the customer in some way (via a case study, logo on your website, etc.).
The company lifecycle
Company lifecycle refers to how mature your organization is, said You Mon. It’s critical to understand because while customer lifecycle metrics work on an individual level (or on a per-CSM level), different company stages make certain metrics more or less important.
Pre-Product Market Fit: at this stage, companies are experimenting and figuring things out, said You Mon. That means a focus on GRR and NRR might be premature—you might have some customers renewing, but you don’t know if they are your ideal customers yet.
At this stage, You Mon said CS should focus on adoption metrics first, answering the question of whether you built something people like. That means overall usage, active users (daily, weekly, or monthly), returning users, feature adoption, and NPS scores.
“You will churn through a lot of customers on your way to product market fit,” said You Mon. “So you don't want to focus on revenue retention because you may get very discouraged. Focus on ‘what's a group of people that really love our product?’”
Product Market Fit: at this stage, you’ve got a repeatable process and you know what type of customers love your product. As you continue measuring usage and NPS scores, you need to start heavily favoring NRR to see if customers are renewing and growing.
“Are you renewing your customers?” said You Mon. “Are you getting more out of them? You really want to grow.”
Scale: at scale, which You Mon defines as roughly $50 million to $200 million in revenue, GRR comes into the mix. When you’re smaller, said You Mon, you still have to prove yourself. That means taking on a lot of customers—some of which will likely churn because they aren’t a perfect fit.
But as you get to scale, bad-fit customers become a resource-draining problem. That’s when Gross Revenue Retention is important because you’re looking at more public-facing metrics like logo retention (how many brands you retain rather than strictly dollars).
You Mon added this is where M&A becomes important because acquiring companies is about scaling up and expanding GRR.
Cruising Altitude: this stage is when you stop focusing on growth and start thinking about maximizing what you get from customers. You Mon said this stage is an active choice, noting some companies choose to stay in ‘scale’ for as long as possible, heading toward an exit or IPO.
For companies that choose to hit cruising altitude, the metrics to track become more about getting more from your customer base: selling incremental products, expansion, and measuring how many customers refer other customers to you.
“At cruising altitude, you probably sold a lot,” said You Mon. “You’re depending on your customers to be more helpful.”
How CSMs become data-oriented
Knowing which metrics to track is all fine and dandy. But knowing what the data is trying to tell you—so you can take appropriate action—is the hallmark of a data-oriented CS person.
But knowing what insight to draw from data doesn’t take a statistics degree.
“You're not going to do the machine learning thing,” said You Mon. “You don't have to worry about that. But you have to know how to make sense of a lot of numbers coming at you—whether it's NPS or your health scores—and being able to then follow up with that effectively.”
Instead, You Mon said CS folks need to understand data on two levels: the individual data point and what two data points suggest together.
For example, if a customer has a low NPS score, that means they aren’t willing to recommend you to a friend or colleague. In short, they aren't happy customers. This could be due to a few reasons, which you need to investigate as a CSM or CS leader. But the data gives you a good direction to charge in.
But what about if that same customer has a low NPS score but high usage? That means they are clearly getting value from the solution, so their frustration might be tied to user experience, support experience, or something else. Again, the data alone won’t give you all the answers—it just sends you in the right direction.
“Every founder should understand that metrics are really important to tell you where the ship is going,” said You Mon. “And if you are going in the right direction. But it never, ever tells the whole story. You really need to dig in.”
Building the next big thing in customer success
Customer success is still pretty new. While the concept of customer service has been around for generations, the unique approach to customer success—driven by SaaS and subscription models—is barely a decade old.
For You Mon, this means a huge opportunity for custom tools.
He said right now, only about 20% of the CS ecosystem is using tools actually built for customer success. Everyone else is trying to hack together a CRM solution or leveraging spreadsheets and shared documents. But he sees the next 5-7 years as a huge driver for customer success technology adoption—specifically, a customer success platform (CSP). These platforms integrate with the data sources CS professionals actually need and do a lot of the data crunching so that CSMs can focus their data orientation on helping customers rather than trying to become statisticians.
“The next big thing is really to focus on going from 20% of the folks adopting [customer success platforms] to 80% of the folks adopting it,” said You Mon. “That’s really what's going to be happening over the next five to seven years.”