Decoding the customer success playbook for B2B SaaS products – Part I

Customer success is one of the most talked-about topics among B2B SaaS circles in India today. During our interactions with founders, however, we’ve realized that it is a lesser understood function when compared to marketing, sales, and product. So, we decided to do a no-holds-barred interactive event for B2B SaaS founders at the Matrix office rooftop in Bangalore a few days ago.

We chose an evenly distributed panel representing companies at different stages of maturity. We are thankful to Ganesh Lakshminarayanan (COO, Capillary Technologies), Shashank Kumar (Co-founder, Razorpay), and Akshat Goenka (Co-founder, DocTalk) who gracefully agreed to be on the panel. Ganesh led an introductory session talking about the basic tenets of customer success, which was then followed by a stimulating panel discussion moderated by Tarun Davda (Partner, Matrix India) who had all the questions.

Part 1 of the two-part series features key takeaways from Ganesh’s introductory note, as presented below:

One way to think about this is that if you are truly selling a product that is a must-have for your customers, then you don’t need a CS team. But it’s rare to have a must-have product, which is when CS comes in.

In most cases, if your company has just started out, it probably is too early to think about hiring a CS team, but it’s never too early to think about CS as a concept, what it really means, and the early beginnings of what it should look like. I will take you through my key learnings over the years in building a CS team:

I ran Dell’s consumer services group for about three years, and we actually co-invented NPS in our early days. So, if you are a B2B SaaS founder, forget NPS – it is a lagging indicator that you arrive at from a sample set. You should get information directly from every customer, and ascertain if they would recommend your product. In my learnings, NPS is a poor way to measure CS.

I know your VCs will tell you to be a product company and not a service company, as valuation multiples are very different. That may be a fact, but CS is a combination of a product + implementation + service, whether you do the service yourself, or your customer does it, or via a third-party. Think of any large product company you know of, Salesforce for example. They have a huge service component which they choose not to do themselves, but there is a service component in CS, and that’s what makes it stick. The way we look at it is you can either buy an assembly kit for a car and go from point A to B, or you can buy an assembly kit for a car, someone else puts it together, and a third person drives the car. Not all these functions need to be in-house in your company, but all these functions need to be thought through.

i. ROI: You can’t get away from the fact that delivering an ROI to the customer is a must. At Capillary, we have developed what is called an ROI index. It’s a numerical update the customer receives. In our case, we use revenue or incremental gross margin divided by how much you’re spending on licenses and services. Early on, it’s important to think about the ROI index and why would your customer buy your software. If you can communicate the ROI index to them, it’s an easy sell. If you are in the B2B SaaS world, this ROI needs to be thought about in very simple terms – if you can define it as either incremental revenue or incremental profitability.

Our whole business runs on an ROI index to determine whether customers are slipping on this index, allowing us to monitor the overall ROI delivered to our customers.

ii. The relationship index: When you’re serving Asian markets, which is where most of our clients are based, the relationship matters. We are codified into what is known as a relationship index. This index is a list of 10 questions, and each account is measured on a scale of 100. They are very objective questions, with direct yes/no answers such as: Did the implementation go on time? Has the customer met the senior leadership in a non-escalation setting? Have there been any product issues P0/P1 in the last three months? Do we have a weekly connect with the senior leadership? Do we have a testimonial from the customer? Do you have a co-branded press release?

All this adds up to a 100. If the customer gives you a testimonial and does a co-branded PR piece, that’s the perfect customer. Our goal is to see that all customers get as close as possible to 100. A high relationship index and high ROI is ideal – high relationship index and low ROI means you’re dead. This points you to the next set of accounts to focus on and gives you a framework to track your accounts as you grow. Even if you don’t have a CS team following this, capturing the data helps you know where to improve. Customize the relationship index to your business. You may have to come up with your own questions, but it is very critical and should be created for every account.

What you will then realize is that you will be able to predict churn based on this. If the ROI is low and the relationship score is dipping, that is a clear indicator of a problem. The ability to predict churn is a very powerful tool for SaaS businesses, and that’s how we use it.

iii. Relationship matrix: What invariably happens when all is going well is your PoC can suddenly decide to change their job, and a new person needs to take over. To deal with a situation like this, what we’ve done is that we have five PoCs in place for each account, and we can actually come up with the depth of the relationship scores for each of these. This can then be further mapped and maintained via Excel. ROI index, relationship index, and relationship depth are all essential functions to follow even if you don’t have a CS team.

iv. Maturity models: People come to you for your product or service, and slowly you want to migrate to a point where you’re known as the expert in your field. Maturity models are very common in the consulting world. For example, in a CRM model, you have five dimensions, three sub-dimensions, and three levels of maturity, and you can rank any customer on this score. All the way from technology, organisation alignment, and the effectiveness of analytics to how well do you know your customer, etc., these are the basic dimensions for a retail CRM model. Once you have this and can draw a comparison to where you fall on this score versus your competition, it’s a great tool to use pre- and post-sales.

It allows you to show a benchmark for your industry and opens the conversation with the senior management to discuss the strategic aspects of your business. Simply put, it’s a score that helps build the longevity of your business.

v. Governance & Communication: The biggest weakness for Indian players is the concept of Governance and Communications. We are very proud of the jugaad system, where we are available 24/7 to our customers. This works at a small scale; once you get bigger, this breaks. You can’t be with every customer all the time. When serving these markets, customers do have that expectation of direct access, and especially to the CEO, the person in charge with the title. This kills most companies because of the limited scalability of the founder/CEO. This concept of a ritual is very important internally and externally – internally, it’s very easy to do, externally not as much.

So, what do I mean by a ritual? The moment you start an account, you need to be upfront and communicate to them that this is how we will work with you, outline the structure of the relationship, weekly operational call, monthly planning meeting, and a quarterly plan. This defines the escalation metrics, which is what we will follow. Put together a process in place. It sounds easy when I say it, but implementing this is the hardest part of any company. As the company gets bigger, this is the only way to sustainably grow, by setting structures, boundaries, and processes. It’s never too early to put this in place.

These are the main pillars of CS. Other points not included here, but questions I’m frequently asked are:

I’m still a year into my company should I hire a CS employee? Where do I hire a CS employee from?

There are multiple stages you go through in a company for which there’s no ideal CS person you can go hire. Anybody who’s done some implementation or handled account management is relevant.

Who should CS report to? Sales or product?

In our learning, neither. A salesperson can’t deal with complaints from customers. CS will influence the product roadmap, which is never good, and thus should be kept separate. Linking CS to sales or product doesn’t work – CS should report directly to the CEO.

What are their KPIs for this team?

The main role of CS in our company is the speed of order book-to-revenue we measure, which is tracking how many orders we’ve hit for the quarter and match it to the revenue it brings in. The second is revenue churn. These are the only two output metrics we measure. The input metrics are the ones mentioned above – ROI index, relationship index, and relationship matrix. Communication and regular updates from your PoC on each account are key to ensure a healthy customer success team.

NOTE: This piece is by no means intended to be the gospel on Customer Success, but we hope to start a conversation. Opinions and thoughts are welcome. If you are a B2B SaaS founder, we’d love to hear your story – just drop an email to [email protected].

Raghav Nagarajan is Senior Associate at Matrix Partners India, where he leads SaaS investments.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)