Perhaps one of the most coveted topics in SaaS is finding customers that will stick around for the long-term. Acquiring new customers is absolutely critical, especially in the early stages of a company’s growth. However, retaining customers is where growth happens.
Heads up sales, retention takes the cake! That said, you can still crush your number in the pursuit of long-term customer retention. What it comes down to is finding the customers that are best-fit, in other words, finding a win-win for both.
When it comes to retention, a 5% increase in retention can have a 25-95% increase in revenue and in fact, it's everyone’s responsibility to pursue it, which includes marketing, sales, product and customer success. Yes, the entire go-to-market (GTM) team.
Typically the pursuit of ongoing retention has fallen to the hands of customer success. With SaaS, we’ve learned that it’s important to step outside the building and put yourself in the shoes of an end-user and that begins with product and engineering. These teams should have a deep understanding of the problems solved and how a user interacts with the product every day.
The GTM starts with marketing that conveys value and how specific features can be used. Of course, customer success is where the battle is won or lost but they should not be ‘taking the heat’ if and when a customer churns.
The level of involvement for sales varies depending on whether your approach is self-serve or sales-led and in reality most companies evolve to a hybrid of both.
As we know, retention usually starts with marketing and sales early in the user journey with focus at the top of the funnel and sales on the front lines doing hand-holding, educating and communicating value. How sales teams spend their valuable time prioritizing activities is crucial to success that ultimately pays dividends at the end of the quarter.
For most SaaS or product-led companies, the first touch is during the product trial. Quickly the user engages with someone on the sales team that comes in the form of questions that aren’t understood from an all-digital approach. This is the beginning of building a relationship and is often the first human experience. From that point forward, you should seek to find the best-fit and how you can add value over the long-term for that user. If you force the fit, it won’t play out well.
If a prospect comes inbound, it’s always a better starting point or what we call a ‘warm lead’. We know inbound isn’t the only thing to rely on and it takes time to reach that growth inflection. Sales is continually balancing outbound and inbound, so when conducting outbound, it’s important to focus on those you believe are ‘best-fit’ accounts.
As sales pro John Barrows states, “the SDR role is easily the hardest role in sales. SDRs spend their entire day getting 99 NOs and 1 MAYBE”. Reps are under pressure to make their number and so often will do whatever it takes, which sometimes means flirting with the boundaries of MQR (minimum qualification requirements), setting false product expectations, or over-promising. It happens often and is detrimental, especially when it comes to aiming for retention - the holy grail of SaaS.
For many sales teams, long-term retention feels like a far-off land that isn’t their responsibility. However, it should be front-and-center as they help to bring in new logos. It’s vital to remember long-term retention will speed-up company growth even though it seems to sit on the back-burner. Also, as a sales rep, you will get noticed, will likely stick around and hopefully, climb the ranks. Hopefully, at the same time crush your number, quarter after quarter.
Truth is most sales reps don’t get the right training or coaching, which is invaluable. In some cases, sales under the leadership of a CRO (Chief Revenue Officer) is also where the customer success team sits. That’s a good thing, especially as the company matures and scales. Having the same leadership principles on finding best-fit accounts will pay off especially when it comes to upleveling users and expanding or upselling, before renewal comes around.
Marketing often refers to this as the Ideal Customer Profile (ICP) which is essentially a blue-print of the types of organizations and end-users who would benefit the most. Again, depending on the product’s complexity, this could involve numerous personas or by contrast, be straightforward and used by everyone in an org, such as Asana or Slack.
It’s important to distinguish what a best-fit customer is vs an ICP. I would argue that ICP is a great model to point everyone in the same direction and get in the ‘zone’ of where teams hang-out. However, finding the best-fit involves a few more bends in the road and definitely more conversations, of the human kind. This is where sales and CS should work really tightly. You know how sometimes things look really good ‘on paper’ but the reality is often messier? That’s what I mean by ICP vs best-fit.
On the surface, fit should cover some obvious points:
As sales hands off to CS, there are a few areas that should be crystal clear, which are often left unsaid or forgotten. Ultimately these are crucial to building long-term success. Fit also includes:
For some orgs, sales is compensated on renewals so there’s a clear understanding of the importance of getting a customer on the right path. Also, when sales and CS work under the same leadership, they generally share the same goals. However, in situations where you are not on the same team or even on “the same page”, you have to work harder to stay connected.
Go out of your way to learn the role of a CS manager and understand the challenges they face. Join the onboarding calls as you likely have a closer relationship with the account, until CS comes up-to-speed and establishes communications. Or, do regular check-ins with CS to understand user sentiment and the account status. If QBRs are a standard practice, you could join and sit on the side-lines, if only as a cheerleader for the entire team.
SaaS makes everything efficient because of the all-digital nature but it also removes the human-ness of the engagement. That’s where sales can really make an impact and be the ‘face’ of your company, rooting for user’s success and to build long-lasting, fruitful relationships. Finally, I assure you that you will achieve a wonderful sense of accomplishment and not just a healthy bank account.
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