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Customer Success Takeaways for SaaS Companies

June 29, 2017

Last month my partner Rob and I attended two events focused on customer success (CS) and wanted to post our takeaways. The first event was a half-day summit we held for our own SaaS Capital portfolio companies. This was the third such event we’ve held, and while the previous two were for CEOs only, this time around we included heads of CS to share best practices on retaining customers.

The other event was the Pulse Conference. This is a three-day customer and industry event put on by customer success software company, Gainsight. It’s very good, growing every year, and becoming one of our favorite annual events. Here are our observations:

  1. Keeping customers is really, really, important. Numerous presentations, including ours, hammered home the mathematical realities of the profound impact of customer retention. In a nutshell; new sales are linear, but retention is exponential. Investments in CS are a long-game strategy, but once the retention flywheel gets going, it is incredibly powerful. SaaS CEOs who do not recognize CS as a foundational element of their company’s future success will underperform over time.
  2. It’s still early days. VMware and Deloitte Consulting took the stage at Pulse for a keynote, and we thought we were going to learn how the pros did it, only to find out they just rolled out their rogram two weeks prior! How to best retain customers is in its infancy but emerging very quickly as a core discipline. Some companies are playing checkers, others chess, but no one has it all figured out. Because it’s early, there is a lot to learn, so go to a conference, read a book, steal the best ideas.
  3. Churn is multi-dimensional. To improve retention, all parts of the company need to be engaged. Sales, marketing, product, finance, operations, HR, etc. It’s not just a customer support thing. It’s truly cultural across the company. Because of this, smaller and native SaaS businesses appear to have a relative advantage executing retention strategies. By way of example, SaaS Capital has a portfolio company with great customer retention that has 40% of its staff reporting up through the head of CS. Customer retention has been a core focus at that company since the beginning, and the long-term results of that focus are paying off in higher growth and profitability.

Stepping back a bit, the encouraging thing about all this is that it bodes well for the SaaS industry in general. Never before in the software industry has the voice of the customer been so strong. This will raise the bar for individual companies but will yield dividends to all our customers and the things they can accomplish with our products.

 

Todd Gardner

Todd Gardner

Founder and Managing Director, SaaS Capital

SaaS Capital pioneered alternative lending to SaaS. Since 2007 we have spoken to thousands of companies, reviewed hundreds of financials, and funded 60+ companies. We can make quick decisions. The typical time from first “hello” to funding is just 5 weeks. Learn more about our philosophy.

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