Closing deals is great — if you're signing customers with high potential for success. But do the wrong deals, and it will limit your options faster than you think. Join Lincoln Murphy, author and Customer Success Consultant at 16Ventures, as he explains why customer success is imperative for sales, not simply post-sales or for some other department down the hall. Learn ways to judge if customers are a good fit, how to unlock their potential, and how to increase long-term retention, upsell, and bookings. Hear examples of how to help customers achieve their desired outcomes and have the appropriate experience with your company. 

The rep said, 'meh, that’s post-sale,' when I pointed out a bad fit. I wanted to jump out of the car.”

Lincoln Murphy | Author and Customer Success Consultant at 16Ventures
 
 
 
 

Kevin Micalizzi: Today we’ll be discussing customer success with Lincoln Murphy, author and Customer Success-driven Growth Consultant at Sixteen Ventures. Welcome, Lincoln.

 

Lincoln Murphy: Thanks for having me. This is awesome.

 

Micalizzi: Would you share a little bit about yourself?

 

Murphy: Oh, sure. Gosh, if you’re not familiar with me, I spend all of my time every day — way too much probably — thinking about customer success-driven growth. How can I help my customers be successful and generate more revenue and higher margins in the process?

And I think this all stems from this idea that, as a customer, I kind of want my life to suck less. And if I can help companies figure out how to do that while making more and generating more revenue and making higher profits, then great. And that’s what I’ve been doing for the last, gosh, at least 10 years probably, and the last five or six as actually having [unintelligible] customer success. And we’ll get into that in a little bit. That’s my focus, that’s my passion, that’s what I do 24/7. And I probably should sleep somewhere in there, too.

 

Micalizzi: Excellent. I love it. I’m Kevin Micalizzi, Product Marketing Senior Manager at Salesforce, and Executive Producer of the Quotable podcast. I’m joined today by my co-host, Lola Chenyek, Product Marketing Manager at Salesforce. Welcome, Lola.

 

Lola Chenyek: Thanks, Kevin. Happy to be here.

 

Micalizzi: Lincoln, I want to dive right in. I think probably the best place to start is, let’s talk about customer success and the lifecycle. And let’s just define it, so that everyone knows what we’re talking about in this conversation.

 

Murphy: Customer success is when your customers achieve their desired outcome through their interactions with your company. And that’s a pretty succinct definition that has a whole lot of stuff to unpack in there. One of the things — and we can go into this in more detail, certainly, if we want — is interactions. I’m evolving. All of this understanding is constantly changing. The more I work with companies around the world, the more I learn and the more all of it evolves.

I used to say that customer success was when customers achieved their desired outcome through the use of your product. I said that for a couple of weeks. I admit it, I said it. And then I realized that’s not true. The use of your product is really just one interaction. And those interactions are reactive or they’re proactive. They are self-serviced. They’re high touch. They’re whatever. And they’re all across the entire customer lifecycle, starting with sales and marketing, and going through the three, five, seven, 10 years a customer is going to be with us. So interactions [are] really important.

The other piece is desired outcome. And desired outcome is this incredibly simple concept that is incredibly transformative if you let it. And that is simply your customer has a required outcome. That is what they need to achieve. And they have an appropriate experience, or how they need to achieve it. And if we understand that, then we understand that that’s going to vary across our different customer segments. Then we can actually build a process that enables our customers to be successful. So we actually have something that can be an outcome from that.

And that’s actually what I call customer success management, is that process. So there’s a difference between customer success and customer success management. We’ll get into all of that, I’m sure. But that’s my definition of customer success. And I used to joke that it was one of the definitions, but at this point I’m, like, that’s the definition.

 

Micalizzi: Right. Totally understood. So if we’re talking about interactions and desired outcomes, I think one of the challenges we run into, especially working with a sales audience, is people assume customer success is a service function. It’s a post-sale process.

 

Murphy: Right.

 

Micalizzi: Which, from everything you’re saying here, it’s not. Everyone has a stake in customer success. So how do you usually address that for folks who are thinking, “It’s not really my challenge, it’s somebody else’s.”

 

Murphy: Right. Well, if I have time I’ll usually go over all of the things that customer success is not. And one of the things is, it’s not a department. And it goes back to the definition. The definition is just that our customers achieve their desired outcome through their interactions with our company. That is not specific to any one part of the company or any particular functionality or anything like that.

It really does take into consideration that this is a lifecycle issue. And it really, to me, also says that this should be what our main focus is as a company. It should be our operating philosophy. Like everything we do should be around customer success. And that means, honestly, if we think about it, this is why we exist in the market. Our customers, [and similar] our prospects, the market thinks, maybe because of what we’re saying in our marketing and what our salespeople are saying, that we can help people in companies achieve their desired outcome.

That’s what they think. So that’s why we exist. If we cannot do that, if we can’t backup what we say, eventually we will cease to exist in their world, and then maybe actually cease to exist as a company. So it’s a pretty big deal. And from a sales perspective, this is one of those things that I get pushback a lot from sales leaders, who don’t want to think about what happens post-sale. And I’ve literally been in situations, and I remember working with a company, where I spent a couple of days with their salespeople actually going around and talking to prospects and kind of watching the way things were.

And I spent some time with a rep and we got to know each other a little bit. And he got to know sort of where I was coming from from a customer success perspective. We had one last meeting. They were talking, the prospect and the salesperson. And as we left I said, “You know, it really seems like one of the things that she said would indicate that they don’t have success potential.” That one thing means that they don’t have a technical fit. Actually, this was a product that was built on Salesforce and that company didn’t use Salesforce. Which means right there, that’s going to be an issue.

And this salesperson that I had spent several days with said to me, “Eh, that’s post-sale.” And I either wanted to kick him out of the car or jump out and dive and roll and just get away from that situation, because that is not going to end well.

 

Micalizzi: Right.

 

Murphy: It’s like saying, “I don’t really care that somebody is lactose intolerant. I’m going to sell them this milk.”

 

Micalizzi: Oh, yes.

 

Murphy: “And they’ll deal with it post-sale.” Right? That’s awful. But it’s so much worse than that. It’s so much worse than just saying, “I’m going to ignore the fact that this customer can’t get success, and just close the deal.”

It’s going to come back and bite you. As a salesperson, if I was working for a company that knowingly allowed bad-fit customers to be acquired — and I have a very clear definition of bad fit, it goes into really success potential, and there are five different inputs, everything from technical fit to cultural fit — if I can’t check all the boxes and say, “This customer is a good fit,” and I sign them, I might make my short-term numbers, but that customer is probably going to churn out.

If they don’t churn out immediately, they’re not going to be successful along the way. They’re not going to be a reference. They’re going to start causing friction in the marketplace by maybe leaving bad reviews for us or not advocating for us. And now, when I go out and try to make my next sale, it’s going to be a little bit harder. I’m going to have to overcome those objections. I’ll tell you this, one company I worked with, we sold three customers that we shouldn’t have closed in the very early days — three. And these customers did not have success potential, couldn’t check the boxes on a couple of things: technical fit, functional fit, and, actually, experience fit.

We couldn’t even give them the entire appropriate experience that they needed. We knew this going in. So one of the myths, especially if you have any startups listening in your audience, is that we have to churn and burn to learn. We have to go through customers, and, yeah, along the way we’ll learn some things. But the reality is, there are things we don’t need to learn. There are things we already know. If I sell a product that’s built on Salesforce and you don’t use Salesforce, right there, don’t close that customer. That’s going to be a problem. We did that with three companies. Actually, that was before I got there.

I’m not saying that was something that wouldn’t have happened once I got there. I’m just saying it happened before. And a year-ish into my working with them, when we would interview lost deals — we had a third-party go out and talk to customers that we didn’t close — those three names of those companies that we churned and burned would show up. So our competitors were using those against us. I could probably quantify, based on the number of times those came up in those reviews, how much actual revenue we lost if we simply went with the minimum license fee.

Not taking into consideration some of them might have been bigger. I could probably then actually quantify the impact it had on the value of the company. We churned and burned three customers. It doesn’t take churning and burning thousands of customers to really negatively impact your ability to close deals, impact the value of the company, and, certainly, impact the revenue. So this isn’t something that is like there’s this post-sales service kind of thing, and we don’t have to worry about it because it’s never going to impact sales. No, it will eventually, and it might quickly, come back to bite you.

 

Micalizzi: Right.

 

Chenyek: Yeah. And you were talking a little bit about desired outcome. And I imagine that the definition of that varies, depending on who you’re working with and the customer, and probably a lot of the characteristics that go along with that industry, etcetera. How do you determine what that desired outcome is? And how does that play a role in how you go through this process?

 

Murphy: Desired outcome, like I said, it’s a very simple concept. It’s not so easy to put into place. I’m not going to lie. I want to make sure you understand that.

But it’s one of those things that, if you do it, it could be, I use the term transformative, because that’s actually true. Look, there’s two pieces to it: required outcome and appropriate experience. Required outcome may be something that’s shared across all customer segments. And we can get into the more complex situations where we have multiple required outcomes. But let’s just say we have one required business outcome that our customers are looking for. That the reason they’re doing business with us. That’s the reason that we, again, exist in their world. If we can’t solve for that required outcome, then we don’t even matter.

So that’s one thing. We have to be really clear here. Their required outcome is not to use our product. Their required outcome is to achieve some business goal and our product is a means to an end. But we’ve all been in a situation, I guarantee it. Whether it’s technology or something else, we’ve used a product or we’ve consumed a service that actually got us the required outcome that we needed. But we didn’t feel successful. So we came out the other end, we got what we needed, but something was off.

And when I say words like feel, it’s like, “Oh, wait a minute. Now we’re getting into kind of soft territory. I’m not really sure.” But it’s actually quantifiable. I can literally tell you the reasons. I could go through a list and say, “This didn’t happen. This didn’t happen. This didn’t happen.” And I could tell you exactly why I didn’t feel successful. So we know that there are things that go on, that have to go on, that if they’re not present, our customer is not going to feel successful. And that’s, ultimately, what appropriate experience is. And the way that you figure that out, I actually get questions about this a lot.

And one of the common questions is, what’s the one thing I can ask a customer to figure out what their appropriate experience is? And I’m like, “I don’t think there’s a one question formula here.” You need to go out and observe. You need to talk to your customers, not about what exactly they’re looking for, but just understand what’s going on. What are they looking for, not just in their interactions with vendors like you, but just in their daily interactions? Observe them. Watch how they interact with other products. Watch how they interact with their customers and their vendors and everybody.

Go look at adjacent products that they would use that would be similar to yours. So in other words, if you have a departmental product, don’t go look at how they’re doing with this big ERP system or CRM or whatever. But look at other products that are sort of similar that are purchased by the same part of the organization and similar price. You’ll see sort of what they expect in an experience. And you can start to unfold this whole thing. It’s a discovery process. I need to be really clear on that. It’s a discovery process. It is not, “I’m going to tell you what your appropriate experience is.”

In fact, one of the biggest problems that happens is — and we’ll talk about segmentation, hopefully, in a little bit — we’ll say, “Look, this customer segmentation based on what a customer pays us is probably not the right way to segment your customers.” Because I might look at a customer and say, “They’re paying us this little amount.” Their appropriate experience, though, is a little bit higher touch. It requires more human interaction. And, really, what we’re looking always for is it’s going to be a combination of human interaction and technology, and a combination of proactive and reactive.

And we kind of pull that together and say, “This is going to be the appropriate experience for somebody.” Maybe we have somebody that would need more of the human touch, so it’s going to cost us more, but they’re not paying us as much. So what we would tend to do is say, “Well, I guess we need to punish them because they’re not going to pay us enough, and give them a lesser experience.” But that’s actually inappropriate. What we should do is say, “Can we get them to pay us more?” Because maybe we’re just not asking for enough and we can make it economically feasible.

Or, if we truly can’t give them the appropriate experience and they can’t pay us any more, then we need to be honest and say, “That’s a bad-fit customer,” and just not sign them in the first place. And we don’t do that. We don’t sign them in the first place because we know it’s going to come back to hurt us in trying to make more sales. It’s not all altruistic. We’re doing business here. From a business standpoint we want to make sure that we’re requiring good fit customers so they’ll stay longer and buy more and bring us into other parts of their business and advocate for us.

But as a salesperson, when you’re out there closing deals, you need to make sure that those deals are going to bring you more deals down the road, either through advocacy or references or whatever. So if you’re closing bad-fit customers, you’re just hurting yourself down the road.

 

Micalizzi: And sometimes you do have to just walk away.

 

Murphy: I think it’s better to walk away now.

 

Micalizzi: Yeah.

 

Murphy: And let’s say in six months you would be a good fit. Maybe you’re going to add some features, or you know that you’ll be able to provide the experience or whatever. Or maybe they’re going to change. They’re bringing on some expertise that will then make them a good fit.

Come back in six months and sign them. Don’t sign them now and let them churn out in the next six months, or by the time the one year anniversary comes around that they just choose not to renew because you’ve been so terrible. It’s better to just wait. And that builds a little thing called trust.

 

Micalizzi: That’s exactly what I was going to ask you.

 

Murphy: Yeah. Trust is a pretty big deal in sales. And I think professional salespeople, salespeople that are in this, not just — and we have to be honest about this. There are some that kind of come to this after trying other things and they kind of end up here.

But professional sales people that look at this as what they’re going to do to retire with and maybe retire early because they made a lot of money, they see that everything is 100% referenceable. I know a lot of top salespeople. That’s sort of their mentality. I’m not going to close a deal that I can’t reference. And not just reference in this job with this company. But some of the best salespeople I know can use customers that they signed at other companies in the past as references going forward, both to get better jobs, or to close new customers.

It’s pretty amazing. And I think those of us that might be coming in that are more transient coming through this thing we call sales can learn from that. If you’re not going to have this be your career forever, cool. But learn from the techniques and the ways of those that are really successful. And it’s not the hustlers that are just closing any deal they can. Those aren’t the ones that are truly successful for the long-term. So I think if you’re going to be in this for any time, you need to take that stuff into consideration.

 

Micalizzi: Definitely.

 

Chenyek: So you talked a little bit about the different ways that you look at segmentation.

It sounds like the kind of segmentation that we’ve been discussing in the past is different from this new kind of segmentation. What is the way that we look at this now as it applies to customer success, and as it applies to these appropriate experiences, as you say? Can you talk a little bit about that?

 

Murphy: I think one thing I want to make sure that we’re really on the same page with is, when I say appropriate experience because that’s going to figure into why, actually, segmentation is so critical, it’s because of this.

We want to give our customers, well, the appropriate experience. I use that word because it’s appropriate. I don’t use the word high touch or low touch or great or whatever, because those may apply to a specific segment, but overall, I just need to make sure that we’re looking at the appropriate experience for our customers. Why this important is, one of the biggest barriers to scaling, not just to customer success organization, but really a company, is over-delivering for some customers.

And it’s not just the low-revenue customers that we’re over-delivering for. You say, “Oh, well, the low-end guys, we don’t need to give them too much.” And, again, that goes back to making sure we’re giving the appropriate experience. It’s true that the lower revenue customers may not expect much. But a lot of times what I see is we didn’t take into consideration any real segmentation, and so we sort of normalized an experience across all customers. And that can include sales and marketing, and that includes all the way up to when the customer has been with us for years. We normalize this experience, and then at some point we realize we’ve normalized in a way that we’re way over delivering for certain customer segments.

Like I said, often that’s the low-revenue customers. But even more often, and I’m seeing this a lot, is we have our higher revenue customers, and because they’re high revenue we say, “Gosh. That means that we need to give them a lot of personal touch.” But what I find is that, actually, there’s almost always a cohort in there of customers that would be just fine if you would leave them alone. But you didn’t take that into consideration. You didn’t take into consideration what their appropriate experience was, so you just kind of shoved this experience on them.

And best case, they’ll take it and they’ll be a less profitable customer. Worst case, you’re actually going to give them such a bad experience, they’re going to go somewhere else to somebody who gets it. So that’s important just to think about in terms of overall experience with the customer. And that also goes to how we sell. And there is very often this idea that we want to tell our customers how to buy, because we really, really want just online credit card sales. That would be awesome. But the reality is that’s not how all of our customers want to buy.

And so we either need to sell how they’ll buy, or we’re not going to do business with them. I remember one time I was in Ireland, I think, doing a workshop. And we were talking about this kind of segmentation and appropriate experience. And this guy said, “Does this count? We were selling into Spain, and in Spain, culturally you need to be able to have a three-hour lunch with somebody to be able to build that relationship, and then close the deal. I can’t afford that. We can’t really make that work.”

I said, “That’s appropriate experience. If you cannot give them the experience they need, and that might include a three-hour lunch, then you shouldn’t go after those customers.” If somebody from Spain comes to you and says, “We really want to do business with you,” then maybe you get to do that, sort of on your terms, because they came to you. But I wouldn’t go into a market where the sales process is not going to be something that you can give them. And if you try to do something else, you’re probably not going to be successful anyway because it’s an inappropriate experience. So it goes all the way back to the sales process.

Now, why segmentation is really important is the same reason it’s important when we sort of segment in the sales and marketing approach. But very often I find sales’ and marketing’s segmentation is different from any segmentation that is happening post-sale, which is very confusing. I’m not sure why that disconnect is there. So I would encourage syncing up on that and understanding why things are the way they are. But we want to make sure that we understand the different groups that might have a shared appropriate experience, and that becomes our segmentation.

You’re segmenting not based on what somebody pays us, but, literally, based on what their appropriate experience should be, so that I can provide the appropriate coverage levels. And, again, that even goes back to sales. So for some lower revenue customers, not very complex, from a sales standpoint I have some BDAs, I have some inside salespeople that are all over the phone, boom, done. For more complex customers, bigger customers that would have a more complex relationship with us, that would be somebody that I would have an outside AE that goes out and literally meets with them.

That stuff doesn’t end when the prospect becomes a customer. So we need to think about synchronizing those segments. But understanding what the appropriate experience is and creating our segments around that is what’s going to allow us to provide the appropriate coverage for our customers. Otherwise, like I said earlier, we normalize across all customers and we end up really giving nobody an appropriate experience. Or we had one segment that we really did something that worked and resonated with them, and then we try to roll that out to everybody. And we end up only making the customers that look like that segment successful, and everybody else isn’t there.

So segmentation based on appropriate experience that kind of spans the entire customer lifecycle is the way to go.

 

Micalizzi: Yeah, I absolutely hear you. We kind of touched earlier on on the fact that the traditional segment bands — company size, revenue, number of employees — isn’t necessarily going to be an indicator of what the appropriate behavior is.

 

Murphy: Correct. The sort of “hyphen-o-graphics,” whether it’s demo or psychographics or those things that are easy to figure out, those are just simple facts.

We can figure that out about our prospects or our market pretty easily. We can buy that pretty easily. We take that and we say, “Split that up into certain groups.” And then, “Can they pay us? How quickly can they pay?” And, boom, that’s our qualified customer, we’re good to go. What we need to add to that is legitimate context around whether or not the customer can truly be successful. And that’s where success potential comes in to play. So we take all those things, and we do take success potential and add on to that.

But the success potential that we’re adding onto it may actually dictate that some of the other characteristics of the customer, we can just look at those and easily qualify them out. Like with this particular market or this particular geography, this is not going to work. We’ve tried it before. We know they’re a bad fit. Don’t sign them. But more often than not, those things that we look at to get a group of customers — that looks like other customers we’ve done business with before that we want to go after, that’s great.

We just need to look at individual prospects and say, “Is there a technical fit? Is there a functional fit? Do they have expertise internally? Are we going to be able to provide them the appropriate experience? And is there a cultural fit? And if not, that individual customer we can’t do business with.”

 

Micalizzi: For our sales leaders who are listening and are thinking, “All right, this is a layer that we are just not tackling and we need to be,” is it something that you’re assessing after the fact? So, based on the sales you’ve already done, here’s the profile we’re finding.

Or is this something that your SDRs, BDRs, your folks on the frontline are making a judgment call on based on their interactions, a combination? How do you tackle it?

 

Murphy: So if we were just starting this process from scratch, we would probably go look at what’s been successful and what hasn’t been, and try to come up with a hypothesis, at least right now, of what success potential would look like. That is stuff we probably know. This is the thing that is quite confounding, if not frustrating sometimes.

People say we don’t know things about our customers. And it’s true. In a lot of companies we know more about our prospects than we do our customers in a lot of cases. So we know more about what’s going on during the sales cycle, but once they’re kind of turned over to whoever takes over post-sale, we lose a lot of context. And so I think what’s really important is to make sure that we’re maintaining and passing along any discovery that happens from the sales side of things to anybody that might take over post-sale. But even more, I think we know this stuff.

And so sit down right now, when we’re done here. If you want to bring customer success into your world, and you understand that customer success-driven growth is really where we evolve with our customers and we get more and more and more out of customers because we’re making them more and more successful, if you believe that that’s the way to go — and there is lots of evidence out there that says this is really how you build a thriving, exponentially growing company — then you will want to go back right now and say, “What does a bad-fit customer look like?” Literally, just make a list.

And if you can check the boxes on any of these things, or conversely, if you say, “This is what’s required for a success potential,” and if you can’t check all of the boxes on that, then we can’t sign a customer. Now, we could also take those characteristics of a bad-fit customer and go back and look at any customers that have churned out and see how many of those were a bad fit. Because here’s the thing. If you’re bringing in bad-fit customers, there is no way that those customers are ever going to be successful because they don’t have success potential. There is something standing in the way. This is binary. This is a black-and-white issue.

Either they have success potential or they don’t. Now, it’s not success guaranteed, it’s success potential. So somebody is going to have to work to unlock that potential. But at least they are starting from a place of, “We know that they have the potential to be successful.” So you go back and look at any customers that have churned and you say, “All right. This is what we came up with from a badfit customer characteristics list.” A huge portion of their customers that have churned out match that. OK, take that to sales and don’t sign any customers that fit this.

What I find very often is it’s easy to blame sales, “They’ll close any customer just to hit their number.” What I’ve found is that most companies don’t know what a bad-fit customer looks like. And, certainly, mostly because they have never gone through this process of figuring that out, they haven’t communicated that to sales. Nobody has told the salespeople, “This is what a bad-fit customer looks like. Don’t sign them.” And when that happens, it’s easy for somebody out there who is trying to hit their number to say, “I think this customer might not be a great fit, but I’m going to ignore it and just move on,” because they’ve never been told.

But once you’ve been told, once you know something you can’t un-know it, so it’s going to be hard for them to close a deal when they know for a fact it’s a bad fit. And as a sales leader you can go ahead and put in some things that make signing a bad-fit customer a really bad idea for a salesperson. Right? So you put in some checks and balances there just to make sure that they’re not doing that. But most of the time you don’t even have to do that. Just tell people, “This is what a bad-fit customer looks like. Check the boxes, and if you can’t —”

 

Micalizzi: If you don’t know what you’re looking for, then you’re never going to find it.

 

Murphy: Exactly, exactly. So just do that. As soon as you’re done listening to this episode, go out and list what you think the characteristics of a bad-fit customer are. Then from there you can start doing all sorts of things with it. But the first thing you should probably do is tell your salespeople, “Don’t close any customers that match this.” And tell your marketing folks, “Make sure we’re not actively attracting. Fill in the top of the funnel with these types of customers. Are our SDRs reaching out to these customers?”

There may be a point to your question about who does the vetting. There’s going to be some characteristics that we’ll be able to identify from that publicly available information to say, “Look. We know people in this market. It doesn’t work.” Most of the time it’s going to be a little bit of vetting of the individual customer, so you’ll probably leave that up to the SDRs or BDAs, or you could do that through something in the self-service process of sign up. But most of the time it’s going to be with that individual customer. And some of it may very well be asking them a question and trusting their answer. If they say, “I don’t have this expertise internally, but I’m willing to take some training,” or do this, you have to kind of take their word for it.

But what I would do is also apply what I call joint accountabilities there. Which is to say, “OK, cool. If you’re saying you will go through training, you have to do that, because if you don’t do that, you won’t be successful.” Just laying it out there for them like that. So, yeah, this is all part of a process, but at the end of the day, it starts and ends with making sure that we’re acquiring good fit customers.

I will sometimes provocatively, if I need to, tell a CEO to get their attention, “If you are knowingly acquiring bad-fit customers, and you are actively investing in customer success, you’re bad at your job. Because why are you investing in something that you are, then, setting everybody up for failure that come through there? So stop investing in customer success, fire everybody, and just close all the deals you can. And, by the way, email your customers and tell them that you don’t care, because that’s what you’re basically saying.”

So if you knowingly allow bad-fit customers to be signed, you’re bad at your job. If you’re a salesperson knowingly closing bad-fit customers, you’re eventually going to be bad at your job. And if you’re a salesperson working for a company that allows bad-fit customers to be signed, maybe go find a company that doesn’t.

 

Chenyek: To all of the sales leaders out there that are looking to heed your advice and go be a pioneer of customer success, what are some of the metrics that they can use to demonstrate maybe to their bosses or their executives to make a case for this?

 

Murphy: There are some challenges here. If a sales leader is 100% focused on this quarter’s number, this is going to be a difficult sale to them because you may not notice a lot of things happening this quarter. That said, next quarter, if you acquired a lot of customers in the last quarter that were a bad fit, you will actually probably start seeing your velocity drop a little bit, because it’s harder to close deals when you have a lot of negative sentiment out there. The companies that I work with, I absolutely try to lay it out as plainly as possible.

This is something that has to come top-down. The CEO, board, everybody has to drive this concept of customer success as our operating philosophy and, ultimately, customer success as our operating model. Because individual contributors — it’s a cross-functional thing — may have their own, individual metrics that they’ve been judged on, and they may not understand how this is going to play out. And, again, this stuff is out there. I have a lot on my website at sixteenventures.com.

In fact, I have one piece that I wrote on the seven different ways that customer success directly impacts the value of a company. And so if you are a sales leader and you have any interest in the company in terms of stock options or whatever, you need to know how hitting this quarter’s numbers could actually lower the value of the company if you’re acquiring that revenue through bad-fit customers that are going to, ultimately, lower the customer lifetime value, make the CAC payback period longer, all of that stuff.

If all you care about is this quarter’s numbers, if that’s all you care about anyway, then I don’t think you’re going to easily understand the concept behind customer success. But if you see this as a way to both drive long-term value for the company, drive long-term value for your customers, and, ultimately, make it easier to close deals and shorten the sales cycles while driving up revenue across the customer lifecycle, I think it might be something that would be interesting to you. And so it depends on what’s going on in their world right now and what they’re being measured on.

I would say, just to give you something to take away from that, I would measure sales on long-term book retention and upsell. If this cohort of customers was signed and their net revenue retention is not over 100%, in other words, that cohort is not growing, that’s going to be a problem. If their success vector is negative, then that means something was wrong in the sales process. We didn’t set them up for success. We did things that weren’t customer positive. We didn’t manage expectations.

And they didn’t get set up, so they’re either not thriving, or, certainly, they might even be on the way out. So all of this stuff is intertwined. Sales for the longest time, I think, has been sort of just this other part or the business. And it doesn’t work like that. We’re all in this together. And, again, that’s not kumbaya, like we’re all one family. No. As a business with a value, we all need to be moving in the same direction. Like I said, this isn’t all altruistic. This is about making money.

But there is nothing better than making money from our customers’ success and our customers’ growth and evolution, because that’s long-term and viable and all that good stuff.

 

Micalizzi: Absolutely agree. So, Lincoln, thank you for joining us today in the studio.

 

Murphy: Oh, yeah. Thanks for having me.

 

Micalizzi: Lola, thank you for joining me today as co-host.

 

Chenyek: Thanks so much, Kevin. It’s been a pleasure.

 

Micalizzi: And for those of you joining us, remember, the best way to learn from the best is to subscribe at quotable.com/subscribe. Thank you.

 
 
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