We all know that SaaS has changed more than just the way software is developed and delivered to customers. SaaS has also fundamentally changed the way a software company’s success is evaluated and what customers expect from an ongoing support perspective.
I was at the TSIA conference in San Diego the week of May 1, 2017, and I left with 2 primary take-aways (reinforcements of what I believed was going on in the industry, really):
- On-Premise and SaaS software businesses are struggling with defining a Services (PS, CS, Support, and Training) strategy that directly impacts product adoption, contract renewals, up sells, and cross-sells.
- Software businesses are struggling with the convergence of Customer Success and Professional Services and all that goes with it: Defining coherent service offerings, determining a monetization strategy, staffing, etc.
TSIA says that Services people touch customers 10x more frequently than Sales people do. In my experience, customers look at those same Services people differently than they do Sales people. They will open up and share concerns with Services people in a way that they may never do with a Sales person.
For these reasons, it is critical that Service leaders take the bull by the horns and develop a strategy that directly drives customer satisfaction, user adoption, and product revenues from their Services business. Driving a positive Services P&L is no longer the best or only way judge the success of the Services team.
Here are 6 things you can start to do today to make this happen:
- Align the Services business strategy to the corporate strategy.
- Develop customer journeys from the customers’ perspective that identify triggers that Services should address.
- Develop Services offerings to drive customer behavior at all phases of the customer lifecycle.
- Develop KPIs and a Services dashboard that illustrates the impact Services has on SaaS metrics.
- Train the Sales team on what you do, for whom, why, and how they (the sales people) will benefit from working with Services.
- Train the Services team to employ consulting skills and salesmanship to identify opportunities for your company to do more with and for your customers.
Align the Services business strategy to the corporate strategy
In my experience, there is a disconnect between what customers need from Services, how Sales leverages Services in the sales process, how Finance measures Services performance, and what Services can and does provide the market on a day to day basis.
All too often I work with companies who have aggressive P&L targets and equally as aggressive “pro bono” services business because Sales sees Services as a way to sweeten a product deal. Alternatively, I have worked with teams that don’t have a formal P&L at all, have been told from the executive team that their mission is all about customer retention, but finance is still on them about Services revenue targets.
The first step is for you to take the reins and meet with leaders from across the organization, including the C-suite, heads of Sales, Marketing, and Product Management, and the leaders of each of the functional areas in Services. The goal is to develop an understanding of how each perceives the role of Services and what each leader needs from Services. You should also be sure to understand the remit of each group and what role you can play to make them successful.
The more closely you can align your strategy to the rest of the organization, the easier it will be to work internally and with customers to achieve common goals.
Develop customer journeys from the customers’ perspective that identify triggers that Services should address
The next step is to develop a clear understanding for the needs of the customer, why and when they engage with your company, and what role Services can play in ensuring a successful outcome for the customer.
A proper Customer Journey is written entirely from the Customer’s perspective. Who is the customer? Give her a profile: Name, title, company, etc. What is she trying to do? What pain does she have? What is she doing to alleviate that pain? What of those things are working? Where are the gaps?
Don’t write the journeys from a corporate perspective – how customers engage with you (e.g., downloaded a white paper, made a purchase). Journeys written from this perspective fail to really get to the heart of the matter: Why the customer took the action to begin with.
Develop Services offerings to drive customer behavior at all phases of the customer lifecycle
Now that you have developed a strong understanding of the customer needs, you should assess your internal capabilities and abilities to meet those needs.
Next, develop a set of Service Offerings that you (and/or your delivery partners) can deliver to ensure customer success. You should consider the following:
- Transactional vs. Transformational Services: I have written in the past about the difference between Transactional and Transformational services. In a nutshell, Transactional Services are “one-and-done” services like a product implementation solution. Transformational Services, on the other hand, are designed to help a customer get value from the product on an ongoing basis. They often have less to do with installing and configuring the product and more about business process reengineering, employee training, or program development.
- Billable vs. Non-billable: As Customer Success (typically non-billable) and Professional Services (typically billable) start to come together, it is important to consider when it's appropriate to deliver services in a non-billable fashion (baked into the product cost, for instance), and when to charge a premium over and above the cost of the product.
- Bundles: Many companies are accustomed to selling billable Professional Services projects and, separately, premium support packages. I encourage you to consider when it may make sense to bundle these two offerings to make it easy to sell, easy for users to consume, and truly value add.
Develop KPIs and a Services dashboard that illustrates the impact Services has on SaaS metrics
Traditional Services metrics like profit (contribution) margin, bookings, revenue, project profitability, team and individual utilization, and capacity are important when assessing the day-to-day operations of a Services business. They don’t explain how the Services team is contributing to the top and bottoms lines of the software company, however.
It is critical for a Services leader to develop KPIs that show correlation between the work their team does and the new SaaS business metrics, including:
- Customer Satisfaction (Net Promoter Score, NPS)
- Product Adoption
- Product Contract Renewals (aka Churn)
- Product Contract Expansion
- Customer Acquisition Cost (CAC)
- Customer Retention Cost (CRC)
- Customer Lifetime Value (CLV/LTV)
- Annual Contract Value (ACV)
- Total Contract Value (TCV)
For instance, the Service team I built at Gomez (2006-2012) achieved 100% renewal rates across all the customers with whom we worked (compared to 93-98% across the base). Could we claim that the only reason these customers renewed was because of the work we did? Of course not. However, when you have these results 6 years running, you can confidently say you are a part of the story. The revenue generated by the 100% renewals was significantly greater than the Services revenue generated by doing the work. We had a strong P&L for Services, and we could confidently say that we were driving the SaaS metrics the way the company needed us to.
Train the Sales team on what you do, for whom, why, and how they (the sales people) will benefit from working with Services
As I have written in the past, there is always tension between Sales and Services. This tension is natural and, as I have said before, necessary to keep a good checks and balance in place. However, the shifting role of Services is, in some cases, making this tension tenser.
Not enough Services leaders take the lead in educating Sales on what we do, why and how, and the benefits of that work to both their customers and them. Let’s face it, it's a lot easier to convince a Sales person to position your services if they understand how they will make money on it.
Training the sales team comes in many forms (Instructor-led, online training, or direct coaching/shadowing). However you decide to do it, it is critical that you reduce the uncertainty for the Sales team and show them how you will help them get to President’s Club.
Train the Services team to employee consulting skills and salesmanship to identify opportunities for your company to do more with and for your customers
Services team members are likely to stage a coup if they think you are asking them to be Sales people. In some cases, you may actually have a team of Services people who carry a quota and work closely with Sales to sell. That model works in some organizations. It won’t work with all Services people, though.
Regardless if the Services person is in an overt selling role or not, every Services person needs to sell. I suggest to my teams that they think of themselves as a physician. A doctor asks questions to better understand the nature of the pain the patient is experiencing. Only then, can she begin to define a plan to address the pain. At no time does the doctor refuse to suggest an MRI or a specialist for fear of being thought of as a Sales person. Rather, she recognizes her role as a trusted advisor, and she gives the advice she feels is best given the situation.
Services team members need to be trained to do the same. Whether you are a Customer Success representative overseeing the overall relationship, a PS consultant working on a project or a Support engineer addressing a customer case, your job is to ask the right questions and develop an accurate understanding of the situation. If the customer’s pain can be addressed under their current contract (product and services), great! If not, Services needs to feel comfortable suggesting different alternatives and, at a minimum, bringing the Sales rep back in to handle the “sale.”
The old metrics and way of doing things will only get you so far. You need to look at metrics that correspond to the business drivers of a SaaS business, too. You need a consultative team skilled in identifying pain and suggesting solutions. You need a close working relationship with Sales and Marketing, and a cross-functional team that truly understands and can articulate the value Services provides.
It's time to really start looking at how Customer Success, Professional Services, Training, and Support can work together to drive customer value – even if they sit in different parts of the organization.