It takes a lot more than a successful implementation to retain your customers
I just read an interesting blog article by Greg Daines titled: The 3 Deadly Fallacies of SaaS Customer Success.
In this article the author questions the premise that value alone, delivered to the customer by the SaaS vendor through a successful implementation of the software, creates customer success, which in turn causes them to renew the contract and continue to use the software.
In fact, Mr. Daines clearly shows that these assumptions are flawed and that SaaS vendors must do a lot more in order to retain customers, regardless of how great their solution is.
This is something that I can attest to, especially with my experience with finance software applications, and particularly CPM (Corporate Performance Management) and FP&A (Finance, Planning and Analysis) software solutions.
These types of applications, unlike accounting software or its modern-day ERP software, may not be perceived by some customers or buyers as essential, or “must-have” products. After all, they don’t directly process customer orders, or the creation or acquisition of inventory, booking sales and collecting receivables, etc. And they certainly, so it seems, don’t directly generate profit or cash for the company. Many of these companies simply continue to use traditional tools, primarily spreadsheets, or (very small companies) ignore the process all together.
Some of those who realize the need and the potential benefit may try one or more solutions and actually go through a complete implementation only to drop out at the end of their initial contract. As Mr. Daines points out, the initial vendor reaction is typically “They didn’t do it right!”. The end result is always customer attrition, also known as customer churn. Of course, certain attrition due to company mergers and acquisitions, or change of management is expected.
Mr. Daine’s article describes his three identified fallacies and shows what SaaS vendors can do to change the customer retention outcome.
In my experience with planning, budgeting and analysis software solutions I realized a long time ago (long before SaaS became a common delivery method and a revenue model) that customers usually take the path of least resistance when starting to use such applications, even after a successful implementation.
Financial analysts and budget administrators and to a certain extent finance department managers and executives are mainly concerned with setting up the budget templates and assumptions in order to be able to input revenue and expense numbers. After several iterations, this becomes the foundation for the corporate annual budget. The approved budget provides basic reports and P&L statements that once approved can be used to monitor actual results and perhaps make periodic revisions to the budget (re-forecasting). Some companies may even use the insight gained to make changes to the plan and its execution.
Beyond that, there is very little initiative and imagination. You well know what actual accounting financial statements look like and what they are supposed to do. Shouldn’t you have similar financial statements for your budgeted periods (12 months, 24 months, etc.)?
So, it is the software vendor that must ensure that the customer understands that with certain changes, they can implement and use the software for its intended purpose and reap the benefits envisioned by the vendor. As such, it is the SaaS vendors that must convey their vision for the software to their customers.
It is also the software vendor’s responsibility to communicate that vision to the ultimate users of the software. In the case of Planning, Budgeting and Analysis, it is the company CFO (and through her the CEO, Board of Directors and certain shareholders).
When these people truly embrace the use of the application and have the vision that the software designers have, we are going to start seeing success, measured by real results. And real results promote additional uses of the software, leading to better results.
Then the organization continues to expand the use of the software, perhaps by enabling additional modules or functionality and often by adding users. The next natural event is contract renewal. To achieve all that, the SaaS vendor must be closely involved in this process.
Mr. Daine’s analysis and long experience with SaaS product offerings clearly drive these points home and empower SaaS vendors to re-evaluate their sales and marketing initiatives, and particularly their company’s customer success function.
Alan Hart, MBA, is Principal Consultant at Pacific Shine Group in Portland, Oregon, with responsibility for client business development and hands-on client project implementations. Prior to starting Pacific Shine Group, he worked in various executive accounting and finance positions with technology and growth companies. Notable is his 18 years in the hi-tech manufacturing industry where he served as Controller, Vice President of Finance and CFO of several privately as well as publicly held companies in the Hi-Tech industry, such as Hybrid Arts, Inc., Hamilton Bay Associates and Syncronys Software. In his role in management consulting, Alan has worked in diverse industries and with a variety of clients, including fortune 1000 companies such as Boeing, Delta Airlines, Intel, Wyndham Worldwide and others, as well as many mid-market organizations such as Guitar Center, Ducommun AeroStructures, Cypress Semiconductor, TriQuint Semiconductor and others.
Combining his skills and experience in engineering with deep understanding of technical accounting, he is able to assist small and medium-size manufacturing companies establish GAAP compliant accounting and reporting systems.