Some news: We have the next issue of the 2.0 magazine, print copies, in hand. We haven’t officially launched it yet (check out this sneak-peek of the issue), but the digital version is coming soon.
This edition is all about Customer-Led Growth, a business model that builds on the principles of Product-Led Growth but accounts for the fact that most companies aren’t a good fit for PLG. In a CLG model, the company 1. Measures the customer’s perceptions of the value at each step in their journey, 2. Uses that data to inform all important company decisions, and 3. Makes outsized investments in the Customer team.
This second issue of Nuffsaid’s 2.0 Magazine, called Customer-Led Growth, explores the team, systems, and executive skills a Customer Success function needs to lead a CLG model.
The following is an excerpt from one chapter in the magazine. This chapter hits on point #2 above (“the company uses customer data to inform all company decisions”) by explaining how CS leaders can influence an important decision: the Ideal Customer Profile definition.
Too often, the company’s ICP is an afterthought for CS teams. It’s easy to fall into being reactive, especially when you trust your Marketing team, or to ambiguously refer to the company’s ICP without holding anyone accountable for follow-through.
But acquiring the right customers is one of the first initiatives a Customer-Led Growth leader pursues. Good Customer Success teams proactively give Marketing the data they need to refine the company’s Ideal Customer Profile (ICP). Great CS teams take it a step further: they assign a Fit Scores to every customer, and use the ICP internally to identify and manage expansion opportunities.
That’s why we asked several leaders one question: What’s one action CS leaders can take to have a bigger influence on the Ideal Customer Profile? Hopefully their responses won’t just inspire you but give you something you can do today to immediately be more influential over who Marketing and Sales are targeting.
Here’s what they had to say.
1. Compare the ICP to reality
RACHEL ORSTON, CCO AT SMARTRECRUITERS
“Planning for the next quarter or year is a great time to revisit the ICP. The big question to answer is how your company is doing on the ICP. Where have you won, and how did that impact renewals or expansions? How many customers churned due to being a bad fit? Does the ICP definition reflect reality, or have the behaviors and characteristics of your best customers shifted?
“Then, don’t just say, ‘We need to revisit this’. Be part of the solutioning too. That means coming prepared to make changes, and having the data to back those changes up. It's the Customer Success leader's responsibility to be the internal voice of the customer and use data to share the experience your customers are having.
“Come to your strategic planning sessions saying, ‘Hey, this is where we're seeing success. CMO, can I better understand our ABM strategy? Are we targeting the right people?’ Or, ‘Hey, Here's where we're really struggling and finding friction. We need to revisit our marketing or sales process here.’
“There’s an opportunity to pause and reflect before we jump into next year and say, ‘Well, do our teams still know what makes for successful customers?’”
“The CS leader must start this conversation, and they need to have a strong voice about what's working and what's not. Most CS leaders aren’t doing enough of that—we go right into OKR planning, we start with targets and back our way into them. There’s an opportunity to pause and reflect before we jump into next year and say, ‘Well, do our teams still know what makes for successful customers?’ And that’s a great opportunity for the CS leader to show their ability to be strategic and bring the right data points forward to the rest of the executive team.”
2. Require Sales to assign a Fit Score to every prospect
SHAWN RIEDEL, EXECUTIVE CS CONSULTANT AT ESG
“I’m a fan of Ideal Customer Profiles (ICPs) with a Fit Score. That way, everybody has visibility into what customers we are bringing on board. Fit Score also allows me to plan for more resources to make a less than ideal customer successful.
“The Fit Score needs to be agreed to by all pillars that touch the customer—Sales, Marketing, Support, Services, & CS. After all, they all benefit from adopting an ICP.
“In theory, low Fit Scores will lead reps to find and spend more time on good fit customers. You don't want to be the rep with all the low Fit Scores.
“In practice, a Fit Score is similar to a Health Score. The calculation will depend on an organization, but the output should be a rating that is objective as possible with one subjective measure:
- Segment your Ideal Customers—what are the criteria?
- Tenure as a customer
- Customer Maturity
- Adoption Rate
- Technical maturity
- Engaged executive sponsor
- Sales Engineer/Pre-sales consultant gut feel
- Weight those criteria. Start with 3-5 criteria on a 1-10 scale.
- Assign the first Fit Score after Discovery. Update it as you learn more about the customer, their ability, and their goals.
- Always allow for a panel from Sales & CS to talk about BFC's (Bad Fit Customers). There will be some horse trading to be had.”
3. Highlight the consequences of acquiring bad fit customers
KATE WALSH, VP OF CUSTOMER SUCCESS AT KLAVIYO
“Proactive data and communication is what CS leaders need to focus on. They should be leading the conversation and showing things like, ‘Look at these customers that are successful. If we sign up more of these types of customers, this is what our business looks like in 12 months, 24 months, five years, 10 years.’
“And then on the inverse, CS leaders need to be equally intentional about sharing the data around what happens if the business doesn’t acquire customers that are a good fit. We're all shooting to build that healthy business, so in your next planning exercise think about how you can get Marketing, Sales, and CS to better understand the ICP and the consequences of not following it. It requires building a plan together.”
“CS leaders need to be equally intentional about sharing the data around what happens if the business doesn’t acquire customers that are a good fit.”
4. Incentivize ICP fit by compensating Sales reps and CSMs on renewals and expansions
ALEX HESTERBERG, CCO AT DELPHIX
“Customer Success is gaining more clout and influence on major strategic decisions, particularly as we go from subscription into consumption. Most companies now are trying to get more than 50% (sometimes as high as 80%) of their revenue for the year from their installed base. So as that shift happens, the most important thing is for CS leaders to have the confidence to influence and change compensation plans.
“The CS and Sales organizations should both be compensated on renewals and expansion deals—although not necessarily at the same rate. There are different ratios your company may use, but both functions should be incentivized and compensated on both so that there is discouragement from selling deals and customers that we know are not in the ICP.
“And at the same time, incentivising both teams should drive a lot of alignment through reward for going after the right profile and working together to get those companies, not just renewing but expanding.”
The best resources for Customer Success teams this week
Don’t Worry, Be Happy
Feeling happy at work requires a combination of harmony, impact, and recognition. Amidst this “Great Resignation” this is a good piece for managers to consider—how can you create more joy, and therefore success, within your teams?
(One typo from the article: the author mistakenly calls NBA player Stephen Curry, “Steph Kerry”)
“Five Stars, Six if I Could!” Strategies for Upping Your CS Game to Add Value and Drive Growth
Here are some strategies builder and investor, Chris O’Neill, suggests to earn more customer love and ensure customers renew year after year.
The Art of Becoming a Better Listener
“It’s easy to assume that listening is merely about showing up and paying attention to the other person, but it’s also deeply tied to paying attention to ourselves.” In this piece, Ximena Vengoechea offers a trove of tactical advice for how to become better, more engaged and empathetic listeners—something that most everyone needs to work on.
OWN A NUMBER
Why the ‘Proof Gap’ is An Existential Threat to CCOs & CMOs
Peter Armaly shared this on LinkedIn last week; the TLDR for this one is that revenue attribution, and specifically owning a number, is key to securing more budget. Written for Marketing but the same concept applies to CS.
Success Happy Hour is a weekly newsletter for Customer Success leaders. Each week we feature one digestible piece of advice or a framework from a top Success leader, along with the best resources from that week. Subscribe here.