Focusing solely on churn reduction does not consider your business outcomes and how these outcomes affect and are related to the customer.
Your customer success strategies need to be tailored around what your customer wants to achieve from using your product/service. And to do this, you need to use customer success vectors.
These vectors tell you where your customers are heading compared to where they want to go/their goals for using your product/service. Below, you’ll find out how to implement customer success vectors to improve the customer experience you deliver.
What is a customer success vector? How to apply the concept of vectors to customer success
A vector is a measurement that has both magnitude and direction.
For instance, let’s say you move four steps forward and one step to the left. You could denote this movement using the vector (4, 1).
If you moved in the opposite direction, 4 steps backward and one step to the right, then your movement would be denoted as the negative vector (-4, -1).
Vectors are often abbreviated using algebra. For instance, vector (4,1) = V, and vector (-4, -1) = -V.
As vectors describe a movement, they are visual measures, and usually mapped on a graph. Vectors are often used to represent physical quantities such as acceleration, velocity, and displacement. How are they then useful in the world of customer success?
The Key to Real Predictable Revenue
Every company wants predictable revenue, but most turn to new business Sales to get it. They create a goal they want to hit – essentially a made-up number the CEO or Board wants to see – and then they try to figure out how to hit that number.
The “predictable” part of all of this comes down to ensuring your pipeline is loaded with (at least) 5x more leads than your target goal so you can hit it with a 20% close rate. Math!
While that may be “predictable” in a spreadsheet, in reality, hitting that goal requires a lot of work, coordination, effort, hustle, incentives, and luck. Yet, historically, this is where companies look for new revenue by default.
That’s changing as companies realize it doesn’t get more predictable than being able to look at your existing customers, say these 100 customers will reach this Success Milestone in the next month, that milestone has a logical upsell associated with it, the value of that upsell is $1000/ARR, and the percentage of customers that should take the upsell based on their Success Vector is 90%.
That means, for that cohort, we’ll add $90k/ARR next month. Then, by combining the expansion value of all of the milestone cohorts, we can give an accurate prediction of the revenue we’ll generate from our existing customers.
That’s actual, real predictable revenue.
Historically, Customer Health Score was a Key Performance Indicator (KPI) for Customer Success, but it wasn’t giving us what we need in this new world of Customer Success-driven Growth. What needed to be done was to tore the idea of a Customer Health Score apart with the sole purpose of giving us a real way to see not just what’s happening with our customers today, but where do we think they’re going in the future.
Revenue Ascension Pipeline vs. Expansion Quotas
And when you can build a revenue forecast model based on actual customer Success Vectors, then you can manage against that rather than the other direction where we have expansion quotas. We can say “according to Success Vectors, this cohort should deliver $90k/ARR in the next month.”
When you have Success Vector in place, internal expansion quotas are not needed, which means you won’t have Account Managers trying to shove products down a customer’s throat when they aren’t ready for it, don’t need it, or are otherwise not in a place where that is the logical next step.
Rather, we can say “this is the expected, logical expansion from these cohorts in the next 30, 60, or 90 days” and if we hit that, it means you simply did your job.
However, if we miss that mark, it means the customer didn’t hit that Success Milestone, because if they had, according to Success Vector analysis, they would have taken the upsell. So that’s a fail on Customer Success Management; not that they didn’t make the upsell, but because the customer who we thought would reach that milestone didn’t.
So there’s no need to quota on expansion; instead, use Success Vector-based projections to manage the success – or failure – of your Customer Success Management (including Account Managers, Expansion Resources, etc.) org.
Step #1: Understand what information can be obtained from a customer success vector
Using business KSIs as opposed to KPIs (aka the customer health score) in customer success gives a measurement that has both a direction and magnitude, as explained:
- Direction: What does your customer need to achieve? Where is your customer going? Otherwise known as the desired outcome.
- Magnitude: How will your customer achieve this? What does the customer have to do to achieve their goal? What is their experience with you as a service? These will all impact the resources, time, and/or money – aka the magnitude of work to be done – needed to get your customer to their desired outcome.
Your customer’s desired outcome consists of two pieces of information: The appropriate experience and the required outcome.
- Required outcome: This is what your customer needs to achieve. There are a few things that must happen. Otherwise, you know your customer can’t reach their desired outcome – there will be no vector as your customer can’t possibly move from point A to point B.
- Appropriate Experience: This is how your customers need to achieve their required outcome, taking customer satisfaction, confidence, and support interactions into consideration.
Together these two measures make up the core of your customer success vectors and will tell you if your customer is on track or heading for the door.
Step #2: Measure the appropriate experience
Any vector needs a magnitude. You can think about the appropriate experience as a collection of measures determining – along with the required outcome – the effort needed to take a customer to their desired outcome (vector magnitude).
For instance, you can determine a customer’s appropriate experience by measuring customer satisfaction and confidence. How satisfied are your customers with you?
Here you could draw from your customer health score measures which incorporate customer satisfaction determinants, e.g. NPS score and CSAT.
If your customers are not satisfied with your current offering, this will hinder their relationship with you.
Low customer satisfaction and confidence scores mean you have work to do to establish a healthier relationship. Factor this work in during the early stages of your customer’s journey with you.
Use our Customer Feedback checklist to gauge your customer’s satisfaction and confidence level.
How to visualize your customer success vectors
Vectors are visual. Visualizing your vectors helps you understand them, but how would you go about doing this?
First off, you need to understand that your customer success vectors will fall under one of four categories:
- Positive success vectors: These accounts are progressing towards their desired outcome. They’ll meet the success potential criteria, and the customers are satisfied with the experience they have with you. Meeting the required outcome with a solid appropriate experience pushes these accounts towards their desired outcome.
- Neutral success vectors: These accounts have stalled or stagnated. You’ll need to get these accounts back on track towards their desired outcome. Look at their appropriate experience – how can this be improved? Are these accounts hitting their success milestones?
- Negative success vectors: These accounts are not on the right track and require urgent intervention. They are withdrawing their use from you and traveling backward from their desired outcome.
- Ghost vectors: These accounts are highly likely to churn. Your key contacts have stopped engaging. We’re moving outside the realms of customer success, and you need to be thinking about strategies that will prevent churn. Be sure to audit these accounts to see if they’re worth the time and effort to keep.