Decision Making

Caution: Predictive Analytics May Miss One Important Thing

Posted on

Predictive analytics is, without a doubt, the new big thing in marketing.  It’s how we marketers are putting so-called big data to work to help us find, target, and sell to the right customers at the right time.  I’ve written about this before; any time we rely on technology or process to tell us about our customers’ preferences, habits, or needs, we run the risk of missing out on one critical element of our customers’ decision-making.  Our customers are human and, therefore, somewhat unpredictable.

Many years ago, I worked with a company that created customized news feeds.  Customers would select their areas of interest, and each day, the company would sort items from a range of newswires (yes, this is before social media!) and send each customer a custom collection of articles, press releases, and other news items.

A general concern others and I raised about the trend toward more personalization (which is still ongoing) is that people would miss out on items of general interest.  In those days, when I read the newspaper, I would seek out sections of particular interest to me, but I would also read the front page and often catch other items on my way to my sections.  This exposed me to news, information, and thinking outside my specific area of interest.  In particular, reading the front page gave me a sense of what was collectively considered important (as filtered by an editor, granted, but one whose interest likely was matching the collective interest).  This provided a common understanding of the world and important events of the day.  With an entirely customized newswire (or, in today’s terms, a group of Facebook friends with whom you completely agree), you create your own unique understanding of the world around you, and you become less aware of what is outside your bubble (and in some cases, less able to understand it).

One of our goals as marketers is to influence behavior, particularly toward buying our products and services.  One way to do this is to create some elements of a bubble around the target buyers so they see more of your offerings than anything else and more messages encouraging the lifestyle associated with your offerings.  That creates stronger associations with the promise of the brand and results in brand loyalty.

We observe the actions customers take and focus on the ones that make them most likely to deepen their association with our brand and all of the things for which that brand stands. That creates the customer journey.

Once we know all that, we work hard to influence customers to take the next step on their journey toward becoming a brand loyalist and buying more and more from us.

Dealing with the myriad actions, possible paths, probable journeys, and the wide range of customer tastes and behaviors has been nearly impossible until technology stepped in to give us ways to store and analyze all that data.  Enter big data and predictive analytics.

We now have computer systems that tell us—if a customer has a certain set of tastes and preferences, and then takes a given action (or a series of actions)—what the most effective way to get them to take the next action is.  So we do that.  Then we see many of those customers taking the hoped-for action.

Enhancing the Impact of Predictive Analytics

One of my favorite themes is to remind marketers that your instinct—your intuitive understanding—goes far beyond the analysis of any computer system.  You will not always be right, but your intuition provides a strong sanity check.

For example, your predictive analytics might suggest prospects who end up buying from you always take a specified action several steps prior to purchasing.  This might be true.  But you might also notice there is a large drop-off rate right before that step—only a small number of prospects in your funnel move to that step.  Your analytics don’t tell you this because you’ve told your systems to answer the question of what causes people to buy, so it looks at the outcome and works backward.  It takes human powers of observation to look at the funnel from a different perspective.

I rely on my systems and the analyses they produce to tell me how my programs are working.  I set them up to give me data-driven answers to a variety of questions, including the question of what actions are most influential in converting prospects to paying customers.

But I always look at the data myself.  I look for anomalies.  I look for things that might not be answered by my systems the way I’ve set them up.  I look for things I’ve otherwise overlooked.  Some of those insights have led to opportunities I would not have seen otherwise.

In short, I use my own experienced intuition to make the final call about what is working, what is not, and where I should look next to improve my efforts.

Don’t miss out on this one critical factor.  Don’t let your predictive analytics and automation systems take over your marketing.  There may come a day when intelligent systems can do this for us, but for now, this is your job.  It’s where your value gets added.  Using your own experienced intuition is what makes the difference between good marketing and great marketing.  Don’t give that up.

Decision Making

How Data Can Be Dangerous: Don’t Market to the Middle

Posted on

Danger!  Your data is causing you to market to the middle of your audience and miss many opportunities.

In my recent post, I wrote about the dangers of relying solely on data to make good marketing decisions.  While data is the ultimate sanity check, data can also be easily skewed, misinterpreted and used in ways that were never intended (or worse, in ways that are meaningless).  Without good judgment and interpretation, data almost certainly will lead you astray and you could market to the middle.  But there’s a subtler danger that lies beyond just the use of data in your marketing decisions.

What if your actions as a marketer are closing off options for your customers?

What if both you and your customers would be better off with those options open?

What can we, as marketers, do about it?

Douglas Rushkoff, an NYU professor and leading thinker on the Internet and society, said in his recent book:  “Companies know things about you that you don’t yet know yourself, and they only know them in terms of probability.  The world that you see is being configured to a probable reality that you haven’t yet chosen.”  And we, fellow MENG members, are the ones doing the configuring.

We work hard to understand our audiences.  We try to decipher their behavior.  We work to develop models of their personalities and their tastes.  We try to determine what we think they are going to do next.  And then we build every experience custom-tailored to each individual, bringing them closer and closer to the next action.  And then the next.

If you look deep down inside the models that got you to “knowing” what each and every individual’s behavior is going to be, you’ll find they are all based on statistical averages. Even if you segment your audience really well, you’re still looking at statistical averages of each segment.

That works for the 68% of your audience within the first standard deviation from the mean. It skews the results for the next 27% and for the last 5%―the outliers―you just have no idea what they would have done if you didn’t pre-define their path.

Market to the Middle:  The Small Danger

You’re missing some great ideas and opportunities.

One of the tenets quoted so often is that the opportunity for innovation lies with the outliers.  It’s the customers who do the weird thing with your product or ask for something which you haven’t yet thought of who show you the way to your next big opportunity.

When you don’t let them get there by following the market to the middle, when you decide they should follow one of your home-made yellow-brick roads, you miss out on the great opportunities they bring.

This is just another way of saying you are listening to your customer too closely, and you will be disrupted by some other company that thinks about the problem differently.

But that’s just the small danger.

The Big Opportunity

Ten years ago, a small group of sales and marketing people started thinking differently about how to use all the then newly available technology to advance the field.  One of the core tenets of that group―later codified in this book and many other publications―is that companies must now learn to adapt their sales and marketing to what, where, and how customers want to buy, rather than asking customers to adapt to how the company wants to sell and market to the middle.

We’ve tried many different forms of this, but what it comes down to every single time is: we have a really hard time delivering a perfectly customized sales process, product, service, and experience to every single customer.  We’re still looking at averages.

A Short but Relevant Digression

In the old, industrial-age, grade-school classroom―the kind most of us experienced―teachers were said to be teaching to the middle, which means they were teaching to the average student in the class. That makes it very difficult for the students at the top and bottom of the class (for different reasons) to learn effectively.

I recently worked with a company that helps school districts implement personalized learning. What that means―when it’s fully working―is every single student gets exactly the right challenge, information, work, assignments, and education he or she needs at every single moment throughout his or her school career.  Sounds like a tall order, right?  It is.  It requires rethinking how education is delivered.  It redefines (and, I believe, elevates) the role of the teacher.  It changes the school from a factory, churning our identically educated kids, into a greenhouse, growing each and every unique kid in their own unique way.

Can we marketers do the same for the customer experiences we deliver?

Yes, but we have to change the way we do marketing.  It’s OK to rely on data, as long as we’re careful using it and do not always market to the middle.  But we have to start building organizations and processes in a very different way.  Can our marketing analysts turn into customer coaches?  Can our marketing leaders turn into Sherpas (with apologies to the site of the same idea)?  Can our content developers become editors?  Everything we do now would have to change.

And change is hard.

But there’s always someone ready to disrupt if we don’t.  And all the outliers, and then the 27% and, eventually, the 68%, will just go their own way―not ours―right to that disruptor.

Your Turn

I’ve attempted, in this post, to offer a glimpse into an idea I am developing in my own work.  But it’s just beginning.  Please tell us what you think in the comments or on social media, and let’s discuss how to do this.  I look forward to your contributions.


Rethinking Customer Marketing for the Subscription Economy

Posted on

This is not your grandfather’s customer marketing.  A business that depends on—or hopes to depend on—subscription (or recurring) revenue must relate to its customers in a fundamentally different way than a traditional one-time-sale business.  But the changes go deeper than just the customer relationship. To be successful in a subscription business, companies must rethink their own business operations.  Let’s take a look at what that means for marketing.

The question I ask you is simple:  are you actually marketing to your customers?  Or are you just keeping in touch and hoping they’ll stick around?

Customer marketing is one of the simplest business changes you can make to succeed in the recurring revenue business.  You don’t need any new skills or expertise, and the processes you need already exist (I hope) in your current organization.  The work you need to do is translating them to apply to your current customers.

The Journey and the Funnel

You have, undoubtedly, spent much of your marketing career thinking about—and seeing many different flavors of—the marketing funnel.  I’m going to guess your idea of a marketing funnel or customer journey looks something like this:

This gives your marketing organization a good working model and, I hope, a deep understanding of how someone in the market becomes aware of your product or service and how they get from initial awareness to making the decision to purchase.

You also have a set of processes and practices that make your marketing work, make potential customers aware of your offerings and help them make the decision to purchase. These include marketing campaigns and programs, content development and distribution, branding efforts, and much more.

I hope in reading this so far, you’re thinking:  “Yes, I do all of that really well.  Why do I need to rethink this?”

Customer Marketing:  Before

You might have a function in your marketing organization called customer marketing. Depending on how you’ve organized your team, this function does anything and everything from customer references, to success stories, to customer events and conferences, and to customer loyalty programs.  You probably also have a way to keep customers informed of new products, updates, and other information you consider important, or that you think will help customers decide to buy from you again.

Rethinking from Day One

Day One is the day your customer becomes your customer, the day after the contract is signed, the day the customer starts getting value from your product or service.

It’s also the day your sales and marketing organizations step out of the picture and hand that customer off to your customer success organization.  Every day from then until the customer leaves you, the primary contact for that customer will be in your customer success organization.  That organization is then tasked (maybe via its own sales team) with ensuring your customer renews their subscription or comes back to you year after year.

In a recurring revenue business, the repeat or renewal sale is just as important as the initial sale.  Sometimes, we assume this sale is easier because we’re dealing with a customer who has already decided they get value from our offering.  That makes it no less important.

Rethinking customer marketing means treating your new actual customer on Day One just like the new potential customer who has only just become aware of your offering.  Day One begins a whole new marketing and sales cycle.  Day One means building a whole new relationship with your customer.

Customer Marketing:  After

The goal is simple:  keep as many customers as you can.

The process is simple:  apply your current marketing funnel or journey, programs, and processes to your current customers.

The transition is not so simple:  learn how your customers go from new customers on Day One to a renewal sale.  Then how they do that again next year.  And again the following year.

The transition requires you to examine both your business and your customers in new ways. You need to ask:

  • Why do my customers renew (not your long held beliefs; look at the data), why don’t they, and how do I tell the difference between customers who renew and customers who don’t?
  • What actions do I take right now that make a difference (again, based on the data) in whether customers renew?
  • How am I helping my customers realize value and renew?
  • Are my internal incentives (marketing, sales, and customer success) aligned with a goal of maximizing renewals?

Then you need to redefine your customer funnel or journey. It will look something like this:

Then you need to design marketing and sales programs, campaigns, and other efforts around that to help your customers move from purchase to renewal (not to frustration and departure).

Organizations that do this successfully create a microcosm of a marketing team within the customer success organization.  This becomes a team that is charged with the full range of marketing and marketing operations functions (except corporate branding and PR, generally), and is measured on the same goals and outcomes as the marketing organization such as leads (which become expansion or adoption programs), conversions to sales (which become integration and realization of value), and sales (which become renewals).

Transformation to Customer Marketing

Rethinking customer marketing as though it were a full marketing function changes the way you relate to your customers.  It can also have dramatic effects on the success of your renewal programs, bringing your renewal rates to new heights and your churn rates to new lows.

And, if you are having great conversations with potential customers in your market, imagine how valuable those conversations will be once your current customers—your loyal fans—are part of them.

How is your organization evolving customer marketing?  Tell us in the comments!

Customer Success

Three Keys to Increasing Renewals

Posted on

(this is a repost of a post written by me for Totango.)

This happens to you more often than you’d like to admit. Your sales team lands a new customer with great potential. You work hard at the on-boarding process and hit all of the milestones. Roll-out is on schedule. Over the year(s) of their contract term, you resolve every issue quickly. Then two months before renewal, you get the call: They’ve decided not to renew.

Wait. What?!?!

This probably came as a surprise to you. You probably have a list of reasons these customers give for not renewing. Some of the items on that list are understandable, from product shortcomings to changes in the customer’s business (such as acquisition). Others you know are just excuses, such as pricing, or that one support issue that was only 90% resolved.

Now tell me, honestly: Was there something you could have — or should have — known that would have let you save this customer?

There are three things you should be examining closely every day to get a deeper understanding of — and a deeper relationship with — each and every customer:

1. Ask good questions

In an earlier post, I discussed the idea of measuring customer success from the customer’s point of view and choosing the right measurements. You have to help your customer use your product, but you also have to help your customer get the value they need from your product.

Your market is crowded. You are competing not only against companies that provide similar products, but with all the other investment priorities of your customer, and your customer is deciding whether whatever work you support is worth funding at all.

One of your first tasks when you assume responsibility for a customer is to understand how your customer will measure their success because of your product. If they are not clear, help them define that measure. (Again, suggestions are here).

One company with which I’ve worked offers tools to bring social information into the selling process. If you ask generically how they make customers successful, they might say they increase revenue. Well, yes. But so many factors affect revenue and the effect of their product may be small compared with others, so it’s a meaningless measurement. They could also quote their marketing material and say they provide a deeper understanding of each prospect. Again, yes, but can you measure that? And is it a benefit or just a thing the product does?

While the product provides many benefits, one that is particularly interesting is it shortens the sales cycle (decreasing time to revenue). So they ask every new customer how long their average sales cycle is. Then they look at the users of their product and ask them three months, six months and nine months later how long their sales cycle is. The length drops every time.

The customer is now convincing themselves that the product has significant benefit. And you know exactly how much and why they should renew (and how to sell the renewal).

Pick your measurements. Ask good questions. Make sure your customer realizes value. And they are less likely to leave.

2. Social engagement

I don’t think I need to convince you business is social. Your customers are in the social channels, discussing their business challenges and issues, as well as the products and services they like and don’t like.

The best possible case is when your customer loves your product so much that they recommend it to their friends and colleagues. You can see this from high NetPromoter scores or by looking at your brand advocates with services such as Zuberance.

The worst case is when they don’t talk about you at all. Remember the adage, “The opposite of love is not hate, it’s indifference.” If your customers are indifferent, they are not getting value from your product, and they are less likely to renew.

So, listen and engage. Follow your customers on whatever social networks on which they are active. Connect to their professional networks. See what they are up to. Talk with them. Focus on issues and items of interest to them.

LinkedIn offers advice to recruiters about retaining candidates. They suggest adding new employees to your network, then watching their new connections. If you see them connect to a bunch of people at your competitor all at once, there’s a pretty good chance they’re interviewing.

Do the same. If a new competitor comes up, and suddenly your customer connects to lots of their people, it might be time to strengthen your connection.

3. Look at the data

You have data. Lots of it. Don’t be afraid to use it. But don’t get caught up in the “big data” hype. Here’s how to make it useful:

You already track every single action your customer takes in your product. You know every interaction, and you probably know the results of those interactions. All of this may not be well organized, but a close approximation will work pretty well for this purpose. And your data analysts can help you make sense of it all.

The key to analyzing large amounts of data is asking the right questions. You should be asking one or both of these:

1)    What specific actions predict either renewal or non-renewal?

2)    What are the relevant (predictive) differences between customers who renew and customers who don’t?

If you know the answer to one of those questions (they are just two sides of the same coin), you will have a much better idea much earlier whether any given customer is on the path to renewal.

It’s important that you not just look at this data when it’s time to ask for the renewal. You must look every month (ideally) or periodically throughout the contract term. Don’t wait until they’re ready to say No to talk them into Yes. Get them on the road to Yes much earlier.

This can feel like a lot to do with each and every customer, and you might be thinking you can only do all of this with your largest customers.

I warn you: That is a mistake. The biggest danger for non-renewal — and for large revenue losses — lies in the middle of your customer base, with those customers who matter, but still fall outside your high-attention area (e.g. your enterprise group).

There are lots of technologies available today that allow you to watch large data sets, interpret social streams and collect customer data. Even I, as an independent consultant with no staff at all, engage and monitor social streams for clients, prospects and new business opportunities. Is easier — and cheaper — than ever to scale these efforts.

Now what?

1)    Pick a question or two to ask your customers every month.

2)    Choose a set of customers with whom to engage on social networks.

3)    Ask your data analysts one of the two questions above.

Most importantly, start counting your surprise non-renewals and the number of customers at risk of non-renewal. And (this is how I deliver value to my clients) watch the numbers drop.

Tell us what you choose and how you do in the comments.

Photo Credit: .krish.Tipirneni. via Compfight cc

Customer Success

Investing In Your Customers (and How to Avoid Churn)

Posted on

I had lunch with a friend recently who ran customer success for a SaaS  company.  Customer success in the SaaS business is typically responsible for handling customer support and service to build renewals when they come due while avoiding churn (customers who do not renew).

As we discussed the issues surrounding delivering a great customer experience and handling renewal sales, he commented that his biggest surprise was how much churn hurt his business.  He noted that every percentage point increase in churn had a multiplier effect on the top line for the business.

I had lunch with a friend recently who ran customer success for a SaaS  company.  Customer success in the SaaS business is typically responsible for handling customer support and service to build renewals when they come due while avoiding churn (customers who do not renew).

I’d be repeating myself if I included a rant on how keeping customers coming back is the only way to realize the return you expect on your investment in customer acquisition.  So instead, let’s talk about investing and how you can apply some very simple investment concepts to your marketing ROI.

Let’s talk bonds to demonstrate churn.

I know:  bonds are much less exciting than stocks when it comes to investing, but if you’ve listened to any of the decent advice out there, you probably have a reasonable percentage of your portfolio invested in bonds.

Here’s the thing about bonds:  they provide you with an income stream.  You expect the issuer to pay the coupon on the bond (the debt payment) at the scheduled interval. The market places a value on the bond that is largely based on the dollar amount of those coupon payments, the time over which they will be paid, and the current market interest rates.  If all goes well, you invest a lump sum and get paid back with interest over time.

Sometimes, all does not go well.  I hope it’s rare for your portfolio, but defaults happen. Companies (sometimes even governments) fail to make the coupon payments.  When this happens, you lose your money.  Yes, it’s part of the risk of investing, but it also means your money is gone.  Not exactly the outcome you wanted.

Connecting bonds, marketing, and churn.

Marketers have been talking about a concept called “customer lifetime value” for the past few years.  Whether you are in a business that depends on subscribers or repeat customers, you can look at your customer the same way you look at a bond:  you pay some amount up front (your acquisition cost), and you get a revenue stream that comes in at predictable intervals over time.  As with the coupon payments on a bond, you can use the risk of the market and net present value formulas to determine the value of a customer’s revenue.

But sometimes customers don’t come back or don’t renew.  The difference is that this happens at a much higher rate than bond defaults.  For some SaaS software companies, churn (the rate of non-renewals) can be as high as 30% annually.

Let me show you what this does to your portfolio or your top line in marketing terms.

For the sake of simplicity and illustration, let’s assume you have 1,000 customers today, and those customers are paying you $100 per month for your service.  Let’s also say you are a fast growing company, hitting growth rates of 50% annually.  Here’s what churn (or customers not coming back) does to your business over three years.

On the chart above, the green line shows monthly recurring revenue (MRR) growth over three years, assuming there is no churn.  The yellow line shows the same growth rate, but assumes 10% churn.  The red line shows the same growth rate, but assumes 30% churn.

If you lose 30% of your customers every year for three years, your revenue is lowered by 56%.

If your portfolio underperformed by 56%, I’m guessing you’d be looking for a new investment adviser.  Likewise, if your revenue is 56% below where it should be, I’m wondering if your CFO isn’t thinking about a new CMO.

I’ve been fortunate to work with many companies who understand the financial leverage keeping customers holds for your company.  And I’ve helped a few gain insight into this leverage.

Which leads me to ask:

– Are you investing appropriately in keeping those customers?
– Does your company know how many customers it’s losing?

Tell us how you’re getting it right (or wish you were) in the comments.


3 Reasons Recurring Revenue and Renewals are Critical [Podcast]

Posted on

I was honored to be interviewed by Linda Popky of Leverage2Market Associates and one of the leaders in marketing innovation in the technology business. We discussed a range of topics, including:

  • Why recurring revenue and renewals are so important to so many companies
  • Why many companies (particularly in the technology business) don’t invest enough in recurring revenue
  • How marketing and selling to renewing and repeat customers is different from new business
  • What companies can do right now to increase recurring revenue and renewals, and reduce churn

You can find the podcast here (just under 30 minutes). I hope you find it useful – please let me know in the comments.

Photo Credit: Colleen AF Venable via Compfight cc

Customer Success

Getting it Just Right: Measuring Customer Success

Posted on

In an earlier post, I discussed how to get measuring customer success right. It sparked quite a few questions about how to choose the measurement and how to ensure it causes you to be aligned with your customer’s business success. Here are some thoughts about how to get it just right.

The Goldilocks Customer Success Metric

In my earlier post, I compared two public safety companies that had very different measurements of how their customers became successful because of their products.

One was RedFlex, whose most often cited metric was the number of red light tickets issued because of their cameras (though, I don’t think they want to be measured this way). This metric misses the mark, because it does not measure an outcome that is of value to the people who have to make a decision on the purchase of the camera system. The goal is public safety, not more tickets.

In contrast, ShotSpotter (SST) measured a variety of outcomes, including number of arrests resulting from gunshots detected and number of convictions made easier because of their data. The goal—public safety—is the same, but the metrics are directly relevant to the outcome.

Let’s analyze these:

Neither company chose what I’ll call the “papa bear” metric, which is something such as increased public safety. This metric is far too broad, far too hard to measure, and while both companies do something that affects public safety, neither can claim to have increased it directly.

The number of tickets metric, which I’ll call the “mama bear” metric, is too narrow. It measures the direct result of the system, but it does not take into account any of the results the activity produces.

The number of arrests metric is the Goldilocks metric (or one of them). It’s not the direct result of the system (you could measure number of gunshots identified), and it does not claim to be a panacea for all police issues. It does measure an outcome most of us can link directly to which is increased public safety (criminals get arrested), and one the immediate buyer (police department) and the ultimate buyer (political leadership) can relate to and definitely care about.

One alternative to the number of tickets metric might be to look at the total number of accidents at intersections with red light cameras. For most of us, fewer accidents mean safer streets.

So How Do You Choose Your Customer Success Metric?

Let’s assume for the moment you are selling to a business.

Papa Bear

Increase revenue or reduce costs. I hope whatever it is you are selling to the business does one or both of these, or I suspect your prospective customer will never buy. That said, with very few exceptions, your product or service probably does not directly do either one, and the outcomes of your product are not “more revenue.” They should do things that lead to one of these two.

These are the wrong metrics.

Mama Bear

More twitter followers (sorry, social media folks, this isn’t a business outcome). This is certainly a metric, but for most businesses, it doesn’t produce something effective, nor does it (in any meaningful way) affect costs or revenue. It’s too narrow, and too immediate. Other examples are things such as, “keeps all your customer activity in one place” or “ensures everyone knows the correct procedures.”

Those might be things your product does, but they are not why your customer buys.

The Goldilocks Metric (encore)

If you were selling a product to a marketing department, the outcome might be “produces more leads in the pipeline” or “shortens the time to conversion to a sale.” Both of those are things your product might do where you can measure the effect your product has on either number of leads or time to conversion, and the metric has a credible effect on the business (in these examples, more revenue).

In another recent post, I discussed Christensen’s idea of “hiring” a product to “do a job.” Your customer has a job they need done (e.g., they need more leads). That’s something they hire a product to do. And it’s something you can measure before and after they buy your product, so you and they can tell how effective your product is for them.

Another way to consider this is that every team, every group, and every department in a company has business objectives they can measure. Your product needs to help their measurement of at least one of those business objectives moving in the right direction.

The Goldilocks metric has to be specific and countable. ShotSpotter counts the number of prosecutions and convictions that use their data. You can count number of leads, length of sales cycle, reduction in overhead, etc.

So finding the right metric is really simple: It is a business objective, and it is countable.

Get that right, and you’ll have no trouble getting your customers to show you just how successful you are for them. Which is just right.

Tell us how you are measuring your customers’ success in the comments.

Photo Credit: Bill David Brooks via Compfight cc

Customer Success

Getting Customer Success Measurement Right

Posted on

The other day, the local news featured a story about the increasing number of San Francisco Bay Area cities and towns removing their red-light cameras. For most cities, the original goal of these cameras was to improve public safety by reducing accidents. While there are now fewer cars running red lights, it turns out accidents have actually increased, mostly due to drivers coming to sudden stops (to avoid a ticket) and getting rear-ended.

It also turns out the company that provides these cameras to most of the cities in this news report (RedFlex) takes, as part of its payment, a percentage of the revenue from the tickets issued using pictures from these cameras.

What does this have to do with customer success measurement? For RedFlex — and for you — everything.

How to get it wrong:

I can’t say what RedFlex knew about their customers’ (the cities, and presumably, their police departments) objectives when they sold the system. But I can tell how RedFlex defines the success of their customer: more tickets issued equals more success.

How do I know this? Because (according to the news report) they get paid on the revenue from tickets, and therefore have an incentive to make products that maximize ticket revenue.

But that’s not the main goal of the their customer. The police department’s goal is to improve public safety by reducing traffic accidents. RedFlex appears to have no incentive to do this.

RedFlex is using the wrong measurement: They don’t seem to understand how their customer defines success, or they don’t align to that definition. As a result, they are now losing customers.

How to get it right:

ShotSpotter (disclaimer: ShotSpotter is my client) sells a gunshot detection and location system. Like RedFlex, they sell this to cities, in particular to police departments.

When ShotSpotter sells a system to a new customer or renews a contract with a current customer, they ask questions such as: “How many more gunshots have you identified using our system?” or “How often were you able to get to a crime scene faster and make an arrest because of our system?” or even “How many times were you able to prosecute a perpetrator because of evidence from our system?”

These questions and the measurements that result from them align perfectly with the definition of success their customers have for themselves: Police want to respond to crimes quickly and catch perpetrators, and the district attorney wants to prosecute those perpetrators effectively and get them off the streets.

When it comes time for ShotSpotter’s customers to renew their contract (their main product is sold similarly to SaaS or cloud services), the customer and ShotSpotter both know exactly how successful they were using the system, and the customer can make a renewal decision based on exactly the right criteria. And ShotSpotter has a strong incentive to make a product that helps their customers meet those criteria.

What you should do right now:

Your customers may not be police departments. But every single organization, including your customers, has a reasonably well-understood definition of their own success. They know what they are trying to achieve, and they are looking to you to help them get there. It’s now your job to know what success means to them and be quite certain you can align your work to their goals.

Ask yourself: How do you measure the success of your customers, specifically as it relates to the use of your product or service? Do you know how your customers use your products to make themselves more successful?

That’s the easy part.

The hard part is looking at your own organization, not just at customer success, but at everyone who plays a role in how successful your customers become as a result of your products. That includes sales, marketing and product development, just to start. I’d bet it includes everyone in your organization.

Now you have to ask: “What incentives do we give our people to advance the success of our customers?” and then ask the most important question: “Are those incentives producing the right results for you and your customers?”

If the answer to that last question does not EXACTLY align to how your customers define success for themselves, then you are not using the right measurements or incentives.

And if your measurements and incentives are not quite right, you are left with two choices:

  1. Change them, or
  2. Watch your customers disappear

Do you have a good story about how you measure customer success? Or do you know companies that can’t quite seem to get it right? Share your story in the comments below!

Photo Credit: Bludgeoner86 via Compfight cc