For the past 15 years, I’ve lead post-Sales teams at SaaS companies. Generally, this has become known as Customer Success. Simply stated, Customer Success (or what we used to call post-Sales) is a philosophy that centers companies around the customer. Not just in the way we talk - we always said that customers were important - but in the way we act.

This was not a change that came about because CEOs suddenly became much kinder and more compassionate towards customers. It happened because customers very suddenly became much more important to CEOs. In a subscription, or consumption, business, less than 10% of the projected lifetime financial value of a client changes hands at the time of the sale. In other words, we get paid a small amount of money because our slide decks and demos convinced the customer to purchase from us, but we have to actually earn the remaining 90% over the life of the customer. And many of the early SaaS companies, including Salesforce, found out the hard way that earning each customer’s ongoing financial commitment was challenging.

I say all that to make a simple point - the customer really is king! And we’ve handed them the keys to the entire kingdom by putting them on a subscription or on a pay-as-you-go license. It is now incumbent on the vendor to ensure that the customers are using our products and, most importantly, getting clear value from them. That’s what leads to continued use, renewals, and upsells. That’s Customer Success.

Selling to the Right Customer

What does all this have to do with customer acquisition?

I think we’d all agree that there are lots of potential customers out there for each vendor. And we’d also agree that there are myriad ways of acquiring those customers. We have to be really judicious about both who we choose to sell to and how we bring them to the table.

In Gainsight’s seminal book on Customer Success, the 10 Laws of Customer Success are clearly articulated. Law #1 is “Sell to the Right Customer”. This is the cry of the Chief Customer Officer to the CRO and the CMO. Selling to customers that we can’t keep is the most costly mistake in our businesses today. The result is an ugly word that has destroyed many aspiring companies - CHURN!

Selling into the wrong market or industry or not paying attention to the use case requirements is a deadly strategy. Customer churn kills companies. It’s incumbent on vendors today to identify their ideal client profile and not stray from it until and unless there is proof that we can make customers outside of that ICP successful in which case we can expand the ICP and our TAM expands with it. But this can’t be assumed, it must be earned.

Transactional Customer Acquisition

The penalty of churn has been well-documented and the idea of selling to the right customer has become a pretty standard mantra for most subscription companies. But, as is often the case, there’s another threat hiding behind the obvious one.

The obvious one is acquiring the wrong kinds of customers. The secondary threat is acquiring customers in the wrong WAY.

On the surface that may not make a lot of sense. While it’s true that, if a customer is a good fit, selling to them may not lead to churn no matter how we do it. However, to be world-class requires us to not just keep customers, but to bring them to ever higher levels of value more quickly than we previously did. That goal requires us to look at our methods of acquisition because they have a dramatic impact on both of those levers.

The truth here is simple but profound - customers acquired transactionally will fall far short of the value we derive from customers acquired relationally. Let’s make sure we’re all on the same page by clearly defining those terms:

• Transactional acquisition: the methodology by which a prospect becomes a customer with a minimum of engagement, trust, and relationship.

• Relational acquisition: the methodology by which a prospect becomes a customer with significant engagement, trust, and relationship.

Example: prospect visits your website, looks at your pricing page, clicks “Request Demo”, gets a quick demo and Sales pitch, and buys your product. This is transactional. No real engagement with your best content, no trust built up through interactions or through your premium content, and no advisory relationship created during the process.

These prospects are the least likely to buy to start with, but even if they become customers, they are weak customers. Many of the things that ideally would happen during the sales process have not happened and will need to be done by Customer Success. This will be painful, time-consuming, and costly.

To be fair, the cost of acquisition in the above example is pretty low. That’s a good thing. But business is not about just minimizing cost. It’s about maximizing the outcome for the minimal cost.

If Customer A is acquired for Cost X at Price Y and goes live in 6 weeks and then renews their contract a year later for Y + 5%, that sounds like a good result. But we need to compare that to Customer B who had a much more relational sales process which cost more (X + 20%) but purchased at a higher price (Y + 20%), went live in 4 weeks, bought 30 more licenses at 6 months, and then renewed all of those licenses and also added 20% to their contract.

Was the latter customer worth 20% more to acquire? The answer is almost certainly yes.

Relational Customer Acquisition

Many of the relational aspects of the acquisition process don’t have to cost more. We just need to be smarter about how to make our premium content more appealing and, ultimately, get it into the hands of more prospects. And we need to be better at getting them involved in our Community so they get exposure to our team and, more importantly, other customers.

Thought leadership has been a critical part of great marketing for many years but it’s becoming more and more important. It enhances your brand value and creates loyalty to your company even before the prospects purchase your product, and it will accelerate the value process for each new customer and expand their lifetime value with you. The affinity created by helping people to be better at their jobs is enormous and the value of that cannot be overstated. And the pathway to that affinity is great content, easily accessed which leads to new customers who are much more loyal to you right from the start.

I’m not saying that you should never pay Google for another keyword or ad, buy another list of prospects, or ever do another cold call. Those all have their place in most Marketing machines. But, as the person/organization inheriting the customer once you’ve convinced them to buy, I’d much prefer customers who have graduated from our revenue pipeline with more trust and engagement with us. We will get them up and running more quickly and their value ceiling will be much higher than those transactional customers.

And the payback for you in Marketing is all the great things our best customers can bring to us - case studies, ROI stories, references, speaking engagements, etc. It’s truly a win-win-win strategy.

About the Author | Dan Steinman

Chief Evangelist, Gainsight

Dan Steinman is a Customer Success expert and Chief Evangelist at Gainsight, a leading customer success SaaS platform. He is a globally recognized thought leader, author, and speaker in the Customer Success space, who co-authored the seminal, best selling book, ’Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue’. You can follow Dan here.