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7 February 2018

Why A Customer Success Strategy for SaaS Startups is Critical

Ross Fulton
by Ross Fulton Reading time: 4 mins

Should SaaS startups prioritize the design and integration of their Customer Success Strategy?

After all, isn’t product development and new customer acquisition all that matters? At least until we get deep into 7 figures of ARR?

Yes, it’s a priority. A big one. It’s part of the startup’s search for product/market fit.

Whether Customer Success Strategy is applicable to early stage SaaS startups is a great question. It highlights that:

The way a company should integrate Customer Success into its business model needs to reflect the company’s current state.

I like David Skok’s three phases of a startup as a way of segmenting startup states:

  1. Finding product/market fit
  2. Finding a scalable and repeatable sales model
  3. Scaling the business

The need to prioritize Customer Success Strategy SaaS companies in all three of these phases. In this article, I’ll focus on early-stage SaaS startups still looking for product/market fit.

Finding Customer Success/Market Fit

What does “fit” mean? I propose that “fit” for an early-stage SaaS startup is the discovery of a “product” that will deliver long-term recurring value to the “market”. This will,  in turn, drive long-term recurring revenue to the company.

For 99% of SaaS companies, I believe this “product” should be made up of 2 parts. The combination ensures that both long-term recurring value and revenue are generated. The 2 parts are:

Part 1) The SaaS Product:

Compelling features/functionality presented in a magnetic UX

Part 2) The Customer Success Product: 

Resources/support/coaching/content/services that enable the customer to realize recurring value from the SaaS Product

As a big fan of Steve Blank’s work, I encourage early-stage startups seeking product/market fit to be running experiments with early customers. Their Customer Success Product should be included in these experiments. This will enable the early stage startup to discover how best they get their target market to realize value with their SaaS Product.

I’m an equally large fan of Y Combinator’s Paul Graham and his Do Things That Don’t Scale principal.  Testing hypotheses that don’t scale are some of the best experiments when seeking product/market fit. The story of Airbnb’s founders physically visiting their customers’ apartments with a camera and offering to take high quality photos for use on the site is a classic example of this.

I regard this Airbnb story as a great example of an early stage startup experimenting to design their Customer Success Strategy. Brian Chesky et al were identifying what they needed to do outside of their SaaS Product to enable their customers to adopt Airbnb and realize value. This, in turn, led to the retention and expansion of these customers.

Scaling the Right Approach

As company growth followed, Airbnb could then scale their winning Customer Success formulas. Scaling was achieved through a combination of Customer Success-inspired new functionality in the SaaS Product and Customer Success low touch & tech strategies.

In today’s hyper-competitive SaaS markets, startups that wait to build their Customer Success strategy until they have 7 figures in ARR will be too late. The leaky bucket will already be full of holes and leaking revenue fast.

Once product/market fit is established by an early stage startup, immediate embedding of Customer Success across the business model is key. Customer Success should drive the Customer Acquisition, Retention and Expansion strategies the start-up is now trying to scale.

Sure, investors and founders will want to focus on top line growth through accelerated new customer acquisition. But those who understand that their ROI will driven by the company’s bottom line, will also understand that acquiring customers that can be retained and expanded over their lifetime is just as important. By testing and building the right Customer Success Strategy early on, startups can be confident they are acquiring the right customers from the start.

Ross Fulton
Ross Fulton

Prior to founding Valuize, Ross spent over 16 years growing software companies and their partners in go-to-market strategy, sales engineering and customer success leadership roles on both sides of the Atlantic. An Englishman by birth but not by nature…he’ll take an espresso over tea every time!