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Customer Segmentation for Customer Success (aka stop calling SMBs who spend a lot “Enterprise”)

Show me the customer segmentation you are using for your customer success organization, and I can tell whether or not you are truly customer-centric.

Almost every B2B company can benefit from some sort of customer segmentation model – a framework for slicing up your client base into chunks that have like characteristics and behave similarly. Segmentation is not a new concept. The marketing and sales functions in most companies have been doing this for years. But developing customer segmentation is relatively new to customer success. (This should come as no surprise – customer success as a discipline is still in its infancy.)

As customer segmentation has become a hot topic in the world of customer success, I’ve noticed an interesting and troubling trend at companies who should know better. These companies start with the best intentions – carving up their customer base into segments to provide a more tailored experience. And they start with a best practice, establishing an Enterprise segment and an SMB segment. So far, so good.

But here is where “company-centric” thinking starts creeping in. 9 times out of 10 when I ask how these companies define who goes into Enterprise and who goes into SMB, the answer is Annual Contract Value (ACV). Customers who pay more are Enterprise, and customers who pay less are SMB.

You can see the quasi-logic that sits behind this decision. After all, your Enterprise customer success segment probably has lower account ratios and more senior ratios. Shouldn’t you want your “best” customers – that is, those who are paying the most – to have the deepest relationships with your most senior people?

While at first glance this approach makes sense, it actually ends up driving really goofy behavior that does not put the customer at the center of your customer success strategy. This sort of segmentation approach results in actual Enterprise clients (customers with tens of thousands of employees and billions of dollars in revenues ) in the SMB bucket, and actual SMB clients (companies with a couple hundred employees and <$100M in revenue) in the Enterprise bucket.

A Tale of Four Clients

As someone who has had the opportunity to work for both Enterprise and SMB companies, I know first hand that these are two different beasts. The decision-making process around implementation, onboarding, adoption, expansion, and advocacy is incredibly different for big companies versus small companies. And when you define “big” and “small” by what the client is spending with you, you inadvertently end up treating them like they are the same.

First, let’s look at the so-called “Enterprise” bucket. Let’s pretend you have two clients, both of which are very high ACV. Client A is a $10B multinational with tens of thousands of employees. Client B is a $50M pre-profitability startup with 100 employees.

Most Enterprise customer success playbooks are going to be tailored to Client A. The implementation and onboarding plan will likely assume a complex project plan with a bunch of interdependencies. The account plan might ask the Customer Success Manager to achieve 3-up, 3-across account penetration. The contract renewal process likely assumes that there will be involvement from procurement, and legal, and finance – and a committee created solely to charter another committee to oversee a third committee.

Does any of this seem to fit Client B? How do you achieve 3 levels of account penetration at a small company that has a flat org chart? Why does your implementation playbook have a section about partnering with the client’s program management office when the client doesn’t have one?

Now, let’s look at the “SMB” bucket. Again, let’s create two fictitious clients. Client C is a $75M, 200 employee company. Client D is a division of a $20B multinational. Both clients are on your lowest dollar plan and have a low ACV.

Like many companies, let’s say that you’ve decided to take a 1-to-many approach to customer success for your SMB segment. For Client C, that is probably a smart allocation of resources. But for Client D, you are losing out on the opportunity to expand into the rest of the company and growing the client into one of your largest. (And there’s always the chance that your competition is in another piece of this business and is treating them like a true Enterprise client, leaving you at risk.)

Treating an Enterprise client like they are a small business, or treating a Small Business client like they are an Enterprise, just doesn’t make sense. You’ll end up overserving some clients, underserving others, and might just frustrate all of them.

A Different Approach

So if this approach causes so many problems, why is it that so many companies use it? Simple – the short-term economics make sense. The thinking is that you should spend the most in Customer Success resources on the customers that are paying us the most today. And while this is quite short-sighted, I understand the financial pressures that most Customer Success leaders are under that would lead them to this conclusion. Because of this, I often advocate an approach that balances the “outside in” need to serve the client the way that they need to be served, with the “inside out” need to put resources where they will have the best short- and long-term return. To do this, segmentation should take place across both dimensions – the size of the client (are they really an SMB or an Enterprise?) and size of the contract (are they paying us a lot of money?). This yields a model that looks something like this:

AccountSegmentation

Depending on the size of your Customer Success organization, you might actually have CSMs aligned to each of the quadrants, or you might group two pairs of quadrants together (i.e., Major & Enterprise, or Large Opportunity & Enterprise). Or if you are just starting out, you might have one Customer Success Team (or even just one Customer Success Manager) who has to cover all four. But regardless of your team size and structure, for the best outcomes, you should develop distinct approaches for all four segments. That means four different versions of your key playbooks, four different groupings of metrics, four different sets of goals and strategies.

By building your Customer Success segmentation strategy from an outside-in perspective, you will achieve tighter alignment to your clients business objective and drive mutual success.

 

Your customer survey is bad, and you should feel bad.

Your Customer Survey is Bad, and You Should Feel Bad


Rob Markey
is a loyalty rock star.

Not just because he’s the co-author of The Ultimate Question 2.0, one of my favorite business books of all time.

Not just because he heads up the Customer Strategy Practice at Bain and is one of the most important thinkers in the customer loyalty field.

All of these things are great, but what pushes Rob from pretty cool guy to loyalty rock star is the fact that he maintains a database of real customer surveys used by real companies. You can check it out by visiting http://www.robmarkey.com/survey-files/ (quick and painless registration required).

As you peruse through Rob’s collection of surveys, you will likely come to the same conclusion as I did – most customer surveys are awful.

Even companies that otherwise excel at customer experience have terrible surveys.

Five Guys asks customers for their receipt number, but then asks you for the time of your visit, order total, and 34 pages of other data that they should easily be able derive from information given on the first page.

It takes longer to complete the Starbucks survey than it does to drink a venti caramel macchiato.

Marriott, a company I love, asks over 80 questions, including an absurd matrix that asks you to rate on a scale of 1 to 10 whether the hotel was luxurious, sophisticated, or engaging (amongst a dozen more marketing words that mean nothing to the consumer).

And in the height of “do as I say, not as I do”, Forrester sent a 20 page survey to all attendees of a customer feedback management conference.

Overly long surveys tell your customers that you don’t value their time. This is especially true for surveys that ask questions to which you already know the answer. Don’t ask for my receipt number and then ask me whether or not I ordered breadsticks (looking at you, Pizza Hut).

The good news is that there is hope. And it starts with us, customer loyalty practioners.

We need to stress out about the length of our customer feedback surveys. It needs to keep us up at night. We should take it as a sign of professional failure if it takes longer to take our survey than it does to purchase, assemble, and use our products. Any time we are even considering adding another question to our survey, we should ask ourselves the following questions:

  • Do we really need to ask this?
  • Will we do anything with this information, or are we asking just to ask?
  • Can we answer this question ourselves with data we already have?
  • What can we remove to make room for this question?
  • OK, seriously – do we really need to ask this?

And it’s not enough to simply prevent new questions from being added. We need to critically evaluate existing questions to determine if they are truly needed.

I once read that you should turn all of your clothes hangers backwards, turning them the correct way when you’ve worn the garment at least once. At the end of a year, any item of clothing that is still on a backwards hanger should be donated to a worthy cause because you’ve demonstrated that you don’t wear it.

Likewise, you should turn a critical eye towards every question on your survey at least once a year (if not quarterly) and ask your team a simple question: “When was the last time someone used the data that this question collects?”. If no one can offer up a concrete instance in the past 12 months, you should seriously consider removing the question from your survey.

Customer surveys don’t have to suck. Companies like Rackspace, Logitech, Intuit and Domino’s all manage to collect meaningful, actionable customer feedback without torturing their customers with page after page of needless questions.

If you remain diligent about what you are asking and why, your reward will be increased response rate, more actionable data, and clearer line-of-site for employees.

And then you’ll be a loyalty rock star too.

The Net Promoter System on a Napkin

Therefore, since brevity is the soul of wit,
And tediousness the limbs and outward flourishes,
I will be brief

– William Shakespeare, Hamlet

If brevity is the soul of wit, then simplicity is the soul of inspiring others. It has been my experience that creating a customer-centric revolution within an organization requires the ability to convey your vision as simply as possible. To that end, I thought it would be a fun exercise to attempt to explain the Net Promoter System on a single napkin.

Net Promoter on a Napkin

The end result of this exercise is posted above. Obviously, this illustration is overly simplistic, leaves out some key concepts, and is limited by my poor artistic ability. With all of those caveats, I still found this to be an incredibly worthwhile exercise. The next time you have a complex idea that you must communicate to a broad group, try drawing it out on a napkin first. The limited space will force you to ruthlessly edit out the fluff to let the essence of your idea shine through.

Key elements for a succesful Net Promoter survey invitation

Elements of a Successful Net Promoter Survey Invitation

One of the keys to success for your Net Promoter Score program is generating a high response rate. Unlike many other customer feedback frameworks, Net Promoter is designed to emulate a census, with target response rates of 50% of more.

The are many factors that contribute to your overall response rate, one of which is the execution of your survey invitation. Many new NPS practitioners don’t know where to start when creating a survey invitation. The chart below lists some of the factors that I have used in my survey invitations to generate response rates of up to 68%.

Click on the image to enlarge

Key elements for a succesful Net Promoter survey invitation

Once your Net Promoter program evolves, you will no doubt develop your own best practices that work for your particular business and customer type. This chart is intended to give you a place to start.

How Marriott made me a rabid Promoter for the price of a bottle of water

I am, as they say in customer loyalty circles, a Promoter of the Marriott chain of hotels.

Last year alone I spent over 60 nights in Marriott hotels, enough to earn my gold status for the next two years. I’ve referred countless friends and colleagues to various Marriott locations. I even set up a corporate rate for Volusion, which has resulted in well over 100 additional nights. Most hotel chains would love to have a customer like me – and the truth is that Marriott won my lifetime loyalty for the price of a bottle of water.

You see, I wasn’t always a one-hotel chain guy. I used to be equally loyal to three different chains. One night I was staying at a Courtyard by Marriott that I had stayed at twice before.  I have a regular routine that I follow – shortly after checking in, I will go to the closest store and pick up a couple bottles of water (depending on how long I am staying) to bring back to the room. This trip was no different.

However, when I returned to my room, I discovered that the room I was in did not have a mini-fridge. It wasn’t that big of a deal, and I had all but forgotten about it until I received Marriott’s post-stay customer survey.

I filled out the survey as I normally did – Marriott routinely earns high marks from me. The last question of the survey asked what they could have done to make my stay more enjoyable. I put a short comment about how I was bummed at the lack of mini-fridge because I like to keep some water in the room.

The next day, I received the following email from the General Manager of the property:

Thanks so much for taking the time to complete our survey regarding your recent stay – we appreciate your feedback.  I am glad to see that you enjoyed your stay and I just wanted to respond to your comment about not having a fridge in the room.  We have about 24 rooms that do have refrigerators (I see that you had one on your stay before this one) but if one of those rooms is not available, just ask us for one and we will be happy to put one in your room.  We value all of our guests, especially our rewards members and want to do everything we can to ensure we provide a great room and a high level of service.  I hope the next time you are in town, you will stay with us again and I will ensure you have a fridge in your room.

I was suitably impressed. However, I was really blown away the next time I stayed at that same location. During check-in the desk agent informed me that they had ensured that I had a room with a mini-fridge in it. When I arrived in my room there was a bottle of water already waiting for me with a hand written note from the hotel manager.

One of the most important components of any customer feedback program is the final step – closing the loop. It’s where you let the customer know that you have heard and understood the feedback that they provided. This Marriott GM performed one of the most effective close-the-loop activities I’ve ever seen, and all it took was a simple survey, some basic CRM functionality, and 10 minutes of the manager’s time.

Whenever someone asks about the return on investment for Customer Feedback programs, I always cite this example. The tangible benefit to Marriott has been over 200 nights (around $26,000.00) from me, my company and people I referred. Not too shabby for a $2.00 bottle of water.