How to Improve Customer Success with Metrics that Matter
When it comes to customer success (CS), many professionals tend to immediately focus on net promoter scores (NPS). While that may have been effective in the past, the customer and business landscape have changed, so CS practitioners need to adapt accordingly.
In this week’s episode, we have an engaging conversation with CS expert Firaas Rashid (Founder & CEO, Hook) about what he believes are other customer success metrics that truly matter. Firaas also talks about the mistakes to avoid, the importance of getting input from customers who are engaged and disengaged, how teams can improve on CS, and what metrics they should be focusing on.
Topics discussed in this episode:
Companies & links mentioned in this episode:
Christian Klepp, Firaas Rashid
Christian Klepp 00:00
Welcome to B2B Marketers on a Mission, a podcast for B2B marketers that helps you to question the conventional, think differently, disrupt your industry, and take your marketing to new heights. Each week, we talk to B2B marketing experts who share inspirational stories, discuss our thoughts and trending topics, and provide useful marketing tips and recommendations. And now, here’s your host and co-founder of EINBLICK Consulting, Christian Klepp. Welcome, everyone to this episode of the B2B Marketers on a Mission podcast where you get your weekly dose of B2B marketing insights. This is your host Christian Klepp. And today I’m joined by someone on a mission to help companies to retain and grow their customer base. So coming to us from London, England, Mr. Firaas Rashid. Welcome to the show, sir.
Firaas Rashid 00:46
Thanks. Hey, Christian, how are you?
Firaas Rashid 00:48
I’m very good. Very good. Um, I dare say we have sunny weather today in Toronto. So it’s, it’s quite unusual.
Firaas Rashid 00:56
We have great clouds, no sunshine, and it looks like it’s going to rain. So we’re pretty usual. Some normal weather. Exactly. That’s a good summer’s day.
Christian Klepp 01:09
Oh, boy. No Firaas, it’s really great to be connected with you. I’m really looking forward to this conversation. Because man, this is a topic could be slightly controversial. But important nonetheless. Alright. So let’s jump in. So Firaas, you mentioned something in our previous conversation, that could be a great topic of discussion in the world of customer success or CS. So you said okay, and I’m trying to quote you as accurately as I can here. Forget NPS (Net Promoter Score), there are other customer success metrics that matter. Ooph, could you please explain what you mean?
Firaas Rashid 01:51
Yeah, um, look, I’ve been in customer success for a few years now. And when I started the game out at AppDynamics, my last company, there was a big focus on the industry in NPS and, and, and customer sentiment. And I think this worked in the old days where you used to ship hardware out to a customer install software on it, you charge them a 15% maintenance agreement. And I also think that NPS was a great overall company metric, or a product metric, I think the thing that has changed is that as people have moved to SaaS (Software as a Service), NPS has become more and more irrelevant for the purposes of measuring whether or not a customer is getting value out your product. So to give you a few reasons that I’ve seen, typically, the first problem that you have is, when you use NPS, you’re focusing on how your users feel about a product. And your first problem is that your buyer and the user are two different personas. So your user typically as an individual contributor, they may be 2, 3, 4 levels down in an organization, they are different to the person who decides whether or not to buy, who typically are looking at a business investment, whether or not they can get ROI (Return on Investment) out of a product. And there’s also a bigger problem that I’ve seen during my time at Hook where we see when customers send out an NPS survey, actually, the likelihood of people to complete it, and to complete it consistently, is quite low. So, for example, I think the most recent response rate we saw in one of our customers was 4% of all of their users actually completed the NPS survey. And within the same customer base, you will have a user at a similar level, voting a product a 1 and voting a product a 10. And, and really the question then comes down to how do you go and figure out whether or not that customers getting value and whether or not they’re using the product. I think the third problem that you have with NPS as well is that the people who aren’t satisfied with your product in the SaaS world, actually end up not completing the surveys. So you end up without an answer from the people that you should have the greatest amount of concern from. My view is that a role of customer success in the modern day SaaS company, is to focus on how customers get value out of a product. And the way that you should measure whether or not that works is to look at the leading indicators of that value, which by the nature of you selling a product should be within the product data of the product that you’re selling. So yeah, I’m not saying that NPS is a bad metric. I’m saying it’s a bad metric for customer success. Because what it’s measuring is how much people like your product. What you should be focusing on is how much people are getting value out of your product and how sticky it is.
Christian Klepp 04:43
That absolutely makes sense. And if I understood correctly, what you said in the past couple of minutes. I mean, the ecosystem has evolved and we’re talking about SaaS, it’s constantly evolving, right? It’s in a constant state of motion. It’s not like okay, whatever you’re doing now is going to be you know, gospel for the next 10 years, right, I mean, to a large extent. Interestingly enough, I’d like to go back to something you said earlier. So why do you think that they’re still… Did you see some kind of like, pushback on, on what you’ve just said? Like, what I mean by that is like… Why do you think that there are still companies out there that are insisting on still measuring NPS despite what you have just mentioned?
Firaas Rashid 05:26
Yeah, that’s a great question. I see pushback all the time. And I remember when we spoke about it, we spoke around general pushback in different areas of the industry. Frankly, the reason that I think NPS has gained popularity is that it’s much easier to send out an NPS survey and to interpret the results of that than it is to go and look at more complex metrics, such as product usage. And so I think that it tends to be the immediate thing that people go to because it is a couple of clicks to send out a survey with a 1 to 10 rating. And to be able to interpret it, you’ve got guidance on how to do that. But I think the world’s evolved, I think that the SaaS industry is worth multiples of what it was before. This was an industry that was $50 billion in revenue back in 2016. It’s $150 billion today. It’s going to be $300 billion in in three or four years’ time. And I think that with that growth, you have to focus on data around engagement, because if you don’t, there’s 10 other startups that are popping up doing exactly what you’re doing, who are and who are focused on stickiness.
Christian Klepp 06:37
Yeah, yeah, no, that that totally makes sense. That totally makes sense. And, in fact, that’s kind of a great segue into the next question, which is about mistakes and misconceptions. Here, we’re specifically talking about mistakes and misconceptions around customer success metrics. So just off the top of your head, what do you think they are? And what should be done to address those?
Firaas Rashid 06:58
That’s, it’s a good question that I I’m gonna mention, a couple that I’ve made, which I think is a good starting point. Yeah. So one of the first ones is I think that it’s easy for people to think that customer success is unique to a company and that as a function, it’s not definable. And so I think it’s easy to overcomplicate what the role of customer success is. And in that process, I think it’s easy to go and get busy developing playbooks developing a whole set of architecture for how to run customer success, without having proved what you should actually be doing. And I actually have a very strong belief that customer success is common for every company. For any company, the definition of customer success should be, what is the gap between the product that you’ve sold, and what needs to be done in order to get value out of it. If you fix that problem, you solve customer success. And I think the way to go and figure out that gap is, is to go and work with your customers and experiment on how that should be done. Before you go and try and proceduralize it. I often speak to leaders who set out playbooks and definitions and KPIs (Key Performance Indicators) of a whole bunch of metrics, which actually have no real relevance into anything that’s proven. And I think that’s, that’s a big mistake that other people have made. And by the way, it’s a mistake I’ve made in my first role in customer success at AppDynamics, where I lead the Emir team, we fell into the trap of trying to define a process before we’ve actually gone to execute it. And where we got it right was where we hired a brilliant team that was able to go and figure out what we needed to do to get customers to get value out of our product. And then we went and proceduralized what worked. And that leads me to the second problem that I think people make and I almost made the mistake and avoided it. We’re in this current situation where there’s a huge explosion in customer success. For me, I think it’s probably going to be the most important company function in any SaaS software company. And I think you’re already starting to see that change over the last kind of three or four years. And fundamentally by the fact that there has been this explosion in the number of people that people want to hire a customer success. The biggest challenge people have got right now in hiring is people with experience in customer success are simply not available. It’s impossible for an industry to go 3 to 5 to 10x over a couple of years. And for you to be able to consistently hire good people from there. When I hired my first person back at AppDynamics when we hired the customer success team across Europe. The first hire I was trying to hire was someone with customer success experience. And thankfully I didn’t find someone that that I felt could resonate with our customers with that experience, I decided to pivot to finding someone who was quite experienced in doing the job of my customers, we were an IT operations product, we hired someone in from, from IT operations. And the results were exceptional because all of a sudden, we had the A team that was able to go and help our customers actually get value out of our product because they could do the job that our customers was doing. So the second thing that I would say it says, sometimes people get stuck in the trap of trying to hire a brilliant Customer Success person from another SaaS software company. That’s not important. It’s really important to go and find someone who understands what is the business problem that your customer is trying to solve. And they understand how they’re going to go and solve it using your products. Because ultimately, your product is just a platform to go and solve that business problem.
Christian Klepp 10:50
Yeah, yeah, no, that’s absolutely right. You mentioned something earlier, and I thought was an interesting observation. Because I had the pleasure of interviewing another gentleman a couple of months ago on the topic of customer success. And he’s seen, and I’m not sure if you have as well. He’s seen companies trying to build up a customer success team, using people from customer support, which, in his experience, more often than not, does not work, because it’s completely different role. And it’s, it’s more reactive, right? No offense to customer support the system nature of the beast, right?
Firaas Rashid 11:25
Yeah, I think it’s funny this problem changes as you grow as a company. And I’ll talk through that before I answer the question, because I think there’s a time and a place for the customer success and the customer support person to be the same person. And those are usually the early days in a company where your customer success person is an all rounder, the first hire we made and customer success is actually, you know, brilliant, technically great at implementations, good at being proactive, greater being reactive. And I think in the early days, you just have to do that, because you don’t have the demand to be able to go and hire a support team on a customer success team. But fundamentally, I think, if you think about the idea that a job for a customer success person is to fix the gap between a product that someone has bought, and the value that they expect to get out of it, that person has to be a change agent. And, and that person has to be an outbound change agent, because you’re going to be faced with a bunch of resistance within your customer base, you’re going to be faced with complex challenges that are political in your customer base. And I think that that persona is different to the person who is a customer support person. And I say this, by the way, coming from a background o IT operations, I used to lead it operations at Credit Suisse for eight years. And so in that job, I was very much the reactive firefighter, where, you know, we’d be up in the morning at 3am, solving incidents for our customers. But I think those are two different things. I think you can get people that wants to do both of those things, I think you can get customer support people that want to be customer success people. But I think it’s really important to make sure that the person you’re hiring, or the person that wants to go into customer success, actually wants to do the hard work of getting into more difficult customers that maybe they don’t want to do. I certainly know, in my career in support, and a lot of the best people that we had were brilliant firefighters and, and they actually enjoyed being thrown problems at them. But they weren’t necessarily the personalities that wanted to start from zero and suddenly solve a problem that perhaps didn’t even exist at that time.
Christian Klepp 13:37
Yeah, no, that’s, that’s a really good point. That’s a really good point. Talk to us about a challenge that you and your team have managed to solve in the past 12 months. And I’d imagine there’s quite a few of those, but just pick one.
Firaas Rashid 13:50
Yeah, and well, I run a machine learning platform that helps customer success, people make sense of their data. So we predict whether or not a customer is going to renew and what actions people should take in order to drive a renewal or an upsell. And we actually started off building our platform last January. So we’re about a year and a few months into that process. And I think the biggest challenge we’ve had in that is how do we build the ability to be able to go and predict renewals and upsells across multiple different companies accurately and go and provide people meaningful information. And I think the bit probably people are most happy about and something we’ve been talking about over the last few weeks is we’ve had a lot of success in doing that. So we now are able to do that to around 80-90% accuracy depending upon the customers. And as a result of that we’ve been we’ve been helping our customers grow their customer base and significantly expand their renewals as well. That doesn’t come without its challenges and those challenges were in hiring the initial team so how do you hire the right people across product across Engineering across data across operations, you know, some of the most basic functions that you need to do in the early days of a SaaS company, as well as bring onboard your first customers, as well as start to actually fix the challenges that they’ve got. So it’s been a, you know, pretty tough time getting there. But it’s been really exciting to see the results and the way that they’re able to go and impact our customers net recurring revenue.
Christian Klepp 15:22
Did you say 80-90% accuracy?
Firaas Rashid 15:25
Christian Klepp 15:27
Wow. That’s so that’s, that’s, that’s quite an achievement. Understatement of the year. But like,
Firaas Rashid 15:34
Yeah, we were aiming we always aim to get at 70% plus. And actually, we ran the numbers over the last couple of days, because we’ve been doing our own reviews with our customers from a customer success standpoint. And, yeah, typically, we’re able to forecast renewals at about 80 to 90%, we’ve started to do the same with upsells fairly accurately as well. And I think the exciting thing for our customers is not only how quickly they can start to use that data to drive impact on their revenue and their customers, but also that they can they can get those results from us without having to spend months and years on data science. Back at my time at AppDynamics, we managed to get to a point where we built a machine learning algorithm that got the accuracy. I think it was about a 90% accuracy. But it costs us genuinely a couple of million dollars in like data and engineering to be able to go and get there. So it’s so it’s exciting to be able to provide that to customers who don’t want to invest a couple of million dollars in that outcome.
Christian Klepp 16:37
Yeah, I can imagine. I can imagine. It’s, it’s not a nominal investment, that’s for sure. Yeah, we had this. We had this conversation previously, right. So as we all know, it’s important to get input from customers who actively provide feedback and are engaged. But what about those that are quiet and don’t engage at all? Surely, you can just ignore them, right?
Firaas Rashid 17:03
Yeah, it’s, it’s a really good point. I actually think this, this like gray area of customers that go quiet and are disengaged, is the biggest problem for Customer Success people. And I think it’s the biggest underestimated problem that customer success people deal with. It’s easy to deal with the customers that are coming to you every day with problems. It’s easy to deal with customers that you have relationships with. And certainly over the years, I’ve become friends with people that were my customers and, and become friends with people that I was a customer of as well. We ran a survey a few months ago that looked at what customer success metrics do people look at? And we asked our surveys a question, which was, “Do you think that the people who complain the loudest are the most likely to go and leave your company?” And we got a resounding no, we had 108 people reply, I think everyone was screaming “No, you’re wrong.” And which was great, because it was good to kind of see the real life experience from customer success managers and Customer Success leaders. And what you often find is the most difficult challenge you have is a company’s brought a product, the champions moved on, either emotionally, or are actually physically moved on. Often, people who are who are change agents are the most likely to change career. So I certainly found in my own career, that that people will buy a product and then move roles within kind of six to 12 months after that. And you’re suddenly left with this scenario where the company has bought a product, it’s sitting on a shelf, people aren’t using it, they don’t know how to get value out of it. And actually the original business driver for them buying that product has now completely disappeared. And I think that’s where you get customers that are quiet and not engaged. And the worst thing to do in that scenario, I think, is to confuse the people that are complaining to you about things that you can do better in your product, who are engaged in know how your product works, and saying that they have a challenge versus that people are quiet and assuming that they’re happy. I know when, in my past career running Customer Success directly. We used to find that some of the customers that weren’t getting value of our product, and had the least level of adoption, were the ones that would tell us that they were extremely happy. And they were happy because they actually didn’t know the flaws and the bugs in our product. There were still in the early days are figuring out what to do. They kind of got frustrated and moved on to something else. And I remember when we sent out product teams to some of our biggest and most engaged customers, they would come back with pages and pages and pages of feedback because they knew everything about the product that problem was solving and the competition. So for me, I would warn anyone in customer success or any leadership role in a SaaS company. Focus on those on those people that are quiet and go and figure out who they are, why they’re quiet and how do you how do you go and drive engage from within.
Christian Klepp 20:01
Yeah, no, absolutely, absolutely. And it’s those customers that provide you with what you said, like pages and pages of feedback, you know, you want to be paying attention to that right? Even if the feedback is not necessarily positive, because that’s what will help you to improve. Right? Well depends, of course, on what the feedback is.
Firaas Rashid 20:19
Without a doubt, I think in my most recent role, now at Hook, I found that the, the pages and pages of feedback that you get from customers are the ones where you really start to build the best product. We started out, we built a product, we had a hypothesis. And what we found was when we built features that we thought were exciting and new, we got a lukewarm reaction. And it was okay, when we built features that were there because people were complaining to us that they weren’t there, we suddenly uplifted engagement. For example, when we do our prediction algorithm, one of the first things that when we launched that and people started to use it was that people got really frustrated that they couldn’t understand: What was the data behind the prediction? And what were their leading indicators? So we would give them a prediction, they wanted to know what the root cause was, as soon as we gave them all of the information around the cause the history and what they should do to fix it, it suddenly changed the way that people started to perceive our product. So I definitely agree with you like the product feedback you get from those engaged users is is exceptional, especially the ones that become real experts in what you do.
Christian Klepp 21:28
Absolutely. Absolutely. Firaas, I’d like to go back to something you said earlier. And I’m just, you know, another question just popped up. And I’m wondering if this is a problem that you’ve seen across the SaaS space, but like, you know, constant churn and attrition rate, like you mentioned, like, the person that had purchased the product, that there’s now no longer connected, but that company, and that probably, to a certain degree adds another layer of complexity for CS team, do you see that as a recurring trend?
Firaas Rashid 21:28
In terms of the person leaving who buys a product?
Firaas Rashid 22:07
I think it becomes a bigger trend, the larger your sales price, and particularly when you sell to business lines, as opposed to central teams. And what I mean by that is, if you’re selling to a business line, you’re typically selling into someone who owns some level of P&L (profit and loss) responsibility, or is close to owning P&L responsibility, versus a centralized IT team or HR team or another team where they perhaps have just been given a remit by the company to go and find a product. Where you’re selling to a business line, you’re likely to get the highest sales price, because you’re solving… you’re selling to someone who has a problem that brings them direct financial benefit that to solve and they have the ability to be able to go and apply that financial benefit into P&L terms. What I found in my career is that the people that go and make that decision to say, we’re going to change how this company works, and we’re gonna go and spend several, you know, 10s, or hundreds of 1000s of dollars, or even millions of dollars on a piece of software that we’re going to implement a change there are typically change agents. And change agents don’t like sitting around on a job for too long. And so you’ll find that the more likely you are to get true champions who drive change within companies who consistently make new product purchases, new changes within their team, new ways of doing things. And you’re likely to see that they will change well, within their own companies, they will get promoted, or they’ll move to other companies. And I think I think this is something that’s underestimated. And as a challenge, I know that both in my career in customer success, and also in my in my current role, we see consistently that like champion change is one of the reasons that three to six months before renewal, you’ve suddenly got a spanner in the works, because you need to go and resell the value of everything that you’re doing.
Christian Klepp 23:30
Christian Klepp 23:57
Yeah, that that is definitely no small challenge that you that you guys are confronted with, that’s for sure. We get to the point in the conversation where we’re talking about actionable tips, right, so something that people can act upon. And let me just set this up really quick, right? Like, Let’s appreciate that. You can’t do all of this overnight, right? This isn’t something that you can do, like, you know, not all of it anyway that you can do immediately. But what are some steps that CS practitioners can take right now to help improve on the customer success metrics that matter?
Firaas Rashid 24:35
The one thing that I would say to people, if you wanted to go and do something today is keep it simple. And focus on one, maybe two metrics and start to understand how those metrics impact your retention and churn and how they impact whether or not people buy more of your product. I think it’s easy to go and look at the idea of becoming more data driven, I get very, very overwhelmed with the idea of where do you source data, where’s the database, I need to hire a data analyst, I need to buy licensing for a data platform. And actually, the first time that I got involved in data driven customer success was, I just been handed the responsibility of running customer success at AppDynamics. We were 170 million ARR company at the time. And we had a very reactive approach to doing to doing customer success. A lot of it was surveys and NPS. And this was a time where three years later, I would leave the company and we’d be at 550 million in ARR (Annual Recurring Revenue). So our growth was huge. And the first thing that we did was, we looked at, we looked at two metrics, we looked at what does licensed adoption look like? And what happens when people use the product A, what does daily active users look like? And what we found was that both of those had a very strong correlation with renewal. But the way that we went and figured that out was we got a spreadsheet, and we listed out every account that it renewed and churned and we did this manually. And we went and looked up the license usage at the point that they’d renewed or churn. And we built an Excel chart with that. And we did all of this over the course of like a week or two. And it told a very obvious story, it told us that if people renewed with us, they’d use 57% of their licensed product. If people didn’t renew with us, they’d use 29% of the product. So we knew if we got people over the 50% mark, they were more likely to renew with us than they’re not. The second thing we looked at was we started to look at what happened when more and more people were to use the product. And we found that there was this wave effects where when people got above 20 to 30% of their users being active, it mothballed and other people started to use it. And using those two metrics alone, we began to change how we did customer success. So I would say just start simple. Start with a spreadsheet, get out your list of accounts, start to look at very basic metrics around adoption around engagement, and start to see what you can see. And generally you start to see quite clear signals around what that looks like. And that gives you the first set of metrics that you can start to measure your team on.
Christian Klepp 27:31
Yeah, no, no, I love that approach in that whole like, concept of starting simple. Which made me think of another question, which I’m sure you’ll have no problem answering. Do you think, especially in the CS space, or in SaaS, for that matter? Do you feel that people are just too obsessed with well, Data? And how much how much tech like you know how much tech they throw into their stack? And that’s, that’s where sometimes it can go all right.
Firaas Rashid 27:59
I think people sometimes look at the data problem and think that it’s, it’s a technical problem to solve. And I certainly know in my career, for example, in when I worked in banking, every data problem was a multi million dollar project, that would inevitably have a load of hurdles along the way, and kind of deliver some limited version of what was envisaged and planned in, in the first place. And what I was very passionate about was that we should use data, but we should just find a very simple way to use it. So rather than going through the engineering task of data lakes and contriving dashboards and so on, we should go and look at what are simple data metrics that go and drive results. And so yeah, I think I think it’s more that when you don’t have experience on driving data very quickly, to iterate on something. I think it’s easy to get lost on thinking it’s a technical problem. And I think that as people that work in SaaS, and that are obsessed with tech in the first place, that happens even more so. So yeah, I for sure. See that problem. And I’ve seen it throughout my career. I and again, I would just say, Keep it simple focus on like, a couple of simple metrics, start to test them and start to build upon that.
Christian Klepp 29:15
Yeah, well, that’s a great answer. That’s a great answer. Speaking of which, I just thought of a while another typical CS question, which I’m sure you’ll find them but there’s two camps, right, but depending on what the answer is, but okay, here it goes. So when it comes to customer success, new subscriptions, or renewals? Which one do you think is more important? And why?
Firaas Rashid 29:45
The we actually have scientific answers for this. This is what we do every day. The one thing that’s clear in all of the data that we look at is that when you’ve got customers, they either get on-boarded well or they don’t. And if they don’t get on-boarded well, they are stuck in this like, pit of, of not getting value being frustrated with the product forgetting that they ever brought it. And I think that when that happens, you begin to get the renewal fight, which is you’ve got the fight three to four months out of find a champion, resell the value, maybe bring in an account exec and run a new sales campaign. So I think the most important thing is to focus on how do you onboard your customer properly. How do you onboard users properly. If you fix that problem, the problem you have later on is significantly decreased. We actually at Hook decided as the customer success company, to start with that as our first customer success hire. So we brought someone in before we even onboarded our first paying customer to be our customer onboarding manager because we knew that if we got that right, and we got people to go in to go and be happy as they as they went through the funnel, there would be way less of a problem later down the line. Now, I’ve been through scenarios where you are six months down the line, a customer’s not really got value out of the product, people are not sure why it’s there. And I’ve been through the cycle of recovering that account. And I’d say that is still way easier than being stuck in the renewal cycle. Because if you’re in the renewal cycle, and someone isn’t happy, there’s a commercial conversation. And it either becomes a discounting problem or it becomes a reselling value problem. And I think there’s some interesting things you can do even through the middle of a contract. When I led the European team customer success in my last job, we found that, for example, gamifying utilization was a really good way to incentivize it. So we used to sell millions of dollars of products into big companies like BP and Barclays and UBS. And what we found was that sometimes, for various different reasons, people didn’t use it. But if we went in, and I made it in a competition for people to show the best shoes that they could get out of a product. And the first example was we went into an account and said, the person to build the best dashboard gets a set of air pods. And all of a sudden, we were to have 22, probably 70 people across the company, obsessed with figuring out the best possible thing that they could do with our product, which is amazing, because they would do it for $200 when the company had spent multi million pounds. So I’d say onboarding first, deal with your, your disengaged companies and your disengaged customers next then and look at things like incentivizing adoption and incentivizing people getting value out of it, and get out of the trap of dealing with the reactive renewals problems.
Christian Klepp 32:53
Yeah, no, that’s absolutely right. And I love that answer, you know, like, especially the part about gamification, because that will certainly drive engagement and get that try, at least to a certain degree, elicit that, that more positive response, right, from customers. Right. In terms of customer success, right? What is the status quo that you passionately disagree with? And why?
Firaas Rashid 33:22
Very pointed and confrontational question. This is really obvious for me. The status quo that I disagree with is that customer success teams are not revenue teams, or so should somehow be disassociated with the idea of selling or with revenue. And by the way, I come from being someone that used to be one of those people. I think it’s easy to fall into this trap, the customer success team should be around how does a customer drive value out of a product, but want to disassociate yourself with the idea that you’re not a salesperson for whatever reason. And I think that’s, that’s wrong for customer success, people to do that. And I think the reason that that’s wrong is, if there’s a customer success team, you want to position yourself as a strategic point of contact as their strategic layer within your company. The only way to do that is to associate yourself with revenue for that company. And otherwise, you’re Europe, you’re a supporting function, which is, which is okay, but I feel very passionately that customer success teams are and need to continue to be revenue teams. And I’ll talk about that, and then I’ll come back to that point in a second. We’re seeing this like fundamental shift in the entire SaaS industry of what is important, and that shift is coming from a shift where in the old world we used to focus on the sales number as the most important number in the new world, net retention is the most important number that matters. And you only need to go and look at the companies with the highest net retention numbers. So Snowflake has a net retention number of somewhere between 178 and 181%. They get to 200x of their revenue as their public valuation. Companies with 100% of net retained revenue will on average, get about a 10x of valuation. So that difference between 100% and 180% changes you from being a 10x, company to 100x company in terms of in terms of your valuation. That’s a new shift like this wasn’t the case five or six years ago, and that fundamental shift has meant that companies have started to look more increasingly at how do I increase that that net retaining number, and who is responsible for doing that? And I think that this brings customer success into solving, like the biggest challenge that software companies have got, which is how do I go and increase that number. And by the very nature of doing that, what a customer success person is doing is a revenue job. So for me, I feel very strongly that we should not be afraid, as CS people have taken responsibility for revenue, we should not be afraid of taking responsibility for how to sell more to customers. And we should deal with those as, as adult business conversations with our customers that we build, build relationships with, and where, when, and if and how people start to do that, that there will be a shift in how people perceive customer success within those companies, because all of a sudden, they become the most important team for that company to be able to go and drive value to its owners and its shareholders.
Christian Klepp 36:44
Yeah, no, that’s absolutely right. And you You’re clearly speaking from experience, because you’ve gone through this before, right?
Firaas Rashid 36:52
Yeah, exactly. And when we went through this experience, it’s AppDynamics of growing the company, we also realized that there was a huge risk of what was going to happen to our net retention number because there was new competitors in the market. You know, we’ve gone from a product which you had to speak to a salesperson for, and now there were 10 products, which you could go and get online and use for free. And we realized that, that we had to get ahead of this problem, and within a year of rebuilding the team at AppDynamics to become data focused. And by that I mean figuring out what were the leading indicators for us again, drive increases in net return, or net retained revenue, we ended up increasing our net retained revenue by about 10 percentage points. And so yeah, I’ve been there, I realized the importance of it, we help companies every day now on on, on fixing that problem. And like I said it, the real experience we had in AppDynamics as well was that as a Customer Success leader and as a customer success team, because we were focused on one of the actions that we can take that go and impact revenue, people took us really seriously. And we were one of the most strategic teams in the in the company.
Christian Klepp 38:07
That’s quite an incredible shift. And, and obviously, you know, your function got more airtime, as we like to call it right. So. Fantastic. Firaas, thank you so much for your time and for coming on the show. So walk quick intro to yourself and how people out there can get in touch with you.
Firaas Rashid 38:24
Thanks a lot. Yeah, I’m for us. I’m the founder and CEO of Hook. And we’re a customer success platform that uses your product and meeting data to tell you which customers you should focus on. My background is in customer success. And I love talking about all things CS. So I would love for anyone who’s interested in getting advice, swapping ideas about customer success, add me on LinkedIn and send me a message. And we’re also going to be at Saastr Europa. So if you’re in Saastr in June, come and head down to our booth, have a have a chat with us. And finally, if you go to hook.co You’ll find out a bit more about us, you’ll see a link to our customer success metrics survey. So if you want to find out a bit more about how you get started with metrics, you can download that for free, no one will get in touch with you to gate-keep it and that survey is yours to try and figure out.
Christian Klepp 39:16
Fantastic, fantastic Firaas once again. Thanks so much for your time. Take care, stay safe and talk to you soon. Bye for now.
Firaas Rashid 39:24
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