Tag Archives: Customer service

customer success

Customer Success: Product Creators Need To Know The Customer’s Voice

by in Build TV, Entrepreneurship, Marketing, Product Development, Product Management, Software Development, , , , , , , , , 0 Comments

Customer success has become a key differentiator when it comes to building software products and retaining customers. Baking customer success into the product and its experience is key. Unfortunately, it has become a real challenge for many companies because silos start to form as a company grows, causing employees in various departments to become distanced from the end customer. Hence they lose connection to the customer and think less about the customer’s success. In this post, I’ll share some strategies for breaking down silos and ensuring customer success.

I am the self-appointed family travel agent. Though if you ask my partner and the rest of my family members they’d agree that I am the best person for the job.

Why?

Because over the years I have become adept at making sure I don’t overlook the details when planning a vacation—you know where the devil hides! And who wants the devil to turn up on their vacation?!

Unless of course, it’s a blue devil 😉

I take the time to read through ALL the descriptions and fine print, talk to customer support agents to find out if there are any additional fees, and make sure that family members who have accessibility needs like my 10-month-old baby and 82-year-old grandma will be taken care of.

Once I’ve done all this planning, I know I have truly earned my vacation 😉

Despite all my effort, there have been times when things didn’t turn out as planned. Like the time I booked a home in India only to find out that the address was incorrect. The host mixed the street name with the city name. We would have had to drive 3 hours after 24+ hours of travel, but I called customer support and they resolved the issue for us quickly.

Elements of customer success

It was a positive customer support experience: responsive, seamless, and efficient. As a result, I continued using that service to book my travel, knowing that if something screwy happened I could count on them next time.

But there are other companies whose customer support agents place me on hold—for more than a few minutes. When the agent returns, they tell me that I’ve reached the wrong department. Then they transfer me to the “correct” department. Once the transfer is complete, I have to repeat what I told the first support person to the second support person, all the while hoping that they can help me resolve the issue. They can’t. When I look at how much time I’ve spent, and the exorbitant fee or unreconcilable charge, I am frustrated and vow to never do business with them again!

I know I’m not alone.

No one likes being at the receiving end of a bad customer support experience

It’s easy to place blame on customer support, but it’s not their fault because the problem originated somewhere else—when the product or service’s feature was being created.

Someone designed the experience in a way that wasn’t particularly customer friendly, and then it became a challenge to change the experience because of the silos that formed in the company between teams: sales, marketing, product, engineering, and customer support.

At the start of a company, teams are usually flat and highly collaborative, but over time, silos start to form, slowing things down, making it hard to innovate, and distancing teams from their customers.

How silos stop customer success

Is it even possible to slow or stop them from forming? And to enable everyone across teams a chance to interact with customers?

Well in today’s episode of Build we’re going to answer these questions and more. We’ll show how silos form of overtime, some best practices for keeping silos at bay, and what to do once they have formed to break them down.

To help us out I’ve invited Nichole Elizabeth DeMeré who is a B2B SaaS Consultant with 20+ years of experience in online marketing, and a champion for customer success.

As you tune into today’s episode you’ll learn the following from Nichole Elizabeth:

  • Why everyone on a team including software developers and engineers should have a chance to interact with customers, not just people who are on the customer support, sales, and marketing teams
  • How to empower teams to break down silos, and a framework for evaluating experiments and features that factor in constraints
  • When to automate and when to interact with customers
  • How silos form over time, how to avoid them, and what to do once they’ve formed
  • Why when building B2B products it’s important to focus on making your customers successful not happy
  • Why you need to rethink off-boarding customers and make it easy for them to leave

“When everyone on the team is aware of the voice of the customer, everyone is super excited about what is going on (with the product).

If you really want to stand out right now it isn’t pricing, it’s team alignment and customer experience.” — Nichole Elizabeth DeMeré

Prefer to listen to the episode?

Listen on iTunes here or listen on Stitcher here.

Check out the resources Nichole Elizabeth mentions on the show:

Cost of a Customer

by in Product Development, Software Development, Startups, , , , 0 Comments

Too often founders and CEOs fixate on CAC (customer acquisition cost) or LTV (lifetime value of a customer), but they fail to consider the cost of a customer.  Many people tie this into COGs (cost of goods sold), but I actually think it needs to be a separate line item.  To me COGs is just how much it takes to build the product, and often times for technology products and services that is amortized as an R&D investment.  Hence, the cost of maintaining the product or service needs to be factored in.  We need to shift our thinking because we we’re no longer making shrink-wrapped software!  We’re doing SaaS (software as a service).

Unfortunately, CAC and LTV being at the forefront is a phenomenon that especially plagues startups and companies that service a broad base of customers rather than a niche market.  However, the reality is that the cost of the customer can actually narrow margins significantly impacting profitability.  Hence, the key is to think about what the cost of a customer is, and how it can be reduced.

Cost of a Customer

Calculating the cost of a customer is tricky.  You have to begin by seeing what is driving up costs, here are three major factors that contribute to it:

  1. The type of customer you are attracting.
  2. Putting a price on servicing their needs.
  3. The quality of your product or service.

The Right Type of Customer

I actually never blame a customer for asking for too much or driving up costs.  The type of customer a company attracts is well within their control.  It is up to the company to determine who is and isn’t the right fit for the product.  In the event that there isn’t a fit the customer and company shouldn’t bother to do business, it will only cause friction and drive up costs.  This is a hard idea for most founders and CEOs to adopt because it causes them to assume that it will limit their company’s growth rate.

To attract the right customer, you of course have to do customer development; understanding their needs, expectations, and what value they are seeking from your product or service.  However, if you do customer development correctly, you can then craft a marketing message that is clear and attracts that particular type of customer in mass.

For example, BizeeBee offers a self-service CRM product to independent fitness professionals and businesses (e.g. yoga studios and personal trainers).  We don’t service businesses with multiple locations or franchises.  In making the product self-service, I knew that the type of fitness professionals we’d be able to service needed to be comfortable enough with technology to get up and running by themselves, or with as minimal customer support from our end.  However, despite their degree of tech savviness, because we are focused on making a self-service product, we knew that the product needs to be as simple to use as possible.  If a potential customer comes to us asking for a lot of help to get setup we tell them that we’re probably not going to be a good fit.  Yes it kills the sale, but it also kills the long term cost.

At BizeeBee, we still talk about having great customer service, but because our product being self-service, lets customers know that they can get setup on their own.  They don’t need to wait on us to get started.  This might seem pretty obvious to most, but for our customer segment it is important to be clear with the messaging because our competitors products’ are very setup intensive.  Our goal is to empower our customers and keep our support costs down.

By baking in customer needs into the design of our product, and conveying for whom and how our product addresses those needs in our messaging we have attracted the right type of customer.

Pricing Your Product

Pricing your product also helps a lot.  At BizeeBee, we don’t appeal to the overly price sensitive customer.  Instead we’ve concluded that the price point we offer attracts customers that value our product and our time.

If it were a free product or very low cost solution there would be an element of entitlement.  The other element to pricing that people often overlook is charging the users of their product directly.  Indirect approaches such as affiliate marketing and lead generation or having two users but one customer (e.g.  marketplaces or B2B2C), can skew costs.

I’ve actually experienced this at my last startup Mint, because it was a free product it attracted millions of users!  This is something people think they want… In reality it drove up customer entitlement (requesting more features), creating the need for support staff to handle customer requests, and put a burden on engineers to spend time building features that weren’t always revenue generating.  The amount of money we were making on lead generation per customer, i.e the LTV, was significantly less than the cost of a customer.

Quality of Product

Quality is the #1 driver of customer cost.  It manifests itself in the following manner:

  • int increases the number of customer support staff you need to address customer concerns
  • it increases customer churn and reduces closing rates for sales staff
  • it impedes the time engineers spend on creating new products because they are more focused on fixing bugs

Now some companies take the strategy of charging their customers for technical support.  I think paying for technical support only makes sense if a customer wants additional maintenance, i.e to add features to a product or receive help/training getting setup.   Barring those two, having a customer pay for a defective product will definitely leave them thinking twice about doing business with you going forward.

Finally, the cost of a customer will change as the number of customers go up.  This is because servicing more customers means you’ll have more operational expenses such as building or maintaining infrastructure to support the larger number of customers.  You can offset the increased costs by looking for services that will support the larger load.  But you’ll still have an interim period of growing pains that will need to be addressed.

There isn’t an exact formula to determine the cost of a customer, but the point is to be aware of what contributes to it, and factor it into various aspects of your business namely: product quality and the type of customer you’re attracting through your marketing and pricing.

Do you want help determining the cost of a customer for your product? Then check out our Lean Product Development Course Learn more!

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Preoccupations Over Pricing

by in My Startup, Product Development, Startups, , , , , 2 Comments

Using growth as an excuse for not putting a price on a product or a service is just denying the inevitable, a lack of a business model.  So you can wait, raise a bunch of money, and then figure out how to monetize.  Hopefully you’ll then make enough to have justified the investment.  But let’s assume that for the time being you don’t have a business that is fundable, how long are you going to give away your product before you find out if people really value it?

Too many founders tell me how many users they have, which is fine.  Its great to know that people are willing to help test out your product.  But then when I ask them how much those users would be willing to pay for their product I get blank stares. The founders have no idea, and worse yet they are afraid to ask their users for a price point.   Why?  Because they’re afraid of getting rejected.  Well I hate to break it to you but that’s kinda what entrepreneurship is about, getting rejected, and testing whether what you’ve built is actually a value to someone else.

I’m going to leave aside the case of advertising being the primary monetization scheme, it works for content driven sites, but if you’re building a product that you think delivers clear value you should be able to come up with a price point that is appealing to customers.  (Sidebar: if you do have a content site and drive up enough traffic checkout iSocket as one method to monetizing.)

So let’s get back to the notion of building products that deliver clear value, and asking people to pay for their usage.  While you  might not yet have unlocked what that clear value is, pricing a product is just like product development, it requires that you have a series of conversations with potential customers and iterate.  Over the past 3 years of running BizeeBee I’ve changed our pricing at least a handful of times.  I usually do it when we add new features, products, or when I think something isn’t clear to a customer.  I’ve also run a lot of pricing experiments like sending people who were on a free plan invoices just so they’d have to respond to me, and after I’ve calmed them down and reassured them, I can have a 5 minute conversation to pick their brain on why they aren’t converting to paying customers!  Don’t be afraid of pissing people off, especially if they’re not paying to use your service.

There are other founders who have been in business longer than I have that have also played around with pricing.  I really enjoyed this post by the one of MailChimp’s founders, Ben Chestnut, mostly because he talks about how MailChimp delayed adopting freemium until it made sense for them, and focused on profitability first.

Pricing Model

Ideally you’d work bottoms up starting with cost structure and then factoring in margins to figuring out pricing.  But for a new product or service you cannot go through that exercise just yet, because as you increase your customer base, the cost of servicing them will go up.  So you’ll just have to get used to having new costs structures periodically, and re-evaluating your pricing.

Before you even begin the conversation with a user you need to do the following:

  1. Figure out if your product is a point tool i.e. used once or occasionally.
  2. Figure out if your product is embedded into the everyday life of a customer.

The reason I bring up these two cases is because it will help you to decide whether you need to ask users to pay right away or over a longer time period.  If you’ve got a single use case product ask for money right away, because you won’t have any control of its usage after it leaves your business.  If you think your product will be used continually and its more of a service, then you can offer a subscription model.

I’m not going to get into the length of trial periods in this post.  All I’ll say is, you need to experiment with those too!  What I am for is to consistently convey the value proposition in marketing messages, and then make sure they first interaction they have with the product coincides with that marketing message.  Hard to do, but necessary to increase conversions from free to pay.

Figure out Substitutions and Competitors’ Pricing

  1. If your product is displacing an existing product or behavior, ask your users: What are they currently using as products, and the price points of those products?   
  2. Next tackle the pain associated with its usage.  How much time does it take to use the product?  (Including: setup time, training, tech support, and customer service calls.)
  3. Are there certain features of the existing products that they cannot live without? (If there are features, then you won’t be able to sell them on your product unless its a completely different value proposition, or your features are better than your competitors.)

I don’t believe you can compete on price, ever. You have to compete on the values you’re offering.  I say this because I’ve lost customers to my competitor and my competitor has lost customers to me.  In both instances it had nothing to do with price, and everything to do with the values we were offering.  Customers who came to us wanted simplicity.  Customer we lost wanted a comprehensive product, that we are still in the process of building, which is fine.  You can fool customers with lower pricing, but you’ll either go out of business if you’re underselling your value proposition or your customers will be unhappy with a low price/low quality product.

How to Set an Anchor

So if you identify that users find your product to be of value then you can put an anchor price.  Here are a few suggestions for how you can come up with an anchor price:

  • Figure out what the ROI of your product is, and how much that is worth to your users.  e.g. Are you delivering new customers to them, or helping them save an existing one?  What is that customer worth to them?  Are you saving them time?  What is their time worth to them?  Or are you offering them an experience (e.g. entertainment value)?
  • Figure out their price point sensitivity based on their persona.  Are they someone who cares about luxury and convenience?  Or are they really sticklers about a budget?

For these two you should be able to figure out a range of pricing.  One thing I will note about placing an anchor is that if you do ever want to change it you’ll have to deal with  magnitude.  For example, increasing a $30 product by $5 is feasible, but trying to increase it by $30 will be seen as doubling.  Same thing with a $120 product, increasing it by $25 to $50 is doable, but when you hit $200 once again its seen as doubling.

Finally, don’t wait too long to enforce pricing.  What you don’t want is for people to get used to your product, and then start to poke holes in it once you do introduce pricing.  Get them to tell you what value they see it in from day 1.  If there isn’t enough value, then either you’ll need to find a new base of customers or build more value into the product.

Just like I tell the yogis I do business with, you’re in business to exchange values, not to give them away.  So don’t be afraid to set a price, and change it periodically, after all it’s not set in stone!

Still wondering how to price your product, and want some hands-on help? Then check out our Lean Product Development Course Learn more!

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