Founders and leaders fret over poor numbers. They forget the mission altogether and can’t see that the lackluster results reflect that amnesia, and not the other way around.
A few weeks ago, two of my coaching clients were struggling with the same problem. Sales were dwindling and customers were churning. That’s bad news for any business, but for venture-funded startups it can launch a downward cascade.
Investors get worried, the board starts calling meetings and the executive team starts trying to “fix” the problem.
Both clients had similar approaches. They would need to revise their “upsell and renewal” processes, revise their messaging, and improve their pitch.
They were scrambling and hoping to find a magic pill that would raise closing rates and get their customers to renew.
But you can’t cure dwindling sales and churn with tactical fixes. They’re only the symptoms.
Root Causes
If you are trying to become a faster swimmer, the instinct is to kick harder and stroke faster–pummeling the water. But in doing that you soon get fatigued, and even worse, your speed won’t budge. How can that be? Surely faster kicking and harder strokes are propulsive!
But as it happens, what matters in swimming is efficiency. That comes from how you slice through the water and push it behind you. What you need to fine-tune is the way your hand enters, the force of your forearm against the water, the rotation of your hips and the forward thrust from spiraling side to side.
In business, we are driven to produce measurable results: Sales, revenue, retention. But the same principles apply. You can’t work on those directly—and when you do it doesn’t work. You are focusing on the wrong thing. Yet, everything in business–and especially start-ups— compels that.
The root cause of fast swimming lies in the hydrodynamics of the body in water.
The root cause of revenue and retention lies in the customer’s experience.
No amount of wordsmithing the pitch or tinkering with the renewal process addresses that.
LARP-ing It
When our eye is on the balance sheet, it is not on the customers. We’re not authentically engaging—learning what they want and need and anticipating their next challenge. Instead, we are LARP-ing (live action role-playing) a relationship.
Sales conversations become formulaic and goal oriented. We treat customers like obstacles to overcome, not like the source of our very existence.
Addressing metrics over mission is insidious. It may creep in when stakeholders are exerting pressure. But it can also happen in the day to day worrying about slow growth, short runways or hard macroeconomic conditions.
The more leaders stress about numbers, the more they begin to channel desperation to their teams. Conversations with prospects and customers get infected with that panic.
It all overshadows relationship-building. The sales reps may feel like they are fully present with prospects, but they’re not. Instead, they are driving an agenda. And so, prospects feel like the only point of the conversation is to make them do something: Buy.
And although customer success teams are still performing the same tasks, they are doing it while teetering on a razor’s edge. They may try to help the customers, but their hearts and minds are firmly fixed on the renewal contract.
Maneuvering End-Runs
Ironically, the thing that would most increase renewals is being mission and customer driven.
According to one HBR research summary, a customer who has an exceptional experience with a company is 74% more likely to renew a subscription contract than one who hasn’t.
Notice the word “exceptional”. These customers did not simply get the service they paid for, or call tech support and get a problem solved. They had an extraordinary experience with their vendor.
The customer experience is directly correlated to revenue and retention. See the chart below:
Best Buy’s Bettering
In 2012 Best Buy was in trouble. Their reputation was suffering as was their stock price. Revenue had dropped from $45b in 2009 to just below $1b.
Hubert Joly took over as CEO, and everyone expected him to cut mercilessly.
But after taking the time to walk the stores, meet and listen to employees and gather their feedback, Joly surprised them. He shifted the entire strategy away from price competition with Amazon and focused instead on the customer experience.
As part of that Renew Blue plan Joly and his team assessed every part of the customer journey, adding flexibility for in-store and online orders, brand concessions, curbside pick-up, and reinforced the Geek Squad.
It was massively successful. Best Buy’s revenue turned around, increasing approximately 30% a year for several years.
Sprint’s Nextel Debacle
In The Human Brand, Fiske and Malone tell the story of Nextel’s acquisition by Sprint in 2005. Nextel was the top-rated business carrier, used by multiple industries, especially construction. But its technology platform was incompatible with Sprint’s.
After the acquisition, calls began to drop. Over the next year, Sprint/Nextel lost hundreds of thousands of customers. Those in contracts clogged call centers with complaints.
In 2007, Dan Hesse was hired to save Sprint. The company was losing billions of dollars per quarter.
He focused everyone’s attention on customers—even going so far as to appear in TV ads inviting customers to email or write him directly.
When he started, no one owned the customer’s experience. That was his first executive appointment. Then, bucking the board, he invested in enough call center reps to answer 80% of calls within 30 seconds.
He also introduced first-time call resolution as a target. Agents began to compete to fulfill that goal.
A manager of a Sprint store in Miami Beach explained that he and his team considered their customers “as family” and treated them that way. Every manager had internalized the knowledge that when customers experience real warmth, they tell their friends and family. Humans seek understanding and attention.
That same year, Forrester rated Sprint the “most improved company”. And by 2012, JD Power ranked them number one.
When Founders Flounder
Every founder’s mission is to help customers solve their problems. They may do it with software, AI, a tool, a piece of furniture, a new drug or combination of spices. But the mission is to delight the customer.
Contracts, revenue and profit are not the mission.
The customer mission disappears in the struggle to put numbers on the board.
While my founder clients were deeply committed to their customers, they were trouble-shooting symptoms instead of seeking the root cause.
Neither had committed to ongoing, intimate and relentless client partnership. Instead, they were trying to satisfy their customers. But satisfaction is the result of responding to complaints. It is not delight.
Delight is the result of anticipating and preemptively addressing customer needs and goals.
It’s a tricky thing to do—especially in SaaS businesses. Customers are reluctant to give up time to talk to a vendor. They see it as a service to the vendor, NOT an investment in their own success.
But what if it was? What kind of conversation could you and your team create that would turn customer calls into explorations that the clients would value?
Context Shift
It’s a matter of reframing. If every employee’s job is to know their customers—to anticipate their needs and solve problems the customer hasn’t yet identified—then client calls become something different.
They are no longer pro forma check-ins, but explorations of the client’s most current challenges and goals; brainstorming inquiries into their root causes and solutions.
Maybe solving that challenge requires a new feature, or an upgraded account, or a single data point emailed every week—or connecting them to a great candidate for a new role.
Random opportunities to serve customers can only arise inside a trusted relationship.
And only if everyone’s north star is the customer’s experience rather than the scorecard. [Click to tweet this thought].
And of course, that starts with the founder.
The Rebuttal
When I share this as a possibility with my clients they push back. It’s fear.
They’re afraid that their employees don’t have enough faith in the product.
And they’re afraid they’re right—the product isn’t “there” yet.
Or they worry that employees are burnt out and can’t take anymore..
But it’s precisely BECAUSE their product is developing, and their employees are burnt out that this matters.
When employees are unified in a mission to create extraordinary customer experiences, they are free to express themselves. There is less struggle and less burn out. Working to cause ecstatic experiences is joyful.
Their to-do lists don’t shrink. But the change in context alters their experience of those tasks.
They are now in service of an energizing possibility—not in service of a number.
Delighting customers happens within relationships. It isn’t about taking orders from customers. As the relationship builds, and there is more trust, employees have the latitude to dig deeply into customer needs.
That can change a feature request into them learning a new way of using the product, or simply revising configuration. But you can only ask the right questions when you’ve earned trust and transparency.
There are material gains beyond retention and sales. When you know your customers well enough to anticipate their needs, you also eliminate the cost of solving those would-be problems.
Finally, day-to-day tasks become obvious. We have an intuitive sense of how to build a relationship and deliver delight. We have no intrinsic knowledge of how to close more sales. But if we look after those
