Why Customer Success Strategy for Early Stage SaaS Startups is Crucial
Multiple times this week, I’ve been asked whether early-stage SaaS startups need to be concerned about 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?
In this brief article, I’ll share the response I’ve been giving.
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:
- Finding product/market fit
- Finding a scalable and repeatable sales model
- Scaling the business
The need to prioritize Customer Success Strategy applies to SaaS startups in all three of these phases. In this article, I’ll focus on an early-stage startup as being a SaaS company 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 I talk about in this article will already be full of holes and ready to leak 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.
