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PODCAST 29: The Customer Success Organization Structure that Creates Alignment & Drives Growth w/ Nick Mehta
This week on the Sales Hacker podcast, we interview well-known SaaS executive & Gainsight CEO, Nick Mehta.
Nick is a two-time entrepreneur, previously having started a SaaS platform called Live Office. Through its acquisition by Symantec, he was Vice President at Veritas Software and Symantec Corporation.
Nick talks to us all about customer success, how to measure it, how to think about it, what phases are important and relevant to your company when you’re incorporating customer success, and he also gives his point of view on why aliens have not yet visited the planet earth.
If you missed episode 28, check it out here: PODCAST 28: How High Growth SaaS Companies Build and Lead Sales Teams w/ Chris Degnan
What You’ll Learn
- What young founders should know about customer success
- Why customer success & account management aren’t the same
- How to identify moments of truth on your customer success journey
- When you should be focusing on gross retention vs. net retention
- Guiding principles and values from a seasoned CEO
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Show Agenda and Timestamps
- Show Introduction [0:10]
- About Nick Mehta: An Introduction [2:00]
- What Young Founders Should Know about Customer Success [7:23]
- Are Account Management & Customer Success Synonymous? [10:30]
- The Moments of Truth [23:30]
- Gross Retention vs. Net Retention [25:55]
- Life Lessons from a CEO [32:20]
Sales Hacker Podcast—Sponsored by Aircall and Outreach
Sam Jacobs: We’ve got a great episode coming up for you this week. We’ve got Nick Mehta, the CEO of Gainsight. Nick is one of the true pioneers when it comes to customer success. Nick is going to talk to us all about customer success, how to measure it, how to think about it, what phases are important and relevant to your company when you’re incorporating customer success, and he’s also going to give his point of view on why aliens have not yet visited the planet earth.
But first, I want to thank our sponsors. We’ve got Aircall. Aircall is a phone system designed for the modern sales team. They seamlessly integrate into your CRM, eliminating data entry for your reps and providing you with greater visibility into your team’s performance through advanced reporting.
Our second sponsor is Outreach.io, the leading sales engagement platform. Outreach triples the productivity of sales teams and empowers them to drive predictable and measurable revenue growth.
And now, on with the interview.
About Nick Mehta: An Introduction
Sam Jacobs: Hi, everybody. It’s Sam Jacobs. Welcome to another episode of the Sales Hacker Podcast. We’re incredibly honored today to have the number three CEO in all of SaaS, according to a recent study. Nick Mehta, the Founder and CEO of Gainsight, the leading customer success platform, and in fact the company and the individual that popularized the entire concept of customer success. Nick is a two time entrepreneur, previously having started a SaaS platform called Live Office. Through its acquisition by Symantec, he was Vice-President at Veritas Software and Symantec Corporation, and he’s also a man of many and diverse interests, and we’re excited to have him on the show. So welcome, Nick.
Nick Mehta: Sam, thank you so much.
Sam Jacobs: So, give us a little bit of background on the company, the mission of the company, why you started the company, and we can go from there.
Nick Mehta: At Gainsight, we’re really passionate about this concept of customer success. We think customer success is the new way to think about sales because we think in new business models, like subscription, SaaS, Cloud, etc., customers have so much power and they can basically vote with their wallet. They can leave when they want to. They can decide not to spend more money. And so therefore, the old model of spending all your energy on customer acquisition and on building a product or service isn’t enough. So we build software to help automate and scale customer success and customer experience across the whole company.
What Young Founders Should Know About Customer Success
Sam Jacobs: What are some of the key tenants that help create the perfect, or an improved, customer success experience?
Nick Mehta: I think customer success is a lot like sales and a lot like product development, in that you’re always going to be working at it, and there’s never a point where you’re going to feel like you’re done. What are the tenants to being great at sales? That answer changes from when you’re a start up to a bigger company. Changes based on whether you sell a high tech solution, or something that can be bought over the web.
- Where are you in the evolution of your company?
- What type of product are you selling and how high touch is it?
That was the logical machine and the components of the machine that I wanted to focus on.
Are Account Management & Customer Success Synonymous?
Sam Jacobs: Are account management and customer success the same thing in your opinion? And to what extent do you always mandate or have a belief about revenue being included in sort of one of the KPIs that customer success is measured against?
Nick Mehta: Let me start with a premise we talk about at Gainsight, which is customer success is more than customer success management, and the context there is, there may be a job called customer success manager in your company, CSM, and it’s a great job and important.
But customer success is about the entire customer experience bringing everyone together to drive towards this positive outcome for the customer, and renewal and expansion for your business. And in some companies, they’re going to segment the roles, and they’re going to say, “Okay, to achieve customer success, we’re going to have a CSM that’s all about value and adoption, but doesn’t have a quota. They’re just about driving value and adoption. We’re going to have an account manager that drives renewal and expansion, the actual commercial side of it.”
That’s kind of a segmented role. Maybe a hunting rep closes the deal, and then these two people work together. A CSM for adoption value, and an account manager for renewal and expansion. That’s very common, especially in businesses where there’s a lot of commercial complexity after the sale, and you don’t want the CSM to have to deal with the renewal.
In other companies, you go from a model where the sales rep closes the deal, and the CSM manages both the value and adoption, and the commercial aspects of the relationship, right? So that model, the CSM is the person after the sale doing everything.
Going back to your question, is that CSM just an account manager? No, absolutely not. Because the traditional account management job was purely about the commercial, right? It was about making sure the commercial comes in.
CSM’s not the same thing as account manager, but customer success can certainly include account managers as part of its larger strategy.
The Moments of Truth
Sam Jacobs: One of the things that you wrote about which resonated with me, is this concept of moments of truth. Key inflection points along the journey?
Nick Mehta: Moment of truth is those really critical things that happen, whether it’s the first time you use a product, or your first kick off meeting, or your first quarterly business review, where the person is building an impression of who this vendor is and what this experience is going to be like. How do you make sure those moments are really, really great?
How are you coming in with those moments of truth to really make them outstanding? To make sure the customer doesn’t feel left behind?
This is about accelerating a new path to expansion fundamentally. It’s not just about minimizing churn. I really think one of the best ways to grow faster is to reduce the time for your customers to get to that initial value and to the point where they can expand.
So the customer journey isn’t just about happiness, it’s about growth.
Gross Retention vs. Net Retention
Sam Jacobs: There’s a debate between gross revenue retention and net revenue retention.
Nick Mehta: Gross retention is all about measuring up to 100% what dollars you retain from your existing customers, but without getting the benefit of the existing customers expanding more.
So the most you can get is 100%. In gross, it really forces you to focus on saving customers. It’s all about minimizing weak edge or loss. And that’s great in the early days of a company, because many companies are under optimized, and they have a lot of people that leave that really should be staying. I think for a while, focusing on gross is really important.
But at some point, you get to what I’d call an efficient level of gross retention. If you’re an enterprise business, if you’re in the 90s, you’re probably reasonably efficient in gross retention.
If you’re an SMB oriented business, or you’re in the 80s, you’re probably reasonably efficient. You can still move it a little bit, but at some point, there might be customers that you just can’t save and there’s not much more you can do. Then your energy might be better spent taking your good customers and making them great, and that’s where net retention comes in.
Because then you have the opportunity to make more than 100% by expanding your customers, and if you look at the publicly traded companies, the best publicly traded companies all have very high net retention. So we believe that in the early days of a CS team, gross is where you should focus, but as you grow and as you think about things, net retention is where you’ll end up adding more value over time.
Life Lessons From a CEO
Sam Jacobs: Do you have lessons or guiding principles that you share with colleagues? What advice would you give to the folks listening?
- I think that having a tail wind in your area of business is massive. Some companies don’t have a tail wind. They don’t sell onto something that’s growing or new, but more companies are becoming dependent on SaaS and therefore they need customer success. And it’s clearly been something where the timing couldn’t have been better for what we’re doing. And we’re really, really fortunate and lucky to be in that situation. That’s number one.
- What’s unique about Gainsight and customer success is it’s not only a business trend, it’s a new profession.
Customer success leaders, customer success managers, almost every day from CEOs and BCs, I get questioned about, “Can you help me find a customer success leader for my company, can you help me find a Chief Customer Officer?”
So, it’s a growing profession. LinkedIn actually lists it as a third most promising job in America in 2018. So I think the second thing we’ve been really fortunate about is first of all, this is a growing profession. Secondly, one of the things we did that I think has really helped, we focused our company not just on software, and we do build software and we think it’s great and it really does add value, but, our main mission is to enable companies to make this transition to customer success, and make the profession of customer success really successful.
- We’re a very value driven company. We talked about our company’s values as being what we call human first, as sort of kind of the umbrella over everything, trying to think about business. There’s that quote from The Godfather: “It’s not personal, it’s business.”
We flip that. We say, “It’s not business, it’s personal.”
Sam Jacobs: We were honored to have Nick Mehta on the show, CEO of Gainsight. It was a great conversation, and you can tell when people are really, really effective public speakers because everyone of his thoughts was sort of delivered in paragraph, perfectly articulated, coherent and insightful.
A couple things to take away, one of them is this emphasis on gross retention versus net retention. Nick is also talking about having customer success organization report directly to the CEO. Sometimes it includes revenue responsibility, sometimes it doesn’t. But you’re looking for the leading indicators and the lagging indicators.
Final thing is, the values shine through, and if you’re thinking about growing your company, one of the things Nick mentioned was, there’s a why. People don’t care what you do, they wanna know why you do it.
Don’t Miss Episode 30
Sam Jacobs: We also want to thank our sponsors. If you’re interested in learning more about the show itself, see upcoming guests, play more episodes from our lineup of sales leaders, go to www.saleshacker.com/podcast-subscribe. You can also find the Sales Hacking podcast on iTunes or Stitcher. If you enjoyed this episode, please share it with your peers on LinkedIn or Twitter.
I will see you next time.
This is a sponsored guest post from a Sales Hacker partner.