B2B Revenue Acceleration
B2B Revenue Acceleration

Episode · 2 years ago

50: The Key to Recurring Revenue Growth w/ Dan Steinman

ABOUT THIS EPISODE

Do you hear that sound?

That’s the rumbling of a long-overlooked source of growth for recurring revenue businesses.

And it’s about to erupt. 

In this episode, we ask
Gainsight’s General Manager, EMEA Dan Steinman about his thoughts on the inevitable movement towards a more customer-centric approach to subscription-based business models. We chat customer success, increasing renewal rates, and more.

You're listening to Beto B revenue,acceleration, a podcast dedicated helping software executives stay on thecutting edge of sales and marketing in their industry. Let's get into the show, welcome to BTB revenue acceleration. Myname is Dancybrook and I'm here today with another Damn Dan Timon, who is thegeneral manager of a meor game site? Damn? How are you DOIYG, yeah m? Doingreally well, thanks for having me down good, no, no, no problem at Tois goodto have you on the show so down the topic for today's episode is customersuccess, a growth engine for recurring revenue businesses before we go intothat conversation down. Could you please give us a little bit ofbackground on yourself and your company, which of course is gamesight yeah sureI grew up in the technology world. It spent thirty plus years in SiliconValley, so I've seen lots of technology come and go. Almost all of my careerhas been on the postsales side of the business, so I've been managing ordealing with customers, almost all my life and then sometime in the middle ofthe year of twosand. That role became named customer success, so it's a roleI done for a long time and now the terminology around it has changed and afew other things have changed as well, which well probably talk about, butalong the way I came across gamesite when I was at Marcetto. I came acrossgameside as a technology to help recurring revenue. Business has managedtheir customers, and I was in that spot at Marquetto, where I I neededsomething like that. I was thinking I might have to build my own solution,but I actually, eight years ago now became gansites third customer becausewe had almost a thousand customers, and I had four customer success managersand there was just no way to be efficient or effective in managingthose customers without some kind of solution, technology likeinsit. So thenI joined gamesits seven years ago and have done a number of jobs since then I,as WEU, mentioned and now, and living in London, managing our Europeanoperation. Okay. Now that makes sense and appreciate your background, then,and just on that point around th the time you spent at Marcetto and nowhaving joined again sying seen it from the other perspective. What sort ofeffort or Legwok do you think a company like morcept or any other company thatare thinking about having to go down that process of biling Yo r solutionhimself to do what you are trying to achieve? How difficult would that be? I guesshow difficult would an organization find it to put in place WAT Games I or,of course doing on a every single day, yeah, it's pretty challenging. We getkind of asked this pretty frequently like. Couldn't I build this myself andmy very cheeky answer that question is yes, if you have three hundred andtwenty engineers who are working around the clock every single day and severalthousand man years of that for over the last seven years, you can definitelybuild it, because that's what we put into it now, the nonsiky answer is, youcould approximate, you know some reasonable percentage of gainsight bycustomizing your crm solution as an...

...example or using a bi tool and thenexpanding that, but there's always going to be something missing, andinvariably, when we show our product to someone who's tried to build it inwhatever solution. They're, always like Oh yeah, we wanted that, but that wasreally hard to do and that's something we haven't ever thought of and the restof it is exactly what I've been trying to do, and I think the bottom line isevery single new business that has a technology kind of platform goesthrough this, where you have to establish that there's somethingdifferent and there's enough difference that you can't build it in a existingtool. You actually have to have something that was built specificallyfor this purpose and I think we're almost there probably of the customersuccess world today. You know no one ever thinks about building their owncrm system. I think in the next few years will find the same thing. No onethinks about building their own customer success solution either yeahthat makes sense, and so as you're talking about your background there andas your role is sort of evolved as the terminology for what the role entailsas evolved. It sounds F, of course, over the years, Yoyou've become anexpert really in the world of customer success, and that's led to you, ofcourse, being a coauthor of the book. Cuson success. How innovtive companiesare reducing Chournin growing, regorring revenue, so you know the endsand outs of custom success in how companies a e using it to theiradvantage to accelerate their growth objectives. Could you please sort ofgive us a little insight into that book and what some of the key takeawaypoints, or that the readers can can learn from it? Yeah Howcy? To do that,you know we're obviously really proud of the book. We we see the book and theand the sales of the book as a barometer for what's happening in thecustomer success movement, and it really is a movement, it's kind of anindustry onto itself, and so when we see the book, in fact it's funny. Myeditor sent me an email a few weeks ago, an he said. This is the firstbusinessbook I've ever seen ever seeing that has sold more copies in the secondyear than it did in the first year and more copies in the third year than itdid in the second year, because most most businessbooks have a prettyaccelerated start and then they cut of tapers off. But what's happened in ourworld is that the industry of customer success has been growing so fast andit's a result of the movement into the subscription economy that the need forsome level of kind of working knowledge about what customer success is what itmeans is so high that the book continues to kind of accelerate insales, not so much as an indicator of the fact that it's like the best bookever written- It's probably not, but just that the industry is moving, andnot only is it is it moving. But there is a deed, because customer success isso new. There's a real need for a community aspect, a place to go. If youwill, that confirms that, I'm not alone doing this, I'm not stupid, I'm notfive years behind the rest of the world,...

...and the book is one solution to that.Another solution is the conference that we do every year, which is really anindustry conference around customer success and did it for the seven timein May and San Francisco and had almost six thousand people there, so thatcontinues to be a barometer as far as the whole customer Successbul Mut aswell. Back to the book I mean the I did most of the typing of the book.People asked me how long it took me to write it. My answer is thirty: fiveyears because it' A it's an amalgumation of kind of everything,I've learned during my entire technology career though reality isfrom the moment I sat down til I finishd. The final manuscript was aboutfour months, and the book was written specifically aimed at CEO's of nontechnology companies, and why did we do that? Well, our business for the mostpart today is technology companies, so they all kind of get it because mostsoftware companies are moving towards this subscription model and they kindof understand customer success and then the rest of technology kind of follows.The software companies lead so they're moving in that direction, and we wantto write a book that said Hey. This is bigger than just technology like everycompany in the world is probably going to move towards some kind of asubscription model, and when you do that, you need to think about YourBusiness and your customers in a very different way and to the point of thepodcast primary piece of that is that overtime, your customers become one ofyour most important growth engines. It's not just about selling newcustomers, it's about renewing. If you have modern subscription, redewing yourexisting customers and then selling more to the install Basan and thebigger subscription base. Companies are proving that that's a model that worksreally really well. That makes sense and in terms of Gane at you mentionedthat that the bok in particular, is focusing on cosor is aimed at cos ofnon technology companies. And then you spoke about the conference that you'vejust held for the seventh year. We had six thousand and ten days in terms ofthat conference and where the bulk of those attendees are coming from. Whoare you really appealing to agains? So what who is your customers? It workyeah, our customers today, I think about it. As concentric circles, themiddle concentric circle is SASS. Companies also has compaies bydefinition, have their customers on is subscription and if you're, a BTOB SASScompany you're developing products that are, I would say at least relativelycomplex, if not very, very complex, and what every btob software company hasfound in all of history is that complex software product does not installitself. It does not a drive adoption by itself. It's not typically viral, withvery very few exceptions and all the way from the very beginning. When saleshorse was building their business, they...

...discovered that cusomers weren'tadopting and then ultimately weren't redewing, because they weren't gettingany value out of the product and it had to be solved with people and then,alongside those people, comes technology, so sales force. I twothousand and four put together the very first customer success team becausethey had a major turn problem and they needed people whose job was by theirdefinition, adoption and retention right. So they were needing to reducethe amount of churn that they were having and the way to do that was toget more users to adopt their software. Therefore get more value, therefore bemuch more likely to renew their contracts and that's kind ofdirectionally. The way the entire business has gone, and I think, as asnonceck businessas moved to subscription they're going to find someof those same challenges where you can't just assume, no matter how goodyour product is, that the rest of the world is going to grab it and use itand use it intelligently and get macx SOMAF value out of it just ends up notworking that way. Yeah yeah that that's very relavant point now, one of thethings that you mentioned, Eriz in sales force intwo thousand and four develop the first customer success team and, of course alot of others have followed sut since witthat sad. I think there is preallyvery much O premed. At least what we see is that organization, particularlyin the early stageof of course, are very focused on driving acquisition ofofi of net new clients and Aly Times. Can that can be to the detriment oftheir existing current client, based where, whereby they're not necessarilyfocusing on not only renewing those customers, caus also expanding thosecustomers into into larger account for them e reason. Toaly showed thecustomer acquisition of net new clients. It costs up upwards to five times morethan customer attention, but but we still do see that therea lot oforganizations aren't necessarily putting the same amount of emphasis orfocus on keeping well, I guess investing properly, he intheir current client base. So, but why do you believe that happens and a d?And do I mean it, sounds s if you do see a shift happening, but you seen theshift happening at a staff, an Ho pace whereby the the people are reallyinvesting as much in their their customers success teams as they are inthe new business sales tm. If you like, yeah, it's a great question Dan by theway th, the research that we use from Pacific Crest says that to acquire adollar of annual recurring revenue, cost about a dollar and eighteen cents,some things I've seen have that cost his eyeas a dolar. Fifty then the thenext two numbers are really stark. In contrast, and that is, the cost ofexpanding in existing customer is fourteen cents for a dollar and thecost of renewing and existing custoers nine cents for a dollar of Arr. So it'salmost an order of magnitude, difference between the cost of gettingadditional money out of your stall maze...

...versus acquiring new customers, and Ithink in a recurring revenue business. One of the Montreas that you have tojust understand is that you can no longer acquire your way to success. Youcan get customers in the front door as fast as possible and if you weren't,but if you aren't plugging the bottom of the bucket, so to speak and gettingthose customers, getin values, so they're buying more and you just don'thave the chance in infect the sales horse. Again is the perfect example:the they had a terrible tern problem. They were really good at acquiring newcustomers. In fact, their number of new custoers was quadrupling in twothousand and three versus two thousand and two, but when almost every singleone of those customers was churning until they actually formulated acustomer success plan, so it's absolutely critical to the long termviability of recarding revenue, business and answer your question Ithink, generally speaking, most companies are not investing as quicklyas they probably should be in the in their install base, and I think themain reason for that is that they they have primarily built into their DNA.This idea that sales drives everything- and most of us who grew up in thetechnology industry at least more than fifteen years ago, always have that onthe top of our head. Like sales is the only thing that matters, it's it's thedriver of our business. It's our quarterly business comperative is tofind x number of new customers and increase our selling price to them, andit was all about acquisition, and so every company kind of naturally has intheir DNA the idea of sales, the celebration of sales, etcetera, andonly in the last I'd say for any more than about fifteen companies. Only inthe last ten years has the postsales part of the business become much moremeatingful as far as a revedue omperative. So it's not a surprise,because it's still very very new and a lot of the Changeis really hard,because the people who become successful in a world where sales waseverything have to struggle to make the change to thinking about it very verydifferently and almost every every co I' met almost is bent towards sales orproduct and not naturally bent towards customers, and part of this process isforcing them to bed towards customers just as much as they been towards sales,and I think it's happening it's happening because it's a hundredpercent necessary or your business won't survive. But it's still takinglong time and there's still a lot of education to be done, and I think,there's still a fair amount of frustration on the part of people likeme, or people who are in customer success who still see companies notdriving with the Luble evergency that they probably should be. This idea ofof the revenue gross that can come from from a good, solid, financially viablekind of in stall base. Yeah Yeah and I...

...think what there's there's couple ofpoints in that the first one is that I think teprobably companies struggle Oor find it tricky to at least measure customer success and whether that'sjust because of the sort of Kpis or or metrics that they do indeed useinternally to do so. The second pieces, despite the stats that you describedaround it being much more cost effective to expand or renew existingcustomers as it is to acquire new customers. I believe organizationstruggle to a tribute revenue bactic to investment in customer success, whetherthat's building a team where that's investing in technology, but but it isprobably a challenge to at least sell that internally. If Theyre, if they'resort of methodology or or I guess processes, Internaly have always beendriven towards sales or product its tricky to build that business caseindturn it from your perspective, being now within a technology company in aCustomr success world, how do you see that technologies can help companies tomeasure it number one and what are the real key, metrics or Kpis at you?Believe companies need to use to truly measure the success of their customersand, of course, then generate my revenue from that instal base yeah. Touse an old analogy. History tends to repeat itself, and I think what'shappening today is is a very, very close analogy to what happened over thelast fifteen years. The difference between what part of the customer lifecycl are we talking about for so for the last fifteen or twenty years,there's been literally billions and billions of dollars spent in creatingand selling and buying technology to help optimize the funnel right.Everything was about the funnel the final meeting, the top part of thesales process, so coun we get more neads into the top of the funnel. Canwe get better leads into the top of the funnel? Can we convert them at a higherrate, every step down the way and ultimately can that lead to morecustomers being acquired and every crm system and every marketing automationtool and every lead optimization product? This was the goal. Right andliterally, I mean just think about sales horse plus marqetto plusMicrosoft Dynamics plus eliqua plus, you know a few other companies I meanliterally billions and billions of dollars were spent and at the end of itthe real the reality of what that money was being spent on was getting a better understanding of ourprospects, not customers, but prospects. So what we think is happening now. It'sclearly happening by the way is that the same mentality in the sameprocesses are happening with regard to actual customers versus prospects, andthat is, if we understand more about ourcustomers, will we not be more successful in giving them value,delivering Ri to them Bein able to sell...

...them more, renewing them at higherrates right? So I think the process that happened on the prospect side,whereby we as companies became like really really intelligent about ourprospects, like think about today's world, if you ask the CMO Hey, what doyou know about your prospects? The answer is a lot. I know every timethey've been to our website. I know exactly how many minutes they spent onour pricing page. I know every meal email that we've sent to them, whetherit bounds, whether it got opened up whether they downloaded what was in it,how many behind the paywall things Hav they looked at on our website,downloaded white papers, etcet ETCA EC. So there's all of this informationabout prospects. That's hapther has helped us to be much smarter about howto deal with those prospects, and our argument, I think inarguable- isthere's way more information about customers than there is about prospects,and if we can tap into that other load of information and use it to ouradvantage, we can have tremendous success with customers that we haven'tbeen having because think about the amount of stuff that assass companyknows about their customers and versus their prospects. We know every singleclick they've ever made in our application. We know every endvoicethey've ever received and when they paint it, we know every support casethey've ever opened and how long it was open and what priority it was, andevery email we've ever sent them and whether they opened it Etcet etcet thepluster of information, and if you could pull that all together and minethroughlite an intelligent way, you can understand how healthy your customersare, and that's the heart of customer success is how healthy are my customersand, depending on how healthy they are. I want to intervene, and this is whatdrives ultimately drives bottom line revenue. I think, because if you'vedone cut, if you've done Hass Company as salesforse did without a customersuccess team, you know that teturn rates are really high and that yourupcell is impossible, because if you don't have a satisfied, customerthere's no way you're selling them more. So if we can pull that data togetherand say, we know how healthy our customers are, we know which ones arelikely to buy our next product when we have one to sell, we know which onesare in trouble and we should intervene with them to help get them back on theright track, so they are going to be good advocates for us by the way,advocacy is another compotit of this. We live in this connected world whereprospects are calling customers all the time without going through ourreference program. So we better make sure those customers are actually getting value from us, sothat those conversations with our prospects that are kind of blindreference checks, if you will are positive conversations because itactually drives new business sales as well, that just retention so at the endof all of that is this concept that customer success. Much like theprospecting part of our world has to become a process driven data drivenorganization in order to deliver the...

...results that we want, which is higherretention rates and more and more upsell. Absolutely there's a lot of interestingpoints there, and I guess what it all comes down to is is not only from gamesite, at least from your perspective, not just selling them the technology,but helping heping customers perspective or opinion on where theyshould be investing their money start to shift a little bit. I don't thinkit's going to be an easy to us to completely shift the mindset of awayfrom new business sells to customer success and, of course, as he drivingacquosition of new client is vital, but it it sounds as if there's a shifthappening, but it needs to h sort of probably accelerate in term of the paceof that shift. That's a that's well said there is a shift happening forsure, but I think there is a need to accelerate the pace of that, especiallyas more and more companies move into the subscription economy or beyond,absolutely absolutely so Dan. I think we're moving towards the end of ourtime today really appreciate your insights and for taking a time to speakwith with us. I know I've certainly started to think about our owncustomers and how we can get more knowledge from them and understand thembetter. If anyone wants to learn more about gamesite or continue thisconversation off line or know more about you and your book as well, what'sthe best way for them to get in touch with you and the company Yeah. Anybodywants to certainly can connect with me on Linkdon Im easy to find bans. Tinman.The book is online. You could buy that Amazon just search for pustomer success.It'll typically be the first thing that pops up and if you're interested ingamesite go to website. Obviously againsitecom request to be contacted orrequested demo, or what most people would do when they go to gainsidcom isactually go to our resourses page and just start absorbing some of thetotleadership right. If you haven't bought the book- or you want more, thatthe book there are literally hundreds of logs and webinars and sessions frompulse, that will give people a really good education in the world of customersuccess, and most of that is not bent towards trying to sell our product itsjust trying to educate people on what customer success is and why it'simportant and we believe, if we do that, if we educate the world on howimportant this is, then, obviously some of those companies are probably goingto beed some software. At some point, it will be there to help if that timecomes absolutely great. Well many things once again done it's Great Emminon the show today and Sartialy look forward to hearing more from fromdownsign itself in the future yeah. My pleasure down thanks for heavinby operadics, has redefined the meaning ofrevenue generation for technology companies worldwide, while thetraditional concepts of building and managing insize sales teams in househas existed for many years, companies are struggling with the lack of focus,agility and scale required in today's fast and complex world of enterprisetechnology sales see how operatics can help your company accelerate pipelineat Operatics, dot net you've been...

...listening to, b, to b revenueacceleration to ensure that you never miss an episode subscribe to the showin your favorite podcast player. Thank you so much for listening until nexttime.

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