Growth at All Costs Is Dead | Build a Growth Engine From Your Customers | Erin Stavi

Hello. Thank you for having me. In case you are hungry or bored, I only tell you how to retain your revenue and get your NRR to where he will invest in you. So if that's not important to you, then go on. But, but if it is, then maybe take a listen. Cool. So I'm going to talk about how to build a growth engine from your customer base. And just to give you a little bit of background on myself, I started my career pulling a lot of data. at Nielsen, a lot of data. Data is the foundation for everything that I've built since. So it's going to be a constant storyline we go throughout. Next up, I went to a big data company that was transitioning from professional services to a SaaS company. It was called Signals Analytics. Now, Signals Analytics serviced Fortune 500 companies in innovation ideas. And in case any of you have done customer success and you think about a renewal, Boy, is it hard to get a renewal when whatever you've sold them, the idea, isn't going to hit market and monetize for 3 to 5 years depending on their development cycle. So that was a joy. But what we did is we actually did build a SaaS function. When it started, our renewal rates were around 60%. And then we got it up to 90% consistently for GRR. Wonderkin was my next stop. And there we were at $60 million in ARR. The net retention was 60%. Terrible. And what we did is we automatically kind of shifted it from a really reactive motion to actually bringing in 30% of our new business from customer referral, $150 million in ARR, and 7 trailing quarters of 90%+ gross retention that was predicted. My favorite. Now, because I'm crazy, I'm an interim head of CS at a company called Fellow. And Fellow in the past 2 years has gotten to $25 million in ARR. We're currently sitting at 99% NRR. We'll get to 100%. And overall, we're making an automated and replicable program. All of these go across both SMB as well as enterprise. So I want to give you a little bit of a flavor of that range, because it does go into everything to do with our customer maturity model, which we'll go over in a moment. Now, sometimes I get asked in more vulnerable and small smaller formats, what is customer success? How do I define it? And my take for customer success is it's post-sale marketing. It's saying the right thing to the right person at the right time. And what I mean by that is it's being able to show the decision maker and that exec that you originally sold to, who you probably haven't spoken to for 6 months, that you delivered on the promise. and that that promise had the value they originally believed, which led them to fight to bring you into the company. At the same time, it's keeping lower tactical managers engaged and understanding how it will benefit them in their daily life to keep you around. Tough game to play. It includes both renewals and expansion, and then a, a huge mass of teams can contribute to it, anywhere from support, professional services, customer success, obviously, account management, sales even, all of it goes into that ultimate renewal and expansion. So what you've heard earlier today, happily for me, backs the reason why I created this maturity scale. And it is that, finally for me, growth at all costs is dead. Investors do care about how you're able to retain your customers, because at some point in your journey, you're going to realize that every customer that leaves means your sales team has to work that much harder to keep hitting your growth goals. And the moment we can really start stabilizing and then growing that existing customer base, that's where the explosive growth happens. Next up, we know that CAC is rising. Of course, we've already gone through that. And then finally, what I really liked about Simon's speech is that all of you have a finite amount of resources and you have to make the tough decisions on where those resources need to work. to get you the best ROI. So the reason for this maturity scale is to help guide you towards what's going to move the needle the most with the least amount of work. Cool. So it does go 0 to 10. And before we get into what 0 looks like and what 10 looks like, I do want to take a look at some key pillars that go into the overall maturity scale. So the key components of customer success maturity, there are 5. And the first, I'm going to stay on for a second. Because customer value and revenue impact is everything. What is that value that caused the behavior change? If you're selling into enterprise, you know how long sales cycles are. You know how hard it is to create change in larger organizations. And if you're selling into SMB, you know that sometimes they just don't have that much cash to be able to spend on a new vendor. Both of those things are difficult. And ultimately, if you can define that customer value and keep it consistent consistent across the entire cycle, meaning whatever the buyers and the sellers said, you're calling that back. You're reminding them of the promise of the value that they purchased, and you're able to substantiate it with numerical impact, is going to put you in a safe place. Now, quick story here. I've worked with a few organizations that give me— and forgive me, I'm pretty direct— they give me excuses of why that's impossible. Well, Erin, the people we work with day to day, they're just not numbers people. They don't think like that, and they think about emotions and value. Totally fair and probably likely true. The problem is, over the past few years, the spending decisions at the customer side have gone up, up, and up. And so even while they might love you as a vendor, there is going to be a CFO looking over your name next to your cost saying, what do we get out of this? And unless you've been proactive in helping that customer get to quantifiable value, you are going to lose. You're going— not all the time, but you're going to lose deals. You're going to lose expansions. You're going to lose renewals. So the more you can take the front seat and help people actually break down, okay, learning and development can feel really ambiguous, right? What does it mean if you can retain or get more out of your current staff? Ask an empty question, right? But it gets the wheels turning. Would you say that human capital is one of your highest expenses at the company? They might say probably, right? The answer is obviously yes. In that case, what would it mean if we could get 5% better outcome for the teams that we're enabling, right? Help them break it down. Because if you don't take the ownership of benchmarking and getting to that number, they won't. And that's all about the proactive management. So that's a little bit about customer value and revenue impact. Now, moving on, we have lifecycle management and experience. There's this dynamic that I call the onboarding cliff. And the onboarding cliff, if we think back to Pete's dating example, which was aged but sweet, was that customers get excited, right? They're talking to your salespeople. They talk about their problems. They have a great first date, maybe a great second date. They, they close the contract with you and they get passed over to an implementation team. That's when the executive buyer typically bows out, gives the job to someone else and say, here, get it live. That person is miserable because I have yet to meet someone who's excited to implement software. And if you are, my God, are you unique. Um, but lifecycle management and experience is about creating and giving value as quickly as possible so that as the fun kind of wanes, and now you have to talk about integrations and CSVs and APIs and all of that good stuff. How can you help the person on the other side learn a little bit? Hey, by the way, I'm seeing this in your database and that's actually different than everyone else that looks like you in our cohort. Did you know that? Here's what we could do. The more proactive and systematic you can get in breaking down the lifecycle and being laser-focused on delivering value, the better you're gonna move these folks through those different cycles. Like, awakening and onward. Predictive and efficient operations. So predictability is everything, right? I always say I hate feelings and I hate surprises, not because I actually don't like emotion— kind of— but because to run a business and to get those investors and keep those investors on your side, you need to show that true ownership and control. So how can we define leading and predictive indicators that are objective within the business to tell us, ooh, these folks are at risk. Hey, if my CSM has 150 accounts, which ones do they need to be working on, and which ones do they need to be bringing executives or leadership on, right? You're only gonna get there through data and leading indicators. Quick question, has anyone heard of the golden metric? Okay. So when we think about leading indicators, Some companies have cracked it, and they've found one thing that they need to measure which will ultimately predict their success. Slack, for example. The moment a team sent 2,000 messages to each other, they have a 93% rate of staying on as a Slack client. Facebook, older. The moment someone has 7, I think it's 10 friend requests in 7 days, they engage and stay on Facebook. It can take some companies, like the one I'm currently serving, a long time to figure out what that singular leading indicator is, but there are often several that when combined can give you a really good direction of who's working and who's meeting what we, we know to be successful, and who do we need to give a little more attention. Critically important. Efficient operations. That's where AI, automation, and scale come in. My CSMs currently have 150 accounts. They're very small, and it is impossible to be able to look at every single one and 38 different criteria of their product usage, right? So what are we doing that's efficient? We're creating AI-prompted automations to reach out to customers saying, hey, I'm noticing you haven't logged in in 45 days. Hey, I'm noticing that this specific set of type of leads isn't working properly. Let's talk about a custom domain. I want to make sure you're getting the most out of it. It simply hasn't happened historically, and it's only going to happen through scale. So that's that third pillar. Fourth, team structure and enablement. When I think about enablement, and when I teach about enablement, I don't just mean throwing up a training like this one and walking away. I mean coaching people, taking them through a training, having applied learning— normally I do mocks— giving feedback, and then making them do it again. And the reason this is so important is because at Wunderkind, we had 75 people on my team. We worked with Fortune 500 retailers, and I had— not that age matters— 22-year-olds in rooms with CMOs. I needed them to be able to understand business dynamics. What do executives care about? How do you tell a compelling story? And how do you show up as a strategic advisor? That only came from really, really, really serious enablement and checking that they could deliver and had the critical thinking and understanding behind it instead of simply regurgitating facts. Okay. Team structure as well. This is where things can get more cost-centric. So you have to think about who's doing what and how does it ultimately benefit the business in terms of revenue. And then finally, strategic organizational alignment. What I mean by this, Is, does your head of product know why customers are leaving? Do they know what matters most in terms of product requests? Do they know how much ARR it will drive if you deliver feature A versus feature B? Not just product. Does sales know why your customers leave? Have we learned something that maybe we should bring into qualification so that if our goal is 120% NRR, we're making sure that anyone who's making it through the door is truly going to emulate That journey—that's what that alignment looks like. Now, don't be alarmed. This took four and a half years to build, and sometimes it might take slower, sometimes it might take longer. That's why we have the overall maturity scale. I'm going to show you zero through ten, just zero and ten. The rest—I have the rest of it in the deck. We don't have time. So overall, no foundation. I've worked with a company that was three hundred million in ARR. Privately held, and they couldn't tell me what their retention rate is. In fact, they couldn't tell me which customers left. Now, I did have a little bit of a heart attack, but we got there in the end, and it all depended on data and structure. So even though they were at $300 million in ARR, they got a 0 on the maturity scale. They just didn't have it. Their team didn't have specialized compensation. Obviously, if they couldn't tell me as a whole what their renewal rate was, they certainly couldn't tell me by rep. Right. So we got there, but that was a 0. The biggest piece for me in 0 is when you really don't know what your customer's goals are. You know that they bought, but then everything kind of fizzles out, and then it turns into kind of a tactical battle with your point of contact who might just be focused on their job instead of that, that higher level value. So that's a, that's a 0. Now 10 is what we got to at Wunderkind. Our NRR was $110,000 to $125,000. At the time, which was 6 years ago now, we were told we had to be at $120,000 or $130,000 or we wouldn't get anything from investors. So that was, that was a little bit of a higher bar, but we had to get there, right? Second, new business coming from referrals. And I loved the last talk, right? It's great when a customer or a prospect comes into the room and they already know about you. What's even better is when one of their friends or fellow CMOs have talked to them, talked to them about what Wunderkind was great at, talked to them about what Wunderkind was not great at, and they're still deciding to have a conversation with you. The level of expectation setting and how quickly we were able to implement them and get them going was a totally different ballgame. And so for me, you know, you're at a 10 when you're able to retain and grow your customers, but those customers do give you that healthy flywheel to bring more and more folks back into your business. It's pretty magical. And then finally, CS has to be profitable. It can be an incredibly expensive department. Like I said, I had 75 people. That was expensive. And we didn't have automation. We didn't have a lot of things productized. Making it profitable is easier now, I would argue, because we have more tools for automation than we ever have before. Alrighty. So overall, the way I got from $65 million in ARR and 60% renewal rate to 150+ and trailing 90s? First thing, we figured out what value was. When I started, and I've been to thousands, literally thousands of executive business reviews, I started, I had a team of 4, I went to executive business reviews, and they went like this. Hi, Mr. Executive, we're here from Wunderkind, and we're just so happy about your performance today. We're really excited that we drove this much revenue, This is what we want to do next, and thanks so much. And I was sitting there like, what? Like, why don't we care what the customer says? Are we just assuming that what was important to the customer 6 months ago is important now? Marketing changes fast. The average lifespan of a CMO is 3 years in most companies. So there's constant shifts. That's where we stopped immediately. First, We changed it to, hey, Mr. CMO, just curious. Last time we talked, we were talking about return from your owned channels being most important. Is that still your primary priority? Yes or no? If no, find out what the priority is and then attach what we can do to it. That's where that enablement came in. Second thing we did, started looking at leading indicators. Leading indicators at Wunderkind, because it's marketing emails that helps them basically drive a ton of revenue through their email channel. Cheapest channel, best return, and if they could scale that, they would have an easier time managing Facebook and Google, which were exponentially rising in cost and dropping in ROI. So the second thing we did is we started looking at leading indicators. If a customer came in and we told them we could drive X amount of revenue, Would we be able to drive it in 3 months' time? And if so, we were able to keep them for literal years. We converted them. Literal years. So what are the 5 things my CSMs had to make sure were checked off in order to drive that revenue? Just that systematic, right? Everyone knew it. Everyone could recite it cold. That level of mobilization. And then finally, coming back to those customers, saying, hey, I'm really curious. Now that we've driven the amount of revenue we promised, how's your life different? What are your worries now? What are you able to do with your life in your role, and how does that affect the organization? Now sometimes people don't know those answers. That's when you social proof and storytell and say, oh, I was talking to a CMO the other day around your size, and now instead of thinking about Facebook, they're actually onto this different campaign model, blah, blah, blah. Okay. Those 3 things served as the foundation for scale. And when we didn't have those 3 things, and certainly if we didn't have those 3 things in any type of data or platform, we would not have gotten to where we were, and certainly not with the predictability. So I just wanted to give you what that looks like. Now, if you're like me, I'm pretty practical, and I like to know if I'm starting out on this thing, where am I going to get stuck? And what do I do? Right? So this next little bit, I'm going to talk to you about some things that might be happening in your business, and if they're not happening yet, no big deal. First one is maybe you have defined customer goals. Maybe you do know what you need to drive or enable or that end outcome, but no one's actually going back to those and saying, hey, can we figure out if we've done them? Hey, who's having that conversation with the executive? Is it the CSM? Is it the salesperson? Do we need like a product manager to go in? Right? If no one's owning them, then you're not gonna be able to consistently drive them. And then you're not gonna be able to do more cohort analysis analyses because they're not gonna be measured. Secondly, this is my favorite and it happens all the time. Your health scores, they exist, right? I'm working with a $150 million company right now. By the way, not all of these 20, Million companies, same thing. They have health scores from Totango, but no one trusts them. And actually, if you look at it, they would have like a 90% renewal rate based on their health score, but they have a 70% renewal rate. So they really shouldn't trust them. Just having something, you need to really stress test it and then finesse it if it's important in that moment. Third is if your CSM, account manager, whomever it is, is firefighting. Right? They're handling churn. For some reason, a lot of them handle billing and invoicing. Couldn't tell you why. If they're not actually forecasting and getting into that predictive and proactive motion, we're going to have surprises. And again, I hate surprises, and I hate feelings. 4th thing, you might have playbooks. I just saw a beautiful 30-slide playbook the other day sitting in Notion at a customer. And then I started talking to the CSM saying, hey, when you get a churn request, what do you do? Every single one of them had a different answer. None of them had to do with the playbook that was sitting in Notion. And so really that enablement, accountability, and then bringing it back to what the strategy is, is, is pretty critical. And then finally, you know, you're leaving money on the table, but you just don't know how to get to it. That's, that's the final one. So that's where we typically see things start to slow down. They're a little bit harder of, of problems to answer. And so that's where things play Now, why you're stuck, enjoy the eye chart. Overall, if let's say your CSMs are in constant reaction mode, there are 2 things that you need. One, oh, hi, Monty, thank you. One, yeah, I know, hi. One is that they either don't have enough automation to be able to be proactive, or secondly, it's really hard for them to figure out which of their customers are happy and healthy, And so they're spending and burning a lot of time doing that instead of actually looking at a dashboard, looking at the reds and yellows, and then taking action based off those scores. So I'm going to give you just that example. Obviously, you can read through this at your leisure. You'll get access to it. What you're going to get at the end of this is a little self-diagnosis. And Dahlia actually has been through the self-diagnosis with me. Super, super fun. That's something you could do at bedtime, whenever you feel like taking a little quiz. But Essentially, you're going to grade yourself on the spectrum. You're going to get access to every single number, what pillars have to be there, what good looks like, and then you're going to give yourself a number. Once you give yourself that number, refer back to this of where you might get stuck. So from 0 to 3, first of all, success outcomes. If that's the one thing you take away, value, success, and quantifiable. Okay. Reactive mode. We talked about that. If you are, let's say, in the defined, Middle of the road. You've got data. You can tell me what your renewals are. You can tell me what your churn is. Then next step is getting really clear about ownership. What I find in scale-ups is that everyone wants to help. Everyone wants to take part and make sure we're saving clients and growing clients. But sometimes what that results in is pointed fingers of saying, oh, well, my sales guy normally handles talking to the execs, or Oh, my CSM should totally be in charge of adoption. Right? Either of those may be true, but if you don't have them documented and clear, you're going to have some trouble as you continue to scale. And then finally, expansion and referral motions. Like Pete said, it's great to ask people for case studies. It's even greater when they're so happy with your service and experience that they're just telling people of their own volition. And in case you wondered, I actually invested in Fathom because of Pete. So if you all start using it, that would be of great benefit to me. Yes. And then finally, for the middle of the road, when your team is stretched thin, take a look at what you can offboard from that team specifically. CS can be a catch-all. I've functioned in countless organizations where it is a catch-all. The moment we can take tactical and reactive off is the moment that you're gonna be able to have richer client relationships and get closer to that higher NRR. And finally, Limited exec visibility. Working with an org right now where when I asked the CRO, hey, what does the renewal projections look like? What do you think? He gave me a number. I said, how'd it go last year? He said, oh yeah, I gave a similar number. The actuality was 2.5 times the amount of churn. The moment a CRO can't tell you that level of churn and certainly what's causing it, obviously we're not gonna have the right strategies. We're not gonna be able to solve the right problem. And so for me, that's where we start thinking about getting those executives directly involved, like we heard in the last chat. Are they going to the customer? Are they hearing directly what the problems or obstacles are, and how can they help across the rest of the org alleviate those obstacles so we don't keep hitting them? Overall, you will get, when you follow this, to a very clear and high NRR. You'll get to proactive client experience, and ideally, you'll get to a place where your CAC decreases because you have people coming in simply because they heard from word of mouth. I wanna thank you so much for your time today, and enjoy your homework. Thank you.