Chapter 10: Product-led Customer Retention and Expansion

The customer lifecycle is a continuous process, and it’s challenging to rigidly define where the acquisition, adoption, retention, and expansion stages begin and end. Often, we associate customer retention with the renewal event — when a customer renews their subscription. But the process of retention, as well as adoption and expansion, starts when prospects and customers experience your product from initial signup. Prospects and customers make judgments based on, for example, how they experience your free trial and onboarding process.

Customer success departments are typically accountable for retention and expansion, but this is changing with the SaaS evolution. With a product-led approach, customer success accountability spans the entire customer lifecycle and is supported by cross-functional teams, including product, marketing, sales, and service.

The first step to product-led customer success is to know your product champion. A product champion is often the person who signs up for a trial and involves appropriate buying personas in the process. Ensure that you share the complete customer onboarding plan with this person because he or she will be instrumental in its implementation and organization-wide adoption.

Since the product champion usually has the highest level of engagement with your product, this person’s success with your product is essential. Because this champion is backing your product, he feels responsible for making sure it satisfies his organization’s needs, and he will be more likely to continue promoting use of your product if he can use it to do his job better or more effectively.

If the product champion is not a daily end user, your company should find the most active and engaged user that fits the role of the champion. We believe that product champions are very active users with a demonstrated level of expertise with your product. These people often transition to “advocates” later in their customer lifecycle.

Applying a product-led approach will help you predict which product champion (and their organizations) is more likely to renew, as well as who will likely churn based on declining engagement and usage.

10.1 How to Improve Customer Retention and Expansion

In carrying on with our theme of providing you with practical, tactical recommendations, here is what you can do to improve the results of your retention and expansion efforts.

1. Orchestrate customer onboarding

As mentioned earlier, customer (or organization) onboarding is slightly different from prospect onboarding. The primary goal of onboarding prospects is to educate them on your product and the value it provides. You should remove anything that interferes with realizing initial value.

Customer onboarding requires a close evaluation of how the whole account (i.e., organization) can create and experience value by using your product. At the same time, you may need a separate customer onboarding process that gets select individuals within an account up and running. The ultimate goal here would be to create customer advocates that help you promote your product within the broader organization. Here are a couple of questions to keep in mind to help you determine which customer onboarding process(es) you need to design:

  • How many people in your customer’s organization will benefit from using your product?
  • Is your product valuable for cross-functional teams?

Ensure that the appropriate people are invited

Create a list of users within each account that could benefit from having access to your product, and understand their personas. One way to create the list is by talking to the product champion in each account. More often than not, this person has a good understanding of who will be using your product in the organization, as well as the roles of each user. Another option is to come up with the list through your product experience — for instance, when you send automated e-mails to users, you can ask if anyone else within the recipient’s organization needs to get involved in the task they are working on. With a complete list of prospective users in your customer’s organization, you can understand what is needed to encourage adoption of your product, as well as how to expand usage.

Consider how your product can engage prospects as they are completing a specific product task with messages that ask if anyone on their team needs to approve the next step. Basically, you need to find a way to involve key people as part of a specific flow where their input might be required.

Here’s how it might look. Let’s use Expensify as an example. Its software helps with expense management. In this case, the main user is an accounts receivables professional. Perhaps as this person is working on a step in the expense management process, your product shows a message suggesting that the CFO needs to approve the task. If the CFO isn’t yet using your product, your product could automatically send an invite with the assigned action.

Tip: Make a target list of all people in your customer’s organization that should be using your product. If they aren’t using it now, create a plan to engage them. You may help a larger portion of the customer’s organization learn about, use, and come to depend on your product.

Review assigned admin and user roles

If your product is going to handle the sensitive process of direct communication with your prospects and customers, you need to clearly define roles and permissions. This will help prevent your teams from making errors and communication missteps. Here’s an example of what these roles and permissions might look like:

  1. Editor: Can create content and prepare engagements (e.g., e-mails, messages, etc.) for approval
  2. Reviewer: Can view content engagements for accuracy and relevance in regard to target audiences
  3. Approver: Can view content and engagements and approve use
  4. Executor: Can launch the engagement

Depending on the size of your organization, you could assign these permissions and roles to one or multiple people. It is typical to see these split into two primary roles of Content Editor/Reviewer and Approver/Executor.

Integrate with customer’s data systems and third-party resources

Most products can provide more value when they’re integrated with the customer’s data and workflow systems. When that is the case, it’s important to ensure that the customer implements all necessary integrations.

Tip: Create a list of critical integrations, and design a process to ensure customers complete this process.

Train every user in your customer’s organization

The more customers use your product, the more dependent and engaged they will become. Training can play a critical role in getting your customers to use your product regularly. With a product-led approach, cross-functional teams can monitor customer segments and their interactions, and use available data to educate customers with guides and messaging as they use the product. From an internal development and training perspective, your customer support team can be more effective by digging into the journey of a specific user to understand, for example, what might have gone wrong if the customer’s usage drops off.

  • Invite teammates and set up admin and access preferences
  • Integrate with customer’s systems and third-party data sources
  • Train everyone in your customer’s organization
  • Ask your customer to share their goals and objectives, so your team can track success
  • Set payment process

Note: While we are not covering the last two steps, they are critical parts of the onboarding process.

2. Closely monitor user behavior

In part 2, we described the idea of a Value Gap, which is a discrepancy between what a customer expects and what is actually received (or their perception of what they received). In most cases, a Value Gap is a result of a decline in customer engagement in general because this often prevents them from experiencing your product’s most important features.

In order to ensure that customers gain value while using your product, your company must pay attention to how frequently customers use your product and which features they turn to the most.

To get at this understanding, answer the following:

  • How often do your most profitable customers log in?
  • What features and product-usage frequencies correlate with renewals?
  • What early customer behavior signs can inform an upsell and cross-sell strategy?
  • What usage metrics help predict a user’s desire to upgrade their current subscription?

Understanding user behaviors enables your teams to anticipate issues that may cause customers to taper off (or increase) their usage of your product. It also empowers them to design behavior-based triggers that automatically activate in-product messages or e-mails that encourage engagement at the appropriate moments.

Here are examples of scenarios your teams can monitor and design behavior-based triggers around:

  • Decline in engagement
  • Increase in engagement
  • Reaching usage limit
  • Readiness to upgrade

Tip: Create competency around understanding your product’s valued features, engagement frequencies, and other customer behavior data that correlate with higher CLV via renewals, upsells, and cross-sells.

3. Focus on continuous product adoption and customer nurturing

Product adoption and customer nurturing are continuous processes. As product teams release new features and capabilities, your current customers should be learning about and adopting them right away.

A product-led approach allows your product teams to deliver valuable features to the market sooner, and that matters, because the longer you wait to ship, the less value is received by your customers. The product-led approach enables this, because your product team is continuously getting feedback from customers and prospects actually using the product — even immediately after new product updates and releases.

A critical aspect of this is ensuring timely engagement with prospects and customers about new product releases. For example, rather than wait three days to inform customers about a valuable new feature, it’s best to inform them right away within the product, so they will have context for better understanding on how to take advantage of it.

Summing up, product adoption and customer nurturing work best when you continually engage customers throughout the lifecycle and deliver relevant, contextual messages in a timely manner.

4. Anticipate renewal, upgrade, and cross-sell opportunities with behavior-based analytics

Behavior-based analytics provide companies with a better way to predict the right time to ask a customer for a renewal or upgrade.

Traditionally, the customer success team is responsible for managing retention and expansion of existing customers by periodically contacting each account. However, this approach is time-consuming and ineffective, and it doesn’t scale well. A better way is to monitor customers for specific product behaviors that correlate with higher renewal and upgrade rates. Once these behaviors occur, you call upon automated, trigger-based engagement, either within the product or outside of the product via an established digital channel such as e-mail.

For example, if your pricing tiers are based on certain usage, then reaching the upper threshold of usage can be an effective trigger to automate an in-product or e-mail message prompting the customer to upgrade.

Many companies are already using some product analytics to initiate contact at the right moment with a customer. However, it’s time-consuming to gather product analytics and then build campaigns to act on this data — and timing is critical. The cost of delay between the time when a company analyzes the data and then creates a response can be a major factor in how successful efforts are to grow customers.

A product-led strategy enables teams to shorten the time between customer action and appropriate response using built-in, automated, and scalable means. Plus, it allows them to improve how the response is delivered. In-product notifications are far more effective than e-mail in getting the customer’s attention, because the message is more contextual.

Retaining and growing customers in the SaaS industry is the most important factor for driving CLV. A product-led strategy not only enables companies to monitor customer behaviors that correlate with retaining and growing customers, but it also helps them minimize the time it takes to deliver the right message to the right customer segment at the right time.

5. Apply break-even analysis

Using breakeven analysis helps teams understand how quickly a customer becomes profitable — and the time in which CLV exceeds the CAC. A product-led approach enables companies to track the customer journey and correlate behavior data with shorter time to breakeven point.

Product-led GTM is a continuous process

With a product-led GTM, customer acquisition is a continuous process that provides valuable feedback on what to build next, how to design strategic messages, what price to charge, and how to drive customers through their lifecycles in more profitable and efficient ways.

In Figure 10.1, we summarize all the steps companies must address across all stages of the customer lifecycle (we covered this previously, in Chapter 4). As an organization calls upon a product-led strategy to learn about and optimize the customer acquisition process, it can use the feedback and findings to adjust other GTM elements. These can include target customer, messaging, product offering, and pricing. In other words, a product-led strategy is a practical way for organizations to receive feedback that they can use to further optimize all aspects of a scalable and repeatable GTM strategy.

10.2 Key Takeaways

  • Retention, adoption and expansion all start when customers experience your product from initial signup.
  • Identify your product champions and share the entire customer onboarding experience with them.
  • To improve customer retention and expansion with a product-led GTM strategy:
    - Orchestrate customer onboarding — educate customers on the product and its value
    - Invite the people who will most benefit from using your product
    - Review assigned and user roles
    - Integrate with the customer’s data system and third-party data sources
    - Train every user in the customer’s organization
  • Closely monitor user behavior for frequency and use of specific features.
  • Continually engage customers throughout the lifecycle and deliver relevant, contextual messages in a timely manner.
  • Anticipate renewal, upgrade, and cross-sell opportunities by monitoring customer behavior and connecting via digital channels such as e-mail.
  • Apply break-even analysis to discover how quickly a customer becomes profitable.