Inviting all marketers who want to do something about their company’s marketing, our Bigbeat ‘Live Okyaku’ seminar was held offering immediately applicable insight for tomorrow.
This time we invited Hiroko Razavi, Representative Director of Success Lab Co., Ltd., and Hideki Ojima, Parallel Marketer/Evangelist and Representative of Still Day One LLC to the live “Customer Success x Marketing” discussion along with Bigbeat CEO Yutaka Hamaguchi. (Coverage/Writing by Madoka Nomoto)
Bigbeat carrying on with the marketing theme explores customer success after Hamaguchi was introduced to the Eiji Publication article 10 Principles Required for Customer Success in the Subscription Era.
‘Products and services are not things to be sold but things to be bought, used, and continually used.’ According to Hamaguchi, a thing of common sense for the electronics stores of old and shopping districts in the countryside.
Hamaguchi remembered the ‘Story of the Balance Scale Boy’ (Tenbin No Uta), a tale often used in training of sales companies about a boy born in a merchant home in Omi Province who walks around selling pot lids.
In the American business scene which (often) has a different set of principles from something like San-po Yoshi ***, I was surprised at the degree of expansion for ideas and techniques in customer success. Thus we planned this time's live Okyaku event.
*** Historical Japanese business term for a win-win-win situation. A win for the buyer, a win for the seller, a win for everyone else.
We began with a presentation titled ‘Community Marketing and Customer Success That Gave Growth to AWS Business’ by Mr. Ojima who was the very first employee of AWS, Japan’s largest cloud user community.
Today I would like to talk about customer success from the AWS era. I want to mention beforehand that there is no customer success division in AWS. But Amazon has code of conduct called ‘Customer Obsession’ where the number one priority is in gaining and maintaining the customer’s trust. The entire company works while keeping this frame in mind.
When I was at AWS, though I was told it would be a worldwide business of about 5 trillion yen by 2020, one of the success factors in Japan is attributed to the community. The Japanese community of AWS is called JAWS-UG, and there are 260 study sessions held throughout the country in a year. The reason the community is wonderful is because, like in the upper part of the following graph, a closed community where vendors close in on existing customers cannot continue to sustain growth, but an open community can diffuse information based on the customer’s output and further attract the people in the nearby vicinity.
Essentially, community marketing is a model that entails customers to self-cultivate which means it’s highly scalable.
One might say, “Isn’t this what you call a ‘review’? How does this relate to BtoB?” It definitely relates to BtoB. Product selection in BtoB is an emotional thing. If not, why is there entertainment involved? Customers making rational purchases draw comparisons but no commodity is the same, and they don’t necessarily have all the time or skill to. Customers are influenced towards what most say is good and choosing to listen to the voices of actual users usually can’t go wrong. The thing that groups together and circulates the customer voice is the community, and the power of this shows in BtoB.
In order to effectively conduct community marketing, there are three important points that I call the "Magic 3”.
· Context First: Draw people together with similar interests, not with pizza and beer.
· Offline First: Start the origin of information transmission offline, because the first step is important to understand for the next.
· Output First: In order to have the participants spread the word, avoid making closed parties.
· Leader: A person who is a fan of goods/services and has “Output" ability
· Follower: Those who can "Follow" the "Output" role model
· Wannabe: Interested but only wants “Input” and does not "Output" or "Follow"
The ratio of the sum of Leader and Follower and Wannabe should be 2:8. The iron rule is to start with 20% Leaders and Followers. The remaining 80% Wannabes will join thereafter.
· Autonomy: To make the community scalable, separate company resources with community growth.
· Regional development: To make offline gathering easier, develop regions outside of Tokyo as well.
· Stock split: Finely divide groups according to matter of concern.
As the community grows in this way, it will also have a positive impact on customer success. If you are thinking about raising LTV, I suggest making good use of customer success and the community associated with it.
Next is a presentation by Hiroko Razavi who is promoting customer success activities in Silicon Valley and Japan.
Customer success is about saying “It's important after you buy", but as business owners, I’m sure you’re more interested in the actual benefits, so I’d like to speak on economic rationality.
Remember these five keywords:
1) Renewal: Continue
2) Churn: Cancellation
3) Upsell / Cross Sell: Increase Buy
4) Gross Retention: Total of Renewal Churn
5) Net Retention: Sum of Renewal, Churn, Upsell/Cross-sell
Here’s a simulation graph by David Skok referred to as an entrepreneurial god in America.
On the left is "Bookings Versus Churn: Contract VS Cancellation", the blue dashed line is a new customer, starting from $10,000 and adding $2,000 a month. On the other hand, if 2.5% churn happens every month, it turns into the yellow line, and if 5% it will be the red line. If the churn can be kept to -2.5%, like the green line, it shows rapid growth. In other words, as time goes on, the bigger the business, the more devastating the churn is.
When converted to "Monthly Recurring Revenue (MRR): Monthly Ordinary Income", is the graph on the right. Even if the Churn rate is only at a 7.5% difference, in 5 years it shows quite a gap. Therefore, how to maintaining the green line is the function of customer success. Please understand that this is not simply conceptual or psychological but a must for business.
This is a graph of the results of the survey by SaaS Capital. It compares the average of the net retention ratio of companies with and without a customer success leader. With CS leader: 104, without CS leader: 98, the difference is 6%. Recall the graph on the right of the previous figure. Comparing the green line with the yellow line, even if the difference is 5%, there is such a difference, so the figure of 6% is not negligible by any means.
Now, in the United States, the term "customer success × marketing = customer marketing" is being advocated by Jason M. Lemkin, Founder & CEO of SaaStr. Customer marketing is "all of marketing activities to be done after purchase", and it states that marketing functions will change as company customer success progresses.
The role of customer marketing is "lead generation of existing customers" and "success support of existing customers". Customer marketing is the expertise of marketers, so it is said that you should entrust it with a marketer or collaborate. Also, Lemkin asserts, "To budget more for marketer skills, for not only before the buy but also the success of existing customers."
On customer success, we can’t cover it all in a short time, so if you would like to know more, please visit my website.
From here, we will introduce some of the discussions that took place at the venue.
Q. I think that the way of business is different between America and Japan. In Japan, since sales themselves are following up on customers, it can be said that they have the function of customer success in the first place.
No, I don’t think that’s the case (in many Japanese sales activities). You haven’t necessarily done any marketing by simply being around customers, have you? It’s a big mistake to think that marketing is route sales. Of course, there are areas that overlap, and it’s a matter of training accordingly in making the point of contact around success, but the current situation is not just about marketing but mere sales/business conduct in my opinion.
As an example, Slack's customer success reforms how its customers work. What is the customer trying to do by introducing Slack? Slack clearly helps accomplish the customer’s goals. It is not the goal for Slack to increase its affiliates. Route sales is just the icing. Customer success says, "Your challenge is this," "This is the success you wanted," and gains agreement, in some cases helping to persuade business owners. Customer growth is the real goal of customer success.
Q. I think that the idea of customer success has existed from a long time ago. Why is the attention of customer success increasing now?
There are two reasons. Firstly, there are fewer trades that can make it with just retail. While there are the businesses that make single earnings even by taking deceptive measures or using strong arming sales, there are increasing number of businesses with LTV in mind and thus utilize customer success for the long run. Especially in the IT world, because things are moving from the retail model of selling licenses to subscription models, you can see this has clearly been an emerging trend. Secondly, Japan is seeing a steady decline in population, so sales will equally fall if the same ways continue to be applied, so it’s more urgent than ever to invest in those who will chose you for a longer time instead of investing in new channels.
What triggered it all was the innovation of digital technology. Whether you think customer success is good or bad, you want to or don’t want to, it doesn’t matter because the reality is you won’t survive now without it. With digitalization, consumers are now king, and they can just switch to other brands / products in the blink of an eye. It’s inevitable that not retail models but models based on relationship and retention will continue to be favored for long run business with customers. One thing that shouldn’t be misunderstand is thinking this isn’t relevant to your business if you aren’t in a subscription model. Customer success is not only for subscription-based business, it is essential to not be left behind as digitalization progresses and the world continues to shift towards retention models.
Q. I understand the importance of customer success, but it’s hard persuading the company without seeing results with numbers, unlike advertisements. Do you have any advice on how to make suggestions to the company?
Since advertising and customer success are different categories, they can not simply be compared by numbers. In addition, even with an advertisement you can only see the metrics prior to it, so it is better to start with examining whether or not the current indicator actually contributes to profitability. I think that the possibility of really predicting an outcome is low. Also, there may be some discord if you make a suggestion personally, so it may be better to bring someone from the outside to tell it how it is. Find the person to persuade and a person who can do the persuading. This is also marketing. Marketing is about who, what, and how to approach. In other words, it is better not to do it when you don’t know who to persuade. Because plans will just be crushed. Should that happen, please change your career. (Laughs)
I will publish a book on customer success next year, so please refer to it. (Laughs)
This times “Okyaku” was on Customer Success. Finally, as Hiroko says, "It was a miniaturization of the discussion that will take place throughout Japan, and there was a lot to be learned," it became evident that the perceptions of customer success differ greatly depending on people’s experience and position. Everyone who participated seems to have gained realization of the reality that the time is now to rethink the traditional business style that placed its emphasis on acquiring new customers.
Hamaguchi says, "Customer success is a digital era win-win-win.”
Ojima also said that because of such a digital age, the experience of offline places where people actually gather, ie seminars and exhibitions etc. will be of importance.
"I want to build an advertising company where plenty of excitement, empathy, confidence can be made," expressed Hamaguchi with enthusiasm for the future.
※ "Okyaku" is local reference to the gathering place for drinking in Kochi, the hometown of Hamaguchi.
We manage the Facebook community "Okaku" as a "place" to discuss challenges and struggles of BtoB marketing, to create a better future. People who are struggling with marketing practice, business people who want to change management with marketing, please have a look.