On this episode, we talked to Chief Customer Evangelist at Gainsight, Dan Steinman. Dan has been deeply involved in the field of Customer Success before the phrase was coined by Salesforce, then adopted by virtually every major business in the world. He’s seen business models shift over the years, from the subscription model to the newer consumption model, and explains how CS has been vital to each of them.
And we did it live! Check out our guest’s beautiful faces below:
About Dan Steinman
Dan Steinman is the Chief Evangelist at Gainsight.
Prior to joining Gainsight as Chief Customer Officer, Dan was the first Vice President of Customer Success and Renewals at Marketo. Dan is a globally recognized thought leader in the Customer Success space, an active blogger and speaker on its behalf, and co-author of the seminal book on Customer Success.
Dan has also served on multiple boards (for-profit and nonprofit) and as an advisor to several companies while maintaining his current position at Gainsight as Chief Evangelist.
Connect with Dan Steinman
Follow Dan Steinman on LinkedIn
Get Dan’s book, Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue
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About Voices of CX Podcast
The Voices of CX Podcast is a podcast that covers all things business strategies, customer decision insight, empathetic leadership practices, and tips for sustainable profitability. With a little bit of geeking out on behavioral science, A.I. and other innovation sprinkled in here and there. The guests span multiple industries, but all of them have years of experience to bring to the table.
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Transcript
Mary Drumond: Welcome to Voices of CX Season Eight. As usual, bringing you the very best thought leaders, practitioners, and academics all in one place. Our goal is to make your job easier by providing you with the tools and inspiration that you need to lead through, one new idea at a time.
Hello and welcome back to Voices of CX Podcast. Today, I am joined by Dan Steinman. Hey Dan!
Dan Steinman: Hi Mary. Thanks for having me.
Mary Drumond: Dan is actually a customer success expert. And today I’m going to allow him to share his point of view on customer experience. Give it a little bit of an outside-in perspective, let’s say. Dan, before we get started, could you introduce yourself? Tell our listeners and viewers a little bit about your passion, your experience and your background. And how you, arrived let’s say, at this point in your career?
Dan Steinman’s background
Dan Steinman: Yeah, I’m happy to do that. Happy to be on with you too. Mary, I’m looking forward to this. Because I feel like I talk about customer success all the time, but to bring CX into the mix, there’s something for me to learn in this process as well. And probably I have some questions for you, so looking forward to this.
But yeah, so I’ve been around, if you can see or not see my hair, you can tell I’ve been around for quite a long time. Most of my career I’ve found, I spent in the post-sales world because I really liked working with customers. So I kind of gravitated in that direction and have stayed there pretty much for the last 20 years or so.
And what I found that I was really enjoying and really good at was actually taking care of customers, doing the things that make them referenceable, and things like that. And even before the subscription economy became a thing, there were roles that were about taking care of customers. So I had all sorts of interesting titles that weren’t customer success because customer success hadn’t been invented yet.
So at one company, I was an account manager, pretty common, at another company I did what we called customer relations. Another company, the title I think was appropriate, that was called customer advocate or customer advocacy. So I was doing all these roles. Then in the middle 2000s, it suddenly became customer success.
And I did a VP of customer success role for the first time. I think around 2006, then I was the first VP of customer success at Marketo for a couple of years.
Then coming up on 10 years ago, I joined Gainsight as Chief Customer Officer, which meant I ran all of the post-sales organization, including customer success.
And as some of the listeners probably know, Gainsight is the leading vendor in the customer success platform space. So we provide technology to companies to enable and empower the customer success teams to do their job better. So that’s been kind of my career. People ask me, how did I architect my career?
And my answer is, I didn’t choose my career. My career chose me. I just did things that I enjoyed and turns out if you enjoy something you tend to do it better. So I just did things I enjoyed and got rewarded for, and it took me down this path, and it’s been a lot of fun. And interestingly, the world of customer success was brand new when I got into it just by coincidence.
The growth of Customer Success
So I’ve been kind of watching over the growth and in some ways the birth and the growth of customer success for the last 10 or 12 years. And it’s been a really, quite a ride. Currently, I still work for Gainsight. The title I have now is chief evangelist, which is the second time in my Gainsight career that I’ve had that title.
And that title basically means if I can find more than two people who want to talk about customer success, I should go there and do that. That’s basically what it means. Hopefully, it’s more than two, but if it’s only two, it’s fine as well. And we just took it seriously as a company that we were the curator of kind of thought leadership and evangelism of customer success.
We wanted people to understand it. And we wanted people to know how important it was. Then as we figured it out, we wanted to share with people how we do it. And whether we’re finding some common ways of doing it that make it easier or better.
We’ve never claimed that we’re the only company that ever has done it right. But we experiment a lot and we try to share all of that. So, I think in some ways we’ve become the voice of the industry because we’ve really taken that seriously. So it’s been a lot of fun. There’s a lot of pressure because then everything you do is kind of for public consumption and people will criticize it in a moment if you do something that wasn’t the same as what you said you should do. So we live with that tension and we actually really love it.
Mary Drumond: Yeah, I was going to ask what it’s like to be the Chief Customer Officer and Head of Customer Success for a company that does customer success? I was like, double trouble.
Double trouble
Dan Steinman: Yeah, it has …there’s a, it’s a double-edged sword for sure. One edge is it’s the pinnacle of your career if you’re in customer success and your Gainsight’s Chief Customer Officer. I’m like, I kind of felt like beating my chest. Like I’ve made it. This is the perfect last chapter of my career. And then the next day I’m like, wait a minute.
What have I gotten myself into? Because the bar is really, really high. And I taught, I’ve interviewed hundreds, if not thousands of CSM candidates who want to work at Gainsight for obvious reasons. And I say, you know, it’s a great thing if you can do it well, but just remember the bar is really high, not just because we demand a lot of ourselves, but the industry looks at us and says, Hey, you guys wrote a blog about how to do onboarding and then guess what, we bought your products. You didn’t do onboarding the way you said you would. We’re not very happy about that.
And if there’s one thing that really rankles my CEO, it’s the accusation of hypocrisy because we haven’t lived up to the way we said we should do things.
What set off the Customer Success revolution?
Mary Drumond: Now, do you remember what it was that set off the customer success revolution? So you talked about how you had roles previously. This was before customer success was even a thing. So do you remember what it was with the trigger was that got customer success started?
Dan Steinman: I do. And part of the reason is because along the way, as Chief Evangelist, I helped to write the book on customer success.
The first book ever written on customer success. And chapter one is The Birth of Customer Success. And it happened at a little company some people have probably heard of called Salesforce. So here’s the story really quickly, Salesforce, built their CRM system. They were great at sales and marketing.
Most of the people at Salesforce came from Oracle, so they were naturally inclined to be great at sales and marketing. So they sold a ton. Their pipeline was really full. People were coming over to CRM. In four years, they started in 1999, in 2003, they did their IPO. But shortly after they did their IPO, there was a guy at Salesforce who realized there was a really significant churn problem, churn, meaning customers would buy, but then they wouldn’t renew their contract because part of the SaaS world was we put our customers on subscription.
And so when Salesforce realized they had a churn problem, they immediately attacked it by creating a new organization in 2003, and Mark Benioff himself anointed that organization with the term customer success. And it became the term that everybody started using. So it didn’t change the nature of the job that some of us were doing before that, but it did change the title.
And even the people I talked to who were on the first customer success team at sales. They didn’t really like that title because it sounded really fluffy. It didn’t sound like it was kind of hard-hitting and punchy and operational. It sounded like this fluffy rebranding of customer support. But the name stuck because that’s what Mr. Benioff wanted it to be.
The problem with the subscription model
And so that was literally the birth of customer success. Then what happened was every single SaaS company, the early SaaS companies like NetSuite, like Eloqua, like Marketo, like Workday. They all found out that when you put your customers on a subscription, you’re actually giving them the option to not be customers if they don’t want to be.
And a whole bunch of them took that option because we were building great software. But we weren’t helping the customer use it and getting value out of it. And in the past in the software world, we never had to worry about that because when we sold our software, we collected all of their money upfront.
We literally had, almost probably 80% of all the money they were ever going to pay us already in our bank account before we even started the onboarding process. So in that world, ask yourself this question, how much did we really care about whether they used our product? We wanted them to use it, of course, we wanted them to be referenceable, but it wasn’t an imperative.
And once we started SaaS and put customers on subscription, then the customer actually getting value became an imperative, cause that’s what led to renewal. And churn is the SaaS killer. All the VCs figured this out pretty early on, too. If you have a churn problem, you’re not going to survive as a company, as a subscription company.
So this led to the reinforcement of customer success. When the venture capital firms started saying, even at the Series A investment, you have to have a customer success team or a customer success leader. Because we’ve been burned too many times by companies that built a great product, but didn’t support it very well.
And customers churned, and it kills the company, right? It just, your whole revenue model goes upside down if you start having a churn problem.
Mary Drumond: Yeah. So you believe it might not even be your belief. It may just be like a common known fact that SaaS truly was the catalyst of customer success.
Dan Steinman: Yeah, it really was.
And SaaS has two meanings. SaaS is actually a delivery method. It means we deliver our product through the web, through a web browser. But when Salesforce, they didn’t really invent SaaS, but they certainly scaled it for the first time ever. And they chose to also put customers on subscription. So SaaS became a term that kind of meant both the way we deliver the software and the subscription pricing model.
Now over time, those two things have become different because a lot of enterprise software companies who still deliver their product, not over the web, but on tapes or disks or whatever, they also move to this subscription pricing model. So those two things have kind of become separate. Whereas in most people’s minds they’re synonymous and it was really the subscription pricing model that drove the need for customer success, because we had to get our customers. To renew those subscriptions, which meant we had to deliver value.
And because SaaS is a B2B thing much more than it is B2C, and B2B software tends to be in general, really complex, like think about all the B2B software you use. Most of it isn’t plug-and-play. It’s not organic. It’s not something that becomes viral, typically it’s not.
So it really requires some elbow grease from people now called customer success managers to work with the customer, to help them figure out how to use it, how to best use it, how to get the most value out of it. And that is the definition of customer success is figuring out how to drive the most value possible for your products to your customers.
Mary Drumond: Yeah. Last season, I had an amazing guest named Robbie Kellman Baxter on the show and she is truly a guru of the subscription model. And she and I talked at length about how so many organizations have migrated into the subscription model. And it seems to be the most widely accepted way to do business.
This week, I read that Taco Bell is coming out with a taco subscription model for five dollars, and that was amazing to me for a couple of reasons. I still haven’t figured out the math. They may eventually. But it’s so interesting to me that even in real life, we have these subscription models now. And, you know, we, we make fun of the subscription models for, you know, like, personal hygiene products, which seems almost ridiculous.
There’s a lot of medication that’s going into a subscription model. There’s companies like Alpha Medical that you have a subscription to medication. There are so many medications that you have to take recurringly. Right? Why not have them pop up at your doorstep? Amazon, essentially, any product that you buy, you can make a subscription to.
And they can automatically send you a new one until you ask to stop. So it seems like the whole world has seen the value in this, and it seems that it’s not only organizations that are benefiting from it. The customers are benefiting from it too. So all in all pretty good, pretty solid?
Dan Steinman: I think so. Yeah. And you know, we’ve been doing the subscriptions for a long time. We just didn’t call it that. If you think. Almost everyone in the world has an Amazon Prime subscription. You pay monthly, whether you use it or not. Right? Most people have heard of something called Netflix.
That’s a subscription. If you still pay for cable, TV, or Wifi, you’re paying a subscription. And all of these little, supercomputer devices that we carry in our pocket, all of those are on subscription as well. In fact, I remember distinctly the day I went into an Apple store. This was probably seven or eight years after the iPhone had been invented.
And I’d had one since the beginning. And I went in and I said, I’m ready to upgrade. You know, I’ve got like $200 in my pocket, I want to upgrade. And they said, no, you can’t pay $200 for your new phone. You have to pay it monthly. In other words, we’re putting you on a subscription. And Apple as a company, really interestingly has started to morph as much of their revenue as possible towards subscription.
Microsoft has done the same thing. You can no longer buy Office from Microsoft. You have to get it on a subscription. Right? And so what happened was, because Salesforce grew really fast, the model became obvious. It’s really expensive upfront to do subscription because we don’t collect all that money we used to upfront.
But over time, if you can build loyal customers, the repeatability of that business model becomes huge to the point where, I always use this as an analog, I use Salesforce because they’re a big company they’re worth about $250 billion today on the public market. If they announced today that they were firing all of their salespeople and all of their marketing people, and they were going to never add another new customer, they’re just going to live with what they have.
We’ll look at what they have. They have a set of customers on a subscription that are worth about $15 billion a year. And that business is growing at 30% a year. So it’s 15 billion today. It’s 20 billion next year. It’s 24 billion the year after that, et cetera, et cetera, et cetera. I claim that Salesforce, if they never added another new customer in all of their life, they are still one of the 50 best companies in the world.
And that’s what the subscription model does for you. It creates this set of loyal customers who continue to pay you. They continue to buy more from you when you come out with products that are valuable. So they renew their contracts. They buy more and it’s a repeatable business. It’s not a zero-cost business.
You still have to take care of them. But think about the profit margins at Salesforce. If they no longer had any sales or marketing people. It’s an incredible business model and the VC’s figured it out. So they started pushing all of their companies towards this subscription model. And so that’s the migration of software companies towards subscription.
Dan Steinman on the Consumption Model
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And now, as you mentioned, all these other companies are also starting to do subscription. My opinion is it’s not going to stop there. The next model is what we call the consumption model, which means you don’t pay a subscription. You only pay when you use it. Right? So I sell my product to you. You don’t pay me a penny until you start using it.
And then every time you use it, maybe it’s 5 cents every time you log in, or if you’re using Cloud storage, maybe it’s a penny every time you download a file or upload a file or something like that. And there’s a lot of movement in the industry towards that consumption model, which only raises the value and the urgency of customer success.
Because now you don’t make your money when you sell the product, you make it only when the customer uses it. So now your whole revenue model as a company is driven by customers using your product, not buying it, but actually using it. So it’s an interesting world and the consumption model won’t be the last one.
I can’t see past that one into the future, but it certainly won’t be the last business model change.
Mary Drumond: It does highlight the importance of customer success. The name itself says a lot because if the company isn’t able to succeed or if the client isn’t able to succeed, and trying to solve the problems that they sought out to accomplish in the first place, then they’re not going to keep using as they go. They’ll drop you and use someone else. So it does highlight that importance.
Customer Success is delivering on the sales promise
Dan Steinman: Yeah, that’s exactly right. And you just did one of the simple definitions of customer success, which is delivering on the sales promise. Right? We sell a product saying, it’ll do this for you. It’s going to be worth this much money.
It’s worth way more than what I’m going to charge you for it. And then customer success’s job is to go actually execute on the vision that sales presented, which actually changes the dynamics inside of a company where sales now has to be a little bit more careful about how they set expectations, because we actually have to live up to them now, otherwise customers won’t renew their product. So if sales says, Hey, we’re going to charge you a million, but you’re going to get 50 million value out of it. And the customer at renewal time says, I’m certainly not getting 50 million. I might be getting two. I’m disappointed that you guys oversold me.
That’s a real problem for the renewal process. So it creates this requirement for balance in your company that never existed before.
Mary Drumond: Would you say that that is the one key element that is the true differential between the legacy customer care that you partook in before customer success started and the role that you hold today?
Dan Steinman: Yeah, it’s a really interesting question. And we really early on at Gainsight, we fought this battle all the time. What is customer success? And one of the best ways to define it is to say what it’s not. Customer success is not sales, CSMs don’t carry a quota, et cetera, or they shouldn’t. Most of them don’t. In particular, the tricky one was customer success is not customer support.
It’s not customer care. Customer support is a reactive organization that is essentially a cost center, right? It’s not a revenue-driving organization. They’re there to take calls from customers who need urgent help with something or have found bugs or your product just plain doesn’t work. Customer success in many ways is the opposite of that.
It’s designed to be a proactive organization that’s reaching out to customers on a proactive basis, not just waiting for the customer to call us. And it’s a revenue-driving organization, not a cost center. Because renewal and upsell becomes a huge part of a company’s revenue plan. And so if customer success is driving those transactions, the sales transactions, then they become a revenue-driving organization.
So one of the clearest ways to define customer success early on was to define what it’s not. And one of the things that we had to really clearly define is how it’s different from customer support, or customer care, cause it sounds similar. And as human beings, we always pattern match. In fact, most people just assumed customer success was a rebranding of customer support.
When in fact it’s a whole new organization and in many ways, kind of the opposite of customer support.
Customer Success vs. Customer Experience
Mary Drumond: Okay. And how does it stack up against a customer experience?
Dan Steinman: Great question.
Now we get to the crux of our conversation. Which is really fascinating because this was another thing we struggled with pretty early on at Gainsight was, how are we defining customer success versus customer experience? It wasn’t intended to be a head-to-head battle, but in some cases it kind of became that.
But we just found a lot of companies asking, Hey, we have a customer experience team. Our marketing team has a CX person or two on their team. Is customer success the same as that, is it different? Do they work together? Should they be part of the same organization, all of those questions. And so somewhere along the way we developed this equation that we use to try to define the difference between customer success and customer experience.
The equation is simple. It’s this: it’s CS equal CO plus CX. The terms are customer success equals the combination of client outcomes and client experience, and what those two things mean, outcomes means is the customer getting, solving the business problem for which they bought your product? We call that client outcomes.
And then the other part of that equation is customer experience. In other words, does the customer like working with you? Are they having a good experience working with you? And so it’s CS equals CO plus CX. I’ve had customers tell me they think that should be a multiplication symbol instead of an addition symbol, because if either outcomes or CX are zero, the whole equation goes to zero.
And I think that’s true. If you’re delivering great outcomes, but an awful experience, your customer is still likely to churn. And if you’re not delivering good outcomes, no matter how good the experience is, customer’s not going to stick with you because they won’t keep paying you money just because they like you, they’re only going to pay you money if they get value, and the experience of working with you is good.
So CS and CX have kind of often sat in different organizations with very different kind of philosophies. Early on CX was mostly about surveys and anecdotal information, where then the CX people would go dive in and say, our invoicing process is messed up.
We’ve got to fix that, cause our customer’s constantly frustrated that we don’t get our invoices, right, as a simple example. So that was one of the ways that CX kind of approached the world at the same time. Here’s customer success, measuring churn, measuring retention, measuring upsell, measuring customer health.
So customer success became very operational. And very kind of hardcore metrics-driven while CX was to use a pejorative that I don’t really mean to be pejorative, kind of a little bit more fluffy, anecdotal survey-based, et cetera. But what we found over time was you have to focus on both of them. So for a while we said, customer success is the only thing you need.
You don’t need CX. And then lo and behold, one day we said, you know what? We need a CX person at Gainsight. And now we have an SVP of customer experience who reports to our Chief Customer Officer, because we realize there’s an operational aspect to the business, but there’s also this kind of intuitive, less operational thing called CX, which is really, really important.
And in the long run, if you don’t create a great experience for your customers, Outside of how they use your product, you just won’t succeed. So I think in many cases, I don’t think it matters a lot organizationally where the two roles fit. But I think in many cases what’s happened is the CEO loves to have one person responsible for the entire customer journey.
That’s the position. We often call Chief Customer Officer. And if a CEO gives that C C-level type. To somebody, he or she is more than likely going to put CX under that organization. And it doesn’t mean it’s less important. Cause guess what? Customer success is also under the CCO because the CCO will own support and training and professional services and onboarding and customer success and customer experience.
So it puts customer success and customer experience under the Chief Customer Officer who just becomes the one throat to choke for the CEO, if everything isn’t going well with customers. And I think the evolution of the organizations to that point, um, has been, uh, a pretty positive thing because I do think customer success and customer experience working together as peers is probably the best way for the, for those organizations to operate.
Mary Drumond: Now, in, in my mind, I have this preconceived idea that customer success only exists within B2B organizations is that,
Dan Steinman: That is mostly true, Mary, and is because of what I said earlier customer, and there’s two parts to it. Customer success is still primarily delivered by people, right? We have people called Customer Success Managers.
So if you were a Gainsight customer, and you didn’t log in to our product for, let’s say two weeks, our Customer Success Manager is going to call you and say, What’s wrong? Did you forget how to log in? Did you lose your password? Are you no longer interested? Cause we need to get you back into our system or you’re not going to renew, right?Because you’re not using it. So it’s a people-driven business.
Now there’s a whole digital aspect to it that’s becoming more and more important because it lowers costs. The more you can do digitally, the lower your costs are. But in general, it’s still a people-driven organization, which means the customer has to be paying us quite a bit of money to deserve a person looking out for them, right?
That’s number one. Number two, as I said, B2B software tends to be pretty complex. Like if you’re using Workday, you don’t just log in to Workday and go, oh, I could do this. This is simple, right? It’s not, neither is Gainsight. Neither is Salesforce. So the complexity of B2B and the value of the problem that we’re solving allows us to charge quite a bit more.
And then that means we can apply people to it, which is the Customer Success team. Now, B2C doesn’t do customer success in the same way, but they still have started to do customer success. Here’s an example. You buy an airplane ticket on United and you’re flying out. Let’s say you’re flying out this afternoon at four o’clock.
Right about now is when you would get a text from United saying your flight, the gate has changed and your flight’s delayed by 25 minutes. That’s customer success, because what you’re doing is you’re setting the right expectations. You’re being proactive. You’re saying we want your experience to be the best experience possible.
Do not come to the airport at the time you were going to, come an hour later, cause we’ve delayed your flight by an hour and go straight to this gate, not the gate that your boarding pass says on it or whatever, right? That’s customer success. Apple kind of does customer success with people through what they call the Genius Bar.
Cause what’s the job of the people at the Genius Bar? It’s to help you get more value out of your Apple product, sometimes by making it work, sometimes by helping you understand how to do a sync, sometimes by helping you find Airdrop on your Mac or whatever it might be. Customer success is being done by B2C companies, but they’re not doing it with people the way B2B does, but they’re starting to adopt the philosophy of customer success, which is really cool.
In many ways, CRM went through this too, where CRM was a pure B2B product. Now it’s being used by all sorts of B2C companies as well. And even B2C is starting to use some aspects of CRM. So what happens, I find, is in B2B, technology becomes something that kind of radiates out from that middle concentric circle and starts to impact the entire world.
Because you think about the world is now driven by technology, whether we want it to be or not, it just is. But customer success and the way we think about it is still primarily a B2B function and a B2B operation. Although some of the philosophy of customer success is being adopted by B2C companies as well.
And just one quick add to that. If you think about all of the main street businesses, they’re all doing customer success because they need repeat business. They don’t have a subscription model where they’re not renewing contracts, but your local Target or Walmart, or Nordstrom needs you to shop more than one time there. But if you go into Nordstrom and buy something once and never go back, they’ve failed miserably and they’ve hurt their overall revenue model. They need you to come back.
It’s why they do loyalty programs, whether it’s their credit card or free drinks at Starbucks, the more times you visit right? All these things that, frequent flyers for all the airlines, these are kind of customer success things that try to generate loyalty and get you to come back.
And like a personal shopper at Nordstrom would be a good example of a kind of more people-oriented customer success thing that’s being done by a retail company. So more and more all along the whole world, retail has been about getting repeat business and more and more companies are kind of developing some of those kinds of practices that really mimic customer success.
Mary Drumond: Yeah. Especially because if you were to calculate the cost of the acquisition of that client, nowadays is enormous. I mean, marketing and advertising budgets for these massive B2B companies is through the roof. And if they can’t secure your business, over a certain amount of time or so many repeat businesses, they’re not going to make it back, or they’re not going to have any profit on you walking into their store once.
That profit is going to come over you going again and again, and shopping for them again and again, over the course of your lifetime. So then, you know, you’re adding all of these different equations in where it all of a sudden becomes absolutely essential to have repeat customers and customer loyalty is no longer something optional.
And in the market that we’re in now, where competition is so fierce and you’re constantly fighting for that customer loyalty and trying to get customers to come back to you as opposed to going… you know, it’s funny because when I think about it that way, there are certain businesses I imagined struggle so much with that because you know, you talk about Nordstrom. Nordstrom sells a variety of products, right.
But if you consider the, a business that sells shoes. There’s not that many people that want to have all their shoes from the same company. You want to have a variety, you know, so how to make sure that you get repeat customers for something that’s a one-time sale? It’s kind of tricky. I’m going off on a tangent here.
Dan Steinman: Well, a couple of comments, one, you kind of just brought me back to Mary, and that is back to the idea of kind of CX and customer success coming together. CX I think much more than customer success kind of was birthed in the B2C world because, there were a number of companies, almost all retail companies that had a title called Chief Customer Officer a long time ago.
And the Chief Customer Officer basically ran customer experience. They were responsible for creating that customer experience. The merchandise in the aisles was set up to make it easier for the customer to find what they’re looking for. And that personal shopper idea at Nordstrom was about having people walk away, going, I love shopping at Nordstrom. I have such a great experience when I go there.
So if you’re a customer success person, you say that’s Nordstrom adopting customer success principles. And if you’re a customer experience person, And you’re right about this you’re like, no, no Nordstrom has been doing customer experience forever.
The tech world’s just realizing how important customer experience is. So there’s this kind of coming together of those two worlds because technology is the link between B2C companies and B2B companies. So I think it’s really, really fascinating how those worlds have come together. And back to one other thing, you said, Mary, which really nails it.
In the world we live in today the scarce commodity in our world, B2B, is the customer, right? There’s so much competition for every single customer and the cost of acquisition keeps going up and up and up. And that drives the need to hold onto those customers almost at any cost. And that’s why customer success was birthed because of the subscription economy.
But has become more important, as has CX because in our equation, you need both of those. It’s so much more important than it ever was before, because you can’t afford to lose a customer. You lose a $50,000 customer, it might cost you $200,000 to replace them because the customer acquisition costs are so high, the competition is so fierce.
And a lot of that is driven by SaaS because it’s so much easier to build a software company than it ever was before, because you don’t have to have all the same tools to deliver that product on site, on location for the customer. All you have to do is have a web browser, right? And a little bit of JavaScript and off you go.
So all of these things have come together to create a world where your world of CX and my world of customer success have become, not just critical, but arguably the most important part of the subscription business.
Because over time, like if you’re Salesforce, let’s say your new business number at Salesforce this year is a billion dollars and you’d love to move that by 30% and have it be 1.3 billion. It has almost no effect on the bottom line revenue at Salesforce because 90%, almost 90% of their business is coming through renewals and upsell.
So therefore, if you’re doing a forecast at Salesforce, you spend all of your time with the customer success and the renewals team, because that’s 80% of your revenue next year. And you spend almost none of your time with the sales team, because that’s only 10 to 12, maybe 15% of your revenue for next year and 20 years ago, the opposite of that was true. The CFO doing a forecast for next year’s revenue spent no time with the post-sales team. The only person they talked to was the VP of Sales.
So it’s caused this internal power shift inside of our companies as well. And then if you think about what the consumption model means to that power shift, if you’re running a pure consumption model, ask this question: do I even need a sales team?
Or what does it mean to do a sales transaction when no money changes hands? Right? So this balance of power inside of our companies has shifted in a dramatic way, where now CX and customer success are the revenue drivers for the company. It’s just a fascinating world.
Mary Drumond: Yeah. That’s amazing. This has been such an amazing opportunity because you’ve got so much knowledge and so much experience in this field.
So I wanted to thank you because I’ve learned so much, there’s so much that I didn’t know that has really, it’s almost like a light bulb went off here for that. So I wanted to thank Russell Harper, who’s our new Chief Revenue Officer here at Worthix who made this introduction to you.
And thank you so much for coming on.
Dan Steinman: It’s so much fun for me to talk about this, Mary, and thank you for saying I have a lot of experience and knowledge, what I really have the most of his scars, because when you’re blazing a trail, you learn most of these things by starting yourself on fire or having trees fall on you or whatever the analogy is for blazing a new trail through the forest. So
Mary Drumond: I like that one. I have scars. I have experience as far as, yeah.
Dan Steinman: I always tell people my biggest value at this point in my career is just sharing the scars because I can help you avoid some of them. So hopefully with your audience, we help them avoid some of those scars and learn something about kind of customer experience and customer success and how those worlds are colliding.
Mary Drumond: Absolutely. Well, thank you so much. Once again, Dan, it’s my absolute pleasure to host this podcast episode with you.
Dan Steinman: It was a real pleasure. Thank you, Russell, for the introduction.
Mary Drumond: And to our listeners and viewers. We’ll see you next week. Thank you so much for joining us once again.
That’s our show. Thanks for joining us. We hope we’ve brought you one step closer to leading through empathy. It’s our way of making the world a better place, one business at a time. Don’t forget to subscribe and hit the bell if you want to know, as soon as we publish a new episode. Voices of CX is brought to you by Worthix.
I’m Mary Drumond. This podcast is hosted and produced by me, edited and co-produced by Steve Berry. See you next week.
