Managing Customer Outcomes, Success, and Value in the XaaS Customer Lifecycle
With any subscription XaaS business, it is important that Customer Success Teams, as well as Sales Teams, are using the same language when discussing their shared customer – if nothing else to ensure a smooth handoff and transition during the customer lifecycle. For instance, sales teams are expected to sell “value” and/or customer “outcomes” while customer success teams are charged with delivering… well, customer “success”.
Are these terms effectively synonyms describing the same concept, or are they very different? In truth, they are neither, but rather are intimately intertwined as they describe the customer’s viewpoint depending on where we are in the customer lifecycle.
Outcomes – Buying Holes
Harvard marketing professor, Theodore Levitt, brilliantly described the concept of outcomes with the statement “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” In the B2B world, customers pay for your products and services(drill and drill bits), but they are buying outcomes (holes). The successful sales team must uncover the outcomes the customer is looking to achieve and then position the appropriate products, services, and support the customer needs in order to achieve those desired outcomes.
Obviously, the customer success team must then be aware of the expected outcomes if they are to help deliver them. But in the subscription XaaS world, it gets a bit more complicated and somewhat nuanced.
Sticking with our drill analogy, customers aren’t just buying “holes” from us, but rather they are essentially subcontracting out the making of these holes to us and paying us on a monthly, quarterly, or annual basis. As a subcontractor, we must understand what the “right holes” are for this customer. (The same could essentially be said for any service offering.) Hopefully, they will keep retaining our services (renewal) as long as we are performing to their satisfaction. But how are we to know we are making the right holes?
Success – Making The Right Holes
Success is simply the metrics that customers attach to the outcomes that tell both sides what are the “right holes”. For example:
- How many holes?
- In what materials?
- Placed where?
- And by when?
(As a side note, “when” is always important to the success of any business and key to the sales team if they are to reverse engineer from the “when” to a reliable expected close date.) In the B2B world, success is further complicated due to the complexity of offerings and the multiple buying influencers.
For instance, assume your SaaS offering has been positioned to help the customer reduce costs and increase reliability and scalability. What costs (Opex, Capex, headcount, etc.) do they want to be reduced? How will we measure reliability? How will we know we have improved it?
The same could be said for scalability. How will we measure and report scalability? It is the customer’s metrics for outcomes (such as scalability), that provide a clear picture of success for that customer. And thus, determines the target(s) the customer success team must hit in order to deliver “success”.
Finally, it is these insights into customer outcomes and success metrics that will allow us to define our value to this customer.
Value – Why The Customer Chose Us/Keeps Us/Expands With Us
Value is perhaps the most misunderstood concept in business – and yet it is the currency of selling, customer renewals/expansion, and referrals. If the outcomes are holes and success is the right holes, then what is value? In business, value is being able to deliver the right outcomes better, faster, cheaper, etc. than the next best alternative. Therefore, value is determined as follows:
- Specific to the customer’s outcomes and success metrics
- Incremental to the customer’s most likely alternative to us
- Measured in both business and personal dimensions
There is little to no value in presenting features, functions, and benefits to a customer unless they directly relate to that customer’s outcomes and success metrics. Otherwise, they are a “nice to have” versus a “must have.” Perhaps the most important thing to understand about value is that it is everywhere and always incremental. There is no such thing as absolute value. See my previous blog HERE that discusses B2B customer alternatives.
In the SaaS example above, let’s assume there is a competitor who also positions their solution to reduce customer costs and increase reliability and scalability. At this point, we have presented no value to the customer. It is only when we can produce better outcomes (more cost takeout, greater reliability, or improved scalability) than the competitor (alternative) that the customer will see value in our offering. Or perhaps we can do it faster and cheaper with less disruption and reduced risk. This too may be seen as incremental value to the customer.
Implications For Customer Success Teams And Sales
What motivates customers to renew? Most likely, the CS team delivered on the promised outcomes and their success metrics (success) or even better exceeded the customer’s success criteria (additional value).
Why might customers readily offer expansion opportunities to us? In a previous purchase, we sold the right value and then delivered (or exceeded) that value.
Why do customers enthusiastically offer referrals? We most likely over-delivered the promised value.
You might enjoy this brief, quirky video which explains value in a relatable way.
Finally, why do customers agree to enter into a subscription model? They believe the XaaS business understands the outcomes and they want to achieve – and that the XaaS business is committed to delivering success.
Outcomes, success, and value do not belong to a single team or stage in the customer lifecycle, but rather are the common language in which everyone in the XaaS business should be fluent.
Steve is the founder of Value Lifecycle, a strategy consulting firm, with clientele representing over 100 diverse industries. He has over 33 years of experience in operations, sales, sales management, purchasing, and executive management. After working extensively on both the selling and buying side of the equation, Steve brings a unique perspective to the challenges facing his clients as they define and execute their business strategies. Steve have consulted, trained, and implemented both strategic and tactical buying and selling programs in all major North American market centers, as well as Europe, Asia, Latin America, Middle East, and Africa.