Impact Pricing Podcast

 

 

 

Jay Nathan is a B2B SaaS executive with a deep focus on revenue growth, customer experience and driving customer success throughout organizations. His expertise is in managing and transforming all post-sale customer operations to grow revenue and deliver a differentiated customer experience.  

In this episode, he shares how Customer Imperative helps companies scale revenue by deploying customer success teams, processes, and technology. With a deep focus on B2B SaaS, they serve CEOs, CROs, COOs and Customer Success leaders to help grow revenue faster while improving the customer experience. 

 

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Key Takeaways:

 

“If you have data that you can normalize across your entire customer base, and even define metrics for your industry, as a SAS provider, let’s say I’m in real estate or event management, there are metrics and their benchmarks that are unique to each of those industries. And if I can sort of normalize those, I can use them in a number of ways one, I can use them to help me understand if my clients how they’re performing relative to their peers.” –Jay Nathan 

“The days of planning ahead and building a big top-down plan are just there, they’re hard, they’re gone, right. And we need to be much more agile in the way that we respond to competition and the way that we roll out our products to our clients, in just that agility, just speed means so much we work with a lot of private equity-backed companies.” –Jay Nathan 

“I think everybody wants to grow quickly, the idea of testing and seeing what works, and then implementing just that just makes all the sense in the world.” –Jay Nathan 

 

Resources and People Mentioned 

• https://tomtunguz.com/ 
• SalesForce 
• Zoom.us 
• Zendesk 

 

Connect With Jay Nathan 

• https://customerimperative.com 
• Email: [email protected] 
• LinkedIn 

 

Connect with Mark Stiving 

• Email: [email protected]    
• LinkedIn 
• Twitter 

 

 

Full Interview Transcript

(Note: This transcript was created using Temi, an AI transcription service.  Please forgive any transcription or grammatical errors.  We probably sounded better in real life.)

Jay Nathan: Growth can come in a number of different ways, additional seat licenses. And so customer success is uniquely positioned within an organization to be able to help identify those opportunities to expand. And in fact, that is where the primary value of customer success and that is. If they’re not doing that, then I would push and why you even have a customer success team, to begin with.

Mark Stiving: Welcome to Impact Pricing, the podcast where we discuss pricing, value and the awesome relationship between them. I’m Mark Stiving and today our guest is Jay Nathan. Here are three things you want to know about Jay before we start. He is the founder and managing partner of Customer Imperative, a company focused on SaaS revenue growth. Just that gets me excited. He has a background in product management or rule that I empathize and respects a ton and his most recent real job was as an executive in customer success. Welcome, Jay.

Jay Nathan: Thanks for having me, Mark. Great. Great to be here.

Mark Stiving: This is going to be fun. I think you’re my first customer success guest.

Jay Nathan: Oh Wow. That’s surprising.

Mark Stiving: And yet I respect that rule a ton. For all of our pricing and product manager listeners, what is customer success? How do you define that?

Jay Nathan: Yeah, it’s a great question and it’s got a lot of different answers depending on who you talk to, but really, you know, customer success grew out of the move to subscription from perpetually licensed software. You know, back in 10, 15 years ago, Salesforce is really coming to pioneer that, but it’s this idea that if we sell our products on a subscription basis that we have to, we have to do a little bit more work. We have to get a little bit more intimate and engage deeper with the clients so that we know they’re getting the value that they’re paying for because they can go away after a year or two. You’re back when we used to sell perpetually licensed software, we sold the whole thing upfront and we’ve got a big chunk of revenue. All our P&L is a result of that, but now it actually matters that customers stay with us a long time in the software world because everything’s bottled subscription and we usually don’t make money, real money, margin money, until the second or third year of our relationship with the client. So retention is just tantamount to successful or a modern software company.

Mark Stiving: What I find amazing about that, and I often tell people that will listen to me is that in the traditional business model, we would sell something, we get that check upfront and we actually never cared if somebody used our product or not. And all of a sudden now we really care.

Jay Nathan: Right. And you might not have ever known, right? The old-style software, the perpetually licensed stuff is usually sitting on-premise too and somebody locked in someone’s data center. And now with the admin of cloud and you know, software as a service where it’s just one big application in the fall, most of the time we can actually see what our customers are doing. So we can understand if they’re adopting the most valuable portions of our product. We can tell just how much they’re using the product itself and we can intervene, we can use all that data. It triggers to intervene if you’re not seeing adoption take off the way that we know it should for that, for that customer to be successful, for them to get the value that we sold out of it. I love that you talked about value right in your intro because pricing to me is the fundamental piece of… It’s how we exchange value with our clients. They get the business return, we get dollars as a software company. And so yeah. Yeah.

Mark Stiving: When I think about pricing, I always think the words we need to create value. We need to communicate value. We need to capture value. And what customer success seems to me to be doing, is making sure that our clients actually received the value that we promised to them or we told them that they were going to get when they bought in or maybe you way more than they ever thought they were going to get.

Jay Nathan: Yeah. You said create, communicate, capture. I think there’s something in the SaaS world between communicate and capture, which is… I wish I can think of something that started with a C to keep it consistent there but it’s something like ensure, right? Ensure value, ensure receipt of value because we can communicate the value, that’s part of the sales process. But after we close the business and bring that customer in, then we really have to engage with them and make sure that they are utilizing our product to the fullest extent. Getting that value every day and that they know they’re getting it and sometimes they’re getting it and they don’t realize they’re getting it. So part of the communication back to your point is making sure that you know, just understand what the value proposition is, but that they understand that they’re getting value out of it after realizing the products.

Mark Stiving: Yeah. Just so I don’t have to add another C, I’m going to bundle that into capturing value so that if we’re providing value, if we’re making sure they’re using our product and we’re continuing to capture the value that we’re delivering. So that’s pretty cool. So tell us about Customer Imperative. What do they do?

Jay Nathan: Yeah, so Customer Imperative, I launched the company about two and a half years ago after, as you put it, my last real job came to an end, which was, you know, sort of a turning point in my career where I, you know, decided to go out on my own. And so I started Customer Imperative as a one-man shop consulting, working with B2B SaaS companies who wanted to focus on customer-centric growth strategies kind of what we call customer success. And as you and your listeners may know there’s, you know, there’s a lot of different facets to that. There’s, there are roles and responsibilities, you’ve got an organizational design, there’s process design or systems and automation. But what we do today, so, so fast forward two and a half years, we have just (inaudible) at 10 people on our team today. And what we do is we engage with clients and we deliver what we call technology-enabled customer success operations.

Jay Nathan: And what that means is that we actually help our clients provide the dashboard, we provide the data, we provide the metrics that they need to run the customer side of their business. And we do that as a service for them today. And so all the other strategic pieces that I did initially when I started the company two and a half years ago, we still do a lot of that work as well. But what we found over time is that if that work didn’t end up in a system and automated and in real processes built around it, it was just shelfware. It’s just strategy consulting where they pick up and put in the shelf. So we’ve, uh, we’ve really pivoted over to taking those strategies, putting in all the way in the system and then even helping our clients run those processes, renewals, customer health scoring, adoption metrics and analysis and that type of thing. So we work with a lot of vendors in the space to bring those solutions to our clients and in helping with automation, scaling, and operations.

Mark Stiving: Okay. And when you say you put them all in a system, does that mean it’s a software application or a framework and a process that we’re going to walk them through and teach them? Describe the system.

Jay Nathan: Yeah, so you probably have seen this as well. I’m sure your listeners have, there’s a lot of processes that get run in a lot of companies that are backed by spreadsheets. Right? And one of the things that we like to say, if, if it’s not actually in a system that’s designed to facilitate that process and to inspect that process, then it’s not really a process. Okay. So the spreadsheet’s not the be-all-end-all-solution. It’s a great place to start when you’re designing a process, but it’s not the be-all-end-all-solution. So imagine if I had, you know, a thousand clients and I had to manage the renewals for that thousand clients and I was trying to do that out of a spreadsheet. I have limited visibility into it. My peers in the organization, my management team, my board, we’d be doing a lot of ad hoc stuff there.

Jay Nathan: Right? And so we think it’s a lot more valuable to put a system in place. Today, companies use Salesforce.com they use other CRM platforms and then there are even tools that are more specific than that just for customer success and customer engagement, renewal management, upsell management, that you can put in place to manage those processes so that you get high visibility, you get adoption across the organization, you get, you know, all the tools in workbooks, in kinds of techniques that you need to be built into a platform that didn’t finish for doing those kinds of jobs. Little stuff like that.

Mark Stiving: Nice. And there are always trade-offs when you go to a package system like that, then it does what it does, where if I’m using Excel, it does anything. But the problem is not everybody’s creative enough to say what’s the anything you need some set of intelligence that, oh, here are the right things to look at. And then you also want the flexibility to say, okay, now I want to go look at something different. Can we go look at that? What does that look like?

Jay Nathan: Right, exactly.

Mark Stiving: So when you think of customer success does, I’m going to slightly change the topic, does that include onboarding?

Jay Nathan: It does, yeah. So, um, you know, one of the first things that we typically do with our clients is an end to end journey map. We do a mapping exercise where we walk across the functional team, meaning marketing people, the salespeople, the customer success onboarding account management, product. We walk all those folks through an activity where they actually map it out on a wall or on a whiteboard what the customer journey is today, where the touchpoints are with the customer, what we think the customer is feeling, thinking and hearing through that process. And, and then we design ways to make it better. So we always start with the journey mapping process because that’s a way to flush out where the gaps are in your customer experience and where they have the opportunity to fail. For SaaS companies and your SaaS listeners will definitely identify with this. The onboarding experience is the number one most critical experience that you can have, that you can get right for your customers because they need to get to success. We call it time-to-value. They need to get quick time-to-value. They’ve made an investment, they’ve probably paid an upfront fee to begin working with your company. And so it’s really important that we find some way to give them the value within 30, 60 days. So that they’re starting to feel, you know, the presence of the value that they were communicated during the sales process. So yeah, onboarding is absolutely a critical piece of customer success and I can talk to you for hours about it but I’ll stop there and see. You know the questions…

Mark Stiving: Well, I want to try to tie this back to pricing for a second and then we’re going to go into some other customer success issues. When I think of SaaS companies and I teach people how subscription companies are different than traditional companies, we have these three revenue buckets that we care a lot about. In traditional companies, all I care about is winning new customers, but now that I’m in SaaS, I need to win customers, I need to keep customers, I need to grow customers. Customer success isn’t really related to winning customers or customer acquisition other than you would say positive testimonials, referrals, references, things like that would be really helpful for our customer acquisition.

Jay Nathan: Exactly.

Mark Stiving: Most people think of customer success for the retention side, I want to keep my customers, but I’ve seen the research that says customer success is actually more valuable in the growth or expansion piece. How do I get people to buy more from us? And that feels like it fits right into the journey map that you talk about. How do you relate to this keeping and growing my current customers?

Jay Nathan: Oh man, you’re hitting on some of the core of our belief system now. So when you talk about just keeping your customers, I’ll get a little technical with you here for a second, we call that gross retention. Okay, so how much of my, it’s like same-store sales for folks who use that metric in more than retail setting. Then we have something else called net retention. That is how much of my revenue did I keep from last year in the same cohort of customers? And then also how much did I add to that same cohort of customers, not new logos, but those existing logos, okay. So we look at net retention is really the metric that customer success should and can and should be focused on. You look at some of the most interesting SaaS companies in the publicly traded space right now.

Jay Nathan: I’ll throw a couple of examples out there. Zendesk. There’s another company called PagerDuty that’s just recently following as one. I don’t know if they’re live on the exchange yet, but if you look at these companies, they have a gross retention rate in the 95 plus percentile, right? Which is fantastic in and of itself, right? If you look at their net retention metrics, they’re in 130, 140, 150% net retention rate area. And what that means is that these companies are growing at 50%, 30%, 40% year over year before they even add another logo. Okay. So the power of that from the compounding perspective is just phenomenal. And that’s why you see so much value being created in SaaS companies who fit that profile. I’m working with a SaaS company right now who has the same exact kind of metrics, and it’s a very exciting place to be because the growth is just sort of feeding itself.

Jay Nathan: And that growth can come in a couple of ways. One, by upselling, you know, new business units, new departments in the organization. It can come from expanded usage or more transactions. Yeah. There you could educate me much more on the different types of pricing models that are out there in terms of the different tariffs that we apply. But growth can come in a number of different ways, additional seat licenses. And so customer success is uniquely positioned within an organization to be able to help identify those opportunities to expand. And in fact, that is where the primary value of customer success lives. If they’re not doing that, then I would question why you even have a customer success team, to begin with.

Mark Stiving: Nice. I love that answer. I spent a big chunk of the… I put together a subscription value management course and a portion of that talks about how to calculate net dollar retention and what does it look like. And I study Tomasz Tunguz. He uses some of those same numbers that you’re using. The one that I like to pull out all the time because they just went public and everybody knows them as Zoom. And Zoom has a 142% net dollar retention rate, which is just incredible.

Jay Nathan: Yeah, yeah. Can you imagine growing 40% year over year without adding another, another client? It is fantastic.

Mark Stiving: Yes. And yet there’s, and yet they’re still adding customers.

Jay Nathan: Exactly! Right.

Mark Stiving: And just to educate the listeners a little bit, there are four basic ways that you can get more money from your current customers. One is, you can raise their prices, obviously. Two, you could increase usage, which Jay just talked about. We could do upsell. So think of that as, we’ve got good, better, best. How do I get them from good to better or better to best? And you could do cross-sell, meaning I’ve built a great relationship with them. Now they would take other products that we’re currently selling to our current customers. I mean those are the only four ways I can think of that you could get more money from your current customer base. That could be awesome. There might be more, but I haven’t thought of them yet.

Jay Nathan: You haven’t thought of them, they probably don’t exist, Mark.

Mark Stiving: I’m not sure about that. So I love that we’re on the same page here. This fits so well. What do you see… Are most companies when you first walk in the door, are they measuring that dollar retention today or is that a metric that you have to share with them and teach them?

Jay Nathan: Any CFO that’s worked in the SaaS space (inaudible) at a time, it’s going to already be thinking about and calculating that metric. What we more commonly see is that the teams are responsible for driving those metrics aren’t necessarily mapping their activities, their day to day, their initiatives. They’re not necessarily mapping those to those metrics and they don’t understand necessarily where they have leveraged to new those metrics. So you’ll need a little bit of a rabbit hole here. One of the ways we help with that or we help them think about that is segmenting the customer base. So you might not be able to move your net retention number for every segment in your customer base, but there may be certain segments where you had a lot of opportunities. And so that’s what you want to get built your processes in your, in your, your playbooks around.

Mark Stiving: Just keep seeing me up here, Jay. Thank you.

Jay Nathan: Yeah, I think we should work together more.

Mark Stiving: So it turns out that there are three different value levers other than building the right products, right? There are three basic value lovers that product managers, product marketers, companies have that they can pull. And one of those is that market segment, right? How do I focus in on the right market segment? How do I choose the right segment for the right opportunity? Maybe we get more and more focused over time. So that market segment is a really big deal. And then the other two, I’ll just toss them out real fast. But one is pricing metrics. What are we gonna charge for? And then the last one is packaging. How do we put the right features into the right packages to get to the right value points? But all of these are challenging, hard, valuable, important and interesting. Let’s jump back to customer success though because I find this so fascinating. What’s the usage of usage data?

Jay Nathan: Yeah. What’s the use of the usage data?

Mark Stiving: I assume there are a hundred of ways.

Jay Nathan: Yeah. And actually that is one of the things that makes usage data, so… Or usage metrics in general so far for folks because it really is a choose your own adventure book. I think, you know, we think about it in a few ways. One is what are the basic capabilities that your system has? The high-value features, the high-value functionality of the system that you can make sure that your clients are using. What we often see is that it’s not a lack of usage data on the part of our customers. It’s a lack of really honing in on that one or two or three most special things about our product that our clients are not doing.

Jay Nathan: And so, you know, there’s a ton of data, but there are just no insights there. And then there’s nothing to trigger behavior or an action in [inaudible]. That’s one thing but it is very powerful if you can look at your customer, look at your customer journey, understand from your customer’s perspective what success looks like, what do they start to get the outcomes from using your product? And then map that back to some kind of data point that you track in the system. So that’s number one. I think the other one, number two for us is it is thinking in terms of benchmarking. So if you have data that you can normalize across your entire customer base and even define metrics for your industry as a SaaS provider, let’s say I’m in real estate or event management there are metrics and there are benchmarks that are unique to each of those industries.

Jay Nathan: And if I can sort of normalize those, I can use them in a number of ways. One, I can use them to help me understand if my clients, how they’re performing relative to their peers. And that’s a really strategic way for me to then engage with that client. Well, the customer success manager basis, CSM customer success manager is sort of the new terminology that we use to describe this person, who’s the point of contact for a customer. If there’s a name to contact, but they need strategic ways to engage because they’re not a support rep, right? They should know what the product does, but they’re, they need a strategic handle to hold on to, to have a business discussion with their clients. That’s what we really want. So this benchmark metrics can be really, really helpful. And then the second way you can use a benchmark metric is in your marketing process, right? It’s part of generating awareness. So what performance looks like, and maybe your prospects can’t even tell you what that metric is because they don’t have the data and the systems to do it. Then you can not only tell them that they need that metric, you can tell them what good looks like and how they can get in your good by coming over your company. So, um, those are a couple of ways that I think that usage data is useful.

Mark Stiving: Yeah. I want to tie that back to a concept that I often talk about in pricing and that is value. And how do our customers get value or perceive value? One of the things I often do with clients when we’re trying to do a pricing metric, I wanna know what we’re going to charge for. I’ll often ask the customer to answer the following question. Your customer fills in the following blanks. I love your product because my blank went from blank to blank. So there’s some metric. My processing time went from an hour to 10 minutes. My number of clicks onto my webpage went from a thousand to 10,000… Or whatever it is, there’s some number that they say, oh my gosh, this is why I love your product and I try to tie pricing and packaging and those types of things back to that. But I could easily see you taking the exact same concept and saying, I want to tie usage to that. How do I make sure that people are using the product in a way that delivers what they’re trying to get in the most effective way? Does that make sense?

Jay Nathan: It does make sense and I think the holy grail is if all three lines, the sorta metric from X to Y, the pricing around it and then as a customer success function driving the adoption of that capability.

Mark Stiving: Yeah, I think that’s absolutely spot on. Usage feels so powerful and yet I don’t see companies using it in the ways that it could be used, right. In all the ways that it can be so powerful for them. Yup. All right. Jay, we’re going to have to start to wrap this up, but I always end with this question. What’s one piece of advice that you would give our listeners that you think could have a big impact on their business?

Jay Nathan: Oh man, that’s a big question. So I think one of the things we try to espouse in our company is… one of our values is, is really think, think large, think globally but act pragmatically. And so I think, you know, one way that I like to see companies work is really in more of an iterative fashion. Take off small chunks of work, test new ideas, iterate quickly, and build a culture of rapid thought testing in an improvement process. Because, you know, the days of planning ahead and building a big top-down plan are just they’re hard, they’re gone, right? And we need to be much more agile in the way that we respond to competition, and the way that we roll out our products for our clients. And that agility just in speed means so much. We work with a lot of private equity companies and your audience is probably aware, private equity owners of any company, they want to drive a return on a timeline, right? And it’s not their only goal always, but it’s really key that you knew fast and move in a really agile way. So I think, you know, that’s one thing that we try to try to work with our clients on and the folks who get it right. I think to accomplish a lot more. A lot faster.

Mark Stiving: Yeah. And I think everybody wants to grow quickly. The idea of testing and seeing what works and then implementing just that just makes all the sense in the world. Jay, thank you so much for your time today. If anyone wants to contact you, how can they do that?

Jay Nathan: Yeah, sure. My email, you feel free to shoot me an email. [email protected] and then you can also hit me up on LinkedIn. Jay Nathan, I think, I’m sure there are other Jay Nathan’s out there, but I’m one of the few.

Mark Stiving: One of the few? Wow. Alright! Episode 33 is finished. My favorite part of today’s podcast, let’s see. I really liked the simple way that Jay described net dollar retention and that was pretty powerful. What was your favorite part? Please let us know in the comments or wherever you download and listen to the podcast. And while you’re at it, would you please give us a five-star review. These are very helpful to us. If you have any questions or comments about the podcast or about pricing, feel free to email me at [email protected]. Now,  go make an impact.

 

**Note: Mark Stiving has an active LinkedIn community, where he participates in conversations and answers questions. Each week, he creates a blog post for the top question. If you have a question, head over to LinkedIn to communicate directly with Mark.

 

Tags: customer success, pricing, pricing strategy, value-based pricing