Guy Nirpaz, CEO of Totango on Customer Success

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I think the reason why customer success is so important is because the business model puts the power in the hands of the customer. And it’s because of subscription. Power in the hands of the customer.

Guy Nirpaz is CEO and Cofounder of Totango, a leading Customer Success Platform. Guy is also a major driving force of the Customer Success community, through local meetups, the annual Customer Success Summit and great content including The Customer Success manifesto.

Guy spoke with Alex Theuma on The SaaS Revolution Show podcast, which is available to listen to now on iTunes or SoundCloud. This article is a lightly edited transcript of that conversation.


HI Guy, what does Totango do?

So Totango is a pioneer in the customer success base. We provide a customer success platform. And the role of a customer success platform is to help SaaS companies and other subscription-based businesses to retain and grow their customer base.

Our unique approach with regards to customer success is that we believe that in order for customers to be customers for life they need to see value from the product. And the best way to understand if they’re getting value from the product is to actually see in reality are they using the product in the way that it was designed to deliver on the value.

Of course there’s other dimensions of information but that’s kind of the key point of view that we have with regards to how do you retain and grow your customer base.

You Co-founded Totango in 2010. Going back to when you started, how did you acquire your first few customers? How did they help you shape Totango?

That’s a really great question. When we started Totango, we were still in Tel Aviv. Right now, Totango is a global company. Our headquarters is in the Bay Area of San Francisco and we have the engineering office in Tel Aviv and some other global sales offices.

But when we started, My partner, Omer, crafted this presentation that tells this story and just started to send it to some folks from various companies. Basically he just said what I said before – This is what we are planning to do. Do you think it’s a problem? Would you like to hear more? And this is how we got our first 15 customers.

I remember that we were still just coding the initial parts of the product and we got an initial reaction to the problem. Obviously, since then we’ve morphed significantly with regards to how the product looks. But the initial core idea was almost the same.

You mentioned your Co-founder there, Omer Gotlieb. What’s pretty incredible,is that you were born on the same day, same time, same town, and only met 14 years later. Is that right?

Yeah, that’s true.

So who came up with the idea of Totango? Was it you? Or was it Omer or both of you?

I think the story is that we were kind of close to our 40’s when we started since we were born the same day so we were close, the same-distance close. And we decided that we wanted to do something together for the first time. Actually have something professionally working together.

So we sat down, we said, okay, we’re going to do something now that’s just maybe a vision of what we want to do and kind of brainstorm. Both of us came from similar backgrounds. Omer spent several years in the Telco business which was very early in subscription. And I’ve spent many years in Enterprise software and big data while it was still called Great Computing.

So we kind of married those two ideas. How do you innovate and do subscription economy with SaaS, obviously it’s part of. And how do you marry big data ideas into that? And this is how the customer success idea morphed into, got shaped into an idea company and a business.

So you’ve been friends for a long time. Now, how is it working with a close friend? I mean, many people say you shouldn’t start a business with a good friend?

Yeah. I guess it has a lot to do with expectations set in, the type of friendships that you have, and clarity of who owns what and what are his priorities. I think on the business place, we don’t necessarily act as friends. We act as colleagues. And we have a lot of things to respect and a lot of…

I think we also developed this conflict resolution mechanism that only long-time friends that have gotten many, many rounds of the lives could have developed.

So I think for me, I’m fortunate to have Omer as a co-founder.

You do a lot within the customer success community. You have the big annual event, the Customer Success Summit. You also do local Meetups as well.  Regarding the Meetups; You recently had one in August and I understand you presented a guide called Customer Success Cubed. 

What is Customer Success Cubed for those that weren’t there and have never heard of that expression before?

Customer Success Cubed. Obviously, customer success is relatively a very new term in the industry. I think everyone in SaaS these days feel more closer to the fact that there is customer success. I mean, a few years ago we had to convince that there’s actually a need around customer success. But I think today everyone realises that someone need to own processes around retaining and growing their customer base. So that’s customer success.

But with that said, I still think that there’s a lot of confusion. So I’ve been thinking before this Meetup to create this kind of simplified version. I call this the simplest guide you’ll ever find about customer success. And truthfully I’m trying to explain customer success in a very simplified form where customer success is basically success of three things, which is why it’s cubed. It’s the success of your customer, it’s the customer success process, and the success of your business. And these are all interconnected. Obviously retention and churn and up-sell are directly correlated to the success of the customer.

And the outcome of the customer success process is about improving the success of the customer, which improves the metrics around customer success and business success. So that’s kind of this idea.

So there are three things that we are managing in customer success. We manage the success of the customer, we manage the success of the process and the team, and we manage the success of the business. And if we realise that these are the three simple things that we’re dealing with then customer success becomes more of, okay, so how do I start and do it. But it’s more around just do it. Experiment with that, iterate and improve.

It’s not a huge, complicated concept. It’s just a practical way to think of those three dimensions of success.

How often do you have customer success Meetups? 

So we have customer success Meetups almost every month. We have also regional events. We join community events. There’s an event this week in Boston and we follow up with a Meetup as well.

What we’re trying to do with regards to that is just foster community conversation around customer success ideas and get the practitioners together to learn best practices. If you look at the theme of the Customer Success Summit we’ve held on March this year in San Francisco, it was all around sharing best practices from practitioners.

We recorded some of that and we’ve put this on for those of you who haven’t had a chance to spend two days in San Francisco for the summit.

At the summit this year you had around about a thousand people. That’s grown from a couple of years ago when it was probably near the hundred. So do you take from that that this is a real building movement around customer success. That it is the next big thing?

Definitely. I can just clearly see the continuation between the funnel where you have businesses around marketing, automation, and lead generation, content marketing. Give them the pipeline. How do you turn a lead into a deal and now how do you take a deal or a customer, which is a human being. It’s not a deal. And you help them be successful so their lifetime value grows.

And I think the Customer Success Summit is a very good story. Like a Meetup, we started that three years ago, in 2013. The idea was to talk to every customer success VP or director that we engage with. I wanted to meet with the peer group.

So we threw this event pretty casually. We called this the Customer Success Summit. It was the first ever customer success group event industry-wide. We invited 60 people, 100 people came. And this year, two years later, over a thousand people joined the summit.

To me, this reflects the fact that there’s a lot of interest. It’s not why there’s customer success. It’s more around the practical advice. What do I do? How do I build my customer success machine? Things that are very similar to other movements that we’ve seen in the past. You know, the move from Waterfall Development into Agile Development. The move from QA being post-process to becoming part of the process and so forth.

Do you think churn is the most important lever for subscription businesses? And what is the key to control churn?

I think churn is extremely important. I think with the high churn growth is jeopardised and the growth is important in the business.

I think it’s not necessarily the right approach to look at a churn as the “metric.” Churn is the result of customer success and value being delivered to customers. So for that reason, customer success teams need to adapt, go from the defence into the offense. And the offense is how do I make sure that my customers are successful through their journey: onboarding, adoption, growth, and so forth.

The keys to overcome churn. You can look it up from two dimensions. One is at the very high level. Make sure that your customers are buying a product or, if we’re talking about SaaS, a product and there’s a clear business outcome that they bought this product for. And make sure through onboarding and beyond that actually you as a company or the customer is being delivered on this value. Because if they’re not then they will make some other decisions. Either look for different alternatives, which is churn, or downgrade, which is revenue churn, or will seek a completely different avenue of solving this problem, which is churn as well.

Another very important question that I feel most companies need to ask themselves on an ongoing basis, when a customer leaves, why do they leave? Why did they leave? What are the things that could cause a customer to leave? And then rank those risks and start working on fixing the problems leading to the reasons why customers leave.

Could be wrong sales to begin with but it also could be onboarding that took too long, or onboarding that didn’t end up at the right point of value for the customer, or the fact that there’s a high churn of people using the product so onboarding new users and training them and so forth is extremely important.

There are multiple reasons. The key is to understand what those reasons are and to focus on improving on those dimensions.

Is it true today that the first market for customer success is SaaS companies and why do you think that is?

I think the reason why customer success is so important is because the business model puts the power in the hands of the customer. And it’s because of subscription. Power in the hands of the customer.

So subscription and SaaS, I would say, because SaaS in most cases is subscription or pay-per-use type of model and digital distribution model which makes it very easy to switch from one vendor to the other vendor.

So I think SaaS really kind of had this meeting of the trends in which the model is subscription so revenue is highly dependent on your ability to retain and grow your customer base, which is maximise lifetime value and at the same time switching ability that didn’t exist before. And those two require a mandate that those vendors to make sure that they are proactively working towards retaining and growing the customer base.

So for that reason, we’re seeing early adoption of customer success within the SaaS companies. I think the term itself, customer success, was coined for the first time by and that’s obviously, up until today, the most successful SaaS company that has ever been created.

Does customer success pay for itself? And if so, are customer success platforms easy to sell?

Customer success, yes, pays for itself. It’s much like asking does sales pay for itself. Companies that treat customer success as a cost centre like support or other, if you will, “necessary” evils of the business simply don’t look at customer success from the right angle. Customer success is a strategic initiative to maximise customer lifetime value.

When you think of a subscription business, you have three revenue streams. You have new, renew, and growth customer success deals in at least 2 out of 3 renewal growth.

Does it make it easy for the customer success vendors to sell a customer success platform? From a need perspective, yes, it’s very, very clear. But since the market is so early, I think a lot of companies are making their first attempts with regards to customer success. So I think customer success today is very much of a consultative sales. And it has a lot to do with not only selling the product but also selling the best practices of how to leverage a customer success product in order to be successful in customer success. And this is, I think, one of the key focus area of the market these days, how do I actually do it. That’s the key question.
And it goes back into the conversation we had before, the Customer Success Cubed, which is what are the basic principles to get this done?

What is the Guy Nirpaz recipe to help SaaS companies become successful?

So I’ve got a shameless plug on that is what we wrote with our customers a couple of years ago, the Customer Success Manifesto. I think these are the six principles that I wholeheartedly believe in.

Customer success is about, first and foremost, delivering value for your customers. And then everything else. So that at the very high level it’s a customer-centric, value-based thinking.

And I try to do as much as I can that everything that comes from my team to our customers is a communication over value or an engagement over value. It’s not about how are things, it’s about how can I help you be more successful in what you do. So I think at the very philosophical level, this is it.

From a practical level, it’s the ability to know what is the value customers are getting and how to drive it even further and building the processes and the procedures around that.

Also, coming from many years in Lean and Agile software background, I also see a lot of parallels here where customer success needs the agility and the flexibility to iterate quickly where you experiment with something and you get the learning and you make the adjustments. There’s no silver bullet. I think there are concepts that are right but for every business it’s a little bit different. And every business will need to understand what is the right best practices for them to be successful in customer success. And obviously there’s a lot of ways that I feel we can help them with, but that’s my silver bullet for customer success.

Final question: what is the name of your rock band and where can we get your album?

That’s a good question. I don’t know. We don’t have a name, although our bass player is a customer success VP and our drummer is also a CEO of a SaaS company. So we’ll see.

It’s rock, right, so we cannot use corny names like Customer Success Band, or something like that. Though we’ll probably figure something… The Led Zeppelin Copycat. I don’t know. Whatever.

Well, maybe the listeners or readers can provide comments and send in some suggestions to give your band a name.

Guy Nirpaz spoke with Alex Theuma on The SaaS Revolution Show podcast, which is available to listen to now on iTunes or SoundCloud.

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