How to build a great customer success function – with Melanie Lawn

We had the pleasure of welcoming customer success expert Melanie Lawn to our latest Moonfire Academy session for founders to talk about building an exceptional customer success function.

With over a decade of experience as a CCO, CRO, and customer success operator at the likes of Peakon (in which I was an early investor and where we first met), Forecast and Deltek, she shared her insights on managing the customer lifecycle, from onboarding to renewal, and the best practices she's learnt along the way.

– Mattias

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Customer success (CS) should sit right at the heart of your organisation. It’s the place for really understanding what you’re selling, to whom, for what purpose, and how you’re going to grow your book of business and revenue.

Even early on, as you’re figuring out product market fit, the CS function is fundamental to that growth, and the source for the kind of understanding and knowledge you need about your existing customers and the customer base you’re going after.

The challenge for founders is knowing when to upskill and scale their customer success teams and making strategic decisions regarding customer segmentation and service levels throughout their journey.

So when’s the right time to start thinking seriously about customer success?

Customer success before the first hire

It starts right from the beginning.

When I’ve been part of young startups, customer success is on the radar of the founder immediately. You have a fantastic product, you’re selling to one or two companies, or you’ve got a few companies in beta, and you’re already talking about understanding those users better, understanding use cases, understanding how you can grow your offering – that is customer success.

Even before you’ve started building out a dedicated CS function, there are two things I’d prioritise:

1. Map the customer journey and capture customer feedback in a logical way, and
2. look at your contracts and make sure your renewal terms fit that journey, leveraging early renewals as opportunities for account growth.

You need to understand the customer journey:

• Who's interacting with the customer, at what time, for what reason, and for what purpose?
• What’s the handoff process between sales and implementation?
• What are you capturing from the customer on that journey?
• And where are opportunities for growth?

Make sure your CS team is closely aligned with product and sales, because during the onboarding and implementation phase you’ll constantly be getting feedback you can use to improve product market fit and build out your first case studies.

Mapping the customer journey will also define how you shape your CS team. If you know what’s stopping you getting the customer to value sooner, you can model out your CS team to overcome those barriers. That might be hiring someone who’s very strong on the relationship piece to push your customers forward, or a technical person who can really dig in on the implementation side. If your product has a particularly in-depth implementation process, you could sell that technical person’s hours as professional services for customers.

Who to hire first

A dedicated CS function becomes essential when you have a significant number of customers (maybe 10+), or a significant amount of revenue from a smaller number of larger customers. Though the more complex your product is to implement, the earlier you'll need a dedicated CS hire.

You can break down the team’s development into four key areas: 1) onboarding and implementation, 2) support, 3) commercial, and 4) education and self-service.

The first person I’d put in is a CS consultant: a generalist with a broad understanding who can work across all four of those core areas. So they can understand the product and help the customer onboard and implement, help with growth and renewal discussions, and juggle support questions.

As your book of business grows, I’d hire a dedicated support person. Not only can they take some of the load off your first CS hire, but they can also start building out the support function, which will help you start scaling, and work towards educating customers and encouraging a self-service mechanism.

After that, bring in a commercial hire – someone who’s really focused on retaining and growing the book of business and actively monitoring churn. This also helps ensure the customer has a champion: a dedicated commercial CS person to handle renewals and upsells, rather than having the same person handle both implementation and commercial discussions.

But this does depend on where renewal and upselling sits in your business. I tend to find that if it sits under the CRO, account executives will run the renewal and expansion piece. However, I think it makes sense to integrate this function into CS, because you get a 360-degree view of the book of business in one place, getting insights about the health of the customer from the rest of the CS team which can drive renewals. In any case, you should differentiate between new logo deals and renewal/expansion deals in incentive and compensation plans to maximise revenue potential and avoid spinning wheels.

All that said, the exact order depends on the complexity of your product and the depth of knowledge required during implementation, the service you’re offering, and the time it takes to get the customer to value.

What you should be measuring early on

At the onboarding and implementation stage, you want to strive toward speeding up that process and getting the customer to value as quickly as possible.

So, from the start, measure time-to-implement. It might be horrendous in the beginning, but that doesn’t matter. It’s also the time to cultivate your customer champions who are key in reducing churn, identifying opportunities for growth, and making sure relationships are retained over time.

The commercial team should focus on revenue growth. That means tracking monthly or annual recurring revenue (MRR / ARR) and monthly dollar retention (MDR), managing churn, and shooting for an expansion and upsell target. They should also be capturing references and case studies, because ultimately it will help them sell more.

There’s a lot you can track in support, but the key ones are first response time, time to resolution, and some customer satisfaction score like CSAT or NPS. The support team should also create knowledge bases and help articles so customers can self-serve, which not only improves the customer experience but allows you to scale faster by reducing support demands.

When it comes to tooling, you don’t need to buy something as extensive as Gainsight in the early years (although if you have the budget it can save you time down the road). There are numerous other, less costly tools that can do just as good a job, for example ChurnZero and Planhat. The most important thing is how well they integrate with the rest of your systems.

How to act on customer feedback

I’d consider two strategies here.

1. Create an advisory board of your top five customers. I’ve usually run this as a dual initiative between CS and Product, with those customers invited in quarterly to give direct feedback to the heads of product and some developers. Your customers feel like they’re being heard and getting a more tailored service, but it also gives you a soundboard and allows you to set expectations for what you’re building and why you’re building it – or why you’re not building something.
2. I’d also regularly share customer feedback across departments. The town hall format or something like a “latest and greatest” seminar have worked well with my CS teams. These are opportunities to discuss what’s been developed over the last 12 weeks or so, what’s on the product roadmap for next 12 weeks, and any adjustments to the roadmap. This helps keep everyone aligned on product strategy and ensures that the development team can see the impact of their work on customers.

Getting customer segmentation and service levels right

As you grow and the type or size of your customer changes, you’ll want to further specialise your CS function.

Consider creating an enterprise team. Each individual would manage a smaller book of business, focusing on more in-depth customers with higher expansion and upsell targets. Those are the customers that perhaps have greater growth opportunities through different locations and branches and they need one individual that really understands their game and what they're doing to help them grow.

You’ll also want to implement a system to tier your customers, assigning a health score to each to determine the appropriate level of service. For example, once the top 20% of your customers generate 80% of your revenue, assess which tiers can transition to self-service, reducing the need for personalised interaction without compromising on support quality. This will help you recognise the right time to positively churn some of your less profitable, high-demand early customers.

For that purpose, it’s helpful to create a maturity or complexity matrix against which you can mark new logos and prioritise service based on revenue numbers and implementation details. That allows you to be mindful of who are your mature best fit customers versus those that are probably going to fall by the wayside down the road.

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Those are the sort of things I’d be thinking about as a founder building out a CS function. The first thing is getting the right hires in, reflecting the right customer journey, and interacting with the right departments internally while you’re capturing the right content and measuring the right metrics. Then you need to look at how you’re going to flex up your CS team to reflect your book of business and the changing size and demand of your customers, and how you’re going to start using tooling to capture the right data to make the right data-driven business decisions.