Thoughts from my journey

I’ve written recently that MAU and DAU are the most important metrics for Customer Success.

I’ve received in an email with the following comment:

“How does MAU and DAU, which measure interactive consumption of a service, are applied to products and services that are inherently revenue share models such as Ad-Tech and Fin-Tech?”

That is a great question and I’d like to answer it in this post. For that purpose I will assume that I’m the VP of Customer Success of Google AdWords product. This product allows you to create online ads web or mobile that are displayed by Google and drive traffic (or people) to your website. Simple and genius at the same time 😉

This is the service – when you look for a “Fender Guitar” Google serves you with these ads

Here’s what an AdWords customer needs to do in order to present their ads, taken from the Google AdWords website.

Simple, success is guaranteed: create your ad, people see your ad on Google and you get more customers.

Well, not quite that simple. The customers are successful and see value if they get more customers. But for that they need to: create great ads, bid on the right keywords – basically continuously manage their ad spend and optimize the keywords and conversions.

The good new is that in this business, the customer’s ability to attract new online customers is clearly in the best interest of the ad business provider. In other words, as the VP of Customer Success of AdWords, I would do everything I can to make sure my customers are successful in attracting online customers thru my ad service.

So what are the metrics for success in this business? In other words what should I be measuring in order to know if my customers are successful or not?

I need simple and actionable metrics that my team can act, metrics that I can develop my success programs on.

A simple approach (good, we like simple!) to the key metrics of customer success in this use case would be to measure daily the following metrics:

1. number of active ads
2. money spent on ads (daily and overall budget)
3. visitors (traffic)

And indeed these metrics are important. I would definitely keep track of those key metrics for every account in my AdWords business. The challenge, they are not very actionable. Changes in these numbers is more actionable once a baseline is established.

So, how MAU and DAU can help in this case?

Customers that really get the most of out AdWords, constantly bid on new keywords, optimize their ads. They do this by using the ad management feature set, they use the keyword search tools and most important, they review daily the spend, visitor and conversion reports.

Although there is one side of this business which does not involve the customer once ad is active, there is a lot of management and administration on the other side of the business that is very important for the success of the customer.

Buy tracking DAU on the administrative tools as a whole, and DAU on a per tool/module I will be able to have additional critical metrics that are all actionable and predictive:

1. Account with daily use – takes ad spend seriously and has a very high growth potential
2. Account with many people that are involved in the project manages probably multiple brands / products and for that reason, is responsible for a bigger ad budget.
3. Customers that don’t add/change their ads nor ad new keywords and don’t look at the performance reports – don’t have a professional approach towards online ads.

I hope this post give you a better sense on how to use DAU and MAU for customer success programs for any business.

Daily Active Users – DAU is the most important metric for Customer Success and user engagement. When Facebook present their quarterly business results, it is the first metric that is being reported on their quarterly call.

source – http://files.shareholder.com/downloads/AMDA-NJ5DZ/2138285812x0x888146/484823BA-5B5D-4BC4-B872-5F239E813384/FB_Q116_Earnings_Slides.pdf

You’ll see in their presentation that the second metric that is reported is of Monthly Active Users (MAU).

On a meeting with a very large enterprise software vendor, I was pleasantly surprised to see them starting to adopt MAU as the metric for business success.

Daily Active Users counts unique users active in a given day. Monthly Active Users counts unique users active in a given month.

Although not very sophisticated, DAU is a measure of customer (user) engagement. How many people take the time to use a product or service? If they use it often it means they see value in it, if they don’t, something is missing.

DAU is CSAT and NPS in one. It counts 100% of your customers, the ones that use your product and also the ones that don’t. And, it is objective!

By taking a deeper look into DAU and MAU you can come up with many important actionable conclusions.

Making the Metrics Actionable

DAU/MAU (ratio of DAU out of MAU) – this is usage frequency metric. DAU/MAU of a given group (could be users of in specific account) determines how often your product or service is being used. DAU/MAU that is closer to one (> 0.7) reflects daily use.

MAU/Licenses (ratio of MAU out of licenses sold) – is your license utilization. If licenses represents the number of seats purchased by an account, than MAU/Licenses represents the license utilization ratio. When license utilization > 1 – it’s time to grow the account, when license utilization is < 0.5 we have an adoption problem and potential churn risk.

Objection Handling

Many peeps in the customer success space are very uncomfortable with usage and utilization based measurements for customer success. Here are some common objections and my responses:

What if my product was not designed to be used daily?

If the product was not designed for daily use, change the frequency of measurement to the time window it was intended to – use MAU instead of DAU

What about non-interactive use? for example – website hosting service?

In some cases interactive use does not exist (really? not even admin and configuration?) – so measure utilization instead of interaction.

Isn’t business outcome the most important thing – more than usage?

Yes, value and outcome are very important, but DAU and MAU gives us great indications into that as well. There’s no single metric to measure, so if you can measure business outcome do that too.

If my customer is using my product – it does not mean they will not churn or cancel

That is true there are no guarantees, but if your customer does not use your product or service they WILL cancel eventually.

The most successful businesses in the world run on these metrics – you should do it too.

The Most Important Metric for Customer Success – Part 2

I’d like to be clear: Customer Health, is not designed to be a churn predictor. Think about yourself, going to a regular checkup at the doctor’s office. A good doctor will check your vital signs: blood pressure, height, weight and in some cases will ask for a blood test that goes deeper into various indications like body fat, cholesterol, vitamin deficiency and so on.

A checkup is not designed necessarily to determine if I’m  going to die this year or not. I’ve recently lost 20 pounds since my doctor noticed my extra weight and discovered fat in my blood.

I’ve changed my diet, became vegetarian cut back heavily on alcohol consumption. I’ve taken action based on the finding of my health check.

Companies should monitor customer health – it’s easy! But they should do it in order to take action. Prioritize based on health (good/green – bad/red) and determine the necessary action based on the symptoms (health reasons).

I’ll write another post about the importance of churn/upsell predictions.

Customer Success is maturing! How do I know?

My first indication is the amount of drinks we’ve had together last night at Norwood. Reminds of some other crazy times ten years ago with a bunch of tech sales people in NYC.

For the first time, when asking a room full of people (over 100!), how many of them actually practice customer success daily – all hands went up.

We’ve spent some time talking about models. The business model of customer success and how the business metrics of maximizing customer lifetime value are should be the goal.

We’ve had a lively conversation about Farming vs. Hunting and the metaphor of running a Grove of customers, as the title of the book “Farm Don’t Hunt – The Definitive Guide to Customer Success” suggests.

And lastly, we’ve shared operational tips on portfolio management, prioritization and measurement at the customer success, director and VP level. This is exciting!

For your convenience, here’s the presentation I’ve used below. Looking forward to seeing you again – the good customer success people of New York!

Customer Success Bootcamp

I’ve spent some time yesterday at a customer success bootcamp with one of my favorite customers.

The leaders have decided to spend two full days with the team in order to build alignment within the team with regards to customer success. This is a company that one of it’s core values is: “Customer Centricity”.

As a customer centric company, is the mission statement of customer success should be about customer love – making sure customers love the company, it’s product, people and services, or is it about value delivery?

This is a very important question that many customer success organizations are dealing with. The consensus these days is that customer value is what matters most, but many have thought differently in the past.

Customer success is a business function with clear business goals – impact CLTV, impact retention and customer growth. By focusing on the value to customer that drives the decision to renew and buy more teams impact CLTV. As a side effect, you get the customer love, as they are successful & satisfied.

I explain it in more details at this video below (this part starts at 6:30 min)
https://youtu.be/-Xm8ejkxMUs?t=6m30s (for direct link)

Norwood Private Club – NYC

I’m going to be in NYC on Thursday for the Customer Success roadshow event. This is probably my 5th trip in the last few months to New York City. It’s going to be at Norwood Club, which usually hosts people from New York art scene.

Norwood was listed #2 at the top 10 private clubs. Last time we were there, we’ve met the entire cast of Orange is the New Black.

If you happen to be in town, and would like to chat about Customer Success – don’t miss this event.

NYC friends! Don’t miss out on our #CustomerSuccess Roadshow ft. @Trustpilot and @guynirpaz https://t.co/6fPnhM1zNS pic.twitter.com/caMG1UHQAg

— Totango (@Totango) April 25, 2016

The truth, I’ve never really “got” animated gifs. But I guess this is an indication of my age and the generation I belong to.

Kevin Garcia, of Totango’s amazing marketing team, posted a very expressive post: Customer Success – The Farming Paradigm (with Gifs). 

If you’re from the generation that is more visual – please check it out (link above). If you prefer to read a book over a cup of coffee – head over here.

Customer Success is relatively a new term.

We can clearly see from the Google Trends chart above that the customer success management community has started to trend up around mid-2014.

Many analysts and investors have been skeptical about the applicability of the customer success engagement model beyond the technology market, software as a-service companies mainly.

I’m happy to report that we’re seeing Customer Success in new markets every day now. People may use different terminologies like “customer marketing” or “proactive account management” – we are seeing the shift to recurring revenue business models and the pro-active engagement to impact the customer lifetime value.

On March this year, I’ve set down with Mary Stanphone, the amazing VP of Marketing of the internet service provider (ISP) Global Capacity. Mary reached out to me few years ago, as she was looking to pro-actively impact the customer health.

Mary describes it best:

We’re now focused on getting customer success right. We are building at Totango the technology to enable Customer Success, and I have documented in my book Farm Don’t Hunt – practical guidelines that I’ve learned from people like Mary.

I am very proud to share more on the publication of my new book, Farm Don’t Hunt: The Definitive Guide to Customer Success. I’ve written this book as a very practical guide to business and team leaders who deal with Customer Success. It is written in similar style to the Scrum book I’ve used to learn how to become a successful engineering leader.

THE MISSING GUIDE FOR CUSTOMER SUCCESS VP’S

I started my journey in Customer Success seven years ago, and from the start one of the biggest challenges has been showing how Customer Success is different — from sales, customer support, marketing, etc. We have now matured enough as an industry, where the conversation is no longer about how it’s different, but how to build it.

This book is based on the Scrum book that impacted my life significantly as an engineer. It featured methods that enabled short phases, frequent revision, and iterative building. After reading the book, I remember immediately handing it out to my direct reports, not as a to-do list, but as a way for us all to speak the same language when it came to our work.

That is my hope for Farm Don’t Hunt, that Customer Success leaders will read the book and then hand it to their colleagues in the company and to their direct reports so that everyone is thinking about Customer Success in the same way. I want this book to empower VPs and leaders with the farming framework and an operating model for Customer Success.

WRITING A PRACTICAL GUIDE FOR CUSTOMER SUCCESS

I have divided the book into two major sections. The first establishes the farming metaphor for recurring revenue businesses, and what it means to “farm” your customers. The second section is a very pragmatic set of instructions for establishing and running a Customer Success organization.

Rather than simply share high-level ideas, this book aims to:

• Provide specific, clear, and actionable guidance on Customer Success for your team
• Connect Customer Success to specific business outcomes and revenue metrics
• Enable organizations to speak the language of Customer Success

I recommend that every team in recurring revenue businesses, whether you are building an organization or scaling the enterprise, take the opportunity to read this book. I hope you enjoy it.

Get your copy on Amazon!

Had a great time today talking to Seth Besmertnik, CEO and Founder of Conductor and a long time customer of Totango.

Seth is really engaging speaker, like you would expect from a young New Yorker with tones of passion. I enjoyed it a lot, I hope you will too.