Are Your Customers Unhappy? Here's Help!

By Morris Panner, Chief Executive Officer, OpenAir, Inc.

Software-as-a-Service (SaaS) provides real-time interaction between application vendor and customer that traditional client server software vendors can only envy. It is one of the key benefits of the SaaS model. In short, the SaaS model aligns vendor and customer incentives and expectations far more effectively than traditional software.

When someone complains about a bug or a frustrating workflow, a SaaS provider can fix it rapidly and then virtually immediately provide the fix to every customer. The first person to find a problem is usually the last.

How can a company take advantage of this business model and turn it into a sustained competitive advantage? I submit that success here hinges on an effective customer support team and the appropriate alignment within the company to take advantage of this real-time feedback loop.

If you look at successful companies across the industry, you will see an inversion in the power structure of the company. New sales are important, but you will see an almost cult-like emphasis on existing customers. Some might say that the previous sentence could characterize any successful company in any industry. At the most superficial level, that is true. Everyone talks the talk of valuing existing customers.

But how many companies would say what I recently heard one successful CEO in the industry say: "If I had to choose between devoting development resources to keeping existing customers happy and making new sales - now mind you, I hope I never have to make that choice - but if I did, there is no question that I would choose to keep my existing customers happy over making new sales."

What is going on? How many traditional technology companies would really make that choice? Given traditional business models around software and hardware sales, how many really could even imagine being faced with that choice?

An unwavering commitment to customer success must permeate a company culture, but the tip of the spear for this new effort is the customer support department. No longer a sleepy department dedicated to retrieving lost passwords and telling customers that bugs will be fixed in Version 8.2, currently scheduled for October '07. No, the world has changed and the customer support department is leading the way.

Most companies are unprepared for this new role. Few companies are designed to make customer support an integral part of the company workflow. Few companies are willing to make absolutely everything from engineering to sales revolve around customer support. Nevertheless, to be successful, that is exactly what a company should do.

This article will focus on this new role and bring out the following conclusions and recommendations, among others: How do you create a great customer support team? What kinds of talents and capacities are desirable? How do you create the right dynamics between support and the rest of the company (sales, services and engineering) so that the company truly revolves around the customer experience? How does this new customer-centric experience change product development and R&D investment when the existing customer base has such a powerful voice in allocating scarce resources?

How to Create a Great Customer Support Team

The first and most important step to build a great customer support team is to recognize and communicate the fact that customer support is the most important part of the company. That means customer support inquiries need to be treated as a real-time feedback mechanism to be watched as closely as any metric in your company. Here is an easy exercise. Try putting all senior executives on the email distribution list for all customer support requests. Don't expect the executives to be in charge of solving the problem, but watch how it changes the awareness of what is going on in the customer base. Have your senior executives start thinking of themselves as traders (watching the overall health of the market) or politicians (watching the polls to gauge public opinion). The rhythm of the customer support feedback starts to create a real-time feedback loop and helps you answer the question - how are we doing? - with honest and customer-driven feedback.

Once you do that, everyone will sense a problem long before it has time to develop into something serious. It will start to influence everything you do in the company. You will wake up everyday to an unfiltered referendum of customer opinion.

Along with establishing customer support as the pivot of the company, the next step is to empower the customer support department to make intelligent decisions. We give customer support access to a great deal of our business data. For example, each person in customer support has access to all of the key revenue as well as other metrics about each of our customers. They have access to virtually any detail about our business relationship with a customer. Second, customer support creates the messages that go to our customers about our product. Engineering, product development and marketing channel their messages via customer support. This ensures that we are not promising something that customer support either doesn't understand or can't explain.

Once you have set up the right processes and conditions for success, the next step is to hire the right people. One thing you may have noticed. I didn't say hire and then set up the right processes. I said the opposite. It is very hard to hire great people and expect them to success without enabling their success. That is why it is so important to have the right processes and conditions in place. Once you do, hiring is still a massive challenge. You are looking more for a type of person than a particular set of qualifications. Remember a lot of what made a great customer service representative in the past - stonewalling clients - just won't work in the new environment. Think of the advertisements for Capital One Credit cards and you can start to get the picture of what many former client server software customer service reps had to do. It was the way the business worked. It had to. There was just no way to rapidly and cheaply fix a customer's problem.

Now with SaaS changing that dynamic, you need to look for people who are willing to engage customers and solve their problems. We have actually changed our titles from "Customer Support" to "Customer and Application Support" to reflect the fact that our support representatives had to solve customer business process problems as well as provide standard customer support. All of this makes the hiring process challenging. Like so much in SaaS, we are breaking the mold and creating a new path in so much of what we do.

How to Create a Customer-Focused Company

Putting the right process and people in place is all for naught, unless the company changes. A company has to create and foster a dynamic between support and the rest of the company (sales, services and engineering) so that everything truly revolves around the customer experience. A strong customer support team will drive toward that outcome, but it can't do it alone. Moreover, it will require great effort on the part of the customer support team and the appropriate attitude in dealing with the rest of the company. There is an old saying that with great power comes great responsibility and that is particularly true for the customer support organization in the customer-focused company.

In particular, the customer support organization has to appreciate its power and the many competing demands there are for corporate resources. First and foremost is the ever present need for new sales. All companies talk about the trade off between new sales and servicing existing customers, but this becomes all the more pressing in the new world of SaaS.

To solve some of these problems, we cheated a little bit. We promoted the person who used to oversee customer support to VP of Sales and Marketing. That is how much we valued sensitivity to current customers.

In other settings where that move may not make sense, you need to create a collaborative culture where all sides of the equation need to learn to listen to one another. As much power as customer support has, as a department it has to realize that one of its key responsibilities is to try to resolve customer challenges by helping customers use the application properly rather than instantly look to engineering or services to change the configurations or rewrite code. That is not designed to put off customers. On the contrary, it is designed to play to one of the strengths of the SaaS company, namely, the virtual best practices community created by the users of the application.

What is a virtual best practices community and what is its significance? Think of it as the ability to hold a free user group conference every day. You get to see how your best customers use your application. You get to ask them how they would recommend others use it. And, finally, you get to ask them about and deliver virtually real-time improvements to the product so they can be more successful.

Then, your customer support team can take these insights - in aggregate, not in any specific or identifiable way - and help others use the application in a more productive way. One of the first responsibilities of the customer support team is to enable other customers to benefit from this expertise. Although this ends up facilitating the optimal use of engineering resources, in other words, we aren't developing bespoke solutions for different companies without a clear need, it also enables customers to rapidly and effectively get the most from our application.

Effective customer support also is critical for ensuring that sales can use the existing customer base as a reference. Ultimately, all elements of the company benefit from this focus and quickly support it.

Customer-Centric Management and Research & Development

As should be clear, managing a customer-focused engineering effort is a bit harder than it sounds. On its face, what could be easier than managing a customer-focused engineering department? We all want to provide features that our customers want, don't we?

In short, I believe that although all of us want to think this way, relatively few of us do this.

I will submit that most software companies actually create features based on relatively little evidence of what their customers really want.

Imagine the typical product development process. A sales representative or a marketing person says that they have heard that "Feature X" is really popular with the "Market." Maybe the marketing department has even done surveys or focus groups on "Feature X." The company, committed to satisfying customers and the market, begins a concentrated effort to develop Feature X. Feature X is not simple - that is its strength. It will really transform the way the customers do business. Deadlines slip, but lo and behold, after six or nine months of concerted effort, the company release "Feature X."

Customer feedback is terrible or, more accurately, non-existent. It turns out no one needs or wants Feature X.

How Did This Happen?

It all goes back to the development cycle of enterprise software - it is hard to release bits and pieces of code, but one is forced to launch a large effort. As in anything, small errors over a large product result in a massive problem.

It also relates to the fact that the focus for this product enhancement came from people who are talking to prospective customers and not actual customers. In our business, actual customers request enhancements on an ongoing basis and when we include them we have a high degree of certainty that the enhancement will be both required and used.

As a result, the bulk of our development effort is oriented toward existing customers. That doesn't mean we are not creating new code. It means we are creating code that customers are directing.

At this point in the argument, someone always asks - how do you move the product forward? What about new product development that builds a new market? All well and good, I respond, but recognize you are taking a completely new bet with a new product and a new market. That isn't necessarily wrong and, in fact, it may be a wonderful way to boost growth, but it means that you are turning aside opportunities to exploit existing growth in your current market. If you want to maximize growth in your current market, focusing on existing customers and their evolving needs, is the best bet for deployment of capital.

Of course, if you believe you have maxed out your existing market and there is simply no more growth there, then investing more capital makes no sense. But, and this is the big but, your next move is into a new market with a set of risks that come with any effort of a new product in a new market.

Put that way, it is much harder to make the argument for a completely new product line, since most markets have a long and profitable way to go. Customer-centric development almost always ensures an optimal return for effort in research and development.

Some criticize this as creating a stale culture where existing customers have too large a voice in allocating scarce resources. On the contrary, your customers remain your very best source of incremental innovation and your best chance of providing a product that appeals to an ever-expanding sector of the market.

Conclusion

An effective customer service team is the core strategic asset of a SaaS company. Implementing a disciplined approach to building and improving the process and team will reap important benefits to the SaaS company. The SaaS software company already holds many strategic advantages - in terms of development methodology, deployment and alignment between customer and vendor - that are greatly improved upon by a focus on customer service. Customer service will change the relationships among all the different departments and will ultimately result in an incredibly successful company.

How will you know you are moving in the right direction? Here is one suggestion. Try and conduct an informal poll to determine who the MVP of the company is? If it is someone in customer support or in a customer facing position, you will know you are on the right track.

About the Author

Morris Panner is the CEO of OpenAir, a Boston-based SaaS provider of business process software for consulting firms. A graduate of Yale University and Harvard Law School, he has spoken at a wide-variety of industry events, including SIIA CNET and IBM Conferences, and written widely in this area, including for AlwaysOn Network. Morris has been featured in the NY Times "The Boss" Column and in Fast Company Magazine, among others. This article is excerpted from his forth-coming book, "Customers, Markets and Democracy." For article feedback, contact Morris at mpanner@openair.com