Category Archives for SaaS

Where Does Automated Customer Benchmarking Make Sense?

A customer benchmarking engine is an emerging technology which uses an artificial intelligence approach to automate the reasoning that underlies data-driven benchmarking. Its benefits are discussed here, there, and elsewhere. Briefly, it uncovers comparative insights on customers which empower customer-focused employees to be more proactive, or which are shown directly to those customers as a premium information service. The business benefits include churn reduction, market differentiation, extra revenue, and deeper customer relationships.

But, automated customer benchmarking doesn’t always make sense. So where does it? Here I’ll summarize the criteria that we’ve learned from clients, trials, conferences, discussions, and analysis.800px-Street_Sign_with_ideas

Data. A single organization collects data on its business-customers’ traits, behaviors, business outcomes, and feedback, e.g., via surveys. Lack of data on customer outcomes narrows the scope of the insights, which may still have internal value for account management. Also, the organization should not be contractually prohibited from performing comparative analysis across customers, appropriately anonymized if the resulting insights are to be shown to customers. Evidently, the data shouldn’t be wrong or mostly missing.

Motivation. The organization should be B2B because consumers (B2C) are generally less motivated to improve, because they are less driven by external stakeholders. The same lack of strong motivation may be found if the B2B organization serves very small businesses, which are less prone to carry out performance analysis: if they are tiny but making money, then life is good, and if they’re losing money, there are more-urgent issues to address. Think of your small neighborhood restaurant, for example.

Also, the business process that the organization supports with its services should not be seen as a utility, meaning that customers only care that the service be available when they need it, and little or nothing more. Think of an internet connectivity service, for example.

A strong positive indicator of motivation is when customers themselves ask the vendor organization how they’re doing compared to other customers, where they could improve, etc.

Comparability. In principle, benchmarking only makes sense if the benchmarked entities are comparable. It makes little sense to benchmark an elephant against an armchair and an airplane. Comparable doesn’t mean identical or even similar, just productively worthy of comparison. For example, a business consultancy that brings the smartest people in the world to fix whatever problem you have, whether it’s a leaky roof, runny nose, or buggy software, won’t have comparable customers. An HR SaaS company does have comparable customers, even if its customers range from the Fortune 500 to startups and in between, because HR has common elements across companies of any size or industry: employee motivation, compensation, tenure, promotion, recruiting, dismissal, etc. Comparability is a judgment call, but most B2B vendor organizations do have comparable customers, otherwise it would be hard for them to scale their business.

Scale. A customer benchmarking engine is a powerful tool that scales beautifully with the number of customers. But, just as a search engine is probably overkill if you only possess 50 documents, or a receptionist is overkill if you have 5 employees, benchmarking 50 customers likely isn’t worth the trouble, even though the engine will do its job. Given the tradeoffs, we believe that about 150 is the right minimum number of customers for automated benchmarking to make sense.

It’s worth citing some false disqualifiers which are wrongly believed to invalidate customer benchmarking, automated or not. (1) Customers need not be concentrated by industry or segment, much less be competitors, since one is benchmarking the customer’s business process that is supported by the vendor organization’s service, not benchmarking the customer’s overall market performance. (2) The data suitable for benchmarking is rarely scarce. For example, if a given metric (employee satisfaction, say) is potentially insightful, then so is the quarterly change in that metric, since it expresses a trend. Ditto for the change when compared to the same quarter last year. Thus, the insightful metrics are easily tripled, based on changes over time, as we’ve discussed elsewhere. (3) Data need not be perfect; it never is. And the end-result of imperfect data is not a plane crash, but a misleading insight, which tends to be caught and discarded before significant action is undertaken.

Now let’s summarize the four qualifiers data, motivation, comparability, and scale in a single brief sentence:  A customer benchmarking engine makes sense for B2B organizations that generate rich data on its 150+ non-tiny customers as a by-product of its non-utility-like, repeatable service.

Who are these organizations?  B2B SaaS (software as a service), Industrial Internet of Things, BPO (business process outsourcing), Managed Services Provider, and 3rd-Party Administrator, are generally good matches if they fit the other criteria.

Automation doesn’t always make business sense, especially when the enabling technology lies outside one’s own organization, which circumstance always involves a coordination cost. But automation scales well and can enable things or insights that don’t yet exist. Apart from the benefits discussed elsewhere, this article shares what we’ve learned about where the emerging technology of customer benchmarking engines makes sense.

Raul Valdes-Perez

Customer Benchmarking Motivates Action

By Ed Powers, Principal Consultant at Service Excellence Partners, a Colorado consulting firm helping to improve customer loyalty and business performance at subscription-based technology companies.

Electric utility companies promoting power conservation programs discovered that simply informing consumers of their electricity usage relative to neighbors lowered overall consumption. This type of normative social comparison has produced the same effects in other domains. Why does this work? How can the idea be used in Customer Success?

Keeping up with the Joneses

Homeowners typically receive letters from the power company showing how many kilowatt hours they’ve used over the past month compared with other homes in the vicinity. In addition to bar charts, consumers see a “smiley face” if they’re doing well or a “frowny face” if they’re trailing the average. The mailers typically also include a list of recommendations for conserving energy.social normSurprisingly, this simple trick works. People change their behaviors when they see how they stack up against others. In multiple experiments run by the utility companies, providing benchmarks reduced overall power usage 2%.1 That may not sound like much, but across millions of homes the savings are substantial, helping power companies meet their government-mandated conservation goals. Similar outcomes from communicating descriptive norms have been shown in hospitality (reusing towels more often),2 voting (increasing turnout),3 and charitable giving (boosting the number of donors).4

What causes this behavior? Neuroscientist David Rock says subconscious social drivers are hardwired into our brains after eons of evolution.5 One primary driver is status, how we view ourselves in the “pecking order.” Social bearing means survival—whether it’s humans, birds, or wildebeest, members at the apex of the hierarchy are more likely to continue living and pass along genetic information. To aid our preservation, we reflexively perceive higher status as a reward and lower status as a threat. As a result, we savor outranking others and become anxious when we fall short.

Seeing rank expressed in numbers may increase the urgency to act. Neuroscientists have found that the brain uses the same circuitry to process number comparisons as it does to determine social status.6 The findings suggest we subconsciously use numbers to record social rank, and seeing status expressed numerically activates overlapping neural networks that may add fuel to our emotional response. Whenever emotions are strong, decisions and actions tend to follow.

Better business reviews

Many Customer Success Managers (CSMs) at Software-as-a-Service (SaaS) companies conduct Quarterly Business Reviews (QBRs) with senior executives at key accounts. Customers derive business value from deploying and using software, so a common objective is to ensure implementation milestones and adoption goals are met. Executive engagement and attendance at QBRs, however, is a chronic problem. Often CSMs do a poor job of describing how the software subscription impacts things like organizational productivity and decision making, but other times they simply fail to capture the attention of senior leaders.

Showing comparative data can help. Besides demonstrating progress vs. the customer’s goals, showing results relative to the customer’s own peer groups has greater impact. Executives are usually competitive people. When they see their organization is ahead of the pack, the fact suddenly becomes a talking point with their own bosses. When they see progress is behind the curve, they are more likely to push subordinates and make things happen. Sharing the tidbit garners increased attention and raises CSM status in the eyes of executives. “Information is power” is also true among top managers, and good intelligence is always appreciated.

The approach works at scale, too. Like the power company, automatically communicating descriptive social norms can move the needle in large populations of small customers. When SaaS companies show individual performance relative to benchmarks via tailored e-mails and in-product messages, they can influence behaviors in mass audiences without the need for personal contact. A simple change in how data are communicated can bump customer usage as well as CSM productivity.

New automation tools make the process much easier. OnlyBoth’s benchmarking engine uses artificial intelligence to automatically uncover readable, motivating, action-provoking insights and customer comparisons. CSMs can use this novel intelligence to nudge customers toward greater success during business reviews and for routine, personalized e-mail communications campaigns.

We’re naturally wired to compare ourselves with others. SaaS companies can easily capitalize on this basic human nature. And that would place them ahead of the pack.

References

1 Alcott, H. (2011). Social norms and energy conservation. Journal of Public Economics 95, pp. 1082-1095

2 Nolan, J., Schultz, W., Cialdini, R., Goldstein, N., Griskevicius, V. (2008). Normative influence is underdetected. Personality and Social Psychology Bulletin 34, pp. 913-923

3 Gerber, A. and Rogers, T. (2009). Descriptive social norms and motivation to vote: everybody’s voting and so should you. The Journal of Politics 71, January 2009, pp. 178-191

4 Frey, B., and Meier, S. (2004). Social comparisons and pro-social behavior: testing “conditional cooperation” in a field experiment. The American Economic Review, December 2004, pp. 1717-1722

5 Rock, D. (2008). SCARF: a brain-based model for collaborating with and influencing others. NeuroLeadership Journal

6 Chiaoa, J., Haradaa, T., Obyb, E., Lia, Z., Parrish, T. Bridge, D. (2008). Neural representations of social status hierarchy in human inferior parietal cortex. Frontiers in Neuroscience.