5 common misconceptions about CLG
Customer-Led Growth is garnering increasing interest. My own interest goes back fifteen years, when eight years into my journey as founder and CEO of SaaS company Clicktools, I and my colleagues were looking to improve our growth, which could never be described as spectacular. Our breakthrough came when we redesigned our entire customer lifecycle and ideal customer profile - the first steps on our journey to being truly customer-led.
The underpinning philosophy was simple but powerful: how can we help key roles in our target customers at every stage in their relationship with us. That led us to build a buyer and customer journey from the outside-in, a rare thing back in 2010. Much of what is in my book is based on that experience, supplemented with what I have learned in applying it with the companies I help.
I have a simple definition of customer-led growth: “Everything an organisation does to deliver measurable results to profitably win, satisfy, retain and grow its chosen customers better than the competition.” More on that here.
One of the key ideas is summed up in the first word: everything. And that is where I want to start in exploring the misconceptions that plague CLG.
ONE: IT’S ABOUT REVENUE FROM EXISTING CUSTOMERS
Yes and definitely no! Growing revenue from existing customers is definitely part of any CLG implementation. Any well run B2B SaaS company will quickly reach the point where revenue from existing customers is the largest revenue stream. For me, CLG goes beyond that. It is about making the delivery of measurable results to customers the red thread that connects all go-to-market activities, including product. Once a company figures out who (key roles) it sells to serves in the companies it targets, that becomes the red thread. That is the basis of what marketing communicates; it is what sales sells; it is what the product delivers and it is what services and customer success enables. Its a practical, proven way of building a customer-centric organisation and culture.
This singular focus on measurable results for key roles is hugely powerful. It is something that all teams can rally around, building alignment rather than friction. It resonates with all customer stakeholders as it focuses on making them successful in their jobs. It allows the different teams to apply their expertise and creativity in a framework that unites the customer lifecycle.
TWO: IT’S THE RESPONSIBILITY OF CUSTOMER SUCCESS
Definitely, definitely not!
Customer success capabilities are crucial to customer-led growth but to place responsibility for CLG with any one team is the biggest made. My friend Greg Daines identified 23 different reasons for churn adding the responsible departments for each reason. CS was not the biggest contributor to addressing churn. I think this is obvious if you take the view that acquiring customers that you can deliver measurable results involves all teams involved in go-to-market. Put simply, the evidence shows CS is not responsible for CS!
There is only one person who can be responsible: the CEO. Clicktools would not have achieved the improvements we did if I had not driven the change. Yes, every department head had a crucial role to play and we would have failed if they had not played a full part. But I still had to persuade, cajole, encourage and sometimes just be plain bloody minded!
To make CLG work involves a change of mindset. Outside-in design means always starting with the customer. We scrapped our lead and opportunity processes in CRM to reflect buying activities. We changed the way we measured our performance, including introducing a company-wide bonus based on revenue growth and customer satisfaction. We trained people in the new ideas and approach. Most significantly, we involved as many people as possible in the redesign.
The company had to know we were serious about the change and that demanded my active involvement at every stage. I will not work with a client on implementing CLG without a conversation with the CEO. If she isn’t fully supportive; it just won’t work. I’m wasting my time and they’re wasting their money.
THREE: WE’RE PRODUCT-LED; WE DON’T NEED CLG
Oh yes you do!
The mistake here is a category error. I think PLG is a powerful way of delivering many of the concepts of CLG. I see them as complimentary, not competitive approaches, as I explain here.
Many companies that adopt PLG as a key part of their strategy exhibit many characteristics of being customer-led. They have to be laser focused on the people that use their product. They have to make buying, using, achieving results and renewing easy; that’s only possible with the deep understanding of customers that is a centrepiece of CLG.
Many PLG implementations I see have one big failing, which to be fair is shared by the vast majority of B2B SaaS companies. They are not good at tracking and reporting the measurable results that underpin the initial purchase and that are essential for renewal and growth. Remember, measurable results for key roles is the red thread of CLG. It is a lesson many PLG companies need to learn. Adding this to their armoury would extend the overlap between the two approaches.
FOUR: IT’S NOT MEASURABLE
Oh yes it is. It’s just not very commonplace.
CLG companies have metrics that inform performance in two areas:
The measurable results customers achieve from using your products and services.
How well their company performs
The former is exceedingly rare; the latter is commonplace. Metrics is one of my pet peeves about customer success. Ask an audience of CS leaders and CEOs how they measure customer success and they will typically reply with metrics like NRR, GRR, Logo Churn and NPS. They all matter (although I’m not sure about NPS) but none are measures of the customer’s success. The apostrophe matters. Research from my friend Greg Daines shows that just measuring the results customers achieve increases retention propensity SIXFOLD! Imagine the financial impact of that on your business and its value. Yet almost nobody measures the results customers achieve. They put it in the too hard bucket and stick to stuff they can measure. Not tracking the measurable results your customers achieve is failing both your customers and your company.
I am about to publish a framework for CLG metrics. Watch this space.
FIVE: IT’S JUST ANOTHER FAD
Time will tell but I genuinely believe not. Here’s why.
Focus on the customer is not new. Its has been a successful strategy for many companies for many years. I have used the definition I quote above for over 30 years. Whilst I have tweaked it a few times, the essence of a company-wide approach has never changed. Commentators wiser than I have extolled the importance of being customer led. Peter Drucker, the esteemed management thinker said “The purpose of a company is to win and keep a customer”. He also said “The customer rarely buys what the seller thinks it selling.” Both play to the message of putting customer results at the centre of go-to-market.
The other reason I think it is not a fad is that it works. When we implemented an early version of CLG at Clicktools, it had a marked effect:
ARR increased 180% from both improved new business and retention
Quota attainment grew 150%
Lead:Win ratio improved from 1:18 to 1:12
Cost per lead fell by 24%
Average order value increased seven-fold.
There is no one way to implement a customer-led approach but for B2B SaaS companies, there are a few pointers; frameworks that have proven successful for me and the companies I work with.
I do not think I was a massively successful CEO but the changes that underpinned these improvements I am proud of. They helped us to a decent exit. So before you write off CLG, think about the impact improvements of that order would have for your business.