I listen to podcasts when I commute. The morning commute is professional development time. I imagine podcast hosts and guests as dream colleagues–sharing tidbits and tips over the first coffee of the day.
Customer Education Labs is a podcast by Adam Avramescu and Dave Derrington. They both work in Customer Education for Software-as-a-Service companies, the type of software that requires a subscription instead of a one time purchase, and is often on the cloud. Not matter where you fall on the SaaS debate, Customer Education is a fascinating training phenomenon.
Customer Education falls at the intersection of training, marketing, technical support, and technical writing. It’s firmly in the Customer Success sphere of a technology company.
The CELABS podcast hosts are self-described data nerds and spent half of the first episode making the business case for Customer Education. They brought an interesting mix of studies by TSIA as well as data and the metrics from their own company.
The gist is that Customer Education leads to more customers renewing. That boosts profits. Customer Education can also lower costs because trained customers are more independent.
Adam explained how he did it at Optimizely. Listen to the episode or read my notes below.
Customer Education is crucial for SaaS Success
The Board of Directors at a SaaS company pays attention to two metrics:
Life time value (LTV): The net profit from the relationship with the client. In SaaS this increases with renewal. The cost of technical support for example also decreases the LTV.
Customer Acquisition Cost (CAC): How much it cost to get the customer to buy the service/product. This is often high.
LTV is critical to success. It hinges on having customers renew. Customers have to stay long enough for a company to recoup the CAC amount and renew even more for the company to make a profit. The net renew rate has to be over 100% for a company to grow.
SaaS companies work on retaining customers through updates that give them the competitive edge and Customer Success programs. These programs include different spheres: technical support, community management, project management and documentation, for example.
At some point Customer Success departments add Customer Education to the mix.
Adam recommends asking: Am I going to achieve LTV if Customer Success Managers are running around, reacting to customers and creating ad-hoc training?
Customer Education is an essential part of increasing LTV. Customer Education is important because it has a higher potential to scale.
According to the TSIA trained customers are 68% more likely to use a product. Training also take the pressure off other teams in Customer Success. Trained customers are 87% more likely to work independently. They don’t ask clog up technical support with newbie questions.
Linking Customer Education to Leading Indicators and Business Objectives
A big plus with web apps is you can collect data about your customers in and out of the application. Of course, you have to choose the right information to tie training objectives to.
If you tie training goals to renewal rates you missed the opportunity to have an impact at the business. You focused too far along the customer life cycle. Renewal and churn (how many people do not renew) are lagging indicators – the final metrics.
Optimizely Case study
Optimizely is a SaaS product that helps customers experiment with ideas and strategy by running tests.
At Optimizely, they found that they needed to identify the customer behaviours that lead to renewal.
The leading indicators that led to renewal:
- How often customers log in to the software
- How many experiments they start
- How many experiments achieve statistical significance
If the leading indicator numbers are high it means that the customer is getting meaningful usage from the product. They are more likely to renew.
At Optimizely, the looked at how trained and untrained customers fared on these 3 leading indicators.
Customers that consulted the knowledge base were 70% more likely to run an experiment than people who did not look at the documentation.
Customers who graduated from the academy (interactive elearning) were 15% more likely to run experiments than people who only consulted the documentation.
So customers who were trained were 85% more likely to run experiments than untrained customers.
That is a stat you can yell from the rooftops.
It was similar for the third metric about how many experiments achieved statistical significance. Basically, how many customers use the app successfully.
Forty-six per cent of customers who consulted the knowledge base ran experiment that achieved statistical significance.
Customers who graduated from the academy got a 17% bump, so 61% ran experiment that achieved statistical significance.
Finally, 92% of trained customers renewed versus 80% of untrained customers.
We can’t say education caused product adoption. It is clear that customer education correlates with product adoption. These statistics are the kind you can bring to a board and they should perk up their ears. It makes a case for sound, thought-out Customer Education.
I am interested in this issue because Instructional Designers have spilled a lot ink about linking learning objectives to business goals. But sometimes I think we over think it. Examples like getting people to log in are deceptively simple. I also appreciated the focus on leading indicators instead of the ultimate business goal.