Best Practices for Building Customers for Life

Creating customers for life! That is the goal of customer success organizations: creating a journey, experience, and value that will shape the customer’s belief system. The focus on creating life-long customers puts a huge amount of pressure on renewals and sales. However, sometimes in the quest to reach this goal, customer success organizations take short cuts and employ questionable tactics.

These short cuts might seem like a way for your company to improve renewals and sales growth to help  reach your ultimate goal, but in the long term it can hurt your relationship with customers and your reputation to prospects. Our sense of duty to do what is right for the company and to do what is right for the customer can put customer success in a tough spot. Sometimes, this obligation to duty can cause ethical dilemmas.

There are three common ethical dilemmas that we see repeatedly in customer success. These may seem like tactics to help drive company revenue, but ultimately they will hurt your ability to retain customers long term. Are you and your customer success organization making these same choices?

Renewals and Radio Silence

Across the industry, 78% of customer success organizations have the charter of renewals, as you can see in the figure below. 

Types of Customer Success Organization Charters (Expand image)

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Some organizations start their renewal process 90, 120, or 180 days prior to contract renewal. Many contracts have a communications renewal clause which states that the customer has to give 30-day’s notice of cancellation or there will be an automatic renewal.

We see companies use a common tactic which is leveraged to ensure that the customer renews, commonly known as the “radio silence” tactic. The radio silence tactic is most commonly used with challenged customers that are problematic and at risk for churn. For the purposes of this blog, that’s the scenario that will be used.

In the radio silence tactic, the customer success managers are advised not to inform the challenged customer that their contract is up for renewal. In addition, the company stops regular communications and engagement with the hopes that the 30-day notification window will pass, and the automatic renewal will kick-in. This results in the challenged account being forced into another renewal.

Here, the customer success managers are fulfilling their ethical duty to their company by following their recommendations. However, it conflicts with the ethics of the greater good in which it does not help their customers. This is especially true if the account is challenged and the customer may not believe they are getting good value.

Who benefits from this tactic? Certainly, not the customer, as they are potentially forced to renew by contractual obligation and not because of the value they received. The technology provider did not forewarn the customer of the pending contract renewal on purpose in hopes of preserving the revenue at the potential expense of the customer.

In this scenario, there are competing and conflicting dilemmas between the two ethics. The first being the ethics of duty the customer success manager  has to their company and the second being the ethics of the greater good the customer success manager has to  take care of their customer. While this ethical dilemma could be seen in multiple ways, we’ll call this the ethics of the greatest good, which is also known as utilitarianism.  

If the customer is not benefiting and getting good value, you are not creating customers for life. If you as the technology provider are profiting but the customer is not receiving value, then the ethics of the greatest good has been compromised. Furthermore, if the customer is not benefiting from the practice of “radio silence,” you are not creating customers for life. Short-term profits do not always lead to long-term customers when your intent helps only your company and not the customer.

Why the Shame Game Is a Loss for Everyone

Companies are always looking for a way to make it better and easier for the customer to renew. However, is “the better and easier way” designed for you as a technology supplier or your customer? Let’s talk about the ethics of virtue.

The ethics of virtue focus less on the ethics of duty to your company or ethics of the greater good. The ethics of virtue focus on your motives. When creating customers for life, are you leveraging aspects of truth, justice, equality, and other virtues for the betterment of your customers? Or are you using negative emotions to shame customers into renewal?  

We at TSIA recently experienced the “shame tactic” firsthand. A renewal alert banner popped up at the top of a software program, which is something we’ve seen across the industry.  Unfortunately, this particular renewal alert was worded in the form of shaming and insinuated that TSIA had not paid the renewal. The technology provider launched a bright red banner for everyone at TSIA to see that read, “You have an overdue invoice. View Invoices.”  

This presented many problems internally at TSIA because our company had successfully paid all the invoices. Employees contacted their management teams and we spent time and effort to look into it. Upon further investigation, the technology provider admitted that they were experiencing a glitch in their software.

As a customer, this was not a positive customer experience, nor did this action create a customer for life. Instead, efforts had to be expended to meet with the technology provider to get a fix to remove the banner and then reaffirm to internal employees that all financial responsibilities had been completed.

Looking at the ethics of virtue, somewhere in the technology provider’s belief system they believed they were doing something good that would result in a faster response for renewal. But was “the good” benefitting themselves or us as the customer? Nothing good from a customer experience came from their decision to launch an enterprise banner across everyone’s screen suggesting that bills were not being paid. That message from the technology provider could have been directed to the Executive Sponsor, business owner, or finance owner. There was no need to blast a banner across every licensed user.

As a customer success executive, you must be ready to fight for ethics of virtue. Are your motives aligned with a great customer experience or solely for your bottom line?  Do your processes make your job easier but create a terrible customer experience? If you do not think about these tactics or processes from the customer’s point of view, then your company will pay the price with churn and no references.

Overselling Leads to Loss of Loyalty

Within customer success organizations, we are seeing a growing responsibility to own parts of the charter of revenue expansion which may include lead generation, upsell, and cross-sell. Difficult and challenging targets are set, goals established, and a number is set to achieve in order to hit the Dollar Renewal Rate (DRR). Challenges can occur that, if not monitored carefully, will comprise the ethical dilemma of duty.

This is where our values of duty compete or conflict with the ethics of virtue and ethics of the greater good. For customer success, this results in upselling or cross-selling to a customer that does not need it in the short or long term–or it is not in the best interest of the customer.

This can be especially difficult on customer success managers, who might be tasked by  leadership to upsell or cross-sell to a customer when they know it is not in the customer’s best interest. It is important to recognize that customer success managers  have their own personal ethics that may conflict with business directives and objectives.  

Customer success leaders must be careful not to push numbers for the sake of pushing numbers, especially if the customer does not truly benefit. Selling a customer additional “stuff” that is not needed does not create a satisfied or loyal customer and will put you on the defensive. The customer will eventually realize they are not getting value from a sale they did not need and their trust with you will be compromised.  

Bottom Line: Serving the Greater Good Is Good for Business

Creating a customer for life is a balancing act of ethics of duty, virtue, and the greater good. Make sure you as a customer success executive are not putting your customer, your team, and your company in a position that challenges these ethics. Once you identify that you have done this, the best way to move forward is asking yourself, “Does this help or hurt my customer?” This will likely help guide you to make the right decision to deconflict competing ethics and values.

It is crucial to invest time in teaching your organization about the ethics of the greater good. Teach and lead your teams to understand scenarios and situations that benefit the greater good of both your company and the customer. If there are ethical dilemmas, show them which one is correct and leads to customers for life.

Do your actions equate to building a customer for life? If not, then it is time to revamp the business model, processes, and procedures to ensure that the entire organization is on the same page–the page of the greater good!