Episode Transcript
Speaker 0 00:00:05 We all want a business like Netflix or Amazon prime businesses, where once a customer engages with them, it becomes automatic and a part of their lifestyle from then on. But how do you build that forever transaction? I'm Robbie Kellman Baxter, and I have been studying subscription and membership models for nearly 20 years in this podcast, my guests and I share the secrets and strategies of the membership economy. Join us for subscription stories, true tales from the trenches five years ago, I spoke for the first time at Gainsight's pulse conference and was intrigued by the way, the passionate community was investing in a new approach to customer interaction, which focused not on just solving the problem, but on optimizing the outcome for the customer, they called it customer success. Today's guest is Nick Mehta, CEO of Gainsight often called the customer success company. It's kind of a meta conversation.
Speaker 0 00:01:08 Nick is both an expert on the emerging discipline of customer success and the leader of a SAS company that is dedicated to a forever promise of helping businesses develop deep and lasting relationships with their customers. Today, we're going to go deep on the discipline of customer success, what it is, why it's growth so closely aligns to the rise of subscription-based businesses and SAS specifically, and how a customer success orientation can help formatically increase your customer lifetime value. A key metric in the membership economy. Anyone who wants to build a forever transaction with customers can learn a lot from Nick and I'm thrilled to have him on the show. Welcome, Nick.
Speaker 1 00:01:57 Robbie is so great to be here. Thank you so much for having me
Speaker 0 00:02:01 The basics. How do you define customer success?
Speaker 1 00:02:04 We believe customer success kind of got created out of this transition that you talk about all the time to the subscription business model and in more transactional business models, the way to make money, it would be to build stuff and then to go sell it right. And that's kind of the two motions most companies got great at, and that's obviously created a lot of the economy that's out there, but in a subscription business model is as you know, better than anyone. If you just build stuff, sell it. And then your customers leave. You don't make any money because all that money comes over time and the lifetime value of the customer. And so this idea of what is my retention rate and very specifically, what's my net retention rates, all those existing customers. Are they drinking? Are they growing? And they're leaving? Are they saying that's where the economics of any subscription business, whether it's SAS or cloud or subscription e-commerce or financial services, any subscription business, the economics are about net retention.
Speaker 1 00:02:53 So how do you improve net retention? Well, we'd argue it's customer success. It's making sure your customers been onboarded well that they're using your products and services while they're using all the new stuff. Like the really cool stuff that you're innovating in. They're seeing and getting the value from your service. They were hoping for, they become an advocate and in that process, they stay with you. They spend more money and they tell their friends and to do that customer success is all about creating a new business process in your company. So you still build stuff, you still sell stuff, but now you got to make sure your customers are successful. Part of that is building a team in some companies like a customer success team. Part of that's automating the customer journey. Post-sale part of that's really like using analytics to understand how your customers are doing and Gainsight builds products for all those areas.
Speaker 0 00:03:39 How is that different from customer support? So a lot of organizations say, well, we already have customer support. We already have account management. It seems like, is this a new thing? It seems like stuff that we've always done. Is it just semantics?
Speaker 1 00:03:50 That's a very natural question. So it's more of an evolution and it's really support and account management kind of evolving into something new. So in the old world to go back to that transactional business model, I build something. I sell it to you. What was my job after that? Well, really two things. One is, if it breaks, you call me that's the customer support, right? Like your refrigerator refrigerator breaks, you call the Maytag repair person, right? And then when you need to buy more stuff, then we chat, right? That's the account management job. Those are kind of like the two jobs that existed, but inherently, both of those jobs were a little bit more reactive because at the end of the day, the customer's bought their stuff and they're kind of stuck with you and they spend all their money upfront. But in the new world, you've gotta be proactive after that customer journey.
Speaker 1 00:04:31 Right? Like, think about how sales works, sales. Isn't reactive. They're not just like, Oh, okay, well call us when you're looking to buy salespeople, don't typically do that. I mean, maybe some do, most of them are like, well, let me check in with you and let me take you through the process and let me help you. But actually after the sales, somehow we all turn really react. And in the subscription business model that doesn't work because if we're reactive, then that customer is not going to get value. And they're going to go do something else and we're not going to make any money off that customer. So we've got to be proactive after the sale. So customer success fundamentally is taking all that empathy and kind of customer centricity of support and all the business orientation of account management and turning them into this proactive business.
Speaker 0 00:05:09 Yeah. That's so smart. And the big idea that I hope people take away from this is that the heavy lifting starts at that moment of transaction. Like you think it's, I build this stuff and sell this stuff and now we can relax and celebrate, but it's like, no, no, that is the starting line for the real world.
Speaker 1 00:05:25 We always joke Robbie that like, you know, in, in, in, in like, uh, B2B sales organizations, there's, there's sort of this image. Some people do it. It's it's sometimes it's just a story about when you close the deal, you ring a gone, like that's actually like a common before, like you have a little gong in your office and you're, Oh, we just closed that deal. Right. And you celebrate and exactly what you said, like that's the beginning, not the end, but in the old transactional business model, it was kind of the end. You got the money, the customer kind of stuck with you. It really was the end, but it is totally the beginning. You said it well, it a very different culture
Speaker 0 00:05:58 Too, because totally if that's the beginning, then maybe the sales, person's not the hero or maybe not the only hero.
Speaker 1 00:06:04 Not exactly. That's right. And you know, it's interesting going back to your book, I mean, you, it's not a one and done thing. It really is a forever thing. It's the infinity loop, all this stuff you talk about because it's like forever that you have to be delivering value. It's not like it ever ends. And so you're totally right. The sales person, isn't the only hero they're still important. Sales is still really hard. Marketing is really hard, but it's also very hard to get customers to value over time.
Speaker 0 00:06:28 Speaking of the hard work of providing value over time, one of the things that you've done, I think really, really well is build community. And when I spoke at your pulse event a few years ago, I was completely blown away by the intensity and passion of the customer success professionals who attended and how this felt like their reunion and their annual meeting and their, you know, secret club all rolled into one. And it was really interesting to me because I started thinking, wow, this is almost like an association of its own. And I was curious how you see the role of community, both for Gainsight as it's been a key part of your growth, but also as an element in ensuring customer success.
Speaker 1 00:07:15 That's such an insightful question. Yeah. I could talk for hours about that. So yeah, for us, um, our pulse community, which we intentionally did not call like the Gainsight community, cause not about our technology, but actually about the whole career of customer success. It's something we've been really fortunate to be a part of. You know, we launched it in 2013 and you know, 300 people were there and the last in-person event, which now feels eons ago, may of 2019, we had 6,000 people there in San Francisco at the Moscone center. And you know, last year we did it virtual, it had 23,000 people and you're totally right. It's not just the numbers. It's the energy people really do feel like I've talked to thousands of them and they say, well, the biggest thing is, it's not just the content or the speakers. It's just feeling like I'm not alone.
Speaker 1 00:07:56 I'm amongst my kindred soul spirits, right? Like these are, it's a reunion. It's like the high school reunion, whatever analogy you want to use, all of them work. And we do try to bring our culture in some of our kind of silliness to it, which helps. And so that, that community building both in that big event and then lots of, I mean, I've hosted, you know, thousands of networking dinners and virtual events and everything you can imagine. And people just love meeting other people. It's just so incredible how, how consistent that is. And I think translating to your second point, then what we've learned is not only is it relevant for our business, we think community is one of the most critical plays in customer success, because one of the best ways to make your customer successful, isn't just to tell them what you think they should do or share with them the best practices it's to let them meet other people and get other people to learn from.
Speaker 1 00:08:42 And we all know this in our walks of life. When you know, when you're going to try to, you know, you've read so many books now somebody wants to come to you and write a book. You know, they, they learn a lot from you. So like the idea of learning from your peers versus like, let's say learning from the publisher, the book, I'm sure you can learn from a publisher too, but learning from peers, there's something that's just intangibly valuable about it. And it's also, again, this feeling of not being alone. So many of our customers, when they think about customer success, community building is a massive part of it.
Speaker 0 00:09:08 Really interesting. And you mentioned that last year, this past year, the 23,000 was digital virtual. How do you keep up the energy in a virtual event to keep building that community?
Speaker 1 00:09:19 It's something we think about all the time. Cause we have done a ton of in-person events and we love them. Like it's not just there, we're good at them. And they drive business and our customer liked them. We actually enjoy them ourselves. So we absolutely are passionate. We were planning our next one, which will be virtual again, unfortunate. Cause obviously the pandemic moves on. And when we think about virtual, one of the core things we wanted to do early on is not have it feel like a webinar. I mean, all of us have been on webinars and they're fine. I mean, you multitask, you've got your slides up there, do your work. I mean, that's fine, but that's definitely a pretty low bar. And so we, our first virtual event was in the throws of the beginning. So we actually were supposed to have our in-person pulse 2020 conference in may of 2020.
Speaker 1 00:09:59 And in you forget, it would be hard to do an in-person event in may of 2020. And so we actually literally had to like figure out how to get out of all the in-person stuff, which has millions of millions of dollars. And then we had Nick figured out how to do a virtual event and it was one of the first out there. And I gotta say, I was proud of what we did. Like we tried to bring a lot of, one of our values, which is childlike joy, like bring the kid new to work every day. That's one of our values. And we always do narrowed person events, which is like, we've had, you know, vanilla ice on stage. I've wrapped very, very misguidedly I've rapped on stage before I'd seen that Disney. You can't un-see it once you've seen it. So we did a Disney musical kind of a parody about customer success on stage.
Speaker 1 00:10:39 So we've done all this kind of fun stuff in the past. Right. And we were like, how do we bring that to virtual? And so we did, we actually like, we did a whole music video opening, which was really fun with our customers, but we also tried to like leverage some of the things you can do in the in-person format. So for example, you know, really tried to make the customers when we were filming them, like include their home. So we were a big part of it. We called it pulse everywhere, but a big part of his pulse in your home. Right. And so have them actually like bring their kids on the camera and in the sessions, right. And like show around, like what's the room like, and this is the beginning of a pandemic with all that stuff was pretty novel. So we did some of that, which is great.
Speaker 1 00:11:14 And then we did another event and the big event in the fall around product people kind of getting better at customer experience. And again, really, really effective did another funny video and just trying to bring our own energy to it. Now that the next frontier to me is networking because as we talked about community building and Bart, a lot of it's meeting your peers. I think that's a little harder in the virtual world, but shouldn't be impossible. So we did a virtual event for executives in the summer, probably like July, August timeframe. We call it CCO summit. It's basically for like chief customer officers. And what we did was instead of having content, like there's a tiny bit of content. And then what we did was went into zoom, breakout rooms and we had facilitators and basically facilitated peer peer discussion. It's not as fun as sitting around with coffee around a campfire or something, but people really liked it that we did in Europe as well. And so we've been doing some of this, like using the breakout room functionality of zoom or whatever technology you're using and trying to let people connect with each other. So I think there's a lot more we can be done. And I think technology is innovating too, whether it's zoom or the hundred other platforms that help in virtual events
Speaker 0 00:12:15 Really interesting, useful tips for almost anybody who's trying to build relationships in this crazy time. I might change gears a little bit and talk about how customer success as a role has changed over the last few years, what it was five years ago versus what it is today and kind of the discipline of customer success. I mean, that was, again, something that really struck me, you know, I think I spoke five years ago, the first time I
Speaker 1 00:12:40 Really early,
Speaker 0 00:12:41 Yeah. Really early. And it was like, what sort of amazing it's like, wow, there's this whole discipline of customer success professionals that is rising up. And it wasn't totally clear who that was going to be or what the profile was. It reminded me of like product management in the nineties, which dates me a little bit, but you know, it was like, you know, you could be a product manager coming out of engineering or coming out of marketing or just say you were one. And now, now it's a very clear discipline. I think the same thing's happening with the discipline of customer success.
Speaker 1 00:13:12 That's exactly right. Yeah. And it's really, has I like the word discipline. I think that's a hundred percent true where it started out as sort of people are doing support and there were maybe changing their LinkedIn title. Cause there's this cool new title, right? Like that's always how things started. People just, Oh, that's a good title. So I'll get more job offers or whatever. And so you had a lot of like support people kind of dressed up as customer success or a, to your point account managers dressed up as customer success. And that's great. That was a starting point. And it wasn't clear, like it wasn't clear that it was a job and how do you define it and stuff like that. And then we tried to help obviously our conference and some of our books and not just us, lots of other people have contributed in really professionalizing it and taking it through to the point.
Speaker 1 00:13:49 Now, if I go to the end where like, you know, last year LinkedIn said it was like the six most promising job in the world and it really is a career. Lots of people come. I was just speaking at like some Harvard business school thing the other day. And like, they were like talking about how many HBS grads go into customer success. And a lot of people go, yeah, yeah. It's interesting McKinsey, Bain, BCG go into customer success. It's like a real career at various entry points, which is awesome. And it's been professionalized, like you said, you know, it kind of went from that sort of artisinal to that more scientific kind of, you know, structured role, right? Like every job, just like you talked about the product management. And so I think there's a few phases. People have gone through there's this sort of starting point where people have changed the title, but not change anything else. So they were kind of more right. More reactive, more
Speaker 0 00:14:34 Support customer
Speaker 1 00:14:36 Success. Right. But it's not actually any different. And then what happened for a lot of companies that they went through kind of these three different phases of maturity, one phase was just like, okay, our job is to like proactively get customers to use our products and technology people refer to as adoption, like adopting the technology, right. Using it, which is great. And then people kind of figure it out. Well, most people don't use technology just to use it. They use it to actually get some business value, right. Particularly in the B2B world, right. Where they're, they're like buying a product because it's going to help grow their revenue or reduce their costs or make their employees happy. And so there was kind of this shift in focus from like, okay, it's just the beginning people to use it to like, okay, let's actually get them to get value from it and see the value from it.
Speaker 1 00:15:19 And then eventually actually what the cutting edge frontier is, I want to get my customers to be like experts and mature and really great at using it. And like, so that so much so that they they've sort of made it ingrained part of their company and their identity. But if we can, some of that stuff is somethings that their habits exactly. Think of this stuff we use where it's so habitual that we don't even think about whether it's valuable or not. It's just part of what we do. Maybe we're doing that right now with zoom software that we're using right now. Most people don't think about things like this anymore. It just is what it is. And so how do you get to that point where it's a habit? And so there's this sort of maturity curve that the industry has gone through and that we're trying to take our customers through as well.
Speaker 0 00:15:55 It's really important. I think a lot of people that come into the subscription world from somewhere else don't recognize right away way how different the culture is, the entire culture is. And it's really about that long-term relationship. That's what you're trying to build is like you said, those habits, getting people to the point where they don't even think about it, but that's how they do whatever it is they do. That's how I manage my relationships. This is how I connect with people during the day. Like somebody asks, I want you to call me and I just went to zoom and then they weren't there because my phone started, you know, my phone started ringing up.
Speaker 1 00:16:27 I know that it's funny. Cause I've been doing some phone calls every now and then just to mix it up. And it's always disarming to people. I know exactly. They're like, wait, we're not on zoom. That's that people are so used to it. That's the only option.
Speaker 0 00:16:38 And so I think that it's really important that you know, that the software exists. This is what I tell people now that are getting into the subscription world is like the software is there. It can support these disciplines, these approaches these processes. But the most important thing is that as an organization, you need to understand that the gong is the starting bell, not the celebration bell and that there's a lot of work to do. And what you're trying to do, it's not even about just getting your customer to use your product. It's about getting them to get the value that they paid for on an ongoing basis. And that means you have to have different metrics. And that means you have to have different processes and you need to have different team members and you might need to design your products differently. But don't think that just because you call this person a customer success person and you sell on an ongoing basis with subscription pricing that you suddenly have a fast business or,
Speaker 1 00:17:28 Oh, you're so right. Robbie. I mean, a lot of our clients are companies that kind of went from that trend through that transition. And I know you've worked with companies like that, to where they used to sell products, physical products or software or whatever. And now they're selling kind of a SAS subscription cloud. And, but exactly what you said, almost all of them, the starting point is, okay, we put it up in the cloud or it's a subscription thing and they're doing everything else the way they used to do. Right. Everything else is just the old model and they haven't changed. The mindset changed. The organization changes the processes. They've just changed the actual product or delivery. That's it? And that's obviously just the beginning.
Speaker 0 00:18:03 It's such a small piece of it. Something that I'm finding really interesting, you know, like you I'm, I'm based in Silicon Valley. I grew up here actually. I've been here since I was, since I was four. Yeah. I grew up in Menlo park and so Silicon Valley has always been around me and I've always worked with, you know, software companies had friends at software companies fast was something that I saw kind of rising up. And many of my early clients were SAS startups, venture backed fast, growing digital natives, building B2B businesses. And honestly, a lot of my subscription ideas came from as well as, you know, working with some consumer companies as well, like Netflix and then others. But what I'm noticing now is that a lot of the principles that have been so powerful with SAS companies are really relevant for any kind of businesses trying to build a longterm relationship with their customer. And I would love to hear your thoughts on that as you think about all of your expertise and what you know about customer success and about, you know, how SAS businesses thrive and what it might mean for consumer businesses, e-commerce businesses, people that are trying to sell pharmaceuticals on a subscription direct to the consumer. How do you think about that?
Speaker 1 00:19:11 That's such a good question, right? Because I think we think of like the world as being very binary, for example, either subscription or not subscription, or you think of software or not software or digital or not digital. And I think what the last couple of years of shown is it's much more of a continuum and a mix. And this idea underlying it all is gonna apply to your business no matter where you are. Cause underlying idea is not about for me, at least it's not about subscription. It's not about like cloud. It's not about pay per use businesses. It's about this transfer of power from the people, the businesses to their customers, right? And that's like the basic underlying shift, the top end where digital technologies have actually made it much easier for customers to find things that they want to compare things, to buy things that they want to switch.
Speaker 1 00:20:03 And in the old world, you know what, like we habitually bought a car and drove it for seven years and we went to the same store cause it was in our neighborhood and we bought from the same salesperson. Cause that's just the person we knew. And we didn't know about all the other options out there. And it was really hard to switch and why would we want to? And we were in the same job for 20 or 30 years and you know, everything was very fixed, right? And in this new dynamic world, largely because of technology, the customer is constantly in power, right. And they constantly have options to do different stuff. And that's obviously true in subscription, but it's true. Like you said, it's true everywhere. I mean e-commerce to the most extreme, obviously every single click, every purchase, the customer has choice of where to go.
Speaker 1 00:20:39 And media is the same way and financial services, the choices abound for the customer power is in the customer's hands. The customer is not kind of the Holden to you. It doesn't matter what business model. And what's interesting is that I think the business models themselves are going to become hybrids. So on one end you have these transactional kind of product based business models adopting SAS cloud subscription. But on the other hand, you have subscription business models that have some elements that are more transactional. Like for example, you might have a subscription model, but they also make money based on how much payment volume they send through your system. Right? So there's a lot of these subscription companies that also manage the payments for your business and they make kind of a slice of every payment. That's a little bit more transactional, right? And you have subscription companies that actually price based on how much you use, not just like a fixed price per month.
Speaker 1 00:21:27 And so I believe this kind of idea of, Oh, either subscription or not, it's going to blur together. And the much bigger concept is your customer has has power. And you're trying to manage that recurring relationship with your customers. There's probably a better word than recurring, but let's just the one that I can think of, which is, and that we've used a lot, which is just like, you're trying to make it not a one and done thing, right? It's an ongoing relationship. You want to maximize that lifetime value. Some of it might be a subscription. Some of it might be purchases every now and then how do you get them to buy more often? How do you get them to buy at higher rates? Right. And e-commerce companies, as an example, I've always thought about this, for sure. Like that's a concept that they've thought about, but I think trying to actually make that really the spirit of the businesses like recurring customer relationships. I think that's the long-term idea here.
Speaker 0 00:22:12 I think that's really important and you've always been a real advocate for customer centricity and for a focus on the longterm, you know, a real groundbreaker in that space. And I think it's really important to remember that even when we're getting into the weeds on, should I use this software platform or that, or that process, or how do I price my subscription, which is of course what everybody wants to talk about that it's really important to say no, you know, the customer has power and so I need to optimize for their needs and I need to do it in such a way that they'll keep coming back. And if they keep coming back because they're paying on a subscription, great. But if they keep coming back because I'm their habit, that's also great. Yeah. I think about Apple and how for many years they didn't even offer any subscriptions.
Speaker 0 00:22:57 Right? They it's hardware, but yet people would say I'm an Apple person. Yes, totally. And if you went to their store, they were like, look, our promise to you is if you buy only our products, I'm paraphrasing, right. But if you buy only our products, they will all work together. And if you bring in some other product that we did not make, or at least did not recommend, we can't help you. But if you trust us, we will go to the end of the earth for you. If you let us, if you only buy from us and it's that kind of mindset, whether it has a subscription attached or not, whether it's in the cloud or a physical product or a service, it's really about it's about that relationship.
Speaker 1 00:23:34 That's so well said. And your Apple's a great analogy. Like I'm a subscriber to new iPhones in that I don't have a subscription with them, but I just buy the new iPhone. Right. Like it's like, I'm just, it's a habitual thing. And a lot of people are like that. So I think it's a really good analogy.
Speaker 0 00:23:48 I mean, I, I find it fascinating now I'm interested. You know, some of the people that are listening are just in the process of setting up their, their, their customer success practice in their organizations, what are the metrics that are important for them to track, to, to understand whether they're on the right journey to building that kind of relationship.
Speaker 1 00:24:07 Totally. I'll give you there's six metrics and I'll kind of give you maybe like some of the basic ones and then some of the more advanced ones. So I mentioned that like the outcome you're looking for in customer success is, is basically to get your customers to stay longer, to spend more money and to actually be better advocates for you. Those are the three kind of levers. And so for getting customers to stay longer and to leave last until like, you know, basically churn less turns that term people use a lot. People often measure something called the gross retention rate. It's a very arcane terminology, but it basically means, okay, if a set of customers a year ago, we're spending a hundred dollars collectively across all of them a year later, those same customers without adding any incremental purchases, they made just the existing stuff that is that a hundred dollars $95.
Speaker 1 00:24:54 Cause you know, 5% of them left or is it $93 or is it $91? Or is it $85? That number is so critical to the viability of your customer base. Because obviously if you get new customers, you spend all this money to get them and then they kind of leave out the back door, then you're never going to make money. So that's gross retention rate. Second one is then net retention rate. So it's the same concept, but including the benefit of customers actually buying more stuff. So that same hundred dollars is it now $120? Cause actually like some customers left, but other ones actually started spending more money. Right. And that idea of like, are my customers going to grow? Even if I don't get any new ones. And then the third one, which I, you know, you know, and obviously a lot of people know or have heard about is called net promoter score, which is this measure of customer advocacy and loyalty and how likely they are to recommend you to your friend
Speaker 0 00:25:39 Net promoter score. I had as a guest last season, Superman who ran the net promoter, the NPS loyalty forum for Bain. So if people are interested in going really deep into MPS, I suggest you listen to that episode.
Speaker 1 00:25:53 Awesome. So then you, then you can start thinking about, okay, what are the leading indicators for those, right? Those are like the three business metrics you might be optimizing for. And so then people start saying, okay, well I want to measure of like the likelihood of my customer to actually stay with me and grow or renew. And people will call that a customer health score. That's like a very big like, cause you know, knowing the past is great. Like did my customers renew, but what about the future? How do I like figure out which ones are at risk and all that. So customer health score is a huge thing that a lot of people have been investing in. Obviously we're, that's, you know, an area we focus on another one is like metrics around adoption of your technology. If you have a technology or are you into business. Right. So like, you know, some people will say like daily active users or weekly active users and there's a lot more sophisticated metrics that are
Speaker 0 00:26:41 That one doesn't have to be just technology. Right. You can adopt like if you're a newspaper reader, right. Are they reading the newspaper every day? And if you're a learning organization, right. Am I doing like, are your team members using whatever professional development resources you make available to them?
Speaker 1 00:26:55 Well, I'll send, it ties to your point about habits too. Right? Cause it's, it gets into this question of, is it habitual or not? That's a very good observation. And then the last one, um, that people will measure over time is I want to get efficient at this stuff too. Like I actually don't want to do it by having time. I mean, to have an army of people. So people measure kind of the cost of retention. So for every dollar of like recurring subscription type revenue, I have, how much am I spending to keep that? Am I spending 5 cents? Am I spending 10 cents? Am I spending 50 cents? That would be a problem. Right? How much are they spending to retain that customer? Those are the kind of six metrics that we see a lot.
Speaker 0 00:27:30 Those are really interesting. And some of those I think are less known like that last one cost of retention. How does somebody calculate that? So people
Speaker 1 00:27:38 Typically we'll take the numerator will be the cost that they're investing after the sale to keep that customer that was cost could be obviously people, customer success managers, you know, for example, imagine you have a customer success manager, they're making a certain salary and they're managing 30 accounts, right? And then you can kind of amortize the cost across those accounts. But then there's also all the operational systems, automation technology to go kind of manage these customers, maybe with a more digital type approach. And so typically you're adding up the people costs and then the sort of process systems, operational stuff, that's your cost. And then on the denominator is your recurring revenue. And so obviously in different businesses, that'll be a different metric in the SAS kind of world-class software world. People refer to like annual recurring revenue or monthly recurring revenue. And so that would be the denominator
Speaker 0 00:28:28 Really interesting and really specific and useful. So thank you for going into those Nick. I want to ask for your advice, what would you say to an entrepreneur or an executive who's trying to build a customer centric organization and really optimize for that longterm relationship?
Speaker 1 00:28:44 I think that any transformation in a company is really challenging. So probably the advice which is going to be so generic is that going to take time, you've got to go in steps, you know, crawl, walk, run, have patience, all that kind of stuff, which is just, it's true. And it's a truism at the same time. But if I haven't given analogy, when I like to tell people is like this kind of new transition, initially it will feel like a new organization and a new initiative. And eventually the whole company will be reinvented around it. And then the metaphor I use cause you know, like you, I I've been working for, you know, for a while. So I can think back to some of the older days. So think about the late nineties and the internet, right? Like you and I were working and then companies that the internet was a new thing.
Speaker 1 00:29:24 So they would have like an internet division of the company. And that internet division would be like, there'd be like a head of the internet division. And they would feel like God, like people just don't get it. They're not like focused on this and they're trying to transform the company, but they're not getting enough resources and everyone's still doing their old stuff. But now today it's so like, it would be so crazy for our company to have an internet division. Cause like everything is the internet, right? And so I believe that the same thing's going to happen. That's like the thing that you can look forward to is one day your whole company will be about customer success, customer centrists, the subscription business model, all that stuff. Your whole company will be that there's no doubt in my mind. And when you look at companies that are fully transitioned, like let's say an Adobe is a big company that's transitioned or Microsoft. Like the whole company is about that. Now there's no more like, Oh, should we do this? And so if you're in those early days where it feels like your system is pushing the rock up Hill, you will get to the top of the mountain and it will start rolling downhill. So have faith.
Speaker 0 00:30:17 That's fantastic. I'm wondering, does that mean that at some future date, your ideal scenario would be that there's no longer customer success divisions because everybody does that. Wherever they sit.
Speaker 1 00:30:27 That's a great question, Rob, be very specific. Cause we, I think the vision we have is it will end up being like sales. So it's not like we got to the point where companies said, Oh, everyone's in sales. So we don't need salespeople because actually like you still need people kind of orchestrating that sales process, but nobody, any more questions? Oh what, why do we need salespeople? Or does salespeople add any value or not? Some people might question that every now and then, but in a general sense that doesn't get questions part of the business model. And so I think what'll happen is customer success will become part of the business model. There will still be a team that's orchestrating the process, but they'll be getting a lot more support from product management, from sales, from finance, from marketing, because everyone will be supportive of the initiative.
Speaker 0 00:31:12 Awesome. Okay. Now I like to do a speed round. Are you up for that? Close out. Okay. First subscription you ever had?
Speaker 1 00:31:19 Oh, Columbia house records. That is a very dated concept, but this was a thing in the eighties where you, it was music was actually really hard to get back then. So as a little kid with that, a lot of body. So you sign up for this thing. I forget you put a certain amount of money per month and you get like a subscription of like a CD every month. And that was massive
Speaker 0 00:31:39 And 13 for a penny
Speaker 1 00:31:42 Children everywhere. Oh my gosh. You remembered totally.
Speaker 0 00:31:46 Okay. Favorite subscription you've used this week.
Speaker 1 00:31:49 Gosh, it's funny because I'm sure you're like me where you're like, well, everything is a subscription. So I would say probably Palatine. I'm definitely one of those annoying, crazy Peloton fans. So that would probably be mine.
Speaker 0 00:32:00 Awesome. Me too. Back's mom. That's my, that's my hashtag. Okay.
Speaker 1 00:32:04 Rigsby fan Cody Rigsby. If anyone's listening to love Cody. Oh, it's not that serious. You know it,
Speaker 0 00:32:13 Uh, the last time you felt like you really belong to an organization.
Speaker 1 00:32:16 Oh, great question. Definitely. I mean, honestly this customer success stuff at Gainsight, I do feel like it gives me a sense of belonging.
Speaker 0 00:32:23 Awesome. And your favorite way to say thank you to your best customers.
Speaker 1 00:32:26 I, one of the things I've told our, some of our best customers is, and it's a very specific type of customer. I'll tell you two different things. One is I tell them that like, I really appreciate the customers that don't just tell us like, Oh, things are great or we're so happy, but actually like want us to be great. And they want to give us like that critical feedback about how we can be great. And so that's like something that I just really appreciate. But then practically what we try to do is one of our philosophies of businesses, we call human first business. Like always remember there's a human being behind that email address and that transaction or whatever. And so we're very big in trying to understand, you know, who they are. So when I do like a networking event, I'll have an icebreaker question. Like what was your childhood dream? And then I'll, they'll like say they want to be a cop and then I'll send them a gift related to being a police person. Right. Or being a fire person or whatever. Right. And so yeah, I try to really get to the human side of them if I can.
Speaker 0 00:33:16 I think I'm going to end there with a human first focus and maybe, uh, an encouragement of everybody listening to try to think about the human being behind the email as Nick suggests so wisely. Thank you so much, Nick, for being a guest today on subscription stories, it's been a real pleasure.
Speaker 1 00:33:32 Thanks Robbie. It was awesome talking to you. I'll see you on Peloton. Thanks.
Speaker 0 00:33:40 That was Nick Mehta, CEO of Gainsight for more about Gainsight, go to gainsight.com and for more about subscription stories, as well as a transcript of my conversation with Nick, go to Robbie Kellman, baxter.com/podcast. Also, if you like what you heard, please take a moment to write a review and give us a star rating and mention Nick's interview. If you especially enjoyed it, reviews matters so much in helping others find us. Thanks for your support. And thanks for listening to subscription stories.
Speaker 2 00:34:12 <inaudible>.
