Guest: Markus Rentsch – Customer Value Led Growth

[00:00:00] Jason Noble: Good morning. Good afternoon, everybody. Welcome to another episode of the Jason’s take on podcast with myself.

Jason Noble here in London, where it’s just above zero is and my partner in crime. Mr. Whitehead, say hello, Jason.

[00:00:12] Jason Whitehead: Hello, everyone. Thanks for joining us today.

[00:00:14] Jason Noble: We are super excited today with another guest joining us today to talk about all things related to customer growth, customer value and net revenue retention.

We have the one and only Marcus ranch joining us from a very sunny Vienna over in Austria. Marcus, welcome to the podcast. We’re really excited to have you here you are. I think everybody knows who you are. You’re a well known thought leader. Coach customer success consultant. You contribute a lot to the communities on LinkedIn.

You’re posting some incredible articles where you’re getting a lot of traction. You are the CEO and founder at remarkable where you’re helping change the way SaaS companies grow. And as part of your work there, you’ve created a customer value led growth model business model for SaaS companies, which is say.

A really unique approach that aligns the whole company around continuously growing and monetizing customer value, which is really exciting. And you’ve previously been CEO and founder of accelerate that focused around creating zero waste growth approaches for companies. As I said, you’re an incredible thought leader around customer success.

You’ve also recently launched a newsletter, the masters of rev, net revenue retention, which I am happy to say I’m a subscriber of and read it evidently every single day it comes out. Welcome Marcus. We’re excited to have you here. Thanks

[00:01:28] Markus Rentsch: for invitation. I’m

[00:01:30] Jason Noble: glad to be here. And today we’re gonna talk with Marcus about customer value, led growth and at revenue retention, both topics of great interest to us all in the world of customer success.

And particularly with net revenue retention, we’re seeing this as being the key differentiating KPI that investors are looking for shareholders and it becomes so critical for us now. Marcus let’s go ahead and please give our listeners an introduction to yourself. Particularly for our listeners that don’t know more about you give us a bit more about your background and your due only to where you’ve got to today.

Yeah.

[00:02:01] Markus Rentsch: Hello. My name is Marcus. I’m the founder of the company called remarkable. It’s a consulting firm that’s dedicated to help SA companies improve their customer success organization and strategies. And I’ve spent like last two years creating and refining very own approach to customer success, which I call customer while you let growth.

[00:02:23] Jason Noble: do you if we start with a really big question what do you mean exactly by customer value led growth and why now? Why is it so critical for companies today?

[00:02:32] Markus Rentsch: Yeah, the thing I’m seeing in SA companies over and over is that I get the impression they focus on growth for the sake of it.

, but what they should do instead is to focus on growth as the consequence on delivering customer landing. Did you in the business model, what a subscription business model itself, it’s literally built on customer success. And most people, they don’t see it because the thing is you rely on so on renewals, it’s the most important thing if customers don’t stick with you for years.

You won’t make any profits. And the only reason why customers would continuously pay you is when you make them successful. It’s that easy. So if you’re selling like cars or something, you might sell a car once every 10 years. So if the same buyer does not return 10 years later, Most companies would say, so what we’re talking about one month later.

So if the customer doesn’t pay again one month, one month later, you really have a problem. I think when you be as simple

[00:03:37] Jason Noble: as that when you give these examples that bring it down into everyday space, that everyone understands, talking about kind of cars it makes it so relevant to everybody to understand the criticality of this.

[00:03:48] Markus Rentsch: Yeah. Another thing I see in customer success is. There’s only many companies see only as the responsibility of a single team. Yep. But customer success in B2B is the reason why a company exists. Why else would you even build the company? And that the logical conclusion is that everybody who works for the company works in customer success.

Everybody contributes to it. It doesn’t matter if you are product development, marketing sales, or in the designated customer success team, you need to contribute to

[00:04:19] Jason Noble: it. It big mind shift change. Isn’t it. It’s changing the way that businesses think. Sorry, Jason.

[00:04:28] Jason Whitehead: Yeah, I was gonna ask, cuz I think for those of us who’ve been in customer success for a while. It seems pretty intuitive, but I’m still amazed when I go out and talk with leaders of organizations not selling on a subscription that they still are shocked by this concept. Oh wait, no, we sell functions.

We sell this. What have been some of the biggest surprises you’ve encountered when you’re dealing with leaders of SaaS C is around this concept, do they get it? Do they struggle with it?

[00:04:50] Markus Rentsch: It’s different from company to company. So in some companies really that the CEO himself or herself is already perfectly aware what matters and really leads the customer success.

Focus in other companies, you have CEOs who don’t care, right? They don’t see customer success as yes. That the basic goal of the very existence. So really customer success, a single team with very limited resources. They see there’s a necessary email. So we all know about these companies and the first thing they do when it comes to cutting the budgets, it’s customer success or customer support, which is insane.

[00:05:34] Jason Noble: Do you see it changing in conversations you’re having with organizations? Do you see them coming around to the, to this new way of thinking?

[00:05:41] Markus Rentsch: Yeah, slowly but steady, you could say. Okay. But I’m really it’s always the same. Yes. So there are only a few companies that will stand out from the rest so that others will always will do what’s mainstream.

Yeah. It has mainstream for so long to create the million of leads and hire things. People, et cetera, et cetera, even when the economics are offer. So they are really stuck. With their approach on growth. So it’s really hard and difficult to, to change these things. And it, yeah, it moves pretty slowly, but I’m positive that I will be able to make an impact on let’s say even if it’s only 5% of CEOs and founders, it would already be great.

Yeah.

[00:06:25] Jason Noble: We talk as a bit through the framework that you’ve created and kinda how you’re using that with your customers. Cause I think that’s something that’s really powerful when you’ve got a framework. You’ve seen it work, but just tell us a bit more about the background behind it and how you’re using it.

[00:06:38] Markus Rentsch: Yes. So that the traditional approach on a growth and says is like we create a funnel, we pour in a million lead and see what’s coming out at the end. So all the money or the funding state, the company gets is to really fuel the funnel. It’s really a weak approach because new customer acquisition and all research confirms it is the weakest level of growth because you have so low conversation rates and high customer acquisition costs.

It’s literally, yeah, you can’t rely on it forever. So my approach. It goes a different drone. So instead of maximizing the number of customers, my approach is focused on maximizing the value per customer for the customer. So that that you really create. There’s a quite famous already that grow, Felix.

So where you it’s basically, you could say the land and expand fear but yeah, even improved because to me, when you have a successful customer, it will create its own business that the company will literally grow its own. Why? Because a successful customer, we continuously war because they will frequently hit the ceiling.

They need more resources. They want to apply more features. And of course, That’s also what drives new acquisitions with much, much better economics because when new customers are driven from referrals, they come much higher conversion rates. Yep.

[00:08:08] Jason Whitehead: And lower cost. So with your framework and when you’re working with your customers I like the sound of that.

Get them focused on maximizing the value per customer, which I think people talk about that they don’t really focus on quite a bit. What does that mean? That a CEO should do differently in, in their organization to actually operationalize that? What does that look like? Where do they divest the resources?

Where do they focus their effort, as opposed to the traditional approach of putting more leads at the top of the funnel?

[00:08:34] Markus Rentsch: So that the first and most important part of the CEO is to create alignment across the whole company. , that’s most important. So what we are now seeing is that all the different teams, they pull in different directions because they have different goals.

So marketing teams, their goals, and the incentive they get are based on the number of leads. It says you have the same with a quota. And then you have customer success, which is usually evaluated by the retention rate they’ve got. Yeah. But the problem is with all these different goals, you even contradict the next team’s goal.

Yeah. So you when you have the sales team and they only a quota to achieve. they will do everything they need to do to achieve the quota, even what it means to acquire bad fit customers. Yep, absolutely. And then you have the CS team and they get the customers and their goal is a retention rate.

Let’s say 95% retention rate , but how on earth are they going to succeed? If they get these bad fit customers?

[00:09:37] Jason Whitehead: Exactly.

[00:09:38] Markus Rentsch: That’s really the most stupid thing. So a question that occurred in the past I’ve been asked several times is what are the best metrics to evaluate the customer success team performance?

 My answer is basically doesn’t matter because the problem is everything will be tainted. If you get bad inputs. Yep. So it only makes sense to measure the team’s performance on the attention rate, if they get the right raw material, if they get the right customers but otherwise, yeah, I think that’s, you can tell anything about the performance, right?

[00:10:13] Jason Whitehead: No, I think that’s really important too. Cuz like you said. If the sales are selling anyone and it’s not the right fit customer. And they’re more work to, hire harder to close and higher costs to serve and to retain them in much more work and effort required to make them successful.

It’s kinda like you’re doubling down every year on your effort to keep a crap customer that’s, we’re gonna work really hard to keep these people that we never should have had to begin with where. If we could work less hard to keep five other customers, if they were the right fit for us and the wrong garbage in garbage out kind of thing.

[00:10:43] Markus Rentsch: Yeah, it’s really insane that companies really still do this crap. So that’s meant, the saints team they don’t do it because they like it so much to acquire bad fit customers, but because they get these ridiculous growth goals and this growth goes that are really with a short term

[00:11:00] Jason Noble: mind.

Yeah. You’ve gotta, you’ve gotta change the way we incentivize teams as well. Don’t we’ve talked before about incentivizing long term. Relationships lifetime value for customers, not incentivizing, just getting the new business in, but it’s a big shift. And I love the way you’ve gone through the metrics.

If you me measure your metrics on retention rate, but you’ve got bad customers coming in, you’re never gonna work. So it’s getting those metrics all aligned and how you get customer working across the teams. I love that way of thinking. How do you see. So the customer value led growth.

How does that relate to net revenue retention rate? And is the kind of, how do you see that correlation?

[00:11:40] Markus Rentsch: Yeah, it’s literally the connection it’s the corresponding metric you could say to customer led growth because when your customer, when you growth, growth there also the NR growths.

Because the more value you produce for customers, the more they will buy it. Yeah. So you can literally grow your customer account value like five times or 10 times in the long run, but you need to focus on it. That’s the important thing. Do you think everybody’s to deliver on the promise you make to your customers?

Yeah.

[00:12:14] Jason Whitehead: I’m curious about something you came back to as well, where you were saying how sales folks are really incentivized around rapid growth and hitting really stretch goals and all that. Do you think that’s more of a, just the result of a short term that, like, how do we hit our goal for the next quarter or the quarter after that?

Or is that. Coming from investors that are pushing for, let me quickly get, invest get some growth and get back out and is what’s really needed more just to shift towards a longer term mindset of, you’re not going to rapidly expand in an existing customer, but you will expand them when they see the value.

[00:12:44] Markus Rentsch: Yeah, it’s different. Sometimes it comes from this CEO sometimes from the board, sometimes from investors. It’s different in several situations. But the real problem I’ve identified is that today our society crew say is really addicted to instant gratification. So they prefer to close the deal.

Now, instead of have having the growth in the long term,

[00:13:08] Jason Whitehead: absolutely. So when you’re working with your clients, then are you helping the CEOs and the board and above that to shift their mindset there, or where do you focus your efforts to really enact a change that you think is gonna help them?

These organizations?

[00:13:21] Markus Rentsch: Yeah, they’re basically two different point of entry. So sometimes and of course it’s the ideal situation is what a CEO approaches me. They say, I saw your methodology. I like this concept. I want to implement it into my company. But more often it’s the CS leader of customer success or director or whatever.

Approaches me where we let’s say you could say it’s the the bottom up version of so where I’m helping the CS leaders to give them their, the evolution to influence their leaders in the company. So all my projects start with running and a custom analysiss. So that we can see. Okay. These are the customers that churned, why did they churn?

What do they have in common? And also at the same time, of course look at their existing customers who are the most profitable ones. What do they have in common? And most importantly, how much growth potential. Yeah. It’s hidden within our existing client base. So if you’re a CS leader and you talk to a CEO about your net promoter scores and stuff like this, they don’t care.

 Cause the company leadership cares about two things. That’s growth and valuation, right? So you really need to shift the talk in these two directions. The best thing you can do it is with the data you’ve extracted from your analysiss.

[00:14:46] Jason Noble: So can those approaches find, I was gonna say, Marcus, which of those approaches do you find the Harding, whether you go or which the most successful going through the CEOs that have reached out to you or through the CS leaders?

Which of you found in your engagements have been most successful?

[00:15:02] Markus Rentsch: Yeah, it’s absolutely way easier if the CEO starts initiative, but there are also CEOs that are really responsive to the inputs coming from CS leaders. But in many situations real, really to yeah. Create the awareness within the company leadership about all the growth potential, and that is really hidden the customer base, or even to to help them yeah.

Show the leadership that churn is not only cost after the purchase of the product. So there are companies really where the CS team gets all the blame for churn, which is right. Absolutely for, because the customer success team sits at the end and they rely on the inputs they get, which is the product that the customer If you have a better product or a bad customer, you’re set up for failure in customer success. So you can never succeed on your own. You really need to align all the teams on customer success insurer. And they’re both they’re both running through the whole

[00:16:04] Jason Noble: company. I like the way you talked about the collaboration there and it is that cross-functional thing that we’ve said before.

[00:16:10] Jason Whitehead: Yeah. And Jason, you’ve spoken to this several times about what we call the, like the rule of threes. You, as a CS leader, you spend a third of your time working with your team and building out your CS practice a third of your time working hands on with your customers and engaging with them, and then a third internally on the alignment piece and all those and Marcus, I’m curious since you’re right, that since CS is so downstream and they do the best with what they get and if they get garbage, then they’re blamed for what goes wrong.

Do you think CS leaders should be spending more of their time on the internal alignment, getting that set up, so that everyone’s focused on the customer value or do they need to be spending more of their time either with their team or with their customer? What’s the right mix to really

[00:16:48] Markus Rentsch: get this?

I’m not sure if you can say there is maybe they need even less time, but there needs need to be more successful with creating alignment. They need to be more successful with influencing the leadership at other teams. Yeah, that’s what I’ve meant before you need to fight the right angles to create these internal alliances.

. So when you talk to your sales team it doesn’t make sense to, to discuss the sales to customer success, handoff, but rather talk about how this two teams could work together. To create better results. So I’m also a big fan of bringing the CS team up to the acquisition process.

Yep. For two reasons, because the customer success team is absolutely the most qualified team to determine whether customer is a good fit or not. But when you’re working with the us of hundreds customers over years, you understand, okay, who is a. Sorry, who makes a great fit and who doesn’t. And if you join the sales process, you can literally clean them out before we even enter And the second part, and also for sales, way more important is the customer success team can make an impression the customer. So if you can talk to the customers about possible solutions and then show that you understand the problem. You instantly build trust and it may be maybe the one thing that moves the needle for the customer to decide for your product instead of the competition, because you have the end of knowledge, you understand the customer problem, the use case, the solutions.

Yeah. And that’s really. Yeah. It’s really what customers want

[00:18:28] Jason Noble: to hear. As we’ve said before, it’s about bringing the case studies, the use cases to life. You’ve got that experience as the CS team, working with customers, knowing how they’re using the product, how they’re getting value from the product.

And you can show prospects that in these meetings. And I think it’s super critical. The other key thing I think we need to do is you need the sales leaders and sales team to join the implementation calls as well to make sure that transition is really be really seamless there you.

[00:18:57] Markus Rentsch: Alignment is so important.

It also works with other teams. If you want to create a strong alignment with the marketing team. You’ve just said it the use cases. So literally what you’re doing, customer success, the work you’re doing, the experiences you make, it’s really it’s the fuel for the marketing team. So you can and create content based on reality.

Instead of just what marketing thinks is interesting to the customer.

[00:19:23] Jason Noble: Exactly. What do you think what’s the, what should customer success leaders be doing today with their team to get them to think differently about value and value led growth? How do they go about making that change?

Yeah

[00:19:35] Markus Rentsch: so one problem I also see is that most customer, the successful organizations have been built from a different different point of view. So it’s it really looks like it’s built back from in the days where customer success, where, or most companies still see it as a cost center.

So we have created these customer organizations that are built. From the internal view from the vendor’s point of view and not from the customer’s point of view. So it’s really astonishing. I’m always asking customers to success leaders. Do you know whether the customers are successful and nine out of 10?

They don’t know because they’re measuring health scores and net promoter scores and using activity and feature adopts and stuff like this. But they don’t know on whether a customer who have said, we want to increase our sales by 50%. They don’t know whether they’ve achieved it goal.

[00:20:30] Jason Whitehead: That’s amazing to me

[00:20:31] Markus Rentsch: that’s a real problem, because we are not focused on the most important thing. That’s customer success. Has to record that. That’s what it’s all about. And we need to measure it and we need to be the right way to help customers achieve it. Yeah. So I also hear obviously that discussion about high touch and low touch stuff, but that’s also from the way point of view, because there’s only one, one touch and that’s the right touch, touches how much touch the customer needs to become successful. . Absolutely. So we can say it’s high or low. Of course you have the limitations. If you have a customer who pays you 20 bucks a month, it’s obviously not possible to deliver a high touch. Yeah, exactly. But really need to focus and customerize and help customers because customers see, even when you have customers that are with the same size.

They may start from completely different

[00:21:27] Jason Noble: starting points. I think that is critical there and it is we’ve. Yeah. It’s that there is no touch that you tell a customer that they need it’s the customer needs to define. What level of experience do they want? What are the outcomes they want, that defines where they should be.

And we’ve said before, you know the idea, there’s a big surgeons now in digital customer success, but you’ve still got to listen to what your customers want. Another there’s one of your quotes that you said, Marcus, that I absolutely love. You said customer success doesn’t happen by accident.

It’s engineered. I absolutely love that. And this isn’t something that you can’t do without investing in it without putting the right processes, the right, working behind it. Can you tell us more about what you mean by that and share as your insights in how we can go about engineering customer success?

[00:22:11] Markus Rentsch: Absolutely. The mantra in, in, in customer success today is to be proactive. But the thing is the pro proactive approach. It really? Yeah. It’s really holding because it relies on on, on monitoring customers and reaching out when you think they, they need your help. What the problem is, what if you don’t see it?

 So you, you have a customer who is adopted or product features. The customers did. The users are active night and day. You think, okay. The customers perfect health, great customers, super successful. But what you don’t see is that they are just trying and trying, but they don’t accomplish anything, but they keep on trying and trying.

And in this situation you would never reach out to them because you have score says they are all green because. They’re active have adopted everything, et cetera, et cetera. So that’s, I think it’s complete bullshit. What you need to do instead is when you acquire a customer, you need to understand, okay, what is the goal of the customer?

The next step you need to identify? Okay. Where does the customer start? Where are they in terms, performance, skill and knowledge. And then the customer success plan is literally. The gap in between. So your mission is to create the roadmap and lead your customers from where they’re now to where they want to go.

That’s what I mean by engineering. So you really move them through the process instead of providing material, let them work on their own and only reach out to them if a think of a problem, or if they reach out to you. Which you don’t. Studies suggested I don’t know, 85% of people who are of customers who are, who need your help, never reach out to just vanish.

[00:24:13] Jason Whitehead: Yeah, I think that’s definitely the case. I’m working with a client now. Part of my business is helping customer success team. The other half is working with buyers of software and helping them drive change in adoption and success internally. And there’s such a disconnect between what the software vendor sees and hears and does versus what’s going on in, in the buyer’s organization.

And. Having worked with many buyer organizations, you see this vendor has no idea that this customer is going to churn and that they’re not getting what they need and they’re not being successful. And that they’re actively soliciting other, other vendors to replace them. And the current vendor has no clue and is not doing the stuff that they should be taking to, to preserve this.

And I think that happens all the time. And I think a lot of CS teams need to get better at identifying that, oh, this customer is not achieving their goals. We need to do something differently. We need to get right in there.

[00:24:59] Markus Rentsch: Yeah, exactly. There are so many companies who are taken by surprise from customers churn, but they could have easily known if they would’ve ever talked to these customers.

Yeah,

[00:25:09] Jason Noble: exactly. Exactly. That’s the key thing, Marcus, look, this has been a really insightful conversation. A big thank you again. What we always like to do is give our guests one final question. What we call a bold challenge question. And the one that we’d like to give to you is what’s the number one thing that business leaders can do today.

So an actionable thing that CU business leaders can do today to move to this customer value led way of thinking and working.

[00:25:33] Markus Rentsch: So the most effective and critical part is to align our teams on the same goal and the same incentives. And for me, the perfect metric for this net revenue retention rate. Why awesome, because there’s literally no way to fake your way about it.

you can grow in the short term. You can grow by a hundred percent with 50% churn in the short term, if you have enough funding, but there’s no way you get customers who are not successful to buy more from you and push your NR. So if you have the wrong customers support, you deliver a poor onboarding. You don’t have a strong customer success process that really leads customers to their goal.

You, you can succeed. So you, I just recently I’ve I’ve read again that a company incentivized their CS teams on net promoter scores, and then yeah. What did people do they ask the customers to give them a high score, right? yep. But it’s all natural. I would probably do

[00:26:37] Jason Noble: the same. It is it faces is the results.

Absolutely. Marcus look a huge, thank you, sir. This has been really great, please. Before we go, could you give a complete shameless plug to what you are doing at remarkable? Really promote what you guys are doing there.

[00:26:52] Markus Rentsch: Yeah, so I’ve recently started a new project where I’m really helping in new, we just interested in customer growth and.

And pushing the contribution to that revenue retention. So I’ve basically started a newsletter. I yeah, couldn’t think of a better name. It’s because it’s actually not the newsletter. It’s yeah. I’m yeah. Sending out indepth knowledge about my approach and my insights to help people move customer success forward in the companies.

[00:27:19] Jason Noble: Highly recommend a newsletter. Please, guys, sign up if you don’t, if you have don’t know it already. We’ll share the links on the podcast as well. Marcus, a massive thank you once again, sir.

[00:27:29] Markus Rentsch: Thanks. Thank you. It’s great to be.