August 04, 2024 | Read Online
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I went to my first non-technology conference for the first time in years this week. I have to say, it was refreshing. What you realize when you dive into other types of businesses is that, at a certain altitude, they are all the same.
A few common themes I heard at the conference:
Cost of acquisition is rising...
Retention / repeat customers are key to success...
Iteration and testing are fundamental to survival...
Any of that sound familiar? Whenever you feel like you're on an island, I'd encourage you to look outside of the typical sources of ideas and insights tailored to B2B SaaS and its functional roles. Especially now, SaaS operators can learn from the lessons of other industries that have seen-and survived-more ups and downs. And there's more similarity than you might think, even in non-technology circles.
Now, status quo bias... let's get to it.
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Tim Riesterer built his career helping companies apply decision science to customer conversations.
Earlier this year I was lucky enough to hear him speak for the second time at a conference in Boulder where I also presented (this was a tech conference).
His talk centered on “status quo bias” and the role it plays in B2B customer acquisition and retention. Simply stated, the status quo bias refers to our preference as humans for the current state of affairs.
It’s why we go to the same grocery store every week.
It’s why we choose the same toothpaste over and over.
It’s why we stay in dysfunctional relationships.
Status quo bias causes us to resist change for four reasons:
It's a powerful force that works for us and against us in both our personal and professional lives.
I'm sure you won't be surprised to find that it rears it's ugly head in B2B SaaS more than we realize.
When acquiring new customers, we must overcome status quo bias. Sales execs have to convince prospects that change is necessary, and reasonable, and that the risk of maintaining the status quo is greater than the risks associated with change. They must help their prospects answer the all-important questions, “Why change?” and “Why now?”
This means we can also use status quo bias to our advantage when it comes to customer retention. Teams are wise to reinforce their customers' natural tendency toward the status quo when fighting for renewals.
Customer success, renewal, or account managers can highlight the costs and risks of change. They can also commit to quick improvements and adjustments in business processes versus starting from scratch with a competitive solution.
The question is, when and how do we make this case to our customers?
As of late, there's a lot of talk amongst the customer success community regarding the death of the business review. But rather than kill business reviews altogether, perhaps we need to return to the first principles of what we’re trying to accomplish.
The goal of every customer success professional [1] should be to reinforce their customer’s natural inclination toward the status quo and claim what MacMillan and Seldon the incumbent’s advantage:
The source of [the incumbent's] advantage is threefold: First, you should have deeper insights into the various needs of the customers you serve than any potential invader does. Second, you should better understand the profitability of serving them and, therefore, be in a stronger position to invest resources to capture and retain the best of them. Third, and perhaps most important, your knowledge of the needs and profitability of your customer segments is far less susceptible to imitation than are the features and functions of your products.
Harvard Business Review - October 2008
To this end, Riesterer outlines three simple elements of the customer relationship we need to communicate as we prepare customers for renewals:
Another bias we humans have is toward sunk costs. We tend to continue an initiative once we invest money, time, or effort. So, we must remind our customers how we got to this point. It’s especially important to show new stakeholders the business’s cumulative investment in the partnership.
Business impact as measured in three ways. 1) impact on the project, 2) impact on the business unit/department, and 3) impact on corporate strategic initiatives.
Impacts are measured in direct (financial) returns, indirect (qualitative) returns, or strategic returns which enable the company to pursue its strategic initiatives.
We get to work with hundreds of companies in our industry, and as a result, we can formulate benchmarks, best practices, and identify trends to share with our customers. Customers are hungry to see what’s happening outside of their narrow view of the world, and we become trusted advisors by sharing unique insights that only we can possess because of our deep, day-to-day exposure to our customers.
How we document and deliver business reviews will certainly continue to evolve. But the ability to get this information into the hands of decision makers is key to using use status quo bias to retain our customers longer and make them more successful in the long run.
Are you communicating with customers in ways that will invoke their status quo bias? If not, what should you change this week to start?
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[1] My definition of "customer success" continues to broaden and here I'm referring to any roles interacting with the customer to help them achieve better outcomes and retain them. Account managers, renewal managers, services, support, executives, etc. It's all customer success.
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