Activating the Third Funnel: How Customer Success Can Help Unlock Revenue Growth
Wait. Three funnels?
It’s a forgivable reaction to this headline since only one or perhaps two of the funnels really get much attention. But I’ll contend that it’s the neglected third funnel that matters most right now.
Let me start with a few definitions:
The first funnel serves inbound demand via self-service trial and freemium product usage in a way that allows prospects to try before they buy. The goal of this funnel is to generate PQLs–product qualified leads–which generally convert at a disproportionately high rate.
The second funnel is the one we’re all familiar with: the traditional marketing funnel, which blends a combination of inbound and outbound tactics to generate MQLs–marketing qualified leads–which are deemed so based on measured firmographic characteristics and observed behaviors.
The third funnel is the least understood and the least mature in most organizations: the customer funnel. This is the source of expansion revenue from existing accounts, based on the aspiration of generating CSQLs–customer success qualified leads, or CQLs if you prefer. I call this an aspiration because very few companies have activated or scaled this third funnel.
When economies stall, the priority pendulum swings from revenue growth to cost reduction. SaaS companies feel this shift acutely as their customers pivot to cost-cutting mode: their acquisition funnels dry up while existing customers actively reevaluate their contracts to find sources of cost savings. It’s a perfect storm.
This means that, in times like these, the first two funnels are less robust than most companies need them to be, which leads them to the third funnel–which has its own set of issues.
It’s Hard to Grow When You’re Trying to Survive
Exactly why this third funnel is so hard to crack can be traced back to one fundamental reality: for most companies, customer success itself is still an aspiration.
Way too many renewals are kick-saves by CSMs who perform frequent acts of heroics on accounts that were otherwise bound for churn. With remarkable regularity, they inherit the sins of our past: the promises made, but not kept; the capabilities claimed, but not delivered …
When survival is the mode of operation, it’s nearly impossible to activate the higher-order functions necessary to drive an expansion motion within these accounts. Frankly, even when the rare CSM is able to call on these higher-order skills, many customers are in no mood to double down when their renewal feels like a concession made in the face of lingering doubt.
Making Customer Success Systematic and Repeatable
What stands in the way of a healthy and vibrant third funnel is a systematic and repeatable approach to customer success. At the heart of this is an outcomes-based approach that begins with 1) achieving alignment with prospects on a shared definition of success; 2) continues into how we deliver on these promises in our implementation, onboarding and user training; and, 3) culminates with proof of performance demonstrated by measurable value realization.
Easier said than done, of course, but if we’re to access the power and potential of this third funnel, we have no choice but to operationalize customer success as a full lifecycle effort. In doing so, we’ll take the unnatural burden off our CS teams, allowing them to access the higher-order calling of driving strategic growth within accounts. And this growth will come naturally because customers will see actual proof that their investments are paying off.
Today, CSMs are called on to create trust in what are inherently low-trust environments. They’re expected to be the triage nurses, the diplomats and negotiators, and therapists all rolled up into one package. Of course, this is necessary to keep the lights on, particularly in difficult times like these. But it’s also dysfunctional, enabling behavior that’s neither scalable nor sustainable–and it’s the reason that, for most companies, this third funnel remains purely an aspiration.
The reality is that customer success begins long before the contract is signed. It requires a full lifecycle approach that begins with what you promise in the sales cycle, how you deliver on that promise after the deal is closed, and how you rise to meet a higher burden of measurable proof.
Anything less than this is merely hanging on, which may help you kicksave a few deals, but it’s no way to scale a business.