Realizing Customer-Led Growth: Creating a Voice of Customer Program

By Harp Dhaliwal, Cota Capital Advisor

Goodbye to 2023!

The last 12 months have presented significant challenges for many B2B SaaS providers. During this period, the Customer Acquisition Cost (CAC) Payback Periods lengthened, primarily due to stalled deals and increased reviews and approvals. Concurrently, Net Revenue Retention rates declined as customers sought to rationalize spending and scrutinize provider value more closely. This combination of factors has unsurprisingly led to double-digit declines in growth rates across SaaS organizations of various sizes.¹

SaaS providers have adapted to these challenging conditions by prioritizing productivity and profitability. There has been a significant reduction in cash burn rates, and the Annual Recurring Revenue (ARR) per Full-Time Employee (FTE) has emerged as a crucial efficiency metric. This measure has nearly doubled across various stages and ARR cohorts, reflecting a heightened focus on operational efficiency.

What about 2024?

Data shows continued softness in growth as we enter the new year. While things appear to have stabilized it seems likely that difficult growth conditions will persist for a while yet. Even once the macroeconomic environment improves it is likely that this recent focus on value and efficiency will persist amongst buyers. With productivity initiatives and spending cuts behind them, SaaS providers will need to look for new levers to achieve growth targets. Primary amongst these is likely be a focus on customer expansion. However, it will not be easy and will require an increased focus on customer experience and value.

We’ve known for some time that expansion revenue is more efficient than revenue from new customers. Now expansion revenue is a lot harder to come by than it used to be. Gone are the days when we could count on customers simply growing their headcount (and therefore increasing their spend) or blindly increasing their usage.

(2023 SAAS Benchmarks Report)

To be successful, SaaS providers will need to better understand the needs, wants, and desires of their customers and look at ways to deliver consistently better experiences and incremental value.

How Well Do You Understand Your Customers?

While most companies would pride themselves on their understanding of their customers, surveys have indicated there is significant room for improvement. For instance, Forrester Research report, The B2B Customer Obsessed Growth Engine, found only 46% of the marketing and sales departments surveyed felt their organizations were effective at understanding and meeting customer needs.²

Organizations that improve their knowledge and act accordingly were able to achieve growth rates up to 10% higher than their peers.

A structured Voice of Customer Program (VoC) can play a vital role in this process in optimizing Customer experiences and value and supporting growth.

What is a Voice of the Customer Program

A Voice of Customer program is a systematic approach to gathering, analyzing, and responding to customer feedback to create a more complete view of customer experiences and value. While various models exist, there are four common activities within a VoC:

Collecting Feedback: A VoC relies upon establishing the means to effectively collect broad, representative customer feedback. This includes formal methods like surveys, interviews as well as unsolicited feedback.
Analysis: Once feedback is collected, it is necessary to analyze this data to extract actionable insights. Qualitative data, like customer interviews, offers depth, while quantitative data, such as CSAT survey results, provides breadth.
Acting and Closing the Loop: Perhaps the most critical step is acting on the insights gathered. This could mean making changes to a product, improving customer service, or altering a communications strategy. Not all feedback needs to be acted on, but it is still essential to close the loop with customers to ensure that the importance of their feedback is reiterated.
Monitoring and Adapting: Track the results of efforts over time, from internal progress on action plans to the business results achieved. This ongoing monitoring helps show progress in improving the Customer Experience and the influence on key financial metrics.

Why a VoC makes sense for Growth SaaS Companies

An effective VoC program helps organizations achieve:

Product Operations Efficiencies: Customer feedback is invaluable for product teams. It helps in prioritizing features, developing differentiated offerings, improving quality, and planning product roadmaps.
Improved Customer Satisfaction: Understanding and addressing customer experience concerns leads to higher satisfaction rates and improved customer journeys and can translate into increased customer loyalty and adoption.
Increased Revenue: A better understanding of customer value and needs often results in incremental revenue through more effective upsell processes and optimized Pricing and Packaging.

Kicking off a VoC Program

While the potential value of a VoC program can be dramatic, many organizations, especially during the early stages of growth, when resources are limited, fear that a VoC program is too big or complex to launch and run. This does not have to be the case.

The best approach for early-stage and growth SaaS organizations is to start small and establish foundations of a VoC program that becomes part of organizational decision-making and customer engagement and can scale with the organization.

I recommend the following actions to launch a VoC program.

Feedback Mechanisms: Start with structured data collection through surveys of representative customers by segment. Qualitative survey data collection can measure the customer experience and value customers are obtaining from your solution. Invest time in survey creation to maximize impact and augment this with interviews and small focus groups. As you progress start collecting more unstructured and unsolicited data including email, support comments, etc.
Analyze: Begin by using basic analysis and reporting to find patterns, themes, and quick wins. Whilst customer success software can be valuable, it is not necessary during initial phases where sample sizes are relatively small and tightly controlled.
Act: Focus on fixing discrete issues to start rather than more complex strategic changes. This creates momentum for the program internally and externally and establishes impact. These fixes may apply to individual customers who have experienced a service failure or across a larger cohort where there has been a customer journey issue.
Close the Loop: Engage all customers. While it is not always possible to fix every customer-specific problem, it is essential to establish a follow-up and communication cadence. In addition to individual customer follow-up, it is recommended to send an email to all customers who submitted feedback, sharing observations, actions that have been taken as well as what is being planned.
Monitor: It is important to note that a VoC program is an ongoing process. Once you have established the program begin to measure effectiveness and revenue impacts. Look to expand the program, for instance by incorporating unsolicited feedback and developing more complex value-planning processes.

Conclusion

For early-stage and growth B2B SaaS companies achieving strong revenue growth will continue challenging as new deals take longer and retention rates are under pressure. In that environment, a VoC program can be impactful in supporting growth, innovation, and customer loyalty.

Through a pragmatic and phased approach to collecting, analyzing, and acting on customer feedback, companies can make better decisions, deliver increased value to customers, and improve revenue growth.