The podcast delves into the evolving landscape of customer success management and the profound impact artificial intelligence (AI) has in this domain. Nick Mehta, CEO of gainsight, discusses with Mike Hoffman the importance of leveraging AI to enhance customer retention and streamline interactions, thereby driving revenue growth efficiently. They tackle the challenge of potential overemployment in customer success roles, and whether AI can replace or augment these positions to improve commercial efficiency.

As organizations seek to optimize commercial efficiency amidst declining productivity levels, the conversation reveals that a comprehensive view of the customer journey is crucial. Missteps often occur when companies fail to align roles or strategies properly. The dialogue emphasizes the importance of understanding customer sentiment and using AI to detect risks and opportunities in interactions, aiming for a more streamlined and effective approach to customer success.

Key takeaways from the podcast:

Please remember to turn on the CC button to view the subtitles.

Key Vocabularies and Common Phrases:

1. gainsight ['geɪnsait] - (noun) - A company that specializes in customer success management tools. - Synonyms: (n/a)

Yeah, I'm Nick Nada, CEO of gainsight. And at gainsight, we're all about helping companies grow revenue from their install base in an efficient way.

2. install base [ɪnˈstɔːl beɪs] - (noun) - The existing group of customers who have purchased a company's products or services. - Synonyms: (customer base, clientele, users)

And at gainsight, we're all about helping companies grow revenue from their install base in an efficient way.

3. commercial efficiency [kəˈmɜːrʃəl ɪˈfɪʃənsi] - (noun) - The effectiveness and productivity of a business's sales operations and revenue-generating activities. - Synonyms: (business efficiency, operational efficiency, productivity)

...commercial efficiency. So the headline of the whole thing from our recent research report has been that productivity has dropped by 68% from a commercial effectiveness standpoint...

4. trail twelve month bookings [treɪl twɛlv mʌnθ ˈbʊkɪŋz] - (noun) - A financial metric that represents the revenue from sales or contracts obtained over the previous twelve months. - Synonyms: (yearly bookings, annual bookings, twelve-month revenue)

And you watch that ratio over time. And looking at on a trailing twelve month basis is the right way to do it.

5. generative ai [ˈʤɛnəˌreɪtɪv eɪaɪ] - (noun) - Artificial intelligence systems capable of creating new content or predicting future events, based on learned data patterns. - Synonyms: (creative AI, machine-generated creativity, AI-based creation)

...a lot of that automated using generative aih in a product.

6. copilot [ˈkoʊˌpaɪlət] - (noun) - A supportive tool or partner designed to assist with tasks, especially in technology-aided environments. - Synonyms: (assistant, aide, associate)

People refer to that concept as having a copilot.

7. blind spots [blaɪnd spɒts] - (noun) - Aspects or areas which are absent due to lack of awareness or visibility, often overlooked. - Synonyms: (oversight, neglect, ignorance)

The second thing is that we see is removing blind spots

8. heuristic [hjʊˈrɪstɪk] - (noun / adjective) - A practical approach to problem-solving based on experience and experimentation rather than theory. - Synonyms: (rule of thumb, problem-solving, trial-and-error)

So are things going well or not? Right, that's, that's a simple heuristic.

9. overlay salespeople [ˈoʊvərˌleɪ ˈseɪlzpɪˌpɛsən] - (noun) - Sales personnel who work alongside other sales teams to support specific areas, often in an auxiliary capacity. - Synonyms: (supporting sales, additional salesforce, supplementary sales)

...you end up with overlay salespeople a matter of reconciling it under very much.

10. propensity to churn [prəˈpɛnsɪtɪ tu ʧɜːrn] - (noun) - Likelihood or probability of a customer leaving or discontinuing service. - Synonyms: (churn risk, turnover likelihood, leaving tendency)

We retention really, really important, identifying customers that have a propensity to churn or go somewhere really important.

GTM Value Creation Corner - Episode 20 - Commercial Efficiency with Customer Success Management & AI

In this episode, Mike is joined by Nick Mehta, CEO of gainsight, exploring the critical role of customer success management and the impact of AI on enhancing customer retention and streamlining interactions. They also address how CEO's can reevaluate business strategies for efficiency amidst declining productivity levels.

Hey Nick, welcome to the show. Hey Mike, great to see you. Thanks for having me. Yeah, good to see you, obviously. So we're recording this on the last day of September, 2024. You obviously live in a warmer climate than I do because it's becoming sweatshirt weather here and you're still down in the short sleeves, so I'm jealous. Yeah, right, California.

So Nick, you are a celebrity in your own right, but I do always want the audience to hear a little bit about our guests and about their company. So if you could do a quick intro for the guests and for our listeners. Yeah. I'm Nick Nada, CEO of gainsight. And at gainsight, we're all about helping companies grow revenue from their install base in an efficient way. We have five products that help with that. One that helps you scale your customer success team, which we're going to talk about.

One that uses AI to 100% automated detect risk in your customer base in terms of sentiment, engagement, et cetera. One that's about driving adoption in your product. One that's about getting your customers connected together, and one about training your customers. But the big value is drive a consistent customer journey so you scalably improve gross and net retention.

That's great. And I think there are probably quite a few of our listeners who use gainsight, and so they should already be familiar with you and some of your products. And if they weren't familiar with all of them, it is cross sell opportunity for you. There you go. That's good.

So, Nick, you and I have had conversations over the last several weeks, and I really wanted to focus and continue conversation that we've been having across the industry, which is really around commercial efficiency. So the headline of the whole thing from our recent research report has been that productivity has dropped by 68% from a commercial effectiveness standpoint and a commercial efficiency standpoint since 2020, and it continues to drop.

And anybody who's interested in seeing the full report, great bit of research. It's available. There's a link in the description of the podcast and you can download it for free. If I get more granular on that and I really get into the world of CS, we look at this when we get inside the customer. So the study we did was 232 publicly traded companies and we really looked at revenue.

When we look at return on go to market, we get down to the bookings level because that's really where the story is told at trailing twelve month bookings over trailing twelve month go to market costs. Right, as a broad metric. And you watch that ratio over time. And looking at on a trailing twelve month basis is the right way to do it.

If you start pulling stuff out of the numerator and denominator, you start to get to some really interesting trends. So in some of our clients we peeled everything back to renewal bookings, expansion bookings, cross sell bookings, upsell bookings, and it doesn't matter. It could be a SaaS company, it could be, you know, a services company that you know, has. And then you put that over your customer success costs. Yeah.

And what we have seen is even those ratios are going in the wrong way. In some cases it's a numerator problem and there's market headwinds and people are trying to save money and they're cutting back on what. But in other cases it's a denominator problem where you can look and you're, and your gross retention bookings on a trailing twelve month basis, or your net retention bookings on a trailing twelve month basis, those might be okay, but the costs are going up so fast that the ratio itself is coming down.

So I guess this leads to the first question that I have for you and since you and your team spend all your time on this, have we fallen in love as a group of companies with the CSM and have we over hired in some cases to that role? Yeah, it's a really good question. I think of course as Mike, I'm sure you see with your clients it's going to vary client to client.

Some people are over investing, some are under investing. I think in general, yeah, we have too many headcount in pretty much every aspect of software. I think it's been rationalized a bit, not a bit significantly the last year. So you look at what Salesforce went through, significantly downsizing by several thousand people, including ncs.

And I think what's happening is, as we can talk more about is people are saying, look, I need the CS role to be more specific. It can't just have this open ended charter of customer success. In some ways the best and worst term for the job is customer success. It's a cool term because it sounds really good, but it makes it really open ended.

And so I'm seeing people say, look, I'm going to either have a really technical person who's focused on adoption, or I'm a person that's all about, you know, commercials, I'm going to merge the CSM, an account manager role, or I'm going to charge for CS. And I think people are trying to say, I need to get a lot more efficient. So to your point, they need to improve gross retention, they need to improve efficiency.

And then the final point is, I think most people are realizing this isn't really about just a CSM team. They, on their own can only do so much. It's really looking at that whole customer journey, which is why I love what you guys do, because you don't approach this from the CSM silo. You look at that whole go to market transformation end to end, right? Yeah.

In some cases the answer might be, are you just, are you selling the wrong new logos that are just going to be churn? So, yes, totally. It is a whole system view and that's how we like to look at it. Because as soon as you tug on one thing and say, I think it's a customer success problem, everything's intertwined and you find out it wasn't really a customer success problem, it was something else and it might be how we price it and how we do like the process by which we go about it. It's a good point.

I'm going to shift a little bit as people are thinking about, hey, how can I potentially get the same outcome on gross retention and net retention at a lower cost? AI has been the big topic over the last couple of years, which is weird because I can go way back in time and chat. GPT, I think shined a new light on it, but AI has been around and we've been talking about it for a while, how will AI advancement?

And I know you guys are at the forefront of this replace the people aspect, in some cases using large language models, maybe that troll social media, troll contact center data and identify these propensities of customers. Can you talk a little bit about that and how you see the future? Totally.

Yeah, I think there's multiple pieces to it. But short answer, Mike, is, yeah, there's a lot of opportunity, some cases to assist employees to be more efficient, in other cases to be able to augment the employees with more coverage of accounts, and then finally, in some cases probably to replace headcount as well. It's certainly going to happen every function. So let me go through each of those.

So in terms of assisting employees, there's a bunch of things that are happening today. We do this at gainsight. Other people are doing too, which is removing the grunt work. You look at all that work of logging notes, defining action items, updating contact information. There's so much opportunity preparing for an EBR, and we're doing a ton of that today.

A lot of that automated using generative aih in a product. It's similar to what's happening in the SDR world or the sales world or marketing. People are saying, how do I remove the grunt work? That's one thing. People refer to that concept as having a copilot.

Microsoft really is the one that originally popularized that term in office. There's a copilot now. Probably a bunch of people use Gainshead has a copilot now. We've built. There's other ones out there.

One thing is really removing the grunt work. I think that's a huge opportunity. The second one is, by the way, just a quick story on that. I was a skeptic on how effective that would be, right? Capturing the notes and then the action items and everything else.

So if you've been able to embed that in it. I had our chief of staff who was out for a board meeting, who normally takes all the notes and action items for the board meeting. It's like, you know what? I'm going to rely on AI and let it listen in the background. And it does a really, really good job of capturing all of, of the key points, summarizing the key points and the action items. So it works.

It's incredible. Yeah, it works. And obviously, as OpenAI and other models get better, like, the zero one model, which just came out, just gets better. In fact, a little funny story is I've the worst handwriting you could possibly imagine. And I took a picture of it and, like, had it take my notes and summarize them and all that, and it got about 90% accurate. So, yeah, removing the groundwork.

The second thing is that we see is removing blind spots. So one of the things that's challenging is we were talking about needing a CSM on every account and carefully monitoring what's going on. That can be generative ai. We have a product called staircase that basically is analyzing our communications or emails, your support tickets or slacks with zero user involvement and just flagging risks for you, upsell opportunities, etcetera. And that's all possible today.

Like, that's, again, like a way to augment maybe touch headcount touch accounts that you're not touching right now or ones where there's just not a lot of coverage. Third example, which I think is also an efficiency play, is today you have a lot of trapped knowledge in a company. Like one CSM or salesperson knows about their accounts, but they don't know the use cases that other accounts have.

They don't know how to solve a problem without going to get help from somewhere else. And so this copilot notion can also help advise somebody and maybe over time reduce the number of roles that you need. Because I'm sure, Mike, you see this with your clients where it's like SDrae, onboarding project manager, onboarding solutions architect, CSM, maybe a technical CS architect, the original specialist. I get tired of even saying that there's a lot, and I think that that AI can help there.

But if you go to the end extreme of think about an AI CSM, we spent a lot of time thinking about that. And there's multiple things you can imagine. You can imagine one version where it's just covering the accounts you don't cover. You can have another version where it's making. So you don't need some csms.

Both of those are eminently possible there. What you're going to want to do is some combination of sitting in the app and guiding the user to do the next thing, but in an AI driven way also like emails and communications that are AI driven to the executive sponsor. So there's a lot of stuff you can do to take all this AI and then over time turn it into a virtual CSM.

And then the question is, what are we all going to do with it? Right? Yeah. It's also what do we, what do we give up on that? Because I think as magical as AI is, there is a certain emotional narrative that's involved in customer interaction. And how does AI flag that and say, don't understand, this needs human intervention.

That's exactly right, Mike. I think that it's naive to say, oh, every customer is going to be covered by an AI. Now. In fact, I think a lot of the bigger customers are still going to need humans, but maybe assisted by AI. But I do think you probably see this too.

When we talk to our clients, they have maybe 10,000, 10,0000 small clients and those just don't make sense for CSM to reach out to. They're already doing some kind of digital touch using gainsight or whatever, but there is an opportunity to make that digital touch smarter.

Yep. I also like the trapped knowledge point. I think that is great because even in our business, when we look at it, we've done thousands of engagements with clients on helping drive outcomes, growth outcomes, and go to market optimization. And you'll watch internally on teams or on email, people going back and forth and they're like, yeah, we've done that 18 times before. And I think just that sharing and people being able to understand what has been done before and what plays have been run before.

It's interesting because one of our, we use that internally, obviously. Right? And like, I was on a call with a client and they said, hey, what customers yours are doing, you know, using this feature, one of the features of gainsight in this industry, in this case it was healthcare. And I was like, I think I know, but I'm not sure. So I just went into the copilot and said, what customers use us in healthcare using this feature?

And it gave me the customers and gave me like a success story for each one. And this is like, there's no user entering this data. It's just totally gender bi. It's pretty, pretty amazing. Did, did you use, did you build that yourselves using some kind of tools available or is that your proprietary.

We built it using OpenAI. So the chat GPT APIs. But in the case of this staircase technology, which analyzes sentiment, we use the OpenAI technologies plus some others that we've. I wouldn't say built, but we've tweaked. But, yeah, I think that's another thing that people are doing, is they're using different models, different ways to do things.

It's a lot of experimentation, which is exciting. Great. All right, so the next place I'll go on this is, you know, we retention really, really important, identifying customers that have a propensity to churn or go somewhere really important. Are there things that you're working on or aware of or how should we think about propensity to expand?

Yeah, good question. Identifying those things. Things, definitely. I mean, there's multiple pieces to that that we see in our clients. And even in gainsight, part of it is, hey, are they, do they have the mindset and sentiment to expand? So are things going well or not? Right, that's, that's a simple heuristic.

As you know, Mike, it's harder to sell to clients that aren't doing great with what you have. It's not impossible, by the way, because sometimes that's. You can sell more as a chance to resuscitate things. You know, hey, go bigger with us and we can do more. But I think in general, we all know that, like, risk and issues can slow down sales cycles for expansion.

And so I think there's a lot people can do. This is why we bought this company staircase. And just analyzing what's happening and tell me which accounts are going well. And actually I get alerts. This product gives you alerts in slack about positive and negative things happening.

And so I get alerts about positive things and then we'll talk about it and say, hey, is this time to go talk about some new product with them now? But I think the thing that's probably equally, but maybe even more actionable is to do that quantitative analysis where you say, hey, the accounts that expand tend to look like X, Y and Z.

The accounts and contract tend to look like a, B and C. Most of our clients have done that analysis. That's not something we do today in our product. But people do that analysis typically offline, or they'll load in their expansion data. They'll load in some leading indicators like usage support data, NP's, etcetera, and they'll identify, hey, these are the patterns of a client that tends to expand.

So for example, we have a feature in gainsight called Journey orchestrator, which is like an automation engine. And we found that people that have that feature tend to expand more than those that don't. And so that's like a useful thing because we can kind of go target people that have that feature, but also we can get other people to adopt that feature because that sets them up to do more. So I think that analysis, which is actually quite simple as long as you have the data.

One of the biggest challenges, I'm sure you've seen this with your clients, Mike, is they just don't have good entitlement data about like expansion, contraction. It's largely due to like acquisitions and not having good CPQ and things like that. That is one of the foundational things to do this analysis.

Yeah, I don't know what you're talking about. Every one of our clients, their data is perfect. It's absolutely, and I'm sure they would all agree with that because I think that it's a good way to attack both the, call it the numerator and the denominator of that ratio return on market, because now you're affecting trailing twelve month bookings.

That's going up. And you also have higher effectiveness and efficiency with your cs spend. And so you kind of affect both. So I think, you know, as more and more you can identify propensity to expand, not just propensity to churn, I think you're able to drive up your overall commercial efficiency as an organization.

So it's good to know there are pieces out there, because I'm sure there's a pattern in everyone's business that says people who bought, and this used to be predictive recommendations. In the e commerce world, people who did this or bought this tended to buy this at a rate of 80%, 100% agree.

All right, here's the next one. This was part of our research as well. So our research, we found in our buyer survey that there are five to seven people after the sale, on average, that call on each customer and the customer. Their sentiment is, we actually don't know what any of those people do.

And so it could be a CS person. It could be an account manager, it could be a technical account manager. How should companies think about all of those things and how they touch the customer so that the customer doesn't feel like a soccer ball in Peewee soccer? Yeah, it's funny. I think we've over specialized in the world of SaaS, so there are so many people.

We even ran this analysis for ourselves because this staircase technology analyzes all your communication, so you could tell, like, who is in meetings with customers. And for our own business, we were like, I was shocked in the chart. I was like, oh, here's customers that had ten people talking to them from gainsight, you know, eight, nine, seven.

And it was just, every customer has so many people. And I find that it's a. It's inefficient. The customer gets frustrated, and it's demoralizing for our team, too, because you just don't know who's got what. So it's very, there's a lot of coordination that has to happen.

So I think there's a few things that I find are happening. One is just a lot more role clarity, because today it's like, oh, the CSM is the customer success manager. So sounds like they should be doing everything. But also, that's what the account manager does. And so it's kind of like a lot of confusion versus, okay, this is your role.

This is your job. You're brought in here. Second thing is, I think, better process. I know that sounds so obvious, but rather than just like, okay, scramble and go make it happen, it's like, no, we're gonna have this really clear journey and these clear handoffs. And I know that sounds like just basic, but people just don't do it right. And I know we need to get better at it, too.

And so just really clarity, I think, for the client, once you have all that being really clear upfront with the client. Here's our journey. Here's the people you're going to interact with. You know, it's always surprising to me that people don't just open up with a slide that says, okay, we're going to have these roles. Here's what they're going to go do.

And I think that that's not standardized for people. And then finally, I think, clearly, the more you make this stuff digital and self service, the better. So if every single thing is a human touch, then you're going to inherently have this soccer ball problem, kids soccer problem. But if there's a lot that the clients just do themselves, that's way better for everyone. So those are the quick things, I'd say.

Got it. The process side. It is funny you say that, it sounds very basic, but even in a conversation I was part of this morning about one of our clients, they said, hey, you know, as an outsider, Mike, can you just take a quick look at this? I took a quick look. I said, all of the people are there that need to do this.

This is just a matter of laying out a racy who is ultimately accountable and responsible for this and then assigning to that and then a commitment from the senior management to drive it down. And it was just a matter of process and documenting that one thing on that mic, which probably resonates with what you guys see. And also, I think in some ways, the ethos of your company, people think of sales and cs as two totally different things, but they're all part of the revenue cycle and the customer journey, you know, and I think that people are.

They're balkanizing them. Like, you know, we just did a reorgan. I put, I have a CCO and I put him. He's great, but I put him under our new CRO. And I think that that's. You don't have to do it that way. There's other ways to do it, too.

You can have a peers, but don't think of them as two different journeys. They're not. They're one journey. Right. It is. Right. It's a single journey. And this one, this morning, it was really a conversation about CS and account management. It was those.

It was those two functions. And I said, they're the same, they're doing the same things, so that's good. The other thing, I mean, this is just sort of a bonus thing for people to think about. A lot of times. What we're seeing right now in the confusion with customers is that I with hold periods being as long as they are, especially with PE back companies, the hold periods at this point, there's been a lot of add on activity that's gone on while we're continuing to try to grow this thing, to put it in a position to exit, and you end up with overlay salespeople a matter of reconciling it under very much.

Yeah. We're five products, so I've been through all that myself. Yeah. Any other, any other words of wisdom before we, before we part? Would love to have you back to do. I think we could probably do about five follow ups to this, but I know there's so much we could talk about.

Yeah. I just think that this is the time to, like, look at things from a bit of a blank slate, just like we're doing in our business and our clients are doing. Probably your clients are doing, too. We've inherited a lot of the mess from the bubble, and I joke that the bubble made us all feel like we're so great at our jobs, and now we're a little more humbled, which is good.

We need to be humble. And I think it's the right time when things are priced slower for a lot of businesses where it's like, hey, let's just go back and look at what really needs to be done. What roles do we need to, what does the customer journey need to look like versus, oh, we've got all these people, and let's just keep evolving with the people we have.

I kind of tell our team all the time, imagine we were starting gainsight again from scratch. What would we do? What orgs would we have? Forget about all the people we have and the leaders and all that, and just start with, what would it be if we started overd? Yep.

Agreed. I think. Yeah, I like that question. And there's always the in addition to that, what right now are we doing that we're not getting a return on investment for? And just stop doing that.

And then the last one is, look at every role in the company and ask yourself, if that role were empty, would I rehire that person that's in the current role? And if the answer is no, then you should make a move. You nailed it. That's so well said. I'm sure you think about that even in your own business.

So awesome to see Mike. I'm happy more often than my team wants to know. Okay. We're similar that way. All right, well, Nick, thank you. This has been spectacular, and we'll definitely have you back, so thank you. Oh, thank you, Mike.

Artificial Intelligence, Business, Technology, Customer Success Management, Commercial Efficiency, Gainsight, Sbi Tv