Refresh 2019 - Can Freshworks change the CX market with better customer success metrics?

My day one piece on Refresh 2019 put Freshworks' enterprise CX ambitions to an early test. An integrated view of the customer based on one customer master record? Sound like a winning approach.

However, once you move up into the midmarket - as Freshworks is intent on doing - the challenges with a unified data model get tougher.

Good luck cutting through the customer experience noise. Every CX vendor - and there is one behind every keynote curtain these days - will be more than happy to tell you about their awesome data platform and their seamless omni-channel capabilities.

Customers trying to drill into the differences between these claims have their work cut out for them. It's tempting to tune it out, and wait for a vendor to solve a real-world problem instead.

Since my last post, I've been in spirited conversations between the Freshworks leadership team and a surprisingly spunky group of analysts (credit to Freshworks for inviting many of the notoriously outspoken analysts to this event). I've also been learning from as many Freshworks customers as I could track down. One area where I think Freshworks may be able to excel: via the Natero acquisition.

Why? Because Freshworks' so-called "customer for life" approach requires new metrics - and much savvier use of real-time data. In my view, that makes the announcement of Freshsuccess for Q4 2019 the most important news of the show (Freshsuccess is what Natero will morph into). Natero showed me some of the functionality their current customers like best; you can check those screens below.

But you can't support customer success with just technology and data visualizations. As it turns out, the customer success initiative at Freshworks runs deeper than the Natero acquisition. I traced that story back through a sit down with Param Vora, Head of Product Management with Freshsuccess.

"Customers need actionable data in the field"

Why do Freshworks customers need Freshsuccess? Why should they care? Vora gave me an example of a pharmaceutical customer trying to get more out of data and analytics (in this case, they are a Tableau dashboards customer). It's about getting the right data in the hands of more customer-facing employees. Vora:

Every enterprise or mid-market company today has a data analytics team - or some kind of data team. And then they obviously have a field team. What I'm seeing through one of our current Freshservice customers is an interest to blend their data team - and all the actionable data that they're getting out of their Tableau team - to the field.

I'm something of a real-time critic - I'm in the "right time" data camp. But in this case, real-time is non-negotiable:

They actually have some very specific needs around account managers needing to get involved in real-time when maybe a sample gets failed in their lab, or a sample doesn't arrive, etc. So there's a whole bunch of things in their supply chain that their account managers should be alerted of, and engage directly with the customer to be more proactive.

The current approach is not exactly "delighting" their own customers. They are either slow or reactive:

What they're ending up having to do today is: they get these weekly reports, or the customers themselves reach out and say, "Hey, my sample never arrived."

SaaS vendors are probably the further along with customer success tracking. Vora sees a bigger Freshsuccess opportunity:

This convergence of data teams and field teams is really where we're taking Freshsuccess... Relationship management teams are becoming more data-driven, and this is where we are going to be taking our first Freshsuccess efforts.

As Vora told me, when Freshworks was only focused on SMBs, customer success programs weren't a priority:

When we were SMB-only, it was not a critical need to have a customer success program. When your customers are coming inbound... You can get away with just having very good support. As we moved upmarket, the need was clear.

Customer goals become the unit of work

Vora joined Freshworks (then Freshdesk) in 2015. His mission: build a framework for low, medium and high touch customer success. As Vora's team worked with Freshworks customers, they realized it was time to shift from a system-of-record focus to a success team - making customer results the priority. Responding to customers who file tickets doesn't get it done. It's now about understanding customer goals:

We have to actually engage with the customer, and treat "customers" as users before they even become customers. So A, get in touch with them. Build an initial relationship, get their goals, use the goals as the unit of work, and make sure you are taking these goals to success. The better you do this with them, the less pain, the more leaned in you are. That's when we found our high touch customer success model.

As Vora's team built out their low, medium, and high touch models, they ran into some surprises. One example:

We learned that low touch was not giving us that much... It was not driving as much value as we wanted. So we incorporated second order segmentation.

Financial segmentation was a no-brainer. Vora's goal? Figure out, for each Freshworks product, how to segment customers to provide content that engages them. With Freshdesk (for customer support), it was about verticalizing the content. With Freshservice (for IT service management), the second order segmentation was based on customer maturity levels.

Customer satisfaction metrics are stale and static

But what really grabbed my attention is the push for new customer success metrics. As we move into the customer-for-life mentality, some KPIs from the SaaS industry, like churn, are obvious.

But most of the "customer satisfaction" scores companies rely on feel stale - and pretty far from real-time. Vora believes Freshsuccess will provide a platform for collaborating with Freshworks customers on a more potent - and actionable - set of customer metrics. For example?

One thing we're adding that's not part of Natero today is the ability to put in these goals. We'll be able to quantify customer goals, right? Today that's just not possible. Even in my CS org, I cannot quantify how much we helped customers. And that's a big pain point around the industry. So what we've added to our model is the ability to capture this data both qualitatively and quantitatively.

Vora thinks that Freshworks can change the value of the so-called "health score."

One metric customer success teams operate on is the health score. Unfortunately, nobody has a very accurate health score. The solution is going to be helping customers understand for your industry, these are the inputs we need to give you a very accurate health score. Today that does not exist.

Vora's team has been hard at work refining the health score model. They must get this right. Customer trust in such data is precarious:

It took us forever to get our health score proper and in Natero, because we had to keep iterating. And the risk you have is CSMs losing trust of that score, which is actually pivotal to the whole system.

Real-time scoring versus static satisfaction reports? That's a big upgrade.

That's what will drive action, right? And engagement. So when you do it once a year, it's more educational. When you do it in real time, it's actually impacting customer engagement.

Natero in action - a few selected screens

Vora's team has plenty of work ahead. The Q4 version of Freshsuccess is more of a design/UI refresh to align with the Freshworks product line. Version two, release date to be announced, will include the low/medium/high touch framework (and segmentation) covered here.

But for now, here's a quick view into some of Natero's current screens, hand-picked for diginomica readers by the Natero team, including former Natero founder and Director - Product Management at Freshworks, Craig Soules.

This Natero screen shows predictive alerts based on customer behavior, lifecycle events, or other KPIs:

Predictive alert uses:

• Reach out to customers before they decide to churn.
• Get reminders about upcoming renewals.
• Spot new advocates and expansion opportunities.

Understanding module usage is a big factor for product roadmap planning, as well as user adoption troubleshooting:

Obviously, as Natero morphs into Freshsuccess, Freshworks modules will be tracked with these types of dashboards. The Natero team tells me their current customers use this dashboard for customer activity data reports, alerts, and email campaigns.

This view of a customer portfolio shows a client's most important customer KPIs in one place:

The red-colored health score for "Acme" obviously jumps out for action, but you can also see trend lines in terms of activity, and customer stages. The final Natero screen is a customer analytics view:

Natero bills this screen as "Point-and-click customer analytics without the need for spreadsheets or time-intensive grunt work." Common use cases: visualize your business, including customer segments, product adoption, and team performance.

Freshworks is obviously not the only company with abilities to visualize, benchmark and alert based on customer analytics. But they have a chance to be one of the vendors leading the definition of new customer metrics, or, as they would put it, "customer for life" metrics. Add in some "intelligent" next best actions, and you're bringing something to midmarket customers they can't typically get from their internal data teams.

My take - "cloud" software needs a shakeup

If Freshworks can achieve what this article lays out for Freshsuccess, it should make a difference to Freshworks' enterprise push. Who doesn't want to pro-actively serve their own customers better? For this to work out, Freshworks will need to offer some of these capabilities in its core offerings (Freshsuccess is a standalone product with its own pricing). As I understand it, that's the plan.

For now, Freshworks will have to stand out in other ways. I see Freshworks as part of a new breed of SaaS players that bring a new meaning to "land and expand," winning over customers with products that are flat-out easier to use and fast to adopt. Functional parity is mostly there for this new breed, but customers' insistence on the most functionally-rich solution is finally wavering - as long as they are confident in frequent SaaS updates or platform extensions that cover their needs. Business user adoption becomes the new and better form of lock-in.

I also like the trojan horse aspect of the Freshservice ITSM offering, which gives Freshworks traction inside of IT teams. SaaS solutions still have to check that IT security and compliance box; Freshworks executives told me Freshservice is already an asset to their upselling. Win over IT teams, and you have a potent sales partner - even in the business user era.

Freshworks has issued some edgy marketing content - the rarest of things - mocking a cloud software market that has become legacy in concerning respects:

Yep, Freshworks can definitely break through the noise here - as long as they expand their CX focus. It's not just about affordable/well-designed solutions. It's about an overall ease of use including licensing, contract negotiations, product support, limited-but-exceptional consulting advisory, and so on. I hope Freshworks doubles down on undermining what has become a concerning level of SaaS lock-in from vendors that need a wake-up call (or two).

Despite the buzzword numbness factor, CX is a sensible play - as long as Freshworks stays away from automagical AI fixing everything. What we're really doing here is helping customers serve all their stakeholders better (including employee engagement and collaboration, another Freshworks priority). However, most of the Freshworks customers I talked to are not yet thinking in such transformative terms. They seemed to be mostly concentrating on one-to-three Freshworks products, with Freshdesk and Freshservice coming up the most frequently amongst those I interviewed.

Still, there is definitely a customer openness for more products and more use cases. Enthusiastic user adoption has a way of paving that road. If Freshworks can make a jugular case for bigger data platform transformations, then land-and-expand should flow from there. If so, Freshsuccess could be a real factor in that transformation pitch.