How to align incentives with your customers’ success
March 2020 was chaotic. I was in my third month at HubSpot when it became apparent that the COVID-19 pandemic was not just a blip. As businesses closed their physical doors, we realized we had to pivot extremely quickly to meet the changing needs of our customers, partners and employees around the world.
We made big decisions in a matter of days — switching to an entirely remote model, creating a multimillion-dollar customer relief fund, and empowering our customer-facing teams to get creative with discounts and renewals, just to name a few.
Honestly, we didn’t know how it would go. The decisions had been made so quickly that there wasn’t any time to test assumptions or “experiment.” We just had to take action and commit. Over a year later, it seems like the plays did work. Our customers and partners shared positive feedback with us and after looking at the numbers we’re making some of the changes permanent.
They worked because of one simple northstar: Solve For the Customer, or SFTC. This is our core company value and first principle, and it means we prioritize customer value in every decision we make. We trust that by solving for the customer, we will solve for ourselves.
In March 2020, this first principle guided our decisions. We heard from customers and partners that their primary concern was cashflow. The customer relief fund was an expensive investment, but we chose to stand by our customers in the worst times, trusting that they would choose us in the best times. And they did.
I share this story because it illustrates something I really believe in — that companies should align their own success with their customers’ success. Yes, SFTC is part of our “art”, but it also is closely tied to our last discipline — aligned incentives.
Aligned incentives is how you really close the loop on your customer-first culture. While a value like “Solve for the Customer” helps guide decisions, the incentives your teams are goaled on are the things that anchor the work. And this can be an incredibly powerful tool for growth.
Retention is the new acquisition
Sangram Vajre, the co-founder of Terminus, said it best: “Retention is the new acquisition and helping is the new selling.” He couldn’t be more correct!
A common refrain heard about leading sales teams is that to change behavior, you must first change incentives. But this is true for everyone customer-facing, not just salespeople. After all, incentives show teams where to spend their time. The crucial point here is understanding the difference between incentives and outcomes.
I would argue that the typical metrics you see companies measure are actually outcomes. Number of new leads, number of deals closed, MRR or ARR quotas — these are all outcomes the business wants to achieve. But what will the path to those outcomes look like?
Well, the simplest way to generate more leads is to buy a list. The simplest way to close more deals is to hard close every prospect you come across, whether or not they’re a good fit. On paper, you’re hitting your metrics. In reality, you’re selling your customers short — and it may be too late to correct by the time it shows up in your churn numbers.
When you solve for your customers, they are more likely to stay customers, recommend your brand to peers, and buy more over time. Solving for the customer isn’t just a slogan on our walls — it’s something we live by because we know that growth in 2021 and beyond depends on our customers.
That’s why we focus on driving revenue retention across the organization. This aligns the incentives to onboard customers exceptionally well, ensures customers are receiving value every single day, and drives meaningful conversations so that customers continue to buy from us to expand that value. For us, this works.
Put customers at the center of your flywheel
Aligning incentives is pretty simple when you think about it. Think about what will make your customer successful. Then, reverse engineer that outcome into measurable metrics for your teams. Think about aligning your flywheel with customers at two different levels.
First, orient your flywheel toward the customer. Traditionally, customer-facing teams carry customer metrics like NPS and CSAT. But marketing, sales, and customer success are not the full flywheel. Every team that touches the customer experience — Product, Finance, Systems & Business Enablement, even People Ops — is part of the flywheel. So make sure you’re looking at this holistically and tying each flywheel team back to the customer in some way.
At HubSpot, we do something pretty unusual — our product team owns the NPS number. At every company I’ve worked at, the customer success team carries NPS. But by the time the customer gets to the customer success team, there’s very little that can be done about the core experience — the product. If the product isn’t working, all the customer team will be able to do is treat symptoms rather than root causes.
Having NPS be a core Product metric has made a world of difference for us. It’s changed the culture of the product team — PMs are talking to customers far more than before. They’re able to see the impact of a feature change, a beta, or a launch pretty much immediately. We even have a Slack channel that displays every customer NPS response that nearly 1,500 employees are in. This real-time feedback means the team is always thinking deeply about the customer and is close to their perspective.
Second, align teams around shared incentives. One crucial place to get this right is in the sales to customer success handoff. The most common misalignment between these teams is that sales is typically goaled on volume, while customer success owns customer happiness. The problem is that left unchecked, a pure volume goal incentivizes salespeople to close the easy deals, not necessarily the best fit customers. And then customer success — and more importantly, your customers — have to deal with the ramifications.
We solve this at HubSpot through giving our sales and service teams a shared goal — customer dollar retention (C$R) and revenue retention (RR). These metrics measure whether our customers are getting value from our platform — are they receiving value from what they have today? Are we delighting them so that they want to stay? are we making them promoters that they stay and continue to buy more?
It also means both teams are oriented around signing the right customers. Our target segment is companies who want to scale their businesses and run their entire go-to-market on our platform. Therefore, we should be looking for customers with expansion potential and that have ambitions to grow. Having the teams carry Customer Dollar Retention and Revenue Retention keeps them aligned on customers’ long-term health, not just closing deals to meet quota this month.
Capturing joy through the “perfect swipe”
Square is one of the largest digital payments companies in the US, with a market cap over $100B. Their most important metric is a great illustration of the power of aligned incentives.
Today, Square does far more than manage payments. But when the company was founded, their primary product was the physical Square POS that many of us have doubtless used. Every transaction has two parties — the merchant and the consumer. Every single transaction needs to work well for both parties, not least because every consumer is a potential future customer. Millions of people experience Square’s product without necessarily being customers, meaning the surface area of the business was massive.
The company wanted to put a better spin on a “boring” utility by making the experience delightful and joyful. So they started measuring the “perfect swipe” — a hybrid metric measuring all the little components that go into that experience. It included measures like time to complete transaction, time to receipt, percentage of overall successful transactions, with time bounds and success metrics for each.
The way Square took a very nebulous concept — customer joy — and operationalized it into all the little things that actually made up that experience — is exactly how to align customers’ success with your own success. Starting with something you want your customers to feel, then reverse engineering it to the right incentives, helps your customers be successful.
Aligned incentives are the final discipline of customer experience. They are the bow on top of the foundations of your culture, teams, strategy and system. The “art and science” of customer experience will look different at every company — and it should. These disciplines are just a starting point for you to build the experience that will delight your customers, and are a better way to grow. They are what make you a truly customer-centric company, and I hope that all of us can leverage them to build the experiences our customers deserve.
