4 MIN READ
Customer education: the multifaceted solution to driving business success
There is a misconception in the software industry (especially among enterprise SaaS companies) that customer education is a tool to be used only to help a new customer learn the product they purchased. While that is one way to look at customer education, it is a narrow way. Customer education can be used to improve recruiting, increase the number of leads into the sales and marketing funnel, help customers use more of your product, increase net negative churn, NPS, and drive more sales. There are many examples of software companies using education to achieve a diverse range of goals from Red Hat running a multi-million dollar training business to HubSpot offering free certifications to non-customers. The only limit on how customer education can improve company performance is our worldview.
And the worldview we should acquire quickly is that customer education exists to help our companies grow. Of course, the question is, "How?" And to answer that question, let's understand what growth means. Tomasz Tunguz describes three main modes of account growth:
- Seat expansion: sell the product to more people within the company and charge by the seat (ex. Salesforce, Expensify)
- Resource expansion: entice the customer to store more data or use more of your service (ex. New Relic, Twilio, Heroku)
- Cross-sell: sell adjacent products that increase the value of the core product (ex. AWS S3, EMR, etc.)
Note that this list is focused on growth through existing customers. So, with our new current worldview of using customer education with customers, this is an excellent list to start with. The list is useful because it can help us target customer education efforts in each of the modes above.
For example, you could set a goal to increase customer use of your product (resource expansion) by helping customers learn how to set up and use more integrations. You might find a list of customers who are not using any integrations and devise a strategy to help those customers discover the value in using integration. After six months you can go back and look to see which customers started using integrations, and then what that means for renewal rates or billings (if you bill by usage).
This example shows how we can use customer education in a deliberate way to increase growth.
Now, you might be thinking, "We're not Red Hat or HubSpot. This does not apply to us." The point here is not to do what Red Hat or HubSpot does. The point is to take a deliberate approach to targeting customer education at your unique challenges. Below are three examples of companies with different challenges and how they implemented customer education.
Increase number of leads, sales conversion rates, and NPS
Widen, an enterprise digital asset management company, had an NPS of 30 in 2014. This is not necessarily low when you consider it all by itself. But when you consider that Widen's target NPS is 50, then you have some appreciation for the customer satisfaction challenge Widen set out to solve. One of the ways Widen chose to improve NPS was to create an online university to establish a better relationship with customers, which directly led to an increase in NPS by 19 points. Customers were more satisfied with their experience because they were better prepared for using Widen's products.
Widen also discovered that prospects were taking courses before they became customers, increasing their knowledge in Widen's products, but also giving them a pre-purchase experience with the company. Prospects were more comfortable with Widen employees, making the actual purchase a more pleasant experience for them. That led to a 56% increase in lead generation numbers and a 22.5% increase in sales closure rates. Widen discovered that customer education affected more than just adoption rates.
Increase product adoption
In 2014, there were 2,500 job postings seeking Docker skills. A year later, they went up to 43,000. The technology took off and was being used by a lot of enterprise companies, but there weren't enough people with Docker skills to help them use it well. However in 2014, not many companies were signing up for the premium version because they couldn't hire anyone to help them implement, maintain, and use it properly. Why pay for something they knew they couldn't use? Good question.
Docker started releasing free, online training to anyone who wanted to learn. Anyone. Not just customers. The courses were self-paced and on-demand, so there was no friction at all. Docker adoption increased by 40% in a single year. I am not saying that the online courses were the only reason to make this happen. Just that it was one action Docker took, among many, to help solve the problem of growing the number of people with Docker skills.
Prevent people from quitting your service
I have written about the Fender Guitar adoption problem before. And I know Fender is not a SaaS or open-source software company. But the problem is very relatable. Fender Guitars has been one of the leading guitar companies in the world for decades. So they were dismayed to see that over a 10-year period, sales dropped 40%. Not only that, but 90% of the people who did buy a guitar quit playing it within one year of buying it; there went any chance of selling guitar accessories like strings, amps, or straps, much less getting them to buy a second guitar at some point in the future.
The problem here relates closely with the three modes of growth Tomasz describes above. In order for Fender to grow, it needed to get people to continue using the guitars they buy, improve their skill, learn more songs, and then buy more accessories.
What was the solution? Fender launched a subscription-based online guitar learning portal called Fender Play to help people learn to play their favorite songs. After all, who doesn't want to learn how to play Here Comes the Sun?