Customer Success for Bankers [Podcast]

Bill Briggs


In this podcast Dallas and Jess explain their concept of customer success, how it works for PrecisionLender, and why it is so important in Software as a Service (SaaS) businesses.

The SaaS economics (low margin but high volume, high cost of customer acquisition, losses in year one, importance of lifetime value and need to minimize churn) also apply to banking. What would happen if bankers started taking some of those same concepts and apply them to their business?



Podcast Transcript

Dallas Wells

Welcome to another episode of The Purposeful Banker, the podcast brought to you by PrecisionLender where we discuss the big topics on the minds of today’s best bankers. I’m Dallas Wells and with me is our co-host, Jessica Stone.

Jessica Stone

Hello everyone, thank you for joining us. Today we’re talking about the world Dallas and I live in, customer success and how that intersects with Dallas’ former life, the world of banking. We wanted to start out with a quote that really stood out to us, “Customer success is first and foremost about keeping the promise to customers”, and that’s Mike Grafham from Microsoft. We think that certainly rings true in banking. At its core, customer success is about proactive attention to customers and ensuring our clients are staying with us for years to come, expanding our relationships throughout that time, and we thought that this sounds a lot like how banks hope their borrower relationships pan out, long lasting and growing.

We know that banks are really proud of their customer service. In fact, we hear that so often that the main differentiation for banks from their competitors is, “we have the best customer service.” What is the main difference between customer service and customer success? Dallas, what do you think?

Dallas Wells

That’s a good question and I think this is a good place to define a little bit further what customer success really is because frankly coming into PrecisionLender from the banking world I didn’t know that this was a thing. When people had titles that were like VP of Delivery and Customer Success I just thought that was some catchy marketing name. It turns out customer success is this common thing and it started in the SaaS industry, Saas being Software as a Service. Where this came from is that the SaaS business is subscription based, so you offer something as a service, typically very short time frames. Some of them do it monthly, some of them do it out to yearly or sometimes multi-year contracts, but it’s on a renewing cycle and so customer success is the group that manages that customer base and basically keeps them happy so that they come back and renew.

This is not reacting to problems, this is very proactive, reaching out, making sure that your customers are being successful with the products that you offer. That’s the what is customer success. I went from not knowing what that was to being eyeball deep in it in a very short time frame.

Customer service, customer success, what’s the difference? Those two are in the same wheelhouse, they’re related, but when we think of customer service what we think of in the banking world is walking into a bank branch and talking to a teller or the way a lender interacts with a borrower when they’re in there talking about a loan.

Maybe if a customer calls in how fast is that question answered by a customer service rep on the phone. They’re all reactive conversations and interactions. A customer asks the bank for something, we respond. We’re either solving a problem or we’re asking a direct question, or we’re opening the account because they asked us. They are really important. You want to make sure that your customers has positive interactions in all those conversations.

Customer success is really about how you interact with your customers proactively. You’re looking around corners. You’re looking for where problems might arise and you’re figuring out how to fix them. You’re also reaching out and saying we’re doing fine here, but how can we do better. You want to know there’s a problem before there’s a problem and you want to give them solutions and ways to get better as you go.

Jessica Stone

Awesome. Thanks, Dallas. Before we dig more into the relationship between banking and customer success we wanted to talk a little bit about how we approach customer success here at PrecisionLender. I think that starts with how we came to realize as a company that we needed a customer success team. About two years ago, leadership here started to realize that we were putting so much time, effort, and resources into signing new customers, but then once they came on board just hoping that the under-staffed, over-worked, really stretched thin consulting team would be able to make sure that everyone was happy and going to stick around for the next year, in addition to all of the work that consultant was already doing.

We started putting the team together that we have in place today and that team that’s just really primarily focused on the client and their entire experience at PrecisionLender. Today that starts from the day they sign a contract, meaning on-boarding, setting up their solution, meeting with the executive team and the lender team about how they’re going to use PrecisionLender, checking in with a core group on a quarterly basis to make sure things are going well and working efficiently, and then additional touch points throughout the yeah to really support the client in anything pricing related.

Dallas Wells

Yeah, as I mentioned before, customer success is really a hallmark of the Software as a Service, or the SaaS, industry. Again, the economics of that, so we’ll talk about that relates to banking… but the economics of the SaaS business will probably sound familiar and that is that you have fairly high customer acquisition costs, so it’s hard to get people signed up and then there’s some effort in getting them up and running. Since it’s a subscription-type model you’re not selling them something at these really high margins you’re selling them on an annual number they have to be happy with forever and ever. That means the first year you are most likely losing money. Almost all SaaS companies have a pretty ugly, negative return on that first year.

It is not just nice if people renew it is absolutely vital to the success of the business. In the SaaS world it’s all about churn rate, how many of those existing clients churn on a monthly or on an annual basis. For companies that do SaaS for either individuals or for consumer type stuff their churn rates are fairly high, but they also have a big group coming into the funnel at the front end. Enterprise software as a service, like we do at PrecisionLender, is going to sound a lot more like banking where the funnel’s a lot smaller, you can’t spend a lot of time putting in folks at the front end where it’s not going to work, so you have to sell to the customers that are going to be successful with your product not just whoever’s got the checkbook open.

In our world the churn has to be as close to 0 as we can make it. In fact, our goal is always negative churn, meaning that whatever we increase with the existing customer base will more than make up for whatever we lose and most of those would be for acquisitions and things like that. That’s our basic economic model.

Jessica Stone

Dallas, bringing that back to our audience today, how do you think customer success relates back to banking?

Dallas Wells

Again, that probably sounded familiar, in that you’re talking about in the banking business low margins, but high volume. Banks survive because there’s lots of commas and zeros after the numbers that are on the balance sheet. We’ll do a loan that’s a lot of work, it’s a lot of effort. There’s a fair amount of risk in there and then we’ll make a 1-1/2 to 2 return on assets on that. If you do $100,000 line of credit for one of your business borrowers if things go well you’ll make $1,500 on that. You think about that, how many of those we have to do to keep the lights on, pay for the ones that occasionally go bad, pay salaries, all that kind of stuff, it’s a little daunting.

There’s also this high cost of customer acquisition where we’re probably losing money in year one. Again, if you’re going to make, especially with really low rates, so let’s say on that same $100,000 loan you’re charging prime, so you’re making 3.25% interest on that and you have to use that to cover the cost of even getting that thing on the books. That means you’re probably losing money in year one. There’s this big focus on lifetime value, which is what the SaaS business is all about. One of the main goals of customer success is to ensure that your customer stays a customer and then when there’s the right opportunities that you can expand that relationship.

This is about cross-selling, getting your foot in the door with whatever product they come in to see you about and then expanding that share of wallet. Then that same need to minimize churn. Getting customers is really hard, it’s really expensive. You have to really pay attention to those things. Renewals are incredibly important, both in SaaS and in banking. You’ll quickly reach a point where your renewals from your existing customer base, those are going to make up the bulk of your pricing decisions and they’re making up the vast majority of your revenue generation.

We’ll put a link out there to a blog that Carl Ryden, our CEO here, did. It’s from a few years ago, but it’s still very relevant, talking about renewals.

He talks about some ways that you can actually try to improve the profitability on a deal, instead of just crossing your fingers and hoping that they don’t push for lower rates. The big takeaway there is that it’s all about value creation. You’re helping find the right solution for your customers and that’s how you’re winning those renewals.

Jessica Stone

Great. Another benefit that we see in customer success is that you’re really ensuring the happiness of your customers and then in turn happy customers are not only repeat customers, but they might be the types of clients that bring in friends or referrals or say, “I had such a great experience you guys should really be doing business with these folks too.” We know that that’s really similar in banking. Community bankers are really close to the folks in their local community that referrals are really important, so that’s also another synergy between the customer success and the approach to banking customers.

Now that we’ve seen the benefit of a customer success type approach, Dallas, what are some specific things that you think banks can do to maybe get started in looking toward a customer success, a more proactive approach to the way they work with their clients?

Dallas Wells

Probably one of the first things you can do is just educate yourself. The SaaS industry has learned a lot about customer success and it’s grown an incredible amount over the last few years. Again, this was something I hadn’t heard of when I started at PrecisionLender and now I see it everywhere. Obviously, I’m looking for it now, but it does show up all over the place. I actually saw an ad on yesterday for the Pulse conference, which happens to be a customer success conference put on by Gainsight, which is a start-up that is serving only the customer success industry. It’s this whole new thing that’s popping up. Go read about it. We’ll put a few links out in the show notes to this episode of some good places to get started. Again, most of those are going to be focused on the SaaS industry, but the economics are similar enough to think about it from your banking world and here’s how I would relate some of those that’s you’ll see.

A really important one is to just think about the customer life cycle. Since those lifetime customer values are so important we want to set them up for success and we want to set up those relationships so that they last a long time and that we’re there to serve those needs along the way, maybe with an ancillary product that we can cross-sell to them.

That means we have to think about that during the sales process, finding the right fit, not again just whoever’s willing to do business with you. Especially from a commercial loan perspective where it’s so labor intensive, there are some customers who are not right for you, being willing to say no to that. We’ve learned that as a company, too. I’ve actually done a couple of those where we do a demo of our solution, we talk about how they’re pricing, we talk about if there’s a fit, and at the end of that conversation we have to say to them, even though they showed a little interest we have to say, “You know what, I don’t think this is the right fit for you”, and it’s because we know that there’s not the ability for us to succeed in exactly what they’re looking for and that it’s going to be problematic for them and for us. As a bank you have to be willing to say the same thing.

The next step of that would be really shepherding the deals across the finish line or, in our terms and what you’ll read about in the SaaS world, is onboarding. Onboarding’s a really tricky thing for banks just because the regulators are so intertwined in that piece of it. I’ll also tell you just from first-hand experience, from doing my own banking business, banks are awful at onboarding. Sorry, you just are and I think it’s because bankers tend to get so far removed from that process. I worked in banks and when I needed a checking account I called Suzie down in accounts and she just brought the stuff up and I was done.

That’s not how your customers do it. They have to sit in front of somebody during their lunch hour and it takes an hour and 10 minutes to sign two things on a signature card and then they leave with this stack of paper, and then they have to go separately and sign up for Internet banking. Then they have to register for e-statements. Then they still can’t get bill pay to work because that’s a separate thing that you have to request. All of the stuff’s a real headache and they go from being excited and saying I think I’m going to switch banks to now they’re just as frustrated with you as they were with the last place. That’s from checking accounts, complex transaction, like a commercial loan, you’ve got even more potholes that you can run into there. Walk through that through the eyes of your customer.

Think about what onboarding looks like to them. I don’t just mean getting a loan from application to close, but those early days of that relationship. How does the first payment work? How does the first draw work if they’re doing a construction project? Lay all those things out, make them clear, make them easy, walk them through. Know that it’s going to be labor intensive the first time. This goes back to one of the points that we talk about all the time on this podcast, which is you guys as bankers do these transactions all day every day, your customers don’t. Keep that in mind, help them walk through this. You have 100 lines of credit that you’re managing, they have one. Make sure that it’s easy for them.

The next point, once you have somebody, you’ve sold them the right thing, you’ve got them onboarded, now they’re kind of used to using your stuff and you’re off and running. We have, and they have a few different names, a lot of times they’re called QBRs or quarterly business reviews, we call them client success reviews or CSRs, lots of acronyms just like in the banking world, but it’s a quarterly touch point. It’s a proactive time for us to reach out, talk to our clients and say how are they performing, just baseline financial performance. Are things better or worse than they were before? What are their goals and strategies as an entity? What’s their budgeted growth? What kind of profit margins are they looking to have? Are they trying to double in size in the next 5 years or do they have real profit margin problems that we need to work on?

Those things need to align with pricing, so we have to figure out how to get our tool configured to meet those things. Banks have an even more direct way to talk to those clients. What’s going on in your business? What’s the next quarter look like? What’s the next 5 years look like? What kind of financing needs will there be in between there? How can we start thinking ahead, proactively laying out here’s the kind of things that need to be in place. If you want to buy your own building instead of leasing 3 years down the road here’s what that approval’s going to look like. Let’s make sure you’re ready when the time comes.

Those kind of things make sure that they don’t shop based on price next time around, they just bring you the deal because you’re walking them right to it. We build for our clients what we call a success plan. Here’s what the world looks like for you over the next year, here’s the things we’re going to do to help you get there, now every quarter we can just check in and tick off are we doing the right thing or not.

Do a similar thing with your customers. What are we trying to do this year? How can we help as a bank? Let’s get a to-do list and then I’ll check in every 90 days or so and we’ll just see how we’re doing. That’s the life cycle that you can work through and that takes the talk of, “we want to be trusted partners for our customers”, that’s how you actually do it is it’s a lot of work, it’s really labor intensive, especially once you get them up and running and there’s an expectation of how the relationship works, you’ll see really big dividends from that.

Jessica Stone

Awesome. Dallas, I want to go back to one of the points you made when you were talking about being proactive. We’ve talked a lot how customer success really moves from management on a reactive level to really that proactive approach and that means understanding your client and their successes, and their challenges, and their everyday responsibilities, really things like that. I feel like we go back to this episode all the time, but a while back you and I spoke with Bill Ragel at Comerica and he had talked about the way his team operates. He manages a lending team with a specific specialization and that it really offers them an advantage in approaching new business because they really understand the audience that they’re going after and thinking about the potential it would offer for customer success in a banking sense. I wanted to see if you wanted to touch on that a little bit more.

Dallas Wells

Yeah, if you think about that customer life cycle and that basic framework that I laid out there that’s really hard if you’re trying to be all things to all people. That’s why Bill and his team have really excelled with what they’re doing. They do healthcare lending and healthcare lending only. Again, they’re part of a decent-sized bank and they’re able to do that, but even within a community bank you can specialize a little bit and we’ve got a blog post or two that we’ll link to talking about the right kind of strategy for really succeeding in today’s world, which is you can’t be all things to all people. The really big banks, Wells Fargo and Bank of America, those guys are doing that and they’re really, really good at it. What you need to do is be a niche player, specialize in something and be exceptionally good at it and be the go-to source for that.

That way when you’re having quarterly phone calls with your customers you have some insights and some value to provide there. That’s what Bill and his team do, they keep up with the industry and they can talk actual business strategy and matching financing to that.

Jessica Stone

Let’s talk about if we were to really drill this down, Dallas, what are the 3 biggest takeaways from this conversation that you think someone listening here could apply to their everyday life in banking?

Dallas Wells

The first one overarching before we get into the list is just do your homework. Go look this up. There’s lots of great stuff out there, so read up. Again, we’ll give you some good starting points to get you kicked off.

I think the 3 ways that are useful for banks is, number 1, be proactive. Don’t wait for people to yell to go fix their problem because this has been proven over and over again in all kinds of industries that if you’re hearing one person yelling there’s 8 or 10 others who just didn’t say anything. If you’re not being proactive all those people are just frustrated and you don’t even know it, so you’re not fixing their problem. Be proactive and especially for those high value clients touch them a lot and know what they’re doing and how you can best help.

Aligned with that would be number 2, which is really understand your customer and their business and really try to see things through their eyes. What kinds of things are they dealing with, what problems do they have, how can you help solve those, and even if you can’t do it directly, even if you don’t get paid for it, introduce them to people who can help. Be a resource, be someone that they pick up the phone and call first instead of the person they call last.

Then third would just be really to think about that lifetime value of a customer. Loan officers especially, you’re drowning in transactions, you have all these deals that you’re trying to juggle and keep in the air at the same time, so you start to think necessarily sometimes very transactionally.

You’re doing the deal in front of you and then you move on to the next one, you’re putting out fires and that’s it. You have to find a way to carve out some time each day before the fires start to really deal proactively with your clients and think about that lifetime value, how can you help the early ones get onboarded in a good way and eventually get them to that point where you’re doing regular 3-month or 6-month check-ins and talking about what’s going on in their business and how you can help.

Those 3, be proactive, understand your customer, and really think about lifetime value.

Jessica Stone

Great. Thanks, Dallas. That will wrap it up for us for this episode. Thanks everyone for listening. We’ll provide some of the links we talked about and a couple more we think should be helpful for everyone in the show notes for this episode and you can find those at If you like what you’ve been hearing please make sure to subscribe to our feed in iTunes, Soundcloud, or Stitcher, and we love to get ratings and feedback there. Thanks for tuning in. Until next time, this has been Jessica Stone and Dallas Wells, and you’ve been listening to The Purposeful Banker.



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