How becoming product led improves customer health

Written by Pippa Armes  | 

4 min

 

If you’re part of the product world, you’re likely familiar with the concept of product-led growth—a business strategy that puts the product at the heart of a company’s go-to-market efforts. At its core, product-led growth counts on the product itself to do much of the “selling” that would otherwise fall on the shoulders of salespeople and marketers—and which would normally be delivered through external or outbound channels.

While it’s true that strategies like freemium plans and free trials are fantastic tools for driving product-led growth and encouraging expansion, their benefits—and those of other product-led tactics—don’t end there. Our new report about the business value of being product led revealed that companies actually see value in areas like customer health, user productivity, and product development, too.

In this four-part blog series, we’ll take a closer look at the four key areas of value we identified in our study—starting with customer health. Read on for an overview of the customer health-related outcomes companies are achieving with product-led approaches, the tools they’re using to get there, and considerations to keep in mind as you define your own product-led strategy.

 

What is customer health and why does it matter?

A customer health score is a metric used to determine whether customer relationships are healthy (and therefore likely to retain) or at-risk (and therefore likely to churn). While the systems used to measure and score customer health vary widely, the end goal is always the same: To give internal teams—like product or customer success (CS)—a way to predict which customers will stick around, expand, or leave. Done right, a customer health score is an effective way to proactively evaluate customer behaviors and identify usage patterns that could indicate early warning signs of churn, so that the right teams can intervene before it’s too late.

At enterprise scale, losing customers to churn can equate to millions—or even tens of millions—of dollars in lost revenue. Not to mention, it creates a ripple effect of additional work and lost momentum that impacts teams across the business, including marketing, PR, and outbound prospecting. High rates of customer churn also deliver a hefty blow to the company’s reputation, making it harder for the business to collect positive social proof that could help open doors in future deals.

On average, product-led companies experience a 5% reduction in customer churn and a 15% increase in NRR.

 

What tools do product-led companies use to improve customer health?

Product-led organizations take a proactive approach to measuring and influencing customer health by putting data at the center of their efforts. Specifically, they use product analytics to track product usage and behavioral KPIs like product and feature adoption, user and customer retention, and stickiness. These measures give the organization a clear and objective view into how users are really engaging with the product, which features they’re seeing the most value from, and where they’re struggling or could use extra guidance.

In addition to quantitative analytics data, product-led companies also use customer feedback to gain a holistic understanding of the product experience and assess overall customer health. Qualitative feedback adds valuable color and context to more objective product usage data, gives customers an outlet to help them feel seen and heard (which in turn improves sentiment), and helps teams across the business prioritize and align their efforts to delivering an exceptional customer experience.

Product-led companies act on all these insights quantitative and qualitative insights using strategic in-app messaging tools like Pendo In-app Guides. In-app guides allow teams throughout the business to influence customer behaviors, provide contextual guidance or enablement, and reach users in a timely and immersive way—all without relying on external platforms or partners. Better yet, mature product-led companies use segmentation to carefully time, tailor, and target these messages. This granularity allows the organization to engage the right people at the right time to improve customer health and happiness.

On average, product-led companies that use product-led tactics to understand and improve customer health across their product portfolio see a 5% reduction in customer churn, and a 15% increase in net revenue retention (NRR).

 

Learn more

Download our full business value report for more product-led customer health insights, and to read success stories from companies who’ve benefited from these strategies themselves.