Owning the Number

In our view there are two primary ways in which this can happen, and the best choice for how to organize Customer Success is typically based on the company’s go-to-market model.

Here’s what I mean…

SMB (low ACV, high velocity sales)

In high-velocity, low ACV (annual contract value) situations, we see CSMs owning a renewal and upsell number outright. They are responsible for maintaining client relationships and closing upsell business, renewals, etc. The conclusion is that it’s too confusing for smaller clients to receive proactive touches from multiple contacts. They lose track of who is their primary point of contact.

Having both a CSM and a Sales Account Manager focused on a smaller accounts can also be duplicative from a cost perspective (note, there are some exceptions, a separate topic for another blog post).

Perhaps the biggest reason for having CSMs own the number in SMB is to keep new logo sales teams focused on prospecting and selling new business to drive overall growth. It’s much easier for a “hunter” to harvest an add-on than to track down and kill a new logo. Give the choice most account executives will take the easier of the two routes to meet their number.

Enterprise (high ACV, low velocity sales)

In the enterprise world, new logo deals close more slowly and have higher contract values. In this scenario we favor tying CSMs to revenue through Net Retention (includes upsells and other revenue expansion) and Renewal rates. While they may not be directly responsible for closing these transactions, their work is highly aligned.

In fact, we recommend tying their variable compensation to the same renewal and expansion targets that an Account Manager would typically carry, just at a lower ratio relative to overall comp. In this model, the CSM acts much more like a TAM – Technical Account Manager – and is responsible for metrics and leading activities that result in negative net churn, such as adoption assurance, product utilization and lead identification.

In some cases, this role can be chargeable to the client. We’ve worked with multiple companies that have premium TAM models that their customers pay extra for.

These two models of customer success couldn’t be more different. There are a ton of articles out there that aim to describe what customer success is and is not. But to us it’s impossible to make such proclamations without some level of qualification around the types of customers a company serves and the nature of it’s contracts and go to market model.

Because of this, you should always take content which broadly defines customer success with a grain of salt (yes, to include this blog post!). Structuring B2B SaaS post-sale customer engagement is almost always nuanced.

Owning it

In any case, where CSMs truly own the number, there is often a culture change afoot in the organization. The CSM team may or may not be situated within Sales or under the “Chief Revenue Officer.”

However, these teams are going to have to start acting like sales teams in three key ways:

1. Aggressively Manage the Pipeline – The level of rigor that mature Sales teams apply to the selling process is going to be a culture shock to some CSM teams. Managing forecasts, pipelines and commits is new territory. Luckily, I believe many CS leaders are capable of managing and inspecting forecasts, pipeline deals and monthly/quarterly commits. But they may need some coaching at first.
2. Align with Sales Operations – Since they are now impacting the number for the company, it’s important that processes align with those of Sales. Deal stages, velocities, and processes will be subtly different from new logo sales, but bookings and forecasts needs to mesh together cleanly with those of the new logo team.
3. Shed Support Responsibilities – Many CSM teams emerge out of client operations teams such as implementation, professional services and support. As these individuals move from a defensive to offensive positions on the field, CSMs are often challenged to leave behind the administrative and support responsibilities they held in the past. I often refer to Support as the “dial tone” of the customer-facing organization. This function has to be deeply capable and always on-point with client needs to ensure that the CSM team is free to engage in value-creation activities with customers.

A lot of change, indeed, but it’s getting harder to justify a CSM team to the CEO and board without metrics and a business case to back it up.

For SaaS companies that sell low-ACV contracts into the SMB space, that business case is taking the form of direct revenue ownership with customers. From what we’ve seen helping companies make this shift, the reward is worth the effort involved.