The drum beat is getting louder in the B2B SaaS world: Customer Success Management teams need to align themselves with revenue.
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…
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.
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.
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:
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.