Tying Customer Success to your company’s strategic growth (aka revenue) can be tricky to maneuver. Yet, for most Customer Success organizations, embracing revenue goals is the only way to have a seat at the table as your company expands and evolves. To really prove your value to senior leadership, CS metrics must have a direct alignment to revenue. Regardless of your organizational structure – whether CS rolls up to sales, operations, or you have your own discreet organization within the business, it is critical to demonstrate how CS influences growth and impacts costs.
Revenue is a hot topic in the CS world, so I sat down with Mark Stoddard, VP of Sales and Marketing at ClientSuccess, to discuss the ins and outs of tying revenue to Customer Success. Here are some of the key takeaways from our webinar.
The evolution of CSMS: A tale of two backgrounds
If we went back in time ten or twenty years, before Customer Success was commonplace, we’d likely see one of two organizations owning the customer relationship post-sale, serving as the ‘trusted advisor’ to the customer.
We may see Account Managers within the sales organization owning that relationship. Teams like this would be responsible for managing customer renewals and growing that business. They would be there to listen to any issues the customer had and help them troubleshoot problems. At the same time, these AMs were expected to proactively grow these relationships.
In other companies, these duties were tucked into a professional services or support organization. These groups would respond more reactively to their customers’ needs. They were not tied to a commission structure or revenue goals, but simply working to resolve customer issues as they arose.
As the prominence of CS grew, and as more and more companies made the transition into the SaaS world, this role of trusted advisor emerged from these two very different sides of the business. Today, almost 20% of CSMs come from sales versus 24% from professional services and 19% from technical support, according to the 2017 Customer Success Compensation Study by TSIA. The gap between proactive and reactive roles has resulted in inconsistency between one CS organization and the next, some without any ties to revenue whatsoever. But when CS organizations are built without considering their impact on revenue, they are in danger of losing the advocacy of executive leadership.
Tying a revenue target to CS can be a scary transition, especially if your team comes from that support background. It’s not always an easy conversation to have, but remember that there is no need to create a culture of high-pressure sales in order to validate your CS team’s impact. You can tie the metrics you’re measuring today to positive growth for the company by understanding the correlation between those leading indicators and the lagging indicators that are part of your company’s larger goals. It isn’t about walking into an existing CS team and handing them a revenue target, it’s simply about connecting the dots and being very clear about the strategic role your CS organization plays.
Creative ways to integrate growth targets into the CSM role
While there is no one-size-fits-all way to align Customer Success to revenue, there are several ways we’ve seen companies accomplish the transition successfully. That alignment does not have to mean handing out revenue targets to individual Customer Success Managers (although it could). Depending on the structure of your company and the makeup of your customer base, your CS team’s revenue alignment could take shape in a few different ways.
- Give the CS organization a goal, but not individual CSMs: When your CSMs are truly focused on building strong customer relationships, driving customer adoption and health, then the natural outcome is revenue. This allows the individuals on your team to concentrate on the right areas and play to their strengths while still proving value by hitting a concrete growth target as a team. That means you own that number as the CS leader. What are you incentivizing in how you coach and run your team to enable those behaviors?
- CSMs own the renewal process: If you are managing the customer lifecycle appropriately, the renewal should be a natural outcome versus a sales event. CSMs are free to build trust and rapport with the customer while driving retention and reducing churn. This can actually improve customer experience by eliminating the handoff to sales and back to CS at renewal time. It runs especially smoothly if the customer isn’t looking to add new products or services into their new contract.
- Customer Success Qualified Leads (CSQL): If you don’t want your customers to feel like CSMs are selling to them and potentially impacting that relationship, or you have customers that are in need of additional products or services, CSMs can pass qualified cross-sell/up-sell leads onto a salesperson. CSMs have insight into who your customers are and what their pain points are, so they are ideally situated to advise a salesperson about the right solution for their customer’s needs.
- Variable compensation model for CSMs: In this situation, your CSMs would earn a base salary that is, for example, 70-80% of their total target compensation. An additional 20-30% of their compensation would be directly tied to a customer health and retention goal. In this scenario, individual CSMs do typically own their own number, be it in dollars retained or revenue growth within their portfolio.
We’ve seen each of these models work for CS organizations, but be sure to choose the one that fits best within the structure of your organization. A smaller, rapidly growing company is going to have a different environment than a well-established hardware brand just breaking into SaaS. Be sure to take all the elements of your business into account so that your CS efforts are set up to bolster and support your company-wide strategy.
Maintaining customer advocacy at your core
The role of Customer Success is all about being a true advocate for your customers. As long as you keep this perspective in mind, your ties to revenue (either with an actual target to hit or simple alignment with the organization that owns that number) aren’t going to negatively impact your customer relationships. Keep the focus on finding and enabling the right solution for your customers and provide support to your employees to encourage the behaviors that lead to your desired outcomes, and you’ll be on the right track.
Proving your CS organization’s value with hard numbers may be easier said than done. But do it right, and you’ll be setting your team up for success and growth over the long run. Even if you aren’t able to connect all the dots between CS and revenue today, start working toward a clear line of sight between customer behavior and the bottom line. That way, there will be no question that CS is driving a positive financial impact on the business.