Customer Success is Taking Off – Are you Keeping Up?By: Taylor McKinley | March 27, 2019
From Mainsail's Customer Success Leadership Webinar
In recent years, we find that Customer Success (CS) has become a vital component of the SaaS business model. In 2018, LinkedIn ranked Customer Success as the #3 Most Promising Job and CNNMoney/PayScale’s Best Jobs in America List put it at #25.
Distinctly different from the transactional, reactive role of Customer Support, Customer Success teams develop ongoing relationships with clients, manage client health (which takes many forms), drive upsell/cross-sell, and minimize churn. To some degree, retention has replaced sales as the north star in the board room and as Jason Lemkin, Founder of SaaStr wrote, “Growth is good, but retention builds empires.”
In light of this, we welcomed You Mon Tsang, CEO and Co-Founder of ChurnZero, to host a Customer Success webinar for our portfolio companies. You Mon founded several software companies and is an expert in customer success, product management and marketing. Culling from his experience, You Mon shared some insights into best practices for a successful Customer Success team.
Here are Mainsail’s primary takeaways from You Mon’s webinar:
Building and Maintaining
How should I structure my Customer Success team?
Team structure will vary based on the ACV of your accounts and the level of service you wish to provide. Here are a few scenarios:
- Enterprise Software ($100,000+): Build teams with specialization in implementation, support, and success. Provide each account with extensive onboarding and high-touch service. Each Customer Success Manager (CSM) can most likely handle 10-30 enterprise accounts. Sales should own upselling and cross-selling.
- Mid-market Software ($25,000–$100,000): Build teams with specialization in implementation, support, and success. Focus on high touch onboarding at first and try to implement more automation for scale. One CSM can support dozens of accounts on their own.
- SMB (<$25,000): Build teams with specialization in implementation, support, and success. Focus onboarding on the core functionality and the “stickiest” features. Start with high touch onboarding but quickly move to automation and eventually enable self-onboarding. CSMs can handle low hundreds of accounts.
In an extreme scenario, you might have one CSM supporting 250+ accounts. In this case, think about your CSMs as “customer marketers” relying on automated systems to engage customers. Don’t expect much handholding.
In all scenarios, be sure to separate your Customer Success team from your support team, which should remain an independent, reactive department capable of offering quick solutions.
Where will I find my CSM pipeline?
Though it seems logical that Customer Support Managers would be good candidates for Customer Success Managers, that’s not always the case. Customer Support Managers are experts at solving problems, working through a check list, and working somewhat independently. Customer Success Managers are good at assimilating multiple sources of data, crafting a strategic solution, and managing multiple relationships. Sometimes people can do both roles very well, but it’s important to understand the differences demanded of each. Sometimes BDRs, onboarding reps, or even technical recruiters turn into great Customer Success Managers.
The Financial Structure
How should I compensate my CSMs?
This depends on two factors: do your CSMs own renewals? And, how much variability is built into their On-target earnings (OTE)?
If your CSMs own renewals, (which most do) they should have around 20% variability in their OTE. If they own upselling/cross-selling, they can have upwards of 50% variability.
Who should own the upsell and cross-sell?
If your company has a land-and-expand strategy in which the initial contract is meant to be only a small percentage of the eventual relationship, be prepared to either give your sales team ownership of the upsell/cross-sell or have a dedicated upsell/cross-sell sales team. In short, if your upselling/cross-selling requires an active sales process (pitching a new team, demoing a new product), Customer Success Managers won’t have the time to do it. If it’s just selling more of the same product to the same person, Customer Success can tackle it.
Fortifying for Long-Term Success
Should I be using a CS-specific tool or platform?
Though Salesforce is a great default platform for an initial business database, there will come a time when you need a more sophisticated tool for your Customer Success team—something that can track trends, customer health scores, goals and NPS.
There are two types of tools for CS teams: those designed with the product in mind, and those built around customer success. Product-focused platforms such as Pendo help optimize your product’s functionality to achieve a better user experience. Customer Success-oriented platforms such as Gainsight, Totango, ClientSuccess and ChurnZero focus on aggregating all customer data and all Customer Success Manager activities, creating the customer nerve center. Both types of applications have their pros and cons, depending on your company’s specific needs.
As to the question of when, a great time to implement a CS tool might be after two major renewal cycles, and/or when you’re about to expand from 2-3 CSMs to 4-5. With your product-market fit secure, that tends to be a good pivot point to start codifying your practices, so your team can speak the same language.
What common Customer Success downfalls should I know about?
Build a team of contributors, not heroes. In the beginning, your CS team needs to do whatever it takes to make your customers happy, because you’re still learning what it takes. But as your team grows, they will all need to align to a clear set of agreed-upon processes in order to scale.
Keep the lines of communication open between the C-Suite and CS. Customer Success operates with a mindset of “the customer is first” and “do what it takes.” CEOs are always thinking about what percentage of the company’s profits can be spent on the customer, including the expenses incurred by the CS team. As a company grows, be sure the CS team understands the CEO’s corporate margin goals so their performance is aligned.
It’s been exciting to see Customer Success rise to the top because it indicates to us that SaaS companies are thinking long-term about their customers, building a powerful and reliable product and experience. As this functional role continues to mature, we look forward to keeping you ahead of the curve in terms of best practices. Thanks to You Mon Tsang for this excellent presentation.
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