Advice From the Frontlines
I shot an email out to two of my mentors recently with the same text – something along the lines of “Hey, I’m trying to redesign my comp model for Customer Success, what do you recommend?” I thought I’d get some suggestions, a few tips, and an offer for a cup of coffee. Boy, was I wrong.
Except for the coffee.
Both of these people are VPs of Customer Success at growing startups here in Seattle. Both have been in the industry for many more years than I have. And they gave me the exact opposite answer.
The first response told me that their company didn’t compensate Customer Success Managers on revenue. The second told me that they compensated their team aggressively on upgrade revenue and churn.
And here lies the great divide in the Customer Success discipline. Should Customer Success own revenue or not? When I started working in this sector, I was of the opinion that Customer Success shouldn’t own revenue. Now, after working in the field for several years, I believe that we should.
Here are the arguments that typically play out.
Why You Shouldn’t Tie Customer Success to Revenue
Customer Success as a whole is driving for something beyond just happy customers – it’s driving towards making customers successful. To be a true partner to a customer and make them successful, you need to build trust and become their trusted adviser. You cannot do this if your goal is upsells/cross-sells and churn management, because the customer will never truly trust you. And of course, if the customer doesn’t trust you, then they will never truly be successful via your sincere efforts and influence.
By not tying your Customer Success team to revenue, you are actually generating more revenue, because your customers will be more successful overall. The role of the trusted advisor should be nurtured and developed over a long period of time. When the time comes to renew and upsell customers, you should pass that off to a salesperson to keep the conversations with Customer Success out of the direct money conversations.
The KPIs for this model are typically a cocktail of the following metrics:
- Implementation Completion
- Feature Usage
- Renewal Rate (% of Customers Renewing)
When Customer Success Owns Revenue
If CS owned revenue, immediately post-sale, Customer Success would take ownership of the account and be the one stop shop for onboarding, implementation, support, account management, upsells, and renewals. Since they would be responsible for the entire customer relationship after the deal closes, they should be compensated based on their effectiveness in the role. By this logic, Customer Success should own revenue.
Salespeople can be trusted advisors, and they are compensated way more on revenue. In fact, the customer overall should be happier with someone who’s tied to revenue because they should get better responses and more advocacy from that Customer Success Manager. Since they’re compensated on churn and upsell, they won’t always be pushing some deal to get you to buy more.
Further, and more importantly, by putting Customer Success directly in the revenue line, the department, and therefore the customer, gets a seat at the table. A Customer Success team that owns revenue will get easier access to Product, to Engineering, and the executive team when they need help. This ultimately delivers a much better experience for the customer, while producing more revenue for the company.
Finally, it is much easier to justify your team when you have tied the employees directly to revenue and managing a book of business. It’s also much easier to manage them when they have a revenue number because they will line up directly behind their number that they are compensated on.
The best way I’ve seen people compensated here is on a function of the ARR or MRR churn minus the Upsell/Cross-sell revenue from that rep. You can also do a yearly book size growth number – though this may be harder in smaller, faster-moving startups.
What We Do at Socedo
At Socedo, we compensate on revenue. We do this because we have a direct and easy line from Marketing > Sales > Customer Success. It creates easy lines of communication and structure for the customers, and then puts the holistic customer experience in the hands of one department. It also makes it simple when a customer wants to upgrade or the renewal comes back around – we don’t have to complicate with multiple people. Finally, we are able to have a big seat at the table, in fact Customer Success is consulted more than our Sales or Marketing teams on what to do with the product – because we care the most about what our current customers want.
Let’s just say my coffee meetings were very different, and very interesting.