Familiar Tropes Between CS & Sales

What happens when a SaaS Venture Capitalist, a Customer Success (CS) Analyst, and a VP of CS sit down to chat about Sales and CS? You might anticipate that a lively conversation would ensue, with many points of contention. For example:

    • CS believes that Sales is acquiring “wrong fit” customers that are contributing to churn and creating problems for the CS Team, just to meet their Sales quotas.
    • Sales thinks that CS is slowing down the Sales process and delaying deals by demanding customer readiness, while revealing too much ‘truth’ to the prospects.
    • Sales doesn’t understand why CS only cares about customer satisfaction, and thinks that it’s less important than the revenue that is needed right now to keep the company afloat.
    • CSMs feel underserved because the Sales team gets all the compensation for renewing difficult customers, while CS does all the work.

Sound familiar? It just might.

A Shift Is Occurring

This is NOT what we discovered recently when I sat down with Jim Wilson, a former CRO and Operating Partner at Costanoa Ventures, and Mikael Blaisdell, founder of the Customer Success Association, for the quarterly Strikedeck venture conversation. In fact, I was encouraged to find out how far we have come in joining these two critical company functions together as we explored reporting structures between Sales and CS, handoffs and interactions, and the metrics and measures of both teams. As recently as a year ago, I was hearing many of the criticisms listed above from CS management, and executives were frequently discussing the ongoing conflict between Sales and CS. Something has shifted. It seems that both organizations have matured in how they relate to each other. It seems that Sales and CS have moved beyond coexisting to working together in a productive, normalized place of collaboration. It’s not universal, but it seems to be a trend. I really hope that this becomes an ongoing movement! Here is what we discussed.

Where Should CS Report? Isn’t It Really About the Revenue?

We had a good conversation about where the CS team should report in the organization. Companies are in business to make money, and it is definitely about the revenue, in part. We defined REVENUE to mean both new customer acquisition and recurring revenue. With this definition, Sales and CS are both contributors. In my view, it speaks volumes when a VC like Costanoa decides to bring on an operating partner who has been a CRO, and has a strong point of view about how important it is for Sales and CS to collaborate. Jim shared his view of Sales and CS working together in a new way. Smart and successful companies recognize that it takes both sides of the customer journey to acquire customers that will complete their onboarding successfully, realize value quickly from the product or service they have purchased, and build references, advocacy, renewal revenue and upsell potential. It takes both Sales and CS working together to become an engine that helps the company build and create growth in both kinds of revenue to realize full market value.

There are many different kinds of reporting structures that are seen in operation today. You will see CS reporting into Sales, into Marketing, Operations, or directly to the CEO. The panel was in agreement that what works best is having the VP of CS reporting directly to the CEO, with a seat at the table. When companies grow and branch into vertical teams, or spin off into business units, this structure might need to change appropriately. One tip that was discussed in deciding whether or not to have CS report to Sales / CRO is to look at the Sales leader. Especially in early stage companies, if that person is customer centric, and has managed CS in the past, they are likely to understand that both the customer acquisition and the customer management aspects of the overall journey need investment and focus. In that scenario, reporting into Sales is probably fine. If not, and your Sales leader has never managed the CS function, they may underinvest in the critical retention aspects of the business, so it’s better to err on the side of having CS report to the CEO.

Deciding where CS reports is about both voices being a part of the strategy and the conversation. It’s about building a relationship and alignment between Sales and CS so that they operate around a common vision – instead of a competitive one. This approach will foster collaboration and ensure the best decisions are made for the company overall.

What About When Sales and CS Don’t Collaborate?

Strong collaboration between Sales and CS sounds great doesn’t it? Well, based on audience input, not all companies are quite this evolved today. Today’s reality is impacted by many things, including the people, the company culture, the product mix, and the stage of the company. Not all Sales and CS teams work well together and we spent some time discussing strategies that CS Executives can use to help improve these situations. Mikael shared a story about a VP of CS who requested “veto power” over one deal per year from his CEO and apparently this VP even offered to give up his bonus in exchange. He didn’t get what he wanted.

Drilling into this challenge, we found that some companies focus Sales teams on revenue at any cost. Sometimes, this is even the right strategy depending on the company situation. Most of the time it is not a good strategy to take on business that won’t be successful long term. Veto power is one tactic that CS Executives can use to help mitigate this. Unfortunately, needing veto power probably means that there are competitive silos set up between organizations, and somehow the overall strategy is not aligned, which does not make for a good situation.

The majority of the panel felt that working towards some form of collaboration between Sales and CS was a stronger approach. For example, using data, the CS Executive can identify what a good sale looks like to the CEO and VP of Sales, and illustrate what happens when bad fit customers are acquired. Think about support costs, PS overruns, the impact of low NPS, and of course, the cost of churn.

Everyone felt it is important for CS to be involved in some way before the deal is closed. It is a good practice to have the customer handoff go smoothly. You just might avert a problem if a bad fit customer is about to sign, and you introduce the CSM. They might be able to facilitate having the customer identify that they are not yet ready, or won’t be successful, so that the company doesn’t have to suffer through deploying a high churn risk situation. Unfortunately in this case, the cost of Sales is a sunk cost, but at least you avoid the cost to deploy and retain that customer who is not expected to be successful.

What Does Sales Want From CS?

What’s in it for Sales? – Support for deals and information about what expectations to set. Sales people want to meet their goals and build their funnel. The key point for companies is to minimize the sales acquisition costs for deals that are not likely to be successful, and achieve enough value to reach the realization of profit for the company on every customer. CS can help. No one wants to waste their time selling to the wrong customer, and CS can use data and experience to segment and identify what kind of customers to target, define what expectations to set, and help coach and adapt marketing focus to ensure that the right kinds of prospects are being added to the funnel.

What Is CS Looking For From Sales?

What’s in it for CS? They are looking for an organized handoff, and the chance to make the customer successful. CS teams understand that by bringing the customer quick value, the company gains revenue and customers are retained and have the potential to grow. Sales can help by ensuring that there is a good handoff that includes some information about who is who, what the power structure is, what expectations were set, specifics about the customers’ personality or belief systems, and a warm turnover so that the customer feels they aren’t being tossed to another team.

Both Sales and CS need to understand their colleague’s perspective to build a good relationship that serves the company overall. That means understanding the other team’s measures and giving up stereotypes to see things from another point of view. With direct communication and good empathy on both sides, the goal of aligning the two teams is very possible, and it starts with leadership.

Handoffs, Metrics, and Involving Everyone

It’s clear that handoffs are required when a customer moves along their journey with your company, and it’s very important to recognize who is involved in the handoffs and what specific inputs are collected to provide back to other teams. Once the customer is turned over to the CS team, they need to know where to go for product requests, escalations, advocacy, and upsell opportunities. Based on audience input, while many companies have mapped some high level customer journey, most have not done full journey maps or maintained them. Completing and managing your customer journey is one concrete thing you can do to add insightful information about things that need to change to improve business interactions and results. For customer centric companies, it is helpful to have a well-documented customer journey to use as a point of reference for making business decisions. That way, you can clearly see what teams and process changes need to be made to improve key metrics.

In order to make business work, companies need to understand their customers. CS teams profile and segment to accomplish this. Across the panel, it was agreed that the leading indicators of both success and failure will vary within customer segments. Maintaining this kind of information and sharing it across the company adds value to decision making, and provides a better snapshot of what to expect from certain customer segments.

For example: Sales can leverage customer fit information to build stronger funnels of good fit customers. Often bad fit customers become the focus when business is down, and Sales people are desperate. While it might be best for the company to walk away from this business, it might not be possible for an individual Sales person to be brave enough to sacrifice their own paycheck or commission in order to do that. Leadership needs to be involved, and they need to understand whether or not there are product issues, process issues, or market fit issues. Today, everyone gets involved when a top customer is about to churn. Why not get everyone involved in understanding the underlying root cause related to a given segment of customers so that next time there are no fire drills needed?

Because everyone gets measured, it’s important that the metrics are aligned. Most companies track churn, which is a lagging indicator, and some are now tying churn to customer segments in order to better evaluate and understand their business. It’s also important to really understand churn reasons. Some churn is unavoidable. Asking your customer doesn’t always give you the true answer. People are human, and they usually like their CS team, so they are unlikely to be direct and provide the real issues. As much as possible, use the data you have in terms of value provided, usage statistics, etc. Sometimes churn happens for external reasons that are completely out of a company’s control. That needs to be understood as well and metrics need to take this into consideration.

Business is built on revenue, so one of the ways to keep score is by the money. What you measure will vary depending on what phase you are in in building your CS Team. When you look at early stage teams, they don’t yet have an opportunity to impact revenue. They can, however, be building advocates, or you can measure on successful deployments, or user adoption growth. It’s important to build a culture that understands both churn and the long term customer lifetime value that can be built by upsell. Encourage everyone to pay attention to all of these things. Some companies are putting a full team bonus (across the company) on some of the CS Metrics like NPS or net revenue retention. That will certainly get people across the company focused on customers being successful.

Don’t Forget to Include the Customer

Customers play a big part in getting value from your product, and they can bring value to your company beyond the money they pay you. It’s up to you to engage them. Just like you have to collaborate within your company – for example, between Sales and CS, you also need to collaborate with your customers. The CS team can be considered part of the product offering, and in SaaS companies, the customer relationship value shifts to CS over time. Understand what value you bring to your customers, and how they are motivated. The result can be greater growth, and strong advocacy.

So a shift is occurring Sales and CS are working closely together to drive company growth and success. It doesn’t matter where you report in the organization, or if your current Sales or CS counterpart doesn’t have alignment. Take the time to understand what Sales needs from CS and what CS needs from Sales, and focus some attention on handoffs metrics and aligning objectives. By doing this, you can take the first steps to be a part of the utopian world of Sales and CS collaboration.

Irene conveys the voice of the customer when setting strategy from go to market planning through maximizing customers for life. She creates effective post-sale teams in startups by hiring and mentoring customer focused staff and applying scalable processes that are dependent on business objectives and target markets. With 20+ years of experience, Irene has successfully built and operated multiple global services, support, and customer success teams in the US, Europe and Asia. Most recently she was VP of Customer Success for Cloud Cruiser, a global venture backed start-up providing consumption analytics across hybrid cloud environments. She is currently writing a book titled, Who Speaks for the Customer?

Irene Lefton

VP of Customer Success, Medigram

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