The type of CSM your organization should deploy, should take into consideration the overall strategy of the role, the length of the sales cycle and your customer needs.
Maximizing customer lifetime value has quickly become a cornerstone of a successful recurring revenue model. Within that, it’s critical to understand how and why your organization chooses to deploy customer success roles. What actions and investments will your organization take to ensure customers receive the most from your product or service?
Before you begin, it’s necessary to understand why it’s important for your organization to deploy the customer success manager (CSM) role. The answer essentially boils down to the basic formula for maximizing customer lifetime value (CLV): usage, value realization, customer satisfaction and renewals & expansion. The CSM’s key job should be to ensure customers are using the solution they purchased, the solution solves a business problem and that they renew.
CSM Archetypes
As technology companies continue to expand their CSM roles and organization over the last several years, the way these roles are deployed often vary, along with where exactly they fall in the sales process. Historically, customer success has focused on driving adoption, but companies are now finding that they can accomplish much more with CSMs if they specialize. Alexander Group’s recent research has identified three common CSM role types:
- Adoption-Focused CSM
Commonly deployed in consumption-based models, this role type focuses on driving customer satisfaction and driving technical adoption at the end customer and user level. This CSM continuously involves the end customer and takes those insights and learnings back to the core seller. - Adoption & Renewal CSM
This CSM type typically owns the adoption part of the sales process, as well as all or part of the renewal sales motion. This role is generally deployed when the renewal is more of a re-order with less technical persuasion skills required. When deployed, it’s crucial that the renewals are linked to customer experience and value realization. - Full-Service CSM
As described, the full-service CSM is responsible for adoption and renewal, as well as upsell and cross-sell. This role typically acts as a hybrid seller, supporting the core seller as part of the land and expand motion.
There isn’t one right answer to which type of CSM your organization should deploy, though you should take into consideration what the overall strategy of the role, the length of the sales cycle and your customer needs.
Compensating CSMs
Regardless of where you choose to deploy the CSM, there are three common ways that technology organizations compensate for the role.
With the more service-focused role (generally adoption-only), the two compensation buckets fall under either a corporate plan or a professional service plan. Corporate plans are 10-20% of the base salary and are typically MBO-based plans, while a professional service plan is a billable role that’s based on more of a utilization type plan. This is often seen when CSMs are built at the end customer on an hourly basis. For both types, overall useable or utilization billings is a key metric in compensating the CSM.
On the other end of the spectrum, the CSMs that are more sales-focused (includes renewals and sometimes expansion) are often put on an at-risk bonus plan. Alexander Group’s research shows that 65% of technology companies have CSMs that are on at-risk compensation plans, most of which have the role absorbing renewals, up-sell and cross-sell. These plans offer a pay mix between 70/30 to 80/20. Regardless of the incentive plan, the primary metrics are usage and adoption.
It’s critical to align what the metrics are for the CSM role based on the archetype you’re trying to deploy and the sales strategy that you’re going after.
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Author
Igor Uroic is a principal in the Atlanta office. He is a leader of the Technology and Media Sales practices. Igor applies his experience in the areas of sales strategy, sales compensation, and quota setting and allocation design. He works with Fortune 500 companies across various industries, including high tech, software and media/advertising. Igor has managed numerous international sales effectiveness and sales compensation design engagements. He’s worked on the ground with clients in several European countries with a concentration in the U.K., Germany and Belgium.
Daniel Kravitz is a director in the Atlanta office. Daniel has experience leading multiple sales transformations, as well as targeted engagements focused on areas such as go-to-customer strategy, market segmentation, job role design, territory optimization, competencies and sales compensation. Daniel’s experience spans multiple industries, including technology, consumer products, medical products and manufacturing.
