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.
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:
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.
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.