Do you need a Customer Success Manager?

In a heated conversation one day, I found myself debating if a customer success organization is essential for business success at an enterprise software company. After all, the argument was if everyone in the company did their job, then why would you need a customer success manager (CSM)? Good point, and is there more to a CSM than being a firefighter? I had the unique opportunity to observe the evolution of customer success over the course of 19 years. Mercury Interactive started delivering enterprise applications over the web in 1999 as a managed service, which at the time was a cutting-edge approach. Coincidentally it was at the same time Salesforce.com was born in a San Francisco apartment. It took a while before Software as a Service or SaaS became commonly used as a term, but the principles of customer success bore fruit early with the subscription business that SaaS-delivered because it was so critical to avoid churn to maintain business growth.
Let’s start first with the fundamental question, who is going to ensure customer success at the company and mitigate churn? From my conversation, we identified multiple organizations as possible owners of customer success:
Sales
If the sales rep sells the product, shouldn’t they also ensure the customer gets value out of their purchase? Well, the reality is that sales reps have quotas, which are targets how much they should sell. That’s how sales reps make money. What about the long term, wouldn’t the sales rep care about the customer to nurture future opportunities? The good reps do, but in reality, time spent with the customer post-sale is time not spent selling new deals. That is what the sales rep is getting paid for and should be doing. We do want them to spend their time prospecting and closing deals. Even in cases where the compensation model is structured to pay for product adoption, it’s a struggle because sales reps are not product experts. They can identify issues with adoption and manage the activities of the product experts to get the customer up and running, but that again opens up the question is that the best use of their time? Therefore, a good sales rep may assist in customer success but is not going to ensure that post-sale.
Renewal Sales
The renewals sales rep (RSR) carries quota for SaaS subscription renewal. Are they the best candidate to ensure the customer is successful with the product? After all, if the customer does not adopt the product, they are not likely to renew. I have seen an RSR organization take on customer success responsibilities, but most of the time RSR’s are not product experts, and renewing a deal typically involves the procurement department which is not driving product success, especially in larger enterprises. Asking the RSR to maintain user relationships when a quota is looming overhead is a tough ask, especially if the volume of renewals to transact is high. Naturally, the focus shifts to accounts that have renewals up and coming, and those that aren’t due for a while don’t get much attention. The balance of onboarding vs. renewal is also tough to juggle because onboarding is so early in the customer lifecycle and possibly years before the renewal is going to take place. Therefore RSR’s frequently focus on the commercial aspect of securing the contract renewal and not customer success during the subscription term.
Professional Services
A professional services organization (PSO) or a consulting partner are expert organizations on the product. Are they ideal to ensure customer success? Not really, for several reasons. First, not all customers purchase professional services. Therefore, there are many customers on their own trying to implement the product. Second, PSO is typically obtained to implement the product and not for the ongoing support of the product. Yes, the onboarding is one of the most critical stages of product adoption, but it does not ensure that the customer fully utilizes the product and renews a year or three down the line. Lack of ongoing consulting opens up a significant gap during which the customer does not get attention, and during which time adoption can falter, or significant risks can appear in the account like the product champion leaving the company. Therefore, PSO is not in the best organization to continuously engage the customer and to ensure customer success.
Customer Support
A SaaS contract includes customer support for the duration of the subscription to address technical problems. Would the customer support organization also take care of customer success? A good support organization creates knowledge bases, monitors forums and if customers run into issues with the product they are there to back them up. The challenge is that most support organizations apply metrics around tickets, which drive the support engineers to focus on closing out cases on time. Responding to tickets is a reactive activity, at a point when the customer already has issues. Also, most support organizations monetize premier services which limit the number of customers receiving proactive attention. Even then, it’s to address technical challenges with the product vs. customer success.
From my perspective, none of the above organizations can effectively ensure customer success. Assigning responsibility to one of the organizations above introduces conflict with the day to day activities of that organization, and most likely a separate group would be set up regardless.
Now that we see a need for someone to own customer success, what should this organization do? That’s the critical question, but let’s first discuss the trap most customer success organizations fall into once they are organized.
Customer support trap — firefighting
Before getting into the responsibilities of the customer success organization, let’s talk about what it should not be (at least, not most of the time). What I have observed, is that many CSM’s become firefighters when a customer runs into issues, addressing deficiencies in processes, tools, and people at the company. Here are some examples that I have seen from my first-hand experience:
Customer support escalations: the customer support organization takes longer to fix an issue than the customer likes. Alternatively, there is a backlog of tickets that are not progressing. The CSM gets a call to expedite the ticket(s), and he/she ends up chasing the support engineers and escalating internally to get more attention for the customer, including extended teams such as development and operations.
Ordering and miscellaneous issues: the order is not provisioned on time, is not configured correctly or does not match customer needs. The CSM gets an escalation call from the customer to resolve the issue. Frequently the CSM is stuck addressing cross-organizational problems as they are the most knowledgeable on how everyone works. I have even seen CSM’s trying to solve inaccurate invoices after the customer gives up trying to work with the billing department.
Implementation issues: during product implementation, the customer is not satisfied with the timelines or capabilities of the services organization. Feature implementation or integration takes longer than estimated or there is a lack of communication with customer on progress and next steps. CSM turns into a project manager to coordinate all the onboarding activities between the customer and internal stakeholders.
The customer success team has to deal with the customer support trap first. When assigning CSM’s to customer accounts, in a supporting or paid engagement, establish clear expectations and processes with the customer. Work with support and professional services organizations to take ownership of any concerns raised by customers. I recommend introducing escalation management discipline to ensure there is a dedicated resource(s) to handle customer concerns, whether they reach out to a CSM, support or professional services directly. The CSM should not turn into an escalation manager and ideally is a supporting member only.
Now that we have established what the customer success organization should not be doing, what should the responsibilities of the CSM be? In short, adoption, retention, expansion and voice of the customer. Let’s take a look at each one:
Adoption
Lack of product adoption is one of the top reasons customers reduce their footprint or leave the product altogether when the subscription term expires. The CSM has to ensure product adoption from the start of the subscription until renewal to reduce churn. Product adoption includes:
Onboarding: the most critical phase of the customer lifecycle which jump starts product adoption and sets long-term expectations and satisfaction. CSM’s identify customer objectives (what is the customer’s definition of success?) and work to ensure the shortest time to value by proactively supporting the customer in their onboarding activities. If PSO is engaged, the services organization will take the lead to ensure a successful implementation, and the CSM will be in a supporting role. It is not unusual, especially for larger enterprise customers with demanding requirements, that the CSM will be adjusting and sometimes resetting customer expectations. Onboarding is the perfect time to do that to ensure the customer gains maximum value from the product. When the customer is small, CSM’s ensure the customer is utilizing all the self-help resources to get started, intervening as required to help the customer progress to the next step. Customer onboarding is the foundation for success — frequently churn is traced to a poor onboarding experience.
Upgrades: a reoccurring event during which customers get exposed to new product functionality. Their experience during the upgrade process either reinforces or challenges their relationship with you, especially when the upgrade requires customer effort. New features give an opportunity for the customer to realize even higher value from your product and keep the competition away. CSM’s play a pivotal role to promote the new features before the upgrade to ensure users are ready to adopt them and administrators are prepared to update their configurations and integrations for a smooth technical upgrade.
Engagement: how customers use your product. To mitigate churn risk, start measuring product adoption. When a customer is not engaging with the product, the CSM should jump in to address the situation proactively. SaaS has an inherent advantage vs. on-premise license software because the product runs in the cloud. Some of the statistics you can instrument include subscription usage, feature adoption, usage patterns, and maturity of use cases deployed. Correlate production data with CRM data across customers to identify trends more effectively and to flag customers at risk for proactive action to address churn risk.
Retention
Proactive customer engagement during the customer lifecycle is the cornerstone of the customer success organization and the key to customer retention.
Establish customer engagement processes for CSM’s to follow to mitigate churn risk. In addition to onboarding, CSM’s should have a periodic outreach to customers to assess their health. For example, the product champion might have taken a new role, and now there is a need to establish a new relationship to ensure continued adoption of the product. Alternatively, there might be a merger, where two products are competing to be the new tool of choice, and your product champion needs to be empowered to advocate for your product. If any product issues are an obstacle, these can be uncovered early before the customer becomes frustrated and gives up. It’s also important to follow-up after issues have been worked on, to ensure issue resolution to customer’s satisfaction. Establish playbooks to educate CSM’s what do in typical scenarios and to drive consistency in the organization as it scales.
Define a customer lifecycle to establish when key processes should take place and to identify when to proactively follow-up with customers during the subscription term. Pre-defined milestones will empower the CSM to follow prescribed activities that engage the customer and ensure retention. Automake key activities to scale the process, especially product education which is an ongoing activity to help the customer maximize the value of the features in the product.
Establish a success plan that captures the customer’s definition of success. It’s important to know what the customer wants, what do they want to achieve, and what problem they are trying to solve. The success plan will reflect the actions needed to meet the customer’s definition of success, and it can be used during service reviews to ensure that you and the customer are making progress.
Engage frequently and proactively with the renewal sales organization. RSR’s need to know when to approach the customer to start the renewal process, what changes to make to the subscription and what risks have to be managed such as company mergers, divestitures or changing budget conditions. A CSM should leverage company resources such as ROI models to help the customer understand the value of their investment, which will make the renewal conversation much easier. A close interlock between CSM and RSR helps to secure the renewal, and I’ve seen a 5% renewal rate improvement within a year of establishing a process between the two groups.
Expansion
A natural extension of CSM responsibilities is account expansion. A successful engagement with the customer will lead to the purchase of additional capacity (up-sell) and related solutions (cross-sell). There are many opinions on CSM involvement in sales. Too much of a sales approach can lead to the CSM losing their position as a trusted advisor. Too little attention to expansion and an opportunity will be missed to capture additional revenue. My opinion is that CSM’s should not have a sales quota, but should have some form of an incentive like a bonus or award for additional capacity, which is a reflection of successful customer onboarding and product adoption. Of course, the actual selling is by the sales rep, and the CSM is referring the opportunity. The most successful CSM’s establish an effective sales rep relationship, as it’s not only expansion opportunities that they partner on, but also the handoff from initial sale to onboarding. Understanding the details of the transaction helps the CSM achieve customer expectations. In some cases, especially for complex enterprise accounts, the CSM should engage before a deal is closed to ensure proper expectations.
Voice of the customer
To effectively drive customer oriented change at your company the customer success organization needs to capture the voice of the customer. The CSM will incorporate customer feedback into their success plan to ensure effective adoption, retention, and expansion. On a per account basis, this will empower the CSM to drive cross-department change to align to customer needs, and on an aggregate basis, customer oriented improvements across the company. Done right, the voice of the customer will realign the company to deliver more significant customer outcomes and amplify business results.
The customer success organization should capture the voice of the customer with every customer engagement opportunity. Naturally, each CSM conversation with the customer is a chance to document account health including adoption status, account changes, product/service concerns, and next steps. Service reviews are another great opportunity to capture account health. The CSM can document feedback when presenting to the customer their success plan, adoption progress, support cases, and service status. For accounts where service reviews are automated, surveys are another effective way to capture feedback. Collection of product statistics is valuable for product management and marketing. Knowing what customers find of value in the product and how they use it can translate to powerful insights into roadmap development and marketing use cases.
Capture the voice of the customer in a place that can be effectively referenced across departments and ultimately aggregated to drive action. Nothing sophisticated is required initially. An online repository is a good starting point, but you need something. Otherwise, nothing will happen. If you have a data warehouse, the data should eventually make it there to drive analytics on top of it with the other data that you have like product statistics and CRM account information.
Analyze patterns in the data to discover powerful insights and to drive action. For example, if customers repeatedly comment on the difficulty of product upgrades, highlight the challenges to product management to improve the product. Also, take the opportunity to have a conversation with professional services to augment their practices before the product improves so that the customer does not have to struggle with this deficiency until then.
Use the voice of the customer to document product success and turn your customer champion into a reference & advocate. Gather testimonials and author success stories. The relationship will grow between the company and the customer, amplifying the success of both.
Introducing a customer success organization
I hope the article makes a compelling case that customer success requires a dedicated group of individuals, ideally a separate organization that can advocate for the customer to achieve customer success. Establishing another organization can be challenging because now you have another function vying for the budget not related to innovation, selling, marketing or delivering purchased product/service. It’s not like there will be incremental budget available, so the existing executives will have to contribute to forming this organization. Another obstacle can be a lack of customer-centric culture. If there is little buy-in across the various functions to drive customer actions, it will be tough to address customer challenges proactively. Customer-centric culture has to be driven top-down and embraced by leaders and employees alike.
