Managing a Customer Success Team

Boaz currently serves as Chief Customer Officer at Talech and has previously led customer success at OpenGov, Mashery, newScale, and FreeMarkets. In this guide, he discusses the role of Customer Success, how to structure a CS team as a company grows, and what metrics to track to measure success.

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Questions covered in this guide

What are the key objectives of a CS team?

Maximize the value your customers extract from your solutions –  if you’re in doubt on what to do, err on the side of optimizing for the customer, and 9 times out of 10 you’d probably be right. No customer ever wants the product, they want the outcome from the product; if they could get that outcome without using the product, that’d be even better.

Maximize the value of customers to your company (monetary and non-monetary) –  this includes things that are easy to quantify like retention, upsells, cross-sells and reduction in the number of cases to support. All of these are simple to quantify. It also includes non-monetary things like product feedback, references and case studies.

What are the levers for maximizing the value to a customer?

Program scope – how much the customer buys from you, how many solutions did they buy, and how many people are using those solutions? Initially, sales sets program scope, and depending on who owns upsells, customer success may expand it. The larger the program scope, the better. However it’s not enough to just receive the money.

Program execution – how well you execute to deploy and maintain the solution (so that the customer actually gets value for what they bought). If your implementation or support is poor, customers will get less value from the solution. Program execution is predominantly the domain of professional services for deployment and the technical support for availability.

Program value – the value the customer sees from the solution. Customer success needs to help customers see the value of the solution in terms of their own business outcomes. Help them by showing them the ROI, showing them the savings, and showing them the results.

“Customer Success” can refer both as an umbrella term to an org, as well as to a specific, proactive team under that umbrella. What are the functions within the broader customer success org?

Professional services – responsible for deploying the solution. Their implementation-type work is project-based, and measured on time, budget, and quality.

Technical support takes over the technical relationships with a customer after the customer goes live. They’re measured on how quickly and how well they solve problems that customers encounter.

Customer success management similar to technical support in the fact that it’s a time-based system as opposed to a project-based system. However, it’s focused on the business relations, not technical relations and customer support. So what they’re trying to do is improve usage, drive program expansion  and ultimately drive more value to the customer.

Specialist knowledge management and/or customer ops at larger companies – some organizations might have a separate knowledge management department that’s responsible for creating reusable assets.  Additionally, depending upon your revenue operations structure, a customer success operations team might support the other teams on projects by deploying methodologies, deploying tools, conducting reporting, etc.

What does the specific, proactive Customer Success management team do?

Helping customers see value from their contract – it’s always the responsibility of CSMs to optimize the initial deployment so that’ll be successful. CS needs to ensure that the customer is utilizing and seeing value from the full breadth of their contract.

Occasionally expanding the contract – sometimes program expansion (upselling) is also done by CSMs. Whether it’s executed by CS or sales, land-and-expand is almost always a must-have strategy in SaaS because very few customers buy everything up-front.

When does it make sense for CS to own upselling (in terms of sales cycle length and upsell type)?

The longer the sales cycle (the bigger the ACV), the more sales should own upselling the more investment the company makes in building personal relationships between salespeople and customers, the more you want the salesperson to continue to upsell. If it takes years to build the relationship, you don’t want to transform that ownership to someone else.

If the initial sales interaction is quick, CSMs should own upselling – if the interaction is extremely digitized and quick, and there is very little relationship between the salesperson and the customer, then the CSM likely has the chance to develop a stronger relationship with the customer than the salesperson. In that case, you want the salesperson to churn through as many prospects as possible to yield the initial deal, and then pass it over to someone else to execute and upsell.

What does proactive Customer Success do day-to-day?

Assess customers– the more energy you put into understanding your customer, the better you can be in the service you offer.
  • Customer health – subjective measure of the relationship between me and my vendor or me and my customer.
  • Customer maturity – objective assessment of the customer’s ability to do their work. Some people are better equipped than others – some customers have more experience, more resources, less technical debt, etc.

Engage with customers based on that assessment – what you want to do with the customer changes based on their health and maturity. Those assessments dictate how CSMs need to engage with their customers. If health is weak, CSMs may need to drive value; if maturity is weak, they may need to boost execution.

At what stage/scale does it make sense to start having CSMs who are proactive retention/upsell specialists?

Early on, the customer success responsibilities are split across other teams – the head of product is doing deployment; the head of sales, or maybe even the CEO, is managing the relationship; someone from engineering is probably owning support. As the company starts to grow, you’ll start to see more dedicated functions. The first one that you see getting established normally is support because you want to protect engineering from the disruption of hourly interruptions throughout the day. Implementation/onboarding is next, so that product can get back to their day job. Proactive customer success comes last.

At 3-5M ARR, it starts to make sense for a senior person to lead customer success – the exact scale depends upon the number of customers. If you have few, large customers, it’s actually easier to manage longer without someone because the head of sales and the CEO are probably involved with every one of those customers. If you need lower touch customer success (to support many more, smaller customers), you’ll want to bring a CS leader on sooner.

How many CSMs do you need?

There isn’t one recommended ratio – there are two problems with ratios: first, ratios tend to be based on ARR, which is existing dollars. Just focusing on retention and protecting existing dollars is very defensive. And second, any ratio based on current ARR could undervalue potential for land-and-expand growth. You want to manage each customer to their potential, but that potential is much harder to define.

Early on, over-invest – you simply have to make those early customers successful, even if you can’t create an ROI analysis to back up the investment. The success of growing, expanding, and scaling out depends on that early success. Also, factor in how much time a CS team frees up for other people, (e.g. sales, product).

When you get to scale, look at ROI – what results can you drive if you add people. This is the same as for any other function. You need to look at how many customers CS can serve, what the impact will be on retention or NRR, and how valuable that impact would be to the business.

When hiring for CSMs who can upsell, what should you look for?

If the vertical requires domain knowledge, seek that out – some verticals have very specific industry knowledge, e.g. Cyber Security is all incremental. Every solution out there sells what they do with respect to what exists today. If you haven’t been there before, you’ll hit roadblocks with customers who know more than you.

Create diversity in the team to scale successfully – hire a mix of domain expertise, sales background, operations/program management, etc. when you first build out the CS team. Diversity allows for good team insights, then over time, you can start to narrow your target profile down as you hone the efficiency of your model.

What metrics should be tracked?

Track the state of customers – track your customer life-phases: new customers, customers in the process of onboarding, live customers, inactive customers (the stages depend upon the business).

Track value derived by customers – this is often the hardest thing to do. You need to figure out how to measure the value your customers get from your product. Occasionally, the ROI is easy. For instance, I worked at a company where customers reduced the cost they paid suppliers, and the value was the discount they achieved. But, usually measuring the value you generate for customers is difficult, and it’s worth working very hard to figure it out.

Track things that customers give/do that are valuable to your company – if it’s very valuable for your business, you should track it, e.g. number of case studies, references, etc.

Track customer sentiment/experience – the customer outcome and the customer experience are different things. I can get the outcome, but I hate your company. Or, I’ve had lots of customers that never got any value, but they just loved the experience. Include some measure of customer happiness (e.g. NPS, CSAT).

Track renewal metrics – financial metrics have to start with net renewal, in terms of dollars. Also look at on-time renewal. Of the customers who are up for renewal this quarter, what % renewed? 

How do you set good goals for CSMs?  

Factor in value to the customer, value to us, and non-monetary value – define a set of objectives that are focused on the value to the customer, a set of objectives that are monetary value to us, and a set of objectives that are non-monetary. Then assign percentage weights to each of those objectives that works towards the hundred percent of a CSM’s goal. The weighting allows you to go to the CEO or Head of Marketing and say, “How important is it to get that case study,” because if it’s really important, you can weigh it heavily, and you may compromise on some dollars from that customer. But if that case study is really important, then it’s worth it.

How should CSM comp be structured?

CSMs usually don’t get a commission, they get a bonus – it’s much more common for CSMs to get a bonus vs. a commission. This allows the bonus to be based somewhat on commercial impact (like a commission), but also to be somewhat based on driving value to the customer and on driving non-monetary value to the company.

What tools are in the CS tech stack?

A CRM “source of truth” in the background – you must have a CRM to work with other teams, but CRMs are predominantly funnel-oriented, which isn’t ideal for everything a CS needs to do.

Customer management platform – a customer success-specific tool, like Gainsight. If you have very few, very large customers, you can probably get by with spreadsheets and Salesforce.

Input tools (to get data) – tools that help you get customer data, like telemetry for usage data, or research subscriptions (e.g. Bloomberg, Gardiner) for industry data, and LinkedIn for data on where buyers/users are moving.

Analysis tools (to analyze data) – BI and reporting tools to analyze and read out data so that the CS team can make decisions based on it.

Engagement tools (to act on data) – tools that allow CS to scalably connect with customers, e.g. email campaign tools, in-app guidance tools. It’s super important to use in-app guidance tools, like WalkMe or Pendo, because it makes sense for the customer to get a notification in the product on the page, as opposed to an email.

What are the most important pieces to get right?

Balance value to the customer and value to the company – like sales, CS should aim to maximize commercial value, but CS also needs to be a counter-balance. If the company focuses too much on extracting value, the ROI for the customer is going to be diminished, and they won’t buy. CS must help the customer achieve value.

What are the common pitfalls?

Deteriorating into glorified support or sales development – if you’re not crisp on what CS is, it’s easy for the function to deteriorate into glorified support (where it becomes entirely reactionary) or glorified sales development (where CS just gives opportunities to salespeople. This is especially common when CS reports to CRO).

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