Making Customer Success Cost Neutral

Anna Alley

Hey All,

We are having a lot of discussions around making Customer Success seen as "cost neutral" in the next few years. Has anyone put together a similar plan where they've been able to shift the view of Customer Success from being seen as a cost center to a revenue generator/being able to use revenue as a means to offset additional headcount, etc. For the current situation, I don't think just referencing churn/revenue retention would be enough.

Currently our CSMs do not own upselling/renewals/etc.

Also, is this a viewpoint that you agree with or have you been burned by something similar in the past?

Thank you!

Sai Arora

Hi @Anna Alley! I've personally experienced two different CS models:

1. Customer Success was responsible for Renewals and Upsells
2. Customer Success was responsible for value-add consultation and would bring in an Account Manager to negotiate commercials when appropriate.

When CS owns the renewal/upsell conversations, I personally feel like it takes away from their ability to be viewed as a Value-Add Advisor. Customers quickly deduce that this person is the "one throat to choke" for all things (product, bugs, commercial terms, etc) and it makes for a very difficult conversation when trying to renew someone to a higher contract value. Customers also start to second guess any advice a CSM may make because they realize the intentions behind it are purely commercial. 

Personally, I like the second model where CS serves as a value-add advisor and then brings in an Account Manager to discuss commercial terms. This continues to solidify your customer's expectations of the CSM as a value-add advisor and the AM as the person they will negotiate terms with. In order to make this model work properly, the CSM and AM must be closely aligned. Sometimes they are even part of the same organization but within their own respective sub team. 

Happy to provide further context if needed!

Anna Alley

Thanks @Sai Arora for the quick reply! I agree with you on the two different structures.

What we are currently discussing/exploring is potentially charging customers for the CS service. We do not have plans to make CSMs responsible for upselling, although renewals are a possibility (which I have mixed feelings about).

Any thoughts on the "pay for CSM" model?

Thanks!

Sai Arora

Ahh gotcha! In the organizations I've been at, we never explicitly called out the CSM being a paid feature. However, we would provide MM and Enterprise level customers with a dedicated CSM (something the Sales team always made a point to call out). We also charged a higher price for these customers to reflect them having a dedicated CSM. We did try to position our Professional Services team as something customers could pay extra for but this did not go over well. Customers always felt like paying for the software should be enough on it's own.


For SMB customers, we generally had a 1:Many model where a Junior CSM was handling a large volume of SMB customers primarily on a reactionary basis. In this scenario, we would not explicitly

James Conant

Hi Anna - 

I could reply with a lot of thoughts on this subject. But before I do, I want to start here: "able to shift the view of Customer Success from being seen as a cost center to a revenue generator". Who sees the CS function in your company as a cost center? Certain or all CXO leaders? Sr Leaders? Your boss? Your strategy will be dependent on the answer to this question.

I am hoping it's not a view possessed by your execs. As we well know the basis for the existence of the CS function is at its core revenue generation and maximization, as well as cost reduction thru operational efficiency.  CXO buy-in is ESSENTIAL for this strategy to work properly since it requires company-wide participation. 

Can you clarify? 

Thanks,
Jim

Anna Alley

Hey James,

Unfortunately, the viewpoint is still at large among our executive team (not my boss). We are taking steps to try to change that (it's still a relatively new function at my company), but in  the meantime are being tasked with reducing unit costs. A thought that was proposed in response to that was the idea of charging for the CSM service, and thus being able to use that increased revenue to counter act the unit cost pressures. This would only apply to customers over a certain expected revenue (as we still would have to maintain the 1:many model for the long tail).

Hope that makes sense. I have my own biases against this, but was curious to hear from others that might have had success this type of model or a difference of opinion.

Thanks,

David Jackson

Anna

Two comments.  
I struggle with the idea of cost neutrality.  I have always viewed good CS as a profit centre.  Anything that is seen only as a cost is viewed as something that can be cut.  I am giving a workshop on the financial elements of CS at The Customer Conference in November if you want to learn more. 

On charging for CS I can send you a research report called Monetising Customer Success; let me know where to send it.  

Dave J

Anna Alley

Hi David,

That would be wonderful! I also struggle with it as well, and that is the risk we are trying to avoid, so completely agree.

I would love the research report - my email is [email protected]!

Thanks,

gurd3v

Building a CS function that can offset the cost is tricky. I advocate for having an upsells and renewals with the CSM if you're in an SMB environment. That said, I would look at if your LTV is expanding as a metric of success to justify your team as a cost center. I seem to recall a mentor of mine saying that at scale, CS expenses should make up no more than 10% of your revenues.

Scott Hopper

Products and Services you have available make a huge difference in how you CS people can affect revenue.  Awesome products get opportunities to show value with complementary products.  I've only worked with products that were deployed across all desktops.  Expansion tended to come with M&A activities or customer growth.  Retention, referencing and referrals were the primary goal and secondarily moving them into complementary products.  So ask yourself is there a compelling upsell story.. If they are already Enterprise what can you sell them?

Paul Mason

Customer Success is the strategic eyes and ears of your existing customer base and they are there to advocate for customers but also to help that customer grow. If they viewed as a "cost-neutral" team then aren't they are simply a support team?  CS is your best resource for identifying growth opportunities (value adds) that make sense for your customers to achieve the success they bought your product for and that should be enough to justify the shift you are referencing or at the very least be included in your plan. 

I agree with @Sai Arora on the fact that CS should own the value-add consultation I reference above and then bring in an Account Manager/AE to negotiate commercials when it comes to enterprise customers.

James Conant

Thanks, Annna.

Very tough row to hoe when CS doesn't have exec sponsorship. Even harder if viewed as overhead. I'd start with current retention rates and build a case for improving it and the $$ it produces. Expand from there.

I am not a fan of charging customers for CS for many reasons, none the least of which is if declined the CS function is eliminated. Buyers expect a product to be easy to use.  If it isn't they expect a resource to help. If advanced help is required typically consultants or professional services are involved.

Good luck,.

Jim