Grow revenues by proactively managing the customer life cycle.

Leverage the How to Make Your Number in 2018 Workbook to access a revenue growth methodology to hit your number quarter after quarter, and year after year.

Absolutely. As J.B. Wood, the CEO of TSIA says, “Customer Success is a service motion with a sales result”.  As a result, all Customer Success Managers carry at the very least a renewal quota. In fact, most CSMs should also carry an upsell and a cross-sell quota. 

 

If you want to learn more about customer success, consider a no-obligation trip to The Studio, SBI’s executive briefing center located in Dallas Texas.  Meet with a team of experts to help you develop a road map for your customer success team.  

 

Now that they have a quota, the next logical question is how to pay CSMs. While variable compensation plans should be less leveraged than those of a traditional sales role, it should still be a meaningful percentage, at least 10% and on the high side 30% of On Target Earnings.  The variable compensation should also include a customer satisfaction component such as NPS, Net Promoter Score.   

 

The Customer Success Manager quotas should be customized based on each CSM’s book of business.  Like all quotas for sales professionals, they must be attainable yet require a stretch to hit it. For the cross-sell and upsell components, the quotas must align to the potential in the CSM’s book of business. This is easier said than done, but can be accomplished by customer segmentation.  Map the existing revenue of customers and determine the cross-sell potential, upsell potential (frequently referred to as white space), and an account complexity score.  

 

Assign accounts to customer success professionals can be used independently, or combined with a customer health score to assign accounts.  It will allow you to assign your best CSMs to your most important accounts, and if you so choose, match individual competencies (retention/upsell/cross-sell) to the book of business.  

 

An emerging best practice, is to adjust the retention target to the risk score of the CSM’s book of business.  This requires a customer risk score which is calculated systemically, not by the CSM. This allows you to put your best people on important accounts that may carry higher inherent risk. 

 

Another emerging best practice is to track, and compensate on the customer value identified.   This requires acknowledgement from the customer, whether in an Executive Business Review and/or case study. This is most applicable for customer accounts with higher Annual Recurring Revenue. For example, if your average ARR is $10,000 this is not worthwhile, but if you have a segment of customers paying more than $100,000 per year, it is worthwhile. Your customer segmentation can quickly visualize where this would apply in your business. 

 

Like all rules, there are exceptions. The Gainsight Customer Success Benchmark report highlights that there are “retention only” CSMs in a defined section of the market.  This is generally at companies with more than $500M Annual Recurring Revenue (ARR). If this describes your team, then you should consider whether a retention only focused CSM is right for you.   This individual gets up every morning, and focused on onboarding, creating value, and de-risking the revenue.  However, even these individuals need to be able to “smell a deal.”  The difference here is that they call upon a dedicated resource (Account Manager, an overlay specialist) who takes over the cross-sell/upsell motion. In this case, the individual may carry a “referral” target, and be incented on identifying opportunities, irrespective of whether it ultimately closes. 

 

As you execute a customer success strategy, consider your overall sales strategy.  It is hard to grow revenue faster than your competitors. Take a few minutes to assess your sales strategy with the Revenue Growth Diagnostic tool.  It will help you assess your sales strategy to pinpoint how likely, or unlikely you are to make your number.

 

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ABOUT THE AUTHOR

Fred Penteado

Guides private equity portfolio companies in a variety of industries on how to make their number.

Prior to joining SBI, Fred held a variety of leadership positions with multinational Fortune 50 companies. He has worked in product/program/channel management, sales operations, and served as a Chief of Staff.

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