Tuesday, August 11, 2015

Customer Success ≠ Inside Sales

Photo: Peyri Herrera

I am frequently asked about building and growing successful Customer Success teams. More and more organizations are finding conviction around the need for Customer Success even if they don’t fully understand how to structure, align and incentivize Customer Success Managers. It is often a case of “I know I need it! Now tell me what it is.”

There is a common mistake that leadership makes when establishing Customer Success or evolving the team because of a failure to deliver adoption, customer advocates, or renewal results. That mistake is aligning the function too closely with Sales, staffing the function with Sales Managers or Sales Leaders, and/or giving the Customer Success team a sales quota. While it is true that one of the key value propositions of the Customer Success function is growing revenue from the customer base, creating a Customer Success team charged with selling is a misguided approach to achieving that goal. It is a bit of a security blanket for Customer Success leadership, “If I own the number, I can justify the value.”

Customer Success should not be another name for Inside Sales.

Go Where the Problems Are
Sales Managers go where the money is. That’s the job. And making quota each quarter is hard work. I have tremendous respect for the challenges of selling and carrying a bag. But the drive to hit their number is exactly why Sales is the wrong alignment for Customer Success. Customer Success Managers need to go where the problems are, not just where the revenue opportunities are. Managing churn requires that Customer Success Managers invest time in the account that is “sold out” or experiencing challenges. An unhappy customer is not a great investment for an Inside Sales Manager working to make a quota, but it is exactly where the Customer Success Manager needs to dig in. A “sold out” account can be a great place for a CSM to build a highly reference-ready partner, to find a secure customer to partner with on beta testing new features, or a place to drive exceptional adoption and ROI. These are all valuable contributions that a Customer Success Manager should drive, but they won’t help a Sales Rep make their number.

Charged with this function, Customer Success is best aligned directly to the CEO through a Chief Customer Officer or VP of Customer Success. This alignment ensures that Customer Success has a seat at the table to act as a voice for the customer on par with the voices of the Sales, Marketing, Product, and Engineering organizations. As an active advocate for the customer, the VP of Customer Success can help drive the organization to ensure those customer commitments are delivered, issues that are driving or creating customer risk are discussed and addressed, and executive partnerships are established, maintained and leveraged all while driving customer adoption, earning advocates and ensuring customer retention.

Selling is Not Delivering
Structuring a Customer Success team requires that leaders understand the full value proposition of Customer Success while appreciating that selling the value of the solution is not the same thing as delivering the value. Delivering is hard work in any company and especially difficult in a software as a service start-up defining a new market. Delivering can often be mistaken for implementation. But delivering value doesn’t end with the implementation sign-off, and in most cases that is just the beginning. Ensuring that customers adopt the product, embrace the disruptive use cases and change management required, leverage the full features and functionality of the platform and manage through the inevitable challenges and issues of software requires a proactive, trusted advocate focused on the customer’s health: a Customer Success Manager. To achieve this, a well-structured Customer Success function is focused on three things:

1. Driving adoption (delivering the value)
2. Earning passionate advocates (recognizing the value)

3. Securing renewals (selling the value)

The role of Customer Success is simple: ensure that customers are successful. Executing on this role is difficult and requires a hybrid skill set that is part Professional Services, part Marketing, part Operations and part Sales. The key to a successful Customer Success structure is ensuring the leadership and team find balance in the full set of skills and don’t identify too closely with the structure of the Sales organization.

A common objection I hear is that Renewals is really a sales activity. And it is. At least, the renewal transaction is. But the process and hard work of ensuring a customer values the product and services enough to renew in the first place is the work of Customer Success. The structure I have seen to be most effective is for the Customer Success team to own customer retention (health) and for Sales to own customer renewals (transactional sales). Through an effective partnership, the CSM sets them up and the Sales Rep takes them down. The CSM is the trusted advisor and the Sales Rep is the bad cop who negotiates the dollars.

Incentivize Success
I will share more of my thoughts on compensation and bonuses for Customer Success Managers and leaders in another piece, but one of the key elements in building and growing a great Customer Success team is ensuring that the right incentive plans are in place. Again, Customer Success is not Inside Sales. Setting a Customer Success Manager up with a quota is automatically setting them up to fail at the most important aspects of their job, ensuring customer success. Customer Success Managers should have their compensation aligned to the same three areas of focus noted above.

Driving Adoption  Customer Success Operations should establish a baseline of healthy customer adoption and CSMs should be incentivized to ensure their portfolio’s adoption patterns are aligned with the health curve.

Earning Passionate Advocates  The Net Promoter Score is an effective way of measuring the health of the portfolio from a reference-ready standpoint and leveraging the relevant industry benchmarks to measure your effectiveness. Each Customer Success Manager should be incentivized to ensure their portfolio is meeting or exceeding the target and that there are mutually agreed upon plans in place to correct any issues. 

Securing Renewals  Again, the role of Customer Success is about setting customers up to renew, not necessarily driving the transaction itself. An MBO plan for portfolio revenue and logo retention has proven to be an effective balance of holding the team accountable without driving the wrong quota-oriented behaviors in Customer Success. 

Structured and aligned to the right set of objectives, Customer Success can have a dramatic impact on the organization. But a common mistake in building Customer Success teams is going the Inside Sales route. This is an easy mistake to make but one that will ultimately undermine the full value and contribution of your Customer Success organization.