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Customer success compensation is one of the most common inquiries we receive here at TSIA. If you’re looking for best practices on variable compensation plans for customer success managers, you’re in the right place.
The world of customer success continues to evolve, as reflected by the variations on the Customer Success Manager (CSM) title and growing number of customer success-related roles in the market. Because of this, you’ll find that there is no one-size-fits-all model when it comes to compensation.
It’s not uncommon to see titles like Client Relationship Manager or Client Success Specialist alongside other emerging customer success roles like Customer Success Operations, Customer Success Analyst, or Customer Success Executive. As similar as some of these roles may sound, they are not all created equal, which is why compensation planning can get so complicated. It’s no surprise that this topic is in our top 10 most common inquiries.
Based on our 2022 Customer Success and Customer Growth compensation study, 90% of CSMs have some variable incentive which could be a variable bonus, quota, or both. However, aside from just the average split between base salary and variable incentive, there are a number of things to evaluate. While you want to ensure that you’re within range with the market, getting general numbers out of context can set you on the wrong path. Here are three things to consider when building out variable compensation plans.
Adoption, Retention, and Expansion are the three leading charters we find across the industry. When clearly defined, customer success charters help to keep plans focused and positioned with purpose. Charters also influence key practices like CSM responsibilities and how they’re measured.
The elements that you measure and evaluate for bonus or incentive compensation should align to one or more of customer success’ organizational charters.
Customer success is uniquely positioned to support the charter of expansion, as they tend to work closely with their customers. Rather than pushing customers through the sales process, customer success can actually make non-complex commercial opportunities smoother for the customer. Just make sure to set appropriate expectations. While you’re at it, make Expansion an official charter of your organization if it isn’t already.
Data from our 2022 benchmark reveals that Customer Retention/Renewal is the most commonly selected factor for bonus/incentive compensation, followed by Upsell/Cross Sell. However, there are still “Other” unique factors that make up incentives for different organizations.
The bottom line is: clearly defining the ways CSMs are measured in relation to organizational charters will help them prioritize their various activities.
Customer success organizations can also vary widely in terms of how they’re structured, which affects the division of responsibilities and who owns what motions in the customer lifecycle. While some organizations have CSMs that own all aspects of the post-sales cycle, others may employ a mix of onboarding specialists, CSMs, TAMs, and renewal specialists. No matter what your team looks like or how you’re structured, it is necessary to establish a compensation plan appropriate for each type of role.
The standard for account segmentation used to be your typical 3-tiered pyramid: enterprise accounts at the top, mid-market accounts in the middle, and SMB customers at the bottom. The trend has now shifted to four segments to account for another layer at the bottom of the pyramid: the digital or tech-touch segment.
The tech-touch CSM is a role that’s been on the rise in recent years, especially as scaling and digital strategies become a focus for customer success organizations. While many of the motions for adoption and renewal are similar, the way an enterprise-level CSM engages their set of accounts will greatly differ from a tech-touch CSM. The skills required for each role will also be fairly distinct in terms of customer engagement. A high-touch CSM servicing enterprise accounts may host a quarterly business review across 5 accounts. On the other hand, a tech-touch CSM may need to be well-versed in certain technologies to design and run at-scale outreach campaigns for 200 accounts.
How you compensate each role should reflect the work, skillset, and experience necessary to support each segment of customers. Also, keep in mind that some segments, and even regions or territories, can be more challenging than others. They will not perform the same way and may not always be within the control of customer success’ resources. To ensure that the variable compensation goals set are achievable for each role type, adjust plans as needed.
Organizations in the early stages of establishing a customer success program likely have very few resources available, or may have dual-hatted leader/practitioner roles. Because of the dynamic nature of this phase, it can be difficult to establish variable compensation models. Typically, there is very little data being collected to track customer adoption and outcomes, so it doesn't make sense to base compensation on data that you haven’t sorted out yet.
At this stage, it’s best to keep compensation simple while you learn what objectives you want to achieve. If you seek to include some type of incentive, consider using a corporate goal versus individual goals, or even stocks and equity options.
Other organizations further along the maturity curve may have a formal and more structured customer program that is fully operationalized. More mature organizations are likely positioned to have more capabilities in place, with defined swim lanes and responsibilities across various roles. At this stage, your compensation models have likely evolved and should be a mix of different plans that match each resource. Bonus structures should be more closely tied to customer value through factors like account health and impact on customer objectives.
As noted at the top, the customer success landscape continues to change and improve. Be sure to keep a pulse on the industry and internal teams and iterate on compensation as needed. Whatever changes you make, make sure you communicate the ways you’re improving upon compensation plans so that everyone is aligned on expectations and goals.
Now that you’ve gotten this far, how much do you compensate a CSM? If you haven’t already guessed, the answer is: it depends.
Based on our benchmark data, the average fully-loaded cost for a CSM is $141,800. But that’s just one brush stroke within the whole picture of a customer success compensation plan. To plan and execute your compensation strategy, you will need to:
The last, and perhaps most important, point: research the latest data. Every other year, we run a compensation study across our membership. The results include thousands of individual data points, which cover base and variable pay, along with other key findings for every role in customer success: from CS leaders, CSMs, TAMs, CS Operations, and more. Our 2022 study just published last week and is now available for customer success members.
At TSIA, we base everything on hard data. That’s why we have the best resources to help you understand best practices and build practical plans around them.
Become a member today and gain access to tailored advisory, unlimited customer success insights, and the best community in technology and services.
November 8, 2022
Darlene Kelly is the senior manager of customer success research for TSIA. In this role, she works closely with TSIA’s customer success members to deliver research and benchmarks to help companies realize and achieve their true value in customer success. Prior to joining TSIA, Darlene spent approximately 20 years in the digital marketing landscape with the last 12+ years at Adobe working in Customer Success across different customer segments and industry verticals. While at Adobe, Darlene served as a Senior Customer Success Manager, responsible for managing Adobe’s enterprise level accounts protecting some of the company’s largest book of business. Prior to Adobe, she held roles within services and sales at Claritas, a marketing company later acquired by market research firm Nielsen.
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