Customer Growth and Renewal

What is a Customer Success Manager’s Role?

Why Customer Success Managers Are Both an Advisor and a Sales Asset

A key sign of long-term success is the customers’ ability to adopt the technology solutions you offer. Customer success organizations are at the heart of making this happen, and within your team, it’s customer success managers who take the lead.

What Is a Customer Success Manager?

Customer success managers (CSM) are a primary point of contact for customers to help them achieve success throughout their entire lifecycle. From nurturing them as a prospect to problem solving with them as an established customer, customer success managers take proactive steps to deal with potential issues before they become larger setbacks to success.

Because of the relational nature of their positions, customers often view their customer success manager as an advisor and ally in executing your solution. While their ability to cement customer loyalty is an asset, it’s also why involving them in the sales process can be powerful, yet tricky.

Everyone agrees the customer success manager’s role is important, but what exactly that role should be is a constant debate.  You may be asking yourself, “Should I deploy my customer success manager into revenue generating activities, or dedicate them purely to a charter of product adoption and trusted advisor?”  (This supposes that being a salesperson does not allow them to also be a trusted advisor – perhaps a conversation for another day.)

There are many well-articulated arguments supporting the thought that a customer success manager is a trusted advisor. However, you’ll find just as many convincing arguments for utilizing customer success managers to grow revenue. So, which is the right answer?

The Growing Role of Customer Success Managers

TSIA 2022 benchmark data indicates that 84% of customer success organizations have adoption as their charter, while 47% of the organizations also participate in expansion activity, and 76% participate in renewal activities.

What we find is that all three are common practices for customer success managers, indicating  that this is really an “and” conversation rather than an “or” conversation. Customer success managers can wear the hat of both advisor and revenue generator while contributing to adoption, expansion, and renewal.

This revelation might not seem that “revelatory” to you, but the implications can be felt throughout your organization.

Why it Matters – Two Key Market Trends

There are two key market factors that make it imperative for your customer success managers to embrace both a sales and advisory role:

1. Recurring revenues are growing, and so is the job to oversee them.

Over the last decade, revenue generated from service subscriptions–meaning it must be renewed periodically–has consistently grown year over year. (This is according to our TSIA Technology and Service 50 index “Source of Revenue” report from Q4 2021.) As a business enters the recurring revenue schedule, it must be managed by someone. While the sales organization is built to sell, it is not necessarily built to cost effectively sell volumes of low complexity renewal deals.

This has traditionally been the purview of a specialty renewal sales team, but it is increasingly supported by customer success managers.With the amount of revenue generated from renewable business, it must be cost effectively managed. I’ve written previously about the complexity of who owns renewals, and so your customer success manager’s ability to step up in this area will free up employee time and also your budget.

2. Focus on expansion can spread sales thin.

The subscription nature of the deals changes the revenue recognition profile from large upfront revenue to evenly dispersed revenue over the life of the subscriptions. This shifts the emphasis to expansion of the account in order to extract full lifetime potential.

Expansion sales has traditionally been the purview of the sales organization. Yet, as more and more low complexity, higher volume expansion work comes online a decision must be made. Can you scale your high-cost sales organization across all segments of the customer base? Increasingly, companies are looking to customer success to participate in expansion charters.

In both instances, we see the need for customer success managers to be a key player in an arena that was once more exclusively the responsibility of sales. The amount of renewal and expansion work is growing and must be cost effectively managed, which is difficult if you’ve boxed in your customer success team to only be an advisor.

Shifting Business Models Require a Shifting of Roles

The transition to the subscription or XaaS (anything as a service) business model has huge implications for every facet of business. Nowhere is this more evident than looking at TSIA’s Land, Adopt, Expand, and Renew (LAER) customer engagement model.

Previously, highest importance was often placed on Land and the initial sale. However, you can see in the graph below how that is quickly changing. The recurrent nature of subscriptions increases the importance of the later  phases of the customer lifecycle.
 

This creates a huge business challenge for technology companies. Deploying sales resources across LAER is costly, and it spreads the focus of the sales organization. They simply have a difficult time effectively scaling to meet all the revenue opportunities available.

Our research shows that when Land sales executives receive 100% commission on renewals, subscription revenue grows 8 basis points slower than when they are not commissioned for renewals (TSIA 2020 XaaS Revenue Effectiveness Survey). Why is that? If a salesperson can hit their quota closing low complexity renewals, how much energy will they apply to the most difficult task in sales–closing complex net new deals with net new customers.

Building Your Customer Growth Team

To achieve optimal revenue growth, we’ve seen many companies adopt a “team approach” with sales. This is an approach in which multiple functions are playing a role on the revenue growth team. How the team is built depends on the complexity of the work and offerings.  

Highly complex sales work will of course rely on traditional sales organizations to lead the charge. Lower complex work, however, opens the door to lower complex conversations. This is where customer success enters the game.

Lower complex selling work can include lead identification, lead development, opportunity development, sales negotiations, or closing the deal. Each company will have a unique profile, and when the work is low complexity then customer success may be a very effective driver of growth.  

Data from our 2020 XaaS Revenue Optimization Survey suggests that when customer success owns expansion goals, growth rates for subscription revenue increase 12.60 basis points. Additionally, when customer success has a formal lead generation program, renewal rates grow 8 basis points.   

Clearly, customer success has  an impact on revenue growth, and the team approach utilizes the best each department has to offer to make, keep, and grow a sale.

Sales and Customer Success Crossover

It’s clear that customer success managers should be trusted advisors AND members of the revenue growth team. But how do those things overlap?

As trusted advisors, customer success managers have earned the right to suggest actions and solutions to customers that help them better achieve their desired outcomes. They may play a role in opportunity identification, lead generation, and up-through deal closure (depending on the nature of the work and the maturity of the organization’s capabilities). 

Helping customers achieve their outcomes is a selling activity. It may start and end with a suggested action and a referral to a salesperson or could go all the way to deal closure.

Simple add-ons are a no-brainer, such as “can you add five seats to my subscription?” In this case, of course, process the expansion! Complex financial negotiations are a different story. A customer might say “I want you to consolidate these five subscriptions and add this product at a 15% discount.  With that amount of complexity,  you would probably refer it to the assigned salesperson.

As previously stated, we see customer success managers owning all low complex upsell and cross-sell transactions. Customer success managers are aligned closely to engage the customer five to 15 times more than an account executive. As a result of their proximity with the customer, they are well positioned to help with these upsell and cross-sell opportunities. 

Merging Customer Experience with Revenue Growth

If you are worried about your customer success manager no longer being perceived as a “trusted advisor” you need not worry. Customers want expeditious service. Almost 50% of the industry has customer success managers that are providing this level of service today. That means the same amount of customers are already acclimated to the customer success managers performing this service and helping them gain value faster.  

Stop slowing down the process and start getting your customer success manager positioned to help move the needle forward with the customer around the commercial charters of expansion and retention.

Here are our top recommendations you can start with today:

• Build a culture of team selling
• Segment the work into logical work types and complexity profiles
• Deploy KPI’s and targets which are aligned across the growth team
• Develop and deploy a unified revenue growth plan, and functional sub-plans that clearly articulate strategy and roles and responsibilities
• Prescribe policies that allow dynamic redirection of work based on specific conditions

  February 15, 2022