The “age of the customer” has had a dramatic effect on organizations. New positions abound that didn’t exist five or 10 years ago. One of those positions is the customer success manager.
The concept is to have a team of employees focused on exactly what the position’s title describes – the success of the customer. However, and ironically, companies have implemented the position to focus on getting additional revenue from the customer instead of ensuring the customer achieves their outcome first and foremost for the lifecycle of the relationship. The function, as well as the industry of customer enablement and empowerment, remains early despite market rhetoric.
The good news is that things are changing and rapidly. That is reflected in the challenges the 2015 Customer Success Salary Survey & State of the Profession Report found facing customer success teams. It speaks to the need for companies to rethink and realign the definition of customer success roles :
- Reactive approach to customers
- Time management and focus
- Visibility into customers
- Scaling the team
- Clarity of the role and goals
Totango, a customer success management software platform, released the results from their 2015 Customer Success Salary Survey & State of the Profession Report. The study was based on a sample of 748 participants comprised of Chief Customer Officers (16%), Directors of Customer Success (35%), Customer Success Managers (36%), and other related roles. The respondents were almost evenly split across team sizes of zero to five, six to 25, and greater than 25 team members. “The ranks of Customer Success professionals are growing by leaps and bounds. It’s not surprising that we’re also seeing the growing pains of figuring out how to practically translate the ambitious mandate of “customer success” into the nuts-and-bolts of a day-to-day job,” shared Kaiser Mulla-Feroze, Chief Marketing Officer, Totango.
2015 compensation levels, compared to 2014, are on the rise with the median annual compensation for:
- Chief Customer Officer / VP of Customer Success between $150,000 and $175,000,
- Director of Customer Success between $125,000 and $150,000,
- Customer Success Manager between $75,000 and $100,000.
The most popular compensation structure is base salary plus bonus (54%) with a small portion of the sample (20%) paid some form of a commission. The criteria most commonly used to determine bonuses, in my opinion, contributes to the disconnect between the role’s title and customer expectations of the role. Thirty-seven percent of bonuses are based on renewals and upsells and over 55% of bonuses are based on team and/or company performance. For those customer success managers paid commissions, 57% are based on renewals and upsells, 23% on upsells only, and 20% on renewals only.
Based on the hundreds of B2B qualitative customer interviews I’ve conducted, when a customer hears that someone’s title is customer success, the impression is just that. The employee’s number one priority is that the customer achieves their target outcome and advocates for them within the organization. Since it’s been long acknowledged that people do what they are paid for, having bonuses based on company revenue performance or compensation based on renewals, upsell or commission generates a very different behavior and mindset than what the customer is expecting. An opportunity for expectation mis-setting and customer dissatisfaction to occur.
Over 77% of companies have had customer success teams for three years or lesswith teams coming from a wide variety of backgrounds. The study’s findings validate just how nascent this function is. While 34% of customer success teams are standalone functions reporting to the CEO, a significant increase over last year’s 15%, a disturbing 14% of teams still report into sales or marketing. While not a large amount, it speaks to the challenge of labeling something that it is not.
Measuring customer success based on revenue generated is not a proxy for customer satisfaction or loyalty. I know of one mobile application vendor in San Francisco that calls their sales reps customer success managers; they are still sales reps. Another SaaS vendor assigns and pays their customer success managers on renewal and upsell quotas. The result is sporadic customer engagement, underutilized products and an annual ‘re-educating’ of users on the vendor’s value.
The most effective compensation models include customer satisfaction metrics over the lifecycle of the contract, product adoption/usage, and customer rating of their customer success managers. According to John Ragsdale of TSIA, customer success / account managers should be responsible for renewal, increased adoption and identifying expansion sales opportunities. Sales should be responsible for closing expansion sales opportunities
Having the right person in the role is critical, not everyone is suited to ‘own the customer’. It requires individuals that are empathetic, patient, problem solvers, technical and committed to both the customers’ and the company’s success.
Totango’s study found that 43% of customer success employees come from sales and/or account management compared to 24% that come from support/services organizations. That background accounts, in part, for the role’s revenue focus instead of customer outcome attainment. Other fields from which customer success managers come from include marketing, product/engineering, finance and consulting.
The good news is that companies are starting to realize that an overemphasis on revenue runs counter to what they and their customers want which are to build enabling and enduring relationships based on lifecycle outcome attainment:
- Product adoption – 57%
- Churn reduction – 55%
- Onboarding – 47%
- Customer advocacy – 42%
- Customer support – 39%
- Upsell – 20%
The bottom-line is that the customer success profession is critical to success in this “age of the customer.” Companies have made great strides in the past twelve months in understanding how to staff, compensate and manage these customer-facing employees. Mulla-Feroze sums it up well, “The profile of the Customer Success profession is clearly on the rise. More teams are reporting directly into the CEO, and companies are investing heavily in growing the ranks of their Customer Success teams — from CSMs all the way to VPs and Chief Customer Officers.”