When a business buyer makes an initial purchase from a seller, it’s only the start of the value exchange between the two. Most of the mutual value accrues over time as the customer benefits and both continues and expands purchasing.
Consequently, more companies are shifting responsibility for ongoing customer care and growth from an account manager to a customer success manager (CSM). The CSM title was almost unheard of a decade ago. But in ZS's 2019 survey of high-tech companies, more than 40% of 109 respondents reported having CSMs. And a LinkedIn survey identified customer success manager as the second most promising sales job for 2019, behind enterprise account executive.
As their ranks swell, CSMs face a multifaceted balancing act. They straddle the gap between service and sales, between company interest and customer interest, and between product expertise and customer insight. When done right, CSMs are a powerful growth engine. Too often, however, customers perceive CSMs to be more interested in making sales than in driving their success. Inconsistency with the role’s title creates customer dissonance and distrust, threatening renewal and an expansion of the relationship.
Why CSM Ranks Are Growing
In high-tech sectors, increasing proportions of sales are subscription-based (such as SaaS products) or consumption-based (such as cloud services). Over the past three years, our consulting company’s per employee spend on recurring-revenue technology products has tripled. We expect that growth to continue, and for CSMs from our suppliers to help us get more value from the investment. Hardware sales, ranging from data storage to jet engines to elevators, are also moving to pricing models based on usage and uptime. The trend does not stop there. Business customers are turning to subscription-based delivery of goods with services such as W.W. Grainger’s KeepStock program, which allows large businesses to outsource maintenance, repair and operations supply inventory management.
Recurring-revenue businesses are not new. In consumer products, chemicals, and pharmaceuticals, for example, revenues are realized steadily over time, rather than as one-off sales. Sellers recognize that in such businesses, usage by customers is the best predictor of renewal and growth. And usage depends on ease of adoption and value for the customer.
With complex and evolving technology products, customers need ongoing help to adapt and realize value. Customer value realization is the flywheel that keeps customers coming back. The CSM can be the power that accelerates the flywheel.
Is CSM an Old Package With New Wrapping?
The title “customer success manager” is used for a variety of sales roles, some old and some new. Some CSMs are rebranded customer service managers who deal with hygiene issues such as troubleshooting and logistics. Other CSMs are erstwhile account managers focusing on renewal and expansion (“farmers”). An IT buyer at ZS who deals with numerous suppliers astutely positioned the CSM role: “Although Alice has the CSM title, she tries to knock down my door every time she smells an expansion opportunity. She is just a pushy salesperson. But Susan is different. She brings ideas about how we can use her products better. She advocates for us in her company’s product enhancement road map. She keeps us informed about what’s coming. Every month, she spends a full day onsite with us. Every quarter, we review our spending and look at other issues that are important to us. These include cost reduction, speed of handling critical problems, security and the path forward.”
The scope of a CSM’s responsibility depends on the opportunity for mutual value creation, determined by solution complexity and customer size. For simpler solutions and smaller customers, one CSM may handle 50 accounts remotely. At the other end of the spectrum, for key accounts with complex needs, there may be a dedicated mostly on-site CSM. This individual acts as the coach of the customer relationship, bringing in technical experts, trainers, and others as needed.
CSM Balancing Acts
As we said above, CSMs must navigate competing interests in three categories.
Mission: Customer success or company success? The CSM job title reflects a change in the mindset of sellers. Instead of “win the customer,” the focus has shifted to “show the customer the path to value.” This is not always easy, especially at companies with hard-driving, results-oriented sales cultures. Unless leaders purposefully act to change attitudes and behavior, CSMs will be viewed by customers as accomplices in making the company’s quarterly sales goals, not as true trusted advisers. The right mission and culture must be reinforced in the CSM hiring profile, success metrics and incentive plan.
Profile: Salesperson or consultant? The CSM success profile is more like a consulting profile than a sales one. As advisers, CSMs must leverage their knowledge of company offerings and the customer’s business and their skills in structured and creative problem-solving. CSMs are often hired with specific experience in the customer’s industry or context.
Metrics and incentives: Customer satisfaction or company revenues? Bonus or salary? Excessive emphasis on short-term, revenue-focused performance metrics and incentives can shift CSM attention to company sales goal achievement at the expense of customer success, which diminishes the business relationship and reduces CSM impact. At the same time, without some revenue accountability, CSMs may spend too much time addressing urgent support needs for friendly customers while ignoring growth opportunities. CSM performance metrics can include customer usage (e.g., retention, renewals, consumption) and satisfaction (e.g., Net Promoter Score and other customer feedback). Result metrics over longer time frames (e.g., annually instead of quarterly) and lower incentive pay are also better suited to the CSM role. The ZS survey indicates that 80% of companies put their CSMs on a sales incentive plan with an average salary/incentive pay mix of 75/25. The same companies use an average pay mix of 55/45 for traditional sales roles (e.g., business development/"hunters").
Building Customer Trust
To get full value from suppliers and their CSMs, buyers need to do their part. Buyers may be reluctant to share challenges and future strategies with a CSM, in part because they worry a sales pitch will follow. However, this transparency is critical for a CSM to have impact. As CSMs earn trust, customers invite them to participate in more internal conversations. This gives them insights for recommending a path to value, regardless of whether that path includes additional revenue.
Realizing the power of the CSM is a fine balancing act. Some companies are getting it right but many are not. By aligning corporate culture and CSM success profiles, incentives and metrics with the objective of customer success, companies ensure that buyers trust in their CSMs. This allows CSMs to unlock more value for their customers, creating a virtuous circle that ensures mutual success.
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Copyright (c) 2019 by Harvard Business Publishing. Reprinted with permission. This blog originally appeared on the Harvard Business Review website: https://hbr.org/2019/11/what-is-a-customer-success-manager