Heading into 2024 and one of the top GTM topics is the future of Customer Success.

When times were good and customers increased their spend consistently (Net Recurring Revenue - NRR - of 130% and upwards), Customer Success was happy to position themselves with the purist CSM definition:

“We aren’t sales people - we don’t carry a quota.”

“We are advocates for our customers’ business and here to help them be successful.”

In good times, the CSM role was positioned between that of the Account Executive who owned the commercial responsibility,

And the onboarding and technical support teams who had the product responsibility.

It was often easier to describe the role of a CSM by what they didn’t do, than what they did.

In 2024 times have changed.

Customers have tightened their spend:

Consolidating SaaS products and removing those with low adoption
Reducing users required through layoffs

This chart from ICONIQ shows NRR reducing from highs of 135% in their larger portfolio companies in 2017 down to just 105% for that same segment in 2023.

The concept of a set of customers growing your annual revenues before you’ve added in any new customers is what drives the valuations of a SaaS business.

So with NRR nearly reduced to zero growth, the pressure is on CSMs not to just ‘advocate for the customer’ but to actually drive their expansion.

Its not enough to make the customer successful - we need to make our own companies successful.

CSMs must grow accounts via users or products

We can expand an account through two main levers:

Finding more users in the account - different roles, teams, subsidiaries or regions.
Selling more products to the same users - a new product, an upgraded tier, an acquired solution.

The combination of these two expands the value of the customer.

To do this we need to go back to first principles.

Who is the Ideal Customer Profile (ICP)?

You might think this is a silly question - they are already our customer so why do we need to define an ICP?

When you step outside of your current contract - either new users or new products - you are dealing with a new ICP.

Why haven’t they rolled out in Germany yet?
Why haven’t they deployed to the parent group yet?
Why haven’t they purchased the new integration module you GA’d last month?

Who is the ideal customer profile for your current product or new module?

Does it really fit this new set of users you want to expand into in your customer?

Who are the buyer personas in the customer?

Companies don’t buy products. People do.

As you navigate across teams, regions, subsidiaries are there a different set of buyers that you need to engage with?

They are likely different and disconnected from the current product owner you work with.

They’ll need taking on the journey from the very start:

Why change from the status quo?
Why change now?
Why choose your product over another vendor they use?

And this is the same for your newer products or acquired solutions.

Does the new product solve a problem for the same set of buyers?

Or does it now solve a problem for HR where your initial product was a Finance solution?

What is the value proposition to the new personas or for the new product?

Having determined the new set of personas we need to deeply understand their world and the jobs they are trying to achieve with the status quo.

If we can’t truly understand their challenge and how our new product will uniquely solve them (or our current product for the new set of users), then why would our customer engage us?

This has nothing to do with our existing contract or relationships.

Yes there might be a small benefit that they don’t need to onboard a new supplier, and they have some existing contacts in your company - but if your new set of buyer personas don’t see that you can solve their pains or deliver their expected gains - there is no need to add on more licences or products.

This is selling

Too often we assume our past relationship allows us to shortcut the basics of a customer’s buying process:

Defining a problem
Prioritising requirements
Evaluating possible solutions

We need to help every new set of users and buyers along this journey.

Mapping your account, understanding the personas and individuals within it. Reading the annual and quarterly reports and aligning your solution to their strategic objectives and risks.

Net Revenue Retention, customer expansion, customer lifetime value, customer ARR are all driven through understanding of the customer and meeting those needs with products and services that deliver value to the individuals across the organisation.

Is this not the Account Executive’s role?

Depending on your org structure it may well be - with an Enterprise or Strategic AE focused on uncovering opportunities and selling new products and new teams.

But if it is - then what is the role of the CSM?

Its not onboarding

Its not technical support

Its not technical account management

If it is not selling expansion I’m running out of ideas.

CSMs are compensated on sales metrics

The late Charlie Munger, legendary investor and long-time partner to Warren Buffett famously said “show me the incentive and I’ll show you the behaviour”.

This chart, again from ICONIQ, shows the compensation of CSMs (allegedly a non-sales role) versus other sales roles.

*ICONIQ Customer Success Compensation, July 2023*

You can see that the primary incentives for the CSM are renewal rate and net revenue retention (listed as net dollar retention here).

Renewal rate and gross dollar retention is as it sounds - for a set of customers, what percentage of last years revenue have we kept excluding any upsells or cross-sells. (95-98% would be a great score here),

Net Revenue Retention is a sales metric - for a set of customers what are they spending this year compared to what they spent last year. i.e. have they grown their spend?

A secondary incentive is to onboard and drive adoption (what you might consider the purist view of a CSM).

And a tertiary incentive is customer advocacy, in terms of driving references and community engagement.

The future of Customer Success Managers is a sales role.

So if the primary compensation metric is a sales one, should we not treat this team as a sales team, with the corresponding training, coaching and enablement to support them in running a strategic sales process in their accounts?

All roads are leading to Customer Success Managers being folded into the sales organisation, leaving onboarding, technical support, professional services as the primary functions in the Customer Success org.

Whether you keep calling the team Customer Success Managers, or they rebrand as Account Managers, the goal for this team is to deeply understand their customers, to position additional products and services, and to expand the spend of the customers in their care.

Lots more to come on this topic this year.

I’d love to hear what you think (especially if you disagree!)

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Is Customer Success a sales role in 2024?