The Essential Guide to

Budgeting for Customer Success

The Customer Success organization supports efforts such as renewals, upsells, and cross-sells. They answer direct questions about new features, industry events, and other marketing initiatives. In this model, their costs are associated with the Sales and Marketing budget. Most large companies with big budgets find this strategy to be the best path. If this strategy makes sense for your business, remember to position CS equal to the Sales and Marketing teams. The budget allocated for your CS Operations cannot be an afterthought but must be prioritized as high as the other two departments.

Because CS teams play an essential part in support, onboarding, and driving retention, their costs are considered COGS. As such, it makes sense to source the budget for CS from Sales. To maintain a clear dividing line, upsell or cross-sell opportunities are only identified by a CSM or CS Ops analysis and then handed to the Sales department. Of course, Customer Success Managers do more than just support, retention, and adoption. That should be a consideration when deciding whether this strategy makes the most sense to your organization.

As CS and CS Ops expand and integrate with more departments in your organization, it may make sense to map out all the responsibilities of your CS team to create a unique budget model. For example, at Gainsight, we see CS and Product work increasingly close together as each team drives the success of the other. That might inform the amount of budget pulled from COGS compared to Sales and Marketing. Create a master list of all the strategic efforts and identify which should be removed from which department. You may find that your allocation is 50/50 from both COGS and Sales and Marketing, or you might discover a different balance. But seeing the complete picture of impact and responsibilities is a tremendous help when deciding.

Another way of looking at CS funding divides the Sales and Marketing category into three SaaS-specific cost categories. Breaking the mold of traditional finance strategy creates a new platform that can adequately fund Customer Success.

Customer Acquisition Costs (CAC) are all costs, including Sales and Marketing, associated with acquiring new customers. Best practices suggest allocating 65% of Sales and Marketing costs into this bucket.

Customer Expansion Costs (CEC) are all costs, including Sales and Marketing, associated with expanding revenues within the existing customer install base. Best practices suggest allocating 15% of Sales and Marketing costs into this bucket.

Customer Retention Costs (CRC) are all costs, including Sales and Marketing, associated with renewing existing customers. Best practices suggest allocating 20% of Sales and Marketing costs into this bucket.

In this stage, your entire team spends the day fighting fires. Rather than addressing issues proactively or operationally, you tackle risks (and the rare opportunities) from your customers as they come. To graduate from this stage, your team needs ways to capture, visualize, and leverage the vast amounts of customer data available to be proactive about their CS efforts.

The biggest priority for your budget in this stage is to buy a software solution like Gainsight that can help provide the foundation your CS team needs to operationalize and grow. You want something that will allow you to take on more customers without increasing headcount spend. More effective CS models, as well as the opportunity to leverage digital-first models, will add tremendous value to your company, and make your team members much happier at work.

In this stage, you’ve taken the first steps to formalize your Customer Success team. The most important processes are standardized, and you’ve begun to track customer data. You’re clear about the metrics you want to keep an eye on, and you’ve thought about the new goals you have for the impact of CS over the next year.

The most critical investment to make at this stage is a solution that can help you make sense of the data. You want a single source of truth that tracks, visualizes, and shares data so that your team can track processes, establish specific goals, and formulate testing strategies to optimize for growth.

Invest in tools and resources that allow you to use the data in meaningful ways across departments, including Product, Marketing, and Sales. You also want simple, integrated methods to deploy surveys, track support data, and capture other signals that prove your impact.

In this stage, your team is focused on one thing: the customer’s desired outcomes. The foundation of your Customer Success team is solid and growing. Based on the data, you could automate some processes to free up time for strategic planning and implementation. Importantly, your team understands the need for your customers to be committed to their outcomes. You’ve instituted Mutual Success Plans as a way to keep both your team and your customers accountable for those outcomes.

If this sounds like your team, you need a way to scale these for every customer segment. You want the right pieces in place to strategically move customers towards adoption, renewal, and expansion. Thankfully, in this stage, you should have data to support your impact on Net Revenue Retention (NRR), which will prove to your team what budget you need and why.

Consider using your budget for building a formalized CS Ops team. These key players support your CSMs by focusing on the big picture and identifying new processes and systems that promote growth and happier customers who have reached their goals.

At this stage, you have a fully optimized, company-wide adoption of Customer Success across every customer-facing department. Your goals now have moved beyond implementation and towards integration. Your team should be searching for ways to keep Sales, Marketing, Support, Services, and Product teams aligned with customer goals and informed of customers’ changing demands.

The budget requirements for your team at this stage revolve around scaling and increasing your company’s value overall. Look for line items in your budget that will yield the highest return. Look for programs and processes that will drive exponential growth. Are there new data and reporting solutions that you can add to your software suite or tech deck to improve your insights? Think about your 5-year goals and figure out where you need to invest your money to reach those targets with the support of your entire organization.

Your customers rely on CSMs to guide them through the product and help them uncover new value consistently. But your CSMs are humans, which means they have a limit to the amount of work they can do every day without feeling adverse effects. If you notice that your current team of CSMs is spread too thin, and your customers are suffering because of that, consider allocating a budget to hire more CSMs.

Figure out what workload a CSM should handle for your list of clients and budget for the right size team. You may also need to consider a Digital Customer Success model that can provide value and attention to your customers without additional strain on your team.

Customers don’t churn in a day. Usually, there are indications that they don’t understand your value, aren’t using the product as much, or in the way they hoped to. Not only are these warning signs easy to track, but they also provide an opportunity to create customer journeys that solve for them.

Customer sentiment surveys that track satisfaction and invite feedback are invaluable to CS Operations, for example. A reporting center that tracks product usage, support tickets, and other behavior-based data will give your team a real-time understanding of trends as well as individual customer warning signs.

If you want your team to invest in CS, give them a plan for the metrics you want to start tracking, the trends you hope to identify based on that data, and how those insights will impact annual revenue. It is much easier to invest a budget in more tools or resources with clear metrics and goals.

Customers spend the most time inside your product. If they don’t understand how to use features or why it’s impossible for them to attain total value. As the direct line between your customers and your internal team, the CSMs are in a prime position to communicate growth opportunities based on feedback.

Use part of your budget to create scalable systems that boost adoption but also equip your CSMs with resources to communicate opportunities to your internal team to reduce avoidable churn.

Although CSMs contribute to adoption and expansion throughout the year, their chief focus remains on renewals. It’s the primary metric when measuring their impact on churn. However, a successful renewal happens over time. To build a strong relationship with your customers, one that reduces churn, your CSMs must be equipped with playbooks and processes to create an exceptional customer experience.

What are the strategies you’ve outlined for them to follow around renewal time? What are the strategies you’ve built for each new customer milestone? If you don’t have any playbooks, you need to invest the time and budget into creating them. Give your CSMs a path to follow so that no customer goes unnoticed. Plus, with a standard procedure, you’ll be able to create different tests that help you optimize and identify early warning signs.

For additional churn reduction strategies, check out our Essential Guide to Churn.

The onboarding process is critical for the overall success of a customer, especially in regards to TTV. This is the point where customers are most likely to feel overwhelmed, confused, or resistant to the value of your product to their organization. Because of this, successful CS teams create as many opportunities for feedback as possible during this period.

Create a Voice of the Customer strategy and send surveys after a customer has finished onboarding. Get a sense of broad trends, such as the features they were most (and least) excited about. Focus on their specific experience. Try to understand whether they feel onboarding spoke directly to their Success Plan and associated goals.

Over time, you can use data from all customers to improve your onboarding playbooks and devise a way to address your less confident users.

Quarterly Business Reviews (QBRs) are strategic, face-to-face meetings involving CSMs and individual accounts. Implementing this practice will allow CSMs to talk with customers about their business goals and how your product can support them. Our Essential Guide on QBRs provides insight into this strategic post-sale touchpoint.

If you are tracking data correctly, the QBRs should not reveal any surprises. The state of your relationship with your customer or their enthusiasm about the value of your product will be apparent. And these should be times to refine Success Plans and talk through opportunities. The CSMs may use this time to note any expansion opportunities to pass to your Sales team or ideas to your Product team.

When a customer asks your CSM for guidance, typically, the question is specific to their business model. The answer involves more than a simple yes or no. To answer the questions thoughtfully and accurately, your CSMs must know all the ins and outs of your product. The more they know, the better help they can provide, and the more confidence your customers will have in the value of your product.

Ensure that you spend time training CSMs on the features and functions of your product regularly. This training includes everything from understanding the ins and outs of each new release to seeing how other accounts are using features of your product successfully. It can be challenging to take time away from managing accounts to train CSMs, but the investment is worth it to prove your value to every customer.

As you roll out more and more capabilities, make sure you provide documentation and notifications so customers know how your product can help them.

Customer Success software provides frameworks for processes, keeps track of customer health, automates activities, and much more. Your team will waste precious time piecing together information from different solutions without dedicated CS technology, often missing critical details. Improve visibility, ensure everyone understands the needs of each customer, and make the daily lives of your CSMs easier by investing in the right technology.

What’s more, CS software will boost your organization’s momentum no matter what stage you’re in. Many successful companies invest in software that can execute digital-led CS models to support their staff and scaling efforts simultaneously. For more on evaluating CS software, check out our guide.

Clearly defining each CS function’s mission metrics, and activities will help your team understand and adhere to the responsibilities and expectations required from each role. Years ago, when CS first began, it was critical to define how it would impact the business as a whole.

Now, we know the impact that CS has on reducing churn and improving customer sentiment. We also know it can do so much more. Working across departments, CS is now considered an essential growth driver that can support everything from Product development to Sales. Ensure that you have clear expectations and metrics that prove the value of CS and the reasons for an appropriate budget.

One of the most important processes you establish is your engagement model. Each customer will require different levels of communication at various times. But, your CSMs will likely not have the time to dive into which customer needs what kind of outreach model every day.

With pre-populated, strategic playbooks that provide emails, slide decks, and other resources to your CSMs, you ensure that you’re always saying the right thing to the right customer at the right time.

Invest in different communication models as early as possible, with a focus on what will scale. Then, learn to leverage a combination of personalized and digital-led communications from your CSMs, and other team members.

Understanding the customer journey is the first step to a highly strategic upsell/cross-sell process that delivers true value to customers. Use data on a customer’s health, product usage, advocacy, and other indicators to mark the optimal times to engage in conversation with them about upsells, cross-sells, and expansion.

Your CS software can be a valuable asset when expanding revenue, as it automates these processes and gives CSMs full visibility into a customer’s activity.

Hiring a CS Ops leader is a critical investment at this stage. Once you have more than 5 CSMs on your team, it’s time to look for a leader who can guide them and help optimize their work.

Your CSMs have specific skills when it comes to supporting your customers. But, to make the impact they are capable of for your business, they need additional support.

Provide your CSMs with the training and resources they need to succeed. Give them opportunities to learn sales skills through online courses or onsite education, and create an upsell and cross-sell workflow that will take the guesswork out of processes. An excellent education system is Gainsight’s own CSM certificates accessed through the Pulse-Plus program.

These investments in your team will empower them to approach upsells with confidence, which means higher returns for you.