5 Lessons from Failed Customer Success Programs Image

5 Lessons from Failed Customer Success Programs

Customer Success Management (CSM) is hot. But it’s also new. So with the tremendous growth in the CSM world come some organizations that have failed in their quest toward success.

While most companies are radically increasing investment in CSM, a few have pulled back. As the old saying goes, “last in, first out;” since many CSM programs are relatively new, they are sometimes cut when times get tough.

From our experience at Gainsight, here are 5 common ways that CSM programs can fail.

1. Wrong Leader

This might be the most common reason why anything fails in business. But to be specific, I’m not talking about hiring a leader that’s wrong for any company—I’m talking about the wrong leader for a specific company. CSM is a broad job and the leadership need varies dramatically based upon stage, scope, and the nature of your solution. Common patterns of failed hires include:

  • A leader that’s skilled at large-scale management in a job that needs someone to work as a “player-coach”
  • A leader that’s good with clients in a job (e.g., a low-priced offering) that demands time spent in the office with data
  • A leader that’s strong with data in a job (e.g., a high-priced offering) that demands time spent in the field with clients
  • A leader that’s great with experienced team members taking over a team of low-paid, entry-level CSMs
  • And so on

Gainsight Best Practice: Companies and candidate CSM leaders are mutually demanding practical exercises and projects in the interview process to get to know each other’s styles better. For example, a company could have the CSM candidate analyze historical churn data or present a sample Executive Business Review.

2. No Goals or Unrealistic Goals

I’ve written about approaching “pilots” for CSM. Whether they are labeled that way or not, most CSM initiatives are experiments at this stage. As such, CSM leaders need to clearly specify how the results should be measured.

If you have a multi-year contract business, it’s unlikely that your renewal rate will change dramatically 90 days after starting the CSM pilot—so you might need to measure a “leading indicator” like NPS or adoption. Similarly, if your pilot is focused on a specific part of your customer base, zoom in on the success criteria in that segment (versus looking at overall metrics).

If you don’t talk about goals and achievement, it’s easy for management to start imagining they can live without the CSM initiative.

Gainsight Best Practice: Create a scoreboard of CSM metrics and share it weekly with your company.

3. Unscalable Model

It’s great to start small in CSM. You can run a pilot and learn a great deal. But make sure you are building a CSM model that can eventually impact your entire business.

As an example, I’ve seen companies run an uneconomic pilot (e.g., one CSM managing $100K of revenue) and have no plan on how to scale beyond that.

Gainsight Best Practice: Choose the appropriate touch model (high touch, mid touch, or tech touch) for your Average Selling Price. Don’t design a pilot that will forever be a pilot.

4. What Does the CSM Team Do Again?

Because CSM is new for most companies, it’s also foreign. Many CSM teams fail because other key organizations (most notably Sales and Product) don’t understand the value proposition of CSM. This means that when budgets get tight, those other orgs often fight for resources from the CSM group.

Make sure you are educating your peers in other leadership roles in your organization’s charter, goals and successes. We’re big believers in following the data at Gainsight. You should be able to prove the value CSM is driving for the company as a whole and across the various departments. To do this, you can build out ROI dashboards for your CSM team based on criteria relevant to each role.

Gainsight Best Practice: Create a “strategy deck” showing the charter and structure of Customer Success internally and dashboards per the above to show results.

5. No Sustainable Funding Model

Even if you manage to get a CSM team chartered and maintained, how do you grow it? It’s critical that you have a clearly defined funding model so you can budget for the group.

Think about how other groups are funded:

  • Support: Case volume or a percentage of revenue
  • Sales: Sales targets and sales quota/productivity
  • Engineering: Percentage of revenue

The worst situation to be in is to have to argue with your CFO for every incremental headcount.

A related question to ask your CFO is whether CSM is a cost of Sales and Marketing or a Cost of Goods Sold. We see an increasing trend toward CSM being a part of Sales and Marketing.

Gainsight Best Practice: We’ve seen three common funding models:

  1. Percentage of revenue
  2. Fixed ratio of accounts or dollars managed per CSM
  3. Self-funding P&L where you charge for Customer Success

For more on budgeting for CSM, see our blog post on the topic.

The road to Customer Success is paved with good intentions. Hopefully this post helps you avoid the potholes along the way.