Customer Success: Who Owns Upsell and Renewal?
When it comes to Customer Success Management, the question of "Who owns Upsell and Renewal?" comes up quite frequently. That question is generally followed closely by "how do you structure CSM compensation if they handle upsells and renewals?"
Well, the short answer is it depends. The longer answer is that it still depends but will also likely change over time. Let me elaborate a bit.
First and foremost, I have to say this. Without customer success, there are no upsells. If your customers are not achieving success - their Desired Outcome - with your product, the likelihood that they’ll buy more of your product is much lower than if they were consistently achieving their Desired Outcome.
So if you want more Upsells - as well as Renewals - focus on making your customers successful.
Also, I want to level-set on the value of a Customer Success Managers (CSMs) as it relates to expansion revenue or growth within your existing install base. Whether you have your CSMs execute the renewal, upsell, or cross-sell transactions, it is important that we are crystal clear on the significant influence CSMs have over these transactions - and the entire lifecycle leading-up to those transactions.
Org Structure depends on Maturity Level
Who executes the transaction just depends on how you’ve designed your Customer Success organization and how it operates as part of your overall organization, which is what this article is about. But I wanted to be sure to lay the groundwork for that key understanding of the power of CSMs.
Early stage companies - or companies with early-stage Customer Success Management organizations - will usually have Customer Success Managers (CSMs) doing everything and then as they learn from doing, they’ll begin to draw specialization lines over time.
That means, when you're first starting out, you may want to incentivize CSMs by giving them a quota to hit (on what? Renewals? Upsells? again, it depends... mostly on what you're dealing with right now. Churn Mitigation vs. Customer Expansion... both?) and having variable compensation based on reaching that quota make up 20-30% of their On Target Earnings (OTE). That means if the OTE is $100,000, the base salary would be $70-80k, with the $20-30k coming from reaching their goals.
An Evolving Customer Success Org Structure
Later on, you may pull upsell and renewals out of the CSM group and give that to CSMs dedicated to the function of expanding revenue from the current customer base (or their specific book of business) or you may turn it over to account or sales reps to handle so CSMs can focus on just CSM work - ensuring your customers are achieving their desired outcome.
This organizational change would likely coincide with a switch of the comp model for the CSMs no no longer doing upsells and renewal to a different comp model, perhaps group-based bonuses measured primarily on net retention (renewals+upsell).
Or you may end up carving out a part of your CSM org that is highly-leveraged and focused on lower-touch, lower-revenue customers. And while that group is compensated based on group goals, the part of your CSM org that’s focused on higher-touch customers, and are less-leveraged (each CSM handles only a handful of customers) and may be compensated directly on the original base+variable model.
Segmenting Upsell Roles Based on Complexity
Something we see quite often these days in SaaS companies is a setup where CSMs do "simple upsells" but bring Sales in to do more complex up- or cross-sells. That means if a customer wants additional licenses, that's easy for the CSM and does not require Sales.
But if there's another division evaluating the type of product you sell, a Sales person would need to get involved. Having CSMs handle more than just simple upsells can break down if you start adding lots of new products, add-ons, or even significant expanded use, because the customer may at some point require a full sales cycle to sell.
Does Upsell Contradict the Trusted Advisor Role?Some argue that moving away from CSMs being comped on upsells or directly carrying a quota ensures the "trusted" advisor role of CSMs stays intact, but I don't buy into that.
If you have CSMs trying to upsell when that's incongruent with your customer's success, that's a problem for sure.. but not necessarily with the comp model. I mean, you could have a base that's too low and a quota that's too hard to hit (remember that cable company retention rep from earlier this year that was overly aggressive at preventing churn?), but it's more likely the wrong motivation, the wrong cultural values, or just the wrong person in that role.
To my mind, there's nothing fundamentally wrong with a CSM helping a customer continue to use - or use more of - your product, as long as that is in-line with your customer realizing value from your product, then it's all good. Which goes back to the core idea here... customer success.