Nick Mehta, CEO of Customer Success leader Gainsight, recently did a short post above on his Top 7 takeaways talking with customer success leader for the first time in-person in a long time.
These points are so interesting I thought I’d add a few thoughts on to them.
1. Many have NRR as a top-level company metric
I love having NRR be the #1 metric for Customer Success. It’s what separates Good from Great, and it’s more impactful than just owning NPS or a renewal rate. It’s also a sign of a great VP of Customer Success when they are willing to sign up for growing NRR as the #1 metric and what their variable comp is tried to. I always see that as a sign of a great CS leader. It’s also one of the top metrics you’re graded on by both private and public investors now. Segment it, break it out, and set a goal to drive each segment’s NRR up. And per the next point, pay up when you hit the goal!
2. Most are adding more “leverage” to their CSM comp plans – one attendee had 40% of the CSM comp “at risk” with half of that being based upon NRR
As Nick notes below, a classic way to comp Customer Success Managers was an 80/20 comp plan. I.e., 80% of their comp is a base salary, with a 20% boost for hitting NRR, NPS, new bookings from the existing base, etc. goals. That’s still pretty common. But VPs and DIrectors are often signing up for more — and looking for more variable comp in return.
I like this as well. A VP of CS that signs up to grow NRR from 110% to say 125% certainly should earn a 40% bonus, not the traditional 20%. Etc. That’s a great deal all around.
3. Others are at 80/20 or 75/25 but moving to more incentive comp and more based upon NRR.
Again, NRR (over NPS, CSAT, logo retention) seems to be the core North Star metric for CS today, irrespective of the amount of variable comp. Having an 80/20 plan of some sort and then a bonus for hitting a bookings plan from the existing customer base can work well, too. Without having to own the bookings per se (see the next point).
4. While most CS leaders don’t own expansion, the ones that do truly own the entire NRR number
Should CS own expansion — i.e., be account managers too? I’ve seen again and again what Nick also sees — most CS leaders and execs don’t really want to be in sales. Or they’d be in sales. 🙂 So they don’t really want to own expansion per se. But some do. Some VPs of CS do have a bit of the sales leader in them. And when those ones do want to own expansion, it can be powerful. In that case, they own the entire NRR number for the company.
5. In these models, companies need to have a way to control the quality of new deals; one company measures sales team members based upon the “quality” (adoption/retention) of their new deals
Churn-and-burn and low-quality deals are the nemesis of Customer Success. I don’t view this as big of a deal as Nick does — I think this works itself out in the end. But it’s definitely a stressor, and a good one, when commissions are tied to NRR.
6. Companies are starting to give NRR goals to every department
I love this. NPS is a company-wide goal. NRR is even better. Although if you’re not sure how to drive NRR up per se, driving NPS up is an input and it tends to work well as an interim goal.
7. While Marketing hasn’t historically been involved in post-sales in most companies, that is changing over time as NRR gains in importance
I still can’t believe, even today, the vast majority of SaaS companies post $5m ARR don’t have a Customer Marketing function. You need one. More on that here. Most VPs of Marketing are tasked with driving new customers and new leads and opportunities. But what if your VPM or at least your CMO is tasked with driving all new bookings — from both new and existing customers? Then think about how your VPM would change their job. They’d change it a lot. They’d probably put 30%+ of their time — and budget — into the installed base.
Maybe try that.