Is Customer Success over?

TL;DR - Depends on what you mean by “customer success”.

The challenge with customer success as a department is that we need to agree on what it means, what sort of things it covers and what the actual role of a CSM is. 

In our industry, “customer success manager” means wildly different things to different people. This isn’t made more transparent by looking at the type of software, size of company or type of customers, and this lack of consistency is causing us problems. 

Internally, sales often overshadow customer success as owners of the number; therefore, the reward for growth regardless of who delivers it. From an industry perspective, we're not effectively developing skills and standards across the board because we haven’t standardised around what we actually do, what we want to do, or how we do it. 

This lack of consistency often means customer success becomes a miscellaneous department within organisations to handle things that are somewhat broadly to do with the customer that no one else wants or won’t ever get productised. We’re running around in circles trying to focus on doing the right things for our customers, often without the reward and recognition desperately needed to solidify our position as a necessary and profit-driving post-sales organisation.

2023 has seen net new business slow, and churn rates steadily increase

It’s been a rough year for the SaaS market; growth is down, and churn is up. Paddle reports that churn is, on average, 18% higher this year than in 2022. When you’re in the retention business, the evidence sure looks damning. From my subjective experience, I’ve defended more downgrades and churn due to “budget” this year than ever before, so if you’re trying to assert your usefulness as a department based on customer success improving retention, that’s been a hard ride. 

However, looking at the data, the overall slowdown in SaaS growth has been primarily due to the downturn in sales versus the uptick in churn.

So why is CS such a white elephant?

Customer Success, for most businesses, is a cost centre. And whilst the impact of cutbacks has been brutal for many in customer success, it’s also been rough in sales. New rev is down. Sales cycles are longer and more complicated, and more than ever, CFOs are asking to be included in the buying decisions as they try to balance the books with more care and scrutiny. 

Sales, however, generate revenue. CS will never be sustainable if it remains a cost centre and a “catch-all” department for customer-related “stuff”. TSIA, in their state of customer success report, says that in 2022, only 26% of CS organisations were profitable, which is only a 6% increase from the previous year. So it stands to reason that when you’re looking to cut costs, you have to cut the costs, which are likely to be revenue-draining rather than revenue-creating. 

Beyond the commercial, some CS leaders and departments have flipped to focus exclusively on what customers need and “making customers happy”. Unfortunately, happy customers are not always successful, and CS leaders who focus on customers' needs to the detriment of all else often cause conflict with their cross-functional colleagues. It’s a fine line to walk to advocate for the customers' needs without becoming a loud distraction.

Is revenue still a dirty word in CS?

I’m a commercial leader who started in customer success. At my core, I still prefer selling to existing customers rather than net new ones. There is (for me) an unfathomable joy to be gained from commercially expanding successful customers, and to be frank, it’s more fun to work with people you know rather than hammer on the doors of new customers who need convincing of your value. 

The problem I see is that many CS leaders, execs and professionals still don’t think customer success should be a revenue-owning department. The old “trusted advisor” slogan still hangs heavy over customer success. Here’s the thing: there is nothing about managing a commercial relationship that impacts trust unless you’re an actively untrustworthy person. 

So, what’s the alternative?

Simplification and rigour. 

How many post-sales departments does it take to change a lightbulb? 

We need simplification in our organisational structures to make it make sense, both to the customer and to our business financially. I’m always prepared to argue that the customer needs a primary point of contact for operations and commercials, and that person should be a CSM. However, we need to apply more rigour to our operations to earn the right to be this person.

“Delivering Value” as an ethos has always been vague and nebulous to me. What exactly is value, and how do I measure it? Some days, a Greggs vegan sausage roll delivers me immense value. On other days, I’m unsure why I wasted my £1.20. Value is in the eye of the beholder. As a customer, you can’t tell me you “deliver huge ROIs”. Whether or not you have a return on investment is subjective and up to me to decide. 

Sales is a numbers game. It’s measured to within an inch of its life. We know what the pipeline looks like, where the pipeline comes from, what the average value of the pipe is, which deals are likely to close, how long they take to close, how long all of our sales reps spent pressing the button on their Nespresso machines last week… etc etc etc. In post-sales, not so much. There are processes and some KPIs around retention, but in my experience, there is no “machine”, not in the same way. 

CS Leaders who don’t run their renewals and growth processes (even if you don’t hold the numbers) with the same rigour as sales operations often have a harder time proving value on the spot. There’s a growing trend towards CSQOs (CS Qualified Opportunities), which is a step in the right direction, but you must understand pipeline management to make this a meaningful metric. Customer Success has a lot to learn from Sales. Don’t forget, whilst Customer Success focuses on delivering value for the customer, CS Leaders have to accept that there has to be value given back to the business. Knowing what this is and quantifying it with the same rigour expected of a Sales leader significantly improves the business-wide appreciation for the bi-directional value chain. 

The challenge for post-sales is that there’s nuance in the post-sales sale; it often takes time and trust. For sure, so do new business sales, but once you’ve closed that deal, you move from “challenger” to “incumbent”, so you’re fighting on two fronts: expansion and retention. 

And lest we forget, ARR isn’t actually annual recurring revenue unless your customer signs for multiple years. Renewals are sales, and you have to re-sell to your customers every year. Only now, you’re not selling the dream. You’re selling the reality in all its glory. If you want to stand on the hill of “CS is a value-driving organisation for the customer”, you’d better prepare to demonstrate that value as part of a renewal selling process. 

Successful customers grow. We invest time into making customers successful with our product, not (only) because we need to deliver on what we sold them but because if we don’t, we will lose revenue. We will also lose opportunities to expand that revenue.

GRR vs NRR

I’ve been clear in the past when it comes to the day-to-day leadership of CS teams NRR is a metric that confuses too much interesting data. However, it is a good indication of whether your customers are growing. 

The question of GRR over NRR is simple: does your customer success team look after up and down, or just down? 

I’ve worked in businesses where we’ve only had down, lord, it was a mess. Advocating for the value of customer success in a world where the number is negative only is a depressing existence. Moreover, in terms of customer journey, it’s a horrible mutant of a situation. Renewals are an interesting mix of salespeople (who didn’t stay in touch and, in some cases, have never spoken to the customer) trying to sell anything to anyone, a CSM trying to keep the renewal as flat as possible and a renewal manager who wants to get it done. For a business, it’s expensive to have 3 people on the job and hard to see who owns the process and is therefore accountable for the outcome.

Realistically, it doesn’t matter whether you have an Account Manager or a CSM managing the commercial part of the relationship; it only matters that they control it in its entirety. I would say that without a revenue number, CS will always have a hard time proving value, but if your product is super technical or specific, then it might work. Whichever way you look at it, we need

both up and down. Otherwise, sales is always a success story and customer success a net loss. 

In the pursuit of a seat at the table, don’t just take churn. 

So where are we?

As we drive SaaS businesses towards profitability over exponential growth, the challenge of customer scale becomes an organisational one. Traditionally, when we’ve had a problem that needed fixing, we created a new department to focus on that. This has led to customer success, implementation, support, third-line support, solution architects, professional services etc etc etc… 

What we lose in the post-sales organisation is any sense of ownership and accountability, and whilst most of these departments are cost centres, we’re stuck in a hole of our creating. For customer success to continue to grow as a practice, we need to embrace the commercial numbers to earn the right to focus on value. As we continue to advocate and speak for the customer in our organisations, we also need the balance of commercial accountability to ensure that we’re on the right track. 

With a number, it’s easy to hold CS accountable for value delivered to customers through growth and churn, and vice versa. I have been in many situations across various companies where churn was up, and growth was slow, in part because colleagues in product weren’t focussing on features for existing customers. I used that quota to hold the business accountable to the customers it already had. 

With sales down and churn up, customer success has never been more critical. To be focused, accountable, commercial and diplomatic is to be the future of customer success.

So, is customer success over? 

Fuck no, but we must overcome the trusted advisor hurdle and make our peace with owning a commercial number.

Customer Success needs to be a revenue-driven department. There is no other way to build credibility and value within a business and industry. Whilst we continue to be a “miscellaneous” customer stuff department, given metrics like NPS and customer satisfaction, we’re not being taken seriously and, therefore, not earning the right to do the work. As the landscape of SaaS changes, we, too, must change and build the space to defend what we believe in.  

You can’t say customer success is over; who wants customer failure? We need to strip back, streamline, optimise and operationalise around customer relationships and what our customers need from us to be successful. Success drives revenue growth, and it’s time we focussed on this versus the myriad of things CS has become in many places. 

Build. Measure. Adapt. Grow. The time is now for Success-driven customer growth.