This post is by Tomasz Tunguz from Tomasz Tunguz
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A few weeks ago, we were fortunate to welcome Nick Mehta, CEO of Gainsight to SaaS Office Hours. I learned a lot from the session about how customer success has evolved over the last 5 to 10 years. Here are my notes from the session. The discipline of customer success varies widely depending on price point. At the lower price points, some organizations combine the role of an account manager and the customer success person into a CSAM (customer success account manager). These CSAMs perform high-volume account management and customer success typically through email and other forms of broad campaigns to drive retention and upsell. In the midmarket, it’s not uncommon to see combinations of account managers and customer success managers. This is the “classic” version of customer success most of us picture when we talk about the concept. In the enterprise, things change again. Customer success teams may also working with solutions architects and customer support teams. The larger the contract value, the more common it is for sales teams to own expansion and for sales to be the primary contact, directing a team of people focused on customer success. Ultimately, the customer success strategy and organizational structure must be designed to reflect the possibility of upsell. There are some products that are sold into customer segments where there simply is no possibility of upsell. In this case, account management makes the most sense. In other cases, land and expand is the predominant go to market strategy and expansions are worth significantly more than the initial contract. In these scenarios, investing in larger post sales teams drives account growth. There are many organizational structures. Some companies structure the CS teams and sales teams in an identical fashion. Others stratify their organizations by price point because the customer success tactics vary by ACV. As mentioned above, for low ACVs customer success managers may use broad marketing campaigns. At the enterprise, where named accounts are common, an individual customer success manager or customer success team may be responsible for a Fortune 500 or fraction thereof. Compensation strategies for customer success are evolving to include a larger fraction of performance compensation. It’s not uncommon to see a 75/25 or 70/30 split between base and commission for upsells, or sometimes more. The greater the opportunity to upsell account, the greater the likelihood of performance-based compensation. There are a lot of different benchmarks for customer success performance. I’ve written about that dollar retention and ARR under management per customer success manager. Nick mentioned percent of ARR at scale spent on customer success. At the early stages, this spend might be as high as 15-20%. It declines over time to about 10% in the growth stage and then 4-5% at IPO stage or later. It’s clear CS is evolving as each company implements customer success strategies in ways to benefit their business. And it was kind of Nick to share his perspective with us. Thanks, Nick!