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Customer Success Is Changing: Top SaaS CEOs Reveal What’s Ahead
What’s Next For Customer Success? Top SaaS CEOs Talk Compensation, Automation, and Investors
No one knows what the future holds (as 2020 has made abundantly clear) but that didn’t stop us from asking top SaaS CEOs what’s next for Customer Success.
At BIG RYG, ChurnZero’s annual Customer Success conference, we hosted a panel discussion featuring CEOs of SaaS companies that are (re)defining the future of customer success, engagement, and experience. The expert panel included Pendo.io CEO and Founder Todd Olson, Gainsight CEO Nick Mehta, and G2 CEO and Founder Godard Abel.
Moderated by ChurnZero CEO and Founder You Mon Tsang, the panel explores three bold predictions for customer-facing teams as well as what lies ahead for Customer Success.
You can watch the recorded panel discussion for free, in addition to all BIG RYG sessions. So, be sure to check out our entire on-demand library with topics ranging from building Customer Success Operations and remote teams to scaling Customer Success and earning a seat at the table. I may be biased, but if these sessions were on Rotten Tomatoes, they’d – no question – join the likes of Toy Story and The Godfather in the 100% rating club.
Now, let’s get back to the future.
1. Automation Takes Over Product Onboarding and Adoption
CEO and Fonder, Pendo.io
“Product-led onboarding and product adoption solutions will automate much of what CSMs do today. And it will be the best things that’s ever happened to the role,” says Olson. To clarify, Olson said he was referring to the more monotonous and mundane aspects of a CSM’s onboarding responsibilities.
“We’ve taken snapshots from data across our customer base showing that customers who get the human-led onboarding typically are healthier customers than the ones that come in after the fact,” says Olson. “One of the big challenges we see is that the initial users are happy but six months later some person comes on the account. We don’t know who that person is, and their experience is very different from those first individuals.”
To create a consistent onboarding experience, irrespective of a user’s onboarding cohort, Olson says Customer Success needs to ramp up automation. In-product onboarding also affords CSMs more time to focus on the work that makes the greatest customer impact and return on effort.
“I don’t think I’ve met a CSM – certainly not at our company or even our customer base – who wants to be treated like a glorified support individual. They want to be trusted business partners and work strategically with the customers,” says Olson. “In my mind, the focus of the future will be to automate all the support and product training aspects. The CSM’s time will be 100% focused on driving business outcomes for their customers and serving as a trusted partner to Product. Because if [the CSM] discovers things that require automation, they should be feeding that data back to the Product teams to make sure we create and evolve the automation.”
2. Customer Success Compensation Catches Up To Sales
“For a long time, Customer Success and Sales have worked together but not in equal footing,” says Mehta. “In the next three to five years, comp between Customer Success and Sales will become close to equal.”
Mehta raises the fact that there is a pay gap between CSMs and salespeople. While acknowledging that Sales is extremely challenging, Mehta recalls prior experiences – such as upselling a sizeable expansion or winning a new contract because of an advocate – where, although Sales led and closed the deal, the CSM’s ongoing involvement in the account made the sell significantly easier.
“You don’t see Customer Success making a million dollars a year, but some salespeople do,” says Mehta. “So, there’s just this big disparity in pay. I think what’s happening, and why I believe this prediction of balancing comp is going to happen, is supply and demand.”
This chart looks at the number of Sales and Customer Success positions in the tech market over the last 10 years as well as projections for 2025 and beyond.
“We know Customer Success is on a tear of growth,” says Mehta. “Over time as Customer Success grows – and Sales is growing but at a slower rate – you’re going to have a balancing out where there’s more demand for Customer Success. There’s more demand for people, and more talented people are going to go into Customer Success and comp is going to go up.”
To further support his prediction, Mehta cites the widely-shared figures among the SaaS space (shown below) that impart the economic value of Customer Success.
“Everyone has seen a version of this chart before about the amount of growth you get by focusing on Customer Success and how it makes your company so much better,” says Mehta. “A more subtle chart is how much of a difference in value companies have based on their net retention – net retention being a proxy metric for Customer Success.”
Mehta continues “This chart looks at publicly traded companies and they’re multiple on revenue based on their net retention rate. You can see that the companies that retain and grow their clients more are worth a lot more, not just in terms of more revenue, but in terms of multiple. Customer Success drives a double benefit in the ROI.”
Mehta also discusses the evolution of the customer lifecycle and how in the old world the focus was directed at acquisition (Marketing and Sales) and post-sale support.
“In this new world, it’s not just about selling,” says Mehta. “It’s about onboarding. It’s about adoption. It’s about growth. So much more happens after that initial sale. The customer buys in smaller increments. Therefore, if more of the work is being done post sale, I think more of the economic value and compensation should go there.”
Lastly, Mehta points to the expanding career opportunities for leaders in Customer Success. He shares recent examples of Customer Success executives taking on other C-suite roles including former F5 Network Chief Customer Officer Steven McMillian who’s now Teradata’s CEO and former Pluralsight VP of Customer Success Andy Rahden who’s now CEO of Shmoop.
“As you see talented people come into Customer Success and then move up into bigger roles, it means compensation is going to go,” says Mehta. “So, my claim is over time – I don’t know if it’ll get 100% balance – we’re going to get much closer between the compensation of a CSM and the compensation of a salesperson.”
3. Investors Use Customer Success as Most Predictive Indicator of Business Value
CEO and Founder, G2
“Customer Success (as measured by satisfaction) will be the most predictive indicator used by private and public investors to value businesses,” says Abel. “This builds a bit on the stats Nick shared – that net retention is such a driver of valuation – but I think you can even predict net retention by satisfaction.”
Abel explains that when G2 captures customer reviews, they ask a Net Promoter Score® (NPS) question which allows them to see every company’s NPS in real time and how it’s trending.
“I would argue that’s actually the leading indicator of variables like net retention. So ultimately, it’s a leading indicator even of company valuation,” says Abel.
Abel says he’s anecdotally seen this with investors reaching out to G2. He recalls an experience from 2017 where venture capital firm Accel approached G2 to share their praise of the product.
“[Accel] said, ‘We see all these entrepreneurs now in their pitches, they’re using the G2 grids and G2 reviews to validate themselves. And we at Excel are using it to evaluate company due diligence and figure out who’s trending and where we want to invest,’” says Abel.
Accel went on to lead a $30 million series B funding round into G2.
In another anecdote, Abel shared the funding backstory of Zoom, the pandemic’s go-to videoconferencing app with explosive growth and a market cap north of $100 billion. Abel says he first met Zoom CEO and Founder Eric Yuan in 2014 when they were both in the Emergence portfolio.
“In 2017, [Eric] did his first really big round where Sequoia invested. He became a uniform unicorn,” says Abel. “The interesting story about that is I was talking to Sequoia partners about this, and at the time, they felt like they kind of had to overpay to win the deal because his financial metrics weren’t that big yet. To pay up over a billion-dollar valuation to get into it, they were uncomfortable about it. But then they said they looked at all the reviews and data on G2. […] They figured out that Zoom actually had three standard deviations higher customer satisfaction than any of the competitors. That’s what gave them the confidence to really pay up. That has now become one of their greatest investments ever.”
Earlier this year, when Abel looked back at G2’s report of the fastest growing products from 2019, he realized just how predictive the scoring was for future investment and success. (Here’s the latest G2 fastest growing companies 2020 list – peep ChurnZero at the #11 spot )
“You can see these companies. You know almost all of them that become unicorns – companies like Monday.com, subsequently raising $150 million,” says Abel. “DiscoverOrg merged with ZoomInfo and then they went public, $14 billion market cap. But almost all these companies, investors came in, raised tons the money, and their evaluation just skyrocketed.”
Abel says G2 now has around a dozen leading private investors and hedge funds consuming G2 stat data by API to identify companies for investments.
“Every investor is always looking for an edge because if they wait for net retention data and earnings results, that’s very lagging. We believe stats can be very predictive,” says Abel. “I think that’s going to put even more importance on Customer Success and CSAT. For entrepreneurs out there, investors are now really looking at this so it’s also critical to your fundraising.”
Defend Thy Prediction
As part of this BIG RYG session, our CEO panelists also poked and prodded at the predictions from their fellow panelists to ensure they were battle-tested claims.
Here’s a preview of the probing questions their predictions were met with:
For Olson’s prediction on fully automating onboarding:
- “Why not focus human effort on onboarding – the most critical part of the customer journey – and implement product-led engagement everywhere else?
- “Who will own onboarding in three to five years: Product or Customer Success?”
- “What about products with non-technical users that don’t lend themselves to an in-product experience?”
For Mehta’s prediction on closing the pay gap between Customer Success and Sales:
- “Most people likely consider Customer Success a sales expense, but some consider it a COGS (cost of goods sold) expense. With the margin pressure to be more profitable and get better COGS, does that limit Customer Success compensation?”
- “Will the Customer Success and Sales roles converge, especially for large enterprise accounts?”
- “To increase Customer Success compensation, does this mean they’d take a lower base salary, but a higher OTE? What is that variable based on, and how much control does the CSM have over that variable?”
- “If the CSM owns the renewal, arguably you could also comp them on that. Where do you see that heading? Does the AE own the renewal? Does the CSM own the renewal? Who gets the commission on that if there is one?” (If you’re mulling over the answer, you’re in luck. At BIG RYG, we hosted our own Oxford-style debate on this very topic. To find out who should own the renewal – Customer Success or Sales – watch the recorded session or read the debate recap on the blog.)
For Abel’s prediction on Customer Success becoming the most predictive indicator of business valuation by investors:
- “If I’m a brand-new entrepreneur and I’m going to build a company, does go-to-market matter less if I focus on building a great product with high satisfaction that people love?”
- “Are there certain categories of businesses – looking at user-oriented products versus enterprise systems – where this thesis is truer than others?”
- “There’s much skepticism about NPS being a valid metric to rely on. How do you counter this?”
To get the answers to these questions, watch the recording now.
Still seeking more clarity for Customer Success in 2020 and beyond?
Check out our article, 10 WTF (What’s the Future?) predictions for Customer Success, featuring forecasts from SaaS Customer Success experts on topics such as Product and Customer Success alignment, customer onboarding, and adding AI to the team.
Customer Success Around the Web
- How to Prepare an Effective Quarterly Business Review– Find out what are the must-dos for your next QBR with a customer.
- Employee & Customer Success: Helping to Deal with Ambiguity and Stress – Learn what you should be doing to help support both employees and customers during this time.
- Managing Renewals Early on in the Customer Journey – See why you should bring up renewals early on with your customers and how it can actually cause less friction.
Fighting Churn is a newsletter of inspiration, ideas and news on customer success, churn, renewal and other stuff and is curated by ChurnZero