CSM + Renewals = ?
“Should a Customer Success Manager own renewals?” is the evergreen question. The answer is Yes. And No.
There are some questions in the Customer Success world which will never get you a definitive answer, and thanks to the dynamic nature of business and the evolving world of SaaS, the answer will probably always start with “it depends on…” and be followed by an opinion formed on experience in the speaker’s world. So here’s my response…
Over the last decade I’ve worked in CS teams where the the CSM has both owned and not owned the renewal number/transaction with the customer. In most cases, the company has moved from one structure to another, over a period of time, during my tenure there, and in all cases I can see both the reason for and against it.
CSM’s own the Renewal
Pro’s
- The CSM is already in a natural cycle of engagement with the customer, and has a regular line of communication to them anyway, so the renewal just becomes another topic of conversation.
- Customers often don’t see a CSM as ‘sales-y’ so there is a different dynamic in the relationship and a different level of trust.
- Where the renewal is a fairly straight forward transaction, with little or no change from the previous year’s arrangement, having the CSM handle the renewal can streamline the transaction and make it a (positive) non-event.
- Owning the renewal can give the CSM a sense of contribution to the wider business and a level of achievement as renewals have a very real and measurable value to the company, and therefore success is also
Con’s
- The CSM becomes more quarter-to-quarter focused and it can often become harder to engage in longer term strategic initiatives because of the immediacy of needing to close renewals rapidly and on time.
- The CSM is under constant pressure to hit a number that ultimately is very transactional and is not immediately value focused.
- The CSM will have conflicting priorities as they are likely to also have to deal with onboarding and adoption and, at the end of the day, the $ will always come first.
- The highly transactional and repeatable nature of some renewal businesses can devalue the worth of a CSM and understate their value and importance to the business.
- The type of person you will hire to be a CSM often doesn’t also come with the profile, skills and experience required to manage and excel in a commercial role. CSMs tend to have a different disposition and orientation towards the customer, solutions and value activities, so you can sometimes end up hiring a round peg to fit a square hole.
- If you are focused or expecting that every renewal should grow (for example to achieve a targeted NRR goal) then you put responsibly for new ARR on a person that typically is not in sales.
- If the renewal transaction does not sit with the Sales/Account Manager then it reduces the opportunity for a sales person to bring in revenue, by removing one of their channels for sales.
CSM’s don’t own the Renewal
Pro’s
- CSM’s have freedom to think and act with a longer term vision, across a greater period of time, without being pulled to the most immediate near term commercial priority.
- The CSM’s are likely to be one of the only(if not the only) customer facing roles in the company to be product experts. They are afforded the time to maintain and sharpen that skill and continually excel in their expertise. If your product is a highly technical solution, taking a CSM away from that area of expertise could be to the detriment of internal and external stakeholders who come to rely on that technical knowledge.
- Without the renewal, the CSM can maintain a relationship which never mentions commercials, something that customers will often appreciate, knowing that the person they speak to is not commercially orientated.
- From a customer experience perspective, there is clear delineation of roles and the customer understands that ‘anything commercial, financial, purchasing, legal sits with the Sales/Account Manager, anything product, usage, feedback, adoption sits with the CSM’
Con’s
- Without the renewal transaction it requires CS leadership to be a lot clearer about what the expectations and measurements of success the individual should be performing to.
- CSM’s will often have their worth and value to the business questioned, because their ‘value add’ is often a lot less tangible.
- CSM’s have a feeling of being worth less than their sales counterparts, especially when big renewals occur that the CSM played a significant role in.
Evolution of Renewal Ownership
Last year I wrote an article about the Evolution of the Customer Success Org and received many nice comments about it. Thank you. In that article I briefly touch upon the renewal transaction, but not with any great focus, so I wanted to expand on my view of the evolution of renewal ownership.
Stage 1
In the early stages of a start-up company, the renewal transaction tends to sit with Sales function. Less so by design, and more so because everyone is running around trying to do as much as they can, wearing multiple hats, that it naturally sits with the sales person. This is often because there are fewer customers, or fewer internal heads, and so one person can manage it all. Sales also tend to precede CS in the hiring plan in a start-up or early stage company
Stage 2
When the growth stage hits and the company is scaling up, building the motion and processes for sales and the commercial business, the decision is often taken. ‘Do we move renewals to customer success, keep it with the original sales person and I hire more heads, or split out sales into hunter and farmer roles?’
This is when this article becomes relevant. You’re at the decision point of determining what’s best for your own business and for the customer experience. There is no right or wrong answer, just a right or wrong way for your individual business.
Stage 3
In a more established business, perhaps one that has reached maturity, an entire renewal function is built out, specifically to own, manage and close out renewals. This team might sit in either Sales or CS, but the role of the specific ‘Renewal Manager’ is one that has they laser like focus on the renewal transaction and experience. The Renewal Manager has no responsibility for activities that are traditional in the CSM role. Likewise the Renewal Manager may not even have any revenue growth targets. Their focus is on the Gross Renewal number. If we had $1,000 yesterday, I need to renew $1,000 tomorrow. The Renewal Manager is focuses on communicating with the customer, negotiating deal terms, parameters and commercials, and executing. Where a larger opportunity to grow the contract significantly, beyond the $1,000, thats when an effective partnership between the Renewals Manager and the Account Manager is essential.
Final Remark
In full disclosure, as a CS Leader, I personally like the responsibility of owning the renewal motion. It appeals to my sense of process, order, timeframes, data and recognition. However, that is a preference based on my character. Looking at it objectively, it’s a challenging position to be in, as a CSM, to own both the renewal transaction and the other customer activities, such as adoption. Unless you have a specific Renewal Manager role or function in your CS team, my suggestion is, CS probably shouldn’t own renewals.
