Transform your Customer Success Managers into strategic partners

This article is based on a presentation given by Chad at our Customer Success Festival in Boston 2023. Catch up on this presentation, and others, using our OnDemand service.

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Embarking on the path to elevate Customer Success Managers (CSMs) from operational supporters to strategic partners marks a pivotal shift in how businesses approach customer engagement and long-term success.

I'm Chad Horenfeldt, VP of Customer Experience at PathFactory. My journey in CS, including roles at Meta, has equipped me with a profound understanding of this transformation.

This article aims to share the insights and strategies I've developed for:

Transitioning CSMs into strategic roles
Addressing the challenge of customer churn with strategic foresight
Aligning CSM efforts with broader business outcomes
Cultivating a deep understanding of customers' businesses
Balancing customer-centric approaches with company-wide objectives

The year of churn

As customer success develops and customer complexities evolve, I find myself reflecting on the current landscape, especially concerning customer churn.

Contrary to the popular narrative of 2023 being a year of efficient growth, my observations and experiences paint a different picture — one dominated by an alarming rate of churn. This phenomenon isn't just about losing customers; it's about the unexpected loss, the kind that catches you off guard and leaves a lasting impact.

During my time leading the customer success division at Meta, and through conversations with numerous companies, the recurring theme has been the struggle against surprise churn.

In data compiled by the Altimeter Group, which analyzed 60 SaaS companies, we've seen a worrying trend. Net dollar retention rates have dipped from an average of 120% down to 111% in just a few quarters. This decline isn't just a number — it's a direct reflection of the challenges we face in maintaining and growing customer relationships.

The repercussions of this widespread churn are felt deeply within the customer success sector. As companies grapple with declining retention, customer success teams often bear the brunt of the blame. This has led to significant layoffs within the industry, myself included among those affected. High-profile companies such as Red Hat, Salesforce, Microsoft, and even Twilio, which eliminated its entire CS team, exemplify the drastic measures being taken.

Transforming CSMs into strategic partners

The essence of this article revolves around transformation — shifting the role of CSMs from operational to strategic. This transformation is crucial not only for addressing the immediate challenges of churn but also for ensuring the long-term success and growth of our organizations.

As CSMs, it's vital that we understand the path ahead to increase our value and better serve our customers. Adopting a strategic mindset, honing our skills, and aligning closely with our customers' goals are just the beginning.

For CS leaders and executives, the task is to foster an environment that supports this transformation, equipping our teams with the tools and knowledge needed to succeed.

Whether you’re a CSM seeking to enhance your role or a leader aiming to bolster your team's effectiveness, the journey toward strategic customer success is both critical and rewarding. By embracing this shift, we can not only mitigate the challenges of churn but also unlock new opportunities for growth and advancement within our organizations.

Beyond product expertise: Refocusing CSM priorities

Imagine we're on a game show, let's say "Family Feud," where I ask, "What does a typical CSM focus on?" The most common responses might include renewals, retention, and cross-selling.

It's widely recognized that a foundational aspect of a CSM's role is to become a product expert. Indeed, knowing your product inside and out is crucial, especially for new CSMs or when leading a team as a CS leader. The initial focus tends to be on product mastery, from onboarding to keeping up with the latest features and updates.

While building deep product expertise is essential, focusing too heavily on product details can unintentionally lead customers to view us as merely support staff rather than strategic advisors. When seen as just an ancillary service resource vs. a trusted partner who understands their bigger-picture needs, our ability to add value diminishes. We should take care not to let an imbalance toward product specialization eclipse the comprehensive, consultative approach that makes CSMs indispensable.

Consider the aftermath of a quarterly business review (QBR) or a significant product update. If we bombard our clients with an exhaustive list of suggestions or features, we risk overwhelming them. This is particularly counterproductive given the increasing pressures businesses face today, including reduced budgets and smaller teams.

Our enthusiasm for our product can sometimes lead us to prioritize initiatives that, while exciting, may not align with our customers' immediate value drivers. For instance, proposing a client to beta-test a new feature might seem like a great idea. However, we must ask ourselves whether it truly aids in achieving the value necessary for renewal.

The key is to balance our product expertise with a keen understanding of our customers' business objectives. Instead of overwhelming them with information or features, our role is to streamline and focus on what will genuinely drive value and support their success. This shift from a product-centric approach to a more strategic partnership is crucial in elevating our role as CSMs and fostering long-term customer relationships.

Beyond adoption: Aligning usage with value

A core focus for many CSMs is driving product adoption. It's a logical goal: monitoring usage metrics and encouraging increased interaction with our product seems like a direct path to demonstrating value.

However, it's crucial to challenge this assumption. Simply because a customer frequently uses various features does not inherently translate to them deriving significant value from the product.

This distinction introduces the concept of the "watermelon effect" where, akin to a watermelon appearing green on the outside but red on the inside, a customer's health score might look positive at a glance, yet underlying issues suggest a different reality. This discrepancy is often a precursor to surprise churn.

An often overlooked aspect in the pursuit of adoption is the decision-maker's perspective. While CSMs might be inclined to showcase usage statistics and feature engagement during QBRs, such data may not resonate with the decision-makers. As someone who has been on the buying side of software solutions, I can attest that the sheer volume of logins or the breadth of feature usage is secondary. What truly matters is how the product aligns with and advances the company's strategic objectives.

There's a tendency among CSMs to focus interactions on their primary contact or champion within a client organization. While nurturing this relationship is easier and can feel more productive, it's a strategy that risks overlooking the decision maker's influence. Engagement metrics, while useful, can distract from the critical conversations about business outcomes and value realization.

Ignoring the decision maker can lead to disengagement, as evidenced when they turn off their video during a QBR, signaling a disconnect between the discussion's focus and what they find valuable. This behavior underscores the need for CSMs to align their strategies more closely with the business goals of their clients, rather than solely concentrating on product usage.

The challenge, then, is to bridge this gap. It involves shifting our approach from merely reporting on adoption metrics to facilitating discussions that connect product usage with tangible business outcomes. Engaging decision makers effectively means speaking their language — focusing on how the product supports their strategic goals, solves their unique challenges, and drives their business forward.

By prioritizing these considerations, CSMs can ensure that their efforts not only boost adoption but also underscore the intrinsic value of their product in meeting the overarching needs of their clients. This strategic alignment is essential for fostering deeper, more meaningful partnerships with customers and ensuring their long-term success and satisfaction.

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