Should Customer Success Own Renewals and Expansion? 

It’s a much discussed and often contentious question: who should own renewals and revenue expansion, sales or customer success? There isn’t a universal answer, and it usually depends on what approach makes sense for the product, business, and team in question. Oftentimes, it takes some trial and error to determine the best approach. Setting expectations with the sales and success teams, and giving them a heads up that there may be some back and forth, is important in managing the response to these trial periods. 

First, Get Clarity on Business Goals

To figure out the right approach for your company, start with your goals. An earlier stage company might be more focused on customer adoption and driving ROI as they seek to prove product market fit and establish a reputation in the industry. Meanwhile, a mid-stage company might be focused on improving net revenue retention by upselling its core product, and a mature company in a highly saturated industry might want to focus on cross-selling new products to existing customers. Determining where you stand and getting executive buy-in on the most important objectives can help identify the best approach here. 

How to Design Commissions for Renewals and Expansion

Once there is agreement on goals, there are a few basic models to follow when determining who owns customer renewals and upsells: 

Scenario 1: Sales handles all revenue activity

In this scenario, the sales team owns all activity that generates revenue; this includes renewals, upsells, and cross-sells. While the customer success team generally still owns the day-to-day relationship with the customer, the customer is referred back to the sales team for any transactions. 

The benefits of sales owning renewals and expansion

This approach helps keep both teams laser focused on their specific activities and goals. Sales is able to develop a longer term relationship with the customer and maintain it over time. Meanwhile, customer success can focus on helping the customer get the most out of the product without having to devote large amounts of time and energy to account planning or pushing revenue generating activities. 

When to use this approach

This can be especially useful for products with long sales cycles; once a salesperson has invested several months working with a prospect, it often makes sense for them to continue serving as a point of contact and a resource for the customer, particularly for questions around their overall solution; meanwhile, customer success teams can own the day-today relationship with the customer.

Similarly, for complex products which have different paths towards customer satisfaction, having a CSM purely focused on the best client outcome without the distraction of quota attainment and potential commissions can result in a better long term customer experience, and potentially lead to higher NRR over the long term. 

The downsides of sales owning renewals and expansion

This approach can backfire when it results in an overly transactional experience for the buyer. Once customer success owns the day to day relationship, passing a customer back to sales solely for the purposes of processing a renewal can sometimes feel disingenuous. In situations where the salesperson did not establish strong rapport with a customer and does not have a strong, ongoing relationship with the customer, having them handle renewals and upsells can lead to a disjointed customer experience. This can ultimately harm the overall relationship between the company and the customer. 

This can sometimes be true for products with very quick sales cycles, or long term customers who have not needed to interact with the salesperson who sold them the deal for a significant period of time. In these situations, it’s best to have the CSM involved with renewals and expansion in some capacity. 

Scenario 2: Sales only handles new customers, and customer success teams manage all transactions from existing customers.

In this model, after a new deal is closed, sales transitions the account to the customer success team, and is no longer involved in the relationship. From this point on, the customer success manager owns all revenue generating activities with the customer. 

When to use this approach

This approach can make sense for companies which have shorter sales cycles; after a relatively quick interaction between the customer and sales, the CSM then serves as a single point of contact, making interactions easier for the customer. The CSM is responsible for managing customer renewals, and is often given a quota for revenue expansion. It’s important to set these quotas carefully, if at all, and only once there is historical data showing what type of expansion rates are achievable and realistic. 

There are a number of potential issues to watch out for with this approach, and it often takes some trial and error to fine tune the solution. Here are some best practices to follow when giving CSMs a quota for revenue expansion. First, ensure that CSMs have the appropriate focus on the core of their job: making customers successful. Next, find the right balance of skills within the customer success team. Customer success requires inherently different skills from sales; CSMs must understand the product in depth, act as advisors to customers, be able to analyze and dig into the root cause of issues, and build a relationship based on trust. Different CSMs come with different skills, and every customer success team needs a balance of these skills to be effective. Ensuring there are some CSMs on your team who are effective at generating upsells is important, and can help CSMs across the team up-skill in these areas. 

Scenario 3: Sales and customer success share commissions for upsells, renewals, and cross-selling. 

There are a few different ways to implement this model. In all of them, sales and customer success have some type of shared incentive to grow revenue. 

The benefits of sales and success sharing responsibility for renewals and expansion

It fosters collaboration between the sales rep and the CSM. With shared incentivization, this team can more effectively manage the relationship and pull in other internal resources, such as a sales engineer, for example, in order to drive the best outcomes for both the customer and the company. 

The downsides of sales and success sharing responsibility for renewals and expansion

Downsides include a potential loss of impartiality for the CSM, and potential lack of fairness with compensation. Both of these potential issues can be addressed through thoughtful compensation plan design. It’s possible to maintain the CSM’s role as an advisor for the customer by designing a commission plan which incorporates a smaller OTE split towards variable commissions. Regular evaluation of compensation plan performance and variables driving changes also helps ensure that plans are designed fairly and in a way that rewards the work each team member puts in. 

Another variation of this plan is to provide sales with commissions for revenue growth, while also providing CSMs with substantial bonuses for renewals. It’s important to ensure that CSMs and sales are each compensated fairly in a manner commensurate with the amount of work they put in. In some scenarios, a CSM may work tirelessly over months on a renewal, only to have sales receive an outsized commission package compared to customer success. When both sales commissions and CSM bonuses are used side by side, it’s important to evaluate how much work each party puts into the renewal and design the comp plan in a way that is fair to everyone.  

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