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Salary Models in Customer Success

The customer success role still lacks standardized incentive models, but we hope that these short guidelines we provide here will help you create your first salary model for your customer success team.

Planhat is also conducting salary surveys for 7 regions around the world to provide you with more region specific data on salary models and success metrics. To participate, read this article here and find the link to the survey for your region.

The Customer Success Salary Continuum

Before you begin, think through what goals, responsibilities, and expectations you want your customer success division to have.

And keep in mind that the end goal is to have low churn and high up-sales (for you) and ROI (for your customers).

The way you get there depends on your philosophy of how your company best can get there. If you think of it as a continuum, you have two extremes:

  1. On one side you have you have a revenue focused CS division focused on up-selling, upgrading and renewing.
  2. On the other side you have a CS division that believes that adoption, ROI and customers “realizing value” will lead to “natural” upgrades and up-sales.

customer success salary model continuum

This push vs pull philosophy and where you want to place your CS division on this continuum will determine the customer experience and culture of your customer success division.

We encourage you to have healthy debates and in-depth discussions on this topic in your management team.

Here are a few arguments for both

pros and cons to having a salary model based on revenue or one focused on adoption

Gather Your Data

Before you start, you also need to gather some data about your renewal base:

1) Appreciate the size of your renewal base

Any salary model for a customer success manger should be determined in correlation to the size of the renewal base the CSM is managing.

The larger the base, the more opportunities for the CSM to make commission off of renewals or up-sales.

Break it down per month & per quarter.

2) Estimate your monthly churn over the next 12-18 months

The higher the churn rate, the more emphasis you want to put on churn reduction in your salary model.

For example, say you have $100,000 coming up for renewal on average every month, and your current churn rate is 20% ($20K churning every month). Then, you want to create a model where the main focus for the CSM should be to create value in existing products/features so that more clients are renewing their subscriptions.

3) Estimate the up-sale potential in your customer base over the next 12-18 months

Can you sell more modules/features to your existing customers? Are there cross-sale opportunities in your customer base? Can you upgrade the existing subscriptions? How big is the opportunity to increase the revenue on your existing customer base?

The more opportunities for up-sales, cross-sales or upgrades, the more important it is to create a model that has clear incentives for growing the revenue from your existing customer base!

Creating a Salary Model for Customer Success

At Planhat, we regularly conduct salary model benchmarking and produce reports that are country- and region specific, check them out here.

Customer Success Salary Model Components

What we’ve found is that there are typically three components/models in an compensation plan for customer success managers.

  1. Base
  2. Base + Bonus
  3. Base + Bonus + Commission

The model that fits your business best will depend on where on the salary model continuum you fall. If you believe that up-selling and upgrading is a function of a pull model, you should go with model one or model two above. If you believe that growth is a function of a push model, you go with model three.

Bonuses

There are a number of hard- and soft metrics you can compensate your customer success team on. Depending on where you want to place your team on the salary continuum (above) you can put bonuses on metrics such as...

customer success managery salary key performance indicators

Commission

Commission is usually paid on up-sales, cross sales and sometimes on renewals.

Customer Success Salary Model Examples

You always want to compensate your CSMs on the value they create for your subscription business. The base salary should cover the basic job responsibilities of a CSM: to be the customer’s first point of contact, to be available, helpful and book the renewals with the happy customers.

The variable part of the salary should be on the value-add that the CSM brings on top of just being there for your customer. The value add is when the CSM is turning churn, when he/she is up-selling or getting your customers to rave about your company (NPS, references etc).

Here are four examples of salary models for different type of subscription businesses:

1) High Churn Company (your annual churn rate is +25%)

When you have a high churn rate business, you want to compensate your CSMs on “turning churn” and keeping your renewal rate high.

  1. Base - $xk
  2. $x Bonus for every x% gross churn is lowered
  3. $x Bonus for every reference case study gathered

Example:

Say that you start out every month with 50% of your renewal base (for that month) cancelling their subscriptions (say that you have 10 customers coming up for renewal every month and 5 of them cancelling):

  • Gross revenue churn 25%: $500
  • Gross revenue churn 20%: $500
  • Gross revenue churn 15%: $500
  • Gross revenue churn 10%: $500 + $1000 bonus
  • Gross revenue churn 5%: $500
  • Gross revenue churn 0%: $500
2) Low Churn Company - but with up-sale opportunities

When you have a low churn business, you want to compensate your CSMs on driving up-sales and that way creating more value on top of the signed subscription.

  1. Base - $xk
  2. x% commission on all up-sales, upgrades and cross-sales
  3. $x Bonus per quarter for an average NPS score of x
3) Medium Churn Company - few up-sale opportunities (mainly upgrading more seats)
  1. Base - $xk
  2. $x Bonus for every x% gross churn is lowered
  3. x% commission on all upgrades

Common mistakes when creating salary model for customer success

The most common pitfalls when creating your first salary model for your CSM is making it too simple:

Base salary + x% commission on all renewals and updales

Too often, startups look at the CSM role as a support function instead of a revenue generating role. Remember, before you know it, your CSM will be handling more revenue than your new business sales reps.

So when creating your CSM salary model, don’t underestimate the revenue impact the CSM can have on the business.

dos and donts for creating customer success salary models
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