CEOs, It’s Time to Talk about Sales and Customer Success Alignment
We talk extensively about sales and marketing alignment, but you know what we don’t talk about enough? Sales and customer success alignment.
And while we say we care about the customer, in the long run, it’s our sales team that brings in cold hard cash right now. At the end of the day, no one in the C-suite wants to sacrifice revenue and say, “It’s time to put a stop to selling to the wrong customers.”
So our salespeople keep selling to bad-fit customers. Our customer team complains about the bad-fit customers. And it’s not their fault. It’s your fault. It’s our fault.
If you’re not willing to take a short-term revenue hit to ensure your customers will derive enormous long-term value from your product, then you’re using your customer success team as a band-aid. Because you don’t care about customer success, you care more about one incremental dollar in revenue. (Not to mention all the future revenue — think retention, cross-sell, upsell, and customer referrals — you’re giving up.)
Okay … rant over.
Now, let’s assume you agree with me and want to make customers successful, and you’re even willing to take the short-term hit in revenue that it might require. Let’s talk about how to make this happen.
As the CEO, you can pull the following three levers to create alignment between sales and customer success.
Leadership
Who you put in charge and how you measure their success is the first lever you have to create alignment between sales and customer success.
Ideally, your head of sales and your head of customer success should both report to the same person — Chief Revenue Officer, Chief Operating Officer, whatever. The title is less important than:
- This person owns revenue (new revenue + upsell revenue — churn), incentivizing them to implement sales and customer success initiatives that boost new revenue, without increasing churn.
- This person isn’t a salesperson who’s been given the additional responsibility to prevent churn. As you’re growing, you might need to place a salesperson in this position as a temporary patch, but this isn’t a permanent solution. You need someone who sees customer success as a growth center, not a cost center, and who will give customer success the same business support as sales.
This person should also facilitate a strong relationship between your head of customer success and sales. One of the biggest tension points between these teams is customer success always complaining about sales selling to bad-fit customers without showing any data to back it up. Your Chief Revenue Officer should continually optimize your sales motion using feedback from customer teams. To add true value to this process, your customer team needs to provide data that shows:
- The shared characteristics of your customers that are churning
- What behaviors or scenarios are correlated with a higher risk of churn, and the increased likelihood associated with each
- What type of customers are a net drain on the business even if they don’t churn (ie. a persona that eats up 60% of your support team’s time)
At HubSpot, we track customer cohorts and do periodic health checks throughout their lifecycle. If churn spikes, we want to know if it’s connected to specific customer types or behaviors. And we always have a short list of customer types that simply don’t work for our business (we call them anti-personas).
Not only is this essential information for customer success and sales teams to have, it’s also hugely valuable for marketing. Having data on which customers churn and which are successful empowers marketers to focus their efforts on prospects that will be good long-term fits.
Remember: Without data, it’s just complaining.
Team Structure
If you’re pre-scaleup, one of the quickest wins you can get through team structure is to create “selling pods” made up of one salesperson, one customer success person, and one support person.
In these scenarios, you place the customer front and center by taking advantage of your employees’ desire to help their co-workers. The tight, instant feedback loops and shared goals inherent to this model are incredibly effective. It does get challenging to scale. Outside of those that target enterprise customers, I haven’t heard of a company using this method successfully past 15 or so pods.
What makes the “pod” structure so effective is it creates communities of hunters (those who bring in new revenue) and farmers (those who bring in revenue through cross- and up-sells), but there are ways to replicate the success of that model without pods.
Aaron Ross, author of Predictable Revenue, traces the advent of hunter/farmer selling back to Benjamin Franklin’s first insurance company founded in 1752. Insurance salesmen found that as their book of accounts grew, they spent so much time collecting payments they no longer had time to sell new business.
Salespeople aren’t typically responsible for collections, but they are often tasked with cross-selling and up-selling responsibilities as well as selling net new revenue, which splits their focus. This is a problem every SaaS company faces today. So the roles need to be split:
- Hunter: Responsible for prospecting and closing accounts
- Farmer: Responsible for cultivating existing accounts and growing those accounts through cross- and up-selling
There’s an ongoing debate about who should own farming — sales or customer success. My background on this is a bit unusual in that I have led initiatives at several companies aimed at moving the farming responsibility from sales to customer success. At HubSpot, I was brought on to do exactly the opposite — give farming back to sales. This initiative freed up the customer success team’s time to focus solely on customer success and not get distracted with a selling motion.
Personally, I don’t think there is one right or wrong method. What matters is that you’re thinking carefully about the tradeoffs of the various structures. Here are the pros and cons that I think are the most important to consider:
Compensation
A former HubSpotter, Mark Roberge, has written about the role of sales comp in customer retention quite a bit. One of my favorite examples of his is a story about a time when HubSpot’s churn spiked to 8% a month (a number that should make any SaaS CEO shake in their boots). You can read his full analysis of the situation here, but the key takeaway is this:
“More often than not, churn issues are rooted in sales rather than customer success. The success of the customer base is often correlated to the customers that sales chooses to pursue and the expectations set during the sales process.”
There are two ways that compensation can be used to incentivize customer-centric behaviors from your sales team:
- Comp based on lifetime value of the customer. This includes either commission paid out slowly over the first few months a customer is with the company or a clawback period that takes commission back from a salesperson if that account churns within a set time window.
- Comp based on upsells/cross-sells. Here’s where we pick up on the hunter/farmer discussion once again. If your sales team is incentivized only on total revenue, they’ll spend their time on the biggest wins, new revenue. If you want them to spend their time building relationships and developing customer accounts over the long-term, you’ll need to compensate differently for upsell revenue and new revenue, whether through kickers or different multipliers for commission. You might also consider having different quotas for new and upsell/cross-sell revenue.
Finally, remember that salespeople will always optimize their behavior around the incentive plan. If you increase the clawback period from three to four months, don’t be surprised if you see churn shrink at the three-month mark and spike at the four-month mark. Whatever mechanism you put in place, your sales team will eventually figure out how to use it to maximize their paycheck.
Sales compensation is an incredibly powerful tool, wield it with care and caution.
As a CEO, you have three effective organizational pillars you can deploy to align the sales and customer success motions:
- Choosing the right leader
- Structuring the sales team the right way
- Compensating salespeople to reward the right behavior
There is no one “right” way to lean on these pillars. It’s all about understanding how your customer interacts with your team and your product, then designing systems that will maximize the good parts and minimize the bad parts of your process.
We’ll continue to explore the ways to get your customer success team aligned with the rest of your organization in the coming weeks. Still to come — marketing and product.
