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How to Move to a Pay-For Customer Success Model

How to Move to a Pay-For Customer Success Model
Photo by Sharon McCutcheon

To charge for Customer Success or not to charge, that is the question.

Whether 'tis nobler in the mind to provide Customer Success Manager (CSM) services free of charge (i.e. included with the subscription fee) or to charge for the efforts delivered above and beyond what is required to be successful with the software to recover real costs.

Shakespeare’s Hamlet probably would have struggled with this topic too.

Organizations looking to balance the costs of driving customer success against their budget tend to wrestle with this dilemma.

Can and Should a Company Move to a Pay-For-CSM Model?

The answer to this question varies widely depending on who you talk to but generally leaders tend to think it is a hard sell and that it is possible.

“It is a tough sell. The key to charging for Customer Success is that there needs to be a different value stream with the CSM service for a paid model. For example, expert or specialized services.” says Jennifer Sutton, Vice President of Client Success at KEV Group.

“Otherwise there is a mindset (with customers) that helping clients with adoption is table stakes.”

When VisionCritical made the switch from a services to a Software-as-a-Service (SaaS) company they included CSM effort as part of the overall subscription fee to ensure that they are cost neutral with respect to CSM resources.

Including CSM effort as part of the subscription fee works well when the Customer Success and Finance departments know what work is required to support customers along the customer journey.

When companies know what activities drive repeatable success, they can determine what the corresponding cost of that effort is and bake it into the subscription fee.

That way, a business knows what it will take for a customer to be successful and can model their operations accordingly to support that success.

Customers wanting services above and beyond what is required to achieve success, and which causes the vendor to operate differently than their defined operational model, can rightfully pay for the extraordinary service that they are requesting.

The point is that it is perfectly legitimate, actually appropriate, for a business to define its business model such that the customer will be successful as well as the vendor.

If customers want more or something different, a fiscally responsible vendor will ensure that there is cost recovery for anything not otherwise defined in their model.

Jennifer points out, “it’s not an all or nothing decision either. An organization doesn’t have to charge for the full CSM services. Charge for some extras. Know where the win-win lies. Be operationally efficient.

How to Charge Customers for Customer Success

When charging for Customer Success, the amount depends on “whether you want to be cost neutral or positive. Our finance team knows the numbers so they have a sense of what is required to recoup our costs. For high-growth customers we offer a different experience that straddles between Customer Success and consulting services.” Deb Chapman, Customer Success Executive says.

Lisa Pellegrino, VP Client Success at Sensibill agrees, “really study current clients and study what the touch (customer interactions) is” to understand your costs to service the customer.

This works well with new customers but what happens with existing customers when a company wants to start implementing a pay-for CSM model?

“CSMs became strategic advisors on things broader then services (required for product adoption). Customers relied on this as a CSM service so to charge for this was difficult. They felt we were taking things away from them. We had to package these services into a consulting model.” says Paari Krishnamurthy, Head of Merchant Success at PayBright.

To counter this, companies can also look to offering two different service models; one for legacy customers that are grandfathered and receive the high-touch services as part of their existing subscription fee, the other model which is the new subscription fee that includes CSM services, chargeable to all new customers moving forward.

Clear and transparent communication is key for any pay-for model.

Customers want to know what they are paying for and that it is fair.

A vendor that is able to articulate what it takes to be successful with the product (including the responsibilities that both parties are accountable for) and how they drive this success (i.e. how they are setup operationally to support that customer to success), can clearly lay the parameters for what is and what is not included with the subscription fee.

Anything a customer wants that forces a company to operate differently is fair game for charging. [Note: This does not mean a company must do so. It can also make a business decision to offer the services free of charge as an exception to that specific customer.]

The key is to demonstrate the value proposition and justify it.

Jennifer’s advice, “at Oracle we used to say don’t just offer another flavour of potato chip.For example, don’t just charge for more hours or data. If the customer is just getting a bigger portion of something it won’t show enough value.”

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