Nick Mehta and Jason Lemkin Answer Your Top 10 2024 Customer Success Questions

room. I know we're running just a couple of minutes behind, so thanks so much for the patience. We have a great conversation in store for everyone today. Welcome to this week's Workshop Wednesday. Hi, everyone. As always, we are here with an amazing SaaS leader and expert to share some learnings and best practices. So we have co-founder and CEO Nick Mehta of Gainsight. And Nick and Jason did an awesome Workshop Tuesday a couple of weeks ago about the future of CS in 2024. They had so much to talk about. And we got so many questions, it was more than we could cover in one short hour. So we are thrilled to have Nick back. And Jason M. Lemkin is going to help moderate some Q&A as well. We are going to have plenty of time for your questions in this session too. So please make sure anything you have about customer success, you are here with the guru who knows all about it, has some great answers. Nick also has done a huge courtesy of kind of putting together the top questions that he does get asked about CS, because again, a lot of folks are picking his brain about this all the time. So Nick's gonna get us kicked off with kind of his top questions that he always hears and the answers that he has for those, and then we'll take it away to audience Q&A. So thank you guys so much for tuning in. As always, drop your questions in the chat and I'll help get you in the queue. And you can drop in also where you're tuning in from. We always like to hear where everyone is from. It's great to see a good crowd in here already. So Nick, welcome. Welcome to another workshop. Thrilled to have you and excited to hear what you have in store for us for the questions that every— is on everyone's mind. So take it away.

I love it, Taylor. Thank you so much. Obviously, thanks to Saastr in general and Jason specifically. This is gonna be awesome. We always like to open up our meetings with an icebreaker, so I'll ask Jason first. What's one thing you gave recently that gave you joy? What's something that gave you—

Oh, you put me on the spot. I know. What is something recently that gave me joy?

I'll answer while you think. So—

OK, you answer while I think.

My answer is— so childlike joy is one of our values at GameSight, which is why we ask this. My answer is I'm on a text thread, perpetual text thread with my mom and my brother. I have one brother. It's always, my mom's amazing, but she's really good at guilt trips. So it's always fun to see my brother being guilted and me not just sitting there watching. So recently my mom said, "Samir, I tried to call you, you didn't pick up." When I was growing up, people always picked up from their parents for when they called, but I guess things have changed now. And I'm just watching this with my popcorn. So that's mine. How about you, Jason?

You know, I'll tell you mine. I, I, um, I don't know if you're like me, Nick. I, I don't need any kudos. I don't need any go, go, go, go, go Lemkin, go Jason, great jobs. I don't need— I, at this point in life, I don't need it. Okay. I, I, I, um, and so sometimes you forget the power of these things, and I know you're great at it, but I'll tell you, last week, um, we were out at this Pavilion CEO Summit in Scottsdale, and I was the last penultimate speaker, and, um, and we just did it for fun. It was great. There are a couple hundred CEOs and the last speaker was Jocko and he got up and as I left the stage, he's like, you got to stay here for a minute. And I said, okay, I'll stay. And he said, before we go on, I want to get the crowd inspired as the last speaker, but I want to take a moment and I want to thank Jason for all the contributions he's made to us in SaaS over the years and give him a round of applause. And what was great, Nick, and I'm not like this, like everyone in the entire room stood up. It was a standing ovation. Okay. And I don't need a standing ovation. I don't need a thank you. I got to thank Amelia and Taylor and you and everybody. I'm a thanker, not a thank-yee. But it was a— it did give me a little childlike joy on reflection, not at the time, but the next day. Right. And you're so good at this, at reminding us to, to be thankful and grateful to our teams, especially these days when it's not clear how to provide that feedback. When to give it, whatever. And I forget, I in some ways I've gotten a little, a little more direct, a lot more direct over time. I used to be softer, right now I'm straight to the point. Nick, let's sit down. Here's what screwed up against like, here's what you did great.

I love you. You're great, but you screwed up A, B, C, and D.

I don't, I don't do that. And it's so powerful to be thankful, isn't it?

I love it. And by the way, sorry, I'm going to embarrass you. They're right. And nobody's done more for SaaS and SaaS startups than you, Jason, and your team. So type, type some Jason love into the chat and then also type in if you've got something that brought you joy recently, please type it in. I'd love to see those. So this quick thing because we want to do AMA, but I thought I'd just level set with like some questions I get very frequently. This is the list. I'm not going to read them here because I'm going to go through them, but basically I'm going to go through like what are some questions I get? And this will be a good tee up for your questions as we go through this. Now, the way this is going to be sourced is we came up with something super cool. We're gonna be launching to the public, uh, soon, but right now it's kind of a private beta, which is a benchmarking website where you can go in and say, hey, I have 20 accounts per CSM. What's the median for my company size for this industry? So let's go through the common questions I get. What's good net retention? This is a question I get all the time. Jason M. Lemkin, I know, gets as well. I've seen him blog about this. You can look at public companies and get great data, But for many of us, that's like a far away, far away thing. So it's interesting, this is private company data. This is like, I don't know, 600 respondents. So it's pretty meaningful. And the little thing you can see is 100% when you're younger is pretty common. You don't have multiple products to sell, a lot of headwinds in the economy right now. And then it kind of grows naturally as you grow bigger 'cause you have more products and more stuff to sell. So don't feel bad about 100%, try to do better. Like we are all trying to get better. But also understand kind of where you are. So I'll keep flipping through these and then we'll do some Q&A. Number 2, what's good NPS? Many people measure it. I don't think NPS is the end-all be-all. It's like one stat. But if you look at the median NPS in our dataset, which again is all SaaS companies, 35, and then you can see it's actually more stable. So this is something that doesn't change based on things like customer size. This is, in this case, is average contract value, meaning the average customer spend per customer. Number 3, very common question, who does CS report into? We can talk more about this in the AMA. There's this kind of raging debate, right? Which is like, is it a CCO who reports to CEO? And we know there's benefits to this. Like first of all, the exec team is more focused on clients and client needs, right? Number 2, you can create this integrated journey across customer success, services, support. That's definitely really good. Can recruit a more senior person because it's more scope. You know, I talk to people that are like, if it's not like this, I'm not going to take the job, right? Over time, some of these CCOs are actually owning the existing sales, meaning renewal and expansion. That's what I did actually. Kelly Capote, our CCO, I put account management underneath her. She's doing a great job. And then the sales leader can focus on new logos. I find this to be more common, this whole approach, in more complex products where there is professional services, there's a longer contract duration, etc. Let's argue the other side. A CRO or president reporting to CEO, a head of CS underneath them. Some benefits: you can integrate the pre- and post-sale journey, right? Those handoffs and all that. You know, on top of that, probably better linked to expansion and commercials. If the CEO gets fewer direct reports, you probably don't care about that, but CEOs certainly do. You know, sometimes what they do is put PS and support under ops and the CSMs under sales. The CRO now owns net retention overall. And then this is more common in, I'd say, either technical products with a lot of land and expand or transactional products with a very short sales cycle. So question number 3, and again, we can dive into any of these in the AMA.

Number 4, going back to that one, Nick, I know you're racing, but this is, this is a, it's, it's, it's number 3 is always in flux. Do we know, I know we're talking about benchmarking in these 2 orgs.

Yeah.

Do you have a, do we have any data on what percent carry a quota? Yeah, great question, especially in 2024, because so much has changed, right? I'm assuming. Yeah, it's— I don't know actually the answer, right?

I know the answer because we just ask all these things all the time. At least in the sample size we have, 50% of CS orgs have a renewal quota.

Okay.

10% have an own expansion and have an expansion quota. So that gives you— the 50% has been quite stable over the years because we've asked this for like 5 years in a row. I think it depends on the nature of the org in the business and things like that. Okay, so kind of continue to fly. What's the ROI of a CS team? You know, if you're running CS, your CFO's asking this. This is another interesting data point from the same kind of dataset, which shows that companies with a CSM team have a significantly higher, you can see the numbers here, right? 14-point higher gross retention. Now the net retention is actually exactly the same, the 14 points. So what that means is, it doesn't really change expansion that much, although I think it does on an individual basis, but it absolutely raises your floor. Now, all stuff is, is it causality or correlation? Well, these are big enough gaps that you can say there's some causality here. Pretty interesting chart. Uh, number 5, how much do I spend on customer success? Huge one as you're going through budgeting, right? One way people look at this question is percentage of ARR that you're spending on customer success. Now, this is including both the CSMs as well as ops and CS management, okay? And, and the benefits and so on. And on the ver— on the horizontal axis, you see what is that spend depending on the nature of your business. So the right side is I have a very high-touch business, like million-dollar contracts. Think of like a Workday, right? On the left is a super transactional kind of self-service. What you see here is pretty interesting is Putting aside the very low end, which tends to have no CSM and more automated, as your contracts get bigger, you get more efficient. Because the truth is, managing a million-dollar customer isn't 10 times more work than managing a $100,000 customer, right? And so you can see the benefit of higher ASPs. And I see Jason nodding. You probably see this, right? Bigger ASPs can be more efficient, right?

Uh, for, for sure. And I'm literally just rewriting our classic SaaS post on the $2 million man or woman.

Exactly.

I'm going to take a shot and add this to some updated data.

Yeah.

So yeah, that is an interesting point that the $100K isn't that— isn't 10 times or a tenth the work of $1 million or vice versa. Right. And, and it's really getting this SMB thing to work at $5K to $10K. That's when the companies I work with, you got to be ruthlessly efficient there, right?

Absolutely.

Automation, ruthlessly efficient in product, all that. Right.

So an interesting one on that one. But I don't mean to get distracted. What's interesting, what I've learned in this $5K to $10K, this 10%, 10% segment, I didn't really realize, as you might have known it, folks in the segment often have more folks in CS than sales.

Yes. Right.

That's not true as you go down this chart. Like, we could do another chart of the ratio of CS to sales. Yeah, that's another way to help CEOs think about things like what's the human ratio, right? But I was shocked when I looked at all the companies I've worked with that are in that, that like I would say 3 to 10K sales-led, they all have more folks in CS.

That's right. And a friend of mine, I spoke at his all-hands recently and, you know, they're a little bit more than the 25 to 50, but they had 70 out of 200 in CS. Out of 200 employees in CS. Number 6, what's the ideal— ties well to this— what's the ideal number of accounts a CSM can manage? There's some kind of physics around how many customers you can manage. And what you can see here is on the low end, people have a couple hundred accounts per person, typically quite automated, because you can't really call 200 customers and do 200 QBRs. It just doesn't make any sense. On the high end, you can see why it's so efficient is, you know, you can manage 5, that's like average of $5 million. It's not a— not the $2 million person, but the $5 or $6 million person, using Jason's terminology, which, which I love that post from back in the day. Um, so this is interesting. Um, another one that's kind of related to that is how much ARR is each CSM carrying, right? So again, no surprise, you get to these big contracts, CSMs are carrying like $10 million a person. Now, if you're a startup, that's just not even realistic, and I would highly recommend don't do that. But as you get bigger, you can do that. And so what you can see here is the businesses that have lower ASPs tend to be a little bit less efficient. You got to do more automation, maybe have CSMs outside of high-cost countries, and so on and so on. So this is pretty interesting. I think like very clear correlation. Okay, I'm— again, I'm going through this quickly. Time deficiency. One of the biggest things is how do I scale in 2024? Even though maybe things are coming back a little bit, I feel it, Nobody is just like, let's hire 1,000 people, right? And so what I'm feeling, I made this blog post a while, a LinkedIn post a while back, which is there's only 4 things you can do. Either you create a lot of digital stuff, which I'll show you in a second, or you're creating quota for the CSM so they truly own it, which is the second and third one, or you're charging for it. Some people do that. I wouldn't recommend early stage startup, but as they get more mature, like Salesforce charges for it, And then finally, or you show a really clear ROI, but what you don't wanna be is a pure cost center. Your CFO eventually like finds all those cost centers and optimizes them. So what does that look like? Well, the way to think about it is remember that customer success is more than just hiring CSMs. It's really looking at the whole lifecycle and how much can I do in an automated way? We have a little chart that we look at around this, which is the left is kind of the things you can do internally. So you have your CS team probably, but you can create a lot of digital journeys. You can do stuff, you know, in the product, you can make your product better. On the right is kind of what the customer experience is. How do you create more self-service by giving them training, giving them a community to talk to, doing more in-app guides? Again, inside this is very self-serving cuz we make products in every one of these areas, but this is very consistent with what we see in the industry. So scaling is super important. Number 8, you know, one to scale, one of the things we see more and more is companies investing in operations. You would never run a, a sales team without sales ops, right? Now, in the beginning with the sales team, you might have one junior sales ops person. Eventually you have like a VP of rev ops. And so what we see is a similar trend. And now this is a bit like maybe converse where this number is the number of CSMs per ops person. So in some ways, like the higher the number, the fewer ops people on a relative basis. And the reason this goes up is obviously As you have more scale, you just have more people and there's more leverage. But what you're finding is in the early days of a company, this is ARR. So the early days on the left, people are investing in ops very early because at the end of the day, if you wanna do that, what I showed on the last chart of that, you know, automation, it's all about ops people. It's not just about CSM. So to Jason's point, if you're in that $0,000 to $5,000 ASP or $5,000 to $10,000, you better be doing this. You better be hiring a CS ops person. Don't flood your company with CSMs. But as you get bigger, you know, you got to do more. So that gives you an idea.

And then do you think— sorry, I could, I could interrupt you with a million questions, but do you think these days if you hire a head of CS, do they know what they need in CS ops? Because a lot of founders, CEOs, even CEOs at scale won't really know what to look for.

Yeah, it's such a good question. This is the hard thing for early stages. How do you hire great CS leaders? Just like what you've written about Hiring a great sales leader when you're an early stage company, and there's so many different factors. One of them is, do they realize the value of scale and ops? So I would be super skeptical if they haven't done a lot of process and automation stuff, or they don't at least think that way. There's a bunch of people that think of like, hey, this is a people job, this is a support job, this is a throw people at it. For some businesses that might make sense. For a lot of them, you've got to have a more process-oriented mindset. And because of that, I'm seeing, Jason M. Lemkin, sometimes people are like, you know what, I don't need somebody who's done CS for 10 years. I want somebody with some experience, but also maybe come out of a product management background or maybe came out of some analytics or ops background, right? I like that. Yeah, it's a good— this is not rocket science, so it's more important about the mindset versus like 20 years of experience. Now, it's always good in a story to have a bit of a villain. So the funny thing is there's a gentleman, very famous named Frank Slootman, And Frank is like an undoubtedly all-time GOAT CEO, was the CEO of ServiceNow, which Jason just posted about, $160 billion market. He's the CEO of Snowflake, all of us know who that is. CEO of another company called Data Domain, sold to EMC for $2 billion. I couldn't even carry his water. Like literally, this is a totally different level. And he wrote a book called "Amp It Up," and he has a chapter that says, "Customer success, the vision of the entire company. Why do you need a department?" Now obviously I'm like, "Dude, why do you gotta pick on me? I'm not like, you gotta, you can pick on some other people." people. And inevitably this will end in some kind of cage death match between the two of us. And realistically, I'll lose because he looks like he's much bigger than me. But, um, what I would say, because a lot of people ask me about this, is yes, if you are a company that has unlimited demand, everyone needs it, you're like the Michael Jordan of CEOs, you probably don't need this. I don't know. But I will just say that for most companies, the customer expects you to drive the outcome. You can't just charge them for it. You can't just do it through sales. If you do it through sales, sales gets distracted. I've seen All of these movies and frankly every single company that cuts their team regrets it 100%. They do it sometimes. I think it's misguided, but they regret it. Obviously, I'm exceptionally biased. You're going to say something there, Jason, or—

No, no, I'm with you. I just— I was literally having a conversation yesterday with— at a board meeting with a company just crossing 20, and they were dramatically expanding their— what we would think of as CS teams, right? The only nuance with Snowflake is this is very developer-focused. It's all API. So actually they have gotten rid of their customer success team generalists and they have put it with a lot of folks with engineering and product backgrounds, going to your prior point, to make them happy. So there's more head, but, but they're all— but, but the titles are, are, are mixed up. And I think there's some truth at Snowflake too, right? And whether you want generalists or specialists is maybe a different CS topic, but it's an interesting one, right?

It's super interesting. And I will say that the, the right point there is if you're a technical product, you better have technical CSMs or whatever you call 'em. Um, so it's just, it depends. If you're an application, you need people that are better at change management. And of course, the last question I always get, some of you've seen me on social media, is what's the deal? Why are you like 46-year-old in a huge Swifty? This is me and my daughter and niece at the first—

We don't ask this question, Nick. We, we don't ask. We just support you.

We just support it. And I'm like, come on, look at the photo of Taylor and Kelce. You got it. You got to love it. Come on. Super Bowl is going to be all about Taylor this year. OK, so last thing I'll just say is obviously we really value the community just like Jason does. And so, and for us, community is a huge part of CS. We have a new book that just came out. One, just as a kind of thank you to the SaaStr community, get a free copy of the book. Go to this link. We'll also send out, once the benchmarking site is live, we'll send out your benchmarking site so you can use it. We'll send these slides out. Now let's get to the most interesting part, which is your questions.

Hey, can I ask one before we do? Can I skip the line?

Jump in.

What you just said was— there are a lot of things you just said that were interesting. I could do 10 questions, but you said for a more developer or technical product, they need to have domain expertise. By the same token, I think CS leaders more and more want it to be all about process. You just talked about CS Ops and they wanted to be about process and making sure every customer is touched on this cadence and this schedule. Do you need to be a product expert in customer success today? How important is it on a scale of 1 to 10 to be a product expert? I have my own opinions, but I don't know if I'm out of sync with reality.

I think more and more you have to be pretty darn good at product. Now it depends a little bit on the nature of the technology, right? So some technologies are really more about change management, less about the product. But even then you have to know enough. It's, I think it's really about the customer. It's super annoying for a customer where you're like, oh, I get on the call and they don't really know their stuff.

Super annoying.

And so to me, it's like what I always tell people is you need to be great at something that can help the customer. So it could either be like, hey, I'm the product expert, and that's particularly important in technical companies, or it could be I'm a change management expert. I'm not a product expert, but I'm gonna help you get this thing rolled out and add value. And I'm more of a consultant, right? Or I'm like an account manager and I'm gonna drive commercials, right? And I'm gonna pick on somebody, uh, who's on here Elaine Cleary, who's one of our, one of our first CSMs. Not against that anymore. We love you, Elaine. And she's like the unicorn that can do it all, but most people can't. And so you gotta find somebody, something that people are great at. Don't have a CSM that I will say is like the email forwarder. Like, in other words, thanks for your email. I'm gonna forward it to somebody else to solve the problem. The customer will just cut you out of the loop at some point. I like that.

They gotta be great. They don't actually have to— great at product is one thing, but they gotta be great at something.

Right.

It's onboarding, product, business process change. Exactly.

I said it.

You've helped me think about it. Then I'm going to shut up and let you do the questions. But I think it's the death of the generalist across that. And the generalist CS person that's actually a good guy but not good at product, not good at change management, and is an email forwarder. We don't need that person. That person may even be replaced with a bot.

That's exactly right. You know, if you've seen Office Space, it's essentially What exactly do you do here? Right? That's the, that's the question. And so if you can't answer that, you—

I like that question. I'm gonna add that to my list. When you hire a CS folks, what, what are you gonna, what are you great at in CS?

Right.

Exactly.

What are you great at?

And if they just say, I'm a people person, I might pass on that hire.

Nailed it. Alrighty. So let's go into some questions.

Audience. Yeah. We have some great questions. Thanks everyone for dropping them in. We'd love for you to ask them live if you're able and in a, in a place to, to talk to Nick. And I know Nick would love that too, to see your face and actually engage with you. But we have our first question up from Ajay. I think you have— you're here with us right now. So go ahead.

Yes. Thanks. Can you hear me?

Yes.

Okay. Nick, thank you for sharing those benchmarks. Extremely useful. As Jason M. Lemkin mentioned, there are like a million questions in those benchmarks. So the question I want to ask you is, and I'll qualify it a little bit because looks like the playbook is different for different situations. For large enterprises, deeply technical products, how do you, how do you even think about the ratio of skill sets within CS? Because you need deep product technical knowledge, but then you also need sales acumen and they typically don't go together. Deep technical knowledge and especially at a large account, being able to navigate the different groups, the different buying groups. What do you do? Like, do you create a ratio? Do you— what do the account managers do? Do they twiddle their thumbs until renewal comes up, or do you give it to sales? But sales is chasing new logos and you create a separate group. And so how do you deal with this? Because at the end of the day, the goal is the NDR growth, right? And the adoption is just to secure the renewal.

Right.

But the goal is Andy, our growth.

So that's a great question. What we find is that there's sort of like two tiers of roles in products that are a little more technical or complex. There's called the CSM or some people might call it account manager. I think that's a, a bit of a dated term, but call it the CSM. And then you've got what some people call customer success architect, customer success engineer, right? And there's these two tiers, kind of like a sales rep and an SE. Right? So that's the mental model. If you have one product or domain area, to your point, you typically have a ratio. And much like in sales to SE, there's not a perfect science to it. You kind of tune it. But if you had to ask me, you know, it's like 1 technical person to 3 or 1 to 2, and you kind of like balance that out. That's quite similar to SE ratios. If it's an exceptionally technical product, might be 1 to 1. Now, as you get to multi-product or just different use cases, you might have specialization just like you might in SE, where you might say, okay, this pool of folks is really deep on product A, these folks are on product B. And that gets to the last point. You have two options for how to structure this. The customer success engineers or architects can be mapped directly to the CSMs. So for example, one CS— one architect might work with three CSMs, or you can have a pool. And so then the CSM is like, hey, I'm gonna bring in my expert on security, but that expert isn't assigned to the account. I'm seeing this more and more where the kind of experts are like a pool and you almost like productize what they're doing. So the expert can do a health check for you. The expert can do a config training for you, things like that.

Got, got it. So then who, who manages the account expansion upsell cross-sell?

Yeah. So, so that's a good question. So now you've got the other side of it, right? So if you think about the 3, things roughly that are there. You've got the renewal and upsell, you've got the like relationship change management consulting process, and then you've got the technical. Okay, so we talked about the technical and relationship. You find one of two things for the commercial: either the product is simple enough and the change management simple enough that the CSM can do both the account management, renewal expansion, and the, um, you know, kind of other stuff— relationship outcomes. Or you need both. You need an account manager and you need a kind of CSM type person. Now I'm getting very detailed here, so hopefully it's helpful. There's over time some people pull the renewal out of the account manager's quota and try to make that a little more process-oriented. So for example, that's kind of what we're doing at Gainsight in this coming year is trying to make the AM more focused on expansion. But in our business, the CSM can't do the expansion today, can't do the expansion and the kind of value management. Because it's a kind of enterprise sale. And the last thing is what we find is in companies, typically if they have kind of account management, that people call that a hunter-farmer model, as you may or may not know, right? And what you find is the reps that are managing the really big customers, like the big million-dollar, they don't hand off to an account manager because there's so much upside expansion. But then as you get in your SMB mid-market, that's where you go. As I— to summarize here, AE to account manager and CSM, CSM driving value and adoption, account manager driving expansion renewal, and then leverage technical resources where needed, like a pool. That was pretty complex, but does it answer your question?

It does.

Thank you. This is very helpful. Thank you.

Thanks, Dick. And yeah, we had another question as well about that account quarterbacking for enterprise. So I think that covered it too. So Thanks so much. Yeah, we're seeing a little bit of overlap. Aditya, I think you had your hand raised. Are you still with us?

All right. Hey, Nick, great session. Thank you for sharing some very, very interesting stats. Quick question on— I just want to build on what Ajay had asked. We go to enterprises, and we have— the way we looked at the model was that we have the— sponsors, the buyers, and, you know, the users. And we tried and tried to map it from the organization in terms of which are the teams that servicing each of these different layers. And eventually the CS or the account manager, as we call them today, was the, the Spock, so to say, on the account for us and for the customer. But we often run into these conversations on, okay, where is the AE coming in? Does the AE still be involved? Because this is enterprise, we're playing in large volume, large value accounts, and there are sometimes multi-country stakeholders. So does the AE still play a role in renewals, in expansion? Where does the CS kind of— where does that handover then happen once we've won an account? And is the CS getting too operational? Should the CS be strategic? And you need to Maybe bring in a layer of operations support. And these are some of the questions that, that we are pretty active discussions on and would love some light on that.

Totally. Yeah. Great questions. I love how practical all these questions are. So what I find simplistically is for your smaller accounts where there's not as much upside, you typically have more of a handoff, hunter-farmer. So you have an original AE handing off to maybe an account manager and/or CSM that works on it. AE kind of goes away. So that's your small or midsize. Maybe you don't have those. Maybe you do. In your enterprise, or ones where there's a lot of upside, what I find is, um, there's an AE who's then going to be involved to drive that upside, and then there's a CSM who's going to be drawn to drive the adoption and value to enable that upside, right? Because people don't typically expand until they've gotten some value. The AE and the CSM are kind of working, uh, side by side. I'll come back to what the role mapping on the client side. And what we find is then over time, even those big accounts mature— this is what we do at Gainsight— where as they mature, the CSM is gonna take more of the lead versus the AE because there's just nothing more to sell, right? Like we have some huge clients and CSM takes the vast majority of the lead. Now, okay, who are the CSMs mapped to? Now this is of course very skills dependent, cuz to be honest, mapping to an executive's quite hard, right? It's hard. It's like, like how do I talk to executive? I'm like a 23, 23-year-old. I just started my career and I'm talking to like the CIO of a company. It's, it's not a fair fight. So, What you find there is that, you know, in your enterprise accounts, the CSMs need to be more upleveled and skilled, and they can probably map to those more senior folks. And if it's— think about the two kinds of accounts, the ones that are kind of sold out, the CSM is really driving that executive engagement. Our CSMs in our mature sold-out accounts, but big ones, CSM owns that executive relationship, has to be good at that. So it's a bit of a success criteria. For those ones we call the other tier grow, where there's more upside, the CSM's more involved at that mid-level, like you called it, the, you know, champion or adoption, you know, person. Now the ops person, because I think there are, there may be 4 levels. There's the executive at the customer, there's your day-to-day champion, there may or may not be an ops person, and then there's users. So for the ops people, that's where I find these technical folks in your, if you have them, the customer success architect engineer to be connected. So let's summarize that in Gainsight, what we do. So for big enterprise accounts, AE keeps the account till it's sold out. CSM drives adoption and value. AE maps the executive. CSM maps to kind of the mid-level. There's a technical resource we call a customer success solutions consultant that maps to the ops person. For an account that's sold out or smaller, AE goes away, CSM drives the value adoption. There's an account manager in our world that drives the commercials, but that's a little bit more point in time. And then there's this technical resource to map to ops. It was a mouthful. Does that directionally answer your question? It does.

Yeah, there's so many more follow-on questions.

So many follow-ups.

Yeah, sure.

Feel free to send them over as well.

So absolutely. Thanks.

Okay, Nick.

Yeah, someone, uh, we have a lot of people tuning in from LinkedIn too. I think this covered your question, but, um, Karen asked on LinkedIn just for your point of view on the difference and delineation between CS versus account management. I think you touched on a couple things there, Nick, but any other further thoughts?

Yeah, yeah. So kind of like account management's what existed for a long time, tended to be more commercial. There was a little bit of relationship management, but it was a pretty pretty clear. It's like, I'm here to get the renewal and the expansion. Those are the two, two things that, you know, they worked on. And so in the, in the world of SaaS, we all realize we— it's on us to drive the adoption and value. And so people have one of two choices. They either have the account manager, kind of CSM, as one role— I'd recommend calling a CSM— or they keep the account manager doing the commercials, and then you have this CSM driving adoption, value, etc.

Got it. Thanks so much, Nick. Next up, Tim, you have a question, a follow-up question to that. Do you want to ask it live?

Sure.

I just wanted to get your thoughts on advantages, disadvantages of consolidating or separating the onboard role versus the customer success role. I find that the onboard role comes in, tries to initiate the relationship kind of while the customer But then as soon as it's done, oftentimes they're handing it off to somebody else who's kind of starting that relationship all over again. And so much appreciate you taking the time to join us today. And if you had any thoughts on that particular scenario.

Yep.

3 things. Great. All these questions are awesome ones. Thank you. And they're so practical. So if you have onboarding that's super light, call it like half an hour or an hour, right? That kind of thing. Definitely you can have the CSMs do it, particularly early stage, and that's quite, quite common. And I think it's a better experience, to your point, no handoffs, right? If you have onboarding that's, you know, days, weeks, months, then, you know, you will have to have two separate teams. It just won't work to have them be the same. But to your point, you can't have it be like, oh my God, I have a relationship with the sales rep, now I get a relationship and re-explain my goals to the onboarding person, and now I'm doing it again with the CSM. It's super frustrating for the client. You lose a lot in translation. And so the two things I think are super important there, if you choose to have onboarding separate, are to actually have a really good way to hand off the client's goals from sales to onboarding to customer success. We have a lot of best practices around that. A lot of our clients actually create— it's in Gainsight terminology— a success plan, in this case in Gainsight, in sales, and then they hand off to onboarding that has the client's goals, and then they hand off to CSM who's responsible for delivering the value. The last thing I would say— oh, sorry, one other thing. If you have the handoff, is, um, don't just have it be a pure handoff. Maybe have the CSM join some of the later onboarding calls. Maybe have the onboarding person join some of the later sales calls. So you have some people, and they're not— it's not like there's a call where the old previous person disappeared and the new person's there. There's an overlapping period. Finally, I think some of this also— don't forget that if it's a more sophisticated onboarding, I highly recommend you consider charging for it as well. That's kind of professional services. And over time, I think people miss that, and what they end up doing is they do a poor job of onboarding, right? And so what I would do, because software to me is 90% how you onboard, set up, drive value, 10% the technology. If you have a multi-week or multi-month onboarding setup, ways to charge for it.

Awesome. Thanks very much.

Thanks for the question, Tim. Huibin, you're up next.

Thank you so much, Nick. So what are some of the best practices in terms of the comp structure for the CSM and the professional services folks? Because I know that like, you know, for AE and account management, it's pretty black and white, you know, their AR number, their NR number. But for like onboarding folks and professional services folks, yeah, what are some of the best practices you have seen?

Yep, it changes as you grow as a company. So this is something that's very important to think about what stage you're at and how that evolves. So a couple things. One best practice, which is just my opinion, but I think a lot of people share it. If you have like 15 levers in the comp plan or even 5, it's useless because each one of those is so small that it makes no difference. And so what you really want to do is have a small number of things. I'd say 2 or 3 max in the comp plan. And so what I find is, first of all, the thing to figure out is what's your ratio of base to incentive compensation? And what I'm finding over time is people are moving. CSMs start a little bit like support, like 90/10, meaning if your OTE, on target earnings, is $100,000, $10,000 is bonus incentive comp, $90,000 is base. I think that's becoming very dated. We want CSMs to be more performance-oriented. So people are either are mostly at 80/20 or some are going to 70/30. So that's kind of like the foundation. How much comp is at risk? If you have 10%, like it makes almost no motivational factor. Now let's say you're that 20, 30%. How do you define the performance and figure out what the person actually got? What I find is as companies get later stage, it tends to be more financial metrics because that is the bottom line and everything else leads up to that. So for example, Gainsight in this new year, It's gonna be basically a GRR and a little bit of an incentive for expansion, right? So that's, that's a later stage. In the earlier stages where it's so critical to get product market fit adoption in that flywheel, what we find is it's more about adoption, maybe something we call verified outcomes, which is clients able to show the ROI and then sometimes referenceability. Um, so those are the kinds of things to consider. So think of those as the leading indicators to the eventual financial metrics. But if you're early stage, the financial metrics, you know, it's just, it's like, um, It's the thing that happens because of all the early stage stuff you do. Now, professional services, great question. Traditionally, the model would very simply be something like utilization, meaning percentage of your hours that you're actually billable. What I find now is if you just do that, you have no incentive to really make the client super successful. So what I would consider there is a mix of utilization and then some proxy metric for value Could be NPS after onboarding, could be adoption, something that drives the, the PS person to think not just about how do I close this project, but how do I get a client to value?

Thank you.

Thanks so much, Nick, and thanks for the question. You've been— Nick, we have a financial, like, comp expenses question related. This was something that came up from the last webinar that you guys did. So someone asked the most important, important and debated question. COGS or OpEx, cost center or revenue driver? Oh my God, CSM to be S&M, but then they can only scale linearly with a— linearly with ARR. That was a mouthful.

Such a good question. We debate internally too. So if a CSM has a quota, that's straightforward, it's sales and marketing. Um, if a CSM doesn't have a quota and they're enabling the salesperson to do the quota, to me the key test is is this something that is like part of the service and the client can't get value without it? In which case it's truly COGS, cost of goods sold. Or is it something that's purely about setting the client up for growth when it's purely sales and marketing? I found most CSM organizations, it's a mix. And so you'd probably consider, let's say you spend 10 points of ARR on CSM, put 5 points into COGS, and 5 points into sales and marketing.

Got it.

Super helpful. Ryan, you have a question about trying to dig into what your competitors are up to. So you want to jump in?

Yeah, I—

my founders and I are all mechanical engineering experts and we kind of launched a digital expert for messy PLM tools at manufacturers. And so we've had success and gotten some enterprise clients in the last month. And so we're doing well. Problem is none of us know anything about the billion-dollar competitors we're going after, the SAPs and the Siemens. And I sold, you know, fastening solutions for a decade. Now I'm selling SaaS tools. And so I don't know how much they cost. I don't know what their team sizes look like. Like my CFO asked last week a bunch of questions and he was happy that my SAO and my SAM were really well dialed out and I could explain every client we're going after and how we're going after them. But like when we got to TAM and team size and everything, I don't know what SAP does. I don't know what Oracle does. I don't know what Siemens does. And so how do we gain some of those insights so that we can start to kind of track, you know, where we should be, where we want to be, and where we're going?

Yeah, it's a great question. First, I love people coming from the, you know, vertical domains and coming into SaaS, but also empathize that there's stuff to learn there, right? Just like anything. And so, I mean, competitive, which obviously wasn't the main theme of this, but it's very relevant because competitive does matter. What I found there is, first of all, all the big vendors are constantly coming for customers and they're the value prop. I don't know your field, but I know the pitch, which is gonna be something like, hey, you have all these things from SAP or Oracle and you're using this one niche vendor in this one area. We can do it all for you, right? That's like clearly the pitch for every larger company, right? Consolidation is what people call it. And so know that that's the pitch happening to your clients right now. And so why— what's the pitch the other way? Well, we have built this kind of like best of breed, some people call it that, or point solution that's like going to be the best at this. And this is super important for your business process. What I find is the day-to-day person you work with usually wants to work with you, but their boss or their CFO is like, come on, we have SAP and we have this huge agreement. Why can't we just— and especially in a tough economy, that often goes in the favor of the bigger suite kind of vendors, like suite meaning like multiple products. And so what you have to do is help your champion build a rock-solid case. And so what that means is like practically creating a like a slide deck, a Google, Google slide or whatever that you're arming the champion with and you're giving it to them for them to present to their boss about why we need to keep using this point solution. Now for research, which is a whole different thing, and I'm not an expert, but done this long enough, I do think there's so much you can do. Simple example, uh, get win-loss and churn calls, uh, through third-party research. I actually know somebody called Iceberg IQ who does this really well, and we've been doing this since the beginning of Gainsight. And when they call your losses or your churns, you lose, or even your wins, you can get them to ask about, hey, what'd you think about the competition? What was their pitch? You can learn a ton. When you close a deal, ask the buyer, you know, what was the competitive pitch? You know, some of your friendly buyers will get you some of that material too. You can ask former people at SAP or whatever, like you can go some LinkedIn sleuthing to find those people. There's a ton of information out there for an SAP, by the way. Almost all of it's just going to be on the web. So you can do a lot of research. Now, obviously somebody's got to go do that. It's not trivial work, like the real secret sauce. If you want to learn software competitive analysis, is go into the vendor's documentation and you will find every little caveat and issue and whatever. So I know that's a lot. You probably have somebody, a colleague who could do that, but those are some ideas. Yeah.

Let me ask you a related one. Yeah, I actually have a company I invested in who literally lost their biggest account, maybe $500K a year, to SAP.

Yeah.

And it was a vertical solution that, that their champion loved. But their boss's boss didn't know the vendor, and it could kind of sort of be done in SAP. Yes, right, the story you said. So I came up with a rule from this. It was brutal for them, right? Because just like you said, their champion loved them, but didn't control the budget. So I have a new rule, and I'm curious what you think of it. In your bigger accounts, and you can define what that is, you gotta, you gotta know 5. This is my new rule, like the 5, like badges. You have to put it in your CRM, whatever you're using. Maybe you could do it in Gainsight, maybe you do it in Salesforce, maybe you do it in HubSpot, and you got to review it monthly. Who are the 5 contacts? And I've done this a little bit with sales or CS. You know what? They don't know. They don't know 5 people. They know no matter how big it is, right? They don't know 5.

Such a good point, Jason. We talk about internally all the time. And, you know, Ryan, if you kind of think about your business or anyone else's, You know, you think about those people that you're working with and your champion, but the biggest issue is they leave and then you're like, you're wearing shaky foundation, all the foundation is gone now. So the 5 gives you this kind of load, you know, backup, right? And one way to think about those 5, they can be senior, but they don't need to be. Like having junior people, they'll give you so much intel, you know, like in our case, basically our software is used not just by CSMs, but that's certainly a lot of the users. And like our, our team can connect with the VP of CS and whatever, which is great. But you know, the person leaves, like if we have one, we're, we're in trouble. And so getting 3 of those CSMs who are like power users and they can give you a little intel, what the company's goals are, what's the new boss saying? Intel is huge and the, the individual contributors will give you the most intel.

And that's the problem we keep running into is, is the linoleum doesn't use the tools that the C-suite signs off on. And when they don't use the tools that the C-suite signs off on, they make multimillion-dollar mistakes. So we put a solution in front of them that prevents the multimillion-dollar mistakes, but C-suite's dealing with SAP directly, and they don't know who I am. And so it's like, how do we filter that? That's been the continual problem.

So one, one other thing I would say, Ryan, I posted about this today is, you know, the question also is, why does your point solution matter to that company? Now you could say, well, we do X, Y, and Z with these features, right? Client doesn't really I don't care about that. So it's more like, what is the strategy? What are the strategic goals at the company level, the client? Can you map why you matter to those goals? That's a more compelling pitch than, hey, we got this feature that SAP doesn't have. Nobody cares, right? The client doesn't care. And so if you— like, a question I always ask people is, when you see your CEO just did your last all-hands, their last all-hands, what were the goals that they listed for the company? Every CEO, they get up in front of the company, including me, and they're like, hey, our 5 goals are X. Get that list of 5 goals, map what you all can do in your company, I guess FES, to those goals. Okay, perfect.

Thank you.

Awesome. Um, Adit, yeah, you had a follow-up question about compensation and commissions. Looks like we'll have time for it.

Uh, Nick, uh, one other question that I had, uh, on that whole AE and CS role in these large enterprises is, uh, how does that impact your comp, uh, or commission, uh, you know, structuring, uh, uh, you know, between the CSE roles? Because both of them may play a role in renewals, expansion, and so on.

Yeah, any—

yeah, great. Yeah, great question. It's a little bit like, um, either an SDE or SDR and an AE, so quite similar situation. So if the AE owns a commercial, the CSM doesn't, but they're like influencing What we find is that CSM, as I was alluding to, might be on an 80/20 or 70/30 base to variable. And then their variable is not gonna be the same. It's not gonna be like just a commission and quota. It's probably gonna be some mix of like, let, if you're mid-stage, later stage, gross retention. And then one of the things people talk about is customer success qualified leads. In other words, leads you're sending back to sales. And so the CSM's job's not to close the lead, or the deal, but actually to kind of identify— you're constantly talking to a client, hey, here's an opportunity for us to do more. So the CSM becomes like the partner to the AE. The AE has a pure commercial quota. The CSM has a mix of some kind of metrics like GR or even an early indicator like adoption and something like a lead passing metric.

Hey Nick, could I ask you one— can I ask a meta question before we run out of time? Something I've been thinking about for 11 years and I'm struggling with more today than in the past, which is if you're— what, which one's a good, a good one again? The vitamin or the, the, the—

yeah, painkiller, I think.

Which one's the good one? I forget which one.

I think I always get it confused, but I think the painkiller is the good one.

The pain— assuming your app's a painkiller, okay, your service now with 99% logo retention.

Yes, insane.

Why do you need a renewals team?

Great question.

I'm blowing my brains out over this because I'm terrified to talk to renewals teams. Right. I don't see the— it's not— why is that good for me as a customer? And why do you need it if you have, if you have high retention, why do you need it?

It's a great question. So short answer is early stage, you don't. Um, early stage should be all about value. As you sell to bigger clients, what the actor we haven't talked about is procurement. And so the big client, the job of procurement is to reduce the price and your job's to get more. And so what you find is good renewals people are good at negotiating price uplifts, or at a minimum price flat. Now you as a customer don't like that price uplift for sure, and I think as you sell to smaller companies like, like a SaaS or, um, your earlier stage as a company, you don't need this. But if you are selling to like a big mega company, you have a 3-year contract, it's coming up for renewal, guarantee that procurement person is going to come in with something like We are asking all vendors to cut prices by 20%. And then you have this negotiation. And by the way, there's little moneyball things I saw in the chat. You know, in your renewal contract, you get some kind of price increase commitment in the future. And so there's just a ton of nuance there. If you are selling to bigger companies with a procurement department.

That makes sense. If you've got to negotiate with procurement every 3 years, you need a team. You need a team to go into battle with that 20% discount you're going to be asked for, right? As silly as it is at a meta level, it's also life, right?

100%, totally.

Yeah.

But what do they—

and so any advice? So that makes sense if I've got my 3-year million-dollar-a-year contracts or half million, and, and I've got to do this. You have to play. If you don't play the procurement game, you're a fool. 80, 95 times out of 100, right? You're a fool. But for folks earlier, why do they all have these renewal teams?

I think it's premature. I mean, I think that like It's very important to get the renewal, have good retention. It's way more important to have clients that are getting a lot of value. So very simple example, which you've written about and I love— I know not all investors will love this, but early stage, a client signs a 2-year deal, 1 year in, they have not gained value. Let them out of the contract. I know that sounds terrible, but let them out, treat them well. They will come back or they'll go to a new job and they'll bring you in. You don't let them out, you hold them kind of hostage, they're never buying from you. And you— I think you had a post about this, about some vendor a couple years ago, right? And like, I'm like, we won't talk about this specific vendor, although I know who it is. And like, it— like, it's just bad early stage to create, uh, detractors and forcing people into a renewal or keeping their contract because they signed something. It's not good. You know, when they hit financial hardship, try to help them. Like those. Now it's hard because you also are startups, but to me this is the only way to go. You got to build advocacy.

Yeah. When you're in there, take a few— one more question that's not for me before I go. But, but you've been doing this— how long you been doing Gainsight? 10 years?

11 years. You and I are the same time clock, man.

11 years.

I don't know.

Whatever you do for 11 years, you do have one insight that, that folks that are starting don't get, which is you almost always get another chance at customers that you lose.

Yes.

Whether, whether it's really another go-around 2, 3, 4 years later, or the champion goes somewhere else, same thing. It like, if you treat them well, you, you go long enough, you see Mary and Bill and Nick and Jason again. You always see them again, don't you? Again and again and again. Like every few years you'll see them again.

They always come back. That's one of our like lines internally. And I'll just tell you a funny story to close. By the way, Aaron will put, my chief of staff will put the link to get the book and the benchmarks into the chat. Um, so Aaron, if you just put that in there. But yeah, final comment is they always come back. And here's an interesting story from today. Um, you know, we had a prospect who chose— like, they didn't have budget, so they bought something, you know, cheaper, good solution but cheaper, and whatever. And then the person who runs CS there, she emailed me today, and unfortunately she got laid off. And you know what? I'm gonna get on a call with her to try to help if I can. And it's like, yeah, some people be like, oh my God, you didn't buy my software. I'm not gonna help you out. No, no, no. Do the opposite. Help them out whatever way that is and help them cuz it's a good thing. Don't even worry about it. But if you do that, I guarantee they will come back. So if there's one adage in customer success, treat people well. Golden rule.

Yeah.

That like, it's oversimplifying it. That's it.

An awesome thing to close on. Thank you so much, Nick. Uh, we appreciate you for devoting so much time with us this whole January. So, um, thanks for doing the awesome session earlier and for answering all the questions. And thanks to the audience for all your amazing tactical questions. Um, Nick, I hope Taylor gets a Super Bowl ring next weekend.

I know, I'm sure she will. Maybe people will ring an engagement ring, you never know.

Well, yeah, um, we could do a Workshop Wednesday with you and me and Amelia on that. So, uh, that'll be a future one. Um, but thank you all so much. Thanks again, Nick. Um, and next week we are back for another great Workshop Wednesday session. Sam Blon, former CRO at Brex and current partner at Founders Fund, is going to be doing a really amazing tactical session on how to hire and evaluate SDRs. So, um, he has a great checklist for that. Um, lots of— going to be lots of amazing, uh, things that we dive into there. So please make sure to join that and have your questions ready on hiring. On sales for SAM next week. And then thanks again, Nick. We'll see you soon.

Thank you.

I can talk to you guys.