In this episode, our host Anika Zubair chats with Pat Phelan, Chief Customer Officer at GoCardless about charging for customer success.
To charge for customer success or not to charge is the question many SaaS companies are currently asking themselves. It can be tricky to know whether or not it should be a part of the cost of goods sold or if it should be charged for as a premium service. So, how can companies start to charge for success? And what are some metrics CS leaders should track if they do?
Podcast enquiries: sofia@planhat.com
In this episode, our host Anika Zubair chats with Pat Phelan, Chief Customer Officer at GoCardless about charging for customer success.
To charge for customer success or not to charge is the question many SaaS companies are currently asking themselves. It can be tricky to know whether or not it should be a part of the cost of goods sold or if it should be charged for as a premium service. So, how can companies start to charge for success? And what are some metrics CS leaders should track if they do?
Podcast enquiries: sofia@planhat.com
Hello everyone. I'm your host, Anika zer. And welcome back to the next episode of the customer success channel podcast brought to you by plan hat, the modern customer platform. This podcast is created for anyone working in or interested in the customer success field. On this podcast, we will speak to leaders in the industry about their experiences and their definitions of customer success and get their advice and best practices on how to run ACS organization. Today on the podcast, we will be speaking to pat Fillon, who is the chief customer officer at go cardless, where he is a strategic leader of a very robust customer success team ranging from onboarding to customer success managers, to support prior to his time at go cardless. He was chief customer officer at brand watch and VP of customer success at bizarre voice. And he has decades of experience in customer facing roles. Today, we'll be chatting with pat all about charging for customer success in his experience. He has not only built and scaled CS teams globally, but he has also added a monetary value to a CSM and added an additional charge for customers to work with customer success. Sometimes it is tricky to know if CS should be a part of cost of good sold, or if we charge for it as a premium service. And if we do charge for it, how do we justify this, this and many other questions will be answered when we speak to pat on charging for customer success. Welcome pat to the podcast. I am so very excited to have you on with us today. And I know the topic we are gonna talk about is probably a bit controversial in the customer success world, but before we actually get into the topic today, can you please tell our listeners a little bit more about yourself, your role at GoCardless, how you've, uh, ended up where you are today?
Speaker 2:Yeah. Hi, Annika. Nice to, to see you again and, and thanks for having me on. Yeah, so, I mean, in a nutshell, um, I'm chief customer officer GoCardless, um, we're, uh, a recurring payments platform, global recurring payments platform. We've got in excess of 75,000 customers globally right now and expanding, uh, pretty aggressively, um, in, in many different markets. Um, I've been at the company three years really, um, next week actually, and my world kind of encompasses, uh, customer success management, professional services, customer experience, uh, support and customer success, uh, operations, uh, you know, it's, it's a team of about 140 people globally right now and again, growing quite quickly. So yeah, I I've been in SAS since I keep using the term since SAS, I guess, was a thing. I mean, I, I, I started my, my career as an account manager in a, in an on premise, you know, software capacity after doing, uh, a little bit, uh, on my own and, and not making a phenomenal success way back in the days before investment capital was a thing. And, and, and, uh, you know, when, when cloud was, was scary for people because they worried people would run away with their data. So it was, uh, it was an interesting transition, um, and really I've, I've progressed from CSM. Um, I started as a CSM bizarre voice, uh, and was very fortunate to join the company and progressed, uh, accordingly and yeah, for better or worse ended up where I am. So that's, that's my, uh, my life story in a pretty short nutshell.
Speaker 1:<laugh> I love it. Thank you for sharing and also like awesome trajectory. Awesome. To hear how long you've been in the industry. And also that you're a chief customer officer. Cause I th I know that's very aspiring to some of our listeners, if you even think about in the early days of SAS, the title CCO wasn't regularly around in, in the SAS world, it's, I'd say relatively new, but obviously in an amazing position, sounds like the team is, is brilliant at GoCardless, but for, for our listeners, can you maybe give a little bit of a background of how you ended up in the position or if anybody wants to be CCO,
Speaker 2:I'm always asked that. And I, I honestly don't have a great answer for it. Um, you know, the, the, there's two things, there's two variables. I think that have really played into the position that I'm in at the moment. The first one is the right company, and I was super lucky to join bizarre voice. Um, you know, it's a company that will always hold a, a very, very, uh, special place for me because it was an organization that I, I, I acknowledged that well for me anyway, um, you know, to be clear, I'm sure other people maybe had different experiences, but for me it was an organization that acknowledged that excellence in execution, um, merited, um, uh, recognition. Um, so that's the first thing. And, and, you know, I'm, I'm actually, uh, talking a little bit about this, I think next week around the path to CCO and, you know, like choosing the right company is just super critical, uh, and not just, not just a customer centric, again, that kind of nebulous term, but more a company that suits you as an individual that has, um, uh, a strong view on, on where the customer lives within that organization. That's really, really important and really hard to do. The second one is timing. My timing was great, you know, throughout my career. Um, I mean, I'd use the term timing slash luck, um, you know, luck and timing. I don't think people understand how huge, a part that plays in your career trajectory. And every time I speak to someone, I, I, I talk to a lot of CS leaders on that path and people aspiring and, you know, my, my, one of my main points is like, you, you can control what you can control, but, you know, there's a lot of other variables and, and timing and luck play a huge part in that as well. And then I think the last one has just been really good at what I did. I never really looked at next stage. Like, I, I never looked at titles. I never looked to the next stage. Now I understand that, you know, now, and depending on, you know, background or depending on being, you know, let's sort of call it out, like, depending on a certain amount of privilege that I would've had as a, as a male and a tech environment, sort of, you know, 10 years ago. I, I understand that that was a privilege to not have to worry about stuff like that, but, but definitely from an underlying perspective, I was just very good at what I did. And I understood what my, my customers needed. I understood what my managers and my bosses needed, and I acutely understood the power of perception. And I think, again, that's something that I don't think a lot of people spend enough time thinking about. It's very much, when is it gonna happen as opposed to why should it happen? And, and whenever I think about people in my team, you know, I, I, I always think about promotions in the context of, if I'm to announce this promotion now will 90% of the companies say, well, of course, like that's annoying, or will they challenge me? And if, if there's any risk of challenge, I tend to be a little careful, a little more careful, probably. And usually that just comes down to people that are leading without the titles and leading without the, without the, the desire, I guess, for it to be acknowledged as that, and just excellence in execution. Like you cannot get away from excellence in execution, if you are awesome at your job, things will happen. They will happen. That's kind of what my path was. And, and it's a combination of, it's an amalgamation of all of those things at different points in time that just, yeah. Came, came to fruition and, you know, so long, well, we'll see how long it continues, but as you get higher up it's food jaded, it kind of gets tougher to be, you know, excellent than what you do, because what you do expands exponentially. And, and, you know, really for me, it's now hiring, you know, I just wanna hire great people and make sure they're excellent at what they do. And internally make me look competent, uh, every now and again,
Speaker 1:Thank you so much for sharing all that background. I know it's super aspirational for a lot of people to be in the position you're in, but I do love a lot of the pieces that you just said about making sure timing is right, as well as, you know, you are executing on what you're set out to do. And coming back to that timing bit, you have been at some organizations that have just really exponentially grown as well. And the startup customer success, SAS experience that you really have experienced in London, I think is a, a unique one. What do you find special about the region or the industry and sector of customer success that you're working in?
Speaker 2:It's definitely a lot higher profile in the last five years, let's say than it had been in, in, you know, the early stage of my career. Definitely. And I think, I think from, from a, from a UK perspective, my last two companies were UK headquartered companies. And that, again, wasn't a, an explicit decision I made having worked for us companies for 15 years, but there was an element of, I was interested to see what it would be like working for a company where I was in the HQ, because I've a long time I've been a regional leader, which, which is a skill in its own. Right. And I've, I've definitely developed. And I remember back at, um, at the tail end of my career at bizarre voice, I, I, I, I kind of acknowledge that actually being a regional leader leader in a hub, sorry, in a spoke for a us hub is a skill in itself.
Speaker 1:It is, it
Speaker 2:Is variables that goes on in terms of keeping the teams together, unified, avoiding the them versus us kind of stuff. But, but when I came to, to a brand watch, you know, that was my first experience of, of the UK CS culture, if you like. And I think, you know, what I enjoy about it now is there's a little keenness about the U the UK that I obviously I, I resonate with because, you know, it's part of my own DNA coming from Ireland. We're not, we're not great as, you know, flagging or shouting about what we do or acknowledging a regular business. And I, I, I do like that to some extent, but I do think it's, it's what I, what I try to bring from my us experience, because there's a lot of value in that kind of, um, excitement around things and that kind of, you know, uh, external celebration of success and acknowledging that we're doing a, a sort of a really good job. Um, and I think the second one is how early stage it is, or it was here, you know, the ability to shape something, um, pretty significant, um, the ability, particularly in the world of startup to be able to embed it early on and in the seat that I'm in to be in a position to be the, the voice in the room that says, you know, this sounds, you know, great from an efficiency perspective, but have we really thought about what the impact is gonna be? So I think it's probably access and exposure is, is kinda a difference when you're, when you're in startup world, certainly in the UK, but culturally, I think that's the difference I've seen between the UK and the us, where you need to build that muscle of like just Mo you know, I use the word excitement very explicitly, but just, just, you know, being out there and celebrating what we do and, you know, acknowledging that what we do is hard and when we win, we wanna make a big deal about it. But at the, on the flip side, I think the UK is I, I, I use the term quietly brilliant in my, in my team a lot. And, uh, there's a lot of quiet brilliance in side because it is very much like, let's get it done, get it done well, and then, you know, assume that we're going to get credit for it.
Speaker 1:You bring up so many good points about the differences. And I really like how you shared the regional leader and then making a conscious decision to be a leader for a UK company, because I also feel that that struggle, pain, whatever you wanna call it is, uh, sometimes you just feel us versus them and also disconnect, no matter how much we're in a global world, on zoom meetings, there is still a level of, of difficulty when you're executive team is all over or in different locations and, you know, making those mindful decisions like you said, in your career of, Hey, this is the bet I'm gonna take. And this is where I wanna see myself. And because of a mix of timing experience and the bet you're taking it, it's landed you where you are. So thank you, uh, for sharing all those pieces. You already mentioned a little bit about the team you run at go cardless and customer success means very different things at different organizations, as we all know, but I think you mentioned service CSM support. Is that roughly give us a little bit better understanding of what the org looks
Speaker 2:Like. Yeah. Customer success management, professional services, which is effectively onboarding and what you would classify as maybe implementation services, as well as, um, you know, in all school, I guess, professional services, kind of the, you know, high value interactions, uh, global customer support. Um, we have operations and programs, um, within our team as well. So we have a team that looks after kind of the big rocks across the CS, the customer success group. Um, and then probably the biggest difference that I, that I experienced here comparable to in my, in my previous roles is we have a very, very, uh, I mean, you, you met Hamish, we have a very strong customer experience and advocacy team within the customer success group. That's a, that was an interesting one because traditionally that would probably live in marketing in more SaaS companies.
Speaker 1:Yeah. I know when you first told me about it, it's not something I would think in customer team right off the bat, but I love that it is.
Speaker 2:Yeah. But we took, we, we, we put our hands up and, you know, we said two years ago, maybe, um, you know, look, this is not gonna work if it's not focused on a hundred percent. And, um, I, I took accountability for that and, and Hamish leads the team and, you know, we've seen the results are just spectacular. Um, when you've actually got the, uh, the advocacy and experience team kind of on the hook with the CS leaders, because they're, you know, I basically have the capability of, of locking everyone in a room and saying, we're not leaving until it's figured out. Like, and I think that's, that's the, this simplistic view I have on, you know, you spoke to me, you know, can I, can I basically put the fear of God of the people, uh, and, uh, and have them listen to me. And, and in that case, that was definitely one of the functions we felt was needed. And we've got a superb, you know, NPS process flow here. I mean, hing again, does a fantastic job with our NPS insights into the business. So, so that's kind of, you know, my world, um, the interesting kind of very explicit decision I made with my chief revenue officer is we don't, we don't have, uh, uh, an actual upsell commercial target within the CSM team. Yeah. I was very explicit about that. I've, I've worked in every one of every environment imaginable when it comes to upsell. I mean, literally I've gone from, you know, fully upsell to zero upsell to some kind of weird hybrid in the middle. And I, I'm a huge advocate in division of labor first and foremost now how that division pans out is up for discussion, but what I, what I really want to avoid where I can, when I can help it at all, is having multiple focus, uh, for team members. Like they need to be accountable for something that's very tangible that they can influence directly and that we can track without being, um, what I would call, uh, punitive. So, you know, when I look at a lot of the, you know, CS platforms, for example, you know, uh, that space is evolving now pretty dramatically, which is good because it, it kind of initiated very much, um, from what I could see from a, from a, a leader's lens in terms of control, rather than actually making it easier for you to do your job as a CSM. I think for me, the same applies with, with responsibility. So I've had CSMs, who've been as responsible for upsell responsible for retention, responsible for NPS. Like no one can do the job if they're the four or five metrics that, like, what do you do? Where do you focus? Like if I super MPS score and I bomb out on upsell, like, do I get fired? Do I get promoted? I don't know. Like, so, so from my perspective, we made a conscious decision on that. And the flip side to that was that with my chief revenue officer, um, we're very, very explicit in terms of the workflows.
Speaker 1:Yeah. And also keeping them very focused by the sounds of it
Speaker 2:That said we have pipeline generation targets. So we have CS QLS, if you want to call
Speaker 1:'em that. Yeah. That's something that I've heard more commonly in SAS now.
Speaker 2:Yeah. So, so my team part of their variable comp will be, and has been in the past, um, attainment on a, on a team level of amount of, of QLS. And then that's very, very tightly aligned with how they engage with the, with the EE. So it's not perfect by any stretch, but then again, no model is right. And, and I'm just playing for the model that I think works best for us, because I want my teams to focus like a hundred percent on expansion of volume and adoption.
Speaker 1:I think that you're already leading into our topic. Great, great segue, pat, but we are talking a lot about revenue and customer success. You already mentioned how with your CRO, that's a big part of, you know, your focus here at go cardless. But I think in your overall experience as a CS leader, you've had a very controversial stance on charging for customer success. And I know some businesses really don't do that, but before we kind of dive into to all the details, like, what is your stance on, on charging for customer success?
Speaker 2:I, I, I'm not, I'm not sure I'd be necessarily controversial or necessarily that it's a stance as such. I, I just, I guess over the years, I just don't necessarily default ever to, uh, an inability to add a cost to something that's of value. Right. And I think that's where, you know, we've talked about this before. I think the question is not so much, should you charge for what we do? The question is, is there a value to it and is that value acknowledgeable through a fee of some sort be that recurring or one off like charging for services has been around since it's, it's always there, like, if you talk about professional services, people wouldn't bat an eyelid, literally wouldn't bat an eyelid. Um, and I think the, the challenge that I've seen is that we've morphed from this world of account management into customer success management over the last 15 years. And account management was never perceived to be a chargeable resource because there was upsell attached. Yeah.
Speaker 1:There was a target that you had to hit to, to earn your seat.
Speaker 2:The revenue generation is there. It was just, it's just in a different guys. But the challenge is because it kind of morphed from an am with a target to a CSM, with a target to a CSM without a target. Then the, the, the kind of the revenue line just got further and further away until we were left with a point where in many cases we were in a scenario where it's like, well, we've never done it. So how can we start doing it? Now, my, my belief firmly is that I think where, where customers perceive value and where customers perceive that the addition of a resource is going to get them kind of, you know, what they want faster than I don't think charging or attributing a cost to that value is something that we should be shying away from. I think, I think it's where we get sloppy and actually literally take a service that we're providing now stick a cost to it, and then assume it's just going to be all of a sudden a cost service. That's where that's where we I've seen a lot of this go wrong. You have to fundamentally change how you engage. You have to fundamentally redesign your, your kind of model, but it doesn't mean you can't charge for
Speaker 1:It. And I think a lot of companies build around charging customers, first customer sales, into the cost of good sold, really. And I think that your experience and what you're just speaking to is completely different. And if a company let's say is already charging with cost of good sold, and that's how customer success is bundled into that, how would you kind of advise, or what would your thinking be if they're okay. Now we should definitely start charging for this service. What's kind of the mind shift that that company would have to do in order to move away from cost of good sold to that added cost for service.
Speaker 2:I would first have the conversation in terms of like, why, you know, because I think I've seen cogs, uh, profile be super different in, in, in every organization I've ever worked with. The percentage attributed to marketing to sales can vary anywhere between 20% and 80% CS is included. It's not included. Like we, we normally kind of sleepwalk into this through financial metrics in many cases, right. Because you know, the first question I would have is like, who's validated that like who's validated CS as part of cogs and, and is the percentage even right? If they, if they are part of cogs first and foremost, the second aspect for me is where do I see the value of that? Like, if, if, if my line item, if my cost is implied in a subscription service, then where am I getting value from that as a CS leader? How is that reflected back into how I hire, um, the ratio of CSMs to accounts that I need to have, you know, of cuz effectively I'm covering my cost, right? The subscription service is covering the cost of my organization or a proportion of the cost of my organization, but do I see the value for that? And that's where it gets lost.
Speaker 1:Yeah. And it gets, it gets lines, get blurred and it, and almost, yeah,
Speaker 2:Completely because they're literally blurred because they're commingled with so many other things. If you look at the sales org, like nobody ever doubts the fact that if you hire a sales guy or, or, or, or lady there's a, there's a, a quota attached to that, right. Nobody doubts that. And if that quote is met, you can have another one and you can have another one, you can have another, we have, we don't have that. We never have that. Now, when I look at all of the discussion and the AR arguments, and I probably would use it like that on, on LinkedIn and all the thought leadership, where should this live? Where should that live? The bulk of all of these discussions to, to me is born out of attribution, some form of the need for attribution of something that the organization recognizes as valuable. And so that's kind of the first place I would start if you haven't necessarily moved down that path. I think the second area for me, and, and where I've seen it in the past as a, an early stage kind of exercise is not necessarily from a CS perspective, more holistically, but to look at this from the concept of what are the actual milestones in a customer journey that you feel that if there was a higher level of attri attribution of value to, through a cost inherent, would you be able to accelerate a customer experience? Um, so when I go back to bizarre, my bizarre voice days, um, we had an onboarding process that was, you know, super, um, eh, kind of consistent, I guess, across the board. But we acknowledged there was probably about two areas of that onboarding process that we knew that if we got right, it would accelerate time to value 20, 30 times. Um, and you know, one of the, the, the, the ladies I hired at the time Kim wood, who came on board as a CSM, um, I pointed her in that direction to just start to flesh out if we were to charge for a service, what would that service look like? And what would the value be associated with that service? And that evolved into a consulting organization at bizarre voice in Europe, which was then evolved globally. Because for the first two years, we built a really strong revenue line item and started to see onboarding, basically be cut in half and at five X higher quality. So that was where I kind of started this journey early on. And it wasn't PA professional services because it wasn't your traditional kind of, you know, um, engagement. It was very much around an onboarding flow, but looking at a couple of different areas. And then as you evolve, you know, you kind of evolve layers on top of that layers on top of that. And then the package potentially kind of evolves with that. But, but yeah, that that's always been my take on it. I, I honestly, I think about all of the things that I pay for, why I pay for them and particularly the things that I don't really think about why I pay for them it's because the value I get is so kind of equal or are higher than, than what the cost is. And I think it's more around having the confidence of that in terms of what the engagement model is first, before you start to look at rolling out a cost to that.
Speaker 1:Yeah, I know. And then you mentioned implementation, onboarding, and starting with that side of the journey. And I think most businesses, if I think of even the larger organizations out there, Salesforce, Microsoft, Adobe, they're always charging for some level of customer service, whether it's professional service, success, support, there's some sort of charge. And I think we've, like you said, blurred the lines of like, how much do you put in cogs into the actual, you know, subscription cost of your business. But I do think that you bring up a good point about really like, you know, starting small growing, et cetera. But I think another, you know, good thing for leaders think about is the ROI of charging for success. Really? Like what are some metrics that you think customer success leaders should really start to track to make sure that they're bringing back to the business? Hey, us charging for success is really returning a bigger investment. Like you said, sales leaders, don't question. If you have an AE, they carry a, a certain target. They hit that target. They get paid for that, but you also know how to hire access, uh, more AEs for that, for that role, but we don't do the same for success. So how should leaders really look at the ROI for charging for success?
Speaker 2:So going back to my original point, the first thing is pilot. You pilot, pilot, pilot, pilot, trial, trial, trial fail so many times before you actually hit the right thing. Because when we started with Kim way back when, and she, she will be the first one to attest to it. We trialed a lot, like we through a lot of different iterations in terms of what it was gonna look like before we actually rolled it out.
Speaker 1:I really think that a lot of people don't do that or they're afraid to, or they think customer success should be built a certain way. And I, I still say that like the customer success is developing. There's no harder, fast metrics. And it's so different at every organization that you do success at that there is no way there's, there's no problem with trialing it. Like try it. If it works great triple down on it, if it doesn't go back to the whiteboard
Speaker 2:Hundred percent, like a year ago, year, 12 months, 14 months ago, we didn't have an advocacy program. 14 months later, we've, you know, nominations three awards, UK wide, you know, 14 K studies attributed to revenue. Like it, all this stuff, just, you, you, I think the last point you made is the most important point. There's just a lot of noise out there in the customer success world right now that that assumes there is a certain way to do this, or a certain binary sort of five steps, 10 steps, where should this live? Where should that live? Like, I don't care honestly, about any of that stuff, because if my org is different in 90% of every other org out there, but my customers are seeing value, my team are engaged, my NPS is high, then I'm doing the right thing and I would never want you to look at me and think, oh, how, how do I do that? Because it's not relevant to you. You have your, your kind of your environment you are living in. I mean, I've worked in environments where literally retention was just bombing. Like that was my job at the time, my job wasn't to build a, a phenomenal, you know, um, uh, successful, efficient CS org. It was like to stop the leak in the bucket.
Speaker 1:Yeah, yeah, yeah. And you have to take it at a moment at a time, like every leader that's like, oh, how do you build this amazing engine of customer success? I'm like, well, look at what is applicable to your situation. What's happening at your business? Is it churn? Is it upsell? Is it retention? Like figure that out and work on that
Speaker 2:Understand a hundred percent. And it might be one thing always think about the world in terms of run the business, change the business. And I think in CS, everyone is so focused on change the business, the strategic things, the, the kind of the, the, the, the big rocks, but running the business is hard. And, and in our world, and especially in this environment, it's getting harder and harder. So I think, you know, that that's super important, but back, I guess, to the original, sorry, I took a bit of a sidetrack there. Um, back to the original question, I think the first thing is trial and, and pilot. And I, I, I include KPIs in that because you're never gonna get the right type of KPI, but what you've gotta be clear on is why you're choosing a particular type of KPI. And what I see a lot is, you know, the KPI that's chosen is to prove something internally. That to me, is the wrong track. I think that to try to prove something internally is one leg of, you know, a, a KPI suite. But if we look at it externally, the, the key kind of metrics I look at here, there's, there's three that we're looking at kind of, certainly in the past. And right now the first thing is, uh, attachment and adoption from a, a net new perspective, no matter what you do in CS, if you can't be easy to do business with, you're not gonna be successful. And we can, we can complain and we can moan, and we can talk about this deal, that deal product market fit bad, AEs, all that kind of stuff. But if we're not easy to do business in, in the startup world, then we're not gonna be successful. So the first thing I always look at in anything like this, whether it's paid, whether it's a new services, is it easy to sell? Am I reps selling it? Right? So that's the first thing. So attachment type rates to whatever you, you path, you go down. The second one is time. Whether you agree with the metric or not time to value, like, are we doing something faster? And is it something more impactful than other stuff? For example,
Speaker 1:We live in a world where time is value. It's a very important metric.
Speaker 2:We're on 12 month contracts. In some cases, some of them are on 30 days, you know, notice periods for, for termination. Like we gotta get this thing spun up and spun up fast. And then the third one is, is depending on the kind of revenue metric you have, if you decide to go down that path, either renewal or repeat. So our customers renewing, and are they renewing at a higher rate if they get a higher level of service? And if that service is paid for, is it having that impact? And then obviously if it's not renewal, uh, sorry, recurring, uh, is it happening more and more? So for example, if you decide to charge for a health check or call or whatever you want, um, is it leading to something else? Is, is it leading to another one? Is it leading to an expansion is so it's more second order revenue from the piece of work that you've done. So again, going back to my previous experience, you know, we, we, we had a, uh, an onboarding service that came at a premium price where our consultants would go in and effectively map out the journey for the customer, uh, early stage sales cycle and late stage deal. Um, and there was a cost to that, but what we found was they were onboarding quicker, better, and expansion happened faster. So straight away, you've got, you know, a suite of KPIs there that you can actually go with and say, well, if I have five more of these people, I'm pretty sure I can five X, those numbers and they're good numbers. And then the last one is CSAT NPS. You know, you wanna make sure that customers are happy with the service you're providing, particularly if there's a cost attached to it. That's really, really important. Um, because that just is a self-fulfilling prophecy. If, if I'm charging and things are happening better and faster, and customers are still happy, then the chances are that your worry about a cost associated kind of goes away pretty quickly because you ability to say, I would pay for this and I pay for this again, because it was valuable. You know? So it's a, it's, it's a journey. It's definitely a journey. But I think the first question I would ask anybody is if you're not willing to look at having a cost associated to customer success in any way, then why, like, why do you think that it's not valuable enough that you could do that? And there'll be lots of reasons, deal sizes, you know, market appetite. I get all of that, but at the same time, we have to believe that what we're providing is, is valuable enough to at least consider some aspects of it, to have a premium attached to that.
Speaker 1:I totally agree. I completely agree. And I know you just mentioned a little bit around KPIs and making sure you're tracking certain things from a, from a leader perspective of a return on investment for charging for customer success, but drawing upon what you said earlier about how your CSMs don't have a reg revenue target, is that correct?
Speaker 2:Yep. They have, have a renewals target. Obviously
Speaker 1:You have a renewals, but not an overall like net dollar or net revenue retention number, which is another, I guess, maybe different thing that you guys are doing. But if you, if revenue is not attached to your CSM, but you're charging for customer success, what sort of KPIs do you assign to your CSMs? So that they're, you know, they know they're doing a great job and that charging for their services is, is paying off.
Speaker 2:So as we move forward, so to be very clear, we have, uh, gross revenue retention targets and net revenue retention as a target, the upsell aspect of it. In other words, the explicit upsell target is the responsibility of the AMS and the sales team, but they work very closely with the CSM. So there are revenue lines associated with them, but very much on the retention side, which is always perceived to be a cost, right? The cost of renewal, basically, as opposed to renewal being an opportunity. Um, but as we're gonna move forward. And as I think about this, you know, from my perspective, the same KPI still apply. Um, if we decided at any point to have a cost associated with, for CS based on a certain type of engagement model, because again, going back to my original point, you cannot do the same as you've always done in charge for it, you to change how you engage and the, the, the, the sort of the tenants of NPS, the tenants of renewal and the tenants of time to value still, um, are still relevant from an individual CSM or a team CSM perspective. So whether you charge or not, you know, these are kind of the, the, the KPIs that we're focusing on. Now, if you think about renewal, it then moves from renewal of recurring subscription revenue to renewal of the CS cost. Let's say so. So for those organizations that might consider a cost, let's say a recurring 3% of the subscription fee. You know, you wanna be renewing that if you're not renewing that the CSMs are not doing their job, or you gotta do engagement model wrong. So they're, they, they're the kind of KPIs that, that I have in the past sort of experimented with. And in some cases, we've got, we did we, we got them, right. Um, but I think the more you go into the cost being spread across the journey, rather than a milestone, then you need to be very, very explicit in terms of renewal of that subscription or that, that kind of, uh, cost being a number one priority, because that is the revenue line. And that becomes the revenue line for the customer success. So obviously renewal of the subscription is equally as important, but now you've got another rev line, which is, am I renewing my customers? And are they continuing to see value in what we're offering enough to be able to pay for it? You know,
Speaker 1:I love that they obviously are thinking in that way, like, Hey, am I doing enough to drive that value? Because that's, that's what we're all really here for. That's, that's why we sign up for the jobs of, of customer success managers. And I think that's super important.
Speaker 2:And the other point I would make, again, like I say, you know, I, I I've had some experience in the past and I am, I'm, I'm always gonna continue to, to, to evolve this, um, and, you know, push, but respect, push outside in not, not inside out, but I think if, if you, if, if people are out there sort of thinking about how, how do you start this? I mean, again, I, I, I can't over emphasize the fact that everywhere is different. And, you know, as I look at GoCardless, for example, we're, we're a selfer, we started out as a very self-serve organization. So, you know, the, the, the costs associated with GoCardless, or, you know, will always be very platform, heavy subscription, kind of heavy because you subscribe to a service. If you do it yourself, it's fairly self intuitive. But I guess the key message I, I would always make is that, um, we, we just need to be, we need to think about this stuff slightly differently, and we need to think about it from our customers' lens. And so far as, you know, are they, are they, like, not assuming that they, they don't see value in what we do enough to have the conversation rather testing that hypothesis on a regular basis, but also holding ourselves to account that if we do go down that path, it bloody well better be good.
Speaker 1:Yeah. It should be. You should be if you're, if you're starting to charge and you're starting to really put this into motion, it should be something that you are ready to back, and you're ready to really go up and say, listen, we made a decision. We're gonna stand behind it. And this is what's gonna be the, the forward movement of how we run success at echo cardless or any organization. And that brings me to, uh, our, our final question really on this topic, because I think a lot of people are probably motivated and inspired to, Hey, we should really start charging in some aspect for success, but there are legacy customers that, uh, don't expect that. But plus it might be very shocking if you come to them saying, Hey, by the way, every year from now on, we're gonna be charging this much on top of your subscription for your CSM. How do you best introduce or manage legacy customers when you start charging for success?
Speaker 2:Well, I think, you know, if you look at Salesforce is kind of a good example in all of this kind of thing, you know, the, the sort of the, it goes back to the value for me. And again, I'll, I'll caveat all of this in terms of like, you know, I've had experience in the past and a couple of, you know, very specific set set of areas where, you know, the value on a, at a particular point of engagement was perceived high enough to be able to sort of really over index on that in terms of a cost. And because that cost got higher and higher, obviously the ability to, to, to offset that with revenue became more and more, uh, critical. Um, I think, I think it goes back to what I talked about earlier on, I think you have to look at the journey that these customers are on. And, you know, we talk about things like digital scale CS versus, you know, high touch CS all the time. We talk about portfolio segmentations all the time. Like none of this stuff is binary. None of this stuff is binary. The key is my, my old CEO, current CEO, actually an old one that used to talk about sort of red face tests for any, for anything that you do as an, as an organizational leader, not, not just in this context, but anything in other words, like, you know, if, if you're to explain it, you know, can you explain it credibly? And can you explain it sort of, kind of get getting awkward or getting kind of embarrassing to some degree. And I think, you know, in this instance, there, there is an onus on us as leaders to just look at our journey and really identify the phases of that journey that we feel are underserved, perhaps because of a resourcing situation or an ability to, to, to justify, you know, increased head counter cost. But that if we serve properly, we'll have a, a force multiplier impact on how our customers engage with us. And I think that's the first step I would, uh, encourage everybody to take a look at because the one kind of area I really want to really overemphasize here again. And I sound like a Paris, but, you know, you cannot do the same thing and charge for it. Like, that's not what we're talking about here. And that's where I've seen so many people fall into that trap. You cannot do the same thing and charge for it. You can completely reorg and rebuild based on having a world where there is higher value and a world where there is the same as, as is like lots of orgs do that. You know, I mean, I know, uh, you look at Zendesk, you look at Salesforce, like these are really slick organizations that do this really, really well, but underlying everything is the value that's inherent in what they offer is equitable to what the cost for that looks like. And I think that's the key message here. It is not about charging for CS. It is about value kind of the, the, the value that's inherent in however you want to engage. And then you can start to look at whether or not that merits, uh, a different pricing structure,
Speaker 1:But that's such a good key takeaway. And I love it. And I've just made a note of it, of how you cannot expect the same results doing the same thing again and again. So how can you expect your customers to start paying for something if you're doing the same things again and again, and it's so, so important, like you can't just expect, you know, net dollar attention to increase year over year. If you're not doing something different to help that metric, the same thing is when you start charging for customer success, thank you so much, pat, for sharing all those takeaways and all the insights I wanna wrap up with our quick fire question session, where I challenge everyone on the podcast to try to answer these next few questions in a sentence or less. I know it's gonna, but let's, let's go. Are you
Speaker 2:I'm ready? Go for
Speaker 1:Awesome. What do you think is next for the CS industry?
Speaker 2:Wow, that's, that's a, that's a, that's a tough one. Um, I think digital the, the way I think about CS is enterprise and scale building for enterprise and scale. And I think the two will become very conflated rather than S and I think the ability to have a scale level of engagement across your enterprise stack is going to become more and more prevalent and vice versa. So it's not going to become segmented separately. I think they're gonna come more and more together and more layered on top of each other, rather than two different modes of interacting. That's something that I I'm I'm I see myself even moving towards on a regular basis.
Speaker 1:Yeah. Maybe we're gonna have to have a different conversation about that, but, uh, we'll move on to the next question, which is, what is your favorite app either on your phone or your laptop that you cannot live without?
Speaker 2:I'd have to be Spotify. I, I live in it. Absolutely. I wouldn't survive without. Yeah.
Speaker 1:Amazing. And I think I know what you're gonna say to this next one, cuz I heard it earlier in the conversation, but what sort of compensation should a CSM get? Should it be just a base salary or a base salary plus uh, commission or bonus of some sorts?
Speaker 2:Yeah, I, I, I'm gonna get on the fence on this and say it utterly depends on the organization that you're in and the scale of the organization you're in. Uh, my, my default has always been based with variable, um, where I won't get specific is what that variable should look like. That's where you need the optionality depending on what you're trying to achieve as a business.
Speaker 1:Amazing. And the final question is what is your favorite part of customer success or being a CSM
Speaker 2:In innovation? I love it right now because I, I, I you've, you've heard when I talk about it, you know, earlier, um, I'm obsessed with not necessarily following a path and making sure that I play the ball that's in front of me. And I wanna make sure that, that we're constantly innovating and constantly trialing and, and doing so with a, a really clear customer lens and, and hopefully just surprise and to delight them, you know, with something that they never thought they needed until you had it for them. So I think that's the bit for me that I love there's no, there's no playbook here. Like really there's no, uh, there's no fixed kind of methodology that we all live by.
Speaker 1:I think it keeps us on our toes and keeps us young and challenged and whatever you wanna say, but thank you so much, pat, for your time really appreciated so many insights. If our listeners do have any other questions or follow ups or wanna get in touch, what's the best place to find you? Well,
Speaker 2:LinkedIn is where probably the second most lived in app. So, uh, outside of Spotify. So by all means drop me a line in LinkedIn, more than happy to, to have a chat with people as much as I, I, I can and share the mistakes I've made and, and what, what they shouldn't do.
Speaker 1:Thank you so much, pat really appreciate your time and speak soon.
Speaker 2:Thanks so much.
Speaker 1:Thank you for listening to the customer success channel podcast today. We hope you learn something new to take back to your team and your company. If you found value in our podcast, please make sure to give us a positive review and make sure you subscribe to our channel as we release new podcasts every month. Also, if you have any topics that you would like me to discuss in the future, or you would like to be a guest on the podcast, please feel free to reach out all my contact details are in the show notes. Thanks again for listening and tune in next time for more on customer success.