Few topics get a reaction faster than asking:
“Who should own renewals? Customer success or sales?”
Leadership teams on either side of the equation have strong opinions that will vary from leader to leader. Some customer success teams are very protective of their client relationships and don’t want a salesperson pressuring their customer into a purchase they may not need. Sales will prospect where there are both opportunity and incentive, making the removal of potential income a heated topic.
Whether you assign renewals to customer success or sales will depend on your company culture, business strategy, the complexity of the product, and the sales cycle's length. Whether or not the team succeeds depends on the infrastructure you put in place to support your objective.
Companies have different priorities depending on what stage they are in. Companies fresh out of their seed round are focused on obtaining new customers. This attitude continues through at least the first few funding rounds. By the time a company goes public, they should have transitioned to focusing equally on retention and acquisition.
When new customer acquisition takes priority over expansion, sales compensation will be structured to favor net new sales over any other business stream. The sales profile used in hiring will favor “hunters” over “farmers.” Hunters are skilled at acquiring new targets and selling them on product features and success stories. Farmers, on the other hand, prioritize relationships over opportunistic selling. They know that in the long run, a customer will be more likely to churn if they feel like they’re tricked into buying something they don’t need, and they’re cautious about upsells.
While there may be a few farmers in the young startup’s sales crowd, they typically don’t last long. They don’t have the existing customer base to mine for opportunities necessary to make a living. They miss their quota and are let go, or they realize they can make better money elsewhere.
The hunter mentality doesn’t lend well to renewal management. They know they can only manage so many opportunities and prioritize the sales that more efficiently add up to hitting quota The compensation structure may not prioritize renewals because that’s not where the biggest concern is. Your operations team will end up tracking and managing renewals for your sales team if you don’t move the responsibility to customer success or create an account management role that’s more sustainable (for example, one national account manager focused on renewals when the customer count is below 50).
Sometimes companies are structured with customer success reporting into sales. This may change their priorities and encourage upselling. Or it may set them up for being largely ignored by a sales executive who is under pressure to hit new logo targets.
Company culture will play into whether or not your plans for renewals are accepted or rejected. Leadership will have strong opinions, and it’s wise to measure how strong they feel about the topic. I’ve watched leaders sabotage efforts because they felt the wrong team was selected for the role. They either de-prioritized the order to upsell or made it very clear to their subordinates that they thought the decision was foolish.
Either of these attitudes poisons the well before your plan has a chance to take hold.
If your support organization is structured to run lean, adding complex sales to their current responsibilities doesn't make sense. If a sales engineer needs to be called in to explain elements and handle a technical review, consider leaving the sale with the sales team.
Another layer of complexity has nothing to do with the product. Some customers are just difficult, while others have a lot of potential for upselling.
In the case of difficult clients, whoever has a better relationship with the client should manage renewals and expansions (likely the customer success manager) while getting support from the other team member. In the case of high yield customers, sales should run point with customer success closely involved.
Clear communication between the teams is a must for either scenario.
Splitting responsibilities is perfectly acceptable if you incentivize the teams properly, and there are clear roles and responsibilities defined upfront.
If the salesperson is compensated for upsells and renewals, they should be responsible for communication, organizing meetings, taking notes, and structuring proposals.
If customer success is running point with a difficult customer, they should take the lead and only rely on the salesperson to suggest the deal structure and create contracts. Compensation should be split, heavily favoring the customer success representative.
Product complexity often determines how long the sales cycle will take. Upsells for complex products can take months, while renewals can merely require the customer to click a button. In the case of simple renewals, customer success may be responsible for merely reminding the customer and following up as the due date looms.
Suppose a considerable amount of time is spent scheduling, tailoring pitch decks, and recruiting the proper technical experts to present during a complex build. In that case, it doesn't make sense to have a customer success representative run point. Consider how many customers they could be assisting during those hours.
We’ve outlined considerations that may make or break your plan for renewals. If you don’t put as much energy into planning the supporting infrastructure, you may as well leave everything as it is today.
Compensation plans are excellent at driving behavior. Unfortunately, what the person writing the compensation plan intends to be motivating may backfire.
Plan on people talking about what they make. If a customer success manager has a higher base salary and lower commission rate than sales, they may still protest if you aren’t extremely clear about why your rates don’t match the sales plan. Then again, they may only focus on the fact they aren’t making the same amount in that one instance.
If you split responsibilities for renewals and/or expansions across sales and customer success, make sure to structure their compensation accordingly. If the customer success representative traditionally runs lead, they should get the majority of pay. Make sure you clearly define what amount of effort constitutes a “majority” lead. The last thing you want to be stuck doing is approving deal split approvals every time because the rates fluctuate.
Don’t make the mistake of not compensating your customer success team if you expect them to sell, even if it’s an easy renewal. If you think no commission will lead to people considering the long time value of clients over their quota, you’re right. Chances are very good it will also build resentment.
Before rolling out a compensation plan, make sure their management teams agree with the plan. They’ll need to meet one-on-one with employees to review the plan and get sign-off from the representative. The last thing you want is an angry leader suggesting they don’t sign the plan because it’s unfair.
Once the leadership teams agree on the new renewal and expansion plan, they should be asked to help define each step of the sales cycle and who is responsible for what. Customer communication, scheduling, presentations, contracts, and follow-up tasks should be given a clear owner.
Make sure people are thinking from the perspective of a customer. The fewer contact points, the less confusing a sales cycle will be. When possible, make one person responsible for seeing the sales cycle through.
Make sure everyone involved in renewals and/or expansions understands exactly what is expected of them, can easily see how commissions are calculated and split, and is kept informed of any exceptions.
Finally, keep the feedback loop on the process open. If there are problems with the model, it’s important to understand the cause as soon as possible.
Sales kick-offs are more than an opportunity to come together, they solidify plans and expectations while setting a tone and building on the past
Compensation planning is hard, and with inflation on the rise, it’s only getting harder. This SDR compensation calculator will help you build a plan, fast.