Who’s heard this one before: “What financial impact did the CSMs have on our business?”? I dreaded this question because I couldn’t answer it for 18 months. I had hundreds of growth plans, saves from retention SWAT, aggregate renewal rates, and consumption data, but I had no systematic way to determine if my CSMs were having a positive impact on revenue. CS kept getting compared to sales where you can measure in quarter signings and revenue. Reality is that CS is about your future signings and revenue if it’s working. However, leaders wanted to see impact now vs later so I needed to respond while staying grounded in our purpose.
It was the beginning of the pandemic (April 2020), and I read every Ryan Holiday book on Stoicism. I came across the quote from Marcus Aurerlius, “What stands in the way becomes the way”, and I knew I had to stop dodging this question. I was also confident that we had an impact on revenue. Why? I was really getting our inputs down systematically: learning, practices, and methods. Inputs which drive outputs.
There is no single way to measure CSM impact, but here’s a method for you to consider:
1. Pick your metric to measure regularly. Examples include: Renewal Dollars, Renewal Rates, NRR, Revenue. I chose Revenue.
2. Apply the metric to criteria. For example, you could measure Revenue against Regions, Products, or Solution areas. I chose Revenue growth by Region.
3. Pull the current and previous period revenue where you have CSM product coverage on customers vs where you do not have CSM product coverage on customers. This has to be measured against the same products. In other words, if you cover products A, B, C on your customer base, you need to compare those exact same products (A, B, C) where you do not have CSMs on customers.
Here is a mocked up example with the method applied. It reads like this ... “CSM Assigned accounts grew 20% YTY vs CSM Unassigned accounts which declined 33% YTY”.
If you grew 20% on the CSM Unassigned accounts by applying CSMs, you’d be up $8.6M vs down $14M. So the question is, “Shouldn’t we invest in more CSMs?” ... YES! That’s your impact.
To build this, you or your analyst will need access to CSM coverage data including customer ID, CSM ID on those customers, products covered by the CSM at the customer, and associated revenue. This data likely lives in different systems such as your financial ledger, Gainsight, and Salesforce. Find a data junkie from your Data and Insights Practice to help you.
Some advice:
CS is a team sport. To say 1 person (a CSM) contributed to customer revenue growth may not be (is highly unlikely) true. Recognize the collaboration of the CSM and other teams who contributed to the success. Consider positioning the impact as correlation vs causation.
Don’t dodge this question. Your organization can put a dollar anywhere: Sales, Marketing, CS, R&D. You owe it to the organization to show the financial impact your CSMs have on the business. If it’s not positive, then get to the root cause and shift. If it is positive, double down on the investment.
When someone questions this model, I ask them for a better one. When I get one, I’ll share it.
I’d love to hear how you are tracking CSM financial impact.
Janine
CS contribution brings revenue growth, an output focused approach. Isn’t it a preventive care group ensuring healthy growing accounts, helping struggling accounts, addressing their pain points, performing early diagnosing of the problem areas and treating the same by regular screening. Metrics around these, strengthens the CS’s contribution to the organization’s growth.
One might debate that the CS team could skew the numbers in their favor by prioritizing healthy accounts over unhealthy ones. I believe YTY revenue growth of CS covered accounts is part and parcel to the larger CS equation. This CS equation would be inclusive of NPS+revenue growth+Product/offering expansion+support tickets+sentiment in a weighted formula. The CS equation would be demonstrated alongside the snapshots of revenue and other required reporting. With the hope that one day, the CS equation takes on priority.