Who Should Own Customer Retention?

I think we can all agree that Customer Success’ mantra is to drive customer retention.  But is the Customer Success team fully equipped to own and drive customer retention?  Who actually owns customer retention, anyway?  

My take on the answer is nobody “owns” retention.  Why?  Because everyone owns it.  Retention depends on contributions from several teams.  The bigger topic is how to do it well when so many teams have to pitch in?

My First Experience with Customer Retention

Twenty years ago I cut my teeth in technology in the telecom industry.  This was back when Internet connectivity was moving from 14.4 modem speeds to 33.6, and modems made a horrendous sound when connecting to the Internet Service Provider.  I worked my way up the food chain over the next few years and landed in a product manager role in 2001 (I know, my age is showing. Treat it like the sun, just glance and then look away).

When I landed my Product Manager role, I was made responsible for retaining and growing our broadband subscriber base.  I had clear financial incentives to drive retention: I was making $28,000 per year and had an incentive plan that paid me <x> cents per retained subscriber.    My incentive pay was the difference between being completely broke that month or having enough money for a full tank of gas and a burger and a beer.  

I had exactly zero authority in the company, I only had the power of influence.  So I set off to decode the best way to grow my paycheck by keeping our customers subscribed (and I would need help from others to do it).  

I began to experiment with various product-based incentive programs in my company that would influence Sales to sell longer termed agreements.  I also extended some of the promotions to existing subscribers that were up for renewal in efforts to grab multi-year deals.  On the provisioning side of the house, we worked on getting new customers faster time to value (though that’s not what we called it back then).

The incentives that I created began to take customers from one year agreements to 2, 3, and 5 year agreements.  Working as a team, we created a provisioning to deploy a VoIP network in about 45 days.  At the time, this was super-fast and itself drove increased customer satisfaction and retention.  

By sure dumb luck (and for a lack of desire to eat Top Ramen and hot dogs) I had the beginnings of Customer Success!  I had managed to align the company into retaining our customers (and protecting my paycheck).

Customer Retention Begins with Alignment

As I mentioned, no one owns customer retention because EVERYBODY owns it.  There are so many actors involved:

• Marketing has to target customer segments that fit your product
• Product Management has to build the right product for the target segments
• Sales has to close deals with suitable customers
• Onboarding has to get customers off to the right start
• Customer Success has to guide customers’ successful adoption and overall success
• Customer Support has to resolve issues in a timely manner

Retention begins with alignment across these teams.  And alignment is most effectively achieved through incentives.  As illustrated through my personal story, it’s the incentives that drive (alignment) behavior.  

If you want your company to be focused on retention, you’ll need to implement incentive plans that push each department to contribute to customer success.  The challenge is that many incentive plans are more narrow and departmentally focused.

How do you balance shared retention incentives with department-specific ones?  Here are a few ideas that might help keep your teams from being out of alignment:  

Incentive Types to Consider

Marketing:  Your marketing team might be compensated by the number of leads that they can add to the top of your sales funnel.  This incentive might be more about the quantity of the leads and less about their quality.  Consider adding an incentive that relates to the lead’s progress through the later stages of the sales funnel.  As an example, pay bonuses for leads that make it to an opportunity stage of demo, or some other appropriate stage for your company.  

Sales:  Most often, sales is incentivized by new logo acquisition (or bookings).  Sometimes this inadvertently affects the quality of customer/product fit because the salesperson is only focused on getting new customers at any cost. New logo acquisition is critical; I don’t recommend upsetting that apple cart.  However, you may give thought to a double trigger incentive plan.  Perhaps pay a percentage of commission on deal closure and another percentage of commission is tied to go-live.  I just love multi-year deals, so anything that results in extended customer relationships is a win that I’d pay extra for!

Customer Support:  Support teams are sometimes incentivized on having a low case backlog or even minimizing the time spent on each call.  This may drive the support team to hurry through calls and rush the interaction with the customer just to get to the next support case.  Adding a customer satisfaction rating element could be a great way to incentivize your support team to focus on how happy they can make that customer.

Customer Success:  CSM incentives are kind of a wild card.  There are many different incentives that relate to retention.  I’ve seen CSMs incentivized by the number of customers they can work with, the number of QBRs they can perform in a quarter, revenue renewal rates, revenue expansion, NPS score, logo retention, and more.  To keep it simple, lean on renewal rates (by logo and not dollars) as the most important incentive that drives retention.  Even as others are used too.

Product Management:  This position has many masters.  The sales team wants features that help to acquire new customers, by keeping pace with the competition while providing differentiation.  The support team wants bug fixes and improvements to the product that will reduce the number of support cases.  Customer Success wants features that enable successful adoption. Consider balancing the incentives for product management that supports the needs of multiple teams. Verify the incentives by inspecting the roadmap for balance across these priorities.

More resources

If you’re interested in diving deeper into the art and science of incentives, check out Roy Saunderson.  He has said that incentives are a combination of behavioral science and pure economics.  It’s not alway easy to set up the right incentive program for each team.  Keeping the end game in sight is the best policy to get full company alignment around your customer goals.