Defining the right Customer Success Manager (CSM)-to-account ratio is a nuanced challenge. This applies to any customer success focused role assigned a portfolio of accounts. Getting it wrong impacts your Net Revenue Retention (NRR) performance, customer experience, and operational efficiency. Traditionally, companies have set CSM ratios based on revenue tiers or account sizes, yet these methods are woefully simplistic when considering the complexity of driving customer adoption, retention and expansion in B2B.
Establishing effective yet efficient ratios requires aligning your CSM headcount with the mechanics of your customer lifecycle design including the definition of the CSM role in your company and the specific activities that achieve successful product adoption with your customers.
This article explores why a lifecycle design-driven approach is more effective, how to define ratios based on required customer engagement activities, and the roles that segmentation and automation play in optimizing these ratios.
The Shortcomings of Revenue-Based Ratios
Sizing CSM-to-account ratios based on revenue metrics is an exclusively inward-looking perspective. This is not to say that the economic value of customers relative to the cost of your internal resources such as CSMs is wrong to consider, however, it can’t be the only consideration for defining your ratios.
Revenue-based ratios often lead to overstretched CSMs who burn out and quit, and under-supported customers who fail to achieve value and churn. For instance, a team of enterprise CSMs each handling 15 accounts valued between $500k-1m ARR could each have a completely different workload depending on factors such as where each account is in the customer lifecycle, the outcomes each account is targeting, the product(s) each account owns that make up their ARR value, and the industry vertical the account belongs to.
Consider three account profiles, each generating approximately the same ARR but differing significantly in terms of their customer lifecycle stages, the products they own, their organizational complexity, their industry requirements, and their target outcomes.
These variables shape the differences in the type and amount of CSM involvement required for each account profile to drive successful adoption, retention, and expansion, despite the similarity in ARR value. Here is an example:
Account Profile 1: Early Adoption
- Industry Vertical: Financial Services, requiring stringent compliance with their data and security policies.
- Organizational Complexity: Highly structured top-down organization
- Next Target Outcome: Achieve full deployment within 90 days and deliver real-time insights to senior leadership by the next quarterly business review.
- Adoption Stage/Maturity: Onboarding with initial implementation underway.
- Adoption Activities Needed:
- Data migration and integration with existing systems.
- Establishing dashboards for the customer’s KPIs.
- Providing training to a diverse set of business and technical users.
Account Profile 2: Expanding Usage
- Industry Vertical: Retail, with a focus on optimizing supply chain collaboration.
- Organizational Complexity: Cross-functional teams spanning procurement, logistics, and store operations.
- Next Target Outcome: Increase usage of a recently purchased second product by 30% within six months
- Adoption Stage/Maturity: Mid-level maturity with one product well adopted and low adoption of a second product
- Adoption Activities Needed:
- Enable deeper adoption of the underutilized product through use case workshops.
- Encourage cross-departmental collaboration for the fully adopted product.
- Identify success stories to drive advocacy.
Account Profile 3: Mature Adoption with Renewal at Risk
- Industry Vertical: Healthcare, demanding industry-compliant reporting
- Organizational Complexity: Large organization with fragmented decision-making across departments.
- Next Target Outcome: Restore confidence that the product will keep up with new industry regulations.
- Adoption Stage/Maturity: High maturity but plateaued usage; renewal is at risk due to perceived lack of innovation.
- Adoption Activities Needed:
- Showcase advanced features and innovation to maintain customer interest.
- Provide tailored insights on how the product supports new industry-specific demands.
- Address feedback on performance and response times.
Customer Lifecycle Design as the Foundation For Ratios
Key to defining effective CSM-to-account ratios is a deep understanding of your customer lifecycle design. Implement ratios that align with the design of the why, what, when, who, and how behind how customers are acquired, successful (adopt), renewed, and expanded.
Establishing this understanding involves integrating three methodologies: customer journey mapping, service blueprinting, and process engineering. Together, these methodologies enable a comprehensive foundation for defining CSM ratios, ensuring that the demands of both customer-facing activities and internal processes are aligned to CSM availability across the entire customer lifetime.
To get the ball rolling in your team, start here:
1. Activity Mapping: Identify the activities that drive success in each lifecycle stage. For instance, during onboarding, a CSM may need to conduct weekly calls, set up success metrics, and train the customers’ teams. During the adoption phase, they may focus on outcome planning and reviews, stakeholder management and strategic alignment sessions. Each of these activities takes time, and estimating that time accurately allows companies to gauge the realistic number of accounts a CSM can handle without compromising quality.
2. Determine CSM Competencies: Determine the specific skills required at each stage of the lifecycle. For example, the onboarding phase may require technical expertise, while expansion or renewal stages may need strategic advisory skills. By aligning these competencies with the CSM’s workload, you can match the right resources with the right customer needs and avoid overloading CSMs with tasks outside their skill set.
3. Estimate Time Per Activity: Calculate the time required for each lifecycle activity to get a realistic picture of the CSM workload. Where can automation and digital self-service drive scale?
Keeping Ratios Optimal
Implementing CSM-to-Account ratios is not a one-time task but a continuous process that involves ongoing monitoring, feedback, and adjustments. Here are three key practices to keep the ratios optimal:
1. Create a Feedback Loop: Establish a continuous feedback loop involving customer insights, CSM feedback, and leadership review. This loop ensures that ratios remain aligned with customer needs, team capacity, and company goals.
2. Incorporate Digital Engagement: Use digital tools to manage routine tasks or provide one-to-many support for lower-touch accounts. Automation can handle routine support functions, giving CSMs more time for strategic conversations and high-touch support.
3. Flexible Ratios for Growth: As products evolve and customer needs shift, ratios should adapt. Lifecycle-driven ratios enable a dynamic model that can expand or contract based on company and market needs.
Conclusion
In recurring revenue B2B companies, the path to successful customers and best-in-class NRR is enabled by understanding and aligning resources with the customer lifecycle design. Defining CSM-to-account ratios based on lifecycle activities ensures that each customer receives the right engagement at the right level at the right time. This lifecycle-driven approach will empower you to optimize CSM resources, increase customer value, and ultimately drive retention and growth.
Call to Action: Ready to transform your CSM ratios? Valuize enables companies to align customer success resources with lifecycle requirements. Discover how Valuize, with the power of ValueFlow, can support your customer success strategy.
