How to Structure Your CSM Compensation

If your company is struggling with creating an effective customer success compensation strategy, you are not alone.

Based on the results from Totango’s 2016 Customer Success Salary Survey, companies are continuing to shift more revenue responsibility to customer success. Individual customer success managers (CSMs) are being challenged to deliver more value by predictably growing their customer portfolio. In order to drive the right business outcomes, you should make sure that your compensation plan incentivizes the right behaviors for the team.

Creating the right plan

Totango strongly recommends an 80% base and 20% bonus compensation plan for CSMs. The variable component of the plan is an important way to motivate your team to focus and prioritize the programs that go beyond customer happiness and actually drive the company revenue over time. Make sure your bonus criteria is easy-to-understand and tailored to each CSM, as companies sometimes have CSMs focus specifically on either low-touch or key accounts.

As you consider the metrics to use for variable compensation, remember that the primary objective of a CSM is to retain and grow their customer portfolio over time. Balance how you reward quick revenue wins and long-term revenue potential to prevent your team from only thinking in the short-term.

At Totango, we believe the following four categories are excellent metrics to use in determining variable compensation:

  • Retention: You can do periodic or quarterly pay outs based on a percentage of the overall portfolio account value.
  • Portfolio Score: Reward month-over-month improvements for a CSM’s entire portfolio to encourage more strategic 1:many programs and activities.
  • Upsell: While the CSM should not be running the upsell conversation, they should be motivated to get accounts successfully prepared and interested.
  • Reference-ability: Cultivating more strong customers can drive significant value for marketing and sales enablement.

Want to learn more about team compensation? Get industry benchmarks for CSM compensation in our 2018 Salary Survey and check out this great presentation from Customer Success Summit 2016.

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