As the SaaS industry matures, business models mature as well – including pricing. How can Customer Success Managers manage to stay relevant?

Masha

Well, maybe for the context of the blog, but also for us, tell us a little bit about you. Tell us a little bit about your role at Sendbird. But also maybe how you got into Customer Success generally.

YK

Yeah, sure, sure. So I head up the Customer Experience org at Sendbird. It’s a new org within Sendbird as well. So, I’ll give you the structure of my organization. So I have a few remits. One is Customer Success. So I have a Global Customer Success team that is within the CX organization. And then next to it, I have a Global Self Service team that works on our self service customers. And then thirdly, I have a Renewals head, who oversees our both Sales and post-sales renewal progress. So it works organizationally across all revenue teams, but sits within my organization. And then I have the Solutions Engineering Group, which works on our high touch customers, debugging, implementation and integration work. Then we have a separate tech support team who is based on like SLAs and frontline of touch points. And then a strategy function, who basically does a lot of kind of PMO plus cross functional strategic initiatives, which becomes harder and harder to do as the org expands. It’s basically a sort of jack of all trades type of function that helps us maneuver strategically, when everybody has a focused vertical, in some sense silo. So sometimes create new silos, but sometimes break the silo. That’s the CX org. Previously—so this org was only formed in January of this year. Prior to it, we had a Head of Customer Success. I mean, he’s still on my team. We had a CS leader, CSM leader who reported into Sales. And we had Solutions Engineering leader who reported into our CTO. So now both of them report into to me. So previously, I headed up Sales at Sendbird. So as our renewal base grew, and our existing revenue base grew, we started to shift some focus to creating the compound interest motion, in a revenue perspective. So that was the organizational transformation. So I’ve been with Sendbird for five years, slightly over now. And we’ve been in business for about six years. So we’ve had our tough times. We were actually incorporated in 2013, doing something completely different, b2c at that point. And then in 2016, we pivoted into Sendbird got into YC. The previous year, we flipped the firm from Korea to the States. So, yeah, I’d say still dark tunnel pretty much until 2018. So Sendbird brand was born in q4 2015. When we’re applying for Y Combinator looking for new brand and name to really take the global footprint from a Korean startup. And since then, it has worked out well, but I think for us, until we got our Series A, it was a long, it was almost a moonshot. [Laughs]

Masha

What a journey! That is amazing. Thank you for sharing.

YK

Yeah, sure. I mean, that’s just a bit, you know, that’s my five years here. I’m a CS and Finance guy by background. But now I think Sendbird is more so my background than anything, so I’ll stop at that. [Laughs]

Masha

Very cool. And do you report directly into the CEO then?

YK

No, I report to the CRO.

Masha

Got it. Okay. Yeah. So this was going to be my next sort of maybe controversial question. How are you folks organized in terms of where you report into? But also, maybe, from an opinion standpoint, like, in what you’ve seen, what’s the best way to organize Customer Success for success? And what’s the worst?

YK

Yeah, I think it’s absolutely stage two dependent. Mainly staged on product dependent. You know, how live is your product? How easy is it to integrate? But also, how easy is it to replace? And is onboarding more important? Or is ongoing relationship more important? And also dependent on your pricing model and sales incentive structure. So how do you price your product? Do you pay by see? Do you pay by usage? Is it by consumption? Or is it by subscription? And do you pay your pre-sales based on what is it, you know, is it contract? Or is it actual cash flow in? Or is it the actual usage? And it’s the difference of CR versus AR versus cash flow. And I mean, I know, it’s ironic that I’m brought bringing up sales comp here and pricing when you’re asking me where’s the right place to put the CS org, but this is really important, because I think a lot of times, people don’t get this right. And try to look to set up Customer Success to solve the problem as a glue. So if you create an organization that—if you create some organization at a startup, it’s going to add value. But it’s a self fulfilling prophecy, because you’re a 30 people org, you add two people, they’re going to help you, regardless of where you put them. So people can easily get into a mistake of thinking that a CSM’s been placed right, and we’re instantly adding value. But what you may get into a trouble is org structure that hits a problem at scale. So once you start to hit over, I think, somewhere around 10 to 15 million in ARR. And your customer base is more than a few 100, that’s when you really start to realize some of these don’t work in conjunction. Because now Sales is really driving sales behavior. And now the glue expansion part of work. Let’s say, you know, previously, because before CS existed, Sales did all pre-sales, signing, onboarding.

Masha

Post-sale.

YK

Yeah. And Customer Success comes in, they work on large accounts, it’s the same story for most companies. And then you start to see that CSMs have to expand into it so that sales can focus more on new customers bringing on. So this is where you start to see, pricing model usually doesn’t change that flexibly compared to the rest of the org structure allocation on who takes care of the customer from pre to post to renewal. So that’s where I think this pricing model and sales comm related to account handle or timing starts to really dictate where the Customer Success organization needs to sit. And a lot of times—I think emailed you around—

Masha

Yeah, I was going to ask about that.

YK

Snowflake. Yeah, it’s a really controversial topic. But the CSM, or can be seen very differently at very different companies because of that part. A lot of times, it’s a glue and you always need glue. But where does that glue really contribute to can be different. And some organizations have CSMs actually run renewals and up-sells. Some organizations don’t, it’s a pure CSM Customer Success Plan. At Sendbird, it’s more so on the pure Customer Success side. And there are pros and cons to it, there is no one absolute winner. But I think if CSMs do run renewals separately, do run up-sell separately. You have a lot of freedom to move this organization wherever you want. It can be CEO direct reporting, can be under CRO. I’d say under VP of Sales might be too complex of a structure for VP of Sales to handle at that point. But if you have a CRO level executive, at that point you have a lot of freedom. And also what you will see is when does Chief Customer Officer get created? So ultimately, until a Chief Customer Officer becomes a position inside your company, Customer Success, organization, or Customer Experience, do report into Sales or sometimes to COOs.

Masha

Yeah, we’ve seen Operations too.

YK

Yeah, there’s a layer between CEO to the organization. Initially, I reported to our CEO, mainly, when things were at kind of a 911 stage. We got to revamp a few things very, very quickly. We don’t have time to go through structures. And then once we come to some form of stage of stabilization, we are now part of the revenue organization.

Masha

I don’t know if you’ve thought about this—and I don’t want to put you on the spot in terms of like a framework—but can you say a little bit more about like, okay, if you’re consumption pricing, this is probably where your CS org should live. Or if you’re focused more on new business, you know, what are those triggers? Because you kind of mentioned that the pricing models should potentially dictate the location. So what are those breaking points?

YK

Yeah, if you’re consumption based, a lot of the Customer Success work gets on to the account owner. And I think, increasingly, I see preference towards that model. Because that means you sell what you know the customer can use. And the customer buys when they are using it more. And then they pay when they use it. So ideologically, this is really perfect alignment. But what’s really difficult about this for SaaS companies is one, you gain no predictability in your revenue stream. It’s hard to predict usage. Not all companies can afford a really well done data warehouse from day one. That’s just a lot of money. Right? So at some point, you have to leverage systems and processes to gain predictability. And the other one is consumption only pricing usually has bad gross margins. Because everything gets used. There’s no—like Snowflake is a good example. Snowflake is not known for high gross margins. But if you think about if Snowflake did only subscriptions, they will have really high gross margins. Yet they might have less high revenue or less higher NRR because we’re selling a lot of it upfront. So it’s really a financial strategy decision on you aiming for high NRR. The easiest way to get highest NRR is to start small. But starting small might have you missed the top line for startups. So it’s a really balanced out, gray area of decision making. But ultimately customers want consumption pricing. They want to pay for what they use and hopefully after they’ve used it, not before. So the kind of in-between model is usually the bucket model where you buy upfront and then—it’s the phone card model.

Masha

And so you prepay until some volume and then the use that up, and then you prepay for the next kind of bucket. Yeah, gotcha.

YK

Yeah, I think when SaaS tools are really consumer SaaS tools, like you’re buying one seat for your Adobe studio, it’s very clear cut. But nowadays, with APIs in place, it’s not that crystal clear. So this is where I think where SaaS traditional model on pricing part is becoming harder and harder to hold the ground of, especially if you’re a developer centric tool.  So I don’t think I have a good structure answer for you. But if it’s consumption model, I definitely see much more Customer Success, the usage part, get levied on to be Sales account owners. So usually Account Managers rather than Account Executives. They would be really geared up on driving usage and adoption. Customer success, in that case, a lot of the times comes in as a kind of a professional service on a project by project basis. Or on a retainer model with a TAM model, like Technical Account Management. But then, at that point, that TAM isn’t really Customer Success. It’s closer to Solutions Engineering, or Solutions Architects. Yeah, so at that point, so on a strict consumption model, and when product market fit is really high, and the company has really high confidence that a customer can do most of the job on their own, and the product does most of the job, like Snowflake. You will start to see that get more transferred over to Account Management. So it’s almost like you don’t have Customer Success managers.

Masha

Right, they’re made redundant.

YK

Yes, yes. And now the AM can actually do both. They would do the contract and hold the relationship, yet utilize the product and surrounding resources to still drive adoption. And you have customer education program departments that help you do that more organically regardless, and there’s a community that supports the customers. So it depends on a maturity level. But until then, until you get to that level, I think a lot of it is, you do have to find new procedures to write our Customer Success plans, because customers don’t have a community or an education department or a lot of blogs about your product on how to get started properly, to adoption. And for your high customers, especially high AR customers especially, they are venturing into new ranges of usages, and they’re going to push your product to expand. And there is no playbook that you know. So someone has to be at the forefront consulting the framework. So really, I think, in the beginning stages, regardless of their pricing model, it has to be there very strongly to handle the customer towards success. But later towards, if you are able to take the journey, and venture into consumption pricing, and can take the hit on gross margin as a company, you do start to see that redundancies kind of come down.

Masha

Super interesting. And so maybe just like one poke at this more, because I do want to move on to other questions. It’s just this is such a fascinating topic. Where do these kind of expansions live? What about new product introduction? Or you’ve reached product market fit on this, but what is the next stage?

YK

Yes. So I think—when you mean expansion, is it the same product expanding in revenue? Or is it you sold Product A and then you have to go to Product B?

Masha

I guess I’m kind of thinking about—so it sounds like an Account Manager or whomever, I guess, should be able to sell more of the same product in the consumption model, right? And then the customer can decide when they want to basically use more, and it just works like that. I’m more thinking about, okay, you’ve got product market fit on this, but now, you’ve identified potentially opportunities, or maybe there are opportunities to be identified that are kind of adjacent for you to create new products. Who kind of handles that piece?

YK

I’ll tell you, at Sendbird stage, that still sits with the Account Manager mainly.

Masha

Okay, interesting.

YK

And probably even so for a while. The reason why I say this is because usually until 100 million to 200 million ARR, you are a one product company.

Masha

Yeah, you’re selling one thing.

YK

Yeah. And I haven’t done the second major product company level. Like, we have two other products. We have customer support solution cost in progress. And then we have VoIP solution for voice and video. But they’re still so early in stage, that it’s not a place where we can tap the existing go-to-market system and build a pipeline from it. It’s still where the PM needs to attend to every sales calls at watch every support ticket. It’s still too early. So I can’t really speak too much of the latter stage on a personal experience of building it out. But even on that front, when I purchase tools that way, like Salesforce, we use Salesforce, we also use ServiceDesk, we also use Quip. I think at that point, it’s who owns relationship, and then who owns vertical products, and depending on the maturity of the organization. But I haven’t seen Customer Success pitch new products to customers. Because at the end of the day, you will have Sales that run the quota. So the Customer Success might be the ones introducing it, bringing to awareness, because you know the business to make the Customer Successful. But at the end of the day, the mechanism of how to close it out, usually you bring back Sales.

Masha

Gotcha. Cool. That’s great. I want to be respectful of your time. I know we only have about five minutes left. And I did want to maybe rapid fire, just ask a couple of questions. I guess one is, and we’ve already been talking about this, but maybe in a couple of sentences. How have you seen the role of Customer Success, I guess, not just specific to Sendbird, but more broadly across the SaaS industry, how have you seen it evolve over the last couple years?

YK

Yeah, I’d say one of the biggest evolution is it’s become bigger, just in general. In 2016, 2017, there were only like one or two Customer Success tools. And then I don’t know what else was really there, there were just like beta prototypes. Now, you can already see the industry growth is just big. And before, globally speaking, you couldn’t find Customer Success manager positions outside of the US a lot. Now, it’s a pretty standardized, go-to-market function. So it’s the sheer expansion of it, the weight of it, is I think the biggest change. If you look at how many Customer Success organizations are out there today versus just last year or the previous year, that’s I’d say, the biggest growth. Still, the Customer Success playbook is largely in defining moments, coming from Customer Support to Success. It’s still that transformation phase. I don’t think there’s one trend that really I can point out to. But at the same time as it expands, people are consciously thinking about what is the ultimate aim of it, what’s the ultimate delivery, you can’t miss out on formula Customer Success organization. But there are interesting things we see, like I don’t see companies talking about NPS a lot anymore for Customer Success. CS, absolutely. NPS, CSAT, we used to hear a lot. Today a report NPS but I never talked about it. Really, it’s more like a product feedback loop channel. It’s not about a Customer Success organization’s work. While we own it, it’s more about, are you constantly having BOC pipeline to it? So, yeah, I don’t know if that was a helpful answer.

Masha

No, no, that’s great.

YK

I did want to talk about—I just wanted to get one request. So the topic that we talked about a lot is very controversial. So before you publish, I think it’d be great if we can agree on verbage.

Masha

For sure. I’m actually just totally gonna send you, once I go through the transcript, I’ll send it over to you and you can decide what you’re comfortable with and not just like hack at it. I was gonna ask you What’s your most controversial opinion, but maybe this is it. So I love it. But I will definitely send it to you first and then you can decide. Definitely want to make sure you’re comfortable. Maybe in the last couple of minutes, how do you see, I guess if and whatever this is all hypothesis, right? But like if you had a crystal ball, how do you see the role continuing to change over the next, let’s say, five years? What maybe early early signal?

YK

I think the really main driver on that one is—I see two main drivers. It’s general pricing model evolution for software companies. You’re going to get customer trend pressure here, either to go seats, either to go subscriptions, either to go like consumption, and depending that is going to be heavily swaying, what Customer Success has to do. Is it consumption? Or is that Sales? Or is it Professional Services? The other part is subject matter expertise. So this is going to, in my view depend really heavily on the branding of the role. One of the new things that I’m seeing is Customer Success advisor positions. That sounds very generic, but actually, the position for CS advisors, how you hire is you hire your customer. So if you are a Customer Success advisor at—I mean we don’t have it yet, it’s a function I’m planning for next year, you would have to be a Product Manager, who is from our core industries, or you are an Engineering Manager from our core industries, where you know, how to use API’s to develop things, or you know, how to productize communication features. So you would actually meet the customer, in a way, it’s not like, ‘Hey, I have an onboarding playbook for you.’ But it will be more like, ‘Hey, why did you not do X? What’d you do in your last project?’ Today, if you mean most Sales or Customer Success, they are knowledgeable about their product, but they may not be as knowledgeable about your job. Like what was your path, career path, being a Product Manager? Like, I don’t know. I know, what you want, you’re gonna ask me about my product in our industry, but I don’t know where you came from, what that would have meant, if you’re a junior product manager or senior product manager. And I’ve never done that job in person. But we’re seeing that actually, there is quite a bit of like that space to feel in terms of bringing on subject matter experts inside your company. As you go up, so as you see a lot of the new API companies and SaaS companies, still a lot of us haven’t crossed the chasm per se. We’re not 100 million AR or 200 million AR. A lot of us are still sub 100 million. So as you see, most more of us cross the chasm, you will see us going up-market and when you go up-market, you start to become difficult to be industry agnostic. So you need a doctor, if you are a medical industry service. You need a scientist, if you are in you know, natural science or if it’s for an education, you need a teacher, or you need someone from the university to come join you, and advise your clients. Not just your product and services. So that is one trend we’re seeing as companies start to scale up-market.

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