For context, I’m defining Customer Success (CS) professional as “non-commercial” in they sense that they influence revenue but are not directly responsible for executing commercial transaction. If CSMs are directly commercially responsible for renewals and/or expansion, then I consider them to be Account Managers (covered elsewhere).
Customer Success Compensation
- As of June 2023, customer success OTE is as follows (source: Glassdoor)
- Customer Success Manager (CSM): $95K with a range of $75K to $125K and a 75%/25% split
- The primary variable compensation metric is net retention rate.
- Most commonly, companies pro-rate bonuses relative to target albeit with a threshold (ex: 90% NDR) below which the bonus is zero. The use of accelerators is uncommon.
- Alternatively, bonuses may be based on tiers such as the following:
(note: one may have more tiers; one may have accelerators up to 200%)- < 90% NRR : 0% payout
- 90% to 99% : 50%
- 100% to 115% : 100%
- > 115% : 150%
- Other variable compensation metrics (in descending order of use):
- company performance (ex: overall net increase in ARR)
- NDR
- GDR
- NPS
| Locale | Low ($K) | Typical ($K) | High ($K) |
|---|---|---|---|
| Austin | 78 | 99 | 128 |
| Boston | 80 | 102 | 133 |
| New York | 89 | 114 | 147 |
| San Francisco | 93 | 118 | 154 |
| Salt Lake City | 76 | 97 | 127 |
Compensating CSMs for Late Renewals
CSMs are usually paid a commission or bonus based on retention, typically net dollar retention. They may have a dollar ($) or percentage (%) target. Things can get a little bit complicated for late renewals (aka boomerangs, win-backs, or reacquired customers.)
Here, I define a late renewal as a contract with a lapse in recognized revenue. I am this precise to ignore two situations. First, instances where vendors continue service as an act of goodwill; in other words, service status is irrelevant. Second, instances where a late renewal is back-dated to the on-time renewal date such that there is no lapse in revenue recognition. Incidentally, these two situations tend to occur simultaneously.
Companies typically define a time window during which a reacquired customer is treated as a late renewal rather than a new logo. A typical window is 180 days (6 mos). Bookings after the window are treated as new logos. And, organizations do make exceptions which should be documented for consistent treatment in the future.
For late renewals inside the window, organizations award anything between 0% and 100%. Full credit is the most common especially since renewals are a team sport spanning customer success, sales, product, marketing, finance, legal, and other functions. 100% credit also makes commission account much less complex.
That being said, organizations may consider reduced quota credit to encourage on-time renewals. Here are some example quota credit tiers:
- 0-30 days late: 75%
- 31 to 90 days late: 50%
- 91 to 180 days late: 25%