Myth: CSMs spend most of their time on relationship building

With Luke Diaz, Director of Customer Success at AppZen, and Founder of DBT Ventures

Munish Gandhi

In Episode 7 of our series, we're excited to be speaking with Luke Diaz, a dynamic leader passionate about building and leading high-performance Customer Success organizations. With over 12 years of experience, Luke has a track record of accelerating product adoption, driving tangible business impact for customers, and achieving best-in-class Gross and Net Retention Rates (defined as 90-95%, and 120-130%, respectively)

Luke's wealth of experience spanning people, processes, and outcomes in the realm of Customer Success shines as he shares insights from his journey, offers advice for CS practitioners, and speaks about his unwavering focus on building meaningful customer relationships.

Let’s get right to it.

1. What is a myth about Customer Success that you want to bust?

That Customer Success Managers spends most of their time building relationships. In reality, many CSMs today aren’t spending enough time on relationship building.
The reason for this is they are often pulled in all directions, from internal meetings to never-ending emails, admin work, updating systems, etc. 

Of the hundreds of CSMs I’ve met or managed, the most time I’ve seen any of them spend actually building relationships via 1:1 meetings with customers is 37%—or about 3 hours per day—consistently, over many quarters.

Today I see a lot of CSMs defaulting to email as their primary means of relationship building. While this might be appropriate for some business models and high-scale segments, I don’t think it differentiates the company, and leaves a lot of knowledge and value on the table. 

2. How did you find your way to Customer Success?

The first half of my career was in finance – I started my career as a lowly associate, and later grew into a partner at a long/short equity hedge fund in China. But I didn’t love it.  

By serendipity, I cracked into CS about 12 years ago after a chance conversation with the then Head of Marketing at a company called Optimizely. He told me their sales were booming, but there was a gap when it came to taking care of customers and handling renewals. 
They took a chance on me, and I joined Optimizely as their first CSM.

Since then, I’ve been building customer success teams and have had the privilege of scaling revenue to above $100M, three times over. 

3. What advice do you have for CSMs early in their career?

Resist the temptation to get too internally focused, such as obsessing over OKRs and documentation. Or getting bogged down in administrative work that doesn't directly enhance the customer experience

Instead, zoom out and prioritize the customer. Think of Jeff Bezos' approach of always having the customer in the room. Don't just focus on the company's needs. Internally, ask tough questions like, "How does this impact our customers?" and keep the customer at the center of every conversation. Externally, hone your craft at the skill and art of discovery. Questions are your superpower, but sadly most CSM just wing it. Curiosity, expressed via the skill of intentional discovery, is hands down my favorite CSM trait, and one I think will take you far in your career—and life.

And if you’re trying to break into software and don’t have much experience, you have to differentiate yourself. When I was a finance guy with no tech/SaaS/CS experience applying to Optimizely, I analyzed all of Optimizely’s competitors, identified strengths/weaknesses, and created battle cards for each one. It took several hours, but I later learned this helped set me apart.

4. What would be your advice for someone looking to grow into or as a CS leader?

Maintain customer touch – even in senior-level roles. Encourage your managers to stay connected with customers – it benefits their understanding of the job and also enhances their ability to guide their team. Celebrate instances where managers successfully own or  nurture customer relationships. If cash is the blood of a company, customers are the oxygen. Breath it every day.

Next, be mindful of the administrative burden you place on CSMs. Often, there are too many recurring meetings and tasks that detract from time that could be spent building relationships with customers, or learning more about their needs. I try to keep recurring meetings to <4 hours per week for the team.

As a leader, you need to explicitly identify the critical tasks that contribute to understanding customer needs, enhancing service, and driving results.  Explicitly state what your team won't focus on this quarter. This clarity will keep the team aligned and focused on meaningful relationship-building activities.

5. As someone who has headed the CS function at multiple companies, take us through the leadership’s thinking about investing in CS. What drives them?

It was different at each company – though I've been fortunate to work for companies/founders that believed in CS – enough to allocate 10 to 20 percent of revenue towards it.

They understood the significance of customer retention, especially considering the high costs associated with customer acquisition (6-figure CACs). 

As unit economics began to play out in the SaaS business model, many realized that human intervention could significantly lower churn risks and expand accounts. Change management done right has a big impact on churn – and it requires people and resources. 

6. What are the core metrics you used to show the success of CS at the board level?

The core metric for conveying the value of customer success is gross retention – ensuring customers saw meaningful value in the software and renewed their subscriptions. After all, customers vote with their dollars.

Over time, we addedNet Revenue Retention (NRR) to their comp plans. Our strategy was twofold: protect the existing customer base through Gross Revenue Retention, and drive growth through Net Revenue Retention.

While there are other metrics such as Net Promoter Score (NPS) and customer satisfaction, I have mixed opinions about them. Ultimately, they're all in service of the customer experience and the value that customers realize. It can vary widely by product, but you can get pretty creative with usage and health scores as well to standardize on leading indicators of success.

7. What is top of mind for you in CS in 2024 for CS? 

Figuring out how LLMs/AI can make my team more efficient and customer-focused– especially given that we deal with enterprise clients. We're looking at how AI can reduce their administrative load, so they have more time to build stronger relationships, and get more multi-threaded in accounts

Back in the Optimizely days, I did a deep dive into how our CSMs spent their time. Our star CSM was clocking in sixty hours a month –  three hours a day –  talking/meeting with clients. She maintained this over many quarters. Protecting CSM<>Customer time is critical. 

Technology should be able to free up CSMs to focus on building relationships and human-to-human connections.  The goal is to enable them to be more curious and strategic and get to know our clients on a deeper level – understanding their stakeholder maps, who's who, and the dynamics at play.

That’s a big theme for the year.

8. With the increased focus on automation in CS, how do we put humans back at the center of the customer value loop?

I would love for all the non-human-to-human interactions fully automated or at least assisted by AI. Imagine all that admin work, synthesizing notes, and even queuing up emails— I believe AI can handle all that, either fully or at least partially, and sooner than we might think. 

I'm riding that wave, trying to get ahead, and figuring out which of the everyday, low-value tasks can be automated to free up more time for building customer relationships. 

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