Magic Ratio: How Many CSMs Per Customer
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Transcript of Magic Ratio: How Many CSMs Per Customer
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HOW MANY CSMS PER CUSTOMERTHE MAGIC RATIO:
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Science tells us we can have
150 friends
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According to British anthropologist Robin Dunbar, the ceiling on human
capacity for stable social relationships hovers between 100 for the more introverted and 250 for the more outgoing, though 150 is the most
commonly quoted. (It’s called Dunbar’s number).
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If you just thought about how many Facebook friends you have, note that
Dunbar’s number applies only to people you’d consider inviting to a dinner party.
So probably not that guy you’re pretty sure you knew in high school.
?
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With this in mind, here’s a quick mental exercise: decide how many family members you’d
put in that group, and then how many friends.
+
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Add work friends to that number -- the ones you gossip with over drinks.
Go ahead and add your dog, too. She’s cooler than most of your friends
anyway.
+
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Add clients or your equivalent; journalists have
sources, for instance.
+
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Now imagine you’re a customer success rep
who manages
200 accounts.
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Technology allows us to handle more relationships; that’s why some of us can have
thousands of Facebook friends without feeling overwhelmed. The difference is in how
intensely you manage them.
+1842
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If a rep is expected to manage each of those 200 accounts closely, she has far exceeded
her relationship capacity, because those are high touch customers. Alternatively, if 50 of
those accounts were high touch, and 150 were low touch (those Facebook friends you
keep but don't talk to much), she'd be in good shape.
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Of these two sorts of customers — low touch and high touch — we’re going to
focus on the latter (those that would show up in Dunbar's number).
Assuming your reps like their families, have friends, and speak to their
colleagues, they probably shouldn’t be closely managing more than 50 (or so)
accounts on top of that.
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Note: This isn't one fits all, but it's a good way to deduce which ratio works
for your business.
125
50
33
51242?17
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Now we have a working ratio ceiling; no more than 1 rep to 50 customers.
The second thing you need to keep in mind is that ratios aren’t static.
1:50
5:30
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Most customers experience a learning curve at the start of using any product. In
SaaS, we often call this onboarding, or the period after the customer has converted
when she's just starting to use the product. Nailing this transition is critical.
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Think of it like a luxury hotel stay. If the resort staff nails your arrival from the
most basic standards — a clean room — to the bells and whistles (a lei around your
neck, a bottle of champagne on ice), they're more likely to earn your trust.
This line of thinking comes courtesy of Ed Powers,
principal consultant at Service Excellence Partners, who
has worked in both luxury travel and customer success.
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The same goes for your company. Nail the arrival. That means front loading your ratio — more customer success reps to customers in the first month of the customer relationship,
or however long onboarding takes for you.
# o
f Cu
sto
mer
Su
cces
s R
eps
0 30 60 90
Days
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Onboarding is usually a high-touch relationship, which means reps managing it will need to oversee fewer accounts at once.
Over time, that relationship becomes less intense.
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So for each customer, your ratio will change over time, from more
reps/customer to fewer reps/customer. That also means each customer
becomes less expensive.
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And that’s good for business.
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Most companies need to spend 12 cents on customer success to protect every
$1.07 in ARR, according to Pacific Crest Securities.
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So let's stress test the 50:1 ratio for a company whose average account value is
$25,000.
50 x $25,000 = $1.25 million
$1.25 million x .12 = $150,000
That's a conceivable number for the fully loaded cost of a customer success manager.
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So use Dunbar's number as a conceptual bar to figure out a ratio that's good for you. And remember
to nail the arrival.
?:?