Support is a cost center - part 2

By taking the stance that Support teams are cost centers, we take on the responsibility of defining the value that is returned for the cost to the business. It's a big responsibility and there’s still a lot of work to do around getting rid of the stigma of “cost center,” but we don't want anyone else defining our teams' value -— and we want to give the best customer support we can.

(By the way: very few people told me they flat-out disagreed with my recent post on embracing cost center life. I find that hard to believe, so I'm gonna need the dissenters to be more vocal.)

But what happens when Support falls under an organization that is a profit center, like Sales? It happens a lot; I usually advocate for Support to not fall under the umbrella of a larger organization that is a profit center, like Sales or Revenue or some other CFO-led or CRO-led team, but every organization is different and you do what works for you. If Support is part of a profit center, it is by definition a profit center within that organization. Does that change the approach Support should take? Should Support start optimizing for renewals or upsells to contribute to profit goals?

The short answer? No. The longer answer: Not if you want happy customers.

Renewals

When Support is asked to show some profit on the balance sheet, one of the first sources leaders and teams point to is renewals. In a SaaS model, this means monthly or annual renewal values; in other business models it could be re-purchases or returning customers. The idea is that Support is key to renewals, so they should "get credit" for that revenue.

Here's the basic logic:

• Happy customers are more likely to renew a subscription than unhappy customers.
• Support is in charge of keeping customers happy after they've purchased a subscription.
• Therefore, customers who renew subscriptions do so because of Support.

Nice and clean, and Support teams often claim that it’s their work that’s keeping customers happy when they run into trouble. But! Even if Support does an incredible job, products and services can (and often do!) still fall short of customer expectations. If Support does everything in its power to keep a customer happy but the customer is unhappy with the product and doesn't renew, who’s to blame? And why do we have to assign blame anyway?

And by following the revenue-driving logic, we can end up in a place we don't want to be.

In my experience, Support teams will do whatever it takes to meet their goals. I had a very smart team member at a previous company tell me that all of my quarterly goals were terrible because if the team changed their tactics to meet the goals, they could ignore pleasing customers entirely. Want a lower contact rate? We’ll get rid of the "get help" link in the app. Want to zero out the backlog? We’ll auto-close unresolved tickets after a week.

At first, I was annoyed. Why nitpick and gamify the goals? But when someone’s job depends on them meeting a goal, they’ll do what it takes to meet that goal even if it ends up undermining the mission of the team. This isn't specific to Support -— it’s people. We all want to succeed.

If you tell Support team members that their quarterly goal is to increase subscription renewals, a team might tell customers that the bugs they've reported are likely to be fixed next quarter and the customer will see an improvement after they renew the contract for the year. It's not a lie if the engineering team put it on the roadmap, even if Support knows it's not likely to happen. It's maybe not something the team would normally tell customers until the renewal depends on it and their jobs depend on the renewal. This isn’t a hypothetical. I've seen multiple teams do this for this specific reason.

The logic makes sense but the outcome isn’t great. Ultimately, the renewal quotas were met but the customer problems weren't solved. Over time, customer satisfaction with the product declined and overall activity (measured by the Product team as "monthly active use" and "weekly active use") dropped off.

The world is a surprisingly small place, so word got around that the company wasn't delivering features and fixes according to their roadmap. A few quarters later, it was increasingly difficult to keep customers renewing. At that point, there was nothing Support could do to keep customers happy, either with the product or the support of the product, and renewals declined.

What we learned was that Support alone is not responsible for subscription renewals of a SaaS product. The reality is a lot more about correlation than causation -— there aren’t straight lines:

• Support keeps customers happy.
• Happy customers are more likely to renew a subscription.
• Therefore Support's goal should be to keep customers happy in order to increase the likelihood of renewal.

The renewal isn’t a given, but it can be made more likely with great support. It's a combined effort between Support and Product and Engineering and Design and on and on and on. The support that a customer gets for a product or service is not the only thing that keeps them purchasing or renewing. In most cases, it's not even the primary thing. You need to know what that thing is for your product and your customers before making renewals the Support team's responsibility.

Upsells

Some companies want to make upsells a core responsibility of the Support team. The most common way this works is that Support team members are individually responsible for upsells — which can look different for different types of products or services — to customers they interact with. Each team member has a quarterly quota, set in dollar amounts calculated based on revenue from existing customers.

The logic is similar to renewals, in that happy customers spend more money and Support keeps customers happy. And as with renewals, the logic is backward and wrong.

When you tell the Support team that they're responsible for product upsells and that their performance reviews and salaries depend on their success in selling more product, they'll become salespeople. And just like with renewals, Support teams can increase upsell revenue without necessarily increasing customer happiness.

It’s true that Support teams have deep insight into what specific customers are doing and what would help them achieve their goals. But asking them to turn customer-initiated support conversations into sales calls is a bait-and-switch tactic that customers, by and large, do not appreciate. Over time, customers will avoid contacting Support. This leads to a drop in contact rate, and not the good kind of drop in contact rate.

When customers stop contacting Support because they don't want to engage with the team, customer problems aren't resolved and the company has less insight into customer pain points. In these cases, the reduction in contact rate is a leading indicator of churn. You can expect to see declining NPS scores, if that's a thing you gather and track, and probably a drop in renewals and net new revenue as people become dissatisfied with the product and the way it's supported.

Premium support

If you're selling your support services, is that not a revenue generator? And if you're generating revenue, aren't you a profit center?

One way organizations try to turn Support into a profit center is by selling some version of Premium Support. This often takes the form of charging customers for faster service or additional phone support. However, while the Support team is providing those services, they don't have to be listed as revenue for that team, the same way that the Engineering team is building the product that people are buying, but aren’t generally considered a profit center and aren't responsible for the revenue generated by the products they build.

Revenue is rolling in, but you’re not generating revenue for the Support team by virtue of selling support services. The Support team is providing those services, but they don't have to be listed as revenue for that team, the same way that the Engineering team is building the product that people are buying, but aren’t generally considered a profit center and aren't responsible for the revenue generated by the products they build.

Putting the profit from Premium Support on the Support organization's balance sheet is a mistake that is hard to recover from.

When a Support team charges for higher levels of service — and are responsible for bringing in revenue for that service — the team is incentivized to find ways to get more people to pay, and to pay more, for their product support. The revenue-generating service drives down the levels of support offered for free or lower-cost tiers; reducing what people get for free is one way to drive people into higher-priced tiers. You often see this with companies moving their free support to community channels, often moderated by volunteers, and telling customers that they can contact the in-house Support team if they increase their subscription plan or purchase a support add-on package.

And the Support team becomes a Sales team again.

Changes in support plans like this often increase churn in the short term as people react to the change. That churn may level out over time, or it may not. Customer satisfaction may take a hit, but that's a calculated balance that the company needs to make.

It's not great, Bob

If Support is not responsible for a revenue target but is responsible for a customer satisfaction target (or better yet, responsible for customer satisfaction in conjunction with other product teams), then they'll go into conversations with Finance better equipped to find solutions that will meet everyone's needs. If you're primarily responsible for revenue, it's hard to convince executives to do anything that will work against the team's stated goals.

And that's the larger point: Renewals and upsells happen, at least in part, because of the quality of support. Better support does tend to increase retention, reduce churn, and boost upsells. But those shouldn't be the goals of the Support team. Those are results that come from the Support team meeting its other goals along with other teams meeting their goals. It's a team effort.