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Jon Johnson:
Like a fine wine, aging, growing older, rippling. Yeah.

Kristi Faltorusso:
Josh, we need to get you out of that apartment and get you some sun, my friend.

Jon Johnson:
I know.

Kristi Faltorusso:
You are looking a little

Jon Johnson:
You are so

Kristi Faltorusso:
freaking little concerning.

Josh Schachter:
Is it gone?

Kristi Faltorusso:
I wanna come over, like, pink your sheets or something. I know. At least adjust the lighting on your camera, my friend.

Jon Johnson:
My girlfriend, Jess, is upstairs, and she’s yelling, yes. You’re absolutely right. Get that boy some sun. Well, what

Kristi Faltorusso:
I tell you, we can do summer Fridays from my backyard, hang out by the pool. You can still answer email.

Josh Schachter:
Yeah. But look at Aaron Thompson chuckling it up, and look at look at look at how pale is he. Like, he’s got, like, the

Jon Johnson:
too simple.

Kristi Faltorusso:
You know? Yeah. He has

Josh Schachter:
a rosy glow.

Kristi Faltorusso:
Yeah. He’s got a rosy glow.

Jon Johnson:
You’re a little just a little, like

Aaron Thompson:
come along. I’m trying to you know, in Portland, there’s so much sunshine that it’s super easy to look like a ghost.

Jon Johnson:
Josh, when’s the last time you ate an apple? Like

Josh Schachter:
An apple? Yeah. Like What? Is that good for your complexion?

Jon Johnson:
I mean, it is. It’s good.

Josh Schachter:
Really?

Jon Johnson:
Get it. Yeah.

Josh Schachter:
Oh, that would explain a lot because I don’t eat apples because my my throat gets tingly.

Jon Johnson:
Ella’s throat gets tingly with apples too. What are we doing here, guys?

Kristi Faltorusso:
This feels like it’s gonna be heavy on the BS.

Jon Johnson:
Oh, so so heavy.

Josh Schachter:
Soft on the CS.

Aaron Thompson:
I this

Josh Schachter:
one really banking on the

Kristi Faltorusso:
See, Aaron is here

Josh Schachter:
for the BS, not CS.

Jon Johnson:
The last time Aaron Thompson and I had a conversation?

Kristi Faltorusso:
Oh, I know exactly when this was.

Jon Johnson:
This was in Washington, DC?

Kristi Faltorusso:
Oh, no. No. I was thinking about the awards. I was thinking about the awards. This was that you guys had a lengthy evening.

Jon Johnson:
Oh, that was a great one. The award. That was a fun one.

Aaron Thompson:
No. But That was that was amazing.

Jon Johnson:
I wore the wrong shoes for that evening, Aaron.

Josh Schachter:
John John likes to do these things where he goes back to, like, the last time I spoke to so and so. And what John neglects to realize is that nobody that’s listening gives a shit. That’s lies. That is a propaganda, Josh. Everyone cares. Everyone cares. If I’m random listener x, do I care the last? I love you, John, and our listeners love you. And as you know, when I was at Pulse and I did these surveys of who’s their favorite cohost, I came in last.

Josh Schachter:
Right? It was you, Christy, and then me. But that being said, like, I just don’t get it.

Jon Johnson:
I don’t get it. Ask them. Hey. Do you like when John relates to our guests in a real and human way?

Josh Schachter:
Yeah. Yeah.

Jon Johnson:
I don’t think that you did. Alright. Anyways, we’re in Washington DC. The reason that I wanted to say this is do you remember the BLT that we had?

Josh Schachter:
Oh, it’s the best BLT I’ve ever had in my life.

Jon Johnson:
That’s all I’m saying. That is what I wanted to say. Yep. But I need to know the name of the restaurant.

Josh Schachter:
John, this is customer success, like, program.

Jon Johnson:
Yeah. Yeah. Yeah.

Kristi Faltorusso:
Yep. Post notes. Their

Jon Johnson:
sandwich. Ignore Josh.

Aaron Thompson:
Like, 3 people to that restaurant Yeah. Said John, like, so brazenly said, if you come meet us here, you will have the best BLT of your life. And I was like, there’s some BS for you. But, sure, I got nothing else to do. Let me go find these guys and say hi. And lo and behold, I swear to god, it was the best deal. And the reason it was so good is because they add an egg to it.

Jon Johnson:
They did. Yes.

Aaron Thompson:
That’s what makes it differentiated. It makes it like a breakfast sandwich. They’re basically cheating Yeah. Is all we’re actually doing, but it was good. It was amazing. Amazing. Yeah. You didn’t

Jon Johnson:
and I’m pretty sure

Josh Schachter:
Jeff I give up. I give up. We’re gonna be 10 minutes into this thing. People don’t even know the guest that we’re having on the episode right now.

Jon Johnson:
Oh, they know Eric.

Kristi Faltorusso:
By his voice.

Jon Johnson:
Ladies and gentlemen,

Aaron Thompson:
ladies You’re

Josh Schachter:
the only one that people know exactly about a voice.

Jon Johnson:
Ladies and gentlemen, it is my pleasure to introduce Aaron Thompson.

Aaron Thompson:
Oh, so well done, John. Thank you. That was

Josh Schachter:
the best intro I’ve ever had in my life. You’re welcome.

Aaron Thompson:
Impressive. I can see why you guys have tens of viewers and listeners.

Josh Schachter:
You okay. That’s that’s my joke. Number 1 podcast. You know do you do you know what he does? Like, that was keep going, John. Who’s I don’t

Jon Johnson:
really care what he does?

Aaron Thompson:
Well, no. I He doesn’t really matter. I mean, let’s be honest. No. I if too busy as shit. I got on this schedule, like, 6 months ago. Yeah. Yeah.

Aaron Thompson:
Yeah. We’ve been waiting for this moment all of my life, to be honest with you. Gosh.

Josh Schachter:
I mean, I feel

Aaron Thompson:
like it’s all led up to this moment here. They’ll hang up with the 3 of you.

Jon Johnson:
Alright. I’ll I’ll give you the the full I’ll give you the full intro. Ladies and gentlemen, please, welcome Aaron Thompson to the podcast, currently chief revenue officer at SuccessHacker. If you’ve done any training or enablement in the customer success space, you have absolutely been influenced and touched by this man and this man’s business. We are so happy. Not only this

Aaron Thompson:
Inappropriate ways. Inappropriate ways. Inappropriate.

Jon Johnson:
No. But my favorite thing is you will know him by the red slacks that he wears at conferences. Every single time, you just see this man going up an escalator at Pulse, and he’s got those red pants on.

Kristi Faltorusso:
There’s more more events out there than just that one that you mentioned. So I’m just just checking.

Jon Johnson:
Actually where 100.

Aaron Thompson:
Took out the red slacks for the very first time was on stage in Utah at the greatest conference of them all.

Josh Schachter:
Yeah.

Aaron Thompson:
The CS 100. There you go.

Jon Johnson:
Which I cannot accept. Like, I cannot wait for this year, by the way.

Josh Schachter:
Thank you.

Kristi Faltorusso:
Thank you.

Aaron Thompson:
We gotta get to that one.

Josh Schachter:
Eric, you have this, like, you have this cool looking chart behind you. I mean, granted that most of our listeners can’t see it, but, what is it all about?

Aaron Thompson:
The whiteboard or the donkey? The the donkey? Well, no. The I’m

Josh Schachter:
not gonna get into the whole, like, why you guys I get it.

Kristi Faltorusso:
Could be a unicorn.

Josh Schachter:
Yeah. Yeah. Yeah.

Kristi Faltorusso:
With the right tools.

Aaron Thompson:
Very tough. Thanks. See? Christy’s got she’s got to catch you.

Josh Schachter:
Yeah. Yeah.

Aaron Thompson:
Whiteboard is, some some stuff I use to coach, and I don’t know how much people could see or not see. But, we’ve got, you know, the typical kind of land and expand sales funnel, but we’re getting into customer driven revenue is what this is really all about. And so you got marketing and sales up there at the top, and then everything at the bottom, activate, optimize, renew, Really kinda what we do post sale, but then how do we expand. Right? So you got cross sell and upsell. Most companies confuse those 2 or don’t make them actually differentiated, but they do have a different acquisition cost, which that’s another interesting sort of article that I’ve written. Revenue acquisition cost or the concept of rack versus customer acquisition cost and the concept

Josh Schachter:
of CAC.

Aaron Thompson:
Right? We’re all familiar with with CAC, but that doesn’t actually get granular enough. Right? With any given customer account, you’ve got renewal, you’ve got cross sell, you’ve got upsell, and then you’ve got advocacy revenue. Not to mention coming in through net new the first time. All of those have different overhead for your business. Right? Renewal is the cheapest. I don’t have to teach anybody anything. I don’t have to do anything. Just sign the paper and away we go.

Aaron Thompson:
Cross sell, a little bit more expensive because we probably have that’s like tacking something else on. Right? Another product or something. There’s probably some training. Upsell, maybe there isn’t training. Maybe it’s just, raise the price at renewal, and now you’ve got that upsell revenue. And that’s amazing in terms of acquisition and overhead. And then the almighty holy grail of customer success and customer driven growth is the advocate. Right? And driving those referral leads into your funnel, your CSQLs at the 1 13th, the acquisition cost, and all of that.

Aaron Thompson:
So this is this is what this is, Josh. I appreciate you asking because I’m always

Jon Johnson:
You’re the only person the first person, I should say, that has ever let Josh look at a whiteboard that he has written behind him. He has asked other guests to explain the whiteboard, and they have denied him.

Aaron Thompson:
Oh, then you got this one here. This is this is one of my

Josh Schachter:
We’re we’re we’re we’re good. We’re good. So I I wanna I wanna challenge. Hey. I wanna Oh.

Jon Johnson:
We’re he’s going down the beautiful mind path real quick.

Aaron Thompson:
So so listen, though.

Jon Johnson:
You don’t understand.

Josh Schachter:
Yeah.

Josh Schachter:
All the shit you put in and all the the etiquette and everything. Yes. Absolutely. Okay. Wait. So my so this is a challenge to John and Christie. I wanna stay on this because I think we found a little thread that we can pull. And rather than going and talking about, like, BLTs or the last time, like, John performed in front of Aaron and his whatever.

Josh Schachter:
Like, I wanna know, can you guys stay on the topic of rack for 5 minutes and go deep with questioning so that our audience can get, like, really cool insight and education from Erin about that.

Jon Johnson:
Don’t like people telling me what to do, Josh.

Josh Schachter:
I know. I know.

Kristi Faltorusso:
Okay. Alright. So, Erin, why don’t we start with just just break down the acronym again? I know you covered it quickly, but let’s just start with that because we’ve got a lot of people. You you use a lot of acronyms. All 10 10 of our listeners would love to know what is what is RAC?

Aaron Thompson:
The tens of eyeballs that we get on these things. So you can go to redslacks.com and read the article to really go deep. And it’s it’ll take you all of, like, 4 or 5 minutes to read it. But that being said, there are 5 revenue streams. And so RAC stands for revenue acquisition cost. So instead of looking at a customer holistically and what does it acquire cost to acquire them, which is typically calculated through all of your top of funnel stuff. Right? Right. What does it cost you to market to them? What’s your return on ad spend and all of that? And then what’s your sales cycle look like in terms of your overhead there to actually get them to decide to become a customer? Alright? There’s your cap because we all have calculated it.

Aaron Thompson:
And you take that sum, you divide it by the number of customers you’ve got, and you’ve got your average customer acquisition cost. That’s great. But that doesn’t account for anything we do post sale. And in customer success, we’re always trying to drive what we do back to revenue. We’re always struggling for a seat at the revenue table. We’re always complaining that we don’t get enough credit for the 90% of post sale revenue that we’re responsible for and all this stuff, but nobody actually tracks back through either dotted lines or a straight straight line between renewal revenue. Yeah. We typically calculate that with GRR and NRR and what we got.

Aaron Thompson:
And then expansion revenue, but even amongst expansion, we look at it as NRR. That doesn’t tell me enough. I need to know was it cross sell or was it upsell? Because those have different overheads to my business, and we lump them all into expansion. But that doesn’t like I said, like, they it should matter to me. And as a CRO who lives in customer success, I’m always thinking revenue and CS and CSMs and what we do every day. But so those are your next you got renewal. Well, you got your net new, obviously. That’s your first revenue, and that’s the most expensive you’re ever gonna have.

Aaron Thompson:
You got all that top of funnel work, onboarding, implementation, configuration, all the if you will, right, to get them up and running. And then you you know, now you got your acquisition. There’s your most expensive. Renewal is the least expensive. And then the 2 expansion revenues, cross selling upsellers somewhere in the middle. And then, typically, the most expense or I should say the least expensive way to generate net new logos is through that advocate referral revenue. Right? Yep. You say they got the funny looking logo, but what that dude with the whiteboard said made a lot of sense.

Aaron Thompson:
You should go check out success coaching. Now you’ve become my advocate who you talked to. I did not have to market to. I did not have to do that top of funnel demand gen and awareness stuff. They found out. And I can do it through different ways. Like, Spotify is genius at this. Right? Yeah.

Aaron Thompson:
The wrap campaign at the end of the year, that is not only an annual business review showing me the value I got for my $9 a month last year in terms of thousands of hours of music and where I fall in terms of the overall listeners of the band, The Killers, which is my favorite band. I was very proud to be in the top 1%. And so what do I do? I go post that on social media. I’ve now advocated for Spotify. Not that a lot of people don’t know what Spotify is, but that then drives leads through that side funnel, if you will, or side door of the funnel where they didn’t have to do demand gen awareness. And now they’re just evaluating Spotify for their listening habits and behaviors, etcetera. And some will decide to become a customer.

Josh Schachter:
Aaron Aaron, it’s so so that’s awesome. Did it sounds like you mentioned one thing in in passing. You said that we know that the CAC, right, the Acu Acuero customer is the most expensive. And then when you said that, something kind of flickered in my mind, which doesn’t happen often, which was, oh, is he is he coming up with this formula as a way to demonstrate that like, the value of customer success in post sales, that we can actually drive revenues for less cost than top line revenue for presales?

Aaron Thompson:
A 100%. Yeah. Right? The first time they go from up here well, for those who were listening, top of funnel to bottom of funnel, that’s gonna be the most expensive acquisition cost because we have all of that top of funnel activity. But then after that point, we really just most CS leaders just look at GRR and interim, which is just simply saying renewal or or renewal plus expansion. But they’re not taking it that next step to say of the expansion, what was cross sell and what was upsell? Because those have different varying overheads to our business, like I talked about earlier in terms of training. Right? And then, certainly, what we struggle to track is the advocate and that referral revenue and our ability to actually tie back to the customer success qualified lead of a net new logo. That is the cheapest way you’re ever gonna get a new business unit or a new company or a new logo, whatever. You write the what is typically the most expensive customer acquisition cost? Now we’ve generated it at a much less expensive clip, and that’s what we as an industry have continually struggled to track to then prove the efficacy of what we do.

Aaron Thompson:
And as I move into customer experience, I’ve been speaking a lot of their comp conferences this year. Spoiler alert, they’ve got the same challenges. They have a hard time talking about or drawing that direct line between what they do every day as an organization to that top line revenue of the business and and then obviously trickling it down to the bottom.

Josh Schachter:
How how do you calculate those costs? How do you like, renewal costs. Okay. Is that just the cost of of the operating cost of all the CSMs and and post sales? Or, you know, what’s the divide of cross sell cost versus upsell cost? It’s what’s nice, I would think about the top of funnel cost is it’s all pretty isolated. You know? You know that your AE and that your BDR goes to your CAC. How do you a 100%. Right? How do you how do you come how do you calculate these metrics in in real life?

Aaron Thompson:
Well, at success coaching, how I track it is through 2 different fields. I’ve got lead type and deal type or the lead source and deal type. And that’s what draws back to the overall c s q l C SQL number. And so they’ve all got different sort of inputs that go into my formula to be able to calculate that. And I could share out some, like, ratios and stuff. But today, we generate 1 third of our revenue is net new and 2 thirds is the c s q l, whether that be considered renewal, expansion, or the advocate. But that’s how that’s how you track it. Then how you calculate it is exactly that.

Aaron Thompson:
It’s gonna be different for every company, of course. Right? What is your renewal cycle look like? Do you have a renewals team who’s involved, or is it much more of that natural byproduct of the customer life cycle? Right? If we have done customer success correctly, we shouldn’t have this big herculean account save play at the end of the contract to get them to renew. If we do have to do that, then there is going to be some additional cost involved in that renewal number to really calculate what that was. But at the end of the day, it’s ironic to me as I’ve gotten into the rack world, and this is just a term I made up. I went I’m I’m I’m looking at trademark it even even so. Because I’ve looked and I was like, has anybody ever sent? I can’t find anything out there in the world about it, but I think it makes sense. And as I talk to leaders all around the world about it, they seem to think it makes sense as well. What’s ironic about it is the most expensive revenue streams we have the least amount of input on.

Aaron Thompson:
And the least expensive revenue streams, we have the most amount of input on. So the most expensive net new, we don’t have anything to do with that. Right? That’s all marketing and sales. The least expensive renewal, we’ve got tons to do with that in terms of helping drive that that renewal and make that that, again, like, natural byproduct of the life cycle, for example. And then in the middle and I I just did a talk, in Toronto 2 weeks ago about that, and I’ll I’ll have it on red slacks here pretty soon. Where I taught I I actually draw the across the 5 and it’s completely inverse of the impact that everybody post sales, whether you call it customer success, customer experience, client success, whatever. But the post sale operations team has the most impact on the least expensive revenue. But we don’t draw that line clearly enough as Gosh.

Aaron Thompson:
As an industry. Okay.

Jon Johnson:
You I love this so much. And I, like, I I wanna get you on record, just because Christy and I are, like, really, really deep into this world right now. Like, are you saying that customer success is is a revenue driver and part of sales?

Aaron Thompson:
Yeah. Yeah. I I know it’s shocking.

Kristi Faltorusso:
I didn’t hear first.

Aaron Thompson:
We’ve done. Right?

Jon Johnson:
It’s been every day since. 13th. So okay. No. But you talk about the, the control, and I think this is unique to customer success. Right? Like, we, as CSMs, almost even as ICs, have more control over, like, the largest swings in cheap revenue, cheap revenue I’m putting in air quotes. But then you go talk to a GAD. You talk to an AE or somebody that’s, like, on the frontline sales, and it’s all their senior leaders that are setting process around how to, you know, top of funnel stuff.

Jon Johnson:
Right? So, like, those people are taking directions and swimming, you know, in the same direction as a whole organization from revenue and marketing and, you know, top of funnel stuff. Right? But they don’t necessarily have the impact other than I’m gonna follow these processes and, obviously, like, close and all that kind of stuff. But that’s so that is a herculean effort. But us, the CSMs, are sitting here going, like, I’ve got $10,000,000 that I’m managing. I’ve got this book, and it’s it’s it’s expensive revenue to lose, but it is cheap revenue to maintain. And what I don’t see is, the early stage, focus from revenue leaders such as yourself, even from the c r CRO standpoint because they’re only getting engaged or brought in during those huge big swing save calls 3 months before a renewal. How do we get folks like you to pay the fuck attention to what’s going on when that revenue is is expensive to lose and cheap to maintain.

Aaron Thompson:
it. Yeah. Yeah. I mean, being able to monitor for that, obviously, throughout the the life cycle is important. That’s why our tools like client success, nothing Yeah. Come in play. I, I advise on a a a product called sturdy dot ai that creates these signals. Right? Expansion opportunities like good things as well as bad things and then kind of surfaces up the the next best thing to work on, depending on your configuration and stuff.

Aaron Thompson:
Like that, I I think we’ve gotta be able to do that. You gotta be able to listen well enough somehow, someway using whatever products, whatever your tech stack looks like. And if we can’t, we’ve gotta enable the people to be able to identify those those moments of truth, if you will. But it’s really about defining, delivering, and demonstrating what success is to my customer.

Jon Johnson:
I wish you would’ve written that in a handy place.

Aaron Thompson:
I know. If I only had that available representation. So nice. Now that Pat Sajak is out of a job, I’m wondering if I can be the next Veda White. Define, deliver, and demonstrate. You know? Like, that’s it. If we do that effectively, that’s what leads to that predictable renewal. And then from there, we can talk about all the additional revenue opportunities.

Aaron Thompson:
But, you know, obviously, the table stakes and kind of the the where we start is that renewal number. And what we’re talking about is how do we do this and and remove some of those friction points. Well, I would say customer success is not just a post sale organization, first off. As a CRO, we’ve got to see customer success as a culture. Right? It’s a it’s a it’s a business growth strategy that says we’re gonna grow the business from this point upwards as opposed to just focusing like we did back in the day, when we were selling everything transactionally. So with that being said, my AE can be doing customer success. They can be laying the tracks of success planning. That’s what this is all about.

Aaron Thompson:
75 to 90% probability to close. We should be doing that first d, defining what success is with you before you’re even a customer so that we know that what we’re selling in terms of the outcome you’re looking to achieve is something that is realistic and in line with what you’re purchasing, and we can hopefully align the expectations accordingly. And that could be the AE, that could be a CSM, that could be like Penske Trucks and other organizations that I I consult with that have a role called the success planner. There’s a person who reports up to success, but they operate with sales and they do it in those late stage deals to start mapping out on a success plan canvas, what does success look like, that then transitions with them into the post sale. And now we’ve we’re all pulling in the same direction when we get to activation, when we get to onboarding, implementation, etcetera. Yeah. As opposed to, oh, shit. You thought it could do this? Well, now now I got I I hate to break it to you.

Aaron Thompson:
You can’t. And here’s the the bad news is is, you know, now you gotta, like, fight that uphill battle, and I’m not saying that sales is overselling when that happens. Maybe that’s the case. I’m not saying it’s Yeah. The game. Like, it’s possible. But oftentimes, what happens is prospects hear what they wanna hear. Hey.

Aaron Thompson:
Can it do this for me? Yeah. I think we could probably find a way to make that work. I heard it does that, and I now I think it’s like ICP purpose built, and I get to implementation. And the onboarding team’s like, woah. What? Like, it’s not designed for that. Like, we need to have a talk. And now we’ve got that that friction and the misaligned, all those expectations set up. So Yeah.

Aaron Thompson:
So, you know, that’s that’s sort of my answer to your question, John, is start sooner with whatever success looks like in terms of what we do from a practice and understand that it’s not just the CS organization who does this. Mhmm. Customer success starts with the product. I I did a keynote 4 years ago about that. Like, if you can build it in the product, you don’t need CSMs. You don’t. If you like, nobody has a CSM for their Facebook account or their Instagram, but we get what we want out of it, Spotify, what have you. We can look at the direct to consumer world and and all of the the other side of it and what they do automate through automation and built in product and learn a lot on the b to b side.

Aaron Thompson:
And so customer success is everything. Product, marketing, sales, delivery, operations, onboarding, everything. It’s about how we do things, not who does them specific.

Jon Johnson:
K. Let me ask you a question because you’re you’re talking through, number 1, my heart. I love this. But, also, this sounds like a very mature organization. So you’re you’re working through specialization. You know, you you talk about having, you know, a success planner with Penske and some of these other roles. Right? What let’s let’s kinda back it up a little bit because I know a lot of our listeners are early stage. Right? And so these processes are generally fighting against an organization that has to be sales led.

Jon Johnson:
And this is where a lot of kind of I I wanna say the poison even though, like, I know that we don’t always need to fight with our salespeople, but, like, the problems kind of start in those early stages where you just have to close.

Josh Schachter:
Well, hey, John. To prove. Go ahead. I I wanna I wanna, I wanna actually contribute value to this because we are we are one of

Kristi Faltorusso:
the us mapping early stage.

Jon Johnson:
Yeah. Well, we’re one of the earliest stages, right, that you’ll find. And, like, we have we have 1 CSM, our head of success head of CS, Jess, and then we have 1 full time sales and then myself. And we do what Aaron was just advocating for. As I was listening to him talk, I was actually thinking that executing on what he was suggesting was would be more difficult in a larger organization. For us, it’s super easy. We have this thing called the sequence of events. You could call it a mutual action plan.

Jon Johnson:
You could call it, like, whatever you want. But literally, as we go into our proof of value we call them proof of value, by the way. We don’t call them trials. But as we go into the proof of value, before we go through that onboarding, our head of CS and myself in proxy of sales sit down, and we say, okay. What are the success like, what’s success for this trial? And it’s super easy because we’re small and agile. So I don’t know. That’s just my experience is that I think at any size company, you should be doing this, and it’s actually maybe even easier when you’re smaller because you have such, like, that white glove concierge service. But, Aaron, you’re you’re the vet.

Aaron Thompson:
No. I appreciate that, Josh. Thanks.

Josh Schachter:
I’m done. I’m good. I don’t have to answer.

Aaron Thompson:
Now my what what I thought was was interesting and what I always think is interesting is the term sales led. Right? We have to be sales led. And, frankly, I think that’s bullshit. I think it’s, again, missing the mark. What you actually mean, I think, is you have to be revenue led. Mhmm. And right now as you’re going to market, that revenue is gonna start up here because you don’t have a whole lot of revenue down here yet. But at the end of the day, you wanna focus on being a revenue led organization, not a sales led Because that could when we talk revenue, now we’re talking renewals, expansion, all of the goodness that happens down here.

Aaron Thompson:
And as you mature through your go to market and you you found your product market fit, this is gonna this is gonna ebbs and flows. Right? Up economies, 1st mover advantage, you you you hit that product market fit with the window and you’re getting all this traction of net new logos, that’s great. They’re gonna all end up down here, though.

Jon Johnson:
Yeah.

Aaron Thompson:
And you’re gonna wanna keep them. Right? You know, like, you can’t grow if you don’t keep them. Right? Typically, we need them to buy something more than once from us for us to be even breaking even on that acquisition cost that we talked about before. So when this slows down, then everybody focuses here. That’s what we’re seeing right now in the industry. Right? It’s like, oh, damn. It’s hard to get new customers all of a sudden. So so what we if we if we change the mindset from sales led or customer led or product led to just simply revenue led.

Aaron Thompson:
Like, I don’t give a shit where the dollar comes from. I mean, I do because there’s more expensive acquisition cost down to least expensive going back to our rack conversation. But at the end of the day, I want my organization to be revenue led, and that’s gonna be a combination and a blend between top of funnel and bottom. And there’s gonna be levers that are pulled and incentive plans that can be altered, right, based on what I wanna focus on, whether it’s new market acquisition or growing the current customer base and, and and and try and really solidify the the revenue that we’ve already got or both. And, you know, like, I I get that question. I was like, well, then how do we how would I ever how sales will never let us in here. Right? They’re they’re protective of the deal. They’ll never let us in to do the success planning.

Aaron Thompson:
Like, they will if you’re clawing back renewals. I guarantee they’ll let you in and start doing stuff. Right? It’s all about how you set up those incentive plans. And so what we see is, like like, old school transactional incentive plans, but in a subscription economy where we get a little bit of money over time. So we pay all these big commissions at the deal sign, but we haven’t even acquired the revenue to offset the acquisition cost, much less necessitate some kind of a a a a spiff or a variable compensation or a bonus or whatever. And so that you know? Anyway, aligning those 2 will allow you to execute this concept of customer success.

Jon Johnson:
Yeah. Right?

Aaron Thompson:
I’ve always loved it.

Kristi Faltorusso:
Aaron, so hold on. So you obviously you work with a ton of customers. You you’ve seen a lot. Tell me, what organizations have been successful in reframing this, and what did they do to get there?

Aaron Thompson:
You know, we worked with HP years ago to change a product led company to be one of customer centricity. And they have extensive I mean, they’re obviously old school born not born in the cloud. Like, it’s much easier when you’re born in the cloud and you’re like, you you you’ve always operated on this repeatable revenue model and you’re you’ve you’ve been a subscription based company. But, you know, HP and their their their device as a service organization was leading the charge to to move from product led to customer centric. And they have such an extensive channel partnership, in terms of how they actually sell their products and services that they’re even one step removed from most of their customers. And so we had to work with them on how to actually do this. And I said, well, how do we know if we’ve done it? And one of the things was there’s a an award at the TSIA Awards in Vegas every October around this. I’m like, well, what are the criteria to win the award? And so I start working with my my contact over at HP and helping him achieve that and win that award.

Aaron Thompson:
And and and then he goes on main stage. He wins it. He goes on main stage in Vegas, and he puts the donkey logo on a screen. And he drives, like, thousands of leads into our funnel. You know? Like, people found out about us that never would have found out about us because we helped him be successful. That’s one example of kinda how we’ve seen this play out. Now that had very specific criteria on what it meant to be customer centric, etcetera. But I think it’s gonna I mean, it’s it’s different in every organization.

Aaron Thompson:
And what what this maturation looks like is really dependent on when were you born, where were you born, were you born in SaaS, or were you born on prem? And now you have to retrain your customers and your sales teams to, you know, align with this repeatable revenue approach. So it’s gonna be different for every organization. But at the end of the day, incentivizing teams on the same revenue that the business incurs is where I think it sounds simple. Right? So we pay commissions on shit we haven’t got yet. Yeah. But companies do it all the time because salespeople have been selling that way for 25 years. Well, I got news for you. Back in the day, we got all that money upfront.

Jon Johnson:
Yeah. You’re right. You sold it and you got a check for $200, and you’re like, here’s your bonus.

Aaron Thompson:
Exactly. Like, my first software implementation took two and a half years. It was in the health care space. It was on premise. I was there boots on the ground as an as a trainer, then implementation consultant for 2 and a half years straight. We had an average run rate of a $1,000,000 a month for 2 and a half years to put this thing in place. So that when you sign one of those deals, yeah, it makes sense to go ahead and pay that big old commission check. But when they can come and go as easily as they can now in this subscription economy, we’ve got to start incentivizing people in line with the revenue.

Aaron Thompson:
If I’m a salesperson, I like that if you do it right. Because what that means is I should be getting a a nice renewal check every year, every 3 years, and, you know, every new contract, I shouldn’t have to do very much work.

Jon Johnson:
Well, it’s like the insurance model. Right? I mean, those guys that are selling insurance premiums, they get paid out every single year, every single time because there is continual value in revenue.

Aaron Thompson:
It was an insurance policy. It’s nothing but I mean, it’s a scam, but discounts. It’s a promise.

Jon Johnson:
It’s a promise.

Aaron Thompson:
Of of of service as a service. Like, it’s it the the business operations of that work so similar to SaaS companies, and yet we don’t seem to operate the SaaS companies. We we we incentivize as though we’re selling physical products, but we are not.

Jon Johnson:
We’re not. Yeah.

Aaron Thompson:
You know, we’re selling the the access to those and, yes, achieving the outcomes, etcetera. And with that, that low barrier of entry, low barrier of exit. And so very long answer to a very short question, Christy, but, like, incentivizing in line with our actual revenue is probably the first place to start. Right? Our our revenue acquired, not the contract deal signed or what have you. When we get a dollar, that salesperson should get a different percentage of variable compensation. I’ve also got that in the, in the rack article, but net new, sales should get the lion’s share of it because we didn’t have much to do with it. Right? Renewal, I want sales to still get a a good heavy percentage of it because I want them to be incentivized to sell to the right customers the right way. I want to incentivize them on that renewal number.

Aaron Thompson:
Now upselling and cross sell, that’s gonna be the CSM and the account manager because they’re the ones who found those leads and those opportunities for expansion, etcetera. So they should get the a higher, percentage. And then this advocate c s q l referral revenue, that’s actually the CSM. I want them to get the lion’s share of that one. But on the renewal of that one, I want that to go back to the AE because, again, I want them to be incentivized to sell the right way. And if our goal is to keep customers in perpetuity, which it should be in the subscription economy Yeah. Then we want to incentivize the salespeople to get that revenue in perpetuity to John’s point, like a insurance broker.

Josh Schachter:
Aaron Aaron, what what would you do as a first step to become a agent of change in this? It makes perfect sense. I love the model you’re advocating for. How could we make such a drastic change in the entire ecosystem?

Aaron Thompson:
Well, I don’t know if it’s a drastic change or not at all. It depends on your organization. I can you know, at success coaching, it’s not a drastic change because we’re I’m that’s how we’re tracking our dollars, and that’s how we incentivize our our teams. So it all depends on the organization. And, obviously, yeah, I get that question a lot. Right? Like, well, I’m just an individual contributor. What impact can I make? Right? I can’t make them change things. But what you can do is start tracking these things as best as you can estimate, and it doesn’t have to be perfectly, you know, accurate or whatever.

Aaron Thompson:
But starting to paint some kind of a picture of your impact on the revenue of your book of business if you’re an individual contributor. Obviously, we’ve got GRR and NRR numbers, but let’s look at the CSQLs and try to really figure out when have we been able to advocate. And then work with your SDRs or BDRs or whoever’s doing the initial qualification of a lead to make sure you find out where they came from you. Did they come from up here, or did they come from over here? They found out about you somehow. It’s amazing to me how many organizations don’t even vet that out in the qualification process of did you Google us because you had a pain point and you found us on your own, or did someone talk to you about us? Or was it a combination of both? Right? But actually vetting that out so that we can start to track those referral leads is critical. And if I’m a leader, I can do this for the whole business or or attempt to. If I’m an individual contributor, maybe I can only do it from my book of business. But it sure is how gonna help when I get into my review season and trying to show my impact and efficacy as a CSM or an individual contributor if I can paint that revenue picture.

Aaron Thompson:
And that’s what it’s you know, whatever impact I have and I can actually control, that’s what I’ve got. And and but at the very the very first step is to start calculating, Josh, to answer your question. Start calculating something. Don’t you know? And and have reasons behind it. Have logic behind it. Why you’re using those numbers? And then it’s you’re gonna have to iterate. I’m sure it’s not gonna be a 100% accurate, but it’s gonna be a place to start. So many just don’t even calculate it at all.

Aaron Thompson:
And that’s a big difference between the CX world and the CS world. CX is so data driven. They’ve been doing this for so much longer than us that they are much more skilled at looking at macro and micro datasets and really understanding, you know, what at least what adoption, engagement. Where does the customer fall off? Where does the user fall off? Right? How they figure that out in the direct to consumer world, it’s all data. We could be doing the same thing in the b two b world, whether it’s related to engagement adoption, just like them, or just revenue acquisition and revenue attribution. Looking at it and trying to really understand where are these dollars coming from, whether it’s my little book business because I’m a CSM or leader or whatever whatever sphere of influence I might have. But start by calculating it somehow, somewhat.

Jon Johnson:
Mic drop.

Aaron Thompson:
BLTs. Let me talk about BLTs. I mean Yeah.

Jon Johnson:
Would you do I was saying,

Josh Schachter:
do you have do you have a template or anything for for for how folks can start calculating it? Like, if you say that, great, but if I’m in IC somewhere, okay, that sounds great, Aaron. I’m gonna start calculating it. Where am I gonna pull that out of?

Aaron Thompson:
Where are you gonna pull how to calculate your impact on it?

Josh Schachter:
Yeah.

Aaron Thompson:
You’re you’re gonna you’re gonna start by calculating what is your renewal rate in terms of GRR. Right? Then you’re gonna look at anything that you are directly involved with from a NRR perspective, figure out which one is a cross sell versus which one is an upsell, Call those out. And if there’s others that you can pull in as well. Right? But at the very least, I was talking to a client. They mentioned a paid point. I said, oh, I think we have a solution for that. They said, how do I find out more? That then converts to an expansion. I found that lead and I should know about right? Because I was the one who had that conversation.

Aaron Thompson:
So tracking that, paying attention to that, and then this is gonna be the trickiest one because you’re gonna have to work with your BDRs, whoever’s doing that qualification at that top of the funnel. But you can start there. I don’t have a template for this. This is what we do from a coaching perspective and kind of what we sell is aiding people in this calculation process. So I’d be happy to talk to people about how to help them. But, no, I don’t have an out of the box stuff.

Josh Schachter:
Let’s start start start tracking your assists effectively.

Aaron Thompson:
Yeah. Yeah. Exactly. And I you know, I’m amazed at how many folks don’t do that today. You know, they they they have a hand off. They identify it, but they just don’t keep track of that stuff. And it’s it’s really not that difficult to to do. We have a very lean team at success coaching, and we do it now.

Aaron Thompson:
Obviously, our product’s very different. We nobody buys the same education twice. Right? I might be a client success or a UpdateAI, customer for life because I’ve always got that pain point you’re always helping me solve. Education is more one of an upgrade. Right? Level 1 to level 2 to level 3. You know? And then once you if you get through all of the content, well, you’re not gonna keep paying this money. Right? If you watched all of Netflix, you wouldn’t remain a Netflix customer. Same kind of thing with us.

Aaron Thompson:
We’ve got a different sort of business model. But that being said, we still track it with a very lean team through, again, those 2, 2 fields is really all it comes down to is lead source. How did you find out about us? Where the hell did you come from? And then deal type. And those 2 combined help me calculate that CSQL number. That’s great. Sounded.

Jon Johnson:
Well, number 1, I think in general, we need more guests with a visual media behind them. I really appreciated the the visuals of your whiteboard. For those of you that are listening to this in audio format, I think that you should go watch the YouTube for sure. This specific episode. Yeah. No. This is this is really great. I actually really love, especially coming from the revenue side that you’re in, honestly, like, how passionate you are about making sure that, like, a lot like, the things that we’re we’re paying for, like, our employment, our our spend, our bonuses, all that stuff align with, like, the bigger vision of what we want from a customer.

Jon Johnson:
And you’re right. This this absolutely is true. If we are truly here for retention and growth, which is where the the cheap money is, Why are we not monetizing absolutely everything for that 2, 3, 4th year of renewal? And if we start I mean, the ideal. Right? I know we’re not there today, but if our sales leaders are used to getting paid on that 4th year of a renewal or whatever you wanna do, they’re gonna be really stoked when they are starting to learn how to sell those deals and coming into those deals and celebrating those wins. And then it’s not just that that day one close that you got. It’s actually like, hey. Look at this customer that I’ve nurtured through a maturity process that is sticky in a way that we’ve never seen before.

Josh Schachter:
Yeah. The the other piece, by the way, is it’s gonna help you with your retention of employees.

Jon Johnson:
Oh, absolutely. Because they they wanna get paid on that Yeah. 3rd or 4th year. Absolutely.

Aaron Thompson:
Dude, that’s a good point, Josh. But, yeah, you know, if I’ve been there 3, 4 years, and I’ve got this book of business that I’m just getting a free check every year because they renew, and I get 5% of whatever their renewal contract dollars are, and I don’t have to do any work for it, that’s gonna build over time and that’s gonna really incentivize me to stick around.

Josh Schachter:
Yeah. Yeah.

Aaron Thompson:
From a k.

Josh Schachter:
K. And you got anything?

Kristi Faltorusso:
Can I can I can I ask a question? Can I can I ask a question? So listen. Your your main point here when I asked my question was incentivizing them correctly, and I I’m all for that. But I hear from a lot of folks, right, a compensation model for this is gonna look a little different than what CS are structured for today.

Josh Schachter:
Yeah. And I

Kristi Faltorusso:
don’t see a lot of CSMs who are like, yeah. Lower my base salary and increase the accountability through quotas and targets and all of that. So everyone wants the upside, but nobody wants the downside. So, Aaron, what are your thoughts there?

Aaron Thompson:
I think that you’re a 100% right. Right? They want to operate on, like, a customer support compensation package that is completely safe and has no very little variable to it. But they also want their cake and eat it too. Right? I wanna you know? And so I, like, I don’t know what the answer is for that.

Kristi Faltorusso:
Oh, well, no. I was told you were gonna have all the answers today, so I

Josh Schachter:
may need you to come

Kristi Faltorusso:
up with something.

Jon Johnson:
We’re on the way to

Aaron Thompson:
the answer.

Josh Schachter:
Thank you.

Aaron Thompson:
BLT. The BLT is so damn I’m

Kristi Faltorusso:
gonna have any need to answer the question, Erin.

Aaron Thompson:
What I would say is, first off, the ideal customer success manager skill set as I believe, and I’d love to hear all three of your thoughts on this as well, is someone who has been my customer, 1st and foremost. I want someone who has experienced the pain point that we help solve or the the pain points that we help solve. Then I can teach them the customer success skill set.

Kristi Faltorusso:
Okay. So you’re a pro SME in the CS space.

Josh Schachter:
Yeah.

Kristi Faltorusso:
Okay. I know there’s 2 camps. We did a little LinkedIn post about this not that long ago. People have different feelings about different things. So you’re you’re pro SME.

Aaron Thompson:
I am. I’m a 100% pro SME if, you know, as opposed to let’s say you’ve been a CSM for 10 years, but it’s never been in my industry. I would rather have somebody who’s been in my industry for 10 years and then teach them how to do a business review and onboarding, you know, whatever. Right? Success planning. The fact that how to be a CSM. I’d rather do that because of the pain points and really understanding. When I was the head of CS the very first time, I did not I had never been in the ecommerce space before. My customers were in the ecommerce space.

Aaron Thompson:
I had a very hard time really truly understanding what it was like to set up a, online store and keep your SKUs all aligned and use Magento or, what’s the,

Josh Schachter:
Shopify.

Aaron Thompson:
Shopify. Thank you. Yeah. I had never used any of this product, and so I had a hard time even though I’ve worked with customers forever, I had a hard time really understanding what those pains were that they were were experiencing. And so ever since then, I’ve been all all smooth. So if we start there, then it’s a matter of finding people who are willing and able to define, deliver, and demonstrate success for their customers.

Jon Johnson:
Aaron Thompson and that big d just define, deliver, and demonstrate.

Aaron Thompson:
Yes. The 3 d’s, if you will. Yes. But the

Jon Johnson:
Risky.

Aaron Thompson:
Can’t even look. He’s giving up.

Kristi Faltorusso:
We are not. We’re not.

Josh Schachter:
I think

Aaron Thompson:
it’s about people finding people the or what’s the right personality who are open to that if you want that more variable focused, comp plan. But you really gotta paint the OTE. Right? The on target earnings for them.

Kristi Faltorusso:
Earnings. Yep.

Aaron Thompson:
You have them see that this isn’t as risky a gamble, you know. Like, it’s not just just your base and then hopefully you get your variable comp. It’s your base plus a range of variable comp. And it’s gonna be a minimum of this if you’re doing okay, and it’s gonna be maybe infinitely high if you’re absolutely crushing it and helping people understand that. But you gotta find somebody who’s, you know, not, not at not necessarily that that kind of support mindset, but maybe more of a a sales revenue focused mindset.

Jon Johnson:
Revenue. I I like I’m actually gonna flip it on you because it is a revenue focused mindset. Because as much as we are making these jokes, like, oh, we’re a part of sales. It’s like, I I agree with that, but I actually really like the way that you framed it before is I actually think a better way to communicate it is that we are driven by revenue. And as soon as we start putting that hat on, you’re right. Like, I talked to some GADs on my team and, like, their ceiling doesn’t exist on what they could make. Right? And CSMs are not used to that. We get 20%.

Jon Johnson:
We have, like, an 80 20 split if you’re a good organization. And you look at that high base and you’re like, oh, good. This is stable. I can do all of this. And then you hear about the guy who just made $600,000 in a year and went to president’s club, and you’re like, I, I’m working on those accounts. Yeah. Right? Give me my $20. Yeah.

Jon Johnson:
But I think

Kristi Faltorusso:
will do what you pay them to do. Right? And so it drives accountability and behavior. But people want the safe role. Right? It’s the problem is the hiring profile that we defined customer success, and I blame our entire industry. Right? Everybody’s wrong. Pathetic, value driven, not quantifiable asset in the organization, and I I just feel like that’s unfortunately, we did that to ourselves, and now here we are, and we brought all these people in for these safe roles to do whatever BS work that we hired them to do, which is, like, all activity based. Right? It’s not revenue based. It’s activity based.

Kristi Faltorusso:
Right? Have your calls. Do these EBRs. Have this many whatevers. And and though that’s all BS. Right? Because we know that doing those things doesn’t drive retention, doesn’t drive growth. Yet we’re holding them accountable to these lagging indicators of retention and growth and wondering why we’re not getting there. So I think the whole model is broken honestly if you ask me, and it’s gotta go back to the beginning. Aaron, I do agree with you.

Kristi Faltorusso:
I wanna tie it all back to revenue, but I think this requires organizations to go so much deeper than just their compensation plans.

Aaron Thompson:
Yeah. It’s the whole cost center versus profit generating part of the business. Right? We we we feel like we’re profit generating, and we’re we’re you know, we’re responsible for all this money down here. What the hell? But we’re viewed as a cost center, and we operate as a cost center Right. When we don’t have some variable comp that actually moves the needle and when we’re not revenue led to your point, Kristin. Right.

Kristi Faltorusso:
Right.

Josh Schachter:
Okay. Well, to be continued, Aaron Thompson, cofounder of Success Coaching. Aaron founder.

Aaron Thompson:
And Todd Nader will kill you if I don’t if I don’t show him anything. Not a cofounder. Chief revenue officer and partner, co owner. You could say that.

Josh Schachter:
Oh, no. No. I thought it was you. I thought it was you, Todd, and Andrew. We’re the 3 cofounders now.

Aaron Thompson:
They’ve founded it a couple years before I stumbled upon them in Silicon Valley and got involved with this whole donkey thing.

Josh Schachter:
Okay. So Aaron Thompson the

Kristi Faltorusso:
whole donkey thing with all these. I gotta go.

Josh Schachter:
The Aaron Aaron Thompson, the Eric Schmidt of co success coaching.

Aaron Thompson:
Sure. The Thank

Josh Schachter:
you. Thank you for being on the program. Oh. Have a great week, everybody.

Jon Johnson:
I’m gonna go get a BLT.

Aaron Thompson:
Oh, let’s do it. Can’t wait. Thanks.