Where are we headed?

In today’s uncertain economic landscape, where customer experience quality has fallen to an all-time low after declining for an unprecedented third year in a row, the role of Customer Success Management (CSM) has never been more critical. With only 3% of companies currently categorized as customer-obsessed, organizations that effectively retain and grow their existing customer base stand to gain a significant competitive advantage. Customer-obsessed organizations report 41% faster revenue growth, 49% faster profit growth, and 51% better customer retention than their non-customer-obsessed counterparts. During economic uncertainty, companies that prioritize strategic customer success initiatives can transform potential threats into opportunities for sustainable growth.

Why Customer Success Management Is Your Recession Shield

Economic downturns inevitably trigger budget scrutiny across organizations. When finances tighten, customers take a close look at all their expenditures, ready to eliminate anything not producing significant, measurable value. This behavior creates a fundamental business challenge: while new customer acquisition becomes increasingly difficult and expensive during economic uncertainty, protecting your existing customer base becomes mission-critical.

The mathematics of customer retention during a recession are compelling. Even without increasing real churn, most companies will see their churn rate metrics spike during a downturn primarily due to slowing sales. As customer acquisition slows, the denominator in your churn calculation changes before customers actually leave, creating a distorted appearance of worsening retention. This mathematical reality underscores why focusing solely on a nominal churn rate can be dangerously misleading during economic uncertainty.

For SaaS and recurring revenue businesses in particular, a robust CSM practice serves as a critical defense mechanism. Historical data shows SaaS companies tend to fare better in recessions than other tech companies, largely due to recurring revenue contracts providing superior predictability. With healthy net retention, recurring revenue businesses can continue growing even if they stop adding new customers entirely. This advantage, however, depends entirely on having an effective customer success strategy in place.

Organizational Structure Impacts CSM Effectiveness

How your CSM function is organized and where it reports within your company significantly impacts its effectiveness, especially during economic downturns. Let’s examine the three most common reporting structures and their implications during a recession:

CSM Reporting to the CEO

In early-stage startups and companies where customer experience is a fundamental strategic priority, the Customer Success lead often reports directly to the CEO. According to industry research, 53% of VPs of CS report to the CEO or COO, highlighting the importance many organizations place on elevating customer success to the highest levels of leadership.

Advantages during a recession:

• Ensures customer retention initiatives receive immediate executive attention and resources
• Creates a direct channel for customer feedback to influence strategic decisions
• Signals to the entire organization that customer retention is a top priority
• Prevents customer success initiatives from being subordinated to short-term revenue goals

Implementation considerations:
When CSM reports to the CEO, success initiatives should focus on delivering measurable business outcomes that align with the company’s strategic direction. During economic uncertainty, this reporting structure enables faster decision-making around customer-centric initiatives without competing departmental priorities complicating the process.

Research indicates that for recurring revenue businesses, having the Customer Success function report directly to the CEO rather than the Head of Sales provides several advantages. This structure ensures customer success maintains its focus on long-term health metrics rather than being pressured to prioritize short-term revenue goals that might undermine retention during a recession.

CSM Reporting to the COO

For organizations where operational efficiency is paramount, particularly during economic downturns, having CSM report to the COO creates strong alignment between customer success initiatives and operational excellence.

Advantages during a recession:

• Facilitates streamlined resource allocation across operational functions
• Creates natural alignment between customer success and service delivery teams
• Enables process optimization that can reduce costs while maintaining quality
• Positions customer success as an operational priority rather than just a sales adjunct

Implementation considerations:
When reporting to the COO, customer success leaders should emphasize operational metrics like customer health scores, time-to-value, and efficiency metrics. This structure works particularly well when recession-related cost pressures require operational efficiency without sacrificing customer experience.

CSM Reporting to the CRO

The trend of customer success teams reporting to Chief Revenue Officers is growing, with the percentage jumping from 24% in 2023 to 33% in 2024. This structure is particularly common in enterprise-stage companies and those with product-led growth models where the boundaries between sales and customer success are naturally blurred.

Advantages during a recession:

• Creates alignment between acquisition and retention strategies
• Enables more cohesive management of the entire customer lifecycle
• Facilitates smoother handoffs between sales and success teams
• Positions customer success as a revenue driver rather than a cost center

Implementation considerations:
When CSM reports to the CRO, teams need to carefully balance expansion goals with retention priorities. The risk during economic downturns is that expansion efforts like cross-selling and upselling might be prioritized at the expense of proactive customer retention strategies. Success leaders in this structure must advocate for measuring net revenue retention (NRR) rather than focusing solely on upsell/cross-sell metrics to maintain their role as trusted advisors to customers.

Action Steps for CSM Leaders During Economic Uncertainty

Regardless of reporting structure, certain fundamental strategies should form the backbone of any CSM practice during economic uncertainty. Here are the critical action steps for customer success leaders navigating a recession:

1. Implement Robust Customer Health Monitoring

During economic downturns, early detection of risk signals becomes exponentially more important. Customer health is a consolidation of all information about customers from all probes, people, and systems. Without comprehensive health monitoring, you’re essentially flying blind during the precise moment when visibility matters most.

Action steps:

• Deploy a comprehensive customer health scoring system that incorporates both product usage and business health indicators
• Set up systems to track customers’ business health indicators, including public signals (like reduction in force announcements) and private data signals (declining user counts)
• Ensure all customer-facing departments have access to a live 360-degree view of customer health
• Monitor utilization metrics closely, as they often serve as good proxies for value creation

Effective health monitoring allows you to make informed, data-driven decisions and evaluate how customer behaviors align with your business priorities. During a recession, this visibility enables you to allocate limited resources precisely where they’ll have the greatest impact on retention.

2. Segment and Prioritize Customers Strategically

Economic downturns force difficult resource allocation decisions. A strategic approach to customer segmentation allows you to focus limited resources where they’ll deliver the greatest retention impact.

Action steps:

• Plot customers on a matrix measuring both the value you provide and their business health
• Develop targeted playbooks for each segment, with particular attention to “at-risk but valuable” customers
• Identify power users within lower-adoption accounts who can help expand visibility and value
• Consider not just current value but future growth potential when prioritizing resource allocation

For customers receiving high value but experiencing business challenges (the “top left” quadrant), become their hero by identifying how your product addresses their current key priorities and helping them communicate this value internally. For high-value, healthy customers, focus on making them champions who can provide testimonials and referrals.

3. Demonstrate and Communicate Value Obsessively

During economic uncertainty, customers scrutinize every expense. Your ability to clearly articulate and demonstrate the specific value you deliver becomes not just important but existential.

Action steps:

• Drive to a fundamental product value creation metric and track it closely for each customer
• Help customers communicate the value of your product internally with easy-to-forward ROI summaries
• Host Executive Business Reviews, especially with strategic customers, to build relationships and demonstrate value
• Shift messaging to emphasize how your solution helps customers weather economic challenges

A Customer Success Manager’s primary responsibility during economic uncertainty is to actively collaborate with customers to understand their goals and tailor services to match their unique needs, maximizing the derived value. This value-focused approach is critical when customers are evaluating which services to retain and which to cut.

4. Create Operational Efficiency Through Process and Automation

When resources are constrained, efficiency becomes paramount. Customer Success organizations that scale effectively during downturns leverage process optimization and automation to do more with less.

Action steps:

• Implement digital customer success strategies to scale personalized experiences without linear headcount growth
• Use process standardization to create consistency and enable measurement across customer touchpoints
• Leverage customer success software to automate routine communications and monitoring
• Build high-risk account planning templates that focus on key adoption metrics and mandate time-based objectives

Digital engagement models ensure every customer touch provides value while enabling your team to manage more relationships effectively. This approach allows you to scale your impact without proportionally increasing costs-a critical capability during economic downturns.

5. Develop Flexible Commercial Strategies

Economic uncertainty requires commercial flexibility. Developing a thoughtful approach to contract modifications can prevent unnecessary churn while preserving long-term value.

Action steps:

• Determine and prioritize contractual levers you’re comfortable adjusting versus non-negotiables
• Consider offering pause options rather than cancellation for customers facing temporary constraints
• Seek early renewals, potentially with incentives, to secure longer contract terms during uncertainty
• Balance “gives” with appropriate “gets” like extended contract terms or customer marketing opportunities

While reducing prices mid-contract is challenging, when used judiciously it can be an effective long-term retention lever. Remember that logo retention remains paramount during downturns-a customer who stays at a temporarily reduced rate can still become profitable as economic conditions improve.

6. Build and Leverage Customer Communities

Customer communities become particularly valuable during economic uncertainty, creating resilience through peer connections and shared knowledge.

Action steps:

• Proactively connect your customers with their peers, especially those in similar industries
• Create opportunities for customers to share best practices for deriving value during challenging times
• Develop community-driven resources that support customers’ changing priorities
• Facilitate virtual communities when travel and in-person events may be restricted

Customer communities “work for you while you sleep.” Building trusted relationships between customers creates substantial value at minimal cost-a perfect strategy when resources are constrained by economic conditions.

7. Make Your Product an Essential Need

The ultimate recession-proofing strategy is positioning your product as essential rather than optional. This requires close collaboration with product teams to emphasize capabilities that address recession-specific challenges.

Action steps:

• Identify how your product can help customers address their current key priorities in the economic climate
• Feed insights about customer challenges to product teams to inform the roadmap
• Implement targeted product adoption campaigns focused on specific high-value use cases
• Consider offering discounted or free professional services to accelerate value realization

During the pandemic, companies that quickly adjusted their value proposition to address new challenges saw strengthened customer relationships. Apply this same principle during economic uncertainty by helping customers use your product to navigate their specific business challenges.

Implementation Variations by Organizational Structure

While the core strategies remain consistent, implementation approaches should be tailored based on your organizational reporting structure:

For CEO-Reporting CSM Organizations:

• Focus on demonstrating strategic, company-wide impact of customer success initiatives
• Leverage the direct reporting line to advocate for cross-functional customer retention initiatives
• Position retention metrics alongside acquisition metrics in board and executive reporting
• Implement voice-of-customer programs that directly inform executive decision-making

In this structure, CSM leaders should leverage their direct CEO access to secure resources for retention initiatives and ensure customer experiences remain central to company strategy even when budget pressures increase.

For COO-Reporting CSM Organizations:

• Emphasize operational efficiency improvements in all customer success initiatives
• Develop metrics that demonstrate how CS activities improve overall operational performance
• Create clear process documentation to ensure consistency as resources become constrained
• Collaborate closely with other operational teams to create end-to-end customer experience improvements

For CSM teams reporting to the COO, success during a recession depends on demonstrating how customer success initiatives contribute to operational excellence and efficiency rather than being viewed as discretionary expenses.

For CRO-Reporting CSM Organizations:

• Develop composite metrics that balance retention and expansion goals
• Create clear definitions of responsibility between sales and customer success
• Implement effective handoff processes to maintain relationship continuity through customer journeys
• Advocate for a revenue retention focus rather than solely new revenue acquisition

When reporting to the CRO, CSM leaders must ensure that short-term revenue pressures don’t undermine long-term customer health. Using net revenue retention as a north star metric helps maintain this balance while aligning with the CRO’s revenue mandate.

Conclusion: From Survival to Competitive Advantage

Economic uncertainty inevitably creates business challenges, but for Customer Success leaders, it also presents an unprecedented opportunity to demonstrate strategic value. By implementing the strategies outlined here, adjusted for your specific organizational structure, you can transform your CSM practice from a cost center into a strategic advantage that shields your company from the worst effects of economic volatility.

The data is clear: customer-obsessed organizations grow revenue and profit faster than their competitors. With only 3% of companies currently achieving this status, the opportunity to differentiate through customer success excellence remains wide open. By focusing relentlessly on customer retention and value delivery during economic uncertainty, you position your organization not just to survive the downturn but to emerge stronger when economic conditions improve.

Remember that churn is never as bad as it seems or as good as one thinks. By looking beyond superficial metrics to truly understand and address customer needs during challenging times, you build the foundation for sustainable growth regardless of economic conditions. The decisions you make today about your CSM practice will determine not just how well you weather this economic storm, but how quickly you accelerate when skies clear.

As a CSM leader what are your thoughts on this? If you wish to discuss how I can help to develop recession proof programs for you in you CSM practice just follow this link to book a 15 minute call to discuss!

⁂