Waterstone Management Group
June 12, 2014
In Part 1 of this blog series, we discussed two of the four key imperatives that software customer experience executives can use to help them develop and operate a new MCR model for the next stage of cloud services growth: Monetizing Additional Offerings and Embracing New Delivery Channels. Read on as we outline two additional imperatives that will help you get to the next level: Proactively Managing Customer Success and Rethinking Professional Services. If you haven't yet read Part 1, please review here.
SaaS companies can better manage these additional costs by a) proactively managing every customer touch point to ensure product usage/business success, b) identifying new customer needs and follow-up on new leads, and c) enabling the customer success function with CRM and other technologies.
Companies should actively engage with customers and perform quarterly check-in calls on adoption or training needs, demonstrate new features and applications, offer best practices, recommend new features, etc. The idea is to better understand the relationship between the customer and the company’s offerings—instead of being focused on blindly getting a renewal. Traditional CRM technologies that integrate sales and support information are getting even more useful as customer profiles are augmented with product usage and community/social media information.
Leading subscription players are tracking and targeting improvement around four key subscription metrics: Customer Acquisition Cost (CAC), Average Revenue per User (ARPU), Churn, and CAC Payback Period. There is not one single formula across these key metrics that ensure profitability – for instance, a company can be very aggressive in customer acquisition (company F in the figure below, a leading SaaS marketing platform) but very low churn offsets acquisition cost and creates a positive Customer Lifetime Value.
Another Company, Company P below (a leading security SaaS provider for SMBs), offsets a higher churn rate with a lower cost acquisition payback model. Investments that are made in the MCR functions need to tie back to the economic model being targeted to build for the overall business. Based on recent research conducted by Waterstone Management Group, companies are able to drive targeted improvement in customer life time value by comparing themselves to relevant benchmarks across a number of dimensions (see Figure 1). These compares will guide decisions on new initiatives and investments within MCR functions.
Organizational capabilities that technology services businesses must master
Software and subscription businesses will get increasingly more sophisticated around how they manage and grow recurring revenue. As they do, MCR functions will be a key source of value and require greater levels of focus than they’ve received before. Key questions that customer experience executives need to be asking themselves are shown in Figure 2. They can help you to identify opportunities for performance improvement.
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