Subscription Scorecard Metric Deep Dive - Sandhillsandhill.com/.../subscriptionscorecardmetricdeepdive.pdf · 2016-12-09 · Subscription Scorecard Metric Deep Dive: Cost of Customer

SubscriptionScorecardMetricDeepDive:CostofCustomerRetention

PerspectivebyWaterstoneManagementGroup

AndrewLoulousis,ManagerAmanSingh,SeniorAssociateSeptember2016

Chicago|SanFrancisco(877)603-1113www.waterstonegroup.com

Chicago|SanFrancisco(877)603-1113|www.waterstonegroup.com

Copyright©2016WaterstoneManagementGroupLLC.Allrightsreserved. Page2

SubscriptionScorecardMetricDeepDive:CostofCustomerRetention

AtWaterstone,oneofthemostfrequentquestionsthatwefieldwhenhelpingcompaniesimplementorupdatetheirsubscription-orientedmeasuresis,“Howshouldwecalculatethesemetrics?”Tohelpanswerthisquestion,WaterstoneisdevelopingaseriesofpapersthatexplorevariousSubscriptionScorecardmetricsindepth.Inthisinstallment,weexplorethedifferentwaystocalculateretention,thevalueofhigherretention,andhowtodeterminethecostofcustomerretention.

WhyRetentionIsImportant

InourpreviouspaperSubscriptionScorecardMetricDeepDive:CustomerLifetimeValue(CLTV)andCustomerAcquisitionCost(CAC),weexaminedthecostandbenefitofacquiringnewcustomers.Inthatpaper,wesawthatalargerportionofacustomer’svaluetoacompanydependedonhavingalongandprofitablerelationshipwiththatcustomer.

Inthesubscriptioneconomy,companiesmustensurethattheyareretainingandmaximizingvaluefromtheirexistingcustomers.Asaresult,SaaScompaniesneedtoenhancetheirunderstandingofwhattheirretentionactuallyisandhowtheirspendshouldbeallocatedtowardsmaintainingandimprovingthatcustomerretention.Theabilitytocosteffectivelyretaincustomerscanbeatestamenttoboththenatural‘stickiness’ofabusinessandacompany’stargetedinvestment,organizational,andoperationaldecisions.

Beforewedelveintothecostofretention,wefirstneedtounderstandhowSaaScompaniescurrentlyreportonretentionmetrics.Companiesdetermineandassesstheirretentionmeasuresinavarietyofways,dependingonwhatalignsbestwiththeirbusinessmodel.Somecompaniesmayfocusonthenumberofcustomerschurned,whileothersmayfocusontheactualdollarvalueretained.Furthermore,companiestypicallychoosetomeasurethesemetricsoverapre-definedtimeperiodinordertoreducethestatisticalvariancearisingfromaspecificcustomerevent,suchasauseraddorcancellation.Inthefollowingpages,wenotethedriversofretentionandoutlinethreedifferentwaystocalculateit.

TheSubscriptionScorecard

Tobettergauge,drive,andpredictthevalueofsubscriptionbusinesses,WaterstonedevelopedtheSubscriptionScorecard.Thisre-balancedscorecardiscenteredaroundthecustomerandtakesintoaccounttheuniquenatureofthesubscriptionmodel,whererecurringrevenueandgrowthdriversmatterthemostandnon-financial-statementmetricshaveincreasingweight.

Withineachofthefourfocusareas,therekeymetricsthatshouldbetracked.Thispaperexplorestwoofthosemetrics:customerlifetimevalueandcustomeracquisitioncost.

http://www.waterstonegroup.com/insightsandnews/2016/3/14/3dpn9fcpefd2wogsl6pkjjh6x79da9





Method1:CustomerorLogoRetentionRate

Wedefinecustomerorlogoretentionastherateofrenewalofcustomersoveragiventimeperiod.Foragivencustomercohort,itwilltrackthenumberofcustomersthatstillremainattheendofagiventimeperiodoutofthetotalnumberofcustomerssignedatthebeginningofthatperiod.Thisratioistypicallyexpressedasapercentageandusuallyrangesfrom70%to99%:

# of Customers! !"##$%& !"#$%& # of Customers! !"#$%&'( !"#$%&

Forexample,ifacompanysigns100customersatthebeginningoftheyearand95ofthemchoosetorenewtheirsubscriptionsattheendoftheyear,thenthecustomerretentionrateis95%witha5%churn.

Asareal-worldexample,Carboniteisapubliclytradedcompanythatchoosestoreportitsannualretentionrate(96%in20151)onacustomerbasis.Carbonitespecifiesitscalculationas“thepercentageofcustomersonthelastdayoftheprioryearwhoremaincustomersonthelastdayofthecurrentyear,orforquarterlypresentations,thepercentageofcustomersonthelastdayofthecomparablequarterintheprioryearwhoremaincustomersonthelastdayofthecurrentquarter.”2

Methods2&3:DollarRetentionRate–GrossandNet

Dollar-basedretentionisdefinedastherecurringrevenueattheendofadefinedperioddividedbytherecurringrevenueforthesameclientbaseattheendofthepriorperiod.Again,thisistypicallycalculatedonamonthly,quarterly,annual,and/orcohortbasis.

Method2:GrossDollarRetention

Grossdollarretentionorrenewalrateissimilartothecustomerretentionrate;itexaminesthetotalannualrecurringrevenue(ARR)dollaramountsignedatthebeginningofagivenperiodagainsthowmuchofitstillremainsattheendofthatperiod.Itiscalculatedasfollowsandisreportedasapercentage,whichtypicallyfallsbetween70%and99%:

$ Recurring Revenue! !"##$%& !"#$%&$ Recurring Revenue! !"#$%&'( !"#$%&

Forexample,ifacompanysigns$500inARRfromacohortofcompaniesatthebeginningoftheyearandthenrenews$450ofthatinitialARRattheendoftheyear,itsgrossdollarretentionrateis90%($450/$500).

Asareal-worldexample,ServiceNowreportsitsretentionmetriconadollarbasis,excludingthebenefitofupsells.Itsgrossdollarretentionratewas97%asofmid-2015.3ServiceNowcalculatesthisretentionrateby“subtractingourattritionratefrom100%.Ourattritionrateisequaltotheannualcontractvaluefromcustomersthataredueforrenewalintheperiodanddidnotrenew,dividedbythetotalannualcontractvaluefromallcustomersdueforrenewalduringtheperiod.”4Othercompanies,suchasUltimateSoftware,reporttheirretentionmetricsimilarly.



Method3:NetDollarRetention

Somecompaniesmaychoosetoreportnetdollarretention,whichbuildsoffofthegrossdollarretentionmethod.InadditiontothegrossrenewalamountofthestartingARRdollaramount,thiscalculationalsoaccountsforupsells,cross-sells,andotherexpansionrevenues.Thiswillgeneratethehigherretentionrateofallthreemethodsandcanoftenbeover100%.

$ Recurring Revenue (incl. Expansion Rev)! !"##$%& !"#$%&$ Recurring Revenue (incl. Expansion Rev) ! !"#$%&'! !"#$%&

Forexample,ifacompanysigns$500inARRfromacohortofcompaniesatthebeginningoftheyear,renews$450ofthatinitialARR,andsellsanadditional$100ofnewrecurringrevenuetothosesameremainingcustomers,thenitsnetdollarretentionis110%($550/$450).

Asareal-worldexample,Zendeskcalculatesitsdollar-basednetexpansionrateby“dividingourretainedrevenuenetofcontractionandchurnbyourbaserevenue.”Itsretentionratewas123%attheendof2015.5

ImpactofRetentiononARR

Todemonstratethemagnitudeofimpactthatretentionhasonrecurringrevenue,wepresentasimpleexample:Let’ssaywehave100customerswithinacohortwithanaverageARRof$5MpercustomerforatotalstartingARRof$500M.Ifwecomparethedifferencebetween96%and94%grossdollarretention,weseetheresultingyear-by-yeardeviationsinARRretainedbelow:

ARRImpactofCustomerRetentionDifferences

After1year,the96%retentionhas$10MmoreinARR;after5years,thegapacceleratesto$41M,andafter10years,thedifferencegrowsto$63MinARR.Cumulatively,thosedifferencesresultinlost

$100

$200

$300

$400

$500

0 1 2 3 4 5 6 7 8 9 10

Coho

rtARR

YearsAkerCustomerAcquisilon

FullRetenlon 96%Retenlon 94%Retenlon



revenuesof$131Mover5years,and$408Mover10years.Thekeylessonhereisthatarelativelysmallincreaseincustomerretentioncantranslateintoaverylargerevenueopportunityovertime.

Nowthatwecanseethevalueassociatedwithhigherretention,itisimportantforcompaniestounderstandwhatactivitiesarecontributingtothatretentionvalue,howmuchtheseactivitiescost,andhowtostrategicallyinvestinprofitableretention.

CostofCustomerRetention(CCR)

Oneofthechallengeswithfocusingonretentionisunderstandinghowmuchmoneyiscurrentlybeinginvested(orshouldbeinvested)onretentioneffortsandwhatspecificfunctionsandactivitiesthroughoutthecustomerlifecycleareactuallydrivingcustomerrenewals/expansions.

Thecostofcustomerretention(CCR)representsalloftheongoingcostsassociatedwithretainingcustomers(andexpandingwithinthisinstalledbase)foracompany.Detailingwhichcostsshouldbeattributedtoretentionwillvarybycompanymaturityandoperatingmodel;however,wewillhighlightsomegeneralconsiderationsandmethodstohelpyoudeterminetheapplicablecostsforyourbusiness.

CostofCustomerRetention–SimpleMethod

CCR = Account Management AM Costs × AM Time Allocated to Retention Activities %

Thiscalculationmethodfocusesontheaccountmanagementorsalesactivitiesdirectlyrelatedtoretainingcustomers;typically,thisinvolvescommunicatingwithcustomers,negotiatingrenewalterms,andexecutingtherenewaltransaction.Whoperformstheseactivitieswillvarybycompany;forexample,itcouldbetheassignedaccountmanager,salesrepresentative,oradedicatedrenewalsteam.

Themajordrawbackofthismethodisthatitfocusesprimarilyonsalesactivitiesandtherenewaltransaction,bothofwhichonlytakeplaceforasmallpartofthecustomer’srelationshipwiththecompany;itmissesmanyoftheon-goinginvestmentsthatacompanymakesinbuildingandmaintainingasuccessfulcustomerrelationshipandhighsatisfaction.

Sales/AccountManagement&CustomerRetention

• Salesistypicallytheprimarycontactforestablishingandmaintainingcustomerrelationships

• Amountoftimespentaddressingneedsofexistingcustomers(e.g.,monitoringbusinessvalue,negotiating/executingrenewalstransactions,handlingotherinquiries)versustimespentwithnewcustomerscanbecountedtowardscustomerretentioncosts

• Retention-focusedactivitiesofSalesteamwillvarydependingontheotherfunctionsthatorganizationsutilize(e.g.,insituationswhereadedicatedRenewalteamexists,Salesisstilllikelytobeinvolvedindevelopingrenewalstrategies,etc.)



AnalysisofCustomerRetentionCosts

Companiesvarysignificantlywithregardstothefunctions,programs,andtoolstheyusetodriveretention.Below,wehavedetailedsomeofthecommonelementsacrossthesethreecategoriesthatmaybetiedtodrivingretention.Detaileddescriptionsofeachcostcategorycanbefoundintheappendix.

AdditionalCustomerRetentionCosts

LaborCosts Programs&Training RetentionTools&Tech

Sales/AccountManagement Webinars CustomerPortal

RenewalsTeam Workshops CustomerHealth/Monitoring

CustomerRelationshipResources Training CustomerSuccessPlatforms

CustomerSuccessProgram CommunityEngagement CampaignManagementTools

RelationshipMarketing AdvocacyPrograms

Retention-focusedlaboractivitiesextendbeyondthepointofrenewaltoencompasstheentirecustomerlifecycle.Programsandtoolsareputinplacetosupporttheseretentioneffortsacrossthelifecycle.

Companiesshouldexpandonthebaselinecostofretentioncalculationmethodnotedpreviouslyandapplytheretentionelementsthatarerelevantfortheirbusinesstoyieldamoreaccuratepictureofretentionspend.

Somekeyconsiderationsfordeterminingyourcostofretentionincludethefollowing:

• Allocatingtime/resourcespendforretentiondoesn’tneedtobeexact,butitshouldbethoughtoutandconsistentonanongoingbasis.Itisalsoimportanttomatchallcostsfromatimingperspective.

• Someofthesecosts(inparticularlaborcosts)mayvarybycustomersegment/tier;insuchcases,youmaywanttosplitoutcoststogetamoredetailedpictureofyourretentionspend.Thisgranularitycanbeimportantwhenconsideringfutureinvestments.

• Customerretentioncostsshouldbeconsideredtobeongoing/annual.Theremaybetimingconsiderationsforsomeofthese(e.g.,tools/techmaybeaone-timefeeorrequirelargerupfrontinvestments).However,onanannualbasis,manyofthesecosts(e.g.,programs&training)willremainconsistent.Laborcostsmayvarybasedonwhereanindividualcustomerisinitslifecycle;however,inaggregate(foramorematurecompany),thesecostsshouldaverageoutovertime.



• Youcanchoosetoincludeseparateexpansionactivitycostsaswell,butitisimportanttoremainconsistentincalculatingandanalyzing.

CostofCustomerRetention–AlternativeMethods

Onceyou’vedevelopedthefullviewofhowmuchyourcompanyisspendingonretainingcustomers,youcandeterminetheaveragecostofretainingonecustomer.Toperformthiscalculation,werecommendthefollowing:

Annual Cost of Retention per Customer =Annual Cost of Retention (per previous calc. )

Total # of Customers

Thiscalculationisusuallybrokenoutbycustomersegment,size,orproduct.Again,theannualcostofretentionandtotalnumberofcustomersneedtoalignintermsofthesegmentationused(aswouldthelifetimevalue).

Weusetotalnumberofcustomersbecause,inherently,yourretentioneffortsaregearedtowardskeepingeveryexistingcustomerfromthedaytheyfirststartusingyourproductorservice.Ifneeded,youcanalsoextrapolatethisannualcosttoreflectthetotalcostofretainingacustomeroveritslifetimebymultiplyingthisannualnumberbytheexpectedcustomerlifetime.

CostofCustomerRetentionRatio(CCRRatio)

Itisimportantforcompaniestounderstandthevaluebeingdrivenbytheirretentioneffortsrelativetothecostofthoseeffortsinordertogaininsightintocurrentoperationsandinformfutureinvestmentsandstrategy.Thechallengeofmatchingrenewalrevenuetotheassociatedcostsisthattheyoftendon’toccurinthesamequarterorevenyear.Forexample,ifanewcustomersignsa3-yearcontractatthebeginningofYear1,variousretentionactivities,programs,andtoolswilllikelybeleveragedandmaintainedeachyearleadinguptorenewalatendofYear3.Ifthecustomerrenews,the‘rewards’oftheongoingretentioneffortswouldbereflectedintherenewalcontract,withrevenuebeingrecognizedafterYear3.Asaresult,thetimingoftheretentioncostsandtherenewalrevenuedonotlineuponapercustomerbasis.

Inordertomitigatethisissue,welookatnormalizingtheaveragerenewalcontractvaluepercustomerandthecostofretentionpercustomeronanannualbasis.Thishelpstoaligntherevenueandcostsonapercustomerbasis,settingthingsupforfurtheranalysis.

Onemethodfordoingsoisdesignedtoilluminate,onaverage,howmuchvalueareyouderivingfromyourretentionspendannuallypercustomer.Todothis,wetakethegrossprofitofanaveragecustomerrenewalcontract(annualized)anddivideitbythecostofretentionpercustomer(annualized):

Average Annual Renewal Contract $ x Gross Margin (%)Annual Cost of Retention per Customer ($)

Thisratiotellsustheamountofgrossprofitgeneratedannuallypercustomerfor$1ofretentionspend.



RetentionProfitRatioExample

Year1

RenewalAvgContractValue(ACV)GrossProfit

AvgACV($M) $5

GrossMargin% 80%

ACVGrossProfit $4

AvgAnnualCostofRetentionperCustomer($M) $1

CCRRatio 4

Youshouldhavearatiothatisgreaterthan1,showingthatyouareprofitablyretainingcustomersonanannualbasis.It’stypicalforcompaniestoreachorexceedaratioof3x.Ifyourcompanyisbelow3,thenwewouldsuggestdiggingintoyourcustomerretentioneffortsacrosstheentirecustomerjourneytoensureyouareperformingtherightactivitiesandinvestingwisely.Ifyourratioishigh,typicallyover10x,thenyoushouldensurethatallretentionactivitiesandcostsarebeingallocatedcorrectly.

Thisapproachcanandshouldbeadjustedforyourcompanyandwillvarybasedonfactorssuchascustomersegment,products,etc.

Oneadjustmentthatcompaniesmakeistore-calculatethegrossmargin%usedinordertoremoveanyretentioncoststhatareincludedinthecostsofgoodssold(COGS)andwouldthusalreadybeaccountedforinthegrossmargin%.Forexample,iftheCustomerSuccessteamisincludedintheproductCOGSversusSalesandAdministrativecosts,itshouldbepulledoutwhencalculatingthegrossmargin%toavoiddoublecounting.

Companiesalsoneedtobecognizantofthetermofarenewalcontractversustheoriginalcontractterm.Thelongeryourinitialcontract,thelongeryourrenewaltermshouldbeinordertorecouptheretentioncostsaccruedandinvestmentmadeinbuildingthecustomerrelationshipovertheinitialterm.Forexample,let’scomparea3-yearinitialcontractanda1-yearinitialcontractbothrenewedfor1year.Thetotalretentioncostsaccruedoverthe3-yearcontractwouldbegreaterthantheretentioncostsforthe1-yearcontractforthesamerenewalgrossmargin,resultinginalowercostofcustomerretentionratioforthe3-yearcontract.

KeyConsiderationsforCCRRatio

• Someofthesecostcategoriesmayalsofunctionasrevenuedrivers(e.g.,training);insuchinstances,needtomakesuretheassociatedcostsareaccountedfor(ifnotalreadypartofCOGS/GM%)

• Costsmaydifferbycustomersegment/tier;insuchcases,itmaymakesensetosplitoutthecalculationaccordingly,e.g.,(ACVforTierX*GMforTierX)/CostofretentionforTierX

• Upsell/x-sellmaybereflectedinrenewalcontractvalue;needtoensurealignmentwithcosts(e.g.,itisokayifyouareattributingcoststhatareinherentlytiedtobothrenewalsandexpansions)

• Doesnothighlightoveralleffective-nessofrenewalspendgivenitisdoneonapercustomercontractbasis



Conclusion

Theguidanceaboveservesasastartingpointandreferenceforcompaniesseekingtogainfurtherinsightintotheirretentioneffortsandopportunities.Ascompaniesscaleandbecomemoremature,onewouldexpectmoreemphasisandspendtobeallocatedtowardsretainingcustomers.Gainingvisibilityintowhatactivitiescontributetoretentionandhowtheyshouldbeaccountedforisachallengingexercisethatcanvarysignificantlybycompanydependingonfactorssuchasoperatingmodel,organizationalstructure,strategy,andmaturity.Itisimportanttohaveaclearunderstandingofthesecostsandtobemethodicalandconsistentincapturingthem.Doingsoallowscompaniestofurtheranalyzetherelativevalueacompany’soverallbusiness(orcohort,product,geography,etc.)isderivingfromretentioneffortsandusethisinformationtoinformfuturedecisions–suchaswhatsegmentstofocuson,whatthebudgetarymixforacquisitionversusretentionshouldbe,etc.

InfutureinstallmentsoftheSubscriptionScorecardMetricDeepDiveseries,wewillhighlightothermetricsthatcanhelpyoubettermanage,inform,anddriveyoursubscriptionbusiness.Toensureyoureceivethem,besuretosubscribetoourquarterlynewsletter,WaterstoneCurrents.

WaterstoneManagementGrouphelpstechnologycompaniesandinvestorscreatemeasurablevaluebyidentifyingandcapitalizingondisruptivegrowthopportunitiesanddrivingexcellenceinServices,Cloud,andCustomerSuccessperformance.ShouldyouhaveanyquestionsonthistopicorwishtolearnmoreabouttheSubscriptionScorecardoverallandhowitcanbeusedtomaximizeCustomerSuccessanddrivecorporatevaluewithinyourorganization,pleasecontact:AndrewLoulousis,Manager(312)[email protected]

AmanSingh,SeniorAssociate(312)[email protected]_________________________________________

1Carbonite,Inc.FQ12016EarningsCall,May3,20162Carbonite,Inc.424B4,October,20113ServiceNow,Inc.Q22015EarningsCall,July29,20154ServiceNow,Inc.424B4,June,20125Zendesk,Inc.Q42015EarningsCall,February16,2016

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Appendix

LaborCosts

Thesearefunctionallaborcoststhataredesignedtocapturetheresourcesthatengageinretention-focusedactivitiesthroughoutthecustomerlifecycle.Thesecanrangefromwholeteamswithadedicatedretentionfocus(e.g.,CustomerSuccess)todesignatedindividualswithinabroaderteamwhoexecuteontargetedretentionactivities(e.g.,RelationshipMarketing).

• Renewals

o Canbeadesignatedteamorexistingfunctionsresponsiblefordevelopingaccountrenewalstrategiesandformallyexecutingonrenewaltransactionsandnegotiations.Dependingontheorganizationalstructureofacompany,theRenewalsteammayworkdirectlywithSalesandCustomerSuccess.

• CustomerRelationshipResources

o Responsibleforstrategicplanningandassociatedproactivecustomerengagement.Activitiescanincludeexecutivebusinessreviews,aligningproductroadmapwithcustomers’businessgoals,providingadditionalresourcestomaximizeproductvalue,etc.Theseactivitiesmaybecapturedbyanotherteam(i.e.,CustomerSuccess)dependingontheorganization,andthetitleoftheseresourcescanvary.Examplesofthisfunctionmayincludeaccountmanagerswhofocusonsalesopportunitiesforupsellsandcross-sells,proactiverelationshipmanagerswhoaremonitoringadoption,healthscores,etc.,andsupportfunctionsthatfocusonescalationsandmakingsurecustomerrequestsarehandledproperly.

• CustomerSuccess

o Programdesignedtoensurecustomervalueisbeingdeliveredpost-sale.Thisorganizationgenerallyhasadualmandate:driveretentionandadoption.Itachievesthesegoalsthroughavarietyofprograms,touchpoints,andreviewsdesignedtomaximizethecustomerexperience.ThisgroupcanincludeCustomerSuccessdirectors,managers,andoperations(i.e.,sub-teamthatperformssupportingCustomerSuccessactivitiessuchasdevelopmentofcollateral,deliveryofscalableprocesses/activities,etc.).NotethatwhileCustomerSuccessalsohasresponsibilityforupsellandcross-sell,dependingonthematurityofthecompany,onecanassumethatthebulkofitsactivitiesareretentiondriven;oftentimes,CustomerSuccessmanagers(CSMs)identifyexpansionopportunitieswhiletheSalesteamwillexecute.

• RelationshipMarketing

o Marketingfunctionfocusedonmaintainingandenhancingexistingcustomerrelationshipswithanultimategoalofretainingthesecustomersandexpandingwithinanaccountviatargetedmarketingoutreach.Anexampleofarelevantactivityisanemailcampaigntoexistingcustomerstoprovidesupportingonboardingresources,communicatebestpractices,andhighlightnewreleases.Ifmarketingdoesperformtheseactivities,itmaybe



reflectedbyeitherdesignatedresourcesaspartofthebroaderMarketingdepartmentorbyaseparateRelationshipMarketingteam.However,theseactivitiescanbeperformedbyotherfunctionalresources/teams(e.g.,CustomerSuccess,Training,etc.)dependingonthecompany.

ProgramsandTraining

Thesearedirectcostsassociatedwithprogramsandtrainingdesignedtosupportcustomerretention.Thesecanbereflectiveofspecificinitiativesorcanbeusedtosupportresourcesintheircustomerretentionefforts.

• Webinars

o Costsassociatedwithsettingupwebinarsforcustomerstoutilizeondemandorthroughvirtualinstructor-ledcourses.Thesewebinarsareoftenassociatedwithsupportingresourcesonacustomerportalandaretypicallynotmonetized.Theycanincludetopicssuchasbestpracticesforproductusage,newfeatures,etc.inordertodriveadoption.

• Workshops

o Workshopscancoveravarietyoftopicstohelpsupportcustomerretention.Dependingonthetopic,theycanbedeliveredbyavarietyoffunctionalresources(e.g.,ProductManagerforatechnicalproductdeepdive,Trainingfor‘trainthetrainer’sessions,etc.).

• Training

o Trainingcostsmaybewrappedintootherretentioncostcategoriessuchasworkshopsandwebinars,orcanbereflectiveofthelaborandmaterialcostsassociatedwithdesignatedtrainingprograms/educationpaths.Manycompaniesselltrainingcreditsthatcanberedeemedbycustomersforspecifictopics(i.e.,companiesmayrecommendeducationpathsbasedonproductspurchasedandbusinessneeds).Companiescanalsoofferotherprogrammatictrainingsuchasadoptionenablement(timetovalue/rapidimplementation),accreditationprograms,andothers.Theseultimatelyhelpenablecustomersintheiruseoftheproductsandsupportoverallcustomerhealth,leadingtohigherretention.

• CommunityEngagementandAdvocacyPrograms

o Communityengagementcanincludeprograms/initiativesdesignedtofacilitatecustomerinteractionsandenableopportunitiestoaddressissues,driveloyalty,etc.Someoftheseinitiativescanincludepeer-to-peersessions,end-of-yearconferences,andloyalty/rewardsprograms.Furthermore,manycompaniesalsoofferadvocacyprogramsdesignedtodriveloyalty,developcustomerinsights,andpromotereferrals.Costsassociatedwiththeseinitiativescanincludeset-upfees,campaignmanagement,etc.



RetentionToolsandTechnology

Technologyandtoolsdirectlyenableandsupportretentionefforts,rangingfromproactiveidentificationofcustomerneedstodrivingscalableprocessestoengagewithallcustomers.Thecostsassociatedwiththesetoolscanvary,butwouldlikelybeintheformofsoftware/hardwaresubscriptionsorlicenses.Theremayalsobeincrementalcostsforthingslikehosting,support,maintenance,integration,andresourceswhomanagethesetools(ifnotcapturedinthelaborcostsabove).

• CustomerPortal

o Customerportalsareoftenofferedtocustomersasahubforon-demandresourceaccess(e.g.,onlinetraining,communityforums,keyannouncements,etc.).

• CustomerHealth/Monitoring

o Acustomerhealth/monitoringtool(e.g.,dashboards)servestoprovidevisibilityintorenewalriskandproductadoption/usage.Thesecantaketheformofstand-alonetechnologyofferingsorcustomtools(e.g.,excelspreadsheets)thataggregateandanalyzerelevantinformation.ExistingCRM/incidentmanagementandreporting/analyticsplatformsmayalsobeleveraged.

• CustomerSuccess

o CustomerSuccess-specificplatformsmaybeusedbyCSMstomanagethepost-salecustomerrelationship(e.g.,customerhealthscores,keyactions/playbooks,reporting,etc.).

• CampaignManagement

o Toolsforone-to-manycommunications(e.g.,emailcampaigns)arealsolikelytobeutilizedincustomerretentionefforts.Thesecostsmayfallunderaspecificorganization,suchasMarketing,butadeterminationcanbemadeonhowmuchitisbeingusedforretentionversuscustomeracquisitiontoproperlyallocatecosts.

Documents

Subscription Scorecard Metric Deep Dive - Sandhillsandhill.com/.../subscriptionscorecardmetricdeepdive.pdf · 2016-12-09 · Subscription Scorecard Metric Deep Dive: Cost of Customer