Keeping Customers on Cloud Nine

Now that the cloud is among us, many companies are chasing the bandwagon to ready themselves with the way they run the business and with the way they serve their customers.

In our earlier article "Cloud Nine or Getting All Cloudy?", we mentioned about the important structures that a distributor or partner needs to have in order to be cloud ready. This week, we focus the discussion on the ways we could measure the business on customers who has bought subscription-based or term-based products.

First, let us look at the basics – what happens after a customer buys such a product from a partner : 1) Nothing changes: They continue with their service as before. This is revenue-neutral. 2) They upgrade, for example by subscribing to additional features, thereby bringing us more revenue. 3) They leave, and thereby cut our revenue.

If we want to grow the business, we have to make sure the number of customers we bring in and retain is greater than the number of customers cancelling the service. Keeping existing customers is as important as getting new ones. Many termed this as renewal or retention rate. However, many organizations commonly measure the subscription business based on the below 2 ways :

1) The number of new customers who bought subscription, usually called attach rate ;

2) The number of customers who renew a subscription, widely known as renewal rate.

While these are useful ways to look at the business, we acclaim this method as great in the past but not good enough in today’s context.

Why?

With cloud-based products on the rise and with competitions getting intense over the years, there needs to be more fresh ways to look at things from a different angle. The purpose is not only to measure, but to be more laser-focused with our actions as a result of these measurements.

In addition to the above 2 measurements, here are a few others to be considered and the possible indications it could imply :

A) The number of accounts that are cancelled each month

Measurement #3

As a percentage of the customer base, and by customer size tiering, i.e. single license customer, multiple and medium quantity users, and large number of license users. How the tiering is done is dependent on the nature and trend of the product install base.

What it could show

If the number of cancelled accounts are largely single users, this could mean that the person who found your product useful may have moved on to another role or change company. It may also mean the value of your subscription is not seen as valuable to the masses.

If the number of cancelled accounts are largely from medium and large customers especially, it could be point to a competition replacing your portfolio as a result of competitive replacement or company mergers and acquisitions.

The possible reasons could be aplenty. More importantly, we take actions to find out the reason, tabulate the reasons in data, and make sense and actions out of it proactively.

B) Total Dollar Value

Measurement #4

Total dollar value of the accounts cancelled.

What it could show

Understanding the dollar value impact would determine if there is an urgent need for the business to relook at subscription business strategy. Example, if the number of customers who cancels the subscription are largely single users, but the dollar value impact is great, there is a need to determine if the value of subscription needs to be repositioned. Or if the cancelling rate is largely from big customers, the sales account team would need to reconsider their account planning approaches or resources.

Whichever the measurement, it is important to find out what triggered the cancellation.

Customers can leave for a variety of reasons :

- Product or subscription is not valuable to them anymore ;

- Maybe it costs too much against a low value perception ;

- Maybe it’s too difficult to learn or use ;

- Perhaps they’re getting poor service ;

- Or they’re not the ‘right’ person in their organization, the person who would get the most out of the service ;

- Maybe the primary – or only – user left the company ;

- A competitive replacement.​

So look at your numbers and do the calculations. A company should not make full use of its energy into sales growth alone. It needs to devote time and effort to existing customers as well.

"If we want to grow the business, we have to make sure the number of customers we bring in and retain is greater than the number of customers cancelling the service. Keeping existing customers is as important as getting new ones."

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We would love to hear from you about your thoughts on today's article. Drop us a comment or give us a pad on the back if you find the above article relevant.

Cherry-O!

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