SaaS/Cloud companies are under tremendous pressure to build market share, to enroll new subscriber customers and to get them up and running as quickly as possible. The driver is fundamental and very powerful: the income stream doesn’t start until go-live has been accomplished. But that’s only half of the essential equation. The other half, about what happens after the contract has been signed, is not as clearly defined despite being of far more importance in the long run. A given customer doesn’t become a profit contributor until after the Customer Acquisition Cost has been recouped, which can often take a year or more. If the customer leaves before that point, the impact to the bottom line can be substantial. Churn is deadly to SaaS companies, all the more so because it isn’t always as visible as it needs to be.
Establishing a Customer Retention Baseline
The first step is to define the metrics of customer retention as they are actually being used today in the SaaS/Cloud sector. What are SaaS vendors doing about tracking customer retention and managing it? There are a number of different variables or views that need to be included. One metric cannot fit all; the often heard claim that a particular company has a “90% customer retention rate” has no real meaning of itself, and may even indicate serious trouble for some companies. 90% of what? All customers by companies? Total user licenses? Total user licenses actually being used? Of total revenues? Of first year renewals? Subsequent year renewals? Each company has their own approach to retention tracking; what is needed is a general consensus.
There are a variety of companies that offer applications for Marketing and Sales process management that can be of tremendous help in analyzing the effectiveness of marketing campaigns and sales teams. There is a critical need for the same level of analytics to be available for customer retention, to enable companies to quickly and accurately identify at-risk customers and to effectively respond. The study will also explore existing products and solutions in this area.
I am designing a survey to begin the research into current practices, definitions and options, and expect to launch it shortly. If you have suggestions as to the questions that should be included, please let me know as soon as possible. Send me an email, or use the contact form here. You can also post a comment in The SaaS Support Forum on LinkedIn.
All company-specific data will be kept strictly confidential. As with The SaaS & Support Project reporting, only aggregate data will be published. When the survey becomes available for participation, a link will be added here.
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