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The Company You Keep: 3 Key Factors For Increasing Focus On Customer Retention

Of all the tech company IPOs launched in 2018, including Softbank, Dropbox and Spotify, only one was singled out by investor cheat sheet Seeking Alpha. Eventbrite, it stated, was one of the top IPOs of the past few years. Why? Eventbrite’s customer retention rate. The company kept 97% of its customers during 2017-2018.

“I’d say that, over the past five years, retention rates have become more requested by investors and are a more important metric overall,” said Rob Belcher, Managing Director at SaaS Capital. “Retention metrics demonstrate customer success and put a company in a better position to measure lifetime value.”

Customer retention metrics have gained momentum as investors look for indicators of business traction and CMOs look for proof of their strategies. Belcher’s company is among those innovating around measuring and deploying customer retention — and the business case for reporting it. SaaS Capital is an investment and debt management company specializing in the SaaS space. It has zeroed in on retention rates as a predictor of success for SaaS companies, and has created new analytics to measure it.

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For example, the company has created a new way to view customer retention as a ratio to customer lifetime value. According to Belcher, that ratio “is the unit economic driver of value and profits that is obscured by normal GAAP financials.” Its 2018 SaaS survey quantified the importance of lifetime value and customer retention. A key finding: the calculated lifetime value of a customer doubles when the retention rate increases just three percentage points from 94% to 97%. Even at lower retention levels, such as the difference between 86% retention and 90% retention, the lifetime value increases 40%.

The SaaS Capital study is reinforced by research from Profitwell, which shows that improving retention rates can positively impact a company’s bottom line by as much as 6% versus acquisition, which has a 3% impact. In addition, 70% of companies say it is cheaper to retain rather than acquire a customer.

Metrics and analytics like this prove the impact of retention to the enterprise. Expect that the emphasis on customer retention will be driven by three dynamics in the current business environment. 

Maturation of B2B SaaS models: According to Cisco, 83% of best-performing U.S. businesses used a planned SaaS strategy in 2017. The runway for B2B companies that rely on customer acquisition in the SaaS space is shrinking. In the hypergrowth, venture-backed environment of the past few years, B2B companies have preferred measuring and reporting revenue. It was consistently positive and fit the demands of investors. But as they mature, SaaS revenue models depend on repeat business to sustain revenue. Retention is the metric that shows consistent customer value. Without retention the most important B2B strategy — upsell and cross-sell — is a non-starter.

Proliferation of B2C Churn models: Telcos have long been held to the churn standard. “Understanding how much your customers actually use and depend on your product is the best indicator of happiness,” said Dale Chang, VP at Scale Venture Partners. “Engaged customers are more likely to renew their contract — which helps to keep your retention numbers steady. They’re also more likely to tell others about their experience with your product, which improves top-line growth.”

Retention rates will become the churn rate of a wider array of business categories, especially as subscription models proliferate. Retail subscriptions for pure play e-commerce and brick-and-mortar expansions are almost ubiquitous. Retention has become the priority for these companies, and a failure to report it has been noticed on Wall Street. In fact, meal kit subscription service Blue Apron took a 15% stock hit in Q3 2018 when it became apparent that it was losing more customers per quarter than it was adding. Blue Apron has still refused to provide a consistent retention metric.

Accountability: CMOs have struggled with finding impactful metrics to prove their marketing activities. A Demand Gen Report study from January 2019 shows 87% of B2B companies ranked marketing measurement and reporting as a growing priority, but more than half (58%) said their current ability to track marketing performance “needs improvement” or worse. Retention is an effective solve for this problem. B2B marketing retention metrics prove that marketing activities are either adding value or falling into the grey area of revenue. For B2C marketing, it will define whether strategies and campaigns get customers to buy again.

What’s the best way to measure retention? A group of marketing automation companies including Perficient, Optimove and Pipestream are leading the way with new technology and algorithms. The combination of necessity and innovation will continue to keep retention metrics and reporting front and center.

  • Published in Blog

Aprimo Unveils SaaS Version Of DAM Solution

Aprimo webAprimo, a marketing operations and digital asset management (DAM) technology provider, announced it has launched a Software as a Service (SaaS) version of its DAM software. The SaaS-based version enables users to implement the solution faster and scale their content database equal to the company’s business growth.

The Marketo Meltdown And The Holy Grail Of SaaS Stickiness

This article originally appeared on the BrightFunnel blog on July 26, 2017.

Dayna RothmanWhen I got into the office Tuesday morning, the first thing on my to-do list was to create a content program in Marketo for a new E-book we were launching. I opened my computer, filled up my water bottle and went to the Marketo login page.

I was immediately greeted by a very unfamiliar and ominous page that looked eerily like what happens when your website no longer exists. WTH.

Aprimo Introduces New Campaign Management Feature

Aprimo Campaign is a campaign management solution designed to access and select lead lists from millions of contacts and transactions across multiple data sources. It enables marketers to manage customer and prospect lead lists into test and control cells, associate those cells with offers and creative treatments and orchestrate distribution across marketing channels, CRM systems and vendors.

TechTarget Enhances Priority Engine With Automated Target Profile Delivery

tech target placeitTechTarget, a technology media company which also sells data analytics services, has announced the latest release of its IT Deal Alert Priority Engine, a SaaS-based purchase intent insight platform, during the SiriusDecisions Summit in Las Vegas. The release features the launch of Automated Target Profile Delivery, which is designed to help marketing teams set up multiple ideal customer profiles within Priority Engine, as well as deliver purchase intent intelligence and prospects into their CRM and marketing automation platforms.

Radius Debuts Predictive Scoring, Integrates With Marketo

1radiusplaceitPredictive marketing platform Radius has integrated its SaaS solution with Marketo’s Engagement Marketing Platform. The partnership aims to help B2B marketers identify their most promising customer and prospect records to discover net-new opportunities within those segments. Marketers are then able to add net-new prospects directly to Marketo.

Cintell Launches Cloud-Based Persona Platform

Cintell announced the general availability of its cloud-based customer intelligence platform. The SaaS application positions B2B marketers to create, manage and share digital personas throughout their organizations.

“Most companies have their buyer personas in a PDF or a word document,” said Katie Martell, CMO and Co-founder of Cintell, in an interview with Demand Gen Report. “A cloud-based persona solution enables for the sharing of personas among the sales, marketing and content teams.”

In addition, the online personas can be integrated with marketing and sales automation tools, Martell noted. This enables marketers to refine their personas based on data from customer databases.

The SaaS persona platform is designed to help marketers:

Build Custom Models. The Cintell platform is designed for both new and experienced users who can leverage the pre-built, easy-to-use persona wizard informed by industry experts, or a fully customizable template-builder. Cintell supports an unlimited number of custom fields and field types, positioning users to manage complex buyer personas.

Understand The Full Buying Committee. B2B technology purchases involve multiple individuals with distinct needs and preferences, formulating a complex buying committee. The Cintell platform enables users to visualize and share relevant insights by committee, making it easy for teams to understand and utilize these insights.

Execute Persona-Based Sales and Marketing. The platform positions users to analyze contacts and add persona insights through a variety of matching capabilities, designed to enable relevant persona-driven tactics.

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