mining retention intelligence
When you have an established subscription brand you have access to the most unique and powerful data to fuel growth and create efficiency.
But for many companies, the retention mine looks like the one in the photo above. But not as beautiful. And generally your team don't want to go there, in case they get given the job of sorting it out.
So, each month, senior, highly experienced leaders who know what they're doing but find it hard to explain to others, work through a spreadsheet to build a picture of what's happening in their business to explain in the boardroom.
They take a deep breath before going into boardroom, because they know they'll be asked a perfectly sensible question in there, to which they'll need to take a judgement call. Do I shoot from the hip and fire a question back. Or do I go out on a limb and piece together a story on the fly?
"But we have lots of data, cubes, the works. We don't need more!"
Does the data you have today, help you make decisions that create
1) better quality revenue retention?
2) improve your product and experience to create a must have solution?
Often times it is just data, and not intelligence. To transform your data, you need to see the direction of travel across different dimensions of your business. And retention data, when transformed, will show you the customers who are in growth mode. This shines a light on those who could be your next growing segment - both in your installed base and in your addressable market.
The subscription trifecta
The three parts of the subscription system to get a handle on are:
These are interconnected.
When you focus solely on one of them, it is at the expense of the others.
Acquiring bad fit customers makes it look like the product needs development and burns resources in other parts of the organisation.
Adding new product without retiring or rewiring product means feature bloat and vintage customers fall over the product lifecycle cliff.
Protecting and growing your installed base demands more resources to maintain customer fit and product efficacy so that customers get value.
If you don't think across all 3 parts, you'll get whiplash at some point. And because of the nature of annual subscriptions, the recovery period is very very slow. Potentially an 18 month turn around. And that's if the customers you lost will have you back.
The hero metric
The measure of progress is the financial performance of your revenue retention and the criticality of your solution.
This is why I believe a Must Have Score is the hero metric.
B2b companies do not tend to speak with their customers. Unless they're selling something.
Asking customers how critical the solution is today and how to improve it is linked to customer value and what they're willing to pay for.
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This is because perceived user value (how must have your solution is), is weighted to 50% of the buying criteria for corporate/enterprise subscriptions.
The cost of growth
Growth comes at a cost, requiring investment in organisational capacity, product efficacy, and aligning with customer need.
For example, when a company decides to increase investment in acquisition at the expense of investment in product, there is a trade off. The system requires good fit customers to avoid straining the resources used to protect the installed base.
When you sell to more customers and increase the price, this puts pressure on teams to create enough value to expand and renew. It takes time for staff to get up to speed with the solution and customer base. This means organisations need to review pipelines to hire ahead of need and allow for ramp up. Does your CFO trigger the hiring process in good time?
Clarity of roles
The job of a subscription team across all functions (not just commercial teams) is to protect the installed base and grow it.
This means new customers need to be a good fit to spread resources efficiently. It means product needs to support growth and protect the base. And all teams need to have a clear understanding of their role in the above.
Have you looked at your new business team's impact on gross revenue retention in the first year?
Have you looked at your product team's impact on net revenue retention (creating expansion pathways) and gross revenue retention (defending the base)?
Have you looked at your marketing team's impact on net revenue retention (acquiring growth customers, nurturing in account expansion) and gross revenue retention (nurturing the existing users and solution)?
How is your back office responding to changing requirements in capacity as your business evolves - do they align with a retention revenue measure and the hero metric?
Information flows
‘Missing feedback is one of the leading causes of system malfunction’ - Donnella Meadows, Thinking in Systems.
Most cross functional leaders, let alone their teams, do not have access to retention intelligence. You can fiddle away with renewal wheels and journey mapping. And AI process automations.
But changing the mindset of teams is one of the most powerful intervention points for leverage.
What are you doing to change the mindset of your teams - are they clear about their role in protecting and growing the installed base across functions?
You can't change mindset unless people know what they're doing is having an impact.
Do your teams see the impact they have on growth and protection? In other words - are they seeing feedback about your revenue retention and perceived user value?
There is a better way
If you are a leader in an established b2b subscription brand and this resonates with you, contact Andy Burden