Churn Avoidance and Customer Programs

Challenge: The Hard Dollar ROI for Customer Programs

Certainly in the early stages of growth for SaaS companies, acquiring new customers is the primary focus. However, a hidden value remains with your existing customers. ‘Land and Expand’ growth models fuel growth rates of the most successful B2B SaaS companies. But there is a hidden gem lurking within your customer base – churn avoidance. 

As we know, long term success is based on a negative net churn rate — which shows that the amount of revenue from existing customers grew, even with some customer revenue that churned. Here is a simple example.  Lets say a company has a negative net churn rate of 115%. At face value, this could mean that some customers expanded their revenues by 30% but another 15% of customer revenue was lost due to churn — leaving the total negative net churn rate of 115%.  While a very simple analysis, this shows the ‘tax’ that churn places on growth – namely 15%. Improving net retention improves company valuation in two ways – both in growth rate and net retention which are often multiplied to calculate company valuation. 

So it’s clear that if a company avoided churn, the growth rate would be higher. But how much can or should a company invest in churn avoidance? Well, here is some simple math.  If a growing company has 100 customers with a $40K ARR, they might experience a total customer churn of 10% of accounts annually (10 accounts churn completely for $400K in total ARR churn).  If 25% of this churn was avoidable through interventions, this would save $100K ARR annually.  If we think of investments with a 1 year payback or CAC, then we would be willing to spend another $100K on annual programs to avoid this unnecessary churn. Voila – budget for the programs! And these programs might help promote customer expand plays — so you could see a return even greater than just churn avoidance.

OK – so it’s clear that companies should invest in resources to avoid unnecessary churn. But where to place these investments? According to Carl Gold, Chief Data Scientist with Zuora, programs addressing customer churn fall into four categories:

  • Customer Marketing
  • Product Enhancement
  • Customer Success
  • Pricing & Packaging

More specifically, from my experience there are a number of more specific programs you might consider in each of these areas (there are likely many more):

  • Customer Data Analytics — Identify and measure key predictors of customer success and churn
  • Customer Conference — Great way to provide training and share success stories
  • Customer Workshops — Training for existing and new users
  • Product Features — Accelerate development of key features to prevent churn
  • Customer Success People & Tools – More resources for front line CSRs
  • Customer Community – Create a place for customers to answer questions and share success
  • Product Value Packaging – enrich value for customers most like to churn

Every company will have a unique product and market situation to guide their customer program investment decisions. This analysis is merely to draw awareness to the ROI of these programs, as I believe they are under-invested in the majority of companies. Strategically selecting customer program investments can improve your growth rates by both reducing churn and increasing expansion rates. 

Many of these programs require tight integration between marketing, sales, product and customer success. Creating cross-functional teams to identify, select and run these programs is likely the hardest part of the process. But for those companies who embed these programs from the start, they can increase growth rates and company valuation.

Lesson: Identifying and remediating avoidable churn can pay significant dividends in terms of company growth rates but requires careful cross-functional planning.

Churn Avoidance and Customer Programs

How you can justify investments in customer programs.

Challenge: Justify Investments in Customer Programs

Certainly in the early stages of growth for SaaS companies, acquiring new customers is the primary focus. However, a hidden value remains with your existing customers. ‘Land and Expand’ growth models fuel growth rates of the most successful B2B SaaS companies. But there is a hidden gem lurking within your customer base – churn avoidance. 

As we know, long term success is based on a negative net churn rate — which shows that the amount of revenue from existing customers grew, even with some customer revenue that churned. Here is a simple example.  Lets say a company has a negative net churn rate of 115%. At face value, this could mean that some customers expanded their revenues by 30% but another 15% of customer revenue was lost due to churn — leaving the total negative net churn rate of 115%.  While a very simple analysis, this shows the ‘tax’ that churn places on growth – namely 15%. Improving net retention improves company valuation in two ways – both in growth rate and net retention which are often multiplied to calculate company valuation. 

So it’s clear that if a company avoided churn, the growth rate would be higher. But how much can or should a company invest in churn avoidance? Well, here is some simple math.  If a growing company has 100 customers with a $40K ARR, they might experience a total customer churn of 10% of accounts annually (10 accounts churn completely for $400K in total ARR churn).  If 25% of this churn was avoidable through interventions, this would save $100K ARR annually.  If we think of investments with a 1 year payback or CAC, then we would be willing to spend another $100K on annual programs to avoid this unnecessary churn. Voila – budget for the programs! And these programs might help promote customer expand plays — so you could see a return even greater than just churn avoidance.

OK – so it’s clear that companies should invest in resources to avoid unnecessary churn. But where to place these investments? According to Carl Gold, Chief Data Scientist with Zuora, programs addressing customer churn fall into four categories:

  • Customer Marketing
  • Product Enhancement
  • Customer Success
  • Pricing & Packaging

More specifically, from my experience there are a number of more specific programs you might consider in each of these areas (there are likely many more):

  • Customer Data Analytics: Identify and measure key predictors of customer success and churn
  • Customer Conference: Great way to provide training and share success stories
  • Customer Workshops: Training for existing and new users
  • Product Features: Accelerate development of key features to prevent churn
  • Customer Success People & Tools: More resources for front line CSRs
  • Customer Community: Create a place for customers to answer questions and share success
  • Product Value Packaging: enrich value for customers most like to churn

Every company will have a unique product and market situation to guide their customer program investment decisions. This analysis is merely to draw awareness to the ROI of these programs, as I believe they are under-invested in the majority of companies. Strategically selecting customer program investments can improve your growth rates by both reducing churn and increasing expansion rates. 

Many of these programs require tight integration between marketing, sales, product and customer success. Creating cross-functional teams to identify, select and run these programs is likely the hardest part of the process. But for those companies who embed these programs from the start, they can increase growth rates and company valuation.


Lesson: Identifying and remediating avoidable churn can pay significant dividends in terms of company growth rates but requires careful cross-functional planning.

B2B SaaS Marketing in a Time of COVID

Challenge: With our new ‘COVID normal,’ how do we deliver against our increasing pipeline requirements?

[First, let me say that my heart goes out to all those impacted by the COVID pandemic. It impacts everyone in different ways – and to some whose lives have been tragically disrupted.]

OK – the pandemic has been with us for seven plus months. We have executed our initial fire-drill response programs to show our customers and prospects that ‘we are in this with you.’ We have adjusted our team operations to work remotely and be sensitive to the varying needs of our team members. We now have back to back Zoom calls that suck up all the time ‘gained’ from no commute. And we have even figured out how to manage our hair with little or no external help. Yes – we are now operating at our ‘new normal.’

But more importantly, we changed our marketing go-to-market. Let’s summarize these top level changes:

  • Shifted from in-person events to online events
  • Re-allocated funds to digital marketing
  • Optimized our landing pages for conversion
  • Improved our nurture programs

OK – now what? Quarterly revenue targets are increasing for sales and therefore so are our targets for marketing sourced pipeline. Unfortunately, reaching buyers on the phone is more difficult than ever because no one is in the office, which also makes mailing packages and ABM programs more difficult. So where do we turn next? How do we convert more MQL into Opportunities?

Before making recommendations, let’s first recognize that our prospects are facing the same issues we’re facing, namely:

  • A tsunami of Zoom calls
  • Stress about COVID
  • Stress with increased family responsibilities 
  • Feeling isolated

My recommendation – let’s make their life easier. I know this might be radical, but what if we:

  • Provide truly helpful content that helps them do their jobs
  • Educate them about things they don’t know that will actually help them
  • Make it easy for them to learn about how our products and services work
  • Simplify the process to successfully trial our product

Now more than ever our prospects need us to make their lives easier and we can do so by making the process of engaging with us simpler and more satisfying. Let’s give them what they crave most: a bit of time back in their day with informative and easy to consume content. And most importantly, a great experience to trial our product and see for themselves how their life improves with our company’s product.

Lesson: Focusing on our customer’s needs is more important now than ever in every step of the buyer’s journey.

What’s in a Name?: Demand Orchestration vs. Demand Generation

Does the term ‘Demand Generation’ really reflect what we do?

DemandOrchestrationChallenge: Does ‘Demand Generation’ Reflect What We Do?

Over the past 10+ years, my functional marketing role has been called ‘demand generation,’ and certainly in the tech community, this term helps quickly communicate where we fit within the marketing org.  However, recently I was speaking with a prospect the other day about a project, describing my typical engagements, how I work with clients, etc. When I was summarizing the typical activities, I found myself describing what I do as ‘demand orchestration’.

Let’s look at the functional areas managed by the “demand generation” leader:

  • Marketing KPI’s, Dashboards and Attribution
  • Customer Persona and Lifecycle Definition
  • Lead Flows and Processes
  • Marketing-Sales Interface and Handoff
  • Marketing Campaigns, Programs and Themes
  • Third Party Demand Programs
  • Webinars, Field Events & Tradeshows
  • Paid and Organic Search
  • Website Design and Conversion Rates
  • Martech Stack and Team Enablement
  • Lead Nurturing and Qualification
  • Lead Engagement, SLA and Qualification
  • Lead Development Rep Training and Playbooks
  • Account Based Marketing
  • ….and so on…

However, as a demand team leader the most important responsibilities are actually more like this:

  1. Align with Sales on Business Plan Targets & Splits w/ Marketing
  2. Build Forward Looking Demand Model for Opportunity and Lead/Account Targets
  3. Create KPI’s, Dashboards and Measurement Processes
  4. Design Bottom Up Demand Plan Across Various Channels
  5. Build Out Demand Team and Assign Functional Areas
  6. Create Planning Process Leading to Program Execution
  7. Track and Optimize Programs Ongoing
  8. Ongoing optimization of people, process, programs and systems: weekly, monthly, quarterly and annually

So what struck me at that moment in our conversation was that demand gen leadership is really about orchestration. The areas that most frequently rise to the top of my attention are:

  • Do we have the right mix of programs to address top, middle and bottom of funnel?
  • Do we have the right skill sets on our team?
  • Are we optimally executing against our plan?
  • Are there opportunities to optimize demand funnel volumes and conversion rates?
  • What is our prospect/account user experience and how can we improve?
  • How are we assisting with customer lifetime value in retention rates, upsell, and cross sell?

These activities essentially have to do with orchestrating people, process and systems to accelerate growth, therefore the role is more accurately described as orchestration. In my experience, I contribute most to an organization in the orchestration of these resources to ensure the team meets and exceeds pipeline and won business targets.

Should we call the function Demand Orchestration? Does that more accurately describe what we demand leaders do?  Does it even matter what we are called? What probably matters most is that demand generation leaders focus on the people, process and systems to optimize performance and growth. Let me know your thoughts.

Lesson: As demand generation leaders, our focus is to orchestrate people, process, programs, and systems to optimize revenue generation that meets or exceeds business goals

 

 

 

 

 

Revenue Attribution Maturity Assessment: The Journey to Reporting Nirvana

MarketingDashboardChallenge: Accurately Reporting Marketing Contribution Without Over-Investing Time and Budget

For many years marketing teams have aimed to identify their contributions to their companies’ success. Over the last five years, there have been significant advances in the tools available as well as the business processes by which data can be managed to support greater insights and gain competitive advantage. In fact, marketing groups today are frequently responsible for driving a specific percentage of company revenue so identifying revenue sourced by Sales or Marketing is critically important to measuring business performance.

But measuring marketing contribution is time, resource, and budget hungry. So how much should you invest? What tools will contribute to success given the maturity of your organization? In working with many different organizations, I have noticed common themes on the road to attribution maturity. Knowing where you are on this maturity timeline will help you plan for what may come next for your organization. While every company is unique, I believe there are common attribution lifecycle stages – and companies move through them as they need greater detail and insight.

So check out where you in attribution maturity so you can balance investment against the value of increasing visibility.

Stage 1 – Early Startup

  • Definition: Sales and Marketing have agreed upon revenue contribution percentages
  • Typical Revenue: $0-$500K ARR
  • Sales-Marketing Alignment: Handshake agreement on total new account revenue sourced by Marketing vs. Sales
  • CRM Deployment: Early deployment often still optimizing data and reporting process/structure
  • CRM Usage: Consistent campaign association is not yet defined for Leads, Contacts and Opportunities; Marketing automation may not be integrated with CRM
  • Attribution Process: Manual monthly or quarterly update of opportunities as Marketing vs. Sales sourced
  • Primary Challenges: Manual update of opportunities becomes overly time consuming

Stage 2 – Maturing Startup

  • Definition: CRM deployed with basic campaign attribution reporting
  • Revenue: $500K ARR – $5M ARR
  • Sales-Marketing Alignment: Attribution to Marketing or Sales identified and defined by first or last touch for new business; starting discussion on up-sell and cross-sell attribution
  • CRM Deployment: CRM standard utilization enforced, Sales forecast process optimization ongoing, Marketing automation integrated
  • CRM Usage: Both Sales and Marketing have created a data dictionary and have established standard processes for updates that have moderately successful usage
  • Attribution Process: CRM reporting using first or last touch for Marketing vs. Sales attribution
  • Primary Challenges: Both first and last touch neither accurately describe opportunity drivers nor comprehensively reflect Marketing and Sales program impacts

Stage 3 – Growth Startup

  • Definition: Specialized attribution software deployed in first version
  • Revenue: $5M ARR – $50M ARR
  • Sales-Marketing Alignment: Comprehensively defined Sales vs. Marketing source new business, upsell/cross-sell business and optimization of handoff processes
  • CRM Deployment: Utilize industry best practices for data integrity and reporting, generally solid compliance from Sales and Marketing teams, and relatively accurate sales forecasting; Initial deployment of third-party attribution tools
  • CRM Usage: Sales operations focusing on tight rep compliance with CRM, Marketing Operations focused on data quality and completeness
  • Attribution Process: Sales vs. Marketing sourced opportunities identified by campaign touches driving the MQL; utilizing both Sourced and Influenced models to optimize marketing performance
  • Primary Challenges: When sourced and influenced models do not accurately capture full account-based attribution impact or when weighted touch models are required to adjust campaign influence over customer journey

Stage 4 – IPO Readiness and Public Company

  • Definition: Specialized attribution software deployed in second iteration
  • Revenue: $50M ARR – $500M ARR+
  • Sales-Marketing Alignment: Business operations teams fully integrated across Sales and Marketing with BI dashboards/reporting; Monthly/Quarterly attribution reviews for program and process optimization; Early deployment of predictive revenue models
  • CRM Deployment: Sophisticated CRM deployment managed by business operations team with sophisticated reporting (BI tools) and data accuracy for regulatory compliance
  • CRM Usage: Well established guidelines and training; key processes are reinforced with end user compliance
  • Attribution Process: Multiple attribution models including weighted touch attribution and account-based models supported by analytics team to assist in utilization and interpretation of the data
  • Primary Challenges: Managing time, cost and complexity of attribution reporting as well as the ability of most marketing team members to absorb the complexity of these models

What has been your experience? Do these levels ring true? Was this helpful to your planning?

Lesson: As organizations grow, so do their needs for better attribution. It is important to make the right investments at the right time to keep attribution management time and costs in line with overall revenue goals.