Archive | Customer Success Management

The 90/10 Rule of Adoption and Customer Success

Consider the first ninety days of a customer’s subscription. How much customer success can you predict based on that period? How much renewal risk gets created? More than you might think, as it turns out. In the subscription economy, renewal revenues are driven by customer usage. For example, if a customer overestimated their needs initially and purchased too many users (or some other measure of use), they’ll want to course correct at renewal time and get in line with their actual historic use. So why are the first ninety days so critical to customer success and renewal revenues? The answer is simple: user adoption equates to higher renewal revenues, and most loyal users are created in the first ninety days. […]

In the subscription economy, 100% of profits come from existing customers

For the vast majority of recurring revenue businesses, existing customers don’t just fuel growth—they represent all of the businesses’ profits. Take the average customer relationship in the SaaS market: it takes 3.14 years to reach profitability, which for a $12,000/year subscription would mean $37,680 to hit breakeven. That means a full 68 percent of the revenue needed to achieve profitability is collected after the initial contract. This means profitability stems first from ensuring customer success and then growing the relationship. That percentage gets higher the further you can extend the lifetime of a customer and as the relationship becomes more profitable. In our research, we’ve found that the most profitable, best-performing companies realize 90 percent or more of a customer’s […]

The Truth Behind Recurring Revenue Growth in Subscription Economy

Goals for revenue growth change over the lifecycle of a company, in both magnitude and composition: Early stage startups want 100 percent growth or more. Late stage startups aim for 60 to 80 percent growth. Companies near the public offering stage are in the 40 percent range. For public companies, growth objectives start to fall below 20 percent. As companies mature, growth begins to blend new customer acquisition with existing customer upgrade and add-on sales—and for the best-performing companies, an increasing percentage of growth comes from existing customers, year over year. In fact, for these best-performing companies, our research shows a direct correlation between average customer lifetime and percentage growth contribution from existing customers. To better understand this dynamic, consider […]

Want to Increase Revenue? Stop Selling and Start Billing.

One of the best practices taking hold in the B2B subscription economy is the automatic renewal – issuing an invoice sixty days before renewals. The interesting effect of automatic renewals is to increase revenue and lower costs. Across multiple companies, Scout Research has benchmarked a four percent or more increase in renewal revenue yield by using this practice. Here are the findings on one case example. Historically, account managers contact customers to confirm the renewal terms and timing. The practice stems from the on-premise product world where customers could continue to receive value whether their maintenance contracts had been paid. As you can imagine, the practice has continued into the subscription economy, but it is not necessary. In the subscription […]