Article by Amy Downs: Happy customers mean larger customers

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IT Pro Portal, Amy Downs (amyd), October 17, 2016

 

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Happy customers mean larger customers

 

While it’s always great to win a new customer and the revenue that brings, delivering additional value beyond the initial business need is one of the greatest challenges facing SaaS providers.

The promise of SaaS is to provide great flexibility to the customer but that flexibility means that it’s easy for a company to switch providers. Churn, therefore, is a significant issue and SaaS providers need to balance the cost of attracting a new customer against the costs of keeping existing customers happy.

It’s clear that customer retention costs less than winning new customers, but SaaS providers sometimes neglect to include the dollar value of second-order revenue that comes from customer recommendations, references and the relationships that can be reignited when product fans move to a different company. Success in SaaS is about the lifetime value of a customer so steps that can be taken to build the relationship beyond the first deal are vital to delivering more value for customers, which ultimately leads to greater revenues.

A Harvard Business Review demonstrated the value of customer retention by reporting that a 5 per cent raise in retention rates will increase profits by 25 per cent to 95 per cent for an average business. Much of this value is not immediately apparent in the simple terms of deal values on a balance sheet and only reveals itself when the relationship matures and grows. Healthy customers usually add features or expand their user base year over year, so it’s clear that they can have a massive impact on annual recurring revenue (ARR).

With customers holding such multifaceted power over the ways in which we grow, it’s critical to have both the visibility into their experience, and the ability to respond to issues on a moment’s notice in order to ensure the overall health of the business.

In other words, we need insight into customers’ engagement with our product – individually and in the context of other customers – if there’s any hope of keeping them happy and renewing. To that end, day-to-day operations at a SaaS company must be literally wrapped with intelligence, where we empower employees with information informing them how systems are performing and with the authority to do whatever it takes to ensure customers realise value each and every day.

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