HomeBlog The Customer Is Always Right: Three Things Recurring-Revenue Companies Get That Others Don’t

The Customer Is Always Right: Three Things Recurring-Revenue Companies Get That Others Don’t

September 19, 2014|Megan Heuer

The business model has many names – the cloud, software as a service, recurring revenue, subscription. They’re not exactly the same, of course, but companies with these business models have something essential in common: Their revenue engines depend on customers who renew regularly. As a result, over the last few years, many have invested in delivering a high-quality post-sale customer experience to keep that renewal engine humming.

The business model has many names – the cloud, software as a service, recurring revenue, subscription. They’re not exactly the same, of course, but companies with these business models have something essential in common: Their revenue engines depend on customers who renew regularly and/or who grow their transaction or use volume over time. As a result, over the last few years, many have invested in delivering a high-quality post-sale customer experience to keep that renewal engine humming.

Customer Is Always RightIt’s only a matter of time before the post-sale expectations that recurring-revenue companies are setting with customers spread to other companies. Trust me, you want to be on the right side of history on this one. The customer is always right. Here are three key things about customers that recurring-revenue companies understand:

Customer experience investment has financial growth impact. At first, customer experience focus was driven by financial reality. While many b-to-b companies – especially those with traditional, transaction-oriented business models – have been busily perfecting their demand creation engines, others have balanced their attention between pre- and post-sale support. They’ve taken to heart the basic math that says faster growth starts with holding onto existing customers. Unlike transactional models – which leave customers more or less stuck with an investment – recurring-revenue models require constant customer experience vigilance to succeed.

As a result, right from the start of the business, recurring-revenue companies have invested in optimizing what happens after someone buys. They’ve given us the term “customer success manager” in place of “account manager.” They track not just when to ask customers for more money, but whether and how much customers are actually using what they’ve bought. They look at whether customers are taking advantage of onboarding, communities and other support directed at helping them get value. These insights are used to predict whether the customer will renew so that the organization can take action before it’s too late. Retention rates get top billing on management dashboards, next to revenue growth, because one is a leading indicator of the other. The focus is not on winning back lost customers, but on not losing them in the first place.

Happy customers create more customers. Over time, the customer experience advantage for recurring-revenue companies extends beyond better retention rates. Cultivating a happy customer base willing to say great things about you is a competitive advantage. As social media has brought complete transparency to what it’s like to be a customer of any business, even very small companies with a vocal customer advocate base can build a positive brand quickly and credibly, allowing them to compete with much larger companies. Often, this is done with small teams and at a relatively low cost, easily building on the positive, authentic environment that investment in customer experience creates. Instead of fretting over how to coax a reluctant customer to participate in a formal case study, these companies simply encourage and amplify the organic advocacy that their experience has created.

The term “customer marketing” means more than sending demand creation offers. As I’ve said before, customer experience is the new demand creation. While any company can emulate a fun marketing tactic that they see an innovative company use, they can’t fake the willingness of their customers to support it if the quality experience just isn’t there.

Customers expect more from you. In the end, what have all companies (not just recurring-revenue companies) that invest in a great customer experience done for us? They’ve redefined the terms of customer engagement to the benefit – and even delight – of customers. Now, even if your business does not use a recurring-revenue model, the way these companies balance winning a sale with delivering on value has changed what your customers expect from you. Saying “But none of our competitors are doing any better than we are” isn’t an excuse to ignore this major shift. Every day, your customers are comparing you to the best experience they have with all companies they work with. Do you truly know how you rate?

It’s time to take a lesson from the cloud crowd. All you need to know is that the customer is always right, and invest accordingly, no matter what business model you have. 

Megan Heuer

Megan Heuer is Vice President of Research at SiriusDecisions. With more than 20 years of industry and professional services experience, she has worked both in – and for – organizations to build a wide variety of collaborative sales and marketing deliverables that drive systematic, predictable growth. Follow Megan on Twitter @megheuer.

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