Author: Josh Hardy



Navigate 2024 Selling Conditions with a Seek to Serve Map



In 2023, B2B selling organizations faced sluggish conditions. Buyers operated on tighter budgets and thus were more indecisive and hesitant to move forward with deals. A new year unfortunately does not always mean we are leaving all our woes behind.

With B2B selling in 2024, things are trickier than ever. Inflation is up, budgets are tight and everyone’s fighting for a piece of the spending pie. So, how do you as a seller stand out? Simple — by showing and proving your value throughout the sales process.

WHEN THE BUYER WINS — YOU WIN

To truly forecast 2024 selling, you have to understand what your buyers are up against. Tough conditions remain for your buyers that threaten to freeze them into indecision or push them toward no deal. Many buyers may remain stuck in the harmful status quo this year. It is up to you to help them overcome their challenges to win.

FACING INFLATION

With prices on the rise, companies are watching every penny. Buyers want more than just a solution — they want something that is worth the investment. As a seller, you need to prove that what you offer goes beyond market ups and downs. Show your buyer that you can deliver them real, lasting value. Build your solution’s differentiated value proposition with this guide.  

DEALING WITH TIGHT BUYER BUDGETS

Buyers’ budgets are continuing to shrink, and sellers need to step-up to address this. It is not enough for your salespeople to engage buyers by talking about your solution and its features. Your sales force needs to show your buyers how your solution directly impacts the buyer’s bottom line. Empower your salespeople to serve as not just salespeople but rather trusted advisors who have a deep understanding of the buyers and their issues—and who can help tailor your solution to what they need when money is tight. Learn the 4 keys to pricing power that drive deals and reduce churn.

COMPETITION FOR BUDGETS

In a crowded market, you have to do more than convince buyers your solution is right for them. You have to prove why your solution deserves a share of the budget pie. And solution features will not help you win in this competition. This means the people in your organization must be an expert on your target buyers’ problems and work to align your solutions with their goals. Remember the difference between solution essentials and game-changing differentiators that can set you apart. 

THE CONSULTANT’S ROLE

This year especially, you and your sellers need to think like consultants. Identifying value means really listening to buyers, asking the right questions, and understanding their unique challenges — and how these challenges translate into business, financial and personal pains. Showing value is about explaining how the solution is a “pain killer” for those challenges. Proving value means backing it up with real examples: case studies, happy clients, ROI calculations and a history of success. And sharing value means following it through even after the sale. If your organization does this well, you can lock down sustainable revenue performance. Help your salespeople make the transition to trusted advisor.

DO MORE THAN SELL IN 2024

2024’s tough economic landscape requires a focused approach to B2B sales. It is important to remember this year that selling is not actually about offloading a product or service. Selling today, now more than ever, means solving problems by delivering real, tangible value in a time when every dollar counts. If you guide your team from salespeople to trusted consultants by emphasizing value and proving your worth to buyers, your organization will not just survive — it will thrive sustainably.

At Mereo, we live and prosper by Seek to Serve and Not to Sell®. We can help you and your organization do this same this year. Embrace this selling culture all the easier with The Complete Sales Organization Guide to Seek to Serve, Not to Sell®.



Formalize Your Funnels of Input for a More-Powerful Annual Strategic Plan



In college we all knew that person who waited until the last minute to open Word and finally start that essay due the next day. (Or, maybe we were that person.) They may have got along alright grade-wise, but this approach leaves us at risk of missing key information and opportunities to learn and grow. And unfortunately, this mad-dash to the finish line does not always go away once we are out of college.

Your annual strategic plan demands months of preparation and efforts. It also rests on the joists of key input from across your organization — from market and customer insights to sales input and competitive intel.

Most product managers collect some of this information with random methods throughout the year or scramble to get the input in the final quarter. Despite knowing this annual deadline is looming, they tend to wait until the last minute and scrounge up whatever they can and pull together all they have piled up. They react.

I want to encourage you during this upcoming annual strategic planning season to get strategic and proactive. It is never too early to start gathering inputs for your strategy. In fact, I want to show you how to build structures within your organization to be gathering bite-sized inputs throughout the year.

FUNNELS OF CONTINUOUS INPUT

Most organizations receive inputs in a number of informal, unpredictable ways: emails, meetings, conversations, lost deals, etc. These inbound inputs are paramount to your organization’s outbound and go-to-market success, though, and cannot be left up to chance. By translating your current flow of inbound inputs into a repeatable, formalized process, you can help improve overall outbound success and feed into sustainable revenue performance.

Here is how we recommend you get started:

Client Advisory Boards (CABs)

CABs can serve as relevant external validation for all product teams. They stand in place of your buyers by matching similar criteria or they can even be members from your buyers’ decision-making teams for primary feedback. At Mereo, we help assemble CABs and build regular meeting structures. It is important to look to this vital audience to take note of their feedback and to align your strategy to what is most important to them and their needs. This is not only valuable to you, but it is a great way to make your customers feel valued and vested in your future.

Quarterly Business Reviews (QBRs) and Sales Advisory Boards (SABs)

Make use of your current formalized structures within your organization — or create new opportunities. As the product manager, show up to every QBR with the intent to gather strategic feedback from the sales force. If you need more, develop sales advisory boards, with a virtual or in-person roundtable of sellers from across regions and product lines serving the sole purpose to share market insights. This offers an additional benefit of aligning your organization, giving your product management the opportunity to present what you are seeing while sales can share their perspective.

Competitive Intelligence

Without a cohort dedicated to competitive intelligence, teams usually glance at competitor activity as an afterthought, often on the heels of a loss or a series of losses. Yet this approach does not help your organization get ahead of the competition. Rather, your team would be better served by having a continuous point-of-view of the competition in order to win against them. Build that team and develop regular reporting structures, such as Win / Loss reports to keep that pulse.

EMPOWER YOUR ENTIRE SOLUTION MANAGEMENT ENGINE

A formalized annual strategic plan provides the direction for the year ahead — but if one part of your solution management engine is lacking, it is likely goals will be hard to reach and many frustrations await. Take this time to also take a larger step back and analyze your solution strategy overall. With the support of our Expert Guide to Elevating Revenue Performance with Solution Management, you can optimize your solution management engine in five key areas for sustainable revenue performance.

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Are You Ready for the Summer Product Portfolio Analysis Challenge?



The kids may be off for the summer and living the life of leisure, but now is not the time for your product team to kick back poolside. Now is the time for your product management and product marketing leadership to set the stage for next year’s strategic annual plan. And we have a challenge to share with you — a summer break assignment if you will — to help focus your efforts.

Gather your team, poolside even if you prefer (just mind the electronics near the water), and get ahead of the planning period with some back-to-basics portfolio analysis planning. If you are up for the challenge, that is.

3 PRODUCT PORTFOLIO ANALYSIS ASSIGNMENTS TO JUMPSTART YOUR ANNUAL STRATEGIC PLANNING

1) Brainstorm Growth Opportunities

You likely recognize this as a version of the Ansoff Matrix. And it is true: The Mereo Growth Strategies Matrix tool is nothing new and revolutionary. It has actually been around since 1957. Yet, we use it because it works. And I share it here because most B2B organizations do not have a leader that drives this thought process. Without a dedicated portfolio management group, an organization lacks anyone tasked with stepping back from the day-to-day who can envision how years of efforts and investments can be optimized and aligned for growth.

One of the most challenging realities for product management and marketing leaders is that while every organization wants to grow, not every organization is going to develop a new product year after year. So, how do you grow then? The matrix offers a common sense but not common practice map forward in your product portfolio analysis.

With existing products, you have two paths to growth. In both options, your team must re-envision how you can modify your existing product for either a current market or a new market. Maybe you change the packaging and pricing to make the solution more appealing. Or perhaps you have to get more creative in how you market it, differentiate it, sell it.

If your company is in the rarer situation of building something new, you have to plan for the investments. With a new product in a completely new market, your organization will face steeper investment costs. Even in an existing market, your team still has to engineer something new, test it, package it and so much more. Think through how long product development will take to go-to-market successfully.

RECAP: Key growth planning steps to take this summer:

  • Turn to the Mereo Growth Strategies Matrix tool.
  • Brainstorm growth ideas with your product team, taking into consideration investment costs and time to market.
  • Hang on to all growth ideas for your next summer portfolio analysis assignment.

2) Revisit Your Horizon Plan

Once your team has thought through growth strategies, be careful with excluding ideas that do not make the next-year cut. Think about the ideas with a longer-term planning outlook and see how they could fit into different time horizons of your growth strategy.

When could you act on a product strategy? Horizon one (0-12 months), two (12-36 months) or three (36-72 months)? How fast can your team feasibly see an idea through? Leverage the inputs from your planning activity to build out a longer-term plan toward sustainable revenue performance.

RECAP: Key horizon planning steps to take this summer:

  • Compile your growth opportunity ideas.
  • Map out ideas on different time horizons.
  • Let go of those ideas that do not make the cut for now or into the future.
  • Make a note to revisit your horizon plan at least annually.

3) Perform a High-Level Pressure Test

Once you have solid ideas in the mix to work with, how do you validate them? How can your teams take a truly critical and objective look at their feasibility of seeing them through or how the ideas align with the internal strategy? How can you get an impression of how your target buyers will embrace the new product or an existing product’s modifications? Change, while key to growth, demands time and resources. It is vital your teams are making the wisest investment decisions by putting them through a pressure test. The struggle is having means of validation, though. At Mereo, we have developed a number of tools to help validate your strategic plans.

This summer, focus on these validation approaches:

  • Score your capability and alignments:
    • Financial Benefit in 202x: The potential revenue and margin contribution of the capability are significant enough to justify this level of investment by the company.
    • Ability to Deliver: Adjacent products that are part of the solution are technologically proven and well-integrated, and the company and/or partners have the resources/qualified staff to deliver on the customer promise.
    • Strategic Importance to the Customer: The solution addresses the strategic business imperative or initiative of the customer.
    • Short-term Financial Benefits to the Customer: Your customer has budget and can achieve financial benefits in a relatively short time frame (1-3 years).
    • Ability of Sales and Channel Partners to Sell the Solution: The value messaging and domain knowledge is straightforward and clear enough for the sales team to effectively sell the offering with proper training and tools.
    • Market Impact: The offering has the potential to reposition the company in the marketplace and/or change the competitive landscape. Plus, it can be supported by a compelling integrated marketing campaign.
  • Rate your business competencies from low to high, and be honest about what is feasible for your organization to take on.
  • Consider the impact new products or modifications will make on your differentiation.
  • Get outside input from a client advisory board.

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Portfolio Performance Analysis: Kill Your Product Darlings



Horror’s Stephen King might not have been a product manager, but he may have done well in such a role. You see, King followed an invaluable rule in reviewing and editing pieces in his prolific body of work to make them better for the end reader: “Kill your darlings, kill your darlings, even when it breaks your egocentric little scribbler’s heart, kill your darlings.”

In a B2B organization, products might be held near and dear internally — but what matters is who they are serving and how they are performing externally. In these times of market uncertainty, being efficient with your resources is even more important. And often that means taking a good hard look at your product portfolio and picking out the weakest links, the hidden errors, the extraneous bits and pieces.

Use the upcoming annual planning cycle to take a critical look at the performance of your product portfolio. With the Mereo Portfolio Performance Analysis Chart, you can map out your high performers and single out those low enough to consider shifting product approaches or killing your product darling altogether.

PUT YOUR PRODUCTS THROUGH THE TEST

Use the Mereo Portfolio Performance Analysis Chart to objectively analyze your products.

1) Plot your products on the Portfolio Performance Analysis Chart.

There are two metrics to gather to place your products within their appropriate quadrants. First, you will want to know how much year-over-year revenue or bookings growth the product delivered. Second, you should figure the investment cost as a percent of the overall revenue. Then see how the products fall. Are they high, medium or low investments? Is the product contributing to revenue growth? Your organization will do well to have most of its products in the high performer quadrant. Yet products dangling elsewhere on the chart are not immediate signals that they need to be stomped like a cockroach. Analyze all sides of your portfolio and its future first.

2) Identify opportunities for shifting the product to a higher value or efficiency.

Once you have a visual of your products, focus on those sitting in the orange quadrants. What products are developing, meaning they currently demand high investment costs but they also are helping your organization grow? These offer an opportunity to your team to figure out how to create, deliver or repackage the product in order to reduce its costs and deficiencies. Then, which products have low investments costs and yet they also have low revenue returns? Where these are sitting is okay; it is not depleting your resources but it is also not a cash cow. So this offers yet another opportunity to shift your product upwards by exploring ways to grow its revenues without increasing its investment.

Products sitting in the red deficient quadrant need most of your attention. Explore options to decrease your organization’s investment costs in these products while and / or to increase its revenues.

3) Know when to retire products that are forever trapped in the “Deficient” quadrant.

If you cannot solve how to decrease the costs associated with a deficient product or to increase its revenues, then it might be time to cut the cord. It might be hard to step back and objectively say, “Should we be doing this still?” But with the Portfolio Performance Analysis Chart, products that drain your resources and take away your time and money from more viable products become clearer.

COMMIT TO SUSTAINABLE REVENUE PERFORMANCE

Your product portfolio should drive sustainable revenue performance. So if a part of your overall portfolio is draining resources and holding your overall performance back, it may be time to make the hard call to kill your product darling.

For more solution management guidance, turn to The Expert Guide to Elevating Revenue Performance with Solution Management — a guidebook, workbook and resource for product managers and marketers alike.

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START BUILDING BUZZ FOR YOUR SALES KICKOFF



As you plan logistics and content for a strategic, impactful sales kickoff, it is equally important to build anticipation, buy-in and buzz around your organization for the event. If you can do this, you will not only have your teams prepared for what lies ahead — but you will also have already infused a strong energy for your sales kickoff right from the get-go.

While there are many tactics for building sales kickoff buzz, we have outlined key elements to consider as you build your internal promotions.

PROMOTE YOUR SALES KICKOFF FOR BETTER ENGAGEMENT

With as much time, investment and potential riding on this program, you never want the date of your sales kickoff to arrive and your team to be taken aback: “Oh yeah, there’s that sales kickoff next week.” Take some extra steps to not just inform your selling professionals about the event to come — but get them excited for it.

  • Introduce the theme and own it. The theme you have built should set the tone of the whole event and program. Be sure to keep this prominent and consistent throughout all your communications to start building the energy and expectations early on.
  • The countdown is on. This marks a good reason to send continuous update messages to your organization. How long until the big day? In the regular mix of work tasks and life, keep the sales kickoff front-of-mind.
  • Share the important things. What do your attendees need to do to prepare for the sales kickoff you have planned? Be sure to communicate more than once these important tasks and insights so no one is surprised and is properly prepared.
  • Tease the exciting stuff. Think of ways to showcase the internal celebrities and external keynotes who will be coming just for them, naming names or sticking to a teaser for a later reveal.
  • Send reminders. Do this across multiple channels. Not all emails get opened. Not all Slack messages get noticed. Not every intranet headline catches everyone’s eye. Spread your message and reminders across your internal opportunities.
  • Engage your leadership and heads of departments. If you can get your leadership and heads of departments buzzing about the sales kickoff event, they will spread their support from the top-down.

MORE SALES KICKOFF BEST PRACTICES

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LOOK BEHIND YOU! THERE ARE LESSONS TO BE LEARNED FROM YOUR PAST SALES KICKOFFS.



We did the sales kickoff like that before. We have always done our sales kickoff this way. From my perspective, the kickoff was a success.

In the demanding environments of a selling organization, it is easy to forge ahead without taking pause to reflect on the past — or reflecting meaningfully. Especially with a large undertaking like a sales kickoff, starting with the building blocks from previous years seems like a smart and efficient move.

Yet there is always room for improvement. By reflecting on data and insights from the past, your leadership team can make better decisions and bigger impacts for the year ahead. And doing so for your sales kickoff program matters. This is your yearly chance to:

  • Bring your teams together to boost morale and deepen culture.
  • Motivate and inspire your salespeople’s best performance.
  • Transfer knowledge, enable with tools and share the go-to-market roadmap to unify all parties for the year ahead.

It can be a challenge to look at something as large as a sales kickoff from the past and try to glean key lessons for future planning. Sure, there might be key anecdotal moments that stand-out as clear successes or complete failures. Yet, it is important to build a proof-based case for how to best plan and conduct your sales kickoff for year-ahead success. Here, I am sharing some approaches for getting started.

PROOF-BACKED SALES KICKOFF LESSONS

Start with the numbers that matter. What was your company’s revenue performance? Did you meet or exceed your initial goal? Were there any outside factors that may have boosted or hindered your sales force? Your revenue performance is a key indicator of whether or not your sales kickoff was successful. Aside from the raw numbers, what other objectives were set for last year’s kickoff attendees? Did you hit or miss those?

Keep a pulse of enablement and skill improvement at follow-up and reinforcement sessions. Sales kickoffs are the start, not the end. Coming out of last year’s kickoff, did salespeople retain what your leadership wanted to? Were they able to showcase their knowledge and skills through reinforcement / coaching efforts and in live conversations with prospects? Or, did nothing really change in their competencies, sales skills, approach or effectiveness? 

Survey past attendees. Even if your current sales kickoff planning team has the direct memory and experience of past sales kickoffs, do not rely on this input alone. Turn to the people who sales kickoffs are built for: your sales force. Ideally, you completed a survey as an immediate follow-up to last year’s kickoff. If not, survey your stakeholders well in advance of your planning, and ask them what went well before — and importantly what did not and could use improvement. By engaging a larger breadth of your organization, you will not only get clearer, more comprehensive insights, you will also signal to them that their opinion matters to you. This way you start building their early buy-in and excitement for the sales kickoff program to come.

If your sales kickoff planning committee is struggling to gather insights from past years, identify how you can better track and measure success for your upcoming sales kickoff in order to have future lessons to guide you.

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CURRENT SUBSCRIPTION CUSTOMERS WANT MORE VALUE — AND YOUR BUSINESS DEPENDS ON IT



Upselling subscriptions can be a win-win for both your organization — and your customers’ continued success. After all, with a subscription, your company and its customers join into a long-term relationship where value is continuously exchanged.

Yet value-exchange is a continuously moving target. As we have all experienced in the last few years, market and environment change can happen quickly. Old customer challenges and goals fall by the wayside for more-urgent problems or new requirements. This not only builds impetus for your selling organization’s product teams to keep enhancing your solution — but it also presents an opportunity as a seller to keep elevating the value you exchange with your current customers, while supporting sustainable revenue performance.

Upselling subscriptions can be a welcome bridge between your customer’s changing needs and your organization’s revenue. There is a trick, though, to up-selling subscriptions in a way that promotes that value-exchange. After all, Forrester research has found that B2B buyers believe only 8% of salespeople are focused on driving valuable end results for buyers. Never let your customers question your motives. Inspire and enable your sales teams to be part of the elite 8% of value-focused sellers. How? Add more value into your customer engagements with the Mereo value selling formula.

SUBSCRIPTION CUSTOMERS WANT CONTINUOUS IMPROVEMENT

According to a recent Gartner survey of 750 B2B customer stakeholders, customer improvement is nearly as effective at account retention as product success and service. And some research has found that a 5% increase in customer retention results in 25%+ increase in profits. Other studies have found that for every 1% increase in revenue retention, a SaaS company’s value increases by 12% after five years.

Growing existing customer business relies on your customer improvement activities and the customer’s confidence in your salespeople. Face it: Your competitors will be engaging your current customers with messaging about how your current subscribers could better meet their goals, better grow, better overcome their challenges with their products. Current subscription success and service with your subscription may not hold a candle to your competitions’ gusty promises of new and improved features and benefits.

It is up to your salespeople and account managers to help your customers not only realize the full business value from the subscription service they are currently using — but to help them proactively address other gaps where your organization can deliver more value.

ADD MORE VALUE TO YOUR CUSTOMER ENGAGEMENTS

The Mereo value selling approach transforms selling from a one-way barrage of pushiness to a two-way exchange of enhanced value and longer-term healthier customer scores. Here is how:

  1. Be your subscriber’s expert. Your salespeople and account managers need to step beyond being your subscription service expert alone. They need to also be experts on your customers to best serve them for mutual long-term success.
    What unique, valuable perspective can you provide for their business and / or market?
    How can you show your commitment to your subscribers’ success?
  2. Emphasize their current / future pains, risks and needed urgency to change. Most customers will remain in the status quo until they see the light of what could be and better understand the harm of remaining in their current state. Do not let your competitors beat you to the punch. Serve your current customers by emphasizing current gaps in their business — and how your higher subscription levels or additional features address these in valuable ways.
    What insights into new or forthcoming issues impacting their business can you offer?
  3. Paint a story of enhanced value and successful gains from your solution. Differentiated value messaging can help your salespeople drive meaningful customer conversations. Enable your salespeople and account managers with the skills and tools to best serve your customers with ways to improve their business with your subscription offerings and up-sells.
    How can your salespeople Seek to Serve™ customers with navigating alternative options to their current subscription?
    Is your solution easy to buy and access? Is it easy to adopt, and do customers have ample support in doing so?
    Do your subscription levels and their pricing models serve your customers as optimally as possible?
  4. Bring the proof. A client value story, use case, success story or point-of-view paper can compellingly address reservations your subscribers have toward elevating or changing their current subscription level. Enable your salespeople with relevant real-world stories to share with customers during these conversations.
    What insights can you share from other, similar subscribers’ shift to different subscription levels? What success did they realize — how and why?

BUILD THE FOUNDATIONS OF SUSTAINABLE REVENUE PERFORMANCE

Access the ultimate guide to pricing strategy principles and models to elevate your value selling during this inflated period and beyond. Unlock the expert pricing insights in Part 5 of the exclusive Elevating Revenue Performance With Solution Management eBook.

 

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Subscription Business Best Practices: Leveraging Customer Health Scores



Recently, I wrote about how to develop a customer health score to improve your subscription business renewals. Creating health score data is not enough. Businesses that succeed with their subscription offerings know how to best decode and leverage that data to improve customer service and retention.

Most customer health scores incorporate a visual status system between green, yellow and red markers. Now that you are on your way to having all the right customer insights, let’s explore how you use that information into the future.

Decoding Health Scores

The common green, yellow and red indicators should be noted as just that: an indication of what you might expect. These health scores are not a definitive state of affairs. In all cases, further investigation is advised before taking big actions.

  • Green is the best-case scenario and means, based on the elements used to calculate the score, things look positive with your customer. Additionally, they are worthy of an exploratory conversation regarding expanding usage or products with you.Why should you not assume all is good? Even if usage is good, the product works and all things point to a renewal, other unknown business factors could be at play. What if the company was recently acquired and the champion will soon find a new solution to replace your solution? It happens, as do a number of other factors that are all impossible to take into consideration. So do not assume the green indicator equals an actual renewal sale.
  • Yellow is not a bad but cautionary indicator. When your customer scores yellow, your sales or customer support team should most likely outreach and explore how to improve value. Having a touchpoint and re-engaging the customer is one of the easiest ways to keep tabs on the situation and avoid your customer falling into the red zone.
  • Red indicates things are not looking great between you and your customer. The best bet is to group these and get involved in the discussions with your customer success managers and sales professionals to understand the game plan to turn these potential churn customers into renewing happy customers. The battle might be tough, but it should not be considered lost.

It is important to fully understand how to overcome health score assumptions, especially in regard to yellow or red scores. While health scores are important tips to your team — they require further investigation and nuanced consideration before action is taken.

For example, consider a customer that has a number of support tickets opened in the past six months. Depending on the weighting of these tickets in your overall health score criteria, this might seem negative and lead you to assume this customer is not happy. Yet, what if these tickets are just an indicator of a very active rollout and increase in adoption? Customer satisfaction oftentimes will relate more to how you respond to support causes than the actual number of them.

So understanding the sentiment from the support team becomes a critical element in truly understanding these statuses.

Using Health Scores

The use of a health score can be broken down into four steps. The steps essentially help you develop an informed and strategic action plan.

Leverage the data-driven insights you have collected from your customer data insights dashboard, discussions and other data sources to:

  1. Identify the current status. Do the indicators point to an at-risk renewal, a customer that needs attention or a potential for expansion?
  2. Review your findings with your company’s renewal team (sales, CSMs, product teams).
  3. Discuss risk mitigation steps, if needed, and who will own them.
  4. And lastly, when appropriate, based on prior steps, reach out to your customer, confirm budget, timeline, correct contacts and the intent for the continued partnership.

Elevate Your Subscription Service

Embrace a culture of service to elevate your subscription business model. Contact us for support. And download the free Complete Sales Organization Guide to Seek to Serve, Not to Sell™ today.

 

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Renewals: A Key to Successfully Growing Your Subscription Business



Subscription business models rely on the long-term relationship between a business and a customer. Yet the health of this relationship is often revealed at the time of subscription renewal, which may be too late for your team to do anything about it. If the customer is happy and feels they are receiving fair value, they will continue the relationship. If not, they will churn or, in other words, they will leave your business.

Minimizing churn is key to your growth. In fact, in some industries, such as financial services, a 5% increase in customer retention produces more than a 25% increase in profit (Bain and Company).

The solution to avoiding churn is not trivial — but not rocket science either. Companies must gain a better understanding of customers’ propensity to churn well before the renewal anniversary. How? By leveraging customer data insights to develop a health score.

Understanding Customer Health Scores

A subscription business health score acts as a prediction tool for the likelihood of future customer actions — such as the likelihood of subscription renewal versus churn. This is not based on ESP but rather driven by data to which your company should have access.

Beyond subscription renewals, health scores can also help your company identify customers that are good candidates for expansion discussions, such as up-selling and cross-selling. Not every business is the same, though. And these expansion discussions require more sophisticated insights and strategy more common with Cloud-native companies that have advanced tracking capabilities. While it is important to identify what to push next in the customer journey — it is more important to do so at the correct time.

In addition to predicting outcomes, health scores should be used to help anticipate and reshape possible negative outcomes. Customer success teams can leverage this information to proactively reach out, offer relevant assistance and suggest new capabilities that proactively aid with adoption hurdles. In SaaS solutions, it is not uncommon for the product management and marketing teams to include built-in automated support such as emails that offer assistance, education or demos.

How to Compile and Create Health Scores

Likely your business is already collecting and tracking a number of customer data points. For many companies, these health scores are made available via dashboards built internally or through third-party software solutions. These dashboards provide sales professionals, support teams and customer success managers quick access at the time of customer engagement, whether it be positive or negative.

Not everything is indicative of customer health, though, and some elements are more important to keep tabs on than others. The must-have five elements Mereo recommends tracking, each with its own specific weight, add up to an overall customer health status.

  1. Financial Health: Is the customer financially healthy?
  2. Contractual Health: How long have they been a customer? How much have they spent with you over the years?
  3. Relationship Status: Has your customer indicated happiness or displeasure through satisfaction surveys? Is there a known champion that has been there and always promoted your solutions?
  4. Adoption: Is your customer using your solution? This is easier to track for cloud solutions and quite difficult for on-premise term solutions.
  5. Interactions: Is your customer engaged in a current sales process, or have they reached out to customer support recently? How often have they had to open a case?

But keep in mind, these are just some of the common elements used by companies across many industries. This is not an exhaustive list, and each element does not tell a definitive story. Each unique subscription business requires its own unique customer health score criteria.

Customer Clues Beyond Health Scores

We can use the health score as a starting place and an indicator of how the subscription renewal might transpire. However, there are additional indicators that your renewal may not go well, such as:

  • What did the discounting look like for the last deal? Is there going to be a big price increase that they are not expecting?
  • Do you know how broadly the solution has been deployed? Are they adopting and using but not realizing the full value?
  • How critical is your solution to your customer’s day-to-day operations? The more critical, the more likely they are realizing value.
  • Is there a current upgrade or separate sales cycle underway?

The takeaway here is to use a data-driven approach (quantitative) and augment it with a little discovery work across your systems, counterparts and customers (qualitative).

Subscription Business in Action

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Embracing a Subscription Business Culture That Serves



Remember your first gaming console? For me it was PONG in the late 70s, followed by ATARI 2600 and a few different Nintendo consoles. I would save my money for the next big release and rush to the store to buy a game cartridge, and I would play it over and over until I mastered, completed or grew bored of the game.

Today games like Fortnite are free to acquire and they have no ending. They are continually updated offering new adventures, character skins and accessories that are within app purchases using V-bucks, the in-game currency that can be purchased with your real hard-earned money.

My nine-year-old son wears a “Will Work for V-Bucks” t-shirt, and he literally does work to raise money to buy the next weapon upgrade, to re-skin his character to LeBron James or Arianna Grande. He has subscribed to the Fortnite experience, and he is a repeat and happy buyer.

This experience generation compels us to think differently about our business and the culture needed to serve our customers’ evolving desires. Be proactive and embrace the subscription economy culture now.

A Greater Need to Seek to Serve™

The success of any company switching to a subscription business model hinges on enabling and ensuring customers continue to succeed with a service over time. This is the epitome of Seek to Serve™ and more vital than ever in the subscription economy. It requires more than a business model shift — it requires a complete corporate culture evolution.

It is critical that you evolve your way to thinking. With subscription-based service offerings the barriers to switching are often very low. To grow you must acquire new customers while, more importantly, retaining the ones you already have.

What happens if you do not meet these high expectations? 78% of customers will back out of a purchase due to a poor customer experience and directly put money in the pocket of competitors. Growth for subscription companies comes mostly from current customers. According to McKinsey, if you are not growing at 20% annually as a subscription business, you face a 92% chance of failure.

Yet business cultures cannot change overnight. They take leadership modeling, dedication, adoption and reinforcement. By understanding the core differences in mindset and responsibilities of a subscription business model from those of the past, your teams can come closer to adopting a business culture that will tap into the power of long-term customers.

Subscribe to a culture change to drive your sustainable revenue performance by reading on.

New Subscription Business Model to Inform New Culture

The modern subscription economy business model differs greatly from the software industry of old. Forget about your product or code. This new business model puts your customer at the center of your business and requires building experiences that they continue to help shape. Subscription models are based in value to the customer.

Who delivers that value? Who helps build experiences informed by the customers themselves? Everyone at your organization. This is not just the onus of your customer service or customer success teams. Everyone from front-line sellers to marketing professionals to solution management teams must contribute to building and protecting customer relationships.

Today’s subscription economy culture requires companies to ask and act upon:

  • What do we need to do to build long-term relationships with our customers?
  • How do we shift the focus to outcomes versus ownership?
  • How do we invent new business models that derive more value from our products in the form of subscription services, and thus generate more recurring revenue for the business?

A Shift to Experience-Focused Over Product-Focused

By answering the questions above and integrating the core outcomes into your company culture, your company will start shifting from product-focused to experience-focused.

This requires an organization to change its approach across how it innovates, markets, sells, measures and operates.

Why does this all this matter? Because subscriptions are about the relationship and the value that comes with that relationship over time.

Being successful in this new economy requires that companies actively manage their customers during their engagement relationship to ensure that they are realizing the economic value of their purchase. Why? Because if they do not see the value, customers churn — leaving your service and go somewhere else. Long-term customers, now more than ever, are of the utmost importance to your business.

Embrace the Seek to Serve™ Subscription Culture

So how do you know if you are succeeding in the shift to subscription? As with any business, it is the realization of value creation. According to a recent McKinsey study, of the 20 most used operational metrics for subscription-based software companies, only four metrics had a high correlation to enterprise value/revenue multiples:

  • Annual Recurring Revenue Growth (Revenue/ARR) – reflects the company’s ability to drive topline growth
  • Net Retention Rate (NRR) – shows how effective the company is at driving growth in its existing base while keeping churn low
  • Last Twelve Months (LTM) median payback period – reveals how successful a company is at generating returns on its sales and marketing investment and scaling them as the business grows
  • LTM Free Cash Flow Percentage (FCF)- measures FCF as a percent of revenue and is used by industry watchers to determine value multiples

Embrace a culture of service now to elevate your subscription business model. Contact us for support. And download the free Complete Sales Organization Guide to Seek to Serve, Not to Sell™ today.

 

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