By Matt Tharp
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Quality over quantity
Nearly everything in modern business is measurable, but often companies are relying on legacy metrics that can obscure the truth about what is happening in the business. For example, measuring customer acquisition cost (CAC) without considering the time-to-payback may cause marketing to over or under spend to acquire customers. Optimizing for renewal rate without understanding usage and adoption metrics can lead to account managers or renewal teams to be limited to discounts to retain customers. Traditional marketing and sales conversion metrics track quantity, but by adding quality metrics to track engagement and value over time companies can level-up sales, marketing and service team performance and processes.
Monthly Active Users
A key subscription business metric to determine the health of your installed customer base is the “active user” metric, which for most will be Monthly Active Users (MAUs). This gives the company a much better understanding of who deserves attention, but this metric also allows you to cluster/segment customers by usage levels for better marketing/sales engagements.
At minimum, your existing customers should be segmented into three major groups – power users, average users, and at risk users – based on active usage data. For example, users who haven’t logged in over 2-3 months are probably at risk, while customers who use the product/service daily are your power users. This makes sense if you are a SaaS software business, but there are plenty of other businesses that can benefit from looking at active users instead of treating all paying customers the same.
Time-to-value can be a difficult concept to grasp, let alone measure.
- What does value mean?
- How do we validate this value?
- Isn’t the value different for each customer?
Most businesses understand the value they provide a customer. Luckily, we live in a post-“Big Data” world so capturing data should be the easy part. If you have access to a data scientist, give them access to your customer data and tell them you are trying identify moments of truth early in the customer lifecycle that are correlated with long-term customer success, and then validate that with observation and/or interviews with customers. Having personally seen a number of different software products, sometimes the answer is a single event (“Completed a meeting”) or a number/count of events (“Completed 4th meeting”) or the combination of an event and a timeframe (“3 meetings in 2 days.”)
One of the best benefits of learning about key success events early in the customer lifecycle is that you can use engagement tools to test changes to the time-to-value metrics. There are two primary goals for understanding time-to-value:
- Understanding the features/capabilities that correlate with long-term success helps you better understand why people use your product/service
- Implementing tactics to help new customers capture more value sooner from a product/service, thus reducing the likelihood to churn later
With a litany of marketing automation options available for email, mobile, social and more, it has never been easier to engage users directly and change behavior.
Customer Lifetime Value
Depending on your industry, customer lifetime value may be represented as CLV or LTV. Go to the full article.
Source:: Business 2 Community