How We Increased Gross Revenue Retention by 20%? Part-2
In Part-1 I shared our journey in discovering what caused customers to churn and what we learned about their usage of our product. In this part, Part-2, I will continue to share our journey and focus on how we transitioned into a new model that helped us to go above the gross revenue retention benchmark, into the 90% territory.
Workflows, not features
One of the great lessons we learned from the third round of discovery, described in Part-1, was that our focus was wrong. Instead of adding more features to the product, training our sales and account managers on how to sell and present such features, we should have focused on the actual workflows our customers are using.
Customers are subscribing to our software to complete a task they have. Each task has one, or more, steps to complete. The group of steps to complete a task is called a workflow. Eventually, customers’ tasks are translated into workflows in our product. The better we support each workflow, the more successful the customer would be in achieving their goal — task complete.
Having this analysis and knowledge, we identified 5 key workflows customers are using our product for. Each workflow is a cluster of features we have in our product.
Value streams
This new discovery greatly helped our product marketing team to shift their efforts from each feature to focus on each workflow. It also helped our product management team to focus on the completeness of each workflow in our product. It also helped to prioritize the workload in our engineering team to focus on where the value stands. We shifted into a value streams operation vs the features race mode we had.
The ultimate customer profile
To operationalize our discovery about our customers, we needed a simple model that we could use and present across the company. A model that everyone can understand. A model with simple KPIs and leading indicators that will drive our success.
In order to do that, we further correlated the workflow usage data with our customer profiles. We looked at the revenue groups, the number of active users, health index, churned customers and many other parameters. Using our data visualization technique, we managed to visualize our entire customer base on a single chart. There was a clear line in the middle that differentiated successful customers from the ones that churned. Each color on the chart represents a module/workflow in our product. When more users were using more modules, the retention went up.
Armed with this new analysis, we managed to create the desired customer profile card. We could guide our sales and customer success teams on how a healthy customer looks like. What are the leading indicators towards successful KPIs. This card also helped to set KPIs for our own teams and link that to their compensation.
Very quickly, everyone had a clear understanding on how a successful customer looks like. Sales knew the customer profile to target, the discovery questions they need to ask to identify the workflow. Customer success teams had a clear definition and metrics for success. Our product and engineering groups knew where to focus their efforts and how to better priorities the work. Marketing had a better definition of the user personas they should go after.
A year after we transitioned our operation into the workflows model, and used our customer profile card as our leading metric, our gross revenue retention crossed the industry benchmark and climbed all the way up, just a little below the amazing 90% mark.
What a great achievement and an amazing journey we had. We never gave up, we supported our decisions with hard data, and we simplified the outcome for everyone to understand and use. This was a cross-company effort over a long period of time that paid off big time for us. The revenue impact of such improved gross revenue retention was material for our business. It also helped to drive net retention and overall business growth.
The importance of customer success on or journey
As pointed earlier, we were a 10-years company. We had over 2 000 customers (big and small), across 20 countries. As we grew nicely over the years, we had to mature the way we operate and support our customers differently in each stage. However, we missed some parts in our day-to-day operation.
At the time of low gross revenue retention, we had account executives and account managers. In other words, we had salespeople focusing on acquiring new clients and we had people that were responsible for the post-sales activities (setup, training etc.) that were mostly compensated on the growth of the client and some on the retention.
As we transitioned into the workflow / value-stream model, we also had to mature the way we worked with our clients. Having the customer profile card, we invested more into our customer success group. We measured the workflow adoption of each customer, based on the workflows they purchased our product for, and we guided the customer success team toward the simple success KPIs. Our quarterly business review meetings with the customers were more focused on their success with each of the workflows. We could easily link the value of our product to their business goals.
This important change greatly contributed to our success.
How do you improve gross revenue retention at your business?
