This is a tough period in history, with the potential for an unprecedented recession. So, if you have established subscription revenues, now is the time to double down on retention. But it’s also about growth. Subscription leaders will protect recurring revenues today. They will also create the runway for optimal growth when the markets recover.
So, what can you do?
Make retention (and expansion) your priority
Retention: Go back to the first principles of subscriptions…design your product to renew. With repeatable value for your customers.
Keep your accounts, and obsess about keeping as much of their revenue as possible. Sometimes that will be growth. Other times, it’s a save, a banker for future growth.
More about Measuring gross revenue retention (GRR)
Expansion: Expansion is making extra revenue from existing customers. The tactics are upsell and cross-sell.
For established subscription organisations, acquisition is expensive and less efficient in a downturn.
Expansion is an important route to safeguard subscription revenue. As a rule of thumb, about a third of your revenue should be coming from expansion.
More about Measuring net revenue retention (NRR)
What can you do?
This was the discussion at Substribe Subsclub. B2b subscription leaders shared their approaches to keep and grow their customer base. We’re digging deeper all the time – what to do, when and how. But for now, here’s the list of levers to look at:
- Price increase – using a value led approach
- Local pricing – aligning better to WTP differences in key regions
- Packaging – bundle or unbundle (add-on) features to target important cohorts
- Usage based pricing – align % of usage to price
- Value metric – link price tiers to customer growth/outcomes
- Negotiation – proactive plans and creative ways to keep ideal customers (ICP accounts)
- New product development – aligning price increases with investment in the service
- Product Led Growth (PLG) – experiment with freemium to premium journeys
- Product improvement – for key customer groups e.g. advisory and priority support
- User experience – make it easier for users to achieve an outcome and speed up time to value
- New use cases – solve new problems your users need help with now as the landscape changes
- Language – empathise with challenges your customers are facing
- Align to outcomes – communicate the impact you create for customers
- Pay it forward – now’s the time to go above and beyond for your ideal customers. What more can you do to support them through the downturn?
- Staff retention – your customers will be focusing on getting the most from their staff. Communicate how your subscription service supports them.
Go to Market
- New user groups – expand the addressable market in your current customer base. Evolve your product to serve a larger part of your customers’ enterprise.
- Customer success – ensure your most important customers get must have moments of value. Create communication programmes to reactivate lapsed users
What must you measure to keep on track?
- Revenue retention – segment and track GRR/NRR for a longer term view of performance. Looking at financials in isolation is not enough.
- User sentiment – tracking users’ opinion of your product to improve the experience. Feed this insight to all teams.
- User behaviour – optimise expansion by measuring user growth and use cases, where there is a pathway to increase licences or protect key user groups
If you want to know more about how Substribe can help you keep and grow recurring revenues in a downturn, please get in touch with Steve Budd.