Subscriptions. The allure of compounding growth. Increasing yields. Quality of earnings.
So why is it so ******* messy behind the scenes? How do information providers get this information so wrong?
Why the Substribe™ revenue retention performance tracker is critical
How can we – as a collective of b2b subscription leaders – truly empower our customers and business without data?
Data should be the guiding light to inform innovation.
Otherwise, innovation is just an annual tick box exercise to add more junk to the trunk to feel good about asking for more money from customers.
But I’ve yet to meet someone in my network who has a clear view, over time, of their revenue retention.
They lack the visibility to explore the direction of travel and work through what’s happening, why it’s happening and what to do about it.
When your network is senior people in established subscription organisations with billions of revenue…well that feels like a problem.
What should we be able to do using revenue retention data. My view is quite simple.
Plenty of symptoms – but what is the underlying cause?
Ideally, an organisation is able to conduct something like an MRI on its revenue business, to look beyond symptoms and identify and diagnose the actual root problems.
Is the problem that sales people aren’t capable of putting price up properly, or marketing aren’t competent at finding leads?
Or is retention data pointing to the root cause that when your clients reach a five-year point, there’s a cliff edge because the product isn’t geared for it?
Is it a rep problem?
A marketing problem?
A product problem?
A pricing problem?
Working through these optics, by segments of your customers will show patterns – what’s hot and what’s not.
Acquisition – suck it and see
Just because customers are acquired first, doesn’t mean that the strategy starts with “closing” (yuk, hate that term).
There is a “suck it and see” mentality about acquiring new logos. To be expected when things are new, in the search for idea and product market fit.
But for established subscription organisations, with let’s say more than 4 years of transactional data, this is a growth blocker.
Retention data about profitable customers must inform the pursuit lists of the acquisition team.
Course correct – the 18 month lag
If you don’t know the underlying cause, then you’ll be hitting a lot of levers and puzzling about it. “Flying blind and gambling” as one subscription leader puts it.
And because our world is all about annual, multi user subscriptions, it takes a long time to notice the major changes and fault lines emerging.
I would argue it’s an 18 month lag, before the chickens come home to roost. This is because the subscription is at least annual, and your client side champion might just pay you out more rope for another go, rather than admit they were wrong to select you.
Revenue data – spreadsheet fodder
Revenue data is being built up in spreadsheets. It is a manual task where, as one subscription leader told me, they are, “getting about 80% of the way through the data build before I realised my brain was about to explode.”
And that is just one year.
As a switched on CFO told me, they haven’t found a reliable source of their recurring revenues, whether that’s from Salesforce, or the army of consultants they’ve tried, or other sweet promises from suppliers lauding their AI credentials.
Calculations – no standards
But ultimately the data needs to be truthful to work. Retention data is reported to suit the narrative of the equity lifecycle.
Little rules like, we only report on our renewals for contracts above a minimum spend.
Or, we include price increases in our gross revenue retention.
Fortunately there is a subscription standard set out and worth using at https://www.saasmetricsboard.com/
Data driven innovation
Do you want to be first out of the blocks?
The Substribe revenue retention performance tracker is ready for you.
But are you ready for it?
Do you have minimum 4 years of subscription transaction data?
We need this to build the view of your direction of travel and where to focus your resources.