In the competitive landscape of Enterprise SaaS, value delivery is becoming increasingly crucial for businesses looking to stay ahead of the game in 2023. There's no hiding the fact that enterprise SaaS companies have realized the value of customer churn vs. customer acquisition. With the shift from an on-premise model to a subscription-based product model, every SaaS company has seen a dramatic increase in the number of competitors in the business.
More so, this shift is not just limited to the "Plug and Play" SaaS companies but also applies to the "Enterprise SaaS" companies, especially to enterprise SaaS companies.
Every enterprise SaaS customer goes through the same process in each journey stage - Sales, Onboarding, Implementation, and Customer Success.
The team needs to work on a whole series of tasks before the product is rolled out for the customer. Gathering business needs, customizations, integrations, and training are all part of enterprise SaaS.
In many companies, putting up dashboards, engaging with stakeholders, and monitoring newly onboarded clients' IT assets might take a few weeks, not just a few hours.
A crucial thing to understand here is that the success of your product doesn't end in converting a prospect to a paying customer. In fact, the success of your product can only be realized if your customers find some value in it.
In simple terms, Value Delivery is the process of creating value for your customers by helping them achieve their business outcomes.
Only when your customers find value in your product will they give a higher NPS score and that they would be renewing their subscription with you.
The formula here is simple:
Value Promised = Value Delivered = Higher NPS/Adoption/Retention
Driving the engagement with an enterprise customer from 'value promised' in the pre-sales stage to "value delivered" on the first go-live is a common leading indicator of NPS, product adoption, and retention.
But tracking the 'value promised' vs. 'current status of value delivered' is challenging. Monitoring the progress requires Sales, Pre-Sales, Implementation, Customer Success, and Product Management teams (working in multiple 'team specific' tools/Excel/Word) to track multi-dimensional data, including:
Now, when we talk about value delivery & the issues with value delivery, we should also look at some of the metrics that matter the most in B2B SaaS companies.
The CAC calculates how much you spend on sales, marketing, and other related expenses to bring in a new customer for your product. To calculate it, divide the entire sales and marketing expenses for a particular month by the number of new consumers that were attracted during that same time. Your CAC (Customer Acquisition Cost) is the resultant number.
Sometimes it takes years or even months to recoup the cost of acquiring a customer. Startups frequently discover that their growth is constrained by the amount they can spend on client acquisition, which makes cash flow challenging during the first few years of operation.
Most B2B saas companies reinvest in more marketing the quicker their CAC recovers. SaaS businesses should try to recoup this expense within a year to be healthy.
Customer churn is the proportion of consumers who cancel their subscriptions to your product. This usually happens when your customers see a huge gap between the value promised during the sales stage and the value being delivered during onboarding.
There are, of course, exceptions. If you previously provided the good or service for free, you might notice some subscribers cancel their subscriptions after the free trial.
The following enterprise SaaS metrics for churn are the most typical ones most SaaS companies suffer from:
This is, quite simply, a loss of customers. Client attrition, customer turnover, or customer defection are some of the other names for this crucial metric for SaaS companies.
If your solution consistently experiences a drop-off point, something in your service or process needs to be improved. You can tell when you need to reevaluate since SaaS companies often report client attrition rates of between 5 and 7 percent.
Revenue churn, which measures the rate of lost revenue over time, is calculated similarly to customer churn rates. The process starts by selecting a specific time frame and deducting all the new income earned during that period.
The SaaS metric, known as monthly recurring revenue, or MRR, measures the predictable revenue stream. It is made to give performance reporting accurately for various subscription terms and types.
Depending on the term duration, special pricing, upgrades, renewals, etc., your business may have various types of consumers, making it challenging to gauge your true growth or even your ARR.
With MRR, you can determine a rate at which you can swiftly and easily assess whether your efforts were successful.
The recurring revenue that a subscriber generates for you over the course of a year is shown as ARR. It is especially significant as an indicator when term agreements have a minimum duration of 12 months. This is how it is explicitly utilized by SaaS and subscription businesses with a fixed contract length.
The arithmetic is straightforward and can be computed in numerous ways across various contracts. ARR is a useful indicator of the health of your business because it reveals what you can anticipate recurring and what needs to be improved, especially the main categories of your ARR (New, Lost, Expansion, Contraction) and the trends and velocities in those statistics.
Similar to NPS, the customer satisfaction score (CSAT) is based on actual consumer feedback rather than internal business data. But compared to NPS, this statistic is far more adaptable and diverse.
You can calculate your customer satisfaction score based on how clients evaluate their interactions with your business. In addition, you have a wide range of options for the particular query you put to customers, the rating system you use, and more.
There cannot be enough stress on the fact that value delivery is table stakes for any enterprise SaaS company. Suppose there are huge gaps in the value promised vs. the value delivered. In that case, it is imperative that the customers will churn sooner or later, affecting the value delivery metrics across organizations.
The only way enterprise SaaS companies could deliver value to their customers is by adopting a single source of truth platform for collaboration with customers and internal teams.