Most B2B tech companies aim to improve customer retention this year, putting a renewed focus on building sustainable customer marketing teams that contribute to retention, and more importantly, measurable growth;
Years ago, a SaaS company I was working for hired a person at the vice president level to run customer marketing. The idea was to put some big thinking behind cross-selling and upselling our product to existing customers.
That mades sense because the cost of sales on an expansion deal ought to be lower than new customers, which means better margins. Trust is a key factor in acquiring new customers, but ideally, a company has already gotten over that hurdle with existing customers.
While communications can certainly have lots of overlap with customer marketing, my mandate was external. As such, beyond friendly office chatter, I wasn’t too close to the interaction with the new VP. Yet from where I sat, the function never seemed to get traction. There was a lot of friction and back and forth about the approach; for example, I seem to remember it took an act of divine intervention to simply get a customer newsletter out the door.
Since those days, my exposure working both in-house and with a variety of B2B clients on the agency, and later, the consulting side, all suggested this was the typical approach for many companies. Customer marketing is always subordinate to the grandeur of acquiring net-new logos.
While the subscription model is changing this view – customer retention has an exponential effect on growth in SaaS – historically there’s been one exception: when the economy gets bumpy. Anyone working in B2B tech currently knows the market is very rough right now.
Forrester: most SaaS growth comes from existing customers
A pair of surveys out recently substantiate this view:
First up, a survey by the research firm Forrester found 73% of B2B revenue comes from existing customers:
“Seventy-three percent (73%) of B2B revenues comes from existing customers in the form of renewals, cross-sell, and upsell, and the remaining 27% comes from new business. While growth from net-new customers isn’t insignificant, the bulk of B2B revenues come from an existing customer base.”
That’s of course great news, but how much of that 73% comes from “marketing-sourced” pipeline? We have no idea because, Forrester says, marketing isn’t measuring it:
“But when we look at what marketing organizations measure, we can see that marketers continue to focus on sourcing — or showing that marketing originated the pipeline and revenue associated with (largely) new business. It’s among the most commonly used metrics appearing on marketing leadership dashboards. As of early 2024, 59% of CMO dashboards were tracking some type of sourcing metric (pipeline or revenue).”
So what?
Well, this is a good time to drop a reference to Peter Drucker – that which gets measured gets managed.
Think about what this means: marketing spends the vast majority of its measurement efforts on acquisition metrics.
From awareness to signature, we’ve got complicated “buyer journey” diagrams with squiggly lines that go everywhere – all to measure the bucket of effort that produces the least results. And we – collectively as B2B marketers – don’t even measure the customer marketing bucket of effort that produces most of the revenue.
Forrester VP and Principal Analyst Ross Graber summed it up this way:
“When we misplace our measurement focus, it forces us to concentrate on improving the wrong things and investing in the wrong things. And it’s unsurprising that when marketers misplace our focus, even if we move the needle on growing our sourcing metrics, business performance fails to improve. Ultimately, that undermines the trust we as marketers have in our measurement.”
Forrester did not disclose the sample size of its survey. A copy of the survey is available for purchase and listed at $395.00.
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Chargebee survey finds growing interest in customer retention
A separate survey by Chargebee, a B2B marketing software provider, suggests there is growing interest in customer marketing. The company polled 318 “subscription leaders” – most of which operate in the B2B space – using an independent survey panel (which I’ve also used and trust).
Among the findings:
“86% agree customer retention is as important as, or more important than, acquisition”;“83% of businesses have a company-wide churn target”;“60% expect churn rates to increase this year”; and“The top three business priorities in the next 12 months are centered around customer-centric strategies. 47% will prioritize improving customer retention, closely followed by improving the customer experience at 43%.”
There are multiple factors involved in customer retention in SaaS. The one that gets the least attention is usually customer marketing. Given the business focus on retention, customer marketing is a good way to ensure the marketing team is aligned with the business.
Hopefully this time around, customer marketing obtains the executive support it needs to ensure its longevity – so that it remains a viable marketing effort that contributes measurably to overall business growth even when the pace of business picks back up again.
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Links to the respective studies are included above; I first learned of the Chargebee survey from a recent article by Marketing Charts: Subscription Business Leaders Are Prioritizing Retention Over Acquisition.
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Image credit: Pixabay and respective studies
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