You might expect an article with ‘recession’ in the title to be lacking in uplifting moments, but stick with me. There’s hope on the horizon for marketers who can adapt the way they think about growth.
There’s not much doubt that a recession is coming. Maybe you’ve noticed the signs. Hiring freezes and rescinded offers. Investors refusing to fund riskier ventures. More scrutiny on spending. Companies downgrading or cancelling SaaS subscriptions.
A Bloomberg Economics model sees a 38% chance of a slump in the next year, with the risks building after that timeframe.1
Hold on, where’s that hope you were promised up front? Here goes. It’s all linked to NRR, three little letters which are “taking center stage as the qualifying metric for determining the health of a SaaS business”2.
NRR, or Net Revenue Retention, is going to be crucial in the coming months and years. Investors are giving higher valuations to companies that have a track record of increasing recurring revenue than those that don’t. As the recession takes hold, a growth strategy that doubles down on existing customers is going to be more effective than throwing all your eggs into the net new revenue basket.
Hoist the main sail
So how does focusing on existing customers relate to growth?
Picture an enterprise technology company as a sailing ship. Schooner, clipper, brig or some unspecified vessel – I’ll leave that up to your imagination and maritime knowhow. The thing to remember is that the size of the sails represents the size of the customer base, and the condition of the sails represents how many customers are retained, year on year.
The bigger your sails, the easier and quicker it is to race across the high seas. And the fewer the rips and tears, the less wind you need to power your ship forward.
The wind, in this analogy of mine, is the time, resources and energy you as a company need to invest into growth.
Companies with a strong NRR – that is, those which are retaining and growing their customers – have well-maintained sails. They can rely on lighter, less resource-intensive growth efforts, or the analogous equivalent of a stiff breeze, to propel them where they need to go.
On the other hand, if your sails have more holes than Swiss cheese (too many metaphors? Sorry) you’ll be constantly trying to patch them up. Your growth efforts will put pressure on internal resources as you struggle to bring new customers on board. Even a force ten gale would struggle to shift you forward. And in that case, it won’t matter how large your sails are – how big your customer base – because customer attrition means those sails still resemble slices of Emmental.
As we all rush towards strong economic headwinds, the model of net-new acquisition as the core driver for growth is no longer fit for purpose.
Customer marketing, baked in
Join me back on dry land now to consider how, if managing the customer base is the route to growth, we can capture that opportunity.
Does your organisation build a customer marketing plan as standard into its go-to-market strategies? If not, it’s time to change. At The Marketing Practice we work with clients on Customer Lifecycle Marketing (CLM) strategies which are targeted at this route to growth. CLM allows enterprise technology firms to generate growth and deliver value for shareholders by nurturing a loyal customer base, who expand their usage and adoption of the product portfolio, providing a resilient source of recurring revenue.
That’s the dream, anyway. But much as we – and many of our clients – have ambitions for marketing teams to wholly own this type of approach, the reality is that responsibility for the customer often sits across several different departments. An overarching strategy, supported right across the business, might be not yet be possible for all firms.
But there are still many ways ambitious marketers can start to capture the customer growth opportunity, such as consumption marketing, co-marketing with customer champions, and cross- and up-selling initiatives.
Small moves for bigger growth
Here are two recent approaches we’ve used to help our clients influence customer retention and growth, which could also work for you.
1. Adoption analysis
We developed an end-user adoption strategy rooted in the behavioural science of why people do and don’t adopt a certain product. We then used that insight to inform an internal advocacy and adoption campaign targeted at end users within a selected account.
Once you’ve understood the drivers for adoption and the levers you need to pull to encourage uptake, you can easily roll out the same programme to any number of accounts who’ve bought that product or service.
2. The customer champion
Our client had sold a solution to the IT department of a major customer but were struggling to penetrate adjacent business units. Growth within the account was stagnant. We worked directly with an internal customer champion from the IT team who used their knowledge of other internal teams to help co-develop a wider business strategy. This customer champion had invaluable insights into how our client’s solution could help other business units, which opened up new, profitable conversations.
Co-creating business cases with individuals who already advocate for your brand lends a layer of credibility that no amount of outside-in marketing can replicate.
“Even a minor improvement to a brand’s customer experience quality can add tens of millions of dollars of revenue by reducing customer churn and increasing share of wallet”3, according to Forrester.
What can you and your marketing team do towards maximising NRR and customer growth?
The answer will depend on what’s stopping your customers from consuming more services and renewing with bigger deals. We’d recommend starting with a workshop to explore the customer barriers and shed light on what element of their post-sale experience is in need of most attention.
If you’d like to find out more, you can signal me by semaphore, send up a flare or drop me a line.