Leverage Your Customer Base
Introduction
Are you fully capturing the revenue opportunity in your customer base?
A B2B SaaS client developing pricing and location intelligence systems has an extensive client base covering more than 20 countries, with clients representing small, medium businesses and international blue-chip operators. It’s two core solutions are developed in a modular fashion (but not sold in that manner) and have a number of add-ons such as mobile applications, extra data libraries and business intelligence. Following a change of ownership the new owners requested focus on leveraging the existing customer base for incremental recurring revenue.
The Opportunity
Initial planning focused on several discrete initiatives to seek incremental revenue as follows:
Revisiting the pricing of core products to reset price lists;
Examining contract terms and adjusting, e.g. ensuring annual subscription revenues escalate by a minimum inflationary index;
Expanding the use of existing products;
Re-packaging existing core products into modules and charging incremental revenues per module;
Identifying value propositions to support the cross-selling of core products and up-selling of modules;
Creating chargeable value-add service streams around core products.
Pricing, price lists and contract terms will be covered in separate case studies.
In parallel to the above an operational change was made to introduce financial incentives for any customer-facing personnel who identified opportunities to grow existing client revenue. The incentive would be applicable based on identifying an opportunity and then immediately handing it to the sales team for qualification and closure.
Taking each initiative, the team implemented the following changes or new practices.
Expand Product Usage
Clearly identify which products/services are used by each client and where there may be cross-sell or up-sell opportunities by constructing a ‘Utopia Grid’*
Conduct license/user audit every quarter & adjust billing accordingly
Review opportunities for training to encourage & improve usage
Check helpdesk tickets to spot need for training, documentation improvement or proactive support
* A Utopia Grid visually indicates which products, modules and services a client uses today – a spreadsheet with all products identified across a horizontal header with each client occupying a row. Colour is used to indicate product/module/service gaps
Product Modularization
Analyze product usage to identify if certain capabilities can be packaged into modules with minimal or no software development, e.g. will modularization define different levels of usage (basic, intermediate, advanced)
Evaluate revised charging structures on a modular basis
Identify Value Propositions to Support Cross-Sell or Up-Sell
Starting with the core products, brainstorm potential use-cases for combining the use of core products and/or the addition of further modules or related applications such as mobile access, additional data sources etc.
For viable use-cases, construct a value proposition and develop collateral to demonstrate value to customers
Create value-adding services
Are there consulting, development or other services that can enhance the value of core products – look at how more advanced clients use the products today for ideas
Investigate current reporting and business intelligence usage to determine potential for value-adding reports, analyses or other data views
Can existing helpdesk support be re-packaged and charged accordingly (Bronze, Silver, Gold)?
The Results
The client was able to identify significant incremental recurring revenue via increased subscription rates, as well as additional services revenue totaling more than $1m per annum. The modularization of the core products also enabled greater opportunity to secure higher recurring revenue with new clients, either upon signature or within the first year through expanded cross-sell and up-sell opportunities.
Note that this incremental revenue delivered higher levels of net margin than core product business due to the relatively low cost of sales.
Expanded product usage, closer attention to client services in general and the restructuring of some contract terms also led to higher customer satisfaction scores and more robust contract renewals.
In summary:
$1m+ per annum incremental revenue from existing customers
Higher net margins overall due to higher margin incremental sales
Increased customer satisfaction from a greater focus on product usage and more proactive customer contact and support
Continued high rates of contract renewal even under growing competitor pressure
