Retaining customers in the cloud

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The Microsoft Dynamics channel has been busy for some time now with the transition from the traditional on-premise model to the cloud delivery model. With this, the customer is no longer the owner of the user rights to his licenses, but simply a buyer of a service that gets settled on a subscription basis.

In this new setting, the financial risks shift from the customer to the vendor and the customer has more power. This shift from a capital investment (CapEx) to an operational expense (OpEx) has already had a significant impact on customer loyalty and retention! After all, in a cloud model, it’s a lot easier for a customer to say goodbye to his supplier.

During Microsoft’s WPC 2013, last July, it was remarkable that – of the many hundreds of sessions – only two had customer retention in their titles! Both focused on Microsoft Dynamics, by the way. Winning new customers is apparently far more popular than retaining existing customers. However, if you analyze the business models, you discover that customer retention, or churn management, is one of the most important indicators of profitability.

Let’s start with the definition. Churn can be described as the situation in which an existing customer stopsbuying products and services from a given company.

In the traditional world of on-premise and CapEx, all the risk was for the customer. After all, he had already laidout the majority of the investment beforehand without the certainty that the solution fit. Or even before it could be put into operational use! As the illustration below shows, the on-premise partner receives at least 70% of the turnoverfrom a four-year period in the first year.

Illustration 1 – Investments in the traditional CapEx model

This is quite a different image from the world of subscription models based on OpEx! With a comparable totalinvestment of $2 million over 4 years’ time, the customer spends only 10% of the turnover in the first year! So the pot of gold is no longer available immediately at the start of the project, but should be filled only at the end of the contract term (at least if everything goes well).

With this, the financial risk has clearly shifted to the partner. Certainly if the agreed contract period is (much) shorter than four years. And what if the customer decides not to extend the cooperation and to terminate the contract after 12 months? Then the investments from the pre-sales phase, including the salesperson’s commission, probably haven’t even been “earned back” yet. Let alone that a red cent ever got earned on that project!

 

 

Illustration 2 – Investments in the OpEx cloud model

In the cloud model, the buyer has the opportunity to “taste” extensively before he actually becomes a user. If things taste good, he can then extend this with all sorts of smaller “micro-transactions.”

Customer loyalty, retention and churn management are terms for activities that vendors initiate to prevent churn. Customer retention is the primary driver for profitability in a cloud delivery model. As it turns out, it’s impossible to operate profitably with churn in excess of 35%. In practice, the first six months turn out to be crucially important to a successful, long-lasting relationship.

Retaining customers in the cloud demands for a complete different mindset and approach. Dynamics partners who want to be successful in the near future better start their preparation on time. How far is your company in this process?

Content Marketing

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One of the hottest topics of modern marketing is Content Marketing. CEO’s and CMO’s instruct their teams to create more content and on average companies spend 25% of the marketing budget on content. But what is content marketing really all about?

Content marketing is about creating, curating and distributing valuable (of value to the customer!) content, combined with measuring its impact on awareness, lead generation and customer acquisition. Simply put, it is business relevant communications …

In this sense it is the antidote to “interruption marketing.” Instead of pitching products or services, a content marketer equips buyers with the knowledge to make better-informed decisions. So, it starts with sharing your relevant knowledge with your prospective future customers. Central to content marketing is the belief that if businesses deliver consistent, helpful information to buyers at the right time, then prospects will ultimately reward the company with their purchase and loyalty. And they do!

Content marketing is used by some of the greatest marketing organizations in the world, but also by small businesses around the globe. Why? Because it works. A famous study by research firm Yankelovich found the average person is exposed to about 5,000 ads or offers per day. Buyers have tuned out interruptive marketing, and businesses must respond by reaching prospects in new ways.

Content marketing is one of these new ways.

Businesses that succeed in developing timely, relevant, non-promotional content reach potential buyers both directly and through the most persuasive channel of all: word of mouth. Exceptional content, like remarkable solutions or great customer experiences, induces conversations and incites sharing. Both through word of mouth and through online channels such as blogs and social media.

Effective content marketing requires you to shift thinking from marketer to publisher. This shift consists of four new emphases:

  1. Define a critical group of buyers (buying personas).
  2. Determine what these buyers really need and how they want to receive it.
  3. Deliver that information in a way that maximizes the impact on the company’s goals.
  4. Measure the result and recalibrate.

Content marketing doesn’t end at creation. A thoughtful content distribution strategy is also a prerequisite for success. Some popular ways for distributing content are:

  • Blog
  • eNewsletter
  • White Paper
  • Referent cases and case studies
  • eBook
  • Video
  • Infographics

 

Finally, like great content, also poor content will be noticed by potential buyers and can have a huge impact on your business. Of course this will not be the impact you are looking for.

So, go the content marketing way, but shoot for a professional level!

The new role of Marketing

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In the past many marketers mainly have been busy with marketing communications and short term – interruptive – lead generation. The orientation and buying journey in the B2B market has changed dramatically over the past years.

Customers now orient and decide about their shortlist based upon their online experience (websites, blogs, social media, forums….). Typically they will only have contact with sales people after they have already travelled about 50-70% of their buying journey.

Based upon the above, it is Marketing that has to change and take the responsibility for helping the customer with his buying journey. It is a dramatic change for many organisations, but if performed well, will be a strong driver for leads and additional business.

Key to this are deciding about your target market and knowing your potential customers. Based upon this you need to define the so called buying personas and build understanding of their needs, pains and behavior. Then, future selling starts with sharing your knowledge first. Provide relevant content for each step of the buying journey and potential customers will recognise you as an expert and thought leader. Certainly not an easy step and a marketing journey for many companies, but if you do not start now, your future is one of many uncertainties.

Of course at Quattro Business Solutions we aim to support our partners with their marketing journey. I look forward to discussing this with you and your team.