Importance of Value Delivery in Enterprise SaaS in 2022

Blog by: Megha Poojari

Value Delivery in Enterprise

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, it is also applicable to the “Enterprise SaaS” companies. Especially to enterprise SaaS companies.

Every enterprise SaaS customer goes through the same process in each of its journey stages — Sales, Onboarding, Implementation, and Customer Success.

There is a whole series of tasks that the team needs to work on before the product is rolled out to the customer to use. 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 client’s IT assets might take a few weeks, not just a few hours.

What is Value Delivery?

A very important thing to understand here is that the success of your product doesn’t end at converting a prospect to a paying customer. In fact, the success of your product can be realized only if your customers are finding 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 be giving 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

The Current Issues with Value Delivery

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 as it 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:

  • What are the desired business use cases of each customer, priorities, and deadlines?
  • Which customer use cases are in Green/Amber/Red status from a fitment and delivery perspective during the pre-sales to go live?
  • What is the revenue impact of customer use cases at risk due to product feature prioritizations or implementation delays?
  • Who needs to do what by when to close any gaps before the deadline?
  • Finally, how do we know when a use case is delivered?

Value Delivery Metrics

Now, when we talk about value delivery & the issues with value delivery, we should also be looking at some of the metrics that matter the most in B2B SaaS companies.

Value Delivery Metrics

CAC (Customer Acquisition Cost) or New Logo Acquisition

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. To be healthy, SaaS businesses should try to recoup this expense within a year.

Customer Churn Rate

Customer churn is the proportion of consumers who cancel their subscriptions with 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:

Logo Churn:

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:

Calculated similarly to customer churn rates, revenue churn examines the rate of lost revenue over time. To begin, pick a time range and subtract all of the new income you generated during that time.

Monthly Recurring Revenue (MRR)

The SaaS metric known as monthly recurring revenue, or MRR, measures the predictable revenue stream. It is made to give performance reporting accurately for a variety of subscription terms and types.

Depending on the term duration, special pricing, upgrades, renewals, etc., your business may have a variety of 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.

Annual Recurring Revenue (ARR)

The recurring revenue that a subscriber generates for you over the course of a year is shown as ARR. It is particularly relevant as an indicator when term agreements have a minimum duration of 12 months, which 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.

Customer Satisfaction Score

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.

Based on how clients evaluate their interactions with your business, you can calculate your customer satisfaction score. In addition, you have a wide range of options for the particular query you put to customers, the rating system you use, and more.

Final Thoughts

There cannot be enough stress on the fact that value delivery is table stakes for any enterprise SaaS company. If there are huge gaps in the value promised vs the value delivered, it is imperative that sooner or later the customers will churn affecting the value delivery metrics across organizations.

The only way that enterprise SaaS companies could deliver value to their customers is by adopting a single source of truth platform for collaboration with customers and with internal teams.

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Cognisaas

Cognisaas

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Enabling onboarding and implementation teams to collaborate with internal and external stakeholders on a single source of truth platform.