Partner Article

The 90/10 rule of adoption and customer success

How much of customer success can be predicted during the first ninety days? How much renewal risk is created in the first ninety days? In the subscription economy, more than you would think.

In the subscription economy, renewal revenues are driven by customer usage of the product. Customers either know or want to know what their usage has been as a basis for their renewing their subscription. If they overestimated their need and purchased too many users or other measure of use, the customer will want to course correct at renewal time and only purchase what they have been historically using.

Why are the first ninety days critical to customer success and renewal revenues?

The simple answer is that user adoption equates to higher renewal revenues, and loyal users are created in the first ninety days.

So, what is a loyal user? A loyal user is an individual that uses a product often enough that they are dependent on the product. And how much is that? Well the truth is usage patterns vary by product. Some products are designed to be used daily, some weekly, some monthly or some other interval. The other truth is that usage patterns can vary by rate plan or user role where some users have different usage profiles. In the end, each user role and each associated each rate plan has an expected usage frequency that can be defined as being a loyal user.

And why is adoption so critical to customer success and renewal revenues?

An analysis of adoption across multiple subscription companies provided this insight, if a user doesn’t become a loyal within ninety days of provisioning there is only a ten percent chance the individual ever will. The analysis involved tracking cohorts of subscription renewals for an entire year where the loyal users during the subscription term were classified by the number of days to become loyal users. In fact, the first thirty days produced the highest volume of loyal users followed by the next thirty and the next thirty.

If you think about it, the statistic is just common sense. Both the company and the customer are most energised and ready to work together after closing the initial contract. The planning has been completed on both sides and the expectations have been set. Now comes the difficult part, delivering against expectations. Ninety days is enough time to vet through all the on-boarding needs and to fostering adoption for each user. In the B2B world, this is a full quarter of financial reporting. And let’s face it, customers want to see results.

The Implication

Managing adoption is not the same thing as managing on-boarding in the subscription economy. On-boarding is often defined as the tasks to provision and train new users of a product. On-boarding can be a checklist activity. For some companies, they assume users will know where to take it from there. In other words, they assume users will see the value and start using the products as expected. The truth is that many times users don’t know how to adopt a new product into their processes.

Developing a means to track adoption and a process to intervene to ensure adoption is critical to customer success. The ability to track and understand user adoption is the key to revenue and profit growth in the subscription economy.

This was posted in Bdaily's Members' News section by Matt Shanahan .