Ingmar Zahorsky, ChartMogul - "Using segmentation data to grow your subscription business", SaaS Nation 2016
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- Tracking KPIs such as MRR, churn rate and LTV have become common practice for SaaS businesses. To gain valuable insights that help you grow your MRR, measuring your data is not enough. You need to look at your metrics in context. Segmenting your customers provides this context and allows you to answer important questions such as: - What plan is associated with the most revenue? - What is the ROI of each marketing channel? - What vertical does a good fit customer come from? In this talk, we will look at several import segments worth paying attention to that can inform your decisions to accelerate the growth of your business
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Ingmar Zahorsky, ChartMogul - "Using segmentation data to grow your subscription business", SaaS Nation 2016
- 1. Using segmentation data to grow your subscription business
- 2. Ingmar Zahorsky Director Customer Success
- 6. Beyond measuring Track metrics Actionable insights
- 7. Metrics vs. analytics Metrics • Measure • Inform • Organize Analytics • Explore • Insights • Action
- 8. Grow your recurring revenue with Segmentation.
- 9. Injecting attributes • Plan or product • Geo-data • Sales representative • Lead source / attribution • Industry • NPS Score
- 10. Do your analysis by team • Management • Marketing • Sales • Customers success • Finance
- 11. Metrics to segment by team MRR, ARPA, ASP, churn rate Lead volume, CAC, LTV New business MRR, conversion rates Customer retention and upsell Revenues, cash flow, costs Management Marketing Sales Customers success Finance
- 12. Marketing • MRR by lead source • ROI • Impact of initiatives
- 13. Marketing: MRR by campaign
- 14. Sales • Trial volume • Trial-to-paid conversion rates • Rep performance (New business MRR) • Sales by industry vertical
- 15. Sales: MRR by rep
- 16. Management • Determine hiring budget • Impact of new features on ASP / ARPU • Upsell and retention rate per account manager
- 17. Management: ASP
- 18. Customer Success • Retention rate by industry vertical or region • Impact of outreach to NPS detractors • How changes to the onboarding flow impacts trial-to-paid conversion rate
- 19. Customer Success: NPS data
- 20. Follow-up process • Define goals and strategies • Setup a schedule and stay consistent • Communicate results to teams • Adjust strategy
- 21. Data driven culture • From metrics to insights • Inject segmentation data • Approach segmentation by team • Have a follow-up process
Editor's Notes
- Good afternoon everyone! Thank you Artem for inviting me to be part of SaaS nation. This is my first time in Kiev. Actually its my first time in the Ukraine. i am excited to be part of the first SaaS conference in Ukraine. My topic today will be “Using segmentation data to grow your subscription business”. Before we get started, I would like to give you a brief overview of my background.
- I work for ChartMogul, a Berlin based subscription analytics company as the director of customer success. My success team is responsible for on-boarding, account management, education, customer support and some inside sales. Our mission is to help subscription businesses measure, understand and grow their recurring revenue. I spend a lot of time talking to management and founders of SaaS companies of all kinds of sizes to to understand their specific analytical use cases.
- This is part of our diverse team. We are 20 people of which several are working remotely. Our staff hails from Belarus, Australia, England, Korea, Germany, Brazil, Canada and India.
- Before starting at ChartMogul, I had the opportunity to be an early employee of Zendesk where I worked for over 4 years. During this time Zendesk grew from a small company to a successful IPO in 2014. It was an exciting journey to be part of a company accelerating as fast as Zendesk to experience the different stages of growth a SaaS can go through.
- In my years of experience working in SaaS, I learned that subscription businesses are about longterm relationships. The overall value from customers is realized over months or years. If successfully managed there is huge potential for predictable, stable revenue growth to achieve a large ARR. Knowing which metrics are important to monitor and how to gain insights from them can allow you to accelerate the growth of your business. Of course you need a great product and a talented team as well. Without it no analysis or strategy will get you there.
- The beginning of a data driven culture in your business is to start to measure your KPI’s so that you can track metrics accurately and consistently. Traditionally, calculating the relevant metrics has been complex and time consuming, not real-time and then difficult to derive insights from. Many founders I talked to spent hours every month compiling complicated spreadsheets. Now there are a number of SaaS analytics solutions out there that you can plug your billing subscription system into our pull in your data from your internal billing system via an API. While, measuring your data is a good start but that alone doesn’t always give you actionable insights. We need to move beyond reporting into the world of analytics.
- Let us look at the difference between reporting and analytics before going deeper. Reporting allows you to understand how your subscriptions evolve over time. Your data is organized intro metrics that are aggregated from various data points. Reports are informative and allow you to see things such as what your MRR is at a given time or how many customers you had gained in a particular month. Analytics on the other hand allow you to explore your data to give you insights that can drive decision making. For example you could identify the months customers on are particular plan are the most at risk to churn. You can then investigate what is causing this churn behaviour. Perhaps a change in your product is necessary or maybe all it takes is to take pro-active action at the right tim to have an account manager touch base with a customer.
- Using analytics in a way where you can associate attributes with particular customers is called segmentation. How is it added to your metrics? Attributes or tags are injected into customer profiles to segment by. What are the key benefits? The key benefits of segmentation are actionable insights that inform decision making to grow your recurring revenue.
- Here is a list of some common attributes to inject into your customer data. Some attributes might be derived easily from the billing subscription system used while others need to be injected from your external CRM, marketing platform or internal database.
- After gathering use cases from hundreds of different companies, we found that one of the best approaches to segmentation is to do your analytics by team, because each has its own set of important questions to answer. In a SaaS business it makes the most sense to look at data by management, marketing, sales, customer success and finance teams. While there are metrics that are relevant for several teams, some are more important to specific teams.
- These are some of the metrics useful to segment by team. Explain each…
- The marketing team can benefit from segmentation by gaining an understanding of which efforts yield the most results. We can answer questions such as: Which marketing channels have the lowest/highest ROI? What is the MRR broken down by lead source? How effective was the recent SEO optimization to drive leads?
- In this example we are looking at MRR by marketing campaign. We can see the MRR generated from our Twitter advertisements, Facebook advertisements, Google advertisements, Retargeting ads and banner adds. Of course what you segment by here depends on your specific needs and the attributes you inject into your data. We can see here that the banner adds generate the most MRR so it might be useful to increase this initiative.
- The sales team can segment New Business MRR in varies ways, look at conversion rates and CAC vs. LTV. When we can track the different stages of the customer journey and segment by them we can track things such as the lead volume and conversion rates. We can also add the sales rep attribute to an opportunity to answer specific questions about the sales team such as: Which reps bring on accounts with the highest retention? Which verticals constituted our highest sales last month? How many free trial customers came on board within one week of the product demo?
- In this example we are looking at the MRR by sales representative. We can see that Jane is the top performer consistently. We can further see that Jose has been underperforming for many months. If we would have to cut one person from the team that doesn’t add as much value as the rest of the team, Jose would be the obvious choice. We could also look deeper to understand the quality of sales by looking at the LTV by sales rep to learn which sales rep closes the best fit customers rather then doing quick pressure sales which tend turn churn quickly.
- Management can answer many operational big picture questions and monitor team performance using segmentation. What will be our hiring budget for the EMEA region when taking into account or revenue growth projections? How did the price increase of a new plan affect the average sales price? Is there any increase in the new business for that plan after the price increase? What is the expansion and retention rate for each account manager?
- In this example, we are looking at tracking the average sales price for a specific plan that we introduced a new feature to at the end of February 2016. This feature is especially useful for larger companies and our hypothesis was that the average sales price would increase over time. We can see that this hypothesis proved true. By June 2016 the average sales price had increased to $766, up from $387 in February 2016.
- Here we are looking at closing the customer / consumption gap to help users accomplish the outcomes they were after when using our product. A key metric to look for is retention and how the efforts of the success team improve it. Is retention above average for any particular verticals, or for customers in particular regions? What effect did my outreach to NPS detractors have over time to avoid churn? How have changes in on-boarding to a particular plan effected trial to paid conversion rates?
- Here you can see a comparison of Gross MRR churn rates segmented by NPS Detractor, NPS Promoter and NPS Passive. For those of you not familiar with the term NPS, it is a survey you conduct with your users in regular time intervals that helps you determine how likely they are to promote your product. When you know who those customers are that are unhappy with your product and even find out why, you can do something about it. While statistics on this differ, we know that acquiring a new customer multiple times as expensive as retaining an existing customer. Tracking the churn rates of our customers that we did a targeted outreach to revealed that we had a 0 of those customers churn when checking the data several months later.
- To get the most out of your analytics, I would advise you to have some sort of follow up process in order to fine tune the effectiveness of your analysis. Define goals and strategies: Determine the questions you need to answer at the current stage of your company growth and what metrics and segmentation you need to attain them. Stay consistent: Check your data in the same interval. You need to allow for enough time to pass to actually have enough data to see results. Communicate results to to team: Many SaaS companies now choose to have a transparent approach to sharing results so that employees at any level can be part of the successes or failures and foster and understanding of the different metrics and their impact. Adjust strategy: Evaluate if you are achieving the results that you are after and adjust your strategy accordingly.
- I hope I was able to demonstrate the value of using segmentation data in your subscription business to achieve a data driven culture. When moving from simply measuring data to gaining insights you are able to know when and where to take action. Inject segmentation data from the different systems that you are using. Approach segmentation by team to to make your analysis relevant. Have a follow up process to reflect and revise as you move along to grow your ARR.
- Thank you for listening. Please find me if you have any questions or contact me via Twitter or E-mail. I brought some SaaS Metrics Cheats sheets that our content team put together that I will be handing out to anyone interested.