Consider this the golden rule of cloud services: It is more expensive to acquire a customer than to retain one. Yet as software as a service (SaaS) and other cloud offerings mature, many providers are still so focused on bringing in new customers that they ignore their existing client base until it's too late.
"In our ecosystem, there has been such a land grab around cloud services that there is little emphasis on longer-term commitments [with customers]," says Nara Balakrishna, vice president of marketing and strategy at Appirio, a global cloud services provider headquartered in San Francisco. "Customers represent one of our core values and they are tied into everything we work on."
The faster customers are brought onboard, though, the more difficulty cloud service providers are having staying close to them, predicting their needs, and keeping them from switching to the competition.
For Tim Maliyil, founder and CEO of cloud-based data and mobile device security provider AlertBoot Data Security, based in Las Vegas, customer retention is about dollars and cents. "The cost of retaining a customer can easily be 5 percent to 10 percent the cost of acquiring a new one," he says.
"A recurring revenue base provides a level of certainty and personal sanity when it comes to running the business and forecasting future revenue." Tim Maliyil, Founder and CEO, AlertBoot Data Security
Similarly, customer turnover can be brutal on business planning. Cloud providers that focus on the SMB market get lulled into a false sense of decreased revenue risk because the "pie" is made up of so many small clients. However, retention is necessary to build a stable client portfolio. "A recurring revenue base provides a level of certainty and personal sanity when it comes to running the business and forecasting future revenue," Maliyil notes.
Cloud providers are finding that retention is more than just offering a service with reliability, high performance, and high availability. Retention comes down to creating a relationship with a customer that can survive the most persuasive pricing and promotions.
WHERE IT ALL BEGINS
Retention starts, according to industry experts, as early as the prospecting phase. Sales and marketing teams must demonstrate to potential clients that once they sign a contract, they won't be herded onto a server farm and forgotten. Otherwise, customers will start considering alternatives as soon as they sign the contract.
"A lot of times new cloud customers get lost in the new service-they can't find features and options," says Dmitry Davydov, chief marketing officer at Bitrix Inc., a SaaS-based social enterprise platform provider in Alexandria, Va. So reaching out within the first day or two can be a customer-saving move. Davydov recommends sending out a simple email that says, "If you find yourself stuck, simply email or call us." He stresses, "This can have a measurable effect on dropout rates."
Implementation and support teams have to carry this mission through, staying in lockstep with customer needs, according to Jeff Collins, director of solutions engineering for IT services portfolio at Earthlink Business, an IT services and communications provider in Atlanta. "You have to take a life-cycle management approach and create a roadmap that demonstrates business value to the customer."
The industry is beyond the point where decisions are made solely on cost. "You don't want your customers saying, 'Well that's great it was less expensive, but the implementation was awful and the conversion was awful and the users hated it," he says. The more you align cloud services with the business, the less likely clients will switch providers.
When Arlington, Va.-based Higher Logic, a SaaS-based private social networking and community platform founded five years ago, hit its three-year anniversary, company executives realized that success-and future investor interest-would hinge on renewing customers that had signed multiyear contracts.