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New Report: Economic Headwinds Require Emphasis on Revenue Retention

Released earlier this year, our data report on the State of the Modern Customer Journey was clear: With recessionary fears, inflation concerns and a volatile job market, tech companies are doubling down on customer retention and loyalty.

73% of B2B tech companies have accelerated existing customer revenue goals over the past 12 months.

In fact, 73% of B2B tech companies have accelerated existing customer revenue goals, while 41% decreased emphasis on net new sales at the same time. While those shifts are well justified based on both macroeconomic factors and trends in organizational dynamics, meeting these goals requires a shift in what B2B marketers prioritize and what they measure.

First, let’s talk about prioritization. While of course net new sales shouldn’t be neglected, they should be evaluated through a different lens. Knowing that retention, loyalty, cross-sells, and upsells are likely to be the key drivers of revenue and growth in the coming year, net new deals should be prioritized based on these factors. Is the potential customer in the segment(s) that tends to renew and grow year after year? Are there short-term opportunities to sell additional products and services? Those prospects deserve the highest level of attention. 

This shift may require re-tooling traditional sales processes and expectations. For example, one survey respondent told us that they had lowered their goals around initial contract value, as they’ve seen resistance to their previous average annual contract value (ACV) based on recessionary concerns. However, they quickly realized they were growing these accounts at a faster pace than before, making the sacrifice in initial ACV worth it. In many cases, he told us, “we’ve been able to increase that ACV 4x in the first 12 months.” 

This change, too, means reprioritizing the metrics that matter to your business. Traditional pipeline metrics – MQLs, SQLs, opportunities, conversion rates, time to close, and even, as indicated above, ACV – aren’t indicators of customer retention and growth.

Instead, it’s Net Revenue Retention (NRR) that matters most. Generally, you want an NRR well above 100%; anything below indicates a churn issue. Two common reasons for this are that you are missing opportunities to effectively educate those customers on the value you provide or that those prospects are not a long term fit and are ultimately low lifetime value (LTV) clients.

Are you investing in the customers and prospects that are most likely to increase NRR period to period? Have you identified the customer segments that typically grow your NRR – and shifted your focus accordingly?

As you answer these questions, B2B marketers must reprioritize focus toward the audiences and strategies most likely to boost NRR. For example, retool your content calendar to address the questions and challenges your current customers ask most. Use social media to spotlight and drive engagement with your existing customer base. And shift your email strategy to focus more heavily on upsell and cross-sell opportunities over nurturing new prospects. 

With economic headwinds changing the way B2B tech brands view the customer journey, rethinking not only your goals but also the metrics that ladder up to those goals and marketing and sales strategies to reach those goals will be key to weathering the turbulence. Read our full report to see how else the modern customer journey is shifting.

Renee Spurlin
As SVP of digital marketing and analytics and Alloy's resident data geek, Renee bridges the gap between traditional PR and demand generation.
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