Most industry-leading, global enterprises do not have the resources to effectively engage with and grow their long-tail customers. This lack of attention causes consistently high churn rates and millions in missed revenue dollars every year.
This blog discusses some best practices and tactics to cover your entire customer base more effectively and efficiently. With these tactics, you’ll be able to provide more effective training, improve customer satisfaction, increase retention rates, and subsequent revenue.
What is the Long Tail?
The long tail, commonly referred to as small-to-medium businesses (SMB), is any customer you have in your install base below a certain dollar threshold. For example, if your higher-tiered customers spend anywhere between $500K-$1M, your long-tail customers may be <$200K.
- Measure Your KPIs and Determine Success
The great Peter Drucker once said, “if you can’t measure it, you can’t improve it.” Based on what your organization considers success and growth, you need to define and get buy-in from leadership on which key performance indicators (KPIs) to track.
We recommend focusing on improving:
- Customer Retention – The percentage of customers renewing over a specified period
- In-quarter Rate (IQRR) – The percentage of opportunities expiring in the current quarter
- Contract Value – The percentage of growth for each customer account
- On-time Renewals (OTRR)– The percentage of renewal contracts completed before the expiration
For more on which essential renewal KPIs you should be tracking, check out this blog.
Unless you evenly distribute various account sizes and types between your reps and partners, they will naturally only focus on your higher-value customers, leaving most of your client base untouched. Think about the number of contracts versus contract value.
Ultimately, you’re looking for your customer success team to do a deep dive into each account they own. Performing a deep dive of every customer and capturing the voice of the customer allows your teams to better understand the customer’s unique organization, their pain points, and take advantage of every opportunity (small and large). Close contact with a customer confirms that they have strong adoption and consistently see value in your product/service. Even distribution of leads will also influence how you set up your incentives program (For example, close five lower-tiered customer renewals for X% cash incentive).
Understand Renewal Performance with Segmentation
To better understand your renewal performance, try segmenting renewal performance into three key subcomponents at the account batch level and rep level. This segmentation methodology helps pinpoint where you can train your team and improve your business at all levels.
Three Key Renewal Subcomponents:
Close Rate: How many customers – out of those who responded – told you “Yes.” It measures how well your sales teams are selling the value of renewing with your company. This metric also enables you to understand why a customer did not renew, whether it is related to the product value or caused by a customer going out of business.
Resolution Rate: This metric measures how many answers (“yes” and “no”) that a team receives from the total pipeline. It proves how well a sales team is covering a “batch” of business. If you’re experiencing a low-resolution conversion rate, your reps may be focusing too much on the top-dollar deals and not enough on the rest of the stack.
Conversion Rate: The conversion rate compares the closed opportunity amount with the current and previous closed transaction amount. This metric tells you how well your team can increase the value of a contract using sales tactics like multi-years, upselling, cross-selling, add-ons, and upgrades. A conversion rate can be negative (a valuable insight for future actions to take).
2. Train Your Reps More Effectively
Long-tail customers are smaller in nature, meaning time, resources, and cash flow will be a constant challenge to overcome. Therefore, your reps need the proper preparation and training to effectively sell your business’s value to capture that renewal consistently.
By breaking down your renewal performance for each rep, you will pinpoint where they may be coming up short. For example:
- Close Rate: Ensure your training focuses on understanding the buying process & potential obstacles with each client.
- Resolution Rate: Coach your reps on how to elicit quicker responses from end-user partners.
- Conversion Rate: Train reps on how to improve upsell and cross-sell tactics. Consider weekly best practice sharing between representatives and teams who are generating best-in-class results.
It may seem obvious, but we consistently see training programs that do not cover the complete knowledge needed to effectively demonstrate how your products and services work, your business’s value, and how your business solves customer pain points. Your goal should always be to arm your reps with the skills they need to be a consultant, not just a sales/renewals rep.
Providing a mixture of training modules, including well-made training videos, scenario training, on-demand courses, etc., that reps can review at any time. Finally, ensure that all sales, development, management, and partners are on the same page regarding the training programs.
3. Implement a Customer Success Management Approach
Using a customer success management (CSM) strategy provides consistency for the customer. Choose one point person to maintain contact with a customer after they buy your product or service. That way, the customer will know whom to contact when they experience an issue or question, enabling a more consistent and personalized relationship
A CSM will be a part of the customer journey at welcome and onboarding, 30 or 60 days after joining, six months after joining, and 90 days before renewal.
This strategy has several benefits:
- Increase contact with the customer
- Identify when a customer is at risk earlier
- Give more chances to upsell or cross-sell
- Improve the customer’s experience
4. Arm Your Teams with Tools and Automate When Possible
Relying on sharing spreadsheets and emails to keep track of a customer journey is clunky, inefficient, and ultimately, hard to scale. Instead, provide your teams with a customer success platform, like Gainsight and ChurnZero, and a CRM tool to streamline and consolidate customer account data.
Best Practice Tip: Share and integrate your CRM system with your channel partners. This enables your business to distribute and visualize customer data/insights and sales/marketing resources more readily. It also improves accountability for both your internal teams and your partner channels.
Additionally, automate parts (especially easily repeatable, time-consuming administrative tasks) of your renewals management strategy to keep your reps efficient and customer-focused.
For Example: Set up an automated email outreach campaign to send out quotes 90-120 days before a contract expires. Using this timeline will give your team plenty of time to begin the renewals conversation and make sure the client renews on time.
5. Outsource Renewals Management for Long Tail Segments
It may not be in your business’s best interest to allocate in-house resources to cover long-tail renewals. Instead of focusing a little of your team’s energy on your lower-tiered customers, you could outsource the renewals management efforts. This help will leave you space to allocate all your resources to your top-tiered clients while ensuring your lower-tiered customers are covered.
Outsourcing provides your internal teams with three additional benefits:
- Enhanced business intelligence capabilities
- More standardized customer renewal data
- Better market data to better inform your business strategy
Schedule a call with ServiceSource to learn how we can help you bump up revenue through better maintenance of your long tail customers.