Customer Success Leadership Community

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  • 1.  Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 14 days ago
    Hey everyone. I'm building a comp plan for our larger customer segment as we're growing our team and have some ambitious growth goals for 2022!

    I've searched far and wide for material on this but it seems as though most companies deal with annual contracts only, or monthly customers are placed in a completely separate segment. In our case, some of our monthly customers are paying us quite a bit of money, more than some annual contracts, so we're very keen to retain (and hopefully expand) them, and of course incentivise this for the team.

    For annual customers, we'll be working towards an NRR goal tracked on a quarterly basis - fairly straightforward. We have an existing amount of revenue, and we want to maintain a certain NRR figure.

    For monthly customers, I'm a little bit stumped. I've looked at tracking results, and compensating, for these across each quarter but keep running into some issues. A big thing to also consider is that the number of monthly customers in this segment will continue to grow throughout the year, we'll need a plan in place so these are also being considered as part of our quarterly retention & expansion targets.

    Any thoughts and guidance would be appreciated!

    Thank you


    #CustomerSuccess

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    Liam Dunne
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  • 2.  RE: Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 13 days ago

    Just spitballing here, but could you do a quarterly NRR target that uses ARR as of the start of each quarter as the  base?  That way, you don't have to separate out monthly vs annual contracts?

    For example, let's say you have $10M ARR as of 01/01/22 and have an NRR target of 100%.  On 03/31/22 you look at the ARR for only those accounts that were customers as of 01/01/22.  If they still provide $10M ARR, you've met your goal.  For then next quarter, let's say you added $2M in new business.  You now have a base of $12M.  Let's say you set a target of 105% NRR.  Again, looking at only the accounts that were customers as of 04/01/22 you are looking to ensure you have $12.6M in ARR as of 06/30/22.  Essentially, each quarter you re-calculate your base and set a new NRR target (or you could just keep the same NRR target throughout the year and just re-calculate the base).  

    Would something like this work?



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    Stewart Stokes
    Umbra Labs
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  • 3.  RE: Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 11 days ago
    Hi Stewart, really appreciate the thoughts! This is something I looked at, but I had a few concerns but it's very possible I might be being too picky.

    When working on a quarterly basis with annual contracts, you're dealing with a new set of customers every quarter so it's reasonable to expect expansion on every renewal. When working with monthly customers, you're taking the same (+ any new customers) into each quarter so the expectation falls a bit. However - being devil's advocate to my own point, expansions can (and will) happen at random points throughout the year, not just renewals, so I could be overthinking that bit.

    With your logic, when a new monthly customer is onboarded, in my mind it would make sense to get their ARR by calculating [MRR * months remaining in year]. This way we get a true figure for their value this year rather than getting an inflated 12-month number, which wouldn't be relevant for this year's target. Thoughts on that?

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    Liam Dunne
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  • 4.  RE: Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 11 days ago
    1) I was assuming that the timing of any expansions is fairly random and not tied to the renewal date. If it IS correlated pretty closely to the renewal date, then you might want to do something to correct for that.  For example, you could determine what % of annual contracts are up for renewal in that each quarter and set higher targets in quarters with higher renewals.

    2) Can you explain why you'd calculate new customer value based on month's remaining in the year instead of annualized revenue?  In my mind, since the expansion $ would be booked based on annualized revenue, the base should be calculated the same way.  Also, I was originally suggesting that you combine annual and monthly customers so you just have one target.  If you don't do this, and you separate them, then you could just use MRR for monthly customers.  At the start of each quarter, determine the total MRR of all monthly customers as of the start of that quarter, pick a % increase you want to see from that segment, and track towards that. For example, if your monthly customers come into the quarter at $1M MRR and you want 10% growth in that quarter, you target $1.1M at the end of the quarter.

    Ultimately, I think the best path is to make things simple for the CSMs and do whatever you need to do behind the scenes to account for nuances of annual vs monthly.

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    Stewart Stokes
    Umbra Labs
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  • 5.  RE: Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 10 days ago
    Hi Liam,
    I'll open with, tracking monthly is always difficult.  For incentive plans, I've always been 2 months on the rears, because our finance and sales ops teams could never keep up with a true MoM comparison. 

    That being said, I've used Net Dollar Retention in combination with Upsell/Cross Sell incentives. Accounts became "active" on a CSMs portfolio after the first quarter of carrying them. We decided on a quarter for portfolio activation based on claw backs for non-starts. I've found that incentives for the upsell peice drove more monthly renewals than anything else. 

    Hope that helps!

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    Sarah Solana
    Senior Director, Relationship Management
    UKG
    Albuquerque NM
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  • 6.  RE: Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 10 days ago

    Hi Liam,

    My last gig was 75% monthly renewals. We broke our quarterly targets out as follows:

    • 75% - Retention (target customer count retained). This would vary based on the segment of our business.
    • 25% - Revenue growth (% subscription & add-on spend growth based on historical trends & seasonality). 

    I'd be happy to talk through some of the pros and cons of this approach. We felt it gave us good ownership and focus on the things we were accountable for and rewarded strong performance. Certainly wasn't perfect, but I'm a big fan of tying incentives to the ultimate end goal.

    I'd be happy to talk through on a call if helpful.

    Good luck to you!

    Jay



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    Jay Wilson
    wilsonjayt@gmail.com
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  • 7.  RE: Monthly renewals: How can you incentivise retention and expansion for these?

    Posted 9 days ago
    Can you let us know why it wasn't perfect, Jay?

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    Mark Flanagan
    Founder & CEO
    Twin Peaks Research
    Evanston IL
    +1-508-922-7605
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