High Touch vs Low Touch with differing contract vehicles

Hey everyone,

I recently became VP of CS for a company that has most of our clients on monthly contracts, yet are moving to annual. We have roughly 1000 on monthly. The average lifetime is 6 years. We are seeing better retention, utilization, and references from our annual clients and would love to continue on this path.

However, some of our most profitable and notorious customers are on monthly.

I would love to dive into how you would set up standards for touchpoints when operating with this customer base.

Thanks!

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Comments

Dmitry Harapko

This matrix helps!

[Deleted User]

I would think about the contract value as part of the growth opportunity for your accounts. From a company valuation perspective, annual contracts are more valuable than monthly contracts, generally speaking. So it makes sense that we'd want to maximize that where possible.

But I would consider the following model when trying to determine high / low / digital-only engagement models. The Annual vs. Monthly is just part of the "Unrealized Potential Value" vector (the Y axis of the 2x2 below):

First decide where the break point is (ARR/MRR-wise) between high and low monetary value customers. Then decide what unrealized value you have in your accounts, e.g. the ability to expand to other departments, add licenses or maybe even move from monthly to annual contracts.

Then once you assign customers into the quadrants you can determine the engagement model to apply, sort of like this:

Once you do these two things, you've identified current and potential value of customers and applied the right level of touch to maintain all your customers and maximize unrealized potential from your accounts.

Keep in mind that high potential accounts may also get additional resources from sales and execs as well because of the growth opportunity.

This framework works no matter how many people you have in CS or Sales, you just scale segmentation to limit the number of accounts in each category. Of course, if you have too few resource, you won't be able to maximize your opportunity to drive retention or expansion into the unrealized potential.

Let me know if this helps.

Sidd

Loved the analogy @Adam Houghton

Adam Houghton

cool - always fun to map out pricing strategy! super important that new products, services, modules, etc., are continuously brought to market so you have a way to keep unlocking value and increasing wallet share. annual and long-term multiyear deals are great but not if it means there's no way to grow the customer during that period which hurts net retention. product strategy is so critical here.

I can't remember who said it to give proper credit but mktg creates vision and promise, product builds it, sales sells it, cs helps realize it then rinse and repeat. it's a beautiful thing when this is well orchestrated

Jim Ashley

Great question. We provide a platform to Pawn Dealers to more effectively run their business. This ranges from POS to ecommerce to inventory management to marketing platforms, etc.

We have great partners, but we have significant opportunity to grow better utilization across all of our offerings.

Jim Ashley

Great question. The increases have come from some that transitioned, but also those that were signed outright as an annual.

The pricing has recently been adjusted to get more in the door with the belief my org will upsell. I have an offsite in 2 weeks with the CEO, VP of Marketing, VP of Finance, and our head of sales. We are going to work on pricing model and our overall strategy for the remainder of the year and Q1 of '21.

Scotty

@Jim Ashley, congrats on the promotion. While yearly make rational sense in terms of value. There certainly are segments that like month to month, because it avoids going through a significant purchasing process. It also means it can be signed off at a lower level of the organization.

It might also indicate a lack of pervasiveness of the product within the organization. They may also be notorious because they maybe in a consulting organization that know how the support end of the business works and no how to push your success teams buttons.

Brian Hartley

Hey @Jim Ashley fun problem to have! We made the switch before I started but there are still a few stragglers on a monthly plan. I agree with @Jarren Pinchuck though, curious on your answer to his question. I might also consider looking at your touch-points based on any segments you have in place as well.

Jarren Pinchuck

Hey @Jim Ashley , it's interesting that you are basing your touch frequency on contract length. Can you explain a little more the thoughts around this and maybe a little more detail into your product?

From my experience, touch frequency is often dictated by where the customer sits in their lifecycle with your product, their goals/desired outcomes or sometimes the type of customer (enterprise vs commercial).

Adam Houghton

Hey Jim - first, curious to learn why you are changing to annual if LTV is 6 years and if the increased utilization and advocacy you're seeing is from customers who transitioned from monthly to annual or did they start on annual contracts?

I have been down this road a couple times and the most important consideration in the end was the thought that went into the pricing/packaging that helps you articulate the value behind annual v. monthly (best if there's something different and better with annual for the customer to feel it's a no-brainer unless it's a forced move).

Jared Orr

Hi @Jim Ashley . Congrats on the promotion! I have over 300 clients in my book of business. Many are on annual contracts and many are monthly. The goal of our company, like yours, is to get the majority of our client base on annual contracts. When reaching out to my monthly clients, I make sure that the annual contract will save them money in the long term. This usually helps these clients want to switch to annual contracts.

For the clients that wish to stay monthly, I make sure to reach out to them on a quarterly basis (our product isn't very complex so quarterly or every other month is usually enough). If I see they are using more services that they signed up for, I use that as leverage to up sell them to an annual contract.

Cheers!