SOURCE: Totango

Totango

February 23, 2015 08:00 ET

Totango Develops New Framework to Measure SaaS Company Performance and Financial Health

Customer Retention Cost Metric Helps Subscription Businesses Benchmark Customer Success Efforts and Investment

SAN MATEO, CA--(Marketwired - February 23, 2015) - Totango, the leader in customer success and user engagement management, today published a new framework that provides the SaaS industry with a standardized method to measure, evaluate, and benchmark company performance. The newly defined metrics on Customer Retention Cost (CRC) and CRC Ratio will allow subscription businesses to assess and benchmark their customer success and customer retention efforts.

"The CRC metric goes to the essence of running a subscription business," said Totango CMO Kaiser Mulla-Feroze. "Working with a large number of SaaS companies, we see the urgent need for a new set of metrics that reflects the operational realities and demands of a subscription business. We developed the CRC framework to help SaaS companies measure their performance, calibrate their financial health, and steer their investment decisions."

Traditional financial metrics do not accurately reflect the health of a subscription business. The key to running a successful recurring revenue business is not just acquiring new customers, but also retaining, nurturing, and growing existing customers. 

"I've spent most of my career as a CFO in recurring revenue businesses," said PayScale CFO Mark Klebanoff. "A lot of great customer acquisition cost metrics have been developed over the years, but good metrics on the cost of retaining customers have been missing. I love the thinking that has gone into the development of the CRC framework. It fills a void in how we measure, evaluate, and benchmark SaaS companies."

In simple terms, customer retention cost includes all expenses a company incurs in retaining and cultivating its existing customers. This includes the cost of the customer success, renewals and account management teams; customer engagement and adoption systems; customer retention and nurture programs; and professional services and training. Totango's CRC Ratio measures a company's level of investment to ensure it can retain and renew every dollar of revenue from its installed customer base. Totango's report titled, "The Missing SaaS Metric: Customer Retention Cost" also offers guidelines for CRC across three categories: staffing, systems and technology, and customer retention programs.

When asked about the CRC framework Jeremy King, VP Finance & Operations at InsightSquared, said, "Ultimately, having a good grasp of customer retention and customer acquisition costs together is critical in understanding and controlling the financial health of a subscription business. I look forward to incorporating CRC principles into how we run our business and guide our investment choices for the future."

Read the full report.

About Totango
Totango is the leader in customer success and user engagement for cloud apps. The company helps SaaS vendors and online subscription services take a data-driven approach to reducing churn and driving customer success, product adoption, and trial conversion. Totango monitors customer behavior and usage in applications -- along with critical relationship data from CRM, billing, and other systems -- to generate insights on customer health and engagement. The company's platform combines big data analytics with powerful segmentation and predictive tools to guide vendors in taking the right actions with each customer to create an active, engaged user base.

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