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SMB Digital Churn
Vendasta’s Data
275k 1250+ 5+
SMBs Markets Years of Data
Genesis of Report
Vendasta’s customer data has revealed patterns that may be triggers or causal factors for churn. This is an
opportunity to understand churn and what may be causing it.
Compare Three Sales Profiles
123
Digital Committers
Digital PurePlay
Digital Extenders
Digital Extender 1
Digital Extender Profile 1Traditional Only Sales Force
Characteristics● Cherry pick top existing customers● Usually bundled with traditional products● Usually DIFM High Gross Dollar products● Salesforce sells both digital and
traditional
Results● Digital account base shrinks along same
profile as traditional customers● Loss of verticals and categories ● High churn
“Doom Loop”
2 Digital Committer
2 Digital Committer Profile Digital & Traditional Sales Force
Characteristics● Cherry pick top existing customers early on● Digital-only sales force (often
telemarketing)● Typically a spectrum of DIY - DIFM - DIWM● Traditional sales force can sell digital
Results● Rapid growth until saturation of existing
traditional customers● Growth continues as sales force opens up
new and/or former verticals and categories
Sustainable Growth
3 Digital Pure Play (DIY)
3 Digital Pure Play (DIY) ProfileDigital Only Sales Force
Characteristics● Outbound marketing ,Telesales , Self-serve ● Very low CAC● DIY - DIFM - DIWM● Full service and products upwards creep
Results● Steady Growth with Low Churn● Increasing services and products
Sustainable Growth
What’s Really Important?
What is the one thing that is more important than getting new customers?
All SaaS companies know this answer.
What’s Really Important?
Retaining the ones you already have!Churn is a KILLER!
Potential Churn VariablesWhich of these variables have an effect on churn?
Number of Products
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Sold as a Offering / Bundle
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle ?
?
?
?
?
?
About The Data
● Churn data from March 2014 - March 2015.
● Partners that were Vendasta customers for the entire year.
● Based on Reputation Management; used as a proxy for entire digital bundle that our partners are selling.
Excluded DataIncluded Data● Atypical data / outliers.
ie. Directories which closed● Customers with 0 churn.● Customers with more than 90%
churn in any one period.● Customer with less than 10
accounts.● Accounts that were created and
deleted in the same month.
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle ?
?
?
?
?
Number of Products Sold as a Offering / Bundle ?
Number of Products & Churn
75%
50%
25%
Chur
n Ra
te
Total Digital Products in Bundle/Offering9 16 23
0%
100%
Average Number of Digital Products
= 11
75%
50%
25%
Chur
n Ra
te
Total Digital Products in Bundle/Offering9 16 23
0%
100%
Average Number of Digital Products
= 11
SummaryA weak relationship found between the number of products that an agency sells and their churn.
Number of Products & Churn
Key Points● Partners sell, on average, 11 different digital products.● A weak relationship was found between number of products
that agencies sell and churn.● Number of products sold does NOT equate greater stickiness. ● Thoughtful product pricing, packaging & fulfillment make the
difference.
Number of Products & Churn
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle ?
?
?
?
?
Number of Products Sold as a Offering / Bundle ✕NO
Pricing & Churn
60%
40%
20%
Chur
n Ra
te
Monthly Price$100 $200 $300
0%
80%
60%
40%
20%
Chur
n Ra
te
Monthly Price$100 $200 $300
0%
80% Every hundred dollars that a package increased, it resulted in 8% higher
churn.
Pricing & Churn
SummaryCompanies with lower prices (below $100) had avg. annual churn of
28%Companies with higher prices (above $100) had avg. annual churn of
50%
Key Points● SMBs are more time-taxed & budget-starved than ever.● They require clear ROI, especially with so many digital
options .● The higher the price point, the higher the demand for
discernible return.○ Especially in a DIFM relationship where they're essentially hiring a
company as their outsourced marketing arm.
Pricing & Churn
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle
?
?
?
?
Number of Products Sold as a Offering / Bundle ✕NOYES ✔
Vertical vs. Horizontal & Churn45%
40%
35%
30%
25%
15%
10%
5%
0%
20%
Vertical Partners Horizontal Partners
31%42%
Vertical vs. Horizontal & Churn45%
40%
35%
30%
25%
15%
10%
5%
0%
20%
Vertical Partners Horizontal Partners
31%42%
SummaryClearly horizontal media & agencies continuously evaluate.
Horizontals often tune their packages to verticals.
Verticals are able to provide a higher specialized ROI.
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle
?
?
?
Number of Products Sold as a Offering / Bundle ✕NOYES ✔
YES ✔
SMB Category & Churn
Annual Churn Rate
0% 20% 40% 60% 80%
Mining & AgricultureTransportation
ShoppingFinancial Services
Industrial GoodsArts
RestaurantsAuto
ProfessionalHome Services
EducationHotels & Travel
Beauty ServicesFood
HealthActiveOther
Event ServicesReal Estate
Local Services
Annual Churn Rate
0% 20% 40% 60% 80%
Mining & AgricultureTransportation
ShoppingFinancial Services
Industrial GoodsArts
RestaurantsAuto
ProfessionalHome Services
EducationHotels & Travel
Beauty ServicesFood
HealthActiveOther
Event ServicesReal Estate
Local Services
SMB Category & Churn
SummaryGenerally speaking, the higher the value of a lead (for the SMB) the lower the churn & greater the retention (ie. Local Services, Real Estate, and Health).
Financial and Auto are exceptions. Highly competitive and often churn as large cohorts (ie. Brands/Franchises).
Under siege by vertical players.
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, Radio, TV etc.
Of the Offering / Bundle
?
?
Number of Products Sold as a Offering / Bundle ✕NOYES ✔
YES ✔
YES ✔
Partner Type & Churn
Annual Churn Rate
TVAgency
IYPSEO / SEM
PurePlayNewspap
erVertical
Radio 0% 25% 50% 75% 100%
Partner Type & Churn
Annual Churn Rate
TVAgency
IYPSEO / SEM
PurePlayNewspap
erVertical
Radio 0% 25% 50% 75% 100%
SummaryChurn Relates To:
● Bundling and trajectory of traditional sales.
● Experience and length of time selling digital.
● Pricing of digital by partner type.
● Types of SMB categories partner types sell to traditionally.
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle
?
Number of Products Sold as a Offering / Bundle ✕NOYES ✔
YES ✔
YES ✔
YES ✔
SMB Service Model & Churn
60%
Annual Churn Rate
45%
30%
15%0%
DIFM
DIWM
DIY
SMB Service Model & Churn
60%
Annual Churn Rate
45%
30%
15%0%
DIFM
DIWM
DIY
SummaryDIY
● DIY still has the lowest churn…by far!
● Self selected / Engaged users.● Reinforces the need for media &
agency to have low-cost DIY solutions.
DIFM● Highest churn and by definition
highest priced.● SMB demand an “ROI”
DIWM● DIWM "middle ground" as a safe &
sought-after spot.● SMBs outsource “work” but still
engaged.
SMB Category
Vertical vs. Horizontal
SMB Service Model
Partner Type
Pricing
Potential Churn VariablesWhich of these variables have an effect on churn?
ie. Restaurants, Real Estate, etc.
Specialization of the Partner
DIY, DIFM, DIWM
ie. Newspaper, YP, Radio, TV etc.
Of the Offering / Bundle
Number of Products Sold as a Offering / Bundle ✕NOYES ✔
YES ✔
YES ✔
YES ✔
YES ✔
Okay, So What?
What is really important?
What model do you need?
What is the prescription?
Given the SMB Realities
1-4 5-9Yearly Spend$2,506.00
10-99Employees EmployeesEmployees (Core/VSBs)
Yearly Spend$20,694.00
Yearly Spend$53,440.00
Total % of SMBs63.3%
Total % of SMBs17.5%
Total % of SMBs19.2%
Preferred ModelDIWM / DIFM
Preferred ModelDIWM / DIFM
Preferred ModelDIY
In-Premise Sales Rep ValueIndifferent
In-Premise Sales Rep ValueMinimal
In-Premise Sales Rep ValueHigh
SMBs 10 to 99 employees - Advertising & Marketing TrendsSMBs with 2 to 9 employees - Advertising & Marketing TrendsLCM Wave 18 Advertising Trends of Core SMBs
Given the Market Realities
DIYLow Cost Digital Solutions
DIFM / DIWMHigh Spend
That the traditional business model is under attack!
Given Traditional Media Co Realities
● In-Premise sales force● High cost of customer acquisition● Shrinking verticals / customer base● Few (if any) DIY / DIWM products● Multiple products & reporting options● Scaling issues
To Succeed You NeedA platform solution that allows you to sell to SMBs in the method, pricing, and model that they want to be sold in.
Must Include:● Marketing automation to lower cost of customer acquisition● Sales force management and measurement● Scalable solution to provide DIY/DIWM/DIFM● Low cost DIY/Freemium Solutions with a clear path to upgrade● Digital sales force / Tele sales● Single Solution for partner and SMB● Extensive Customer Reporting and deep integration of products● Easy and cost effective onboarding and support● White label branding ● Integration with back end systems
Competitive Landscape
Mobile: 306-717-3808 Twitter: @[email protected]
Brendan KingCo-Founder and CEOVendasta Technologies Inc.