Blog / The Greatest Risk to Recurring Revenue Is Customer Failure

Last Updated:April 21st, 2022

The Greatest Risk to Recurring Revenue Is Customer Failure

The Pursuit of Recurring Revenue

Services drive recurring revenue by helping customers to successfully adopt and apply products. Many products have the features a customer needs, yet features are irrelevant if customers cannot use the product to achieve their desired business outcomes. When customers succeed with the products they purchase, it increases the likelihood of sustained recurring revenue and creates opportunities to expand the long-term value of relationships.

Landing the New Deal is Only the Beginning

Landing a new customer sale is the first step in creating a recurring revenue relationship. While sales and marketing efforts help convince customers that your product has the right features at the right price point, it is not enough to assure the recurrence of future revenue. Customers don’t just buy your products because they like the features or the price. Customers buy your products to optimize their business’ performance.

The ability to establish and sustain recurring revenue from customer relationships demands that customers be successful with your products. The greatest risk to recurring revenue is customer failure. To mitigate failure companies must be prepared to supplement product capabilities with essential services to help customers effectively adopt and apply products successfully to achieve their business objectives.

Adoption and Success Are the Foundation for Long Term Relationships

For many technology companies, 70% or more of revenue comes from existing customers. When customers do not fully use what they have already purchased, they are less likely to purchase more or even renew current subscriptions. The key to sustained revenue growth is through the delivery of services that drive product adoption and assure that customers can use products quickly and effectively.

According to a study by ServiceXRG, the majority (93%) of customers that receive some form of onboarding and adoption services report that they feel confident that they have the skills to use a product effectively. Customers that receive onboarding and adoption services are 3.2 times more likely to continue using the products they purchase or subscribe to, purchase more products and services, and renew existing relationships.

Adoption Services

Adoption focused services are designed to help customers use the products they have purchased. Adoption services may start with a formal hand-off from Sales to Services to assure the expectations set during the Sales process are carried forward to the implementation of the product. Adoption services may include installation, configuration, and training. These services provide a solid foundation so that customers have the skills they need to use a product effectively.

Most Effective Adoption Services

Source: ServiceXRG

Success Services

Where Adoption services help customers to get up and running with their products, Success services focus on helping customers to apply products to drive tangible business outcomes. Success services often include success planning and guidance, account management, business reviews, health checks, best practices guidance, and expert resources. Success services assure that customers can apply products to solve their business problems.

Most Effective Success Services

Source: ServiceXRG

Customer Success Drives Recurring Revenue

Services are the key to maximizing recurring revenue when companies have the capability to define, sell, and deliver the services customers need. When companies lack these capabilities, product adoption and achievement of successful outcomes by customers is inhibited. When adoption and success is impeded, the potential for customer churn increases, placing recurring revenue at risk.

Service capabilities aligned to the needs of customers are fundamental to ensuring customer success. A well-defined portfolio of services; effective service sales and marketing; and highly effective and scalable service delivery capabilities are fundamental to reducing churn and expanding recurring revenue.

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