If your company licenses software, you’re likely using a recurring-revenue model where customers pay a monthly subscription for the use of your technology. A typical contract term would be 12 months.
If customers love your software, they’ll likely renew their contract multiple times. With each renewal, the lifetime value (LTV) of the customer increases for the software vendor. This is not just beneficial, it’s essential for the vendor’s long-term financial health.
However, the natural tendency for customers is not to renew, according to author and customer-success expert Karen Pisha. Customers are more likely to churn.
Why? Because of change. Business models change. Strategies change. Leadership and key personnel change. Adoption, enthusiasm and focus change (often wane). In fact, change is such a common disruptor that it’s become a painful constant for recurring-revenue companies.
Change causes vendors and customers to drift apart. Dialog drops. Engagement ends. Customers don’t renew, and the vendor’s considerable upfront costs of finding, closing and onboarding the client are never paid back through anticipated multiple contract renewals.
Customer retention is imperative to the software vendor’s survival. Renewal is life in the subscription world. With the recurring revenue model, most of the revenue comes after the initial sale.
Certification is a simple, effective strategy for combatting drift and change
One of the goals of customer success, a subject discussed in more depth in previous posts on the Kryterion blog, is to anticipate problems in the vendor-customer relationship.
If customers are drifting away, certification can be a bonding, unifying force as follows:
- Certification is proof of advanced skills and competencies with the vendor’s software. Certification is an investment of time, money and emotions for the exam candidate. Most churn occurs because users simply aren’t emotionally invested in the software. Certificants, on the other hand, have skin in the game.
- Certificants are committed and loyal to the software and to the vendor relationship. They often become effective brand ambassadors whose enthusiasm and respected voice fuel more product adoption.
- Recertification deepens the relationship between sponsor and certificant. It’s common for sponsors to hold webinars and special trainings to prepare the certificant for the recertification exam. Dialog and engagement increase. Sponsors may also ask high-profile certificants to become subject matter experts tasked with creating and/or reviewing new test items (questions) to replace ones that are underperforming.
- One of the reasons for churn is the loss of key people in the client company, like a manager, evangelist, raving fan or power user. Momentum and product adoption can break down without these spark plugs. Certification creates valuable continuity. Transitioning replacement personnel into vacated positions becomes easier when certification has equipped them with the knowledge and skills to get up to speed quickly.
- Certification creates vibrant communities where leadership is often shared between vendor and customer. This kind of communal, collaborative relationship brings people together, and that works against drift.
The best way to combat churn is to make sure that customers become successful using the vendor’s software. Churn occurs when vendors miss (or disregard) the warning signs that the customer is getting ready to leave. And once the vendor does become aware, the scramble to save the account is often too late.
Telltale signs often cluster around diminished product adoption, engagement and usage.
The bottom line is that vendors must put proactive measures in place to monitor the health of software customers.
Certification is an effective strategy to engage clients early on, post early wins, sustain momentum and generate the emotional investment necessary for the all-important contract renewal(s).
We have a cool, two-minute video about how certification amplifies customer success. Check it out here!
Find out more about developing your own certification program here:
