Subscription-based companies focus on churn rates. Ask any executive and they can probably quote the company churn rate. They appreciate the negative impact that high churn has on company performance.
But what about the company’s stagnation rate? Every company has customers which don’t grow. These customers signed up for the products. They’re using them. But they’re not developing their use. So, they renew each year, but no expansion revenue.
Think about the impact on total expansion revenue. Imagine the vendor wants to increase current-customer revenue by 20%? What if they have a stagnation rate of 50% ie half of the customers aren’t growing? To achieve 20% growth overall, the non-stagnant customers would need to grow 40%. Every year. That’s a big ask for most companies.
The conclusion – vendors can’t focus on churn and ignore stagnation.
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