Measure These Metrics for Success in Your Software Business

Three particular metrics—renewal, fulfillment, and high-water mark—are essential for a successful quote-to-cash process.

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A top goal for software businesses is to secure recurring revenue. To meet revenue targets, software companies must rely on insights from entitlement data. Three particular metrics—renewal, fulfillment, and high-water mark—are essential for a successful quote-to-cash process. Analytics based on the following three use cases enable suppliers to reach out to customers in support of robust customer engagement—and robust revenue recognition.

1Renewal trends: understanding retention and churn risk

Reliance on subscription monetization is growing. This means that getting customers to renew their subscriptions is more important than ever.

As found in the Revenera Monetization Monitor: Software Monetization Models and Strategies report, 82% of respondents are using subscription/term monetization models. This is a noteworthy jump from 68% just a year before. Reliance on subscription is also expanding, with 59% of respondents indicating that they expect subscription to grow as a percentage of overall software license revenue in the coming 12–18 months.

Software suppliers must be aware of customer engagement to understand if the renewal is at risk and to improve customer retention rates. A data-driven approach will help make the risk more manageable by providing visibility into each user’s renewal position, based on actual usage (whether measured by frequency of use, access of specific features, etc.). Clarity into how customers engage with your product can also help minimize churn, which 41% report is a significant barrier to revenue growth. Yet there’s significant room for improvement, as only 31% currently have automated churn risk alerts.

Securing a renewal requires that the software supplier understand where and how the product delivers value to the customer. Usage data, illustrating how features are being used, can help offer insights that will help secure the renewals. A centralized entitlement management system can help provide clarity into which renewals may be at risk, with proactive notifications that help the supplier create appropriate outreach activities to get ahead of the process, well in advance of when an entitlement is going to expire. This is particularly useful if there is a concern about the level of use—or the lack of use—of a product.

2Fulfillment trends and customer success

What was allocated to your customer? What was consumed?

Answers to these questions provide important fulfillment information about how customers utilize and value products. By focusing on fulfillment, a software supplier can take action to address scenarios where there’s misalignment between what a customer needs and the product being sold, such as:

  • When products aren’t being used in a manner consistent with the entitlement, often a good indicator of retention risk. In this case, fulfillment data can help a supplier take appropriate actions to improve customer engagement with the product, strengthening the likelihood of renewal.
  • Overconsumption of a product or when a user is reaching the usage capacity provided with a license entitlement. Here, an upsell opportunity may be present.

3High-water mark, cross-sell, and upsell

The high-water mark is a measure of the peak utilization of a particular license feature. Reporting on the high-water mark provides the ability to understand what’s happening with your product at a granular level. For example, a software supplier that has a product with thousands of features may want to show the top 50 features, along with their consumption levels, for monthly feature consumption trend analysis.

By drilling down on a specific feature- or time-based aspect of a product to understand how it performs over a period of time or how frequently it is being consumed, the high-water mark can help ascertain the actual value of that particular feature for your customers. It can also provide an illustration of customers’ use patterns over time in enterprise applications.

The high-water mark metric has multiple practical uses when it is relied on to notify the supplier of when thresholds are met. It can show how well a new product or offering is performing in general, over a period of time, or for a set of accounts that represent a core market. The high-water mark can help the sales team, such as when a cross-sell or upsell opportunity may be present. It can also support initiatives of the finance team, such as when overage billing situations must be addressed.

Victor DeMarines

Victor DeMarines is the Vice President of Software Monetization Product Management at Revenera (formerly known as Flexera’s Supplier Division). Vic joined Revenera via the acquisition of Revulytics and was a founding member of the team since 2006. He is now responsible for leading the Software Monetization product management team. Prior to Revenera, Vic held senior product management positions at RSA Security (now part of EMC) where he drove product strategy for the company’s strong authentication, Smart Card, and enterprise Single Sign-On client products. He has also held senior product roles at Authentica where he was instrumental in defining product strategy for the company’s enterprise rights management and secure email solutions, and at AXENT Technologies and Progress Software.

Victor DeMarines

Victor DeMarines is the Vice President of Software Monetization Product Management at Revenera (formerly known as Flexera’s Supplier Division). Vic joined Revenera via the acquisition of Revulytics and was a founding member of the team since 2006. He is now responsible for leading the Software Monetization product management team. Prior to Revenera, Vic held senior product management positions at RSA Security (now part of EMC) where he drove product strategy for the company’s strong authentication, Smart Card, and enterprise Single Sign-On client products. He has also held senior product roles at Authentica where he was instrumental in defining product strategy for the company’s enterprise rights management and secure email solutions, and at AXENT Technologies and Progress Software.