From the research we’ve conducted with IDC, we know that driving customer lifetime value is a key factor in the success our top partners have seen in growing their business.
While both our recent eBook and my recent blog provide plenty of best practices you can use to increase your customer lifetime value, we want to help you take it one step further. So, to help provide a framework for building an offer and modeling the financial aspects of your plan, we’ve created the new Customer Lifetime Value Modeling tool.
Once you download the tool, allow me to take you through each of the steps and show you a bit of each one to show you how to get started.
How to use the new Customer Lifetime Value Modeling tool
Before we get started with step by step instructions for using the new Customer Lifetime Value Modeling tool, be sure to review the Definitions tab in the tool for descriptions of the variables within the model.
Step 1: Define a focus
The first step is to define a customer focus for your offering.
As I have discussed in my blogs, given increasing competition in the marketplace, it is critical that partners think through their differentiation strategy to help stand out from the competition, and protect their price points and margins. One of the best practices I have seen is to differentiate by creating a vertically oriented offering. I recommend conducting research to understand the market opportunity, customer needs, trends, and core challenges faced by your desired target customer as a part of this step. I also recommend being as specific as possible in selecting your target.
Remember, answer each of the questions on the “Define a focus” tab in the red text areas within the tool.
Step 2: Create the solution
Once you have identified the needs of your target customer, then you can create the solution that will help address your customer’s needs. This can be a combination of Microsoft, third party, or your own intellectual property along with the project services, managed services, and IP license fees you intend to package with the solution. Check out the Microsoft Profitability Scenario research content to get insight into the Project Services, Managed Services, and Packaged IP other partners are delivering on top of Microsoft cloud solutions.
Enter the details associated with each element in the red text areas. You can also enter a month of sale for each individual component because we know it’s common for partners to sell and deploy solutions in phases. Finally, enter the key margin assumptions and annual churn assumption based on your current or projected business performance.
Step 3: Build the Go-to-Market Plan
Next, build a go-to-market plan to help tee up the customer needs for each of the solutions outlined in your plan. Think carefully about what trigger events would compel a customer to want to discuss the elements of your proposed solution. Also think about how you can best reach the customer at each stage or phase of your relationship. Finally, craft your messaging for each solution element and the best vehicle to use to convey this message.
For example, after you already have a customer on board, you might want to think about deploying a nurture email campaign directing to a whitepaper or blog to show incremental solution elements, reduce cost of sales, and build more scalability into your marketing efforts. For tips on modernizing your sales and marketing efforts, download the ebook we created with IDC and visit the Smart Partner Marketing site.
Step 4: Review your Customer Lifetime Value Projection
The final step is to enter your customer add assumptions and review your five-year customer lifetime value projection based on the deal economics you entered into the tool. Adjust the model to create “what if” scenarios and model different assumptions. This is great information to help you build a business case for investment.
To complement this tool and help you hone your strategy for cross-selling, upselling, and driving up your customer lifetime value, download the new IDC ebook, “Microsoft Modern Partner Series Part 5: Deliver Customer Lifetime Value” for best practices from top performing cloud partners.
Have you tried the new Customer Lifetime Value Modeling tool yet? What did you think? Share with us in the comments below!
Until next time,