Why? Because it makes good business sense, especially if you are a SaaS company. Let me explain.
Many of these companies take a short-term view and want, or say they need, to emphasize revenue on a quarter-by-quarter basis. Their view is that training costs money, customers, especially new customers, need the training, therefore we mark it up and charge. Let the longer term take care of itself. If customers need training later on, it’s a new profit opportunity.
Other companies take a longer-term view and want to maximize their growth and return over time. These companies do not charge for training and view it as an investment in their customer base. This investment produces customers that gain more value from their product now, and over time, and pay the company back in loyalty and longevity.
The Power of Training
Training may be the single greatest lever to ensuring your customers’ success, satisfaction and profitability. Training’s metrics of success, as shown in the infographic below, are compelling. A 15% improvement in renewal rate is huge when you operate on a subscription model.With that increase in renewals, profit increases in staggering amounts.
Infographic – ROI of Customer Training
Charging for training creates a bump in the road, which makes your customer slow down and bounce around. If training is a budget hit, do I, as a new customer, resent it or take it in stride? What about a 10-year customer? Do I send everybody or do I just send our super-users and have them train the staff? Do we need the training and the upgrade now, or can we just exist with the previous release for a while?
Either way, this translates into less training for your customers, which also means they will use the product less, need more help desk support, renew less often and your profit will inevitably shrink.
Leveraging Customer Lifetime Value
Easy to nod your head with these considerations, but the question begs, why can’t we also add to this quarter’s profits? Training costs us money now.
What we need is a discussion of customer lifetime value (CLV). Embracing CLV shifts marketing from the transactional customer business view to the long-term relationship marketing approach.
Simply, CLV is the amount of revenue (and profit) you can expect from each customer over their relationship with you. There are 3 variables.
1. Revenue – how much do they spend.
2. Time – how long do they stay an active customer.
3. The third variable, the one that you can influence, and that influences the other 2, is customer success. To stick with simplicity, successful customers buy more and stay longer. They’re also the ones that generate referrals.
Revenue from long-term customers is more profitable, because the high cost of acquisition has been amortized. The training fuels the value they receive and drives demand. Research shows that training increases customer longevity.
The cost of developing and administering the training is like fertilizing a garden. Effort is required. How would you like your garden to grow?
Creating a Competitive Edge
Looking over the SaaS industry, it seems that old market giants like Oracle and Microsoft charge for training, largely because they can. They may feel that they are so embedded that customers will be theirs for perpetuity. They also tend to outsource training to third parties that have to generate a profit from training.
Which is why an investment in training can be an important competitive edge for the next in line, the contenders. You view your customers as resources to be grown. They view customers as “share of wallet”.
From a Profit Center to a Customer Success Center
There is one other benefit that companies who take the long view and do not charge for training reap. That is innovation – the drive to keep your training sharp, in line with your latest advances, and geared to your customers’ success. As your organization adopts and practices this innovation, it has a spillover effect, pushing your organization to rethink how they add value to the customer relationship overall.
Don’t Be Penny Wise and Pound Foolish
There is a great British saying, “penny wise, pound foolish.” It means, making decisions with small amounts of money (pennies) that end up making bad sense for affecting larger amounts of money (pounds, as in Great British Pounds). And that’s the difference between charging for training now versus investing in your customers’, and your long-term success.
Investing in training enables your customer to use your product more deeply, to more closely align their methods and processes to you, and ultimately attribute some portion of their success to you.
Unfortunately, even in a world where it costs 5 to 25 times more to acquire a new customer than it does to keep current customers, many companies perpetuate short-term, transaction thinking. These companies continue to invest nearly 80% of their budgets on customer acquisition. Just 42% of businesses are currently even able to measure customer lifetime value, let alone accurately. (What Most Companies Miss About Customer Lifetime Value by Michael Schrage, HBR)
This is a real business opportunity, a commitment that will benefit your company now and in the future. Remember, making customers better makes better customers.
