Case Study 2 – Software Subscription

Company Profile:
Software and data service provider to retail stores nationwide.  Customers pay a monthly subscription fee for data, updates, and support.  The company is backed by VC investors looking to grow the company.

Objectives

  • Spend sales & marketing more efficiently
  • Figure out whether to spend more or less on marketing
  • Understand service and product profitability
  • Develop pricing models for services
  • Project customer volume, revenues, and profitability

 

Challenges:

  • Long sales cycle makes analysis of marketing difficult
  • Sales driven by sales team, and less testable & consistent than high-volume direct response programs
  • Hadn’t allocated overhead burden of sales and marketing to acquisition costs
  • Didn’t have master database of customer billing history
  • Didn’t know what change in sales volume was needed to justify marketing investments or pricing changes

 

What I Did:

  • Calculated Lifetime Value of new customers
  • Calculated gross margins & LTV for individual services
  • Assign sales and marketing overhead costs to channels
  • Calculated customer retention
  • Projected customer counts, revenues, and COGS for 3 years

Impact:

  • Increased investment in profitable sources
  • Cut underperforming sales and marketing channels
  • Structure new partnerships confidently
  • Know how to price new services and products
  • Board of Directors is now confident in company’s revenue projections
  • Improved prioritization of marketing and product investments
  • Management and board understand “what if” for future years by running scenarios