New Year’s Resolution: Measure Net Revenue Retention

New Year’s Resolution: Measure Net Revenue Retention

Broker Revenues

Do New Year's resolutions work?

A few weeks ago, the Washington Post ran an article entitled Here’s a better way to make New Year’s resolutions.

In the article, points out that the conventional wisdom is that New Year’s resolutions typically fail. However, a closer look at the data shows that many people do benefit from making resolutions. Lindsey also summarises the tips for improving your odds of success if you do make a New Year’s resolution.

Lindsey’s tips in that Washington Post article are fairly straightforward:

  • Set your New Year’s resolutions at the right time
  • Make an explicit plan for achieving your goal
  • Choose a goal you’ll enjoy
  • Subtract things from your life
  • Forgive failures

We’ll come back to those tips shorty. BUt first, let’s try to apply that Washington Post’s article to the B2B world.

The New Year’s resolution that I would like ALL B2B leadership teams to make this year: Measure Net Revenue Retention (NRR) in 2024.

Revenues at Kainos, excluding acquired companies (£m, 2015-2022)

What is Net Revenure Retention (NRR)?

The easiest way to explain NRR is to use a real-life example. Take a B2B company call Kainos – I wrote a blog about them a year ago – which has been operating at an average Net Revenue Retention (NRR) rate of 110-120% ever since it went public in 2015. 

(See the box below for a more detailed explanation of Kainos’ NRR figures.)

Kainos may not be a household name but since it floated on the London Stock Exchange way back in 2015, the company has been growing revenues organically by 20-30% a year. That’s 20-30% a year every single yearWithout fail. Kainos floated at a share price of £1.39. On 1 January 2024, its share price was over £10.

If you’re a member of a B2B leadership team that would like to emulate Kainos’ success, read on!

Kainos is a high growth, high profit company precisely because its NRR figures are so strong. In its nine years as a publicly-quoted company, its NRR has only once dropped below 100%. In 2019, it hit 139%. Kainos is certainly ‘Best in Class’ and is a role model for any company trying to achieve above-average revenue and profit growth.

NRR is not a difficult concept to grasp but few senior executives truly understand the power of monitoring their company’s NRR performance. The reason for this is that most B2B leadership teams don’t understand how much it costs to land a ‘Net New’ client (brand new logo). If they did, they would become obsessed with retention in general, and NRR in particular as a key metric to monitor.

That’s why the adoption of NRR should become your main corporate New Year’s resolution in 2024.

NRR Explained

Net Revenue Retention is not yet a commonly-used financial term in business even though it is a well-known term in Software as a Service (SaaS) companies.

Let’s look at Kainos’ revenues from a NRR perspective. Let’s group revenues by the year in which they were acquired.

The graph on the right shows that in 2015, Kainos generated revenues of £61m.

Now suppose Kainos signed up no new clients in 2016. Its revenues would still have grown as the clients that were on its books in 2015 generated revenues of £68m in 2016.

Here’s the NRR calculation:

Kainos’ Net Revenue Retention for 2016 is:

NRR = £68m ÷ £61m = 111%

Kainos NRR net revenue retention


Is it worth the effort?

Yes! But it does require effort – not just in measuring NRR, but making the changes that are required to drive that NRR figure up.

Here’s why it’s worth it. Let’s say you and your fellow directors are running a B2B company with an annual turnover of €100m. You have an Enterprise sales team that’s delivering €10m in new sales each year and you feel you’re doing a good job for you’re shareholders.

But you’re not growing and your shareholders aren’t ecstatic.

That’s because you’re operating at a NRR of about 90%. In other words, the clients that accounted for €100m in revenues in 2023 will only generate €90m for you in 2024. So you need €10m of ‘New Logo’ sales to make up the gap. In other words, your Enterprise sales team are working their socks off but all they’re achieving is to help you stand still.

NRR - 3 years

Impact of Improving NRR – taking a 3-year view

So let’s see what happens if you manage to retain your existing customers for a little longer or if you expand your footprint across those accounts a little better.

If you do the right thing for, and by, your clients, your NRR should increase to 100%.

That would turn your €100m company into a €130m company in three years – see graphic on the left. Now you’re growing again.

If you could get your NRR to 120% which is where truly market-leading companies operate, you would more than double the size of the company over the next three years.

Of course, the reverse is also true. If your NRR is only 80%, then your Enterprise sales team (who currently do €10m a year in New Logo sales) have no chance of plugging that €20m revenue gap each year. So the company goes into long-term decline.

NRR - 10 years

Impact of Improving NRR – taking a 10-year view

The real benefit comes when you replicate these NRR achievements over the longer term.

Suppose you can maintain a NRR rate of 120% for 10 years. Yes, that’s a tall order. But it can be done. Well-run companies like Kainos have achieved this. The most successful software companies often exceed this rate.

The graph shows the impact very clearly. You will increase revenues almost ninefold over ten years with a NRR of 120%

Even at 110%, you will still double the size of the company in a decade purely through organic growth.

Of course, if you’re operating at a NRR of 80%, your company will lose almost half its revenues over a 10-year period, and probably more than 90% of its share value. And you’ll be out of a job well before those ten years are up.

Tips for Success

Let’s go back to those tips from at the Washington Post at the start of this blog:

  • Set your New Year’s resolutions at the right time. Honestly, there’s no better time than now. It may not be the start of your financial year – most UK companies have a financial year beginning in April – but that gives you a few months to try it out so that you can get your company’s financial systems tracking NRR formally from 1 April 2024.
  • Make an explicit plan for achieving your goal. Table this topic at your January leadership team meeting. Challenge yourselves to be bold, and put the customer at the heart of everything you do. (This is the key to improving your NRR figures.) 
  • Choose a goal you’ll enjoy. If you can achieve a NRR greater than 100%, you’re definitely going to enjoy this New Year’s resolution. If you get anywhere near 120%, your board and shareholders are going to enjoy it even more!
  • Subtract things from your life. If you’re going to add NRR to your leadership team’s KPI list, drop a couple of your existing KPIs. Do a spring clean of your management dashboard. Are all those metrics really necessary? Which ones can you drop?
  • Forgive failures. Change is not easy and the road to success is challenging. You won’t get everything right first time. But the journey will be worth it. Read through that Kainos blog and interview with former CEO Brendan Mooney again for a little inspiration.

Happy New Year!

“Excellence in CX” Awards 2023 – That’s a Wrap!

“Excellence in CX” Awards 2023 – That’s a Wrap!

Congratulations to our 2023 Winners

2023 That's a Wrap

This is the second year of Deep-Insight “Excellence in CX” Awards.

These awards focus on companies that we have worked with in 2023 that have embraced our Customer Relationship Quality (CRQ) framework and methodology to make meaningful change for both their customers and their employees. 

That makes us very proud!

Before we talk about the winners, let’s answer the following question:

What do we mean by ‘Excellence in CX’?

Deep-Insight is a small team of Customer Experience (CX) consultants who work extremely closely with our customers. The single question which drives us in each engagement is “will this programme inspire transformation in our client organisations?”.

Transformation does not need to be, and usually isn’t, a huge significant event in itself. When done well, transformation is a series of small, well thought through changes and improvements. Transformation is only worth it if it leads to growth, and it always does when it is inspired by the customer.

Also, we are not interested in vanity projects! We are focused on our core mission of Inspiring Transformation i.e. effective, growth-oriented use of Customer Experience (CX) and Employee Experience (EX).

This is what excellence in customer experience looks like and it is the foundation on which our customers build their CX and EX programmes.

AND THE 2023 WINNERS ARE…

 
open eir wins Best CRQ Newcomer 2023 award

open eir has been awarded Best CRQ Newcomer in the Deep-Insight Excellence in CX Awards for 2023. We are thrilled for them.

If you live in Ireland, you’ll know open eir. It’s the wholesale arm of Ireland’s largest telecommunications company. At some point you will have seen their vans on the streets, and their technicians out and about, installing fibre lines and connections into business premises and homes across Ireland. 

This is a truly deserved award as it’s hard to believe that open eir’s very first Customer Relationship Quality (CRQ) assessment was launched to its customers as recently as October 2023.

Maeve O’Malley recently took on the role as Managing Director at open eir Wholesale and in recent weeks has been leading the charge with open eir’s response to its clients and partners.

Maeve has over 24 years of experience in the telecommunications industry and joined eir in 2013. According to Maeve:

open eir is delighted to be working with Deep-Insight and are already finding huge value in the insights and input from the team as we continue our journey of transforming our customers’ and partners’ experience with us.”

Best CRQ Engagement

When we run a Customer Relationship Quality (CRQ) assessment at Deep-Insight, the average completion rate for our surveys is around 35%. If it is a first-time assessment, the average participation rate is lower – typically 30%. So that’s the figure we were expecting to achieve at Insight.

However, the senior leadership team at Insight had different plans. Jill MurrayVice President Marketing EMEA at Insight led the programme. Adrian GregoryPresident of EMEA, sponsored it. Together, they felt that 30% was a pretty low hurdle to achieve so they mobilised their regional and country managers, plus all of their account managers, to start a conversation with key clients across Europe. The message was simple: We want to be better partners for you, so we need your help to tell us what we’re good at, and where we need to improve.

Insight contacted 203 key individuals – key decision makers, influencers and operational contacts – from a selection of their strategic clients across Europe. 100 of the 203 responded – a whopping 49% engagement rate

Jill Murray has this to say about receiving the award:

Our unwavering commitment to our clients drives us to constantly improve our solutions and expertise in order to provide exceptional service. It is with great pride that we accept this award from Deep-Insight, a testament to the hard work and dedication of our teams in building strong client relationships and driving meaningful business outcomes.

As a leading Solutions Integrator, we are thrilled to continue supporting our clients on their digital journeys and enhancing the experience we deliver.

Best CRQ Score

DWF, a long-standing customer of ours, has been awarded Best CRQ Score in Deep-Insight’s “Excellence in CX” Awards this year.

We will always be the first to say that great Customer Experience should NOT be about scores only. It’s about much more than that. However, this year we want to recognise DWF for their amazing Customer Relationship Quality (CRQ) scores regardless as they have been consistently rewarded with glowing reviews from their clients as part of the CRQ programme.

With a CRQ score of 6.0 (as well as a Net Promoter Score of +62) we can call this a truly phenomenal set of scores. On top of this, DWF is notorious within Deep-Insight for struggling to get their clients to give any negative feedback at all – a true testament to how much their clients value their relationships with DWF!

 

Sir Nigel Knowles is CEO of DWF, having previously served as Chairman of the Group from September 2017 to May 2020. Sir Nigel Knowles shared:

“We are very proud of this award from Deep-Insight which reflects the exceptional client relationships we have been able to develop thanks to the hard work, dedication and excellence of our colleagues.

The valuable insights provided by Deep Insight are helping us to go even further, continuing to enhance the way we support our clients.”

Focus on Employee Relationship Quality (ERQ)

Doing the right thing for customers means doing the right thing for your employees.

We award the “Best Focus on ERQ” prize to the company that shows the greatest interest in Employee Relationship Quality (ERQ), the sister methodology to CRQ.

Pelican Self Storage has been a client of ours for years, and it has been a privilege watching the Pelican management team take the views of its employees so seriously over that time.

 

Burkhart Franz is CEO of Pelican and has always been a huge advocate for his management team and all of his employees across Denmark, Sweden and Finland.

“Our twice-a-year employee satisfaction surveys, alternating the eNPS (employee Net Promoter Score) question and the more in-depth Employee Relationship Quality (ERQ) assessment are now in their 7th year.

They have clearly made Pelican a more employee-focused organization. Over the years we have addressed many issues that had previously wiped the smiles off the faces of our collaborators, from slow internet connections and faulty printer set-ups to significant changes in management style, workplace scheduling and internal communication. As a result, we have very low employee churn in what are otherwise red hot labor markets; a premium service proposition; and the happiest customers in our industry.”

Insight wins “Best CRQ Engagement 2023” Award

Insight wins “Best CRQ Engagement 2023” Award

Today we are delighted to announce the second winner in the 2023 Deep-Insight Excellence in CX Awards.

Today’s category is “Best CRQ Engagement“.

CRQ stands for Customer Relationship Quality but what exactly is Engagement, you might ask? Engagement is all about convincing your customers to give you feedback on your performance, and then working closely with them to improve the overall customer experience. The “Best CRQ Engagement” winner is the company that does the best job at eliciting the most feedback from its customers. Think of engagement as the completion rate you achieve when you send out a customer survey to all of your key accounts.

This year’s winner is Insight EMEA, the European arm of the Fortune 500 leading Solutions Integrator Insight Enterprises.

What exactly is a Solutions Integrator, I also hear you ask? Well, Solutions Integrators work as both a service provider and an advisor to ensure a project is successfully delivered from the initial concept all the way through to execution. That advisory work can also extend beyond implementation to ongoing support, management and optimisation. Also, Solutions Integrators are equipped to deliver meaningful change and a greater return on investment at a global scale.

What is a Good Engagement Score?

Some time ago our Operations Manager Alex Calugarici wrote a blog on the topic of engagement rates in a B2B environment

In that blog, Alex explains that when we run a Customer Relationship Quality (CRQ) assessment at Deep-Insight, the average completion rate for our surveys is around 35%. If it is a first-time assessment, the average participation rate is lower – typically 30%. So that’s the figure we were expecting to achieve at Insight.

However, the senior leadership team at Insight had different plans. Jill MurrayVice President Marketing EMEA at Insight led the programme. Adrian Gregory, President of EMEA, sponsored it. Together, they felt that 30% was a pretty low hurdle to achieve so they mobilised their regional and country managers, plus all of their account managers, to start a conversation with key clients across Europe. The message was simple: We want to be better partners for you, so we need your help to tell us what we’re good at, and where we need to improve.

Insight contacted 203 key individuals – key decision makers, influencers and operational contacts – from a selection of their strategic clients across Europe. 100 of the 203 responded – a whopping 49% engagement rate

Jill Murray has this to say about receiving the award:

Our unwavering commitment to our clients drives us to constantly improve our solutions and expertise in order to provide exceptional service. It is with great pride that we accept this award from Deep-Insight, a testament to the hard work and dedication of our teams in building strong client relationships and driving meaningful business outcomes.

As a leading Solutions Integrator, we are thrilled to continue supporting our clients on their digital journeys and enhancing the experience we deliver.

About Insight

Insight Enterprises, Inc. is a Fortune 500 Solutions Integrator with more than 13,000 teammates worldwide helping organisations accelerate their digital journey to modernise their business and maximise the value of technology. We enable secure, end-to-end transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 35 years of broad IT expertise.

Rated as a Forbes World’s Top Female-Friendly Company and a Great Place to Work, we amplify our solutions and services with global scale, local expertise and a world-class e-commerce experience, realising the digital ambitions of our clients at every opportunity. Discover more at uk.insight.com.

About Deep-Insight

Deep-Insight is a leading European B2B Customer Experience (CX) company founded in 2000 by a small team of ‘magicians’ with one goal: researching a way to read customers’ minds. Today, Deep-Insight supports customers all over the world with the skills, tools and methodologies to establish and operate world-class Customer Experience (CX) and Employee Experience (EX) programmes.

For more information, go to www.deep-insight.com or email us at sales@deep-insight.com.

open eir wins “Best CRQ Newcomer 2023” Award

open eir wins “Best CRQ Newcomer 2023” Award

The ballots are counted and the results have been confirmed!

open eir has been awarded Best CRQ Newcomer in the Deep-Insight Excellence in CX Awards for 2023. We are thrilled for them.

If you live in Ireland, you’ll know open eir. It’s the wholesale arm of Ireland’s largest telecommunications company. At some point you will have seen their vans on the streets, and their technicians out and about, installing fibre lines and connections into business premises and homes across Ireland. 

This is a truly deserved award as it’s hard to believe that open eir’s very first Customer Relationship Quality (CRQ) assessment was launched to its customers as recently as October 2023.

open eir wins Best CRQ Newcomer 2023 award

The Deep-Insight team was led by Alexandra Calugarici and Kate Casey. Here’s Alex’s perspective:

“We started working with Orlagh Nevin and the senior leadership team at open eir in mid-2023, and were immediately impressed by the way everybody showed engagement with the process and were keen to make the project a success. 

Kate’s perspective is similar:

“open eir embraced the Customer Relationship Quality (CRQ) process from the very beginning. They approached it with an open mind and showed a real bias to action when the results came back. They started making decisions quickly from the feedback and insights they received about their products, services and people.”

Maeve O’Malley recently took on the role as Managing Director at open eir Wholesale and in recent weeks has been leading the charge with open eir’s response to its clients and partners.

Maeve has over 24 years of experience in the telecommunications industry and joined eir in 2013. According to Maeve:

open eir is delighted to be working with Deep-Insight and are already finding huge value in the insights and input from the team as we continue our journey of transforming our customers’ and partners’ experience with us.”

For me, the key word in Maeve’s comment is ‘journey’ as it acknowledges that transformation doesn’t happen overnight. open eir has some fantastic strengths in terms of its products and its people, and under Maeve’s leadership has already started on that journey.

Congratulations again to everyone at open eir and a special shout out to Orlagh Nevin and John Gregg who were our team’s day-to-day contacts over the past few months at the start of this CRQ journey. We’re looking forward to working with them over the next few years as they and the open eir transform the company into a truly customer-centric organisation.

About open eir

open eir is a division of eir and is the largest wholesale operator in Ireland, providing products and services across a range of regulated and unregulated markets.

For more information, go to eir.ie.

About Deep-Insight

Deep-Insight is a leading European B2B Customer Experience (CX) company founded in 2000 by a small team of ‘magicians’ with one goal: researching a way to read customers’ minds. Today, Deep-Insight supports customers all over the world with the skills, tools and methodologies to establish and operate world-class Customer Experience (CX) and Employee Experience (EX) programmes.

For more information, go to www.deep-insight.com or email us at sales@deep-insight.com.

“Excellence in CX” Awards 2023

“Excellence in CX” Awards 2023

We have the privilege of partnering with some of the most amazing organisations in the world who are working hard to ensure that their customers’ (and employees’) voice drives strategy across all areas of their business.

We are excited to share some of the great CX work that we see daily while working with them.

At Deep-Insight we are not interested in vanity projects. We are proud to work with customers who align with our mission to ‘Inspire Transformation’ based on open and honest feedback from customers. That is what our Customer Relationship Quality (CRQ) framework and methodology is designed for and is what we are focusing on for these awards.


4 Award Categories in 2023

Last year we had four categories and made four awards. 

This year we also have four categories but the awards are a little different. We are keeping the ‘Best CRQ Newcomer’ award but adding some different categories including one that will reward one of our clients for its focus on Employee Relationship Quality (ERQ) which is arguably as important as CRQ.

Best CRQ Newcomer

 

We award this prize to a company that has never deployed Customer Relationship Quality (CRQ) before but embraces the CRQ approach for the first time with gusto, takes the client feedback seriously, and truly commits to improvement. 

Best CRQ Engagement

 

Engagement is all about convincing customers to give their feedback and working with you to help you make significant improvements. The winner is the company that does the best job at eliciting feedback from customers.

Best CRQ Score

 

We know that Customer Experience is not all about the score, but we feel it is still worth recognising the company that recorded the best Customer Relationship Quality (CRQ) score in 2023. Remember that customer centricity isn’t easy!

Best Focus on ERQ

 

Doing the right thing for customers means doing the right thing for your employees. We award this prize to the company that shows the greatest interest in Employee Relationship Quality (ERQ), the sister methodology to CRQ.

Next week we will announce the winners.

Let the Games Begin!


A Reminder of the 2022 Winners

Six Degrees has won best leadership response to CRQ

Vreugdenhil Dairy Foods was awarded ‘Best Newcomer to CRQ’. This is a truly deserved award as Vreugdenhil embraced the CRQ process like they had been at this for years, and kept their momentum up all through the live survey and afterwards.

Six Degrees won the ‘Best Leadership Response to CRQ’ award. Everything in Customer Experience starts with leadership commitment and drive, and Six Degrees have this in spades.

invenioLSI was awarded ‘Best CRQ focus amid change’This is a truly deserved award for an organisation that has seen exceptional growth and transformation over the previous 24 months.

BT Ireland won ‘Trailblazer in CRQ’ for its courage in leading the way in customer experience. They disrupted an already successful Customer Relationship Quality programme in order to re-focus the entire business on the basics – the value of growing customer relationships.