How to set up performance testing on your new subscription model
by Niclas Lilja, on Jan 30, 2018
Once your subscription model business is up and running, it might seem like the hard part is over. But without proper data tracking and understanding important KPIs like recurring revenue and customer churn, you may quickly find your company going into the red. Once you’ve set up your subscription model and established your pricing tiers, service packages, or product groups, you need to set up testing to make sure your offerings and business practices will facilitate long-term growth. Setting up performance testing is a crucial part of your new subscription model business, and it can be done through five components.
1. Identify the right data points to measure
We are inundated with massive amounts of information about our customers and potential customers, especially with Big Data and increasing use of the Internet of Things (IoT). Not all of it will be important for your business. You need to establish early on which data points can actually give you the right indication of your SaaS or product performance.
Some of the crucial data to look at might be monthly recurring revenue (MRR), average revenue per user/customer (ARPU/ARPC), customer lifetime value (CLV), renewal rate, customer churn (and retention), customer acquisition cost (CAC), and marketing and sales return on investment (ROI).
For high-touch sales organisations, keeping track of customer data early on will be imperative. Then combine with financial information, performance data, net promoter scores, etc. to drive understanding of business performance.
You’re going to want to make sure you have the right kind of dashboards set up for reporting, and most importantly, that you have a revenue recognition system in place. While it’s good to be able to see these data points, it can be difficult to measure them accurately if you’re not ensuring your company distinguishes between cash in, and actual revenue.
2. Set realistic KPIs
When you’ve established the data points that are most important to measure the performance of your business, you need to set realistic KPIs for those data points. Your KPIs, or Key Performance Indicators, should act as benchmarks for measuring performance against.
KPIs should be realistic in that they paint you an accurate picture of success, but aren’t too high to be unattainable or too low to really prove sustainability. Set specific timelines for analysis and review, find historical data to compare to over time, or find published market standards or competitor data (if available) for benchmarking.
3. Create avenues for customer feedback and surveying
As we’ve outlined before, setting up a customer support system is an integral part of establishing or transitioning to a subscription based business. But while customer support systems are necessary for launching and succeeding with a subscription model, they are also an important part of the performance testing.
Customer support systems are also a way for you to understand and use feedback as important data pieces for indicators on performance. When you introduce surveys, or other systems for customers to let you know how they feel about their experience, you can run analysis on sentiment, keywords that keep appearing, and whether or not customers feel positive enough to continue to renew subscriptions.
You can also utilize surveys as a great customer touchpoint: you can approach your customers in a way that shows you value them and their opinion, while obtaining important viewpoints for improving your performance, or measuring against your other KPIs to ensure that there is correlation.
4. Create temporary deals and offers to run along side existing offers (A/B testing)
In the SaaS industry, mobile apps, or with marketing and sales in particular, A/B testing is a big component of performance measurement. We don’t always know precisely what will sell the best, what versions of interfaces or email newsletters our customers will respond best to. A/B testing is the hypothesis/experiment component of business. And it allows us to see better ways of doing things, and provide the best experience to our audience.
To do this with a subscription business, you can test run temporary offers that run alongside your typical offerings. Or, use SMART content to deliver different options to target groups to see what performs well with who. As with an experiment, just remember an A/B test should have a control - one constant that stays the same in order to measure against. Also consider that A/B testing is not a quick and dirty solution. For it to be accurate, you’ll want to only make one change at a time, so you can attribute success or failure to specific conditions, not become more confused about what performs well.
5. Performance test software and other deliverables
While you want to certainly performance test your subscription model from the standpoint of sales and revenue, you clearly need to make sure that your products and services are actually performing as they should.
Is the time between an order and delivery for your subscription box too long? Does the subscriber receive the box later or earlier than they expect or desire? For SaaS companies, does your software integrate easily into your customer’s existing systems, or is difficult to get up and running without assistance? Do you find your platform intuitive but your customers actually find it difficult to understand?
All of these things should be taken into considerations when you’re measuring your data, and reviewing your KPIs. The actual performance of your products or services might actually be the major influence on whether or not you’re capturing recurring revenue and decreasing customer churn. Make sure you do periodic performance tests on your business practices to ensure you’re not actually getting in your own way.
Performance testing your subscription model is a necessary part of ensuring your business is poised for success. When you utilize data set against appropriate benchmarks, get customer feedback and run comparison testing, you’ll have a much clearer picture of the factors that contribute to your growth or stagnation. Top it off with periodic testing of your own products and services, and you’ll be in the position to make educated decisions to help your business succeed.
Want to learn more about how to successfully build and launch your subscription model business? Take a look at our step-by-step checklist that takes you through the process.