Feb 23, 20232 min
Partnerships are associated with user acquisition, but they even more effective in driving 🙏 NDR (net dollar retention) - arguably the most important metric in SaaS. Take a look how much of a difference it makes over time.
NDR measures growth across a company’s revenue base.
It tracks customer upgrades, downgrades and churn.
NDR = Retention [1-Churn] + Expansion - Contraction
Net dollar retention is essential part of ARR growth metric
NDR + New Logo Acquisition = ARR growth
NDR of companies that IPOed is ~107% (Crunchbase)
NDR of +120% is excellent. Okta IPOed with NDRs of 123%
Tier 1 companies that have 20% higher NDR have 📈 3X LTV - see the graph (logo growth equalized b/w cohorts)
💡 How partners can help drive NDR?
Discovered that 3rd party integrations make their product 2X stickier.
“When customers add at least one app or integration in Jira Software, dollar churn reduces by approximately half”.
Today 70% of Jira and Confluence customers have 1+ app installed.
"Partners who are leading edge in customer success are seeing double digit increases in renewal rates and expansion rates leading to double or triple the lifetime value of a customer."
Ed Daly, Customer Success-Global Leader [Gainsight’s Guide to channel partners success]
💬 Jay McBain of Canalys explained it well in our recent episode:
Think of partnerships differently - the way you do that is introduce the swim lanes:
〰️ Tech strategic business alliances
〰️ Influence type partners - before the point of sale
〰️ and those retention partners - after the point of sale
… with partnerships there's a higher stickiness to the customer, a higher retention rate, lower churn rate…
The trick is, it doesn't happen immediately…
but on the hockey stick curve, when that partner can start doing it on their own - get a deal, sell a deal, and service a deal - you're starting to win deals in your sleep,
your cost to acquire customer almost goes to zero, the lifetime value goes up because the churn rate goes down on those type of deals.