This isn’t a metric that analysts look at: LCV [Lifetime Customer Value]. Analysts look at churn (and quite frankly I do not believe anyone’s churn number. If it was almost zero, you would grow every week. When your customer count doesn’t grow, you have churn. Period.)
LCV is an important number because if your cost to acquire a customer is more than the LCV, you lose!
For example, if it costs you 2xMRC plus 20% on a $500 account, the contract value is [$500 x 36 = $18K]. You paid out [2x$500 + 36x(20% of $500) =] $4600 commission. Plus the channel manager’s comp.
Your cost of sale is likely 2x the commission (one to the agent and one to the CM) so $9200. Your cost of sale is at least 51%, which is about average in the industry.
This only gets better if you keep the customer past the 36 months.
LCV improves if you solve post-ink issues. Post-ink means after the prospect signs the agreement but before the service is turned up. The Post-ink churn – or the churn in the 90 day window after ink – is a real unspoken problem.
To do that, you have to get better at install, support, user adoption and customer experience.
Going forward the big differentiation will revolve around Integration and Customer Experience.
In Integration, it will almost be about Vertical stacks. The voice enabled app that reads the schedule and dials the patient to confirm the appointment. Next it will confirm the insurance. It could even dial to confirm referrals. This is where it is going.
In Customer Experience, it will encompass everything from digital signature to install to maintenance. Right now, all of it is anything but an experience. It is 1970s style.
Before you spend more money on building in one more feature, take out some friction, sprinkle in some customer awesomeness. Take some wrinkles out of the tech. Until then, it will be about features and price.
