B2B data, information and software: Protecting and growing revenues in a Covid-19 environment

13 July 2020

The public health and economic impact of the Covid-19 pandemic has been far-reaching and will continue to disrupt the global economy in some form until a vaccine is found.

While B2B data, information and software services tend to be structurally resilient businesses, given their high renewal subscription revenue models and critical role in supporting customer operations, there are emerging headwinds resulting in the tightening of information and software budgets, particularly in sectors which are most negatively exposed to Covid-19.

The initial response by B2B data, information and software providers has been to stabilise operations in a lockdown environment: protecting employees, creating virtual work environments, shoring up cash positions and taking cost management actions as necessary. Once internal operating and cost actions have been taken, the focus should shift to protecting and growing the top-line, both in the immediate future and in the mid-term.

 

Focus on renewals

Operators should prioritise customer renewals over new business sales. Renewals typically represent at least 70% of annualised revenue, and the net contribution of a renewal tends to be 6-8x a new business sale. Furthermore, during periods of economic stress, customers are less likely to change information or software providers given the disruption and costs of switching.

That said, there remain significant challenges to maintaining or growing historical renewal rates of 85%+ as the uncertain operating environment will hold back investment, many businesses are under pressure to cut costs, and there may be a reduction in usage given the slowdown in end customer economic activity. All of which may drive declines in spend or even churn.

While every renewal is important, and there are always reasons to provide flexibility to each customer, a successful short- and long-term revenue growth strategy requires a disciplined approach to commercial strategies underpinned by robust customer segmentation, accounting for:

  • The long-term value of the customer: including current spend, ability to grow share of wallet and strategic / non-monetary benefits (e.g., to support marketing or new market entry)
  • The risk of non-renewal: including the financial position and business outlook for customers, the criticality and embeddedness of the product, product usage, and the viability of switching to alternative options

 

By understanding the relative value and risk of each customer, commercial teams can quickly assess whether the right approach is to provide greater flexibility on discounting or payment terms should or whether they should stand firm, thereby minimising value leakage.

 

Product roadmap and value proposition: beware the shift in value perceptions

Above protecting existing revenue, B2B information vendors should also be proactively assessing new opportunities arising from the disruption caused by the Covid-19 pandemic.

Emerging customer needs and changing behaviour, particularly around collaboration through remote working and building additional business resilience, may result in new product development opportunities to offer new features or modules. The new business environment may also lead to changes in user priorities and perceptions of value. Providers should review and refine their go-to-market propositions where necessary to reflect evolving customer priorities.

The increasing digitisation of the workforce should also drive the availability of new datasets in the mid-term. B2B data, information and software operators should be beginning to develop technical capabilities or partnerships to both capture and analyse these emerging data sources to drive product innovation, as well as monitoring start-up activity in this space.

 

Invest in customer understanding and success

Underpinning both the renewal and product development strategy is a requirement to better understand and segment customer behaviours and needs, particularly in a changing external environment. With data becoming increasingly available to capture and aggregate, B2B information businesses need to ensure they have the technical infrastructure and analytics in place to:

  • Proactively and automatically identify ‘at risk of churn’ accounts
  • Understand which products are used, by whom and which provide the most value
  • Assess where customer pain points with the existing offering are

This is not purely a technical endeavour, as once data is captured and analysed, modifications to existing customer success and product development processes will be required to action these customer insights (e.g., developing new account management and customer success touchpoints for high risk-high value accounts to limit churn).

Driving this change will require both a financial investment and time commitment across senior leadership. However, if executed successfully, B2B data, information and software providers will be well-positioned to weather the initial business disruption, and to accelerate growth in the post-Covid-19 era.