toucanBox And Sparked Improve Playtime For Kids Everywhere

Sparked & toucanBox Improve Playtime For Kids Everywhere

UK-based toucanBox is a monthly subscription box of creative and fun hands-on activities for children aged 3 to 8 years old, delivered right to their door. Each box contains everything that’s needed to keep children engaged for hours, including all the materials to complete at least 4 projects, colorful step by step instruction manuals, and a picture book, improving the quality of their playtime.

Every month, a different box is released, with themes ranging from ‘bugs’ to ‘outer space’. The boxes are tailored to suit each child’s developmental stage, and the content of the boxes differ accordingly. However, in order to be truly effective, it’s important to know what works and what doesn’t. Some boxes do better than others and in order to improve, we’ve got to identify the high performers. That’s where Sparked comes in.

Sparked is now making sure that toucanBox can deliver even more delight to kids across the UK. By integrating toucanBox’s billing data from Recurly with usage data from their website, we have identified which boxes experience greater acceptance from their customers, and which ones could use some tweaks. Sparked’s unique Retention Radar product identifies customers who are at risk of canceling and even provides the reasons for their dissatisfaction – all in time to take action and make things right.

“We’re already seeing an improvement in our understanding of what our customers really want to see in the boxes. We can figure out what themes and concepts work best and see where we can improve each month, without having to use a less efficient method like a survey” says Virginie Charles-Dear, Founder and toucan Chief.

Like many companies in the fast growing Subscription Economy, toucanBox has a huge following of customers on social media platforms. And because it’s important to get the complete view of all customer interactions and map out their journey with toucanBox, Sparked will continue to integrate new data sources, including social media presence, support and other data. With this 360-degree view of the customer, toucanBox’s staff will have a never-seen-before picture of how their customers use their product and interact with toucanBox on various platforms. Taking decisions will finally be easier and faster and toucanBox will be even more efficient at being awesome.

All of which translates to better boxes with more interesting activities being shipped to happier kids and even happier parents, improving the quality of their Quality Time. -We like that tag line so much, we might just use it!

Calculating the Value of Churn Reduction, Part 1: The Correct Calculation Of Customer Lifetime Value

Much has been said about the value of retention and acquisition, and there are many different theories – unfortunately, much of this can be confusing and misleading. We are going to explain how to calculate these important metrics of a SaaS company correctly. First, we have to start with customer lifetime value (CLV) – many people often use simplified versions of CLV that can be very far off. In this article series I will explain the importance of cash discounting and its application in SaaS metrics. This is a slightly complicated subject (for those of us who never studied finance), but fortunately two professors, Sunil Gupta of Harvard and Donald R. Lehman of Columbia, have already derived a relatively simple equation that does it for you! The first three articles in this series will convince you why and teach you how. Later in the series we will go over the valuation of acquisition campaigns and the value of customer retention. But we can’t get to those until we get a really good understanding of CLV.

Main Result

The best formula for CLV was created by Sunil Gupta and Donald Lehman and first published in their seminal paper, “Customers As Assets [PDF]“, (Journal of Interactive Marketing, 2003, 17.1 pages 9-24). It is:
CLV=M * r/(1+i-r)
where:
  1. M is the margin on the customer(s), i.e.recurring revenue (RR) minus Cost of Goods Sold (COGS)
  2. r is the retention rate
  3. i is the interest rate for discounting project investments
The parameters of the formula (margin, retention and discount rate) can all be stated assuming either an annual or a monthly period (or any period you want, for that matter) as long as they are consistent. Consistency of the time period is the main “gotcha” when using the formula, and we will explain how to do it right.
If you know exactly what those three terms mean and you know how to convert them to a consistent time period, you may want to just skip to the article by Gupta & Lehman! My discussion here is for people who are either new to SaaS metrics or want to see the least math possible but still get the important points. In this post, and those that come after it, we will explain exactly what those terms mean, and explain enough to know why that is the best formula for CLV, but we will introduce the bare minimum of mathematical equations.

Expected Lifetime of a Customer

CLV means the value today of a customer, including the money you expect that they will pay you in the future. The first thing you need to know is how likely the customer is to last as a subscriber. For that you use the churn rate and this equation:
Expected Lifetime=1/churn
For the mathematically-minded, this equation is derived from an exponential decay model of customer lifetime. For the non-mathematical, the intuition is that if a customer has a 1 in 10 chance of cancelling each month, you expect they will stay about 10 months. Make sense? Sure! Note that if your churn rate is monthly, your expected lifetime is also in months, and if your churn rate is annual then the expected lifetime is in years. We’ll have more to say about this in a little bit. So if this is the expected lifetime, does that mean that the customer lifetime value is just monthly recurring revenue (MRR) times the lifetime, or CLV=MRR/churn? No! Although you see this equation used in some SaaS metrics articles (we won’t link any names) this is wrong and will overstate the value of a customer. It is wrong in two respects: it doesn’t include the cost of acquiring and maintaining the customers, and it doesn’t discount or devalue the cash that will be paid by customers in the future. Without accounting for these you will overestimate the value of a customer and make bad decisions about acquiring and retaining them. We actually won’t use the equation above directly, but it’s important to get an idea for how expected lifetime value comes into play and how you calculate it. So that equation is meant to give you some intuition more than anything else. Next we will explain discounting future cash flows in some detail. Here is a short preview of what to expect:

Calculating the Value of Churn Reduction, Part 2: Discounting Future Cash

In the last section we introduced the Customer Lifetime Value (CLV) formula of Gupta & Lehman, and we began to explain it starting with the expected lifetime of a customer. So was that it? The lifetime value of a customer is expected length of the customer’s subscription times the profit you make on them each month. That is:

CLV=M / c
So if the churn rate is 10%, the CLV is 10 times the recurring margin, if the churn rate is 5% the CLV is 20 times the margin, and if the churn is 1% then the CLV is 100 times the margin. This approximation to CLV is widely used, but it has some serious flaws and as we will see it can significantly overstate CLV…
To be continued…

Customer Churn Pipeline

The customer journey is fraught with key moments when a customer decides to leave. Typically, they say nothing. And the last indication that a company gets from customers before they go is one of positive sentiment. The Sparked infographic below documents when and why customers leave, but also shows key ways to keep your customers on board and happy. Sparked Killer Churn Infographic

Entrepreneur.com: 4 Steps to Knowing What Your Customers Want Better Than They Do

Sparked’s mission is to help companies deliver more value to their customers. And that starts with making sure you know your customer as well as possible. Sometimes, that means getting to know them even better than they know themselves. How is that possible? Well, in my latest article on Entrepreneur.com, I explore the methods that leading companies use to learn about their customers – methods that you can apply to your unique case as well.

4 Steps to Knowing What Your Customers Want Better Than They Do

TheNextWeb: How to avoid getting burned when hiring overseas

Sparked International! Sparked CEO Ben Rigby is in London this week with current and potential new clients, while Sparked Managing Director Joseph Pigato discusses how to build teams overseas. From assembling a battle-tested hiring team to mining your networks and ultimately making a rock-solid hire, this article on TheNextWeb should be your first stop if you’re looking to expand your company’s presence across the globe.

Worst Retention Call Ever

Warning, this retention call is painful. It’s so bad that it seems like it’s got to be a joke. If Comcast had a bit more insight into reasons for churn, they wouldn’t have had to comp their rep on getting through these questions… which has resulted in a good deal of reputation damage (already ~800k listens).

6 Teamwork Tips To Help Implement Predictive Analytics

Sparked MD Joseph Pigato recently wrote an article for InformationWeek.com on the 6 teamwork tips that companies can use to prepare for the coming transformation, where data teams and business managers work closely together.

Sparked’s Predictive Analytics and Machine-Learning powered product, Customer Radar, goes a long way towards easing the process of getting business managers to work with data teams, by providing an easy-to-master dashboard, rich with information that can be both easily understood and quickly acted upon.

Click here to read all six tips.

[Whitepaper] Customer Retention Best Practices

The Sparked Team has always had an eye out for compelling stories and case studies, which can help subscription companies better their customer retention rates. Although there are multiple approaches and a vast combination of factors to juggle, some companies manage to stand out in their execution of customer retention programs.

Whether it’s by using a tried-and-tested communication method in a new way, or coming up with innovative solutions to customer problems, the 10 companies in our whitepaper, Customer Retention Best Practices put their customers first and that’s ultimately what led to the successes we describe in their case studies.


Download: Customer Retention Best Practices

Deception of NPS

The Net promoter Score system, while useful in a few narrow applications, is not the general purpose tool that some companies claim it to be. Here are a few of the more obvious deceptions that an NPS score might be hiding…

Deception of NPS Sources:
http://experiencematters.wordpress.com/2014/01/27/why-net-promoter-score-may-not-align-with-business-results/
http://blogs.forrester.com/richard_evensen/11-04-18-stop_using_nps_net_promoter_score_but_please_save_the_question
http://www.measuringusability.com/blog/nps-ux.php
http://infoquestcrm.co.uk/2012/10/the-cassandra-phenomenon-and-customer-satisfaction-surveys/
http://wordofmouthindex.com/press-releases/foresee-releases-word-of-mouth-index-womi-benchmark-showcasing-customer-loyalty-scores-for-the-top-100-u-s-brands/

Sparked Partners with IBM to bring Predictive Analytics to IBM Cloud Marketplace

Sparked today announced a partnership with IBM that brings the power of predictive analytics-powered customer retention to the IBM Cloud marketplace. IBM clients can now use the IBM Marketplace to access the full power of Sparked’s Customer Radar software to reduce customer churn.

As part of IBM’s best in class ecosystem, Sparked is among a handful of distinguished cloud service providers in the analytics category. The IBM Cloud marketplace enables IBM’s enterprise clients, as well as business, development and IT professionals, easy access to Sparked’s customer retention solution.

Sparked’s machine-learning powered analytics engine pinpoints why a company’s customers stay or leave, who’s likely to leave next, and how to keep them – showing the specific factors, behaviors and patterns that drive churn and retention. On the basis of this analysis, Sparked helps companies run interventions early in the customer lifecycle to prevent attrition and enhance customer success.

Read more about the partnership