License Utilization: The Key to Identifying At-Risk Customers in Time
A customer health score criteria, 'License Utilization,' refers to the extent to which a customer is using the licenses they have purchased from a company. It is important because it can indicate the level of engagement and satisfaction a customer has with a company's products or services.
Join us in this article as we explore how License Utilization, a key metric for measuring customer success, can help businesses unlock growth potential and drive greater value for their customers.
High license utilization can suggest that a customer is finding value in the product and is likely to continue using it and potentially purchase additional licenses. Low license utilization can indicate that a customer is not fully utilizing the product and may not be getting the full value out of it, which could lead to dissatisfaction and potentially result in the customer canceling their subscription or not renewing it. Additionally, tracking license utilization can also help a company identify potential areas for improvement in its products or services.
A good value for license utilization is dependent on the product and how the engagement value is measured. For example, if license utilization is measured as the number of monthly active users divided by the number of purchased licenses, then product usage is controlled on the monthly level. Assuming that an active user is a user that is logging in at least monthly the good license utilization for mature SaaS products should be between 70 and 80% whereas a value below 50% should be considered low.
We collected several benefits for including License Utilization as a metric in Customer Health Scoring:
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Measuring and controlling for license utilization can present several challenges, including:
To mitigate these challenges, companies can implement tools and systems for tracking and monitoring license usage, establish a clear licensing policy and compliance procedures, and provide education and support for customers to maximize the value of their licenses.
There are a variety of alternative criteria that can be used in addition to or in place of license utilization to measure customer health. Some examples include:
It's important to note that different industries and companies will have different key metrics that are relevant, so it's best to consult industry experts and/or conduct research on what metric is best suited for your company.
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Customer Health Score is an important concept that should help customer success and sales to prioritize customer outreach and communication. It’s simple to grasp but complex to calculate. We created a powerful ready-to-use instrument Customer Health Score Template for calculating multiple KPIs and metrics that aligned to one customer healthcare formula. It is based on the weighted average that gives the value to make it easy to grasp and understand for future actions.
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