SAAS Growth Strategy Guide: Breaking The Growth Ceiling

Growth is the dream of every business, arguably even more for SAAS businesses with the subscription-based business model. A good thing about SAAS growth is that it is relatively more predictable compared to other businesses. You simply need to monitor new user acquisitions and whether old users are cancelling the subscription.

On the other hand, the bigger your SAAS business is, the harder it is to continue growing. This is where you need a clear growth strategy.

This guide will discuss the relevant SAAS growth strategies you can apply. Yet, before we begin, let us understand an important concept: the SAAS growth ceiling.

 

Measuring SAAS Growth Ceiling

There are two key factors to SAAS growth

  • Customer Acquisition

Pretty self explanatory, the number of new users that purchase your software per any given time.

  • Lifetime Value

The expected revenue you get from any given customer during their relationship with your business. Check out our previous guide on lifetime value here.

  • Churn Rate

The number of customers that stopped using your SAAS product, measured in percentage.

You can calculate the SAAS growth ceiling by dividing the customer acquisition rate with your churn rate in percentage. For example, if you acquire 1000 customers a month and your monthly churn rate is 10%, your growth ceiling is 10,000.Meaning, your growth will be zero when you reach 10,000 customers, because the churn of 10% (1,000 per month) will equal your acquisition rate.

To beat this ceiling, obviously there are two options: optimize your churn rate or increase your customer acquisition rate.

In general, however, churn will always win, because it will scale as you grow your customer base. You can only counter churn when your product went viral, utilizing what we know as network effect.

For the rest of this guide, the strategies we will discuss will be based on this principle.

 

SAAS Growth Strategy: Improving Customer Acquisition

1. Eliminate Buyer’s Difficulties.

Let us first understand the main issue on SAAS customer acquisition:

There is one unique thing about purchasing an SAAS software: it took a lot of work, probably a lot more than purchasing any other products out there. Let’s think about it: the need to purchase an SAAS software often begins with a problem, and your buyer must then research for solutions, often blindly. Now, the solution for the said problem can come in different types of SAAS products, leading to even more research. Finally, after they are done with comparing price and features, they got a brand new software they will need to learn.

Unfortunately, many SAAS businesses make the process even harder than required. Some SAAS products are hard to find due to the lack of effective marketing. Some are( let’s admit it) really difficult to understand. The worst mistake, arguably, when the product is hard to buy with all the confusing registration and payment processes.

So, here is the first secret to accelerate your customer acquisition rate: make the whole process easier for your buyers.Eliminate unnecessary bottlenecks and overly complicated processes, and you will be amazed how it will improve your customer acquisition success. The other strategies we will discuss below will be based on this first one, so make sure you grasp this idea right.

 

2. Improving Brand Awareness

We have mentioned that one of the worst mistakes you can make is making your SAAS product hard to find. Improving the awareness for your product (and brand), is the most important step in eliminating this issue.

However, brand (and product) awareness by itself is a pretty broad subject that can involve countless tactics and techniques, and different SAAS companies might be better off with one tactic over the other. Yet, here are some of the key areas all SAAS businesses should focus on:

 

1. Content Marketing

We have repeatedly stated how content marketing is really, really important for SAAS businesses. (link) As we have mentioned above, most demands for SAAS software begins with a problem. By providing solutions for related problems to your niche in the form of valuable contents, you can capture the awareness of your potential customers, while also building your credibility. Check out our previous guide on SAAS content marketing here (link). Content marketing in conjunction with SEO (link) and other inbound marketing approaches (link) will especially work well if your software is relatively affordable

 

2. Public Relations

So many of us underestimated the power of public relations in this digital age. A mention of your product by an influencer or reputable third-party site/media can be really powerful, especially when your software is industry-oriented.Build long-term relationships with press and key influencers of your niche.

3. Cold Calling

Yes, cold-calling still work, especially if you are offering something totally new or if your pricing is really premium. In this modern, digital era, you can also use email marketing to replace cold calling to some extent, but good old cold call over the phone still works best.

2. Easy Evaluation and Comparison

Your potential customers will evaluate and compare different products before they (hopefully) settle on your software. Rather than shunning this fact, it is best to rather embrace it and facilitate your would-be buyers with easy product evaluation and comparison.

There is no easier way in allowing your buyers to evaluate your software by giving free trials, and many SAAS businesses have done this. Another aspect of this tactic, however, is to also provide your full-fledged support service during this trial period. Support service is also a huge part of any SAAS business, and this is a great time to show your would-be customers that you have an excellent support team.

For comparison, the best way is arguably to provide a comparison page of your product and your closest competitors’. Many SAAS businesses have successfully done this. For example,HubSpot has several comparison pages with their closest competitors.

Also, think of a way to explain your software to your customers as clear as possible. Will a tutorial video work best for your business? Would a written manual serve them better? Conduct surveys and competitive analysis to perfect your product tutorial.

3. Nurture and Retarget Your Leads

Let’s think about this scenario: a would-be buyer visited your site. She was impressed with your product, but decided to research more options first. After she researched, say, five products, actually your product was the best, but she got tired of all the research and decided to call it a day (happens to a lot of us, isn’t it?).

The best-case scenario is she remembers your product is the best, and decided to purchase it. The worst-case? She forgot about you (again, happens to a lot of us).

This is where lead nurturing and/or a retargeting campaign can help you. For those who aren’t familiar with retargeting, check out our previous guide here. (link)

Arguably, the most ideal way here is to give them a phone call as soon as they bounced from your site. Even if they aren’t ready to convert immediately, there’s a better chance that they will remember you.

In short, make it easier for them to remember you, and renew their interest.

4. Streamline The Buying Process

Since deciding on an SAAS product is already complicated, don’t ever make the purchase difficult. First, show them a clear pricing scheme. Face it, the people on the internet are getting smarter, and gone are the days you can fool them with complex pricing schemes that are cheap upfront with very expensive hidden costs.

Second, make it easy to contact you, and make sure you have a friendly support team. This is especially true if your product is high-priced, since streamlining the pricing system can be difficult.

Last but not least, make sure your form and any interface for the purchase process work smoothly. Even if you want more security, you don’t have to compromise simplicity.

 

SAAS Growth Strategy: Maximizing Lifetime Value

When we discussed SAAS growth ceiling, we have established the fact that your customers’  lifetime value is just as important as your customer acquisition rate. For those who are not familiar with the concept of lifetime value, you might want to check our previous guide on important digital marketing metrics here.

So, the first thing you will need to do here is to change your mindset: your job as an SAAS marketer does not end when the customers made their initial purchase, in fact it is just the beginning. Your next job, then, is to keep each and every customer longer, maximizing their lifetime value. There are three key aspects you should focus on here:

1. Reducing Churn

Churn’ refers to when your existing customer or SAAS subscriber stops doing business with you. The key here is to maintain relationship, by giving them reasons to stick around with you. Here is the key mindset you should have: the more customers that use your product (and the more famous your brand is), the less likely they are to stop using it. So, reducing churn rate will be closely tied with customer acquisition, which we have discussed above.

A common mistake regarding churn in an SAAS business is that it’s only about renewal. In fact, the cause of SAAS churn begins much earlier in the customer cycle.Think about this for a second: when you subscribe a product or service, how often do you cancel immediately after a single mistake? Not too often, right, except if the fault is incredibly horrendous. More often than not, the cancellation happens after an accumulation of several or many different disappointments.

So, if you haven’t you should shift your marketing focus from solely customer acquisition to also address ongoing usage.

For an SAAS product, improving lifetime value begins on the product design itself: you should create a product that becomes more valuable after increased usage. Of course, the ideal way is to create a product so distinctive your user will love it more after each use, but we all know it’s easier said than done. Yet, there are other, more accessible ways to do this, like giving personalization features, historical data, automation, and rewarding deeper learning.

Your content marketing will again play a huge part here: if you can continuously provide valuable contents where your customers can learn something new from your product, you can indirectly increase its value.

Last but not least, you should put more focus on the service end on your business, especially you support team. Remember that SAAS is both your software AND your service, and providing service excellence is one of the most effective ways to reduce churn.

 

2. Up-Selling

When up-selling (or cross-selling) your products, your aim should be to increase customer’s satisfaction by solving their problems. Up-selling, in its essence, is selling the same product to said customer. In SAAS with the rather non-traditional business model, up-selling can translate to adding more users or upgrading to a more premium package, depending to your business model.

While improving churn rate is your way to prevent negative results (less use), up-selling works by encouraging more positive results (more use). So, we can consider up-selling as the next step of optimizing churn.

Not every SAAS product can use the up-selling approach effectively. In general, SAAS products with less constraint can use up-selling tactic better. For example, a productivity or collaboration SAAS product can be used by virtually anyone in a company, while an SAAS tool for specific SEO purposes might only be used by selective SEO officers. In this case, a productivity SAAS product has less usage constraints, and you can up-sell this product from just a single-user purchase to hundreds or even thousands of users in the same company.

The idea can also apply to other SAAS products like advertising tool or big-data, cloud computing products. While these types of products typically only have a single user, you can scale through different sub-products (like ad campaigns for an advertising tool) according to the user’s budget.

As before, the battle here begins during the product design phase. A common mistake is to create your pricing structures based on features, functions, or modules. Instead, you should align your pricing structure with customer value to increase use. The less constraints you have, the more effective you can up-sell your product.

 

3. Cross Sell

As mentioned, not every SAAS product can work effectively with the up-selling tactic. This is where you can move to the cross-selling approach. In general, cross-selling is selling a new, different product to an existing customer. So, the key here is to create new products that can complement your older, core product to increase its value.

While it’s tempting to intentionally reduce features from your core product to later cross-sell the said feature as an add-on, you should avoid this approach. Doing this mistake might affect your churn, or reduce the overall value (and interest) of your core product in general.

Generally, up-selling is the better tactic for an SAAS product, but there are successful SAAS companies that can cross-sell their different products effectively. A good example is Microsoft Office, where Word, Excel, and PowerPoint can cross-sell between themselves.

Cross-selling is generally more effective for SAAS businesses with a highly-fragmented, independent customers. Remember, however, that just because you have more than one products to sell, doesn’t mean your existing customers want to buy it. Depending on the diversity of your products and your business model, you might need to create individual marketing strategy for each product. On the other hand, there is also a possibility that products with good synergy can amplify each of your marketing effort through cross-selling.

The idea is: during product design, explore all the up-selling and cross-selling opportunities you can have, and maximize them.

 

SAAS Growth Strategy: Improving Customer Advocacy and Viral Network Effect

There’s nothing more powerful in the digital marketing ecosystem than when a product or a content went viral. In the SAAS industry, utilizing both customer advocacy and network effect is arguably even more important than in any other industries, due to the nature of the industry itself with avery small market entry cost.

While viral growth is indeed volatile and unpredictable, you should avoid the mentality of not embracing network effect, while also avoid being solely dependant on viral growth. So, the keyword here is ‘balance’. The basic principle stays the same: aim for satisfying each and every customer, and hope for the best.

 

Understanding Network Effect In an SAAS Ecosystem

What’s the secret behind any viral network effect? Us humans tend to  follow the crowd: when a new restaurant is really busy, we are more likely to be interested in trying it. When everybody in your class like a certain new song, there’s a higher tendency for us to follow. When a nightclub has a long queue, it tends to get longer. You get the idea: we are more likely to spend money on something a lot of people have already bought.

The concept translates really well in internet-based businesses, including SAAS: the perceived value of your SAAS product will increase with the number of customers using your service (and preferably, talking about it). So, you can see that viral effect can be really powerful in an SAAS ecosystem. The more existing customers you have, the more prospects will come to use your service (improving acquisition rate), the more money they are willing to spend, and the less likely they will want to cancel subscription (improving churn). Network effect, if you can utilize it, can have a profound impact throughout the entire aspects of the SAAS customer lifecycle.

So, how can we maximize advocacy and network effect? Here are some of the key strategies:

 

  1. Create A Space Where Users Can Engage

Interaction is a huge part of the network effect. By allowing your users to talk to another user about your product, you will also increase the chance of them talking to other people. To facilitate interaction, you will need to create the right environment. Let’s go back to the nightclub analogy: if a big crowd isn’t dancing, it’s just a crowd, and they will leave pretty soon. To get them to dance, you will need the right music and the right ambience, and your job here is to give them that music, that atmosphere, that environment.

The right environment can come in the form of collaboration between users, sharing space, or simple communication space like blog comment section or the good old discussion forum. Of course, depending on your business model, offline tactics like events or conferences can also work.

In conjunction with the churn strategy above, the interaction between your users should also be aimed to increase the value of your product. By facilitating knowledge sharing, customization sharing, and other investment sharing features, you can increase the value of the product with each discussion, while also create network effects.

 

2. Optimizing Advocacy

Now that you already have a strong user community in place as discussed in the previous section, how can you use that community to create more value? The answer is to turn that community into your advocates. This is, obviously, easier said than done since it requires efforts and real works from your customers, but there are several principles you will need to maximize the potential:

  • Improve Customer Experience

Happy customers are talking customers. By improving the customer satisfaction, you will increase the chance of them being your advocate. This is obvious, but so many SAAS businesses are not putting enough focus on customer values during the product design phase. Here is the catch: customer values do not always equal more features and technologies. Your software wouldn’t need to be so deep and complicated with rich features, but the most important thing is that your software should be able to answer your user’s problem.

  • Enable Crowdsourcing

The idea about crowdsourcing is to allow your community to work together to create more value for your products. A good example here is PowerPoint and the very rich world of crowd-sourced templates. The higher your users value your community, the higher the chance they’ll spread the word about you. Effective crowdsourcing community is something to aim when your SAAS product has already matured, but doesn’t mean you shouldn’t plan it in advance and blend it into your initial product design.

  • Referral Campaign

One of the easiest way to turn users into advocates is to start a referral campaign, where you will reward users for bringing a new customer. The key here is to find the proper incentive: too high of an incentive might lower the referral quality, while when your incentive is too low, you might not get any. This guide by Shopify might help you in starting a referral campaign.

 

3. Encouraging Virality

It is very hard to predict and create virality. Even after you’ve done your homework t  create the best possible environment and give the best possible customer experience, there’s no guarantee that your product will go viral.

On the other hand, sometimes a product that is not ideal by any means can go viral for no apparent reason.

So, the first thing you will need to do is to embrace the volatility of the virality itself, and that you, as a marketer, cannot create surefire virality. Yet, that doesn’t mean you should give up on this, as your job here is to facilitate the possibility of a viral effect as well as possible.

If you already have a strong product with strong viral potential and a healthy community network, you are almost ready to facilitate virality. The last thing you need to do is to grasp every viral opportunity: when your users have good things to say about your product, encourage them to share it (and incentivize them if necessary). If you have a strong problem-solving community, encourage them to build a knowledge base. Give them a space to share their customizations and templates.

The idea is, be a catalizator, but don’t get in their way.

 

Bottom Line

Having a great product is just the first step of a successful SAAS business. To ensure success, you will need to have a growth-centered marketing strategy, especially to break the growth ceiling. There are three key areas to focus on: optimizing your churn rate percentage, maximizing customer lifetime value, and utilizing network effect into its full potential.

As mentioned earlier in this guide, SAAS growth is fairly predictable. So, the key to a successful SAAS growth strategy is to always monitor your progress, so you can always adjust your tactic accordingly.

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