SaaS Revenue Growth Without Compromise: 7 Secrets

Transcription

1 SaaS Revenue Growth Without Compromise: 7 Secrets

2 Table of Contents Introduction Prioritize Your Sales Targets by Subscriber Worthiness Provide Dynamic Offer Management Capabilities Benefit from the Consumerization of the Enterprise Measure Customer Usage to Influence Pricing and Packaging Manage Your Upgrade Segmentation Link Customer Acquisition Activities to Long-Term Customer Lives Improve Subscriber Retention... 5 Conclusion...5 2

3 Introduction As the software-as-a-service (SaaS) and cloud computing models sweep through various markets, there are many ways to measure the effectiveness of companies who market and sell this way. Metrics like average customer lifetime value (ACLV), monthly recurring revenue (MRR), and the customer acquisition cost (CAC) ratio are becoming both well known and frequently used. In a recurring business, understanding where you can pick up an extra half percentage point each month will lead to annualized double-digit gains in revenue. However, it s the subtle revenue levers that often separate the excellent performers from the merely good. In a recurring business, understanding where you can pick up an extra half percentage point each month will lead to annualized double-digit gains in revenue. Based on our experience running recurring revenue SaaS businesses, as well as managing over a hundred million accounts which have transacted over $4 billion with Vindicia, we want to share insights that every SaaS business should consider as part of their overall growth strategy. 1. Prioritize Your Sales Targets By Subscriber Worthiness Most SaaS and Cloud businesses instinctively understand the revenue rule: 80% of their revenue is driven by 20% of their overall customer base. However, few SaaS companies provide their sales and marketing teams with insights that enable them to appropriately prioritize their efforts. The concept of subscriber worthiness can help SaaS companies overcome these issues. Your own customer data provides you with the essential information to form the basis of the subscriber worthiness score : 3 Who are these customers? Segment by SMB vs. Enterprise vs. End-User 3 How valuable is each segment specifically, what is their average customer lifetime value? 3 What is the support or chargeback burden for that customer? Once you have this data and have determined the appropriate score, your sales and marketing teams can apply this to their outbound efforts based on your strategic priorities. 2. Provide Dynamic Offer Management Capabilities As previously mentioned, not all customers are alike or have the same propensity to pay. If you provide pricing and packaging online, you can provide dynamic offers to people visiting your service, based on the following: 3 From where do your Web visitors originate? Can your offer page be priced in Euros automatically if the visitor is from Germany? 3 What campaigns drove that customer interaction? If you know Google Ads conversions typically result in longer term customer lives, how do you reflect that in your offer pages (bundled offers) relative to offer pages provided to people who don t come from valuable campaigns (discounted offers)? Dynamic offer management gives SaaS companies the ability to personalize offers to potential customers leading to greater conversions, revenue and longer-term customer lives. 3

4 3. Benefit from the Consumerization of the Enterprise One of the many benefits of the movement towards SaaS and cloud computing is the ease with which companies can purchase, implement and consume services, at individual price points far less than their on-premise counterparts. This consumerization of the enterprise allows individuals to purchase SaaS services for themselves, their work group or even the company as a whole, without going through a centralized purchasing department. No matter how sophisticated you believe your internal billing system is, your SaaS business faces 10-13% churn of your customers every month, even though many of these customers want to remain subscribers. A critical implication of this trend is to ensure that people can pay online for your service with automatic payments, especially in subscription or recurring billing environments. These automatic payment methods span credit and debit cards, to ACH, and even PayPal. An immediate, direct benefit of accepting automatic payments versus relying exclusively on invoices is radically reducing your Days Sales Outstanding (DSO) and improving your cash flow. 4. Measure Customer Usage to Influence Pricing and Packaging Utilization of your SaaS or Cloud service is a critical input to your pricing and packaging. Your pricing model may be usage-based, in which case you automatically have a built-in testing framework to determine whether that pricing is appropriate. Independent of your business model, measuring usage and engagement is a great mechanism to validate your pricing models. 3 Are your heaviest users underpaying or overpaying relative to your infrequent users? 3 Do you provide your heaviest users with cross-sell/up-sell opportunities more frequently than your light users? 3 Is your support team empowered to engage in sales activities based on customer interaction? 5. Manage Your Upgrade Segmentation Pricing and packaging are not just relevant during the initial acquisition process, but also when the customer is actively using your SaaS service. How you segment customers with respect to upgrades and when you decide to pitch them are both important. For example, you shouldn t pitch upgrades to customers who have previously churned, but you should pitch them to customers who are already beyond your ACLV. 6. Link Customer Acquisition Activities to Long-Term Customer Lives As a SaaS business built around recurring revenues, you should focus your business activities around crafting long-term customer lives. However, most companies focus their customer acquisition efforts around optimizing the conversion rate, especially if they offer a free trial or provide a freemium offering. They then rate their various marketing campaigns and activities around that metric (e.g., webinars drive the highest conversion rates, so pour money into developing additional webinars). A more relevant metric is to understand which marketing activities lead to the longest customer lives. Once you segment your customer cohorts by customer life and marketing campaign, you can then optimize for those acquisition activities that drive the biggest gains in overall revenue, not just conversion rates. 4

5 7. Improve Subscriber Retention No matter how sophisticated you believe your internal billing system is, your SaaS business faces 10-13% churn of your customers every month, even though many of these customers want to remain subscribers. Your subscriber s payment can fail for any number of reasons from failures in the card association network, to the subscriber being temporarily over their credit limit. How you manage these involuntary failures can be worth potentially millions in additional revenue to your SaaS business, and few businesses understand the payment networks well enough to optimize this retention on an on-going basis. Conclusion While no company will take advantage of every single revenue lever noted above, there is plenty of hidden revenue to be gleaned from implementing even a few of them. Our SaaS marketing and billing platform Vindicia CashBox enables us to increase customer acquisition, improve existing subscriber retention, and build long-term revenue on behalf of our SaaS and Cloud clients. For more information please visit us at US Headquarters Vindicia, Inc. 19 Davis Drive Belmont, CA P F /contact Canadian Headquarters 1235 Bay Street Suite 400 Bay and Bloor Toronto, ON M5R 3K4 P x2135 /contact UK / European Headquarters Hammersmith Grove London W6 7BA P +44 (0) F +44 (0) /contact About Vindicia Vindicia is the leader in marketing and selling automation for the Digital Economy, managing 120 million customer accounts on behalf of its clients. Vindicia has processed $4 billion in global revenues for clients through its CashBox solution. Its integrated marketing capabilities generated nearly $75 million in annual incremental revenue. Clients include Activision Blizzard, Bloomberg, Encyclopedia Britannica, Groundspeak, Intuit, Mind Candy, Next Issue Media, Pearson and Vimeo. To learn more, please visit www. or connect with us on Twitter (@vindicia), Facebook or blog.. Copyright 2012 Vindicia, Inc. All rights reserved. Vindicia, the Vindicia logo, Vindicia CashBox and the designated trademarks herein are trademarks of Vindicia, Inc. in the U.S. and/or other countries. All other brands or product names are the trademarks or registered trademarks of their respective holders. 0812