A guide to Reducing Churn and Increasing Revenue Through Inbound Marketing MEDIAWIZARDZ
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1 A guide to Reducing Churn and Increasing Revenue Through Inbound Marketing
2 About the Author Media Wizardz Media Wizardz is an inbound marketing agency inspiring business to re imagine the way marketing is done through our marketing quantification process, consistency and on-going education. Michael Korolishin is a Marketing Consultant with Media Wizardz, helping companies both big and small grow their business through effective application of innovative and efficient processes. Obsessed with anything rugby, good design and innovative thinking, Michael aims to bring a diverse educational background to the forefront of his work. - Inbound brand development - Inbound marketing planning, designing, launching and executing - Inbound delivery system to build advocates - Inbound resources Plans and Pricing Request Assessment
3 Contents Icons Chapter 1 - What is Churn? Chapter 2 - How do I calculate my churn rate? Chapter 3 - Why you need to track your churn rate Chapter 4 - The inbound philosophy Chapter 5 - Why Saas and inbound belong together Chapter 6 - Inbound marketing and the 3 stages of business growth Conclusion You will see this icon near the most important information You will see this icon around important recipes This icon is used just for fun throughout our content When you see this icon there will be a downloadable worksheet to work through.
4 Chapter 1 What is Churn?
5 What is Churn? Churn is the number of customers who chose to end their subscription to your product or service in a given time frame. Churn is the mortal enemy of all Software-as-a-Service companies. Customers churning means that they are no longer a part of your subscription pool. Smaller subscription pools means smaller revenue streams, and smaller revenues streams means your company is shrinking. Learning to manage and prevent churn can be the difference between a flourishing business and a floundering one. Now before we begin discussing how you can apply the methodology of inbound marketing to reduce your churn rate, let s talk about how you can calculate your own churn rate to begin with. Share and Inspire
6 Chapter 2 How Do I Calculate My Churn Rate?
7 How Do I Calculate My Churn Rate? So, let s say that your company just registered their 100th customer at the start of this month. Congratulations! Bad news though, you also lost 6 subscribers during this past month. The churn rate for your company would look as so: 6 Subscribers Lost = 100 Starting Subscribers 6 % Churn While taking the number of customers lost divided by the number of customers at the start of the month may be the most common way to calculate churn, other formulations work as well. For example, some businesses base their churn rate off of subscribers at the end of the month as opposed to the start. Choosing the most appropriate model for your specific service is imperative. So I ve told you how to calculate your churn, let s just hammer home how important tracking this metric is for your SaaS business before we move any further. Share and Inspire
8 Chapter 3 Why You Need to Track Your Churn Rate
9 Why You Need to Track Your Churn Rate Calculating and tracking churn rate is absolutely essential to any subscription-based service company. It facilitates better management of the bottom line as well as a stronger engagement of your customer base. Having a portfolio of ongoing contracts means that these customers must be kept happy, so that they keep paying you. Mismanaged churn can rapidly kill off a thriving business. If your business has a churn rate of 10% you will actually lose money even with 10% growth because of the cash sunk into marketing and the cost of customer acquisition. Major Reasons to Track Churn: Churn rate is necessary to calculate your customer lifetime value Churn rate directly impacts the ability of your business to grow Tracking churn gives you an indication of the benefit, or lack there-of, of any actions you may take regarding your business Here are some helpful articles on our blog Share and Inspire
10 Chapter 4 The Inbound Philosophy
11 The Inbound Philosophy The core tenet of the inbound marketing philosophy is Execution ensuring a near-cosmic alignment between your service and your customers. Inbound wants to facilitate a more cohesive dialogue between your company, your prospects, your leads, and your customers. When a company and its customers find themselves reading from the same page, business suddenly becomes a very pleasurable experience. Things used to work this way A marketer blasts messages, hoping to connect with a consumer. Sales then follows up with this lead, hoping they are able to solve the needs of the person indicated in the initial message blast. As this strategy is very much akin to throwing things at a wall and seeing what sticks, it very rarely ends in both the marketer and potential lead being on the same page. Television advertisements are skipped, billboards are ignored, magazine ads are simply an annoyance, you know what I mean. Use this of an inbound marketing plan built around the inbound philosophy allows you to create sales that people actually want to see. Rather than just throwing money at the issue, a well-designed inbound marketing plan lets you connect with customers who are already interested in what you have to sell them. This connection between marketing and your prospects allows for a more organic and fulfilling business experience for all parties involved. Software-as-a-Service companies have a special edge when it comes to executing an inbound marketing plan, though. In fact, you could even say that the SaaS industry is already inbound by nature. To achieve this Share and Inspire
12 Chapter 5 Why SaaS and Inbound Belong Together
13 Why SaaS and Inbound Belong Together Software-as-a-Service and Inbound Marketing go together like peanut butter and jelly. However this statement may sound, it is the simple reality of the situation. Nearly all SaaS companies are engaging in some form of Inbound Marketing, whether they realize it or not. How is this possible though? Well, any SaaS company is constructed on a subscription-based platform. This means a constant connection between customer and company -- remember on the last page when I said that this was the core tenet of inbound marketing? SaaS businesses are inbound by nature. Properly constructing and nurturing this connection with your customers is what separates SaaS companies who are able to overcome their initial revenue trough and achieve explosive growth from those who are left to answer to a room full of angry investors. Now, finally, what you came here for. We ve covered the basics of churn, inbound and the relationship between these two concepts and your business. Let s move on to discuss how inbound marketing can benefit your SaaS company as it progresses through three primary stages of growth. Share and Inspire
14 Chapter 6 Inbound Marketing and the 3 Stages of Business Growth
15 Stage 1: Inbound and the Startup Business The first things that any business should be concerned with upon launch must be brand awareness and lead acquisition. Your sales funnel must be filled with sales-qualified leads (LINK HERE TO OUR BLOG) captured through targeted campaigning across relevant forms of media. A typical inbound marketing strategy would involve a mixture of social media marketing, content marketing, SEO, SEM, and campaigning. One of two major advantages for an SaaS startup would be the cost-per-lead associated with inbound, as opposed to traditional, outbound methodologies. Inbound marketing-generated leads cost, on average, 61% less than outbound leads. This reduction is to the tune of a cost of $346 for an outbound lead, and only $135 for an inbound lead. The second major advantage would be the ability of inbound marketing to infiltrate a targeted market and efficiently spread your brand through the market you actually want to sell to. This targeted marketing allows you to reach out directly to your prospects and get your product in front of their noses. No more getting drowned out in by the buzz of outbound campaigns launched by major players in the industry. Get your product directly to those you developed it for and let them compare the merits of your service. Share and Inspire
16 Stage 2: Getting Back to Zero Following launch, the most important goal of any SaaS company is to overcome the cash trough and reduce customer churn to the point where they can break even on their bottom line and begin to profit from their subscription model. This trough can be overcome by keeping customer-acquisition costs as low as possible and converting leads in a way which is scalable and doesn t undo your budget. Overcoming this phase of your business life cycle comes down to brand loyalty established through superior product performance as well as top-shelf customer service (LINK BLOG ABOUT CUSTOMER SERVICE/PRODUCT DEVELOPMENT THROUGH INBOUND IN SAAS COMPANIES). Inbound marketing places an emphasis on success in both of these sectors, which in turn reduces churn and allows for your business to grow. Satisfied customers using a well-developed product rarely have any reason to leave your subscription pool. Share and Inspire
17 Stage 3: Analysis and Domination If you survived the trough, prepare to step out of the fire and into the frying pan. By making it to this stage in the growth of your business you ve already achieved some level of success, and more importantly gotten your brand out into the market. More potential customers know you now than ever did before -- so do more competitors. In this final stage, using the metrics provided by the research-oriented approach of Inbound Marketing to perfect your strategy is key. Inbound Marketing strategy is based almost entirely in metrics and data, the only concrete indicators of the success of any marketing campaign. All the social proof in the world won t save a campaign that is failing to convert the proper percentage of prospective customers. If you have properly analyzed your metrics through the first two stages you have succeeded in minimizing your churn and maximizing your growth as a result. You will even be able to forecast for future sales and churn rates based upon your historical data, allowing for the optimization of sales and support staff to meet increasing demand. Don t rely on notoriously inaccurate focus group studies or other outdated methods of market research to provide the guidance you need in directing your marketing. Instead, generate relevant, organic data through a well-constructed Inbound Marketing campaign. Couple this with the real-world social proof provided by a well nurtured customer-company relationship and you have a devastatingly accurate way to measure the performance of your SaaS business. Share and Inspire
18 Conclusion
19 Conclusion Marketing is an indescribably important aspect of any successful Software-as-a-Service business. The extent to which you are able to align sales, marketing and production will ultimately determine how well you are able to manage your churn rate and grow your business. Inbound Marketing can work to aggressively lower this churn rate through optimal product development lead by organic data and customer feedback, amazing customer service backed by this same organic data and feedback, and the advanced marketing analytics at the core of the entire campaign. I hope that this short E-Book was able to inform you about the relationship between your SaaS business, Inbound Marketing, and your churn rate. I also hope that it has imprinted upon you the importance of a well managed Inbound Marketing campaign to the success of any SaaS business in today s world. If you d like to learn more about how Inbound Marketing can help your SaaS business succeed, Request an Assessment with one of our Wizardz and they will walk you through your current marketing and the inbound methodology. Share and Inspire
20 Additional Resources 1701 Walnut street. 7th Floor. Philadelphia PA Schedule your free business assessment with and inbound certified wizardz. Learn to inspire your team to re imagine the way your company does marketing Request an Assessment Share and Inspire
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