Subscription companies face a lot of challenges. Chief among them is developing a service that meets a customer need and convincing a large number of users to get on board.
Here are some common pitfalls SaaS companies make when acquiring customers, which can hurt marketing ROI, reduce customer lifetime value (CLV) and lower recurring revenues.
This is as much an issue of product development as it is for marketing. When it comes to new SaaS products, simplicity is best. Adding features to appeal to an additional market can be a good thing for growing your customer base, but it can just as easily clutter up your product with features most of your core users aren’t interested in having or paying for.
Solution: Stay focused, especially early on. Decide what you want your service to do and make sure it does that really well and satisfies customers before moving on to new functionalities and new target markets.
A lot of SaaS companies make the mistake of listing the many features their product offers rather than focusing on the overall benefit their solution provides. To compound the issue, each new release brings a new wave of features that get tacked onto the website and other marketing materials.
Solution: Generally, customers respond better to communications that detail how a SaaS product is going to solve a particular challenge or pain point rather than a long list of features. So, highlight the benefits of your SaaS offering like cost advantages, risk reduction, greater flexibility, simple deployment, automation or better usability. Some customers may want the finer details of all your features but they can be made available at a deeper level of your site once you have the customer engaged.
Many companies hold back important information like price with the hope that website visitors will enter their contact information or contact sales people directly to find out more.
Solution: Unfortunately, burying important information like pricing is counterproductive, especially for B2C SaaS companies. People want to quickly know the essentials of your service, especially how much it costs. Otherwise, they will move on.
The only exceptions to this are enterprise-level SaaS providers where the final price will be dependent on a lot of different variables. But for most SaaS products, always provide pricing information upfront to reduce any hesitation for potential customers who are considering your solution.
Many SaaS companies offer trial or freemium versions of their services to get users signed up with the hope they will upgrade to a paid version. But many fail to encourage trial users to start using their service. In an informal study conducted by customer engagement company Totagno, seven in ten SaaS companies failed to notice or take action when their trial was not being used. Furthermore, only three of the ten had sales representatives personally follow up with leads.
Solution: Just because someone signed up for a trial or a lead didn’t convert to a paid version right away doesn’t mean you should ignore them. New users should be welcomed to your service with an automatic email which invites them to get started. From there, keep your subscription top-of-mind with automatic or, even better, personal emails highlighting the value of your product and simple ways to get started.
Whether it’s a trial or a paid subscription, once a customer actually signs up for your service, you only have a short time to get them engaged. Barriers that prevent immediate usage such as extra steps (like registration), an unclear path to get started or delayed access will increase the number of users who fall out of your conversion tunnel or unsubscribe soon after they signed up.
Solution: Getting started should be easy and instantaneous for your new users. At its core, your service should be easy to use and include hints on ways to begin. Customer service should be ready to answer any questions.
Reaching and converting customers is often much more challenging than expected in the competitive and constantly evolving SaaS space. The average customer acquisition cost in SaaS for direct sales and marketing costs is usually 6-12 times the monthly fee.
Solution: While this illustrates the importance of keeping customers subscribed over the long-term, it also demonstrates the need to look for ways to generate leads that don’t necessarily require spending a lot of money. As traditional outbound methods such as PR and advertisements tend to blow through budgets, SaaS vendors are increasingly relying on alternatives such as email campaigns, content marketing, blogging and social media.
And then there are customer referrals. Once you have some traction, make it easy for your users to refer the people they know. As an added incentive, offer discounts or upgrades for each new customer your user refers.
Avoiding common customer acquisition mistakes doesn’t have to be difficult or expensive. In fact, just exposing these pitfalls should get you thinking creatively about how you can grow your subscriber base. That’s the clearest path to increasing your customers’ lifetime value - and it will help ensure the success of your company’s service.