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The Metrics-driven SaaS Business : CloudAve

My first serious lesson in the criticality of SaaS metrics was about six years ago when I was unexpectedly stumped in a board of directors meeting. I had just presented the booking plan for the year and one of the Director's in ...

The Metrics-driven SaaS Business

saas business metricsMy first serious lesson in the criticality of SaaS metrics was about six years ago when I was unexpectedly stumped in a board of directors meeting. I had just presented the booking plan for the year and one of the Director’s in the meeting said that the plan was good, but we really needed to increase our booking rate. My first reaction was something like: “Well our current booking rate is pretty strong and we’re a SaaS business, so even with no immediate improvement to bookings we’ll continue to pile up revenue quarter after quarter, right?” Wrong! I had totally neglected the impact of churn. At the time, SaaS investors and executives were still getting their heads around the SaaS recurring revenue business model, so there were very few resources to turn to for support. Yet as the person in the room primarily accountable for the top line, I had to have the answer.

Fast forward to today. In 2014, we not only have a much better understanding of the financial levers that drive SaaS business success, we are on the verge of a metrics revolution in the way SaaS businesses are managed. Unlike licensed enterprise software, the SaaS recurring revenue business model offers a much higher degree of stability, measureability and predictability. These three factors form a foundation that enables SaaS executives to take a much more analytical approach to driving SaaS business success. SaaS business executives are uncovering new operational metrics that connect SaaS customer success to SaaS financial success, and in the process are creating recurring revenue machines. Today we are witnessing the emergence of The Metrics-driven SaaS Business.

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This is the first post in a new SaaS metrics series inspired by my ongoing collaboration with Bluenose Analytics. This series explores the promise of customer success metrics and their role as the glue that connects SaaS customer success to SaaS financial success. This first post discusses the unique qualities of SaaS that enable a more analytic approach to management than was possible with licensed enterprise software and introduces the concept of the Metrics-driven SaaS Business.

The SaaS Metrics Mandate

Why are metrics so uniquely important in SaaS? Every business tracks some relevant set of financial and operational metrics. What makes a SaaS business different? A SaaS business is different because of the recurring revenue subscription model. In fact, most of what follows applies equally well to any subscription business. The economics of a subscription-based business are fundamentally different from those of a transaction-based business. That difference derives from a simple probability. In SaaS, today’s customers will probably be tomorrow’s customers, as long as we keep them happy. In a transaction-based business, no such probability exists.

SaaS Business Stability

The recurring revenue subscription model creates business stability. As recurring revenue accumulates, short term bookings have less and less impact on short term revenue. Short term revenue and costs alike become a function of long-term historical bookings. The feast-or-famine, deal-centric nature of licensed enterprise software gives way to a stable recurring revenue stream and a process-centric business operation. When you know you will have customers tomorrow, you can invest in the support of those customers, as well as the acquisition of new customers, with a much higher degree of confidence. Operations become more reliable and predictable, lending themselves to standardized processes that can be continuously improved. SaaS businesses are recurring revenue machines, and machines are best managed by metrics.

SaaS Business Measurability

SaaS businesses are also uniquely measurable. The SaaS product creates an always-on, communication channel between the company and the customer that allows for direct measurement of customer interaction. This link gives SaaS businesses unique access to operational metrics that provide a much more detailed view of the customer relationship than simple financial metrics alone. Every business can count cash, but only a SaaS business can count customer clicks inside the product. Product usage data is an operational goldmine when properly collected and analyzed, enabling a SaaS business to improve customer success, reduce churn and increase upsell. Moreover, a SaaS business can integrate its business processes and communications directly into its SaaS product, giving product-related metrics new meaning that goes well beyond the number of times a customer logged in today. The more a SaaS business embeds its business operations into the product, the more measurable its business becomes.

saas customer success metrics

SaaS customer success metrics provide the glue that connects SaaS customer success to SaaS financial success to create a SaaS recurring revenue machine.

SaaS Business Predictability

Together, stability and measurability give rise to a new level of predictability. The mass amounts of historical financial, operational and behavioral data available to SaaS businesses enable predictive analytics that are virtually unheard of in B2B companies. B2C companies have always had the law of large numbers working in their favor, enabling a wide array of statistical methods for planning and forecasting. B2B companies have always suffered from a dearth of data for planning purposes, forcing an overreliance on ad-hoc information and the subjective judgments of managers. In the mature Metrics-driven SaaS Business, financial forecasting is a science grounded in customer success metrics and predictive analytics.

The SaaS Metrics Universe

In the SaaS business model, the ongoing customer relationship is a continuous source of revenue, cost, business activity and risk. This contrasts sharply with traditional software where the short-term sales transaction has always taken center stage. A traditional licensed software vendor makes and sells software copies, whereas a SaaS business makes and rents ongoing service subscriptions. Each new SaaS customer brings a new thread of recurring revenue and cost which are woven into the larger tapestry of customers to create the total SaaS recurring revenue stream and associated SaaS total cost of service. This fundamental shift in the unit of value from copies to customers turns the economics of licensed software upside down.

Customers Form the Center of the SaaS Universe

In traditional licensed software, value is equated to the intellectual property of the code, and is monetized using copyrights in a fashion similar to books, music, and movies. It’s a product. Product volume is measured in copies sold and product value is measured by the price of a copy. In the SaaS business model, service volume is measured by the number of customer subscriptions and service value is measured by the recurring revenue of each subscription. A software vendor invests in developing code, and then operates a sales and marketing infrastructure that scales to sell more copies. A SaaS business invests in acquiring customers, and then operates a service delivery capability that scales to service customer subscriptions. Mathematically, the contrast looks as follows:

Software profit = ( price per copy – cost per transaction ) x copies sold – R&D costs

SaaS profit = (avg recurring revenue – avg recurring cost ) x current customers
– avg acquisition cost x new customers

Customers are the fundamental unit of measure in the SaaS business model, not transactions. Whereas profitable transactions drove financial success in licensed software, profitable customers drive financial success in SaaS. SaaS customer success is SaaS business success.

Connecting SaaS Customer Success to SaaS Business Success

Measuring and monitoring SaaS financial metrics are essential to managing a SaaS business. If SaaS executives don’t understand recurring revenue, acquisition cost, churn and upsell, then they have no ability to grow the business. As important as they are though, financial metrics only measure the ends, not the means. They say nothing about how those results were achieved, or how those results can be improved upon in the future. A smart SaaS CFO can construct a SaaS business forecast based on historical SaaS financial metrics. Reduce churn from 20% to 15%, improve upsell by 20%, reduce acquisition cost by 10% and next year looks great! Unfortunately, such a high-level model provides no insight into how to make the forecast a reality.

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The emerging Metrics-driven SaaS Business digs beneath well-worn SaaS financial metrics to uncover the operational levers that drive SaaS business success. For example, it’s a verifiable fact that customers that use your SaaS product are less likely to churn than customers that don’t. So, if you want to get serious about churn reduction, then you have to get serious about measuring product use. At a minimum, you will get a better understanding of what causes customer churn. At a maximum, you will discover patterns and predictive analytics that enable you to take preventative action before they do. Customer-centric operational SaaS metrics, or simply SaaS customer success metrics, provide the glue that connects SaaS customer success to SaaS financial success. Together, SaaS financial metrics and SaaS customer success metrics provide the foundation for building the Metrics-driven SaaS business.

SaaS Growth Strategy | A Customer Lifecycle Approach : CloudAve

Driving sustainable growth is a challenge for every SaaS business from startups to public companies. In the beginning, the SaaS recurring revenue model seems like a dream compared to the revenue fits and starts of licensed ...

SaaS Growth Strategy | A Customer Lifecycle Approach : CloudAve

Driving sustainable growth is a challenge for every SaaS business from startups to public companies. In the beginning, the SaaS recurring revenue model seems like a dream compared to the revenue fits and starts of licensed ...

SaaS Growth Strategy | A Customer Lifecycle Approach

Driving sustainable growth is a challenge for every SaaS business from startups to public companies. In the beginning, the SaaS recurring revenue model seems like a dream compared to the revenue fits and starts of licensed enterprise software. But within one short customer lifetime, every SaaS CEO startles awake to the fact that the churn monster is always looking over your shoulder.

In the short run, SaaS growth scales with customer acquisition, but in the long run churn kicks in and dominates even the most aggressive SaaS growth strategy, creating a SaaS growth ceiling that can be incredibly difficult to break through. SaaS churn naturally scales with the size of your customer base making it negatively viral. Overcoming churn and breaking through the SaaS growth ceiling requires a relentless focus on growth that pushes every available SaaS growth lever.


saas growth strategy

Click the image or link to download the complete SaaS Growth Strategy eBook

A compilation of recent popular articles at Chaotic Flow, this detailed eBook outlines a framework for driving sustainable SaaS growth throughout the SaaS customer lifecycle. It introduces the concept of the three fundamental SaaS growth levers: customer acquisition, customer lifetime value, and customer viral network effects as well as the SaaS Growth Pyramid that outlines the corresponding SaaS growth strategies for pushing them. Finally, it wraps up with Eleven SaaS Product Secrets that Drive Growth, one for each stage of the SaaS customer lifecycle.

Enjoy. And if you like it, please share it!Cheers,

jy

Eleven Secrets of SaaS Product Design : CloudAve

SaaS product management professionals should always remember that there are four P's in marketing, one being product. Unfortunately, software companies have a bad habit of thinking about product in isolation from the rest ...

Eleven Secrets of SaaS Product Design

SaaS product management professionals should always remember that there are four P’s in marketing, one being product. Unfortunately, software companies have a bad habit of thinking about product in isolation from the rest of the marketing mix. This is a particularly costly mistake in SaaS and is the root cause of many a SaaS Don’t. Unlike other businesses, SaaS creates a real-time, always-on connection between the customer and the company through the SaaS product. Smart SaaS product managers look to establish this connection as early as possible and to leverage it throughout the entire SaaS customer lifecycle.

This is the fifth and final post in a series that explores SaaS marketing strategies that drive growth throughout the customer lifecycle using the three fundamental SaaS growth levers: customer acquisition, customer lifetime value and customer network effects. In the course of this exploration, we’ve encountered numerous examples where the SaaS product itself is the instrument of growth. This final installment explores the product P in more detail providing Eleven Secrets of SaaS Product Design that drive growth at each stage of the customer lifecycle.

The Boundless SaaS Product

What are the boundaries of your SaaS product? Login? Purchase? Mobile? From a SaaS customer’s point of view, there is little distinction between your SaaS product, website, mobile app, support, service and community. It is a seamless online experience…if you design it that way! Great SaaS product management professionals don’t simply specify features and functions, they create online experiences that satisfy business, professional and personal needs. And in the course of satisfying those needs, they drive revenue growth by pushing the three fundamental SaaS growth levers.

Below are eleven SaaS product management secrets for creating SaaS products that sell themselves, one secret for each stage of the SaaS customer lifecycle. Underscoring each secret are two enduring economic themes: 1) create competitive advantage using the SaaS customer-company connection and 2) enable customer self-service to accelerate revenue and reduce costs. Grounded in sound SaaS economics, the Eleven Secrets of SaaS Product Design are more than mere technology tricks. They are SaaS growth drivers that challenge the creativity of SaaS product managers and encourage them to push SaaS product boundaries into the business to do things better, cheaper and faster than the competition.

SaaS Product Secret #1 | Optimize Public Pages

saas product optimizeGood SaaS marketers know that optimizing content for search and social media is essential to expanding online awareness. What great SaaS product managers also know is that your SaaS product should be an integral part of your search and social strategy. Does your SaaS product produce public pages that can be found by search engines? Can it? For example, customers often create useful and unique public content in the course of using a SaaS product, such as branded websites, widgets, profiles, comments, analyses, and so forth. Smart SaaS product managers enable these pages to be created in volume as part of the natural product experience and automatically optimize them for search and social.

That sounds pretty technical, so let’s look at a classic example. Search for any one of your favorite SaaS colleagues on Google and chances are that you will get a public-facing LinkedIn profile page in the top 5 results. This Google search of Joel York quickly finds my public facing LinkedIn profile page (usually 2nd after Chaotic Flow ;)). While I created the content, LinkedIn made it a landing page and automated the SEO (notice the big yellow button and the repetition of the keyword “joel york”). Many SaaS products have untapped opportunities to get found in search with public-facing trial content, product content, educational content, community content, and so forth. The important thing is that the content be a) original, b) useful and c) optimized, so that both search engines and the people landing on the pages will find it of value.

SaaS Product Secret #2 | Formalize Free Trial

saas product free trialI’ve yet to see a SaaS product that can’t benefit from a free trial. I have, however, seen many SaaS products that can’t quite seem to pull it off well. Sometimes it’s really hard, because the product requires significant onboarding in order to shine. Other times, it’s just a foolish, flagrant violation of SaaS Don’t #3. Most of the time, it’s an under-appreciation of a SaaS product’s role in automating core business processes. Free trial facilitates product evaluation and shortens sales cycles. When trials are easily converted to production use, they also streamline purchase and adoption. Most customers are willing to pay for these benefits in the form of an inbound lead! From the vendor’s perspective, a free trial offers huge increases in sales and service productivity through customer self-service–even if all your leads are outbound.

Great SaaS products don’t simply offer a free trial; they formalize core business processes around free trial to drive demand, shorten sales cycles, increase revenue per rep, accelerate deployment and reduce churn. It is far easier to get a customer to sign a contract after using your SaaS product than after seeing a demo. If this is not true, then you have bigger SaaS product issues than not offering a free trial. The secret to successful SaaS free trials is relentless pursuit of these benefits. Don’t settle for less.

SaaS Product Secret #3 | Enable Ecommerce

saas product ecommerceEcommerce in SaaS is about more than simply taking credit cards over the Internet. It is about streamlining purchase such that the online customer experience isn’t interrupted with offline activities. It should not only support self-serve purchase, but sales assisted purchase. Every purchase activity has potential for automation through e-commerce, including pricing, product configuration, trial account conversion, contract signing, payment, invoicing, billing and collections. Ecommerce done well can simplify the sales process by setting clear customer expectations. For example, transparent pricing limits discounts and standard contracts reduce redlines. Robust Ecommerce lays the foundation for further SaaS product design secrets that drive growth later in the customer lifecycle through churn reduction, upselling and cross-selling. In SaaS, purchase is part of your product. Let them buy!

SaaS Product Secret #4 | Design for Discovery

saas product design for discoveryIf your customers are going to onboard themselves, then they need to be able to explore, understand, use and adapt your SaaS product without outside help, i.e., they must be self-taught. The natural conclusion then is that your SaaS product must be self-learning. Each user logs into your SaaS product with a different level of interest and expertise, however, most SaaS products are defacto designed for the expert user. For each new feature that is added, the typical SaaS product manager will ask: “Where is the most logical place to put this feature, so that it is easiest to access.” The result of this kind of thinking is that all features end up being really easy to access, creating a bewildering array of choices for the vast majority of non-expert users.

Great SaaS products provide an experience that adapts to the interest and expertise of users over time. Novice users are encouraged to explore essential tasks, while expert users are allowed to tailor tasks to their individual tastes for speed and efficiency. At the enterprise level, organizations can configure processes that meet essential business needs. Design for discovery supports the process of personalizing a SaaS product: taking something unknown and generic and turning it into something understood and adapted to your needs. Like most of the SaaS product design secrets, design for discovery has an impact that extends well beyond its primary purpose. Easy discovery of new capabilities is essential for driving upsell and personalization is instrumental to reducing churn.

SaaS Product Secret #5 | Capture Customer Content

saas product contentThere is only one SaaS marketing strategy to reduce churn: increase use. However, there are many types of use: new use, expert use, casual use, habitual use, individual use, organizational use, and so forth. The one thing all forms of use have in common though is that they create customer-specific content. Capturing customer content is the single most important SaaS product secret to reduce churn, because personalized data is directly proportionate to switching costs.

Capturing customer content is the motivation behind SaaS Do #8 | Enable Mass Customization. Mass customization allows mass personalization without compromising essential SaaS economies of scale. Your competitors can copy every feature in your SaaS product, but they cannot copy the personal, historical record of customer use. Historical data contains critical business records, processes, policies, preferences, and organizational knowledge. After extended use, the value of customer content usually outweighs the value of your SaaS product itself. Capture that value!

SaaS Product Secret #6 | Unleash Upsells

saas product upsellThe best designed upsells are painless and invisible: painless in that the upsell value far outweighs the upsell price and invisible in that the upsell process provides a seamless bridge between the need for the new capability and the use of that capability. Well designed SaaS products upsell themselves by letting customers do what they want to do: use more. The key to unleashing upsells is a smooth synthesis of SaaS Product Secrets #3 and #4. If you’ve done a good job of letting customers discover new capabilities and purchase is as simple as clicking a button, then unhampering upsells amounts to little more than putting that button in the right place at the right time. Hired a new employee; add a new user. Got new work to do; get the new module you need to do it. Out of storage; add some. Need to integrate; turn on our API. Just click here!

SaaS Product Secret #7 | Tantalize with Teasers

saas product cross-sellCross-selling is by it’s very nature more difficult than upselling. Upsells are often non-dicretionary, because they are driven by naturally expanding use. Whereas cross-sells usually take on the flavor of a new purchase driven by an unmet business need. It’s probably not enough to wait passively for your customer to stumble across an entirely new capability or recommend it to a friend, your SaaS product must cross-sell proactively.

Wait. How can a SaaS product be proactive? Unlike other products, a SaaS product creates a real-time, always-on communication channel between the customer and the company. Anything you have to say about your SaaS product can usually be said better inside your SaaS product, because you can say it in context. One of my favorite SaaS product communication channels is the login page. There is only one buyer personae that visits the login page: customers. Your login page offers prime real estate for tantalizing cross-sell teasers. It’s your customer home page! Once customers log in, you know who they are and what they are doing, offering even more opportunities to encourage consideration and trial of new capabilities in real-time based on actual usage patterns. And, after they log out, proactive offers and alerts can motivate them to return until they make a final purchase decision.

SaaS Product Secret #8 | Make Friends through Feedback

saas product feedbackYour SaaS product can do more than cross-sell by proactively speaking to your customers. As a two-way communication channel, it can also support, service and nurture community by proactively listening to them. Building community within your customer base is the first step to energizing network effects that drive viral growth and your SaaS product is the best place to nurture your customer community.

Just like selling to your customers, listening to them is better done in context. When customer’s encounter issues, do you make them go searching through your website for a support email, or can they click to chat from within your SaaS product? Can they request new features? Comment on current features? Watch a training video? Register for a webinar? Report a bug? Visit your support forum? Check account billing status? When they need you, are you there? Because they are there and the beauty of a SaaS product is that they don’t really need to go anywhere else. Don’t make them!

SaaS Product Secret #9 | Consolidate Customer Content

saas product contentThere is far more talk of crowdsourcing in the SaaS community than there is actual crowdsourcing. That’s because crowdsourcing is hard. Improving data quality, language localization, operational benchmarks and support are just a few of the ways smart SaaS product managers can put crowdsourcing to work. However, you can’t just wake up one day and say: “let’s add crowdsourcing into our SaaS product.” At a minimum, you have to have nailed SaaS Product Secret’s #4, #5, and #8.

Crowdsourcing is a two step process. First, customers have to contribute content. Then, your SaaS product has to automate the process of consolidating that content into useful information. Mass customization followed by mass consolidation. For example, the process of crowdsourcing translation is essentially similar to the process of crowdsourcing a support knowledge base. Customers contribute solutions, those solutions get reviewed, and the best solution is chosen. The real SaaS product secret here is that the technical process of crowdsourcing can be baked into your SaaS product architecture in a fashion that opens new opportunities as your SaaS business grows.

SaaS Product Secret #10 | Streamline Sharing

saas product sharingAt the very peak of the SaaS growth pyramid, customer’s go beyond selling themselves and start selling their friends. When customers refer new prospects, the SaaS customer lifecycle begins anew. Your SaaS product can help close the loop and catalyze viral growth by streamlining sharing between your customers and your prospects. Streamlining sharing requires that you give your customers something useful to share and then reduce sharing it to the absolute minimum amount of work.For example, sharing important business documents or analyses is one of the best ways to drive viral growth in SaaS, because it embeds a referral inside collaboration through product use, similar to the invisible upgrade of SaaS Product Secret #6. Take a look at the Zoho sheet embedded in this post on SaaS sales commissions.

Viral sharing, like crowdsourcing, is easier said than done. Referrals are built on reciprocity. When a customer shares your product with a prospect, the customer is not doing you a favor. The customer is doing the prospect a favor. SaaS product referrals are nine parts motivation and one part automation. Whatever gets shared must be something the customer is certain will have value for the prospect. Don’t just ask your customers to say: “Try this SaaS product, you’ll like it.” Encourage customers to share something valuable with prospects that requires trial use. The the SaaS customer lifecycle repeats when you get them to sign up for that trial, and you are well on your way to viral growth!

SaaS Product Secret #11 | Manage Through Metrics

saas product metricsThe great thing about online communications channels from a marketer’s perspective is built-in measurement. There’s little need for costly surveys or panels to understand what customers think of your SaaS product, because every click speaks volumes. I’ve saved this SaaS Product Secret for last, because it augments every other SaaS Product Secret on the list. Metrics empower SaaS product managers to create better products faster. Not only do metrics provide critical input to SaaS product development, but they can also dramatically increase the effectiveness of sales and marketing. What are the traffic stats of your public pages? How do trial prospects navigate the fuzzy funnel. Which customers are exploring new capabilities and have the highest probability of upgrading? Which customers aren’t using your product and have the highest probability of churning? What can you do about it?

Unfortunately, Google Analytics will be of limited help here. While there is much value in the aggregate metrics provided by many website optimization tools, customer-level metrics are where the action is when it comes to driving SaaS growth. It’s the differences between customers that matter most, not their similarities. Usage metrics are so critical to building great SaaS products that startups like Totango and Blue Nose Analytics have taken on the challenge full-time. I wish these guys much luck, because goodness knows we need the tools. Measuring every click for every customer and then making sense of it is a big data challenge for even a modest SaaS product, but the ROI is immense.

If you liked this post, then you’ll love the eBook of the complete SaaS growth series. And if you like it, please share it!

Breaking Through The SaaS Ceiling : CloudAve

It's the dream of every Internet entrepreneur to build a business that goes viral. Yet the sad truth is that most do not. It's hard to think of any other industry with such a winner-take-all mentality as Internet software. The volatile ...

Breaking Through The SaaS Ceiling

It’s the dream of every Internet entrepreneur to build a business that goes viral. Yet the sad truth is that most do not. It’s hard to think of any other industry with such a winner-take-all mentality as Internet software. The volatile combination of small market entry costs and big network effects creates wave after wave of disruption and consolidation, and quite a few millionaires along the way. Alas, virality is an elusive goal, particularly in SaaS. For this reason, SaaS Don’t #10 insists that you should not depend on network effects. Instead you should focus first and foremost on satisfying each and every single customer. But, if you’ve done that…bring on the hockey stick!

This is the fourth post in a series that paves the path to sustainable SaaS growth. The first post in this SaaS growth series introduced the concept of the SaaS growth ceiling, as well as the three fundamental SaaS marketing levers for breaking through it: customer acquisition, customer lifetime value and viral customer network effects. This installment explores the third, final and most funnest SaaS marketing lever: network effects, offering three proven SaaS marketing strategies to drive SaaS growth by getting your customers to sell themselves.

The Roof is On Fire!

saas growth marketingYou don’t need a PhD in economics to understand network effects; you just need to know how to throw a party. No one wants to go to a lame party. The more people that are going to a party, the more other people want to go. And, the more they are willing to pay to get in. If you’ve ever tried to get people to move from one party to the other, say from dinner to dancing, then you know that you have to get them ALL to move at once, or nobody moves. Finally, if your party gets big, crowded and mainstream, the hipsters start leaving to find the next big thing. So, let’s party!

We know that the biggest your SaaS business can ever get is determined by the SaaS growth ceiling: a simple function of customer acquisition rate, average recurring revenue per customer and percentage churn.

max SaaS company revenue = acquisition rate x average subscription value ÷ % churn rate

Where are the network effects in this formula? Where’s the SaaS growth lever? Everywhere! As with our partygoers, network effects kick in for your SaaS customers when the value they see in your service increases with the number of other customers using your service. The greater the number of customers that use your service, the greater the number of prospects that want to use your service (acquisition rate), the greater the price they are willing to pay for it (subscription value), and the more difficult it is for them to leave (churn rate). Unlike other SaaS marketing strategies that attack individual stages of the purchase process, network effects have a pervasive impact across the entire customer lifecycle.

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SaaS Marketing Strategy #8 | Nurture Community

It’s not a party if no one’s dancing. A big crowd that isn’t interacting is just a crowd. Network effects require a network, a community. It’s not sufficient to just get customers in the door. Every good party planner knows that you have to facilitate interaction by creating the right environment. So it goes with SaaS marketing. Your SaaS marketing plan should nurture community by enabling communication, sharing and collaboration between your customers and prospects. Luckily for SaaS marketers, the Internet is built for just this purpose.

SaaS Marketing Strategy #5 | Reduce Churn points out that unlike other products, SaaS offers a direct, dynamic, personalized two-way communication channel with your customer. By the same token, SaaS offers a direct communication channel between your customers. SaaS customers are always just one click away from each other. While traditional offline tactics, such as user conferences, may still play an important role of your SaaS marketing strategy, online community nurturing that energizes your customer network offers considerably more bang for the buck. Online SaaS communities can be as straightforward as a forum or as sophisticated as a marketplace, but the best ones all have one thing in common: they facilitate sharing the knowledge and investment of one customer’s use of the product to increase the value of using the product for other customers. That is, they create network effects.

SaaS Marketing Strategy #9 | Crowd-source

It’s never the music or the food that makes for a really great party; it’s the people. People creating value for other people through their interactions. Crowd-sourcing fun! Crowdsourcing is very near the pinnacle of great SaaS marketing, just shy of virality. It’s very powerful and very difficult to pull off, because it requires actual work on the part of your customers, community service if you will. You are unlikely to get a customer to perform community service if that customer does not see value in the community, hence SaaS Marketing Strategy #7.

Assuming that you have nurtured a strong community, how can your SaaS marketing strategy put that community to work? Make it easy. Make it fun. Make it profitable! And most importantly, build it into the product. SaaS Success Do’s #8 & #9 | Enable Mass Customization and Open Up to the Cloud are the foundations of crowd-sourcing. Before customers can share their unique product knowledge and experiences with other customers en masse, they must first be able to create unique knowledge and experiences en masse. While crowdsourcing may be a distant dream for the early SaaS startup, it must be planned in advance and baked into the architecture of your SaaS product.

SaaS Marketing Strategy #10 | Catalyze Virality

Getting a party to go viral is hard. Getting a SaaS product to go viral is even harder. Virality and network effects go together like chocolate and peanut butter, especially in SaaS. For a party to go viral, it might be enough that you tell two friends and they tell two friends, and so on. In B2B SaaS, there better be beer. In other words, word of mouth alone is unlikely to set your SaaS business on fire. Business buyers generally require economic incentives and network effects provide the fuel for the economic flame. Your job is to be the spark.

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SaaS marketing cannot create virality, it can only catalyze it. In the end, your customers must create the value and spread the word, you can only facilitate. That said, a catalyst can make all the difference. If you’re SaaS marketing strategy has successfully nurtured a community and crowd-sourced new value from that community, then you’re 99% of the way to catalyzing virality: you just need to facilitate use of crowd-sourcing by your community! When clients have good things to say about your service, let them tell the world. When clients have solutions to support issues, let them build a knowledgebase. When clients create useful processes or analyses, let them share the templates. When clients build apps on your open APIs, let them promote them to other clients. And, so forth. Lead, follow, but most importantly get out of the way.

If you liked this post, then you’ll love the eBook of the complete SaaS growth series. And if you like it, please share it!

SaaS Marketing | Maximizing Customer Lifetime Value : CloudAve

What's the stronger driver of SaaS company growth: customer acquisition or customer lifetime value? The answer is yes. Rapid, sustainable SaaS growth is equal parts customer acquisition and customer lifetime value. Simply ...

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