February 16, 2017 | Authored by: Vindicia Team Blogs
The relationship between customer acquisition and reduced churn
Success for a software as a service provider is based on the company's ability to find and retain customers. Excessive churn is a SaaS company's worst nightmare, as each lost customer chips away at secure profits. Reducing churn is therefore a key priority, and this goal might actually relate closely to customer acquisition.
Sixteen Ventures put forth the notion that churn results from a failure early in the acquisition process. Businesses often spend energy attracting the wrong customer instead of focusing on finding ones who will become long-term subscribers. Essentially, SaaS providers can begin reducing customer churn by working smarter to bring on better customers, not just more. Targeting businesses and individuals more likely to commit to subscription billing long-term saves time and energy and leads to a more stable source of revenue.
Gaining insight into customers doesn't just reveal what marketing and acquisition strategies work best overall. By segmenting their consumer base, businesses can determine what methods work best among various demographics. They can also look for patterns within these groups and find commonalities among their most profitable subscribers. Knowing what keeps customers coming back to a service helps attract more with the same values and loyalty.
Data to find profitable customers
Hansa Marketing provided a list of factors businesses can look for to find common threads among long-term subscribers. SaaS providers should start by observing the channels their most and least profitable customers come from. As the site mentioned, affiliates and search engines are good for locating first-time subscribers but don't make customers loyal to a provider on their own. Either these customers need more personalization after signing up, or a company should increase its marketing efforts through other channels to attract more dedicated users.
SaaS providers should get even more in-depth with the data from their site. Which landing pages received the most hits among profitable customers? What was they last thing these users looked at before committing to a subscription management system? Even seemingly insignificant factors like sign-up dates point a SaaS business to the habits of potentially profitable customers. If the majority of a company's current long-term users first subscribed after major holidays or during a particular season, this indicates the business should focus its marketing efforts during that time.
Another aspect to consider is which services long-term subscribers chose and if they favored any particular additional benefits when signing up. It's important to keep in mind that a company's most popular service might not be the favorite of its long-term customers. A switch in strategy to promote what appears to be a lesser product could bring in and retain better subscribers, leading to increased profits overall.
While there's no denying that more is better in terms of subscription numbers, SaaS providers must maintain a stable base of users. These long-term customers provide enough consistent revenue to keep a SaaS company in business and ensure profits for the time to come.
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