Software-as-a-service (SaaS) is always in demand for a simple reason. Our post notes that its benefits range from automating workflows and enhancing real-time collaboration to reducing costs and improving customer relationship management. However, it’s often challenging for SaaS companies to bolster their profit margins, and that has to do with the business model they leverage.
Unlike traditional products and services that can be bought with a single purchase, cloud-based software is often offered via subscription. That makes SaaS businesses vulnerable to “churn.” The churn rate refers to the percentage of customers canceling their subscriptions, which can significantly affect revenue.
Even major SaaS providers like Salesforce are at risk. It’s currently leading an industry decline after experiencing its biggest reduction in stock prices since 2004. Experts attribute this to rising costs, forcing companies to tighten their belts. With many businesses finding that what they spend on SaaS results in waste, more are canceling their subscriptions—spiking SaaS churn rates.
Fortunately, SaaS providers can use plenty of strategies to prove their value to users better and strengthen their long-term revenue streams.
Improving Lead Generation
A few SaaS startups fail within the first three years because of inefficient marketing strategies. If you’re spending too much on campaigns that don’t effectively convince businesses that your software is valuable—like pay-per-click advertising—you’re draining the already limited resources you have. Instead, opt for cost-effective methods that are more likely to generate leads that convert to sales.
In the same vein, growth marketing specialist Nick Zviadadze particularly recommends SEO marketing, emphasizing that optimizing your website can help you cut down on customer acquisition costs and reduce your reliance on paid ads. Despite that, it’ll drive a steady stream of organic traffic to your site—attracting more highly qualified buyers.
Look into the best keywords related to your business and infuse your blog with case studies, how-to guides, and think pieces that use them. More importantly, embed useful internal links that point to your products and services. These techniques will help attract businesses actively seeking to make more informed decisions about the SaaS they invest in. You’re more likely to build a subscriber base that sticks around for longer.
Boosting Sales Conversions
Getting businesses to subscribe to your offerings is an entirely different challenge, and many SaaS providers choose to overcome it using product demos. These can benefit their ability to illustrate how software works, which can tell potential customers how easy it is to use, how they can integrate it into their existing operations—and if it can ultimately solve the problems they want to address.
However, product demos often require the presence of a software specialist or sales representative, which means you have to invest a significant sum into training a sales team. They can also pressure businesses to make a purchasing decision, discouraging them from subscribing altogether. More crucially, perhaps, is the fact that they may not be as effective for sales conversions as initially thought.
A MarTech report found that free trials can be more beneficial in the long run because they allow users to try the software independently without adding pressure for further commitment. As a result, they encourage a higher click-through rate when advertised and can deliver more sales conversions per impression. If you’ve been using product demos thus far, it may be worth switching to free trials to build a more substantial customer base.
Tweaking Billing Models
Given how rising costs negatively impact SaaS revenue, revisiting your billing model will be vital. That’s especially true now that many businesses experience subscription fatigue due to the sheer volume of SaaS available to streamline different areas of their operations. The fact that the fees they need to pay each provider don’t vary regardless of usage can serve as a significant deal-breaker if they’re looking to cut costs. As a result, simply offering different payment tiers may not be sufficient to retain SaaS subscribers.
A business may require features only offered by your most premium plan, for example, but might not find it worth the price if they only use it occasionally. That’s why you may consider tweaking your subscription model to a usage-based one that only charges customers based on how much they leverage your offerings. The consumption billing solutions at SOFTRAX show that this can be beneficial because it combines usage-based metrics with the appeal of subscription models.
Usage-based billing gives your customers more options for using your SaaS offerings while maintaining the ease of subscription management. This allows you to maximize revenue while providing a more cost-effective product that ultimately lowers your churn rate. In fact, this billing model is proving so effective that SOFTRAX is finding it’s increasingly becoming the more popular monetization channel for SaaS businesses.
Fostering Long-term Loyalty
Upgrading your billing model isn’t the only thing you can do to reduce SaaS churn rates. Churn happens when businesses second-guess how much they spend on your offerings or find a competing SaaS more compelling, leading them to switch providers. Growth strategies aimed at preventing that should thus include taking note of customer preferences and offering incentives that align with them.
One way to do so is by establishing a loyalty program. Here, you can offer exclusive benefits like cashback, deals, discounts, and even points your customers can accumulate to unlock further rewards. For example, you can provide tiered benefits to encourage long-term subscriptions.
In the current SaaS landscape, however, the most effective rewards should emphasize the value of keeping your software amid the need to cut overhead costs. The features from loyalty solutions front-runner Capillary Technologies show that you can keep your offerings relevant with AI-generated customer insights. Doing so allows you to more accurately pinpoint customer preferences to personalize your loyalty program in real-time—such as by providing long-time users with in-demand premium features. Such flexible data models will help you provide a more consistent customer experience that discourages the “regret” that leads to churn.
Published by: Khy Talara