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There are tons of SaaS businesses available in the sales and marketing industry, with more popping up every day. So how do you rise above the competition and become truly profitable?
The SaaS model works especially well in the B2B sector. Profit margins are huge and the customer base is large and enthusiastic since SaaS products offer SMBs what used to be only enterprise-level tools. In fact, SaaS is such as a successful business model that the coming years are expected to see a bunch of new niches emerges in Software-as-a-Service. That means increased competition, no matter your market, but it also means that with the right tools and strategies, there is the potential for major success.
Here are 4 things to do if you want to give your SaaS Company an upper hand. Don’t just do one of them — plan to do all of them this year. The time is now!
- Full-Cycle Email Marketing:
Email marketing is a continuous process. It’s trickier than people think, and the email landscape is increasingly crowded. Using email for marketing has become more widespread and mainstream. Newer businesses are entering the email marketing space quickly, but there’s one thing they ignore: using email marketing for every stage in the customer journey.
Customer acquisition is important, but it’s not the only means at stake for SaaS companies. You can use email marketing as an effective tool to ensure your current user base makes effective use of your product and available resources. Gartner has shown that for most companies, 80% of their future revenue comes from just 20% of their existing customers. Ignore that statistic at your SaaS Company’s peril!
Moz does this really well. They use email as a means to encourage free users to convert into paid users and at the same time, they use email to interact with their current customer base for higher retention rates. This is the real reason that their revenue chart grows higher every year. The idea is to engage your customers with email (preferably based on automated triggers) at every stage in the customer life cycle.
- Bill Annually:
Billing annually is key. You shouldn’t just make annual billing or a “yearly pay” option available for all of your SaaS pricing plans, but encourage your customers to pay that way instead of monthly or other options. There are two major reasons for this:
- Guaranteed customer retention for the whole year.
- Increased cash flow from larger, upfront, yearly payments.
There are many SaaS companies that use unique tactics to encourage users to pay annually. ClickDesk, the popular live chat software, has found holiday discounts (such as 35% off plans, if paid upfront for the entire year) to be the most effective, even on top of their normal discounts for yearly plans. On top of that, ClickDesk offers team plans with setups designed for specific SMB teams.
Customers get even bigger savings and the company has more cash to put into product development and growth hacking. It’s a win-win situation!
- Reduce the cost of acquisition
Since we are on the subject of billing, I might as well make it clear that most businesses hesitate too much to enter into standing with any company for enterprise solutions. High costs are their major worry, especially when they’re checking out a new product or service, even if they know that product or service will save them money in the long run. And really, you can’t blame them. If you reduce acquisition costs for new clients (especially enterprise clients) who want to get going with your SaaS app for the first time, you get two major benefits:
- Clients get to fully test your app, from end-to-end, and are hence more likely to find it a “must-have” in the future.
- They will likely develop a close relationship with one of your sales or support reps, which is the best way to increase SaaS profitability in the long run, through up-selling and personalized support.
Want to learn more about the cost of acquisition and how you can reduce it as a SaaS business? Here are some super-useful tips from Optimize Smart.
- Build a Better Product
The thing with B2B SaaS solutions is that you cannot get complacent, even if you have an awesome app, a solid development team, and the best marketing team in the region. Talk to any IT expert and they will tell you that a system’s health is never perfect.
That does not mean your solution is lagging, it just needs to be in a process of continuous development. SaaS products have the benefit of being able to push updates instantly; users immediately get the benefits, but only if you’re making the updates!
At the end of the day, every cancellation you get is a chance for you to develop and upgrade further. Learn from customer feedback and build a solution that wows customers instead of just satisfies them.
As you draft a business plan for 2020, I hope you will consider those four tips. SaaS business is complex, but it can also be tremendously profitable and rewarding as you grow a customer base and build a real community around your product.
Do you have other secrets to SaaS profitability that you’d like to share? Let me know in the comments. I’d love to hear your feedback.