Question: What makes up a successful SaaS business?
Answer: Customer acquisition, customer retention, and customer growth.
There’s not much else. You can make an argument for healthy margins…but profitability is not a hallmark of a successful SaaS business. In 2014, only 11% of Tech IPOs were comprised of profitable companies. Out of 127 Tech IPOs, 14 were profitable.
Unanimously, the pace of customer acquisition, percentage of customers retained, and the dollars earned from existing customers (expansion MRR), determine success.
David Skok, General Partner at Matrix Partners, publishes extensively on SaaS metrics that matter. He highlights the true gem of SaaS success: Negative churn. This happens when the additional revenue you bring in via cross-sell/upsell exceeds the revenue you lose to churn.
There’s a huge opportunity for marketing to impact both retention and growth, and help their SaaS companies work towards negative churn.
I recently wrote The Next Era of SaaS Growth: The Go-To-Customer Strategy, and called myself and my fellow SaaS marketer’s out: We’re spending too much time focused on strangers, not enough on customers. Marketing should a strategic asset to the entire customer lifecycle, not just responsible for customer acquisition.
In the typical Go-To-Market (GTM) strategy, which I’ve always been responsible for as a product marketer, you build market share by doubling-down in markets you’ve had early success, and target new industries/buyer roles/geographies to plant seeds for expansion. The thing is, this is all about new customer acquisition.
As outlined above – that’s only 1/3rd of what makes a SaaS company successful.
The last year I spent running product marketing at Acquia – we realized we had a huge opportunity to market to customers. We started a customer marketing program and it yielded a tremendous benefit towards the expansion MRR (customer growth) goal.
Through that experience I learned through trial and error how to treat customer segments uniquely, and put as much time and effort into the Go-To-Customer strategy as I was on the Go-To-Market.
Your Go-to-customer strategy should treat customer segments as uniquely as you’d treat different industries and personas in your Go-to-market. I created a presentation that pulls together the best practices I’ve learned which you can view on slideshare:
To break it down, the tenants of the Go-To-Customer strategy are:
- Relevance. You have to start by segmenting your customer base to make sure every communication is relevant.
- Value. This is the core of the strategy – make sure your customers see value from what they’ve purchased. The best way to do this is to track and drive usage.
- Retention. You need to continually assess and improve customer satisfaction to impact retention.
- Monetization. For your customer segments – set your intention. Do you want to upsell a segment to a higher tier? Do you want to cross-sell a new product line. You really need to think about who’s in the segment and what they came for, and be specific about how else you can meet their needs.
Check out the slideshare for much more detail, and if you have a minute, we’re actively doing research to assess The State of Go-To-Customer Strategy.