When I talk with new customers about how and why they bought a software-as-a-service (SaaS) solution, here’s what they tell me:
• “We didn’t spend a lot of time with the free trial. We just subscribed.”
• “Because the monthly cost is so low and there’s no long-term commitment, we figured if we didn’t like the product, we’d just unsubscribe.”
• “We didn’t spend weeks looking at demos and trials; we just bought the solution. Once we’ve used it for a couple of months, we’ll figure out whether we want to keep paying for it.”
It’s not like these companies made their purchase decision carelessly, or there wasn’t much at stake. In fact, often they were considering the solution to manage a critical part of their business, like keeping track of employees, customers, or patients.
But they didn’t want to spend time looking at slick demos or inputting lots of data into a free trial – data that they’d lose when the trial expired.
Buy it and try it
These customers took a different approach: Just buy it and try it.
They figured they would simply subscribe to the solution, pay for it for a few months, and then decide whether it’s worth the cost.
What they did was to take advantage of one of the great benefits of SaaS solutions: subscription pricing.
Unlike traditional on-premises software, SaaS solutions’ monthly fees are typically much lower than up-front license costs, deployment expenses are lower, and often there’s no long-term commitment.
For customers, it’s just easier to evaluate and buy SaaS solutions.
Good news for SaaS vendors too… but there’s a catch
This isn’t just good news for buyers. A solution that’s easier to evaluate and buy is good news for SaaS vendors, too.
Solutions that are easier for customers to buy are also easier for vendors to sell. Converting prospective customers from “opportunities” into “paying customers” is faster and simpler.
But there’s a catch.
SaaS companies need to convert these new buyers into long-term, committed customers. It’s not enough just to win new customers; they then need to keep them.
For most SaaS companies, they need to retain a customer for at least several months, and in some cases 2-3 years, to recover the cost of acquiring that customer. If the customer leaves too early, the company will actually lose money, not make money.
A new task for SaaS marketers
For the SaaS sales and marketing team, this means even when they’ve brought in a new customer, there’s still more work to be done.
Their job involves more than attracting leads and converting prospects into new customers. Now it includes converting those new customers into long-term, committed customers.
The sales and marketing team takes on a whole list of new tasks: helping with on-boarding, training, expert guidance, or whatever else it takes to retain committed users.
To handle these broader responsibilities, I’ve seen teams add all kinds of customer retention activities to their programs:
• Implement “quick start” programs to get new customers up & running with the solution
• Host webinars for existing customers to pass along advice on using the solution more effectively
• Publish customer success stories that share best practices
• Maintain online forums where customers can share ideas with their peers
• Communicate with customers on new features that they should be taking advantage of
• Establish a “VP of Customer Success” role with responsibility for keeping existing customers happy.
The investment in these efforts is easy to justify. Spending money to acquire new customers while losing existing customers is a quick way to a SaaS failure.
Another step in the customer acquisition process
I know this isn’t the best news for sales and marketing folks – adding more work to the customer acquisition process. As if it wasn’t tough enough already to build visibility, capture leads, convert them into qualified opportunities, and finally into paying customers. Now you need another step: retaining new users.
Sorry, but that’s the cost of SaaS. It may be tough enough to win new customers, but it’s tougher to keep them.
Peter Cohen is the Managing Partner of SaaS Marketing Strategy Advisors, a firm that helps SaaS companies acquire and retain