By Paul Schmidt
It takes every part of your business—from product and marketing to support, finance, and accounting—to grow your SaaS company into a market leader. Fortunately, there are several levers you can pull within a SaaS business to achieve the growth rate you need to scale your business.
In order to drive SaaS marketing growth, your company first needs to understand a handful of metrics that define the economics behind your business. With a firm grasp on the right numbers, you’ll have the firepower to catapult your SaaS marketing strategy to the top of the market.
Use LTV-to-CAC Ratios to Unlock Fast SaaS Marketing Growth
One of the most important metrics for SaaS marketers is the ratio of the average customer lifetime value to the customer acquisition cost (LTV:CAC). In order to improve your LTV:CAC ratio, you need to focus on customer acquisition, retention, monetization, and segmentation.
We’ve broken down those areas below to show how you can shift the SaaS marketing levers and boost growth:
1. Visualize funnels through closed-loop marketing.
Closed loop marketing allows the business to know what channels and initiatives work best to grow traffic, convert leads, and close customers. Your marketing and sales software must be in sync if you want to see this insight.
After someone becomes a customer, your sales rep will close the lead within the CRM. This data syncs back to your analytics platform to show you the customer’s entire path to purchase.
You need this level of insight to map out your customer funnel. At a high level, HubSpot’s sources report can show you this information.
2. Lift your free-trial-to-paid-subscription conversion rate above 20 percent.
Once someone is trialing your software, they should have enough context to understand how your solution could fit within their workflow. They should also clearly see how it’s an upgrade from their current solution.
Improve the trial-to-paid conversion rate by developing a trial nurturing program that provides walkthroughs, how-tos, and lessons on how to get the most out of the trial.
3. Improve new lead conversion rates.
You’ve likely heard of conversion rate optimization (CRO). CRO’s primary focus is getting a user to take a specific action on your site. You can improve conversion rates by:
- Creating multiple offers on your site to see which offers convert best with your audience
- Using A/B testing to see how variations in messaging affect conversion rates (go beyond small changes like button color variations)
- Using event tracking to understand common behaviors on your site
- Incorporating smart, dynamic content, based on the user’s location, device, or source
- Using heat mapping to see where on a page users are drawn (at this stage, make sure your call-to-action button is above the fold)
SaaS companies get in trouble when they stop paying attention to those paying the bills. If you want to retain customers and make the product better for existing users, you need a customer-first mentality. Here are some ways to retain customers:
1. Lower churn.
Churn is a hot topic for all SaaS companies.
You can lower churn by investing more in customer marketing programs, using support resources or reps, and providing ongoing educational programs for your customer base. The types of programs will vary based on your SaaS. However, don’t forget that there is tremendous opportunity in keeping your customers happy and turning them into evangelists for your brand.
2. Watch for churn signals.
Every SaaS company should take time to recognize the signs that indicate a customer is heading down the path toward churn. These signals could include:
- Active usage
- Repetitively visiting content on your site about how to cancel a subscription
- An increased amount of support or technical issues
You can set up event tracking on your site to monitor many of these behaviors. After these behaviors are triggered, you can use automated workflows to send account managers a note to connect with the customer and help resolve their issues.
Interviewing or surveying customers who have already canceled is another way to understand the pain points, challenges, and roadblocks stopping them from using your software.
3. Make your product sticky.
Once people start using your product, focus on making that product as sticky as possible. Your customers need to be using it in their day-to-day workflows. You can accomplish stickiness by:
- Providing unique data: Moz’s Open Site Explorer is a great example of a company providing proprietary data that can’t be sourced elsewhere.
- Using time-saving benefits: HubSpot’s social share Chrome extension is a huge timesaver for marketers. Instead of creating tracking URLs and inputting content into each social channel, marketers can easily publish and track social content from any page on the web.
- Becoming a customer’s data storage hub: HubSpot’s CRM is a good example of a stellar storage hub. If all of your sales data (activities, companies, contacts, and analytics) are stored inside the CRM, it won’t be easy to transition to another system.
1. Use multi-axis pricing and offer additional products.
SaaS companies need to think about how they can improve the lifetime value of a customer. Multi-axis pricing allows SaaS organizations to drive revenue from the monthly or annual subscription, as well as through other sources. Here are few pricing examples:
- Salesforce’s pricing is based on subscriptions and the number of Salesforce users.
- HubSpot’s pricing is based on subscriptions and the number of contacts in the subscriber’s database.
- Wistia’s pricing is based on subscriptions and the amount of bandwidth used for video.
Additional products offer another way to improve customer monetization. The more products of yours a customer uses, the less likely they are to churn. Plus, you’ll increase revenue from additional product usage.
2. Know when a customer flashes an upsell opportunity.
SaaS companies can identify triggers that indicate a customer is fit for an upsell. Triggers could be based on usage of your software, pages customers are visiting on your site, or login usernames they are creating for new or different users.
Use event tracking to measure these signals, and automate workflows that send emails to sales reps or account managers to see if an upgrade would make sense.
3. Segment your customer cohorts and personas.
Last but not least, a clean, segmented database will provide you not only with more effective marketing campaigns, but also clear insight into which cohort or persona is most profitable for your business.
After understanding the LTV:CAC of your business as a whole, use this ratio for different segments of your customer base.
By understanding the LTV:CAC for each of your personas, you can invest more in the profitable segments and spend less energy on others. You can easily segment your leads in HubSpot and run revenue reporting to understand these unit economics.
It’s important for any SaaS professional to understand the metrics, strategies, and levers for seeing sustained growth and success. Once you’ve secured the right figures, you can present your SaaS marketing metrics to investors and executives. Ultimately, a focus on the right data can prove ROI, land more stakeholder buy-in, and pave a clear path to SaaS marketing growth.
This post was originally published in June 2016 and has been updated since.