5 Ways SaaS Companies Can Increase Customer Lifetime Value
One of the many success metrics in SaaS business is the Customer Lifetime Value (CLTV).
In a nutshell, this refers to the total revenue a business can get from a single customer over their lifespan.
For example, if it costs $100 to win every new customer, but they stay for 3 years and pay on average $250 a month, then the CLTV is $2,150. Which is a pretty good return on a $100 investment.
In a strong economy, increasing this number would be a good idea. But in the present-day economic climate, considering the current fiscal crisis and growing competition, getting more revenue from the same number of customers could literally save your business.
After all, higher revenue from existing customers makes it easier to hit target. You can also generate stronger profit margins once you've gotten to that point.
So, if you’re looking to increase your CTLV, here are the 5 strategies SaaS companies should consider.
Create upsell opportunities
It’s always easier to upsell products, services, or upgrades to the existing customers who are already happy with your services than to win new ones.
To start with, ask yourself: What else can you sell? Do you have premium offerings or services that would complement your core offering?
You can also turn to your loyal customers for ideas. Look at what they need, assess this based on their current usage, and use this to show how they can benefit from new products/services.
Before rolling out to new customers, test these additional products or services out on your current customers. Tweak and improve these products/services. Once they are perfected, have a rolling promotional pipeline for customers that seem to fit the profile for spending more.
Sell complementary products and services
This approach is similar to the one mentioned above, except it offers a more holistic approach.
Look at what else your customers would benefit from and come up with complementary offerings you can sell to them, whether directly or through a third-party or trusted partner.
For example, say you sell payroll software. Ideally, companies using payroll need accountants or bookkeepers. Could you offer your customers a trusted panel of accountants? It gives them an all-in-one solution to their needs and offers accountants a new channel to win customers.
When third parties get involved, this also opens the door to additional revenue. Whether through introductory bonuses, or ongoing commission, such partnerships could soon become a lucrative revenue stream.
Another way is to look at the consulting end of things. Depending on what you do, charging a day rate for expertise and skills would be a smart way to go.
Yet, be careful. As more clients request those additional services, it might be difficult to deliver. That is why it’s better to work with partners who can provide these complementary services. Get paid in commission, especially if it’s retainer-based work. That way it will be no different from customer subscription payments.
Provide an excellent on-boarding experience
Alongside upsell and cross-sell opportunities, look at how you can improve the entire customer experience.
Is onboarding and training something you need to invest more in? Do customers truly get your product when they start using it?
Look at the data. And ask them. If there’s more you can do to make the customers happy, whether that means creating or improving tutorials and walk-throughs, creating more material to support them, or providing real-time video demos, now is the time to do that.
The more comfortable customers are with your products, the more they're going to use them. Which means they will remain customers for longer, and probably encourage others to sign-up too.
Look after your customers
Customer service has never been more important. You need to look after them. Each and every one. This means providing the best possible customer service. If customers aren't engaged with the product, reach out and ask if they need help.
If customers do need more help, then jump on a live demo or screen-share call. Walk customers through various features, making sure they understand their value and can use them more effectively. This can help you make them happier and more likely to stick around.
It’s also important to make it easy for your customers to share their feedback, especially something they don't understand or want to change.
Whether through email, Slack, or an online form, give them a convenient way to voice their concerns or suggestions regarding your product.
Another way to keep your customers happy is by rewarding them. You could do this by giving customers a discount, cash rebate, or gift voucher.
A simple thank-you goes a long way. This is also a great opportunity to ask them for referrals to other would-be customers, making it a potentially profitable thank-you.
Prevent customer churn
All companies, whether they're Amazon, Spotify, or phone networks have customers who leave. Known as “churn,” it’s a number you need to keep an eye on. Last thing you want is too many leaving without you understanding why.
However, too many companies don't benefit from this as a learning opportunity. Look at why customers leave. Ask for feedback. Take a look at their specific data journey/usage before they left, and any warning signs, such as mentioning to customer services that they're unhappy.
Aim to identify the reasons why and make any changes you can to prevent others from leaving too.
Right now, it’s never been more important to look after customers and encourage them to spend more whenever possible.
All in all, happy and loyal customers are your most valuable asset, especially in subscription-based SaaS businesses.
So make sure to show them how much you care about them: Ask for their feedback often and act on it, meet their needs (even the ones they are not aware of yet), and always strive to exceed their expectations, be it product quality or customer experience.
The better you serve your customers, the more likely they will be to stay with you longer and spend more. It’s as simple as that.
Jói Sigurdsson, Founder & CEO of CrankWheel, a zero hassle screen-sharing web and mobile-based app, designed to help salespeople increase conversion rates and engagement with prospects.
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