Losing fewer customers and depending on advertising less should be the top New Year’s resolutions for SaaS companies in 2022.
Software-as-a-service (SaaS) companies are a segment of the ecommerce industry. Their subscription-based digital offerings can be profitable. But the SaaS model also has challenges.
1. Cut Churn
“Churn” is a SaaS company’s customer attrition rate. It measures the percentage of subscribers who stop doing business.
A high churn rate singles critical business problems.
Every SaaS company I’m aware of needs to improve this vital metric. Ideas include:
- Help customers succeed. SaaS customers subscribe to solve a problem or complete a task. They will cancel if the results are unsatisfactory. So find ways to help customers succeed.
- Deliver value. Ensure the SaaS product delivers the expected value and a little more.
- Ask canceled subscribers. Communicate with customers who cancel. Learn what happened.
2. Reduce Facebook, Google Dependency
Many SaaS companies depend on audience-based, programmatic advertising on Google and Facebook for subscriber acquisition and content marketing distribution.
Without ad investments on leading programmatic platforms, few folks would sign up and all of the white papers, case studies, and free templates would be idle.
This is a significant problem because programmatic ads are unpredictable. In just the past year, changes to mobile privacy and opt-in procedures have made some of these digital ads —such as targeted ads on Facebook and Google — more expensive and often less effective. Attribution is more challenging. Audience building appears to be harder, too.
SaaS companies should look for alternative ads or alternatives to ads.
For example, contextual ad targeting may be an alternative to audience-based ad targeting. Adding a direct sales team could be an alternative to advertising more generally.
To be sure, advertising will remain a mainstay of SaaS companies. But resolving to depend less on top programmatic platforms should be a priority.
3. Improve Conversions
SaaS companies measure multiple conversion types, but two stand out.
First are sign-ups — when customers sign up for the service. Often it’s a free trial or a free limited version.
Second is the transition from a free trial to paid — when subscribers pay for the service.
For many SaaS companies, the first conversion is more difficult than the second. That is, converting free subscribers to paid is harder than enticing them to a free trial.
Thus, focusing on the transition to a paid account in my third new year’s resolution. One way to accomplish this is to identify the behaviors that lead to a paid conversion.
For example, an email marketing platform might find that customers who build a list of 300 subscribers or send email messages three weeks in a row are more likely to convert to paid accounts. In that example, the platform could focus on helping customers obtain those first 300 subscribers or send weekly messages.
4. Prioritize Mobile
Since early 2017, about half of all internet traffic worldwide has originated from a mobile device, according to Statista. In the first three months of 2021, mobile devices represented 54.8% of website visits.
If website traffic is about evenly split between computers and mobile devices, one might expect SaaS use and conversion rates to be divided, too. But for many SaaS companies, particularly B2B SaaS offerings, conversion rates and usage are lower on mobile devices.
In the coming year, SaaS companies should seek to understand this gap.
In this sense, prioritizing mobile means learning both mobile and computer conversion rates and then:
- Understanding the reason for the difference,
- Determining if the difference is detrimental to the business,
- Taking appropriate actions.
5. Find the Next Thing
SaaS leaders might be wise to look at the success and then failure of the BlackBerry mobile phone.
The company that once controlled 50% of the U.S. phone market is no longer in that business. BlackBerry is now a cybersecurity company.
There is a couple of lessons here: How did BlackBerry lose at mobile, and how did it survive despite the failure?
In both cases, failure and success might have been about finding the next thing.
The BlackBerry phone was replaced because it did not adapt. The companies leaders believed a tiny keyboard would beat a touchscreen. The company survived by recognizing the coming importance of online security.
In 2022, SaaS leaders might ponder the next evolution in their own industry.