Computers have proven to be a boon for mankind. They have helped people in several ways- all the way from aiding the student to acquire knowledge, convenience to workers in the workplace, or at their homes, to being an unlimited source of entertainment to everyone. Lately, with the introduction of Smartphones, mobile phone technology has also risen significantly.
Enhanced hardware and development of a sophisticated operating system and applications have made it possible for people to utilize these devices nearly with the same accessibility and utility as a Computer. Software is the essence that gives life to these devices. They are programmed to do certain tasks.
The world now works around these digital devices and it has nearly become unimaginable to not come across them while being involved with some business transaction, as a customer, or as an entrepreneur. And to augment the capabilities of these systems, software development companies have been on a rise as well.
With the change in time, change in technology is inevitable and with innumerable manpower and intellectuals contributing to the development of Computer-based technology, it certainly is going up. Back in the day, software programs were sold as ‘one-time purchase’ packages.
A particular version of the software could be used lifelong unless an update was launched for which the new package needed to be bought again. These days due to the availability of high-speed internet with enhanced web developments and browsers, companies have found a new way to put forward their developments for the public.
SaaS as the cloud computing nomenclature suggests- ‘Software as a service’ is a model where software is provided on a subscription basis. These software programs are Web-based which means that users can access the programs from their web browsers and the working data is stored in the program’s cloud storage. These have several advantages and thus have become vastly popular.
These software programs are cloud-based and are readily available for public use. A major plus point these SaaS programs have against a traditional downloadable software is that any necessary update is done centrally and users don’t have to go through the hassle of downloading bulky files and installing them.
Deriving revenue from such a business model requires businesses to offer their services on a subscription basis. This allows a steady flow of income and adding to it the ease in maintenance, upgradation, and importantly not having to bother with the expenditure of tedious supply chains makes it a lucrative opportunity for businesses.
However, profiting from such a business model is not as easy as it seems. Businesses face challenges in the areas of customer retention as a lot of customers tend to leave after a brief period of membership. It, therefore, is imperative for such businesses to lay considerable efforts to keep customers engaged, addressing their issues suitably, and coming up with developments to keep them enticed to ensure their prolonged involvement.
Here are some tips for a SaaS business that will help grow the business revenue while keeping in check the growth in expenses thereby increasing the business profit margin
The tips are essentially divided among three sections which will take into consideration important issues that concern a SaaS business, i.e. to minimize the users canceling their subscription plans, increase the average revenue generated per user, and increase the number of users onboarding.
* Churn Reduction-
The cancellation rate is an important issue that every SaaS business faces. Churn is the rate at which people are canceling their subscriptions from the SaaS platform. Marketing campaigns however innovative, will in the end, be of little use if the customers don’t stay for long. Therefore, it’s important to lower the Churn.
A customer’s value is determined by the revenue they create for the business over their lifetime and it is called the customer’s Life-Time Value (LTV). By lowering the Churn the LTV increases.
Focusing on the product and service quality certainly plays a decisively positive part in customer retention. However, some other activities prove to be beneficial in doing so. Let us have a look at them-
- Marketing Campaigns-
Marketing campaigns, in most businesses, are mainly focused on onboarding new customers. However, a little innovation in designing new campaigns will prove to be useful. Launching marketing campaigns for customer engagement and their retention are effective ways to make sure the customers stay for longer. Running campaigns to demonstrate the interactive features of the platform and how beneficial it might prove to the customers or to highlight new features incorporated in the platforms are some ways to do so.
Customers can also be provided with attractive takeaways or some opportunity to participate in certain development events. One can come up with numerous ideas to fuel their campaign.
Automating these campaigns makes this process less cumbersome, businesses can use email marketing and send customized emails to their subscribers regarding the appropriate features or offer that would engage them further. Messages or notifications can be dropped within the application to do the same.
- Customer Retargeting-
There are always instances where a customer doesn’t opt for the business services or products even after a thorough briefing. This happens more on the internet where the influence of the sales force is less compelling as compared to some brick and mortar stores and the number of casual strollers is significantly high.
Moreover, for any business, there are always going to be some clients who will unsubscribe the service no matter how rigorous and efficient the marketing campaign is. And for this purpose retargeting campaigns prove to be an effective way to win back the lost customers. Businesses can reach out to these customers again after a while and offer discount offers, some extra or perhaps some other incentives to make them return.
The focus should be exclusively made on the features which made their experience bad enough to make them leave if that is the case.
Being acquainted with the business and the services it is comparatively easier to entice them again if the drawbacks are taken care of effectively.
- Predictive Analysis-
Predictive Analysis is used in terms of customer retention to identify the customers who are on the verge of canceling service subscription. Every SaaS platform should incorporate necessary analytics tools that would be of particular help here. Customers’ intentions are well demonstrated by the way they use the platform. The frequency of their visits, the time they spend, and the number of features that they explore. Reduction of these means a lack of interest.
Customers who impart such behavior must be reached out for, and proper assistance must be provided in case some feature is giving them a hard time. In case they find the feature not compelling enough in general, try to entice them with the methods that have been discussed in the ‘Retargeting campaigns’ section.
- Dunning-
Customers getting automatically unsubscribed due to a failed transaction is an important problem to address. When the customer’s credit card transaction fails, that is when the dunning process comes to play. There could be several reasons for the same. Maybe the card expired, or there is some issue in the payment gateway integration with the credit card company. The process of reaching out to customers, when to do that and how often to re-try the transaction plays a significant part in the dunning process.
The transaction must be re-tried at-least three times, and business must give some days’ time in case there is a failure in carrying the transaction the first time. Emails notifying the customers regarding the failed transaction must be sent to the customers requesting them to look into the issue from their end. Requests must be put forward asking them to update the billing information in case there is a complication with that.
*Average revenue per user (ARPU)-
Deriving revenue for the users is another way to increase the income and the profit margin for a SaaS business apart from the idea of onboarding several clients.
While managing the Churn seems to be an important process to do so, increasing the revenue that an existing client contributes to is much easier owing to the facts that the client is currently involved with the business, and isn’t having problems that would make a bad impression in the client’s mind.
Here are some ways that can be adopted to improve the ARPU-
- Encourage more usage-
A general SaaS platform provides several utilities to aid its customers. Many of them come with the package while many of them are a part of other enhanced plans, and some of them are still independently available for use at a certain price. Subscribers must be encouraged to opt for these services by giving them the benefits they will provide to increase their convenience and productivity.
In case the business charges its customers based on the number of projects that they work on, the users must be encouraged to take on new projects. A project helps them generate revenue as well, therefore, laying extensive effort in such cases by aiding them to find new projects will prove to be a win-win scenario.
A lot of customers aren’t sufficiently acquainted with the complete functionality of the SaaS platform that they are engaged with.
This could result in them missing out on the features which might prove to be of significant help and leading to the business missing potential revenue generation.
Customers must be provided with proper training sessions to brief them about the SaaS platform in detail, the tools that they provide, and the ways to get the most out of the platform in general and the tools in particular.
- Pricing strategy-
The debates about opting for an appropriate pricing strategy are never-ending and most of them conclude that reduction in the prices will salvage their businesses. Complete Guide about SAAS Pricing Models can help you in this regard.
Offering a reduced price than the competitors sound a compelling idea to a lot of businesses especially the startups. While a reduced price seems compelling to a customer, it might not be a profitable idea for the business.
If the customers are satisfied with the services that they are receiving and are generating value from it, there is a chance that they can be charged a little higher than what they currently are charged, and there is nothing wrong with that
Monitoring the value that your platform creates and the time it saves for a customer will help to make a proper conclusion regarding the increase in costs that need to be done for the tools and the services.
A little increase in the dollar will see a lowered conversion rate. However, it will prove worth practicing in the long run.
- In-app upsells-
An application provides an effective way to deliver messages to the users without being ignored as the case arises with the Emails and Mobile messaging services. This can be effectively used to offer customers with new plans and tools to opt for.
Care must be taken however, to avoid being overly aggressive with bombarding the customers with promotional messages as it can make them irritated.
Right opportunities to promote the features that best suit the situation is the key to make the best use of In-app upsells.
- Third-party cross-sells-
The in-app messaging feature can also be used to promote the products that other companies provide or maybe some other services that the SaaS platform owning organization promotes.
The platform can have commission based tie-ups with the companies, and the sales from their platforms will add to their revenue generation.
However, just like the case of In-app upsells, care must be taken to promote the products at the right time with limited aggression making sure the customer is comfortable with the pop-ups and it is making them curious about the same.
*Increasing the client base-
While addressing the issues regarding customer retention and increasing the ARPU are of significant help in boosting the revenues with little costs, when it comes to growing the business, increasing the client base is the most straightforward way of accomplishing the goal.
Businesses tend to bring in more customers by carrying on extensive marketing campaigns, targeting new markets, increasing their services to accommodate a wider demographic, and so on.
Such innovative campaigns are essential for a business, but these practices come at a risk, as these campaigns cost a fortune.
A relatively less risky way is to micro-analyze the onboarding process and make amends and improvements in these levels to make the customers feel more assured and taken care of.
In case of a SaaS business, the sign-up process plays a vital role in a customer making the sign-up decision. Here are some ways to streamline the process and increasing the sign-up rates
- Testing-
Testing is an essential part of a business process to get rid of the shortcoming and make the product ready for the customers. Before customers sign for a service, they essentially go through the pricing page to opt for the proper plan that will suit their requirements and it, therefore, plays a very important role in the customer’s decision-making process. Generally, the customers look for information regarding the contract, prices, cancellation policies, and the features that the package provides them. Businesses must endure that relevant information is readily provided to them. The hidden information is a big drawback and will set off the customer right away.
Designing the page is important as well. Certain people wish to see the pricing page with detailed information while certain people are comfortable with brief overviews where they don’t miss any crucial information. The page must be tested and amended frequently to make it optimal in design that serves the intention of all the customers.
After the customer considers the pricing options and decides to sign up for the service, comes the very process of signing-up. And to make the process hassle-free, testing the sign-up page needs to be done likewise. Making it simple, with the customers having to enter only the relevant and necessary information to be able to get on board and start working with the product is what needs to be made sure of. The easier the process of signing up, the more the rate of conversion. Assurances of security and the positive testimonials of the client base will help the customer feel safe and give the sign-up page a positive ambiance. But before even thinking about testing make sure to hire an experienced SaaS Application Development Company to make the testing phase run more smoothly.
- Charging options-
The sign-up process ends with the customer providing the billing information to the SaaS platform and this can very well make or break the situation. While credit cards are the standard options to make transactions and by default, the form to fill the credit card info pops up on the billing page, several customers might be willing to opt for some other mode to offer payments. Providing these customers with the ways to offer payment in which they are comfortable with will positively affect the sign-up rates. Paypal, Debit card, Net-banking, Digital wallets, Tokens, and a lot of new payment interfaces have come to be lately which must be incorporated to make the process viable for people with diverse opinions.
Conclusion-
Increasing the profit margin is the main focus of every business however sophisticated their process seems to be, and the methods to achieve the same varies accordingly as the business model does.
SaaS-based businesses are growing exponentially and being comparatively new to the world requires new approaches to face the business challenges it poses. While traditional ways are proven techniques to build a business, new approaches are necessary for improvement and innovation. The above methods to improve the revenue generation and increasing the profit margin are simple yet easily overlooked. Making sure they are properly addressed will prove to be immensely beneficial.
‘Change one small thing today, bigger changes will follow.’
Author Name:- Harikrishna Kundariya
Biography:- Harikrishna Kundariya, a marketer, developer, IoT, ChatBot & Blockchain savvy, designer, co-founder, Director of eSparkBiz Technologies, A Mobile App Development Company. His 8+ experience enables him to provide digital solutions to new start-ups based on IoT and ChatBot.
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