I talk with a lot of new customers about how and why they bought a software-as-a-service (SaaS) solution. Here are the kinds of things I hear:
- “We didn’t spend a lot of time with the free trial. We just subscribed.”
- “With such a low monthly cost and no long-term commitment, we figured if we didn’t like the product, we’d just drop it.”
- “We didn’t spend weeks looking at demos and trials; we just bought it. Once we used the solution for a couple of months, we figured we’d know whether we wanted to keep paying for it.”
It’s not that these companies didn’t evaluate the SaaS solution seriously. In fact, often they were considering it to manage a critical part of their business.
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.
Just do it
They took a different approach: Just buy it and try it.
After all, subscription pricing is one of the great advantages of SaaS solutions over traditional on-premises software. Monthly fees are 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.
That’s good news for SaaS solution 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
But it’s not all good news for vendors.
For most SaaS companies, they need a customer to stay for at least several months, even 2-3 years, to recover the cost of acquiring that customer. If the customer leaves too early, the vendor will actually lose money, not make money. (See “Acquiring Customers Ain’t Cheap.”)
For the SaaS sales and marketing team, this means even when they’ve brought in a new customer win, their work’s not done.
Now they need to convert those new customers into committed users. Success requires more than converting prospects into paying customers. It also means converting new customers into long-term customers.
Their responsibilities now include helping with on-boarding, training, expert guidance, or whatever else it takes to convert a new buyer into a committed user. To fill that role, I’ve seen marketing teams add all kinds of “post-sales” activities to their programs:
- Host webinars for existing customers to pass along advice on using the solution more effectively
- Publish customer success stories that share best practices
- Support 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.
(For more thoughts on effective on-boarding, see “Get SaaS customers off to a healthy start.”)
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 easier to win new customers, but it’s tougher to keep them.