Though the story exaggerates perhaps, the point still pertains. In the on-premise software model, you can win the deal, secure the up-front license fee, and then head on to the next victim… I mean prospect.
In the software-as-a-service (SaaS) model, however, this approach won’t work.
You can’t take the money and run
For one, you need happy customers to serve as positive references. Sure, positive references are always important for business – SaaS or otherwise. But they’re especially important for SaaS companies, where you need to be particularly frugal with customer acquisition expenses. And the fact is, positive “word-of-mouth” promotion can be very cost-effective.
A second reason to keep existing customers happy is renewals. Unlike the on-premise license model, SaaS providers need customers to renew when their subscription expires. High renewals and low “customer churn” are critical to recovering the initial customer acquisition and provisioning costs. Many of the successful SaaS companies are achieving renewal rates of better than 90%.
Ideas on marketing to existing customers
So now I can imagine the already over-burdened marketing executive muttering, “Just what I need – another target audience. Like it’s not tough enough to reach all the influencers at my prospective customers – the functional buyer (e.g. HR, sales, accounting, etc.), the CIO, the CFO, procurement – now I need to reach them within my existing customers too.”
For those marketing folks who haven’t become completely discouraged and stopped reading yet, I’ll offer a couple ideas on how to manage this challenge.
For one, include your existing customers right along with your prospects in most of your marketing efforts: invite them to webinars, send them case studies, meet with them at tradeshows and conferences, and send them news on product enhancements. You’ve promised them an on-going stream of enhancements over the life of their subscription. Make sure they know about the enhancements and encourage them to use them.
A second practice that I’ve seen succeed is an on-line “community” web site where customers can ask questions and provide answers on best practices. Your own experts within the company can jump in, but often customers are in a better position to help other customers. Besides the impact on support costs, an engaged group of customers can be your most effective advocates, so give them a forum.
The challenge, of course, is to run these programs to engage existing customers within a constrained marketing budget. (I didn’t promise this would be easy.) But ignoring existing customers – the “take the money and run” strategy – will ultimately lead to lower renewals and higher new customer acquisition costs, which for SaaS companies is a shortcut to failure.