B2B SaaS Marketing: How to maximise your Customer LTV

The success or failure of a SaaS company boils down to the three aspects. They are how well a company can:

• Acquire new customers quickly and cost effectively
• Retain existing customers
• Grow and monetise customers through up-sell and cross-sell opportunities

Companies operating with a subscription business model are very different compared to non-subscription businesses, and this is mainly because the revenue and profit for the service come over a longer period of time.

So, if a customer is truly happy and able to extract the value of your service, they will stick around for a long time.

On the other hand, if a customer is unhappy they will quickly churn and you will not only lose the money you invested on customer acquisition, but you’ll also never get the pay back of the customer acquisition cost and the resulting profit.

Let’s illustrate this point using the following example and graphics below:

It doesn’t matter how much more you’re able to sell each month if you’re simultaneously losing customers at a higher rate. While selling more is good, it’s crucial to keep your customers happy so they stick with you.

Let’s take another example to bring this issue to life:

If you are using a platform such as HubSpot, then you’ll see that their default customer lifecycle stages are:

While HubSpot’s default Lifecycle Stages are good for most businesses, they do not fully support the needs of a SaaS company.

For example, as a SaaS company you would almost certainly want to communicate with your churned customers. And if you have a freemium business model, you would need to distinguish between free and paid users. In addition, your free users should not be considered an MQL forever since their likelihood to buy will diminish over time if they are unable to extract a certain amount of value from your service.

And if you have a no-touch sales strategy without sales reps, you probably don’t need all SQL/Opportunity stages.

With this in mind, we recommend that SaaS companies build their own Lifecycle Stages based on their actual business needs.

To help you get started, we have created a base model which you can utilise and modify when planning the lifecycle stages of your SaaS business, taking into consideration your business and sales model. This is what we'll outline in the next section.

3.2 SaaS Customer Lifecycle Stages

• Subscriber: A website visitor who has opted in to hear from you periodically, such as signing up for blog updates or a newsletter.

• Lead: A contact who has converted through an offer on your website (participated in a webinar, downloaded an eBook or watched an on-demand product demo) and has typically filled in a form with more than just their email address. Leads show a stronger interest in your offering than Subscribers.
• Free User: For companies with a freemium business model, this would be a user that has opened a free account but hasn’t upgraded to a paid plan and become a customer.
• MQL: Marketing Qualified Leads (MQLs) have identified themselves as more deeply engaged with your company and your offering. They are more sales-ready than your usual Leads, but they’ve not yet become fully edged opportunities. These are typically contacts who have converted with Bottom of the Funnel content such as demo requests, buying guides, and other sales-ready calls to action, or they would be a Free User who has demonstrated behaviour that they are ready to upgrade and buy.
• SQL: If you have a high-touch sales process, Sales Qualified Leads (SQLs) are those MQLs that your sales team has accepted as worthy of a direct sales follow up.
• Opportunity: If you have a high-touch sales process, opportunities are the contacts who your sales team have identified as sales opportunities to pursue and they are tracked in your CRM.
• Customer: An actual, real, paying customer. 
• Churned: A customer who has now churned. They are no longer paying for your service.
• Evangelist: These are your super, happy customers that actively promote your product, mention your company, and are a true advocate for your company and service. Leveraging their networks often bring in new customers and help you reach leads you may not have been able to otherwise.
• Other: The wildcard; basically anyone that doesn’t fall into any of the categories mentioned above.

This will enable even more improved and timely communication, and in the next section, we’ll look at what practical steps you can take to grow the LTV of your customers with relevant marketing tactics for each stage of the lifecycle.

Read more: HubSpot essentials for growth marketers: Lifecycle management

In order to help you maximise your LTV we have created the SaaS Lifecycle Marketing model, which is built around the three cornerstones of acquisition, retention and growth.

 

4.1 Acquire 

 

4.2 The Customer Acquisition Framework

Attract:

• Define your Ideal Customer Profile to help you understand your dream customers; what challenges do they have? In which channels do they like to communicate? Where do they spend their time online?
• Create relevant and highly valuable content that your target audience will appreciate
• Optimise your content for search engines to increase traffic.
• Promote and utilise relevant social networks to increase your reach.
• Read more: Forget buyer personas – Here's your step-by-step guide to better customer research in B2B SaaS

Convert:

• Make sure your website has more than just the traditional “Sign up” or “Free trial” as a way to generate leads.
• Use conversational marketing to convert website visitors into contacts.
• Once you’ve generated a new lead, it’s time to nurture them towards becoming a customer through automated workflows.

Close:

• Once a lead or free user has started to show signs that they are interested in your service and are getting ready to buy, educate them with highly targeted sales materials (sales enablement).
• This could be bottom-of-the-funnel content such as case studies, ROI calculators, TCO calculators, buying guides and product comparison sheets; make buying as easy and simple as possible for your customer!

 

4.3 Retain

As you’ve come to realise, growing your SaaS company is highly dependant on your ability to retain your customers.

In too many cases, and especially with services that use a freemium model, the biggest challenge is to make sure your users actually start using your product and are able to gain the value you promised. This, what product people call stickiness, is crucial to retain the customers you worked so hard to get.

Product stickiness is not something that just happens by itself, but through a combination of factors. You can increase the stickiness of your service by:

• Having a product that actually stores the value. For example, HubSpot houses all your data regarding leads and customers, which is a pretty good reason to log in and use it on a daily basis.
• Changing the way we do work, for the better, and over time it creates and facilitates the adoption of a new habit. For example Slack solved the problem of email and inbox overload by changing the way teams communicate.
• Giving you reason to log in, for example to follow analytics/metrics, check your progress, or as a tool for something you do on a regular basis. Trello is used by teams and individuals for a variety of purposes - scrum task boards, content planners, or a CRM - and hence it ensures you will use it on a regular basis.
• Creating a killer brand. In addition to the above, HubSpot, Slack and Trello have all created brands that their users love and advocate and are modern day cultural icons. They’re excited about using the product and don’t consider it a chore or something they’re forced to do. This has a twofold benefit in that it increases stickiness but also generates evangelists who will promote your product to others.
• The other great thing about getting your customers to use your product is that it starts generating usage data.
• This will give you insight into what your users love, and also what they hate. Earlier in the post we brought up the concept of lifecycle stages for your customers, and one example was churn threat. Over time you will start to develop an understanding of the type of behaviour a customer exhibits which indicates they are likely to churn. These could be:
  • A customer asking for features that your product doesn’t have but are important to that customer
  • Your product doesn’t integrate with your customer’s other tool
  • Your customer is only using part of your product, which doesn’t deliver the expected value and can be replaced by a competitor or alternative solution
  • Your customer has not logged in for a long period of time and isn’t actively using your product
  • Your customer is checking your Terms of Service page or viewing the page where you cancel your subscription

Retaining customers is hard work. But for it to work you need to have your customer analytics in place. Tools such as Mixpanel give you a better view on how your customers are interacting with your product, which will help you retain your exist- ing customer base.

 

4.4 The Customer Retention Framework

Onboard your new customers:

• The foundations for customer retention success are built as soon as your customer signs up.
• Make sure your first touch is warm and friendly, yet at the same time delivers educational information about the best way to get started.
• You should make this as simple and fun as possible, whilst ensuring you promote the value-adding differentiators your product has over competitors or alternatives (hint, this one is actually is quite important).
• Check out this short video from video hosting platform, Wistia, about how they developed their onboarding program to produce a 15% lift in one of their main retention KPIs, which also led to more account activations and sales.

Analyse usage patterns:

• Analyse which kind of behaviour tells you that your customer is likely to churn.
• Follow usage metrics (e.g days since last login, usage time for each login, daily visits/ usage, the number of apps used) to determine to whom and when to send some communication.
• Follow the sales uplift the program creates, but just be sure you don’t jump to any conclusions too quickly - you’ll gather this data quite slowly and it requires a fairly large user base (hundreds of thousands) and it’s most likely you won’t get sufficient data here within a few weeks.
• Track and monitor “activity churn”, which is how many users became inactive during the month. This will provide a good forecast for your future churn, so having your churn prevention programs in place can make all the difference!

React to customer feedback:

• Today’s customers can really have an impact on your business, both positive and negative, but especially if they are unhappy.
• One tweet from an unhappy customer might be worth of hundreds of thousands of dollars of lost new sales and churned customers.
• It’s super important that you’re monitoring your customers on social media to follow what they’re saying since it’s priceless feedback.
• In addition, your standard NPS & Customer Satisfaction surveys create a great deal of actionable data, upon which you can base your retention campaigns.

Read more: Who should own customer retention in B2B SaaS? Here’s what 8 experts have to say

 

4.5 Grow 

Like we discussed earlier in this post, the best performing SaaS companies achieve negative churn (up-sales and cross-sales to existing customers exceed churned revenue).

But still, way too many SaaS companies struggle with their pricing model in that they don’t enable effective up-selling mechanics. This is something that holds your growth back and prohibits it from being what it could be.

Let’s take a good example: If HubSpot only had one pricing axis, the basic monthly subscription, then it wouldn’t have grown into the company that it is today.

But they understood the power of multiple pricing axes.

Your monthly fee is not only based on your subscription plan, but also the number of contacts you have, (which is going to rise over time), as well as various add-ons you can buy, which will help you get even more out of the product.

This would already be pretty sufficient for a marketing automation platform, but HubSpot also has another suite of products available; HubSpot Sales. So all in all, their customer LTV will gradually rise over time, but more importantly, it’s tied to their customers’ success, so their is a clear motivation for HubSpot’s growth team to ensure their customers can extract and measure the value of the platform.

So if you have your add-ons and additional products in place, then you should have certain workflows in place that you trigger when a customer completes a certain action, for example visiting your add-on product page three or more times over a two day period.

This typically tells you that a customer has a specific interest in that add-on and that it’s certainly worth of follow up, either by automation (such as an email or in-app message) or via a human touch (if you have a high-touch sales process using reps).

Advanced tools, such as HubSpot Marketing, enable you to receive real time alerts when customers complete these actions, such as visiting your add-on product pages.

In addition, you might also want to consider utilising the customer support data that you receive in via chat, emails, and phone calls; customer questions usually contain a lot more insight than companies realise. You may well hear some sound bites that a customer has specific problem with their existing tool set, which your add-on could solve.

 

4.6 The Customer Growth Framework

Start cross-selling, up-selling and upgrading early:

• Too many SaaS companies fall short when they don’t realise they should start their upsales communication as soon as the onboarding program starts.

Upgrade from monthly to annual plans:

• If your company offers an annual subscription plan in addition to the monthly subscription then make sure you promote it to your monthly billed customers.
• Upgrading to an annual plan is an underused growth tactic in SaaS companies and it offers benefits to both you and the customer How? For you, customer commitment for one year takes the pressure off your churn, and getting cash in the bank 12 months in advance is always a good thing, and for your customer it will reduce their cost since an annual plan should always be less than 12 times the monthly plan.
• If you don’t have the possibility for an annual plan then think about adding one.

Define actions, set up triggers and alarms, and create a sales process:

• Define a certain set of actions that a customer can complete which indicates a sales opportunity.
• Build an alarm system that notices you every time this action is completed.
• Create a standardised process that is triggered each time the alarm rings; this could be an automated work ow (sending an up-sell email) or it could be a call from one of your sales reps with more information about your up-sell offer.

5. Summary

Your growth will come from your ability to successfully retain and monetise your customers once you’ve acquired them.