Every business knows how important it is to understand the target market and their current subscriber base. This is key for acquiring and retaining the most customers, and it is exceptionally critical for companies selling software as a service. Knowing your customers helps your company create the most effective advertising strategies, including email marketing, new customer promotions and more. Below are the metrics your business needs to acquire and retain subscribers:
Attracting new customers
The buyer persona, defined as the perfect or target customer, is an important part of success for any business. Knowing your target market tells which channels are best for customer communication, what your customers' personal and professional needs are and more. All of this gives you the information necessary to create and advertise better products.
"Companies using a SaaS business model come into contact with their customers at numerous points."
Luckily, as Business2Community noted, companies using a SaaS business model come into contact with their customers at numerous points throughout the customer lifecycle. They can combine insights from sales, marketing, account management and customer support into a robust profile, using knowledge of their current customers to define their ideal one.
To create a buyer persona, you need to understand your customer demographics, including education, age, industry experience and location, as well as their goals, preferred news and industry sources and competitors. You should also know the company role of whoever makes the final decision regarding software purchases. These people tend to be more involved, knowledgeable and critical of the software you provide. The best way to communicate with them depends on whether they're in sales, IT, marketing or the C-suite.
You'll also need to identify your customer's pain points. Since SaaS companies provide a product that solves a particular issue, having a close understanding of your subscriber's frustrations tells you what features of your software to highlight in advertising.
Understanding current customers
You need data to understand your existing customers, but studies show many companies don't keep track of important customer metrics. As Smart Insights reported, research from Totango found that while most subscription-as-a-service businesses track customer churn, only 35 percent track the cost of retention. Forty-six percent track customer health, while 49 percent track customer lifetime value. Meanwhile, half of the businesses surveyed tracked their net promoter score, and only 54 percent monitored the revenues per user.
Understanding these metrics is incredibly important - they help you predict how many customers will cancel their service, determine the value each one brings in terms of revenue, identify customer pain points and more. For example, tracking customer health helps you estimate what percentage of your subscribers are unhappy and thus most likely to cancel their contract. Meanwhile, tracking the cost of retaining each customer and comparing this value with the cost of acquisition allows you to design marketing strategies that make the best use of your advertising budget.
However, the most important metric is the average customer lifetime value, found by multiplying the length of a customer's subscription by the price of their recurring charge. Tracking this data shows the long-term financial benefits each customer provides, allowing you to forecast future revenues and structure your business accordingly. In addition, you can use the information gathered from your current customers to create your buyer persona.