This article was originally published on PayKickstart, a SaaS company that specializes in payment processing. You can view it here.
Monthly recurring revenue is crucial for your subscription business success. Whether you have a SaaS company, or service that relies on a monthly and yearly recurring customer base, this concept is critical.
Maybe you have already started searching for information online, but like many business owners and partners, we can feel lost in the sea of information that can seem helpful, but often gets us feeling lost and confused.
In this article, I am going to go over 10 proven strategies that have been found to increase the MRR of SaaS companies within the last few years. Some examples are of known companies, and in many ways they can be good indicators of what is currently working in the market right now.
1.Do free trials strategically
Nearly every SaaS business does a free trial, especially if they are new to the market and don’t have an existing customer base.
If you think about it, the ultimate outcome here is to demonstrate the value of your software in real time.
Free trials are important, and you should do them, however many business owners lack the correct method when implementing this strategy. We have to face the fact that it is simply not enough to just do a strategy. It is best to do it correctly, and at the right place and right time.
Typically, many SaaS companies offer 7-14 day free trials to test their software.
This can convert users into customers, however there is a caveat: Can your product deliver within that time period?
This is what Wayne Mulligan of Crowdability wrote about in an often cited post on Quora. He said, ‘’Do not offer a free trial when your customer can’t get a complete picture of how your product benefits them during a reasonable free trial period.”
If your product can deliver within that time, then by all means offer a free trial within 7-14 days. If it cannot deliver within that time frame, consider offering a longer free trial or abstaining from one all together.
Ideally, the main benefit of your product should be demonstrated nearly instantly, or within a quick time frame. Your customers likely won’t see a 10x increase in their sales during 7 days of using your software, however, you can create tangible results for them very quickly by demonstrating tangible outcomes in an easy way.
Some examples include Wix Artificial Design intelligence that makes a site nearly instantly, Ahrefs SiteExplorer that can show you instant intelligence about a website, and Paykickstart with multiple features like 1-click Upsells, pre-filled checkout pages, and exit intent-popups that your customer will instantly see!
2.Unbundle your features
This is definitely a key component of your marketing plan. Many SaaS companies in recent years have adopted this strategy, and for good reason.
Why just offer one product with many features, when you can offer multiple feature options for one product? This is definitely a good way to increase monthly recurring revenue, because even if you have less users but they pay more, it can make up for those losses.
Some real life examples include Adobe, monday.com and ahrefs. Adobe is one of the best examples, because when it comes to their multimedia softwares, you can’t just pay for one and get the whole package, there’s a video editing software and a graphic design software, but you can’t have both in one!
On their pricing pages of these companies, they offer different plans, increase the features the higher you pay, and they also charge per seat in many instances.
When talking specifically about Monday.com and considering the success of their SaaS, the marketing team was using Bigbrain, a marketing analytics software, to track their campaign data all in one place. From there, they were able to make the right decisions, and this likely led them to splitting their pricing.
According to Yolande D’Mello’s report on Martechseries about monday.com, ‘’They grew 350% in 2016 and their client base doubles approximately every 5 months. Their ARR grew by a similar margin the year prior and they anticipate similar growth this year.’’ Considering those metrics, there is definitely something to learn here!
3. Examine in depth why your customers are churning…
You can’t fill a leaky bucket, so you are going to need to plug the holes; This is a good analogy to describe reducing churn and increasing monthly recurring revenue.
So how do you discover the real reasons for losing customers?
First and foremost, your customer service will be a big predictor of your customers staying or leaving. This is common wisdom within the business community, and according to an often cited survey by hubspot, 80% of respondents said that they stopped doing business with a company because of a poor customer experience and service.
Also, according to a 2011 survey conducted by American express, ‘’78 percent of consumers have backed out on an intended purchase because of a negative experience.’’ So now that you know about the holes, let’s focus on how to plug them….
Here are some things you can do to prevent loss of customers and MRR:
- Make sure you are keeping up with customer complaints, and that you have effective software to do so. According to a survey conducted by Twilio, 90% of the customers surveyed preferred messaging, so listening but also having the right tools matters.
- Follow-up before and after a cancellation happens; For this to work properly, you have to build a relationship beforehand with your customers. Make sure that when they subscribe, you send a personalized message or even video message that welcomes them and shows that you care.
Through doing this, you are priming your customers to be more responsive in the future, and this is especially helpful when it comes to cancellations as they may likely tell you what the issue was in detail. A real life example of this was mentioned on Baremetrics, where Pigeon founder Pat Wells spoke about how this method has helped him understand his cancellations better.
- Focus on analytics that show how your customer is using your product, and whether they are even using it all. These are usually precursors to cancellations and/or customer complaints.
4. Never stop testing prices.
Testing prices is another commonly overlooked strategy. And again like the other strategies, it is not enough to just do them. You have to do them correctly and at the right time.
The best way to test your prices and avoid pitfalls, is to use your data. This is what SaaS company Klipfolio did, as co-founder Allan WIllie explained in an article on their website.
Rather than sending all their customers to the new pricing they were testing, they decided to send 70% of their new and trial customers to the new price, and 30% to the old price. They did this over the course of three months, from November to January of 2016.
The benefit of this strategy came down to recognizing what pricing worked and didn’t without risking severe losses in monthly recurring revenue.
Allan and his team then went on to discover that when testing the new higher price, they didn’t suffer losses in conversion rates, so that was the green light for them to proceed with new higher pricing. In short, they took a risk, but it was a calculated one.
5.Dont’t settle for one time and monthly payments, always try yearly first.
You’ve undoubtedly seen this method used on many SaaS pricing pages, and for good reason.
This is a recent trend that can not only increase the initial payment you receive, but filter out low paying and potentially troublesome customers.
Hubspot for example offers by default annual payments at their price point, but if you tick the monthly option, the monthly price increases. The average psychology of a consumer would feel a disincentive with the increased monthly price, and may consider the lower monthly price but with a higher up front payment.
The strategy of offering yearly payments also plays into the law of commitment and consistency first discovered by psychologist Robert Cialdini and explained in his book Influence. Bottom line, the more someone commits upfront, the more likely they are to stay consistent with their decision.
This is why it is crucial to try going for the yearly payment first. Then, if the customer rejects that, you can offer the monthly option.
If the customer does choose the monthly option, it could possibly be a good idea to follow in hubspot’s footsteps and offer it at an increased price. Test this strategy out and see how it goes!
6.Constantly offer more value and upsells, even in Premium.
But aren’t I already charging my customers enough?
Wouldn’t this make me look money hungry? Possibly, but if you want to survive in this market, you are going to need to be constantly selling, but more specifically, offering value.
This is similar to splitting your product features, but in this case you are splitting the sales process. For example, maybe your customer paid for your pro monthly subscription as a yearly payment, from there, you can later on offer them an extra feature at a discount.
The key to this strategy is thinking about the sales process as on going, not a one time event, or monthly subscription.
A good example of this is Trello. They offer their enterprise pricing plan, where as you increase the number of seats, the price per person drops. This can incentivize higher purchases, but also, as the enterprise increases their revenue, they may have to hire more employees and pay for more seats. If Trello’s customer loves the software, the upsell is already more likely…
7.Event based billing
This is a newer concept, spoken about primarily by SaaS company Chargify.
Event based billing is the concept of charging based on events that happen when your customer uses your software.
Chargify talks about this often because their software allows you to track events, but this trend may quickly start to be a feature of many other SaaS companies.
The reality is, as mentioned in the sixth strategy, you should offer upsells even in premium, but event based billing is an even more covert form of upsell. That sounds sneaky, but it can be done ethically, by telling your clients upfront that you have extra fees depending on what events happen from their use of your software.
It’s possible that you can also incorporate this concept into your SaaS if you offer freemium, but this decision should really depend on whether you have the customer base to do so.
If you are a new company that offers freemium, this is likely not a good idea profitability wise.
The concept of Event based billing has the potential to become a trend in the coming years because of the possible worsening of the current economic contraction. This type of strategy could lead to higher profitability with less customers, and it is definitely possible that consumer spending, even in B2B, could slow down slightly.
It’s like an orange. If you want the juice, wouldn’t you want to squeeze every last drop?
8.Win at the comparison test
This is definitely much harder to achieve, and is more of an overarching strategy of which you should base all your actions off of.
It is key to be self-aware and reference other options, because as humans, we have egos, cognitive bias and blindspots. The more you are aware of this, and prevent these shortcomings from guiding all of your business decisions, the further you will go.
A real life example of this is Wix. Since the beginning of the company Idan Segal, the Organic growth lead, noticed they had some ranking pages, but ultimately Wix was struggling to really rank content that addressed the problems of their customers.
The team understood that they had to keep up with google in order to outrank their competition, and because of this, they focused on optimizing customer satisfaction and keyword research.
For Keyword research they used SEMrush, because they knew that their keywords were constantly updated and accurate, ie: what their customers were searching for, but rankable especially in different languages.
What did they do for customer satisfaction? Good customer support was an important aspect, but really, its ADI feature (Artificial design intelligence).
There are barely any other web platforms that offer the easiest design option possible: An automated one. And even if others come onto the market, they were first, or at least are first in the minds of customers in their market.
A way to get started with this concept is to take a step back and do the following:
- Note down all of your competitors
- Mark down everything they offer
- Examine everything you offer
- Ask yourself how you stand up against them. Look at their web traffic, branding, features they offer etc…
- If you have reviews, examine what customers are saying about your product, in comparison to your competitors products. Look for patterns…
9.Increase perceived value
It is important that first and foremost, the software you offer is of good quality. If that is the case, you should then focus on an often overlooked concept: Perceived value.
Think of luxury brands in the fashion, car and jewelry industry. All of these companies understand aesthetics, and how this can influence their customers to pay more.
Obviously a diamond, gold necklace and a well designed dress can have costs, but much of the time, especially in fashion, the mark-ups are insane and mainly based on status and social approval in the customers minds.
A similar concept is likely going on in the SaaS industry, as some softwares are used more than others, even though they may offer sub par customer service and similar features to better options…
So how can we implement this concept into our SaaS companies?
- Layout of site
Make sure the web page speed is quick, the web layout is simple enough to understand at a glance, the offer is front and center, and there are no spelling errors and broken links.
- The ‘’Look’’
Does your logo convey value? Are your photos pixelated and cheap looking? Part of the look is using colors that make sense for your product. For example, If you are trying to imply intelligence use blue. If it’s optimism and friendliness, use yellow. Crazy egg has a good article about this, where they show data on what studies found about colors and marketing.
- Testimonials/Social proof
You have probably noticed many businesses use testimonials, but keep in mind that who is giving the testimonial, and how it is presented matters. As a SaaS company, obviously a big name would be great, but if you are newer, consider reaching out to moderate sized blogs that your customers follow. From there, try to build a relationship and give them free access to your product. If they like it, ask if they can write a testimonial.
Some other ideas to increase perceived value:
- Make a waiting list. Ex: ‘’Sorry subscriptions are currently closed, but it will open up again to the first 100 customers in January 2021. Join the waiting list to secure your spot.’’
- Higher your prices, and possibly just offer a phone call where you will then offer a quote. (Do with caution, but it will filter out low paying clients and send a message that you are of high value and quality).
10.Target untapped markets
This is another crucial strategy that some SaaS companies never do. They make their software, and then just target whoever their competitors are targeting.
Ask yourself, ‘’Who could use my software, but is under served?’’
You are likely marketing to people who are over marketed to, and let’s be honest, distraction is rampant, especially now! So when targeting, you should take the approach of marketing to your ideal customers in your market, but take it a step further, and see who is untapped. This will give you a competitive edge!
Here are 3 things to consider when it comes to untapped markets:
- Can they use your software?
If you have a payment processor company for example (Pay kick Start), a wide range of business owners could use your product. If it’s a project management system, then it’s going to be companies with a team of a few people or hundreds.
- Can they afford your software?
This is crucial if you want to keep the lights on. They may be untapped, but they have to be able to pay, and ideally, pay a lot for your software. When they can pay a lot, there is likely more where that came from!
- Are they part of an emerging trend?
Research will come in handy here. Looking up analytics on keyword trends, reading different industry publications/blogs, verifying customer reviews, and scanning forums will give you a sense of what consumers are thinking about.
Wal-mart initially was a good example of this in action. A key part of Sam Walton’s strategy back then was to 1.Undercut the competition with a lower price, and 2.Set-up shop in suburbs instead of in the city. There were stores in the suburbs, but barely any of them were department stores, so he recognized a possible demand (A one stop shop) and capitalized on it.
Many SaaS companies are promoting in the busy city. You need to find the suburb…
Hopefully you found these strategies helpful, and they shifted your thinking about how to market your software. A key concept behind all of these strategies as you probably noticed, is distinguishing yourself from the crowd.
Distinction is a key part to increasing your business (Monthly recurring revenue), because it will solidify a place in your customers minds, rather than just be one of the crowd.
Testing different price points, tapping into underserved markets, using surveys and analytics, and really anything that can plug the leaks and fill your bucket, are all crucial components to consider throughout your process of increasing revenue and eventually profitability.
WIth many companies retracting, there is no better time than now, to outperform, and capture market share…