Whether they realize it or not, most people are now using subscription-based “software as a service” (SaaS) products in some way or another. Even familiar software programs like Microsoft Office, which you used to purchase on a disk, are licensed as an annual subscription.
In fact, the combined revenue of SaaS and cloud-based services will grow to $32.8 billion in 2016! And while the industries that these products support range diametrically from healthcare to security, there are a lot of strategic commonalities that go into running a subscription business.
Because of these shared characteristics, the SaaS industry has nailed a few marketing tactics that are well-known and widely practiced. But the value of these tactics isn’t limited to subscription software products. Any business can learn from these SaaS marketing tactics, and apply the theory behind the tricks to their own marketing strategies.
SaaS Marketing Tricks
Here are five of the most popular SaaS marketing tricks that you can adapt for your business.
Free Trials and Freemium Offers
One of the most common SaaS company offers is a free trial run of their product. Free trials are often showcased above the fold on the homepage and as a call to action throughout the rest of the site. Sometimes the offer is for a week’s access to the whole product, others provide a “freemium” version of a portion of their product that is unlimited.
Free trials and freemiums both provide the same advantage. They offer a way for customers to test out the product or service on their own without much skin in the game. This way a customer can actually see on their own if the product will be useful for them, instead of relying on information from someone else.
This is by no means a new idea, but it has really been perfected by the SaaS industry. I actually saw something similar this week where a local coffee shop was doing a blind taste test outside of their shop (which happened to be down the street from Starbucks). Anyone could try two options, one was Starbucks and one was theirs (the better one). They gave away a coupon for a free coffee just for participating. Not only were they giving a couple of opportunities to “test drive” their coffee for free, but they clearly contrasted their strengths with their nearest competitor.
SaaS companies have mastered the basic psychology behind decision-making on their pricing pages. In most cases when you land on a SaaS companies pricing page you will come across something like this:
There is a low, middle, and high price for the product. This does a couple of things. First, it segments the customers into size based upon the version that they click. But more importantly, it provides a small psychological trick that by picking the middle-tier product, the customer is getting a deal. The middle version must be better than the cheap, quick-and-dirty version, and it’s a steal compared to the highest tier (customer pats self on back)!
This is, again, not very different than the more traditional tactic of discounting. When JCPenney tried to do away with their old standby of discounting, and move instead to offering an “everyday low price,” they had a horrible result. Their customers enjoyed the feeling of believing they were getting a deal with 20% off, 30% off, etc., so they quickly went back to their old ways.
Find ways to lay out your pricing so that it is clear when customers are getting a discount like an example above. Offering a small, medium, and the large line up is one simple, clean way.
Another psychology tactic that SaaS companies do a good job of employing is creating a sense of scarcity. By playing to the emotions of potential customers, they increase the urgency for purchasing their product.
Some common phrases are “only 2-time slots left” or “limited time for this version of the free trial.” If customers feel a fear of missing out (FOMO), they will be less likely to put off their decision until later.
Because their business relies on subscriptions and renewals, one of the major metrics that SaaS companies focus on is the frequency of drop-offs. This metric is called churn. As with any business, it is more expensive to acquire a new customer than to keep an existing one, but this is especially the case when a business depends upon subscriptions for revenue.
With that in mind, customer success is a very important area for SaaS companies and a great deal of time is spent on optimizing and improving retention results. This is something that all businesses can learn from, the art of getting better at delighting existing customers and measuring the effectiveness of those efforts.
Find quantifiable ways to measure customer retention and optimize your efforts toward making it better. Improving customer success is a surefire way to bump up your bottom line.
SaaS companies often have the luxury of constant communication opportunities with their customers who log in regularly to their product. Since their customers may need to use their product weekly or even daily, they can collect a wealth of qualitative information through brief surveys and one-off questionnaires. Many SaaS companies showcase the logos of their best customers along with positive reviews right on their homepage.
Potential customers are much more likely to trust the word of other consumers over promotional material from the company that is selling the product. Testimonials show value.
It may not be as easy for your business to access current customers in a seamless way, but there are a few workarounds. For example, you could shoot a quick follow-up email asking for a rating from 1-10 (which doesn’t take much time or effort to answer). Then, if the result is at the top end, prompt the customer with further information that you can use in a testimonial.
Market with SaaS
The SaaS industry has adapted many old marketing standbys and optimized them for their subscription needs. But the fact is, we all want customers to be “subscribers” of our brand. We hope that when they need something else, they will come back for more from our business. So there is a lot that businesses outside of the cloud can learn from SaaS companies, especially when it comes to connecting with customers for the long haul.
Have you tried any of these tactics for your business? Let us know in the comments below.
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