Software-as-a-service, by definition, provides 24/7 accessibility to its customers. The success of the erstwhile on-premise business software was dependent upon the number of licenses sold, SaaS is helping drive the change that success is now dependent on user engagement and hence linked closer to ‘value’ provided. Hence the growth in the SaaS world is moving away from trying to convince someone to buy the application, but rather, in ensuring that customers and users… continue to regularly use it!
Engagement levels of users vary significantly among the B2C and B2B worlds. In the B2C realm, businesses are trying hard to imitate the Facebook and YouTube models to ensure as much usage as possible (though recent reports would strongly suggest any ‘addiction’ driving approach to be misguided). This cannot be said for the B2B SaaS world though, as reports indicate that only the large businesses are maximizing gains from SaaS usage and this reflects in their market share, growth, and revenue.
Do the rest of the SaaS companies in the B2B sector, particularly the SMBs care enough to go about systematically tracking user engagement? Do they track areas like product usage, duration of usage, product performance, feature heat maps, etc., which is critical to product success? Is the paucity in self-evaluation leading to user apathy? Finally, where is this trend leading?
Future of SaaS
A recent post by Gartner points out that SaaS will likely remain the largest market segment among the Cloud derivatives, and the forecast is that it should grow to about $116 billion in 2020 due to scalability of the software (details below).
The Cloud managed service landscape has heated up significantly in the last few years. The article notes that by 2022, up to 60% of organizations will use an external service provider’s cloud-managed service offering, which is double the percentage of organizations from 2018. This is not surprising, considering that SaaS has several inherent benefits that help attract customers and boost services by reducing infrastructure and administrative costs.
SaaS has successfully found application in several industries, specifically in the areas of marketing, sales, task management, project management, customer support, and customer success. Therefore, maturing cloud-managed service strategies will continue to be a top priority in the years to come. Considering this projection, it will be judicious for the business strategies, especially the SMBs, to take note of their SaaS user engagement level.
SaaS in the B2B sector
Let us also examine the adoption rate of
applications run in cloud. Notwithstanding the absolute popularity of SaaS, the
graph below indicates that except for websites and emails, the adoption rate can
do with a lot of improvement in a host of other areas.
Do these areas represent domains that are clamouring for better and improved experiences? Or, are they not fulfilling the needs of users? Furthermore, the following statistics show that smaller customers churn at higher rates.
From these existing surveys on
adoption and churn rates, it is evident that the B2B sector of SaaS comprises
of immense potential and growth, yet there are areas that demand better
attention, especially the ones concerning small and mid-sized companies.
B2C Apps influences expectations from B2B Apps
“The success of an app is often measured by the extent to which it introduces a new habit,” said app developer Peter Mezyk in an interview with Business Insider, where Mezyk equates attention to currency. The more time one spends on social media sites, the more advertising revenue the companies earn. Social media apps like Facebook and Instagram have been often called out for deliberately conditioning users to use it as a drug. In 2018, an estimated 2.65 billion people were using social media worldwide, a number projected to increase to almost 3.1 billion in 2021.
The “Fogg behavior” model established by B.J. Fogg, elaborates on the three criteria for a habit to be formed: sufficient motivation, an action, and a trigger. This is the three-pronged approach that is now standard among consumer app developers.
Even though the functionality and usage pattern of B2B product is fundamentally different, SaaS companies need to take note of the success of B2C apps in gaining user engagement, and also about the high expectations users carry on design and ease of use, due to constant exposure to these high engagement consumer apps.
This is important now more than ever because companies investing in SaaS rely on usage metrics to determine the success of the product. Which means renewals of the subscription is directly linked to usage. The more time users spend on the products, the more the companies providing the SaaS solution can claim about ‘value’ provided by their product, thereby providing them an opportunity to upsell to their customers by adding more accounts and extending subscriptions.
So, what’s the way forward?
“The times, they are a-changin'” – BOB DYLAN.
For SaaS companies to do well in the B2B space, they must start ensuring that usage does not slip soon after the implementation/integration is over. There are 5 things that the founding and executive teams need to ensure, to drive appropriate growth and success.
1. Start by Measuring Usage: Trying to gather product analytics using Google Analytics is no longer going to cut it. Google Analytics (or Firebase) were built for website and mobile app analytics and are not too useful for creating insights for B2B SaaS apps. Top performing companies focus on getting the right product analytics tools to craft the best experience for not only their customers but also the end-users. One should consider using solutions like Heap, or even SmartKarrot’s suite of Product Success tools to understand the user engagement of SaaS customers.
2. Invest in Design Thinking: Enough has been written about the need for inculcating Design Thinking into all parts of a Product organization, starting with the executive team. More and more product companies are realizing that when it comes to taking a big step forward with an innovative strategy, a design thinking framework is required to appropriately evaluate product and business strategy direction.
3. Excel at On-boarding: Having a proper onboarding strategy (for both customers and end-users) in place is crucial to achieving higher customer retention. When you improve onboarding by creating an appropriate playbook custom to your business, you get massive leverage that provides a lift throughout your entire retention curve. To achieve this, you have to identify the point where your customers first get value from your product – where they first start to achieve their goals?
4. Continued focus on Product Adoption: It is dangerous to assume that software products that have gained wide market acceptance will also naturally gain user acceptance inside customer organizations. The Product Adoption process needs a dedicated strategy. Again enough has been written about this already, CrazyEgg’s article “7 Ways to accelerate product adoption” explains the nuances pretty well.
5. Automate Analytics to be part of Customer Success: Recently, some thought leaders are beginning to talk about the need to integrate Product Success and Customer Success. Not making product analytics easily (and automatically) available to your Customer Success managers, or having them compile it from segregated systems is a folly that will rapidly impediment them from being successful, apart from killing efficiencies. Finding synergy between the two will help firms grow their subscriptions and revenue exponentially and build a more loyal and passionate customer base at the same time.
6. Define a Target Audience: Forget about the mindset of your product software being for everyone. You need to identify who your target audience is. If you cast too wide of a net, you are less likely to have a high conversion rate. Defining your target audience will help you build up a large user base that will be excited to invest in your software. When defining your target audience, determine exactly the type of user your software will help and how it will do so.
7. Understand the Value of Your Customers: You need to realize what each one of your customers are worth. This can help you in a few different ways. First of all, it helps you streamline your marketing. It also helps you define attainable goals when it comes to revenue. Finally, it will help you determine how you can increase your revenue. You can use a formula to calculate the Average Revenue Per User and see how much value each one of your customers brings you. The way you get the ARPU is by using this formula:
ARPU = Total Amount of Revenue in a Period / Number of Active Users in a Period.
8. Calculate Your Churn Rate: It’s important to know what your customer churn rate is, so you can identify potential issues with your software that need to be addressed. There are many ways to measure the churn rate. For example, you can look at how many users have canceled their subscriptions. However you decide to calculate your customer churn rate, you will find it helpful in resolving potential issues with your software.
Hacks for Growing SaaS Companies
As mentioned earlier, to grow in the SaaS world today, you need to do whatever you can to ensure users continue using your software on a regular basis. What are the best ways to do that today? Here are some of the leading methods being used by SaaS companies for continued growth.
Take Advantage of Content Marketing
These days, content marketing is seeing an explosion in its use. That’s because it’s a great way to get useful and original content out into the world, while promoting a product or service a business has. Content marketing helps your company build itself up as an authority in your niche, leading to more people trusting you and looking to you for solutions. Content marketing can be done with blog articles, infographics, social media posts, and videos. To increase SaaS user engagement, you want to provide meaningful and engaging content.
Implement Effective Search Engine Optimization
How do customers find your SaaS software? The way most people learn about something is by searching for it on Google. The importance of implementing effective SEO practices cannot be overstated. When you do it right, you optimize your company’s website in such a way that your software gets in front of the eyes of more people when they are searching for something like it. Most people never go past the first page of the search engine results pages (SERPs), which means you need to rank for specific keywords that people search for, in order to get massive amounts of organic traffic. You want people who are searching for SaaS software to come across your website before a competitor’s.
Use Lead Magnets
Once you get a customer to your SaaS website, you need an effective way to hook them. A lead magnet is a great way to do that. You get to gain their trust, along with their contact information, while giving them valuable content that helps them in some way. The possibilities for lead magnets are numerous. Offer up things like checklists, mini-courses, or downloadable eBooks that provide valuable information relating to your SaaS software. Demonstrate how your solution helps them with an issue they have.
Encourage Testimonials and Referrals
Research has found that 71% of people are influenced to purchase something because of referrals. The reason referrals and testimonials are such a strong driver of sales are because they are deemed more trustworthy than any sales copy, in whatever form it would be created, would be. Testimonials demonstrate proof that your SaaS solution has solved a challenge or issue someone else had in a similar situation. Another novel term for this is social proof. There are some really creative ways that social proof can be generated. Video testimonials are a common favorite these days. You can also display quotes on your website or social media accounts from previous customers praising your application in an effort to increase the SaaS user engagement.
Create an Affiliate Marketing Program
These days, you have the opportunity to work with online influencers who can put your SaaS software solution in front of more eyes than you probably could ever do on your own. Partner and collaborate with the people in your niche who can reach your target audience in the form of an affiliate program. This is something that can multiply your SaaS growth several-fold. You could have dozens of de facto promoters of your software without needing to pay them upfront. Instead, you would give them a percentage of the revenue you bring in from gaining a new customer, thanks to these influencers. Affiliate marketing is powerful when done right. For it to succeed, you need a winning strategy and a team that understands how to manage affiliates. Spending time and resources on developing a successful affiliate program is worth it.
Provide Exemplary Customer Service
Customer service is no longer an option; it has become a requirement for any business that wants to succeed. Make sure you place enough focus on providing great and expedient customer service. This includes every point of your sales funnel, both before and after a sale.
Your customers want to know that you value them and are going to be there for them if they need your help. Your SaaS company should have an all-star customer service team that can help your customers with any and all issues they may have with your application. Creating and maintaining working relationships with your potential and actual customers is essential for keeping them as long-term subscribers.
Offer Free Trials
Some of your potential SaaS customers may be on the fence as to whether they should use your software. This is why you should offer a free trial. This allows users to test out the features of your application and see if it’s the right fit for them. The way many SaaS companies go about this is by providing a sign-up form on their website for something like a 7-day free trial. Not only will this be a great way to show off your software, but it also builds your email list of potential customers. What’s more, influencers in your niche can take in on a test drive when they are reviewing it, without having to pay anything. One thing you want to make absolutely sure is that the free trial should show off an application that provides a seamless experience so that you can convert those prospects into sales.
In conclusion: As highlighted in this post (Six keys to Customer Success) by Boston Consulting Group, when companies move to a subscription-based model, the risk of adopting the product successfully moves from the buyer to the seller.
Instead of being complacent just by generating subscription orders, SaaS companies now need to imbibe a more dynamic approach: evaluate and appropriate—that will hopefully lead to win-win for both SaaS companies and their customers.
The SaaS world is continuously evolving, which means you need to change with it. Innovate the methods of obtaining and retaining customers, so that you can keep them subscribed to your software for the long-term and keep the SaaS user engagement high.
Thanks for reading! Please drop me a note/comment below if you would like to try out our FREE Product Engagement Score calculator.
As an entrepreneur Arnab spent over 20 years handling design & development on latest technologies. In his prior role as Co-founder & CIO of a US healthcare tech organization he was responsible for all technology R&D strongly intertwining with clients’ business needs.
Published January 19, 2020, Updated July 06, 2022