This article is part of our SaaS Business Startup Guide—a curated list of articles to help you plan, start, and grow your SaaS business!
When you’re trying to grow your subscription business, you need to understand the key metrics that drive your growth. I’ve talked before about the metrics you need to know and track when you are running a subscription business, but there are really only three things you can do to move the needle of growth: reduce cancellations (churn rate), increase average revenue per user (ARPU), and increase the number of people who signup.
Even though there are only three areas to focus on to help grow your subscription business, there are many things you can try to improve in each of these areas. I’ve put together my 12 favorite ideas that you can use to help grow your SaaS business.
1. Reduce churn
Churn is essentially your cancellation rate. The percentage of your paying customers that cancel is your churn rate. So, the lower your churn rate the better, and the longer your customers are subscribing to your service, the more valuable they become to you. When you reduce churn, you’re generally increasing lifetime value (LTV).
While you always want to focus on improving your product or service to help retain customers, there are a few things you can do to help reduce churn that aren’t related to product development and building out new features.
Launch an engagement or retention marketing campaign
While your marketing is probably mostly focused externally on capturing new customers, you can turn your efforts internally to help reduce churn. Engagement marketing is when you highlight the benefits of your product to your existing customers rather than to new customers.
You can use products like Intercom to deliver customized messages to your customers inside your app, encouraging them to try features that they haven’t tried yet, or offering help when they seem to be struggling.
Engagement marketing can be entirely automated, and messaging can be triggered by actions that users take (or don’t take) inside your subscription service. So, instead of letting customers drift away or miss out on trying key features of your service that will lead to a longer subscription, start a conversation that encourages your customers to get the most out of what they are paying for.
Improve your dunning process
Your dunning process is what you do when a customer’s credit card fails to successfully charge. A credit card could fail to charge for any number of reasons: the card has expired, it’s near its maximum limit, or even simply because the credit card authorization network fails to communicate with the bank properly.
Instead of just letting a failed credit card transaction lead to a lost customer, you can focus on improving your dunning process: how often and when you re-try the failed credit card, and what emails and other messages you send to your customer.
Most experts agree that you should retry the failed card at least three times, but wait at least a few days before you try the card because your first attempt may have been at the end of a billing cycle.
If you know a card is going to expire, you can send an email or two before the card expires to encourage your customer to update their billing information. You can also email your customer several times after a card has expired and remind them about what they’re missing without access to your product or service.
Try a “win back” campaign
Even with good engagement marketing campaigns and a solid dunning process, you’re still going to lose some customers. After a few months, you can always reach out and try and win your customer back. You can offer special discounts, extra service, and other incentives to encourage them to return.
Sometimes customers simply cancel because they are temporarily trying to cut expenses or are just “taking a break” from your service. Enticing them to come back after they’ve already canceled could be an easy win for you because the customer already knows your company. You don’t have to market in quite the same way you do to new customers. Instead, you can focus on what your lost customer has been missing out on and perhaps highlight new features or offerings that you’ve introduced since they left.
Use predictive analytics
Predictive analytics is when you use your app usage metrics to look for patterns that indicate that a customer is on the verge of canceling. Predictive analytics goes hand in hand with engagement marketing and helps identify customers that are at risk. These are customers that you should be reaching out to so you can figure out how to keep them before they cancel instead of waiting to win them back after they’ve canceled.
Predictive analytics can also be used to determine what aspects of your application or service might encourage users to cancel. If it’s a frustrating experience with a certain part of your service, then that can help guide your product development efforts.
2. Increase Average Revenue per User (ARPU)
One of the fastest ways to grow your subscription business is to increase the average revenue each of your customers generates for you each month. Moving the needle on ARPU can have a bigger and more immediate impact than reducing churn, so it can be an excellent place to focus your efforts.
Encourage more usage
Generally, you can simply encourage more usage, assuming that you charge customers more for additional features. For example, if you have a project management app and you charge either for the number of users or for the number of projects being managed, you could encourage your main account owner to invite more people or manage more projects.
Also, try offering training programs to your customers to help them get the most out of your tool. The more your customers embed your product into their daily lives, the more they will use it and depend on it—hopefully adding more paid features as they go.
How did you choose your pricing strategy when you launched your business? Did you look at competitors to see what they charged or talk to potential customers to see what they’d be willing to pay?
There’s nothing wrong with those methods, but there’s a good chance that you might be able to charge more than you are currently charging. If customers really like your product and find it incredibly useful, you might be able to increase your prices.
You could explore what’s called “value-based pricing“ where you look at how much time and money your product saves for your customers. If you sell to other businesses, you can also look at how much your product helps your customers grow their businesses. Based on the value of the time your product saves or how much your product helps others grow their business, you could choose a price that reflects that value.
You could also simply test different prices with standard A/B testing methods (using tools like Convert or VWO) and see if you can raise prices by a few dollars. There’s a good chance that even if you see a slight dip in conversion rates with a higher price, you might end up in a better position in the long term.
Another route you can explore to increase your ARPU is in-app upsells. This means offering upgrades to your product, within the product itself.
Now, you don’t want your users to feel like you brought them in at a low price, just to have them get out their credit cards to access every new feature. But, you can certainly find the right opportunities to encourage users to upgrade within the product, or add on things like additional storage or other special features that not all users might need.
Similar to upsells, cross-selling is when you offer other products, maybe not even your own, from within your application. Perhaps you have a complementary product offering that you want to tell your users about. Or, you could partner with another company to offer their product, giving you a commission for every sale.
As with upsells, you want to be careful with cross-selling. After all, your users paid to use your product, so they don’t want to feel like they continue to get sold to at every turn. But, the right offers at the right time could help provide value to your customers and provide a revenue boost for you as well.
3. Improve signup rates
Last, but certainly not least, is the most straightforward method for growing revenue in your SaaS business—increasing the total number of customers you have. This certainly isn’t rocket science.
Of course, you can always increase your marketing spend to try and attract new customers, or expand into new target markets. Those are great ideas, but they can be relatively risky. It’s not guaranteed that additional marketing efforts will work or that new markets will like your product.
Instead, start by optimizing your actual signup process. This will improve the conversion rates for prospective customers that are already showing up and checking out your offering. Here are a few things you can try to improve your conversion rates.
Try a better guarantee
Prospective customers want to know that what they are signing up for is as risk-free as possible. They want to know that if they try your product out, they can easily cancel or get their money back if it doesn’t work out.
In addition to (or instead of) a free trial, you could try offering a satisfaction guarantee. Instead of just offering easy cancellation or no long-term contracts, you could guarantee to refund a certain number of months of usage of your service if the customer decides that they don’t like your offering.
This might feel risky, but I think you’ll find that you will actually increase your conversion rate and very few customers will take you up on the guarantee. It’s like buying from REI or L.L. Bean; you get the peace of mind of a rock-solid guarantee that reduces your risk as a customer, so you’re more likely to purchase and actually not that likely to take the merchant up on their money-back guarantee.
A/B test your pricing page
Your pricing page on your website is probably one of your highest-trafficked pages and is one of your biggest opportunities to increase conversion rates. This is where your customers are asking crucial questions about your business: Is there a contract? What’s the price? Is there any fine-print? Can I cancel easily? What features do I get for what price?
This is where you’ll want to do a lot of experimentation. Use a product like Convert, Optimizely, or VWO to test your page and figure out what you should have on this page and what you can cut. Perhaps you’ll find out that you need a long pricing page with tons of information. Or, you might find that your prospects want a very streamlined look and feel.
Test everything from small things like button placement and color to big things like the overall design and structure of the page. You’ll find optimizations that will bring you more customers.
Test your signup process
Just as you tested your pricing page, you’ll also want to test your signup process. How can you streamline it to get customers into your product as quickly and easily as possible?
Ideally, you’ll want to try and reduce the amount of information that you collect during signup. The fewer things you ask during signup, the lower the barrier to completion, and the better your conversion rate will be.
Also, test including various forms of validation and trust-building messaging during the signup process. Your customers want to know that their data is secure and that other customers enjoy your product. Including security badges can help improve signups, as can simple statements about the number of customers that you have.
There are endless tests you can run on your signup process, so experiment with as many ideas as you can come up with and you’ll be sure to improve your signup rates.
Allow different charging options
Everyone has a preference for how they want to pay you. The vast majority of customers still prefer standard credit cards, but many people prefer options like PayPal.
Adding additional options for your customers can help bring more customers in the door. When we added PayPal about a year ago, we noticed a notable increase in signups, especially from our international customers.
We’re now in the process of adding the ability for customers to pay for our product in their local currency, instead of just paying in USD. Based on surveys we’ve done, we expect to see a notable increase in signup rates from this as well.
Give your customers the flexibility that they want and you’ll almost certainly bring more customers in the door.
There are no doubt hundreds of tactics that you can use to grow your subscription business. We’ve just scratched the surface here, but hopefully, these ideas will spur you to think of other things you can test in your business to see if you can bring more revenue in the door.
If there are things that you tried that really worked, I’d love to hear about them—let me know by sharing this article on Twitter or Facebook, and adding your input.