Software-as-a-service (SaaS) is on a rise. This is because SaaS products are flexible to use in terms of pricing. A typical SaaS product works on a monthly or annual subscription and is based upon the usage of customers.
What is a SaaS Customer Lifecycle?
A customer lifecycle for a software-as-a-service product is the continuous journey from knowing about a product to using the product to becoming a promoter of the product for others. This is a continuous cycle as by nature it has to continuously deliver value to customers. It is not something that a customer buys and forgets at one time.
Companies always have this challenge to continuously prove their value to the customers. This is what makes the customers stick to the product and pay subscriptions every month or year. A SaaS lifecycle has different stages that deal with different customer mindsets.
Awareness
This is the first step of the life cycle. Probably the most crucial one. Customers have requirements for which they try to search on the internet for possible solutions. Companies put their best efforts into making potential customers aware of their products via different kinds of marketing.
The goal of this step is to maximize the impressions of the potential customers to let them know about the product.
Metrics tracked – the total impressions and clicks.
Acquisition
A typical SaaS product has a freemium or limited-time free trial or a free trial of a part of the product. This is meant for the customers to try their hands on the product first and get to know how it works. This is an important part of the SaaS process because in most cases there are no manual salespeople explaining about the product. A customer has to figure it out on their own.
Acquisition is the step where the prospects are converted to trial users. This is closely related to the awareness step, as after the appropriate education only a prospect signs up for a trial.
Metrics tracked – Conversion rates, number of sign-ups, trial registrations.
Onboarding
Once a prospect has signed up for the trial, the acquisition is successful. The next step is to make a conducive environment for the prospect to realize the value of the product. This is where the user experience comes into the picture. How easy can you navigate the users from one point to another? How difficult is it for them to figure out what they are looking for?
Metrics tracked – Onboarding completion rates, time to first value, user engagement during onboarding
Activation
Activation is when the user realizes the product’s value for the first time. The goal is to encourage users to take key actions that indicate they are getting value from the product.
Customer support and the knowledge base regarding how to use the product are important for a customer to get activated. This step is crucial as it is the very point when a customer can decide whether to continue using the product or not. It is not only about providing value to the customer but also how easy you make them to realize the value. Often users can get stuck at a point in the product exploration journey. But whenever there are blockers, they should be able to figure out how to go past them. This is done by quick & responsive customer support, and knowledge base at the right places.
Consider a case where a user tries two different products. They eventually figure out the value that both have to offer. The user gets to the value of one product in a few minutes but requires a few hours to get the value of the second product. The user would prefer the first one.
Metrics tracked – Time to activate, feature adoption rates, successful task completion
Engagement
SaaS products have to continuously prove their worth to the customers. Once the users are activated and find the product to be satisfactory and purchase the product, they need to be continuously engaged with it. Engagement is when they are using the product regularly. This usage frequency can be different for different types of products.
Companies have to empower the customers with the right tools to let them know about the different features of the product.
Metrics tracked – User activity, session frequency, time spent in the application
Retention
Retention is encouraging customers to a point where they are ready to purchase the subscription in the next month or year. This is where the power of SaaS lies. If customers are satisfied, they pay for the product regularly. The crux of retention is to master the art of onboarding, activation, and engagement.
Metrics – Churn rate, customer satisfaction scores, customer support interactions
Expansion
In any business, it is more difficult to acquire new customers than to retain older customers. The goal of expansion is to generate more and more revenue from the existing customers than the previously paid price by them. This is done by cross-selling different products or upselling the existing ones to a higher tier of pricing. A great help from the customer support and customer success teams is the deciding factor for SaaS expansion. The expansion opportunity is more with large enterprise clients as their ticket size is very large.
Metrics – Expansion revenue, upsell conversion rates, average revenue per user
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