Categories Articles, SaaS

Lincoln Murphy wants to make your customers happier, to help your Software-as-a-Service company drive up profits and drive down churn. The well-known writer and consultant has years of experience specifically focused on SaaS customer acquisition and retention. In fact, since 2006, he has helped more than 300 SaaS companies optimize their customer lifecycle and dramatically accelerate their growth.

At his informative blog, Sixteen Ventures, Murphy offers his experienced perspectives on marketing, customer acquisition and churn reduction to entrepreneurs and SaaS providers everywhere. With so many fascinating insights into B2B customers and SaaS businesses, it was difficult to choose our favorite takeaways…but we did it! Here are  the top 10 things we learned from Lincoln Murphy.

1. Only Offer Discounts For The Right Reasons (Click to Tweet)

Murphy says you should use discounts sparingly to get customers to pay you more, not less. When SaaS customers ask for a discount on your product, this usually means that there is a gap between the perceived value of your product and the price you’re asking. In this case, average sales reps will grant the discount rather than lose the sale, resulting in a hit to the company’s margins and bottom line. In contrast, the best sales reps on the job will find a way to increase the perceived value of the product. For example, if a customer is ready to buy a $50/month service, try to upsell and offer them a discount on the $100/month service, down to $75/month. This offers the customer real value, while still increasing your overall sale price.

2. Scale Pricing According to Complexity (Click to Tweet)

Instead of increasing price with the number of users, as many SaaS organizations do, Murphy suggests that companies put a higher price on complexity and integration of  deployments. That includes not just users, but databases, infrastructure and other complications that make it difficult to implement SaaS. For example, a customer with 50 seats and a simple organization could be paying much more than a smaller, complex company with 10 seats, even though the smaller deal is taking up more of your company’s time and resources. Scaling your pricing according to complexity can solve this issue, and increase profits.

3. B2B Can Use Freemium Models For Lead Generation (Click to Tweet)

Many people think a so-called “Freemium” model is just for B2C startups trying to get off the ground, but it can be much more. Murphy says Freemium is a great tactic for disrupting markets, by offering customers something for free that they didn’t realize they needed. Some Freemium success stories include Evernote, Box and Pandora, but Freemium models aren’t exclusive to B2C sales. For B2B, Freemium has to be used strategically and sparingly. Free versions of your product should be very pared down, giving potential customers a small taste of what your product offers to tempt them to buy the full version. However, the free option should not be the focus for your company’s marketing or appear anywhere on the pricing page. When used correctly, a free app can get attention and drive the right type of traffic to your site.

4. Increase Free Trial Conversions By Finding Activity Patterns (Click to Tweet)

For many SaaS companies, most of your customers went through a free trial before buying the product, but conversely, only a small percentage of leads that complete a free trial become customers. So how do you increase the conversion rate for free trials? There are many metrics you can track, but Murphy says it’s important to look at what he calls Common Conversion Activities (CCA). While it doesn’t guarantee a sale, CCAs are leading indicators of success that you can use to identify the most promising leads. By analyzing historical data, you can find that in the past year people who became customers behaved a certain way – they either downloaded multiple pieces of content or actively used the free trial product. When new leads perform those same behaviors, you can have sales reps focus on them to see an increased lead to opportunity conversion rate.

5. Growth Hacking Comes From Having A Growth Mentality (Click to Tweet)

Everyone talks about growth hacking, but not everyone knows where to begin for their company. Murphy says that the first step to true growth hacking is focus – what type of growth are you looking for? Once you have a clear goal in mind, then you have to analyze your users and understand why and how people use your product. Then you need to exploit organic network effects, encouraging people to spread the word about how great your product is. However, you also have to be willing to pay to advertise your product and attract users. The number one key to growing your business is having a constant growth mentality – your entire business needs to  be focused on growing.

6. Work Strategically with Partners (Click to Tweet)

Your company has valuable partnerships, and you need to leverage those relationships to bring in new leads. Whether you’re creating a joint webinar or eBook, or even just exchanging email lists, the benefits to working with partners can be amazing, but have to be utilized sparingly. If you’re allowing a partner to email your list, make sure the offer is relevant, and the same goes for the email you’re sending to a partner’s list. You have to carefully craft a marketing campaign that fits the new audience you’re reaching to capture their attention. Use a high-performing offer, tailor it to the audience, and get ready for the leads to pour in as your message reaches a totally new audience.

7. Don’t Obsess Over the Competition (Click to Tweet)

When you’re growing your SaaS company, competitor analysis can become an unhealthy obsession. While many SaaS startups like to say they have no competition, we all know that’s not true. Founders who have become obsessed with their competitors constantly think, “How did our competitors price their product? How many customers have chosen them over us? Why are we losing business to the competition?” But Murphy says focusing on your competition can be unhealthy for your business. You should know what competitors are doing, but make sure your business is focused on your ideal customer and your target market. Focus on making your company and your product the best it can be, and the competition won’t matter.

8. Drive Down Churn Before You Sell (Click to Tweet)

Murphy says that the seeds of churn are planted very early for your customers, and you have to make sure they have an amazing experience even before Day 1 of using your product. In fact, the biggest mistakes that lead to churn can happen before customers even sign the deal. Churn often occurs when you sell to customers that shouldn’t buy your product in the first place, over-promise functionality that you can’t deliver, or sell based on the price rather than the value you provide to customers. By fixing these common problems, you can decrease the likelihood of churn before a customer even signs the deal, ensuring happier customers in the future.

9. Hacking Your Ideal Customer Profile (Click to Tweet)

Creating a customer profile can be incredibly tough, but is a vital part of building a successful SaaS company. Murphy offers a hack for speeding up this difficult process by ranking your potential customers according to the value they bring to the business. Instead of spending months interviewing customers in detail, create a spreadsheet that rates potential customers according to budget, market size, accessibility, pain level and customer lifecycle. You can then rate your customer profile, such as small B2C companies, according to this criteria. The profile with the highest score wins.

10. Encourage Word of Mouth (Click to Tweet)

For many SaaS companies, word of mouth (WOM) referrals are incredibly valuable and more likely to become customers than any other lead source. While many SaaS companies love WOM, Murphy says not enough actively try to encourage these types of referrals. This means, when you get a new lead, you should ask, “How did you hear about us?” If they mention a referral from a colleague, then you can say “I’d like to get in touch with them to thank them.” Then you reach out to that original customer, and find out why they shared information about your company with a colleague. By getting to the root of why customers refer your company, you can focus on that differentiator and drive more WOM.

 

Murphy understands that the key to keeping customers is providing a valuable product at a great price, and continuing to produce results no matter what. With valuable insights into how customers think, and how SaaS businesses should be run, Lincoln Murphy has the blueprint to SaaS success.

Cara Hogan
Cara Hogan is a Content Marketing Manager at InsightSquared, where she is a constant contributor to Ramp, the InsightSquared blog, and the host of Ramp, the SaaS analytics podcast. Cara studied Journalism at Boston University and has written extensively about the intersection of technology and business.
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