The SaaS industry has been steadily gaining traction as a cost-saving means of servicing customers and clients. As with all business markets, trends come and go, as customer preferences change, and as the industry shifts. There are benefits and drawbacks when using SaaS, depending which side of the fence you are on (SaaS user data is in the hands of the provider, which is a risk), but SaaS usage has grown enormously over the past several years, and the industry is forecasted to experience an almost 18% growth rate by 2018. 59% of all cloud workloads are estimated to be SaaS by that year. It is safe to say, SaaS is here to stay.
As seen above, the SaaS industry is only moving forward, soon to almost entirely replace installed, permanent software for business purposes. According to data, at present, the usage of SaaS or purchased software is in a tie, but projected to see SaaS absorb the lion’s share of what used to be on-premise territory. In this article, we will address the top five trends that are happening in the SaaS industry this year, and why.
1. The decrease of the human factor in sales
A primary trend developing in the SaaS industry, is the reduction in the time and money SaaS companies are needing to spend on human sales team, which also boosts profitability. Because SaaS is already entirely an online service, SaaS companies are starting to focus less on prospecting potential customers using traditional methods. SaaS providers are now beginning to concentrate their efforts on online marketing, with an emphasis on content saturation.
It is hardly a secret that 81% of consumers do online research before making a purchasing decision. They are doing Google searches, reading blogs, scrolling through forums, and sharing information with each other. The current trend, for better or worse, is that many SaaS companies are assuming that their product sells itself.
SaaS companies are increasing the amount of data they provide online in an effort to woo their customers, and performing less prospecting activities. The current trend is to use Google search results as your own voice as a marketer. SEO is quickly replacing direct email marketing campaigns, and phone calling to prospects is non-existent.
The content available online after a Google search for a product has now become the primary focus for SaaS companies in their marketing efforts. However, even as the industry continues to grow, this can be a counterintuitive trend for the industry. Nothing will ever compete with the value of the human experience when it comes to marketing a product. Once we all become robots that may change but, for now, a dialogue between buyer and seller is key for convincing the customer to buy the product or service.
As most SaaS companies are moving away from human interaction prior to purchase, while the industry is still growing, they may have to abandon their standard practices of solely providing detailed content on their services, and again incorporate personal communication with leads for increased sales. We will have to wait and see, whether this trend continues to benefit the industry for the future or hinder further success for SaaS companies. At present, the buyer’s journey is 75% complete before they communicate with a company online, but this is not a guarantee that clever SEO and robust content alone will remain sufficient enough to drive business in the future.
2. Growth of inbound marketing strategies
The proliferation of inbound marketing in the SaaS industry continues to boom in success. Inbound marketing is the promotion of one’s company through validation, often using blogs, YouTube promotional videos, social media marketing, etc., rather than performing cold-calling/emailing, or paying for ad space.
At the top of the inbound marketing trend, is the rise in the success of user-generated content. At its core, user-generated content is getting your customers to do your promotional advertising for you. A simple example would be customer testimonials on your company’s website. However, SaaS companies are beginning to incorporate user-generated content opportunities into their software, shared amongst other users, and made available online in forums, blogs, and shared on the SaaS company’s social media outlets. In fact, user-generated content has been shown to increase purchasing willingness by 20% for potential buyers.
Another popular strategy being implemented by the SaaS industry this year has been the use of interactive storytelling for their inbound marketing campaigns. Target audience members build deeper connections with companies when they can interact with the storyline of the company’s value to them. Inbound marketers have begun to incorporate quizzes, generators, and interactive videos on their websites.
Episodic content has also taken inbound marketing by storm. As the internet is flooded with SaaS companies struggling to create engaging content, episodic methods of delivering content have proven to harness the attention of the reader, and keep them coming back for more. Serial content increases article views by 124% compared to traditional narrative content.
Guest blogging has also become an extremely popular trend for inbound marketing, yet, it is a double-edged sword. According to Google’s Matt Cutts, “guest blogging is done.” What he means is that the amount of spam and negligence of grammar, has lead to some inbound marketers losing faith in guest blogging as a viable means of attracting leads. In the same breath, however, guest blogging has proven to be a success for many companies, as long as due diligence has been used to verify the writing quality of the blog’s guest posts, and the quality of the sites that they link to.
3. The war on churn
Churn, or the loss of returning SaaS customers, has been plaguing SaaS companies for over a decade. There’s a high cost of doing business as a SaaS company, such as technological investments, new operational procedures, and the fact that in almost every case you need to lure customers by giving your software away for free during an initial trial period. This year, CEOs are starting to approach churn with the concern it deserves.
Companies in the SaaS industry are all relative newcomers, as SaaS has only been a professional service platform for about a decade. A popular trend within the SaaS industry now has been to label and identify that churn is the gravest threat to profitability, for all companies, and to put measures in place to specifically address it to reduce its effects on company costs.
Companies have experienced high rates of churn, and are now learning that it is dependent upon how they perceive the value of their company, and how their customers value the service. SaaS companies are learning how over-valuing and under-valuing their product has resulted in churn in these two ways:
- Over-valuing, and thus over-selling their services, has resulted in customers having expectations that were not met, leaving a bad taste in their mouth. Every company wants to tell the world that their product is the best, but this has proven counterintuitive in the SaaS industry. Customers are unlikely to renew their SaaS subscription if they were promised a jet, and were given a car.
- Under-valuing the company’s service has a compounding negative effect on costs. If you can charge more money, you can afford greater operations. Under-valuing your service not only directly impacts profitability, but also public perception of your service. The greater your pricing, the greater your service is perceived by potential buyers, so if you are marketing an inexpensive product, it may seem “cheap” and of low usefulness to potential (especially larger companies) users.
Another trend in the SaaS war on churn that has proven itself worthy is the removal of self-serve account cancellation options in the software. CEO Josh Pigford, of Baremetrics, reported that when his SaaS company removed the option, they noticed a 15% decrease in the amount of cancellations.
When the SaaS industry first noticed the perils of churn, they had to discover a way to identify why their customers are not coming back. This year, almost every SaaS company is conducting exit interviews with their customers, and applying the feedback to modify their service.
4. Increased focus on customer lifetime value
SaaS CEOs are a metric-minded bunch. At first, many SaaS companies were focused on the development of their software and the marketing methods, but not on each individual customer as a living, breathing person.
A customer’s lifetime value (CLV) is just what it sounds like; how much revenue they provide a company over the course of their lifetime. Ideally, you want your CLV to be at least three times greater than you customer acquisition costs, otherwise your company is set to fail. So, how has the SaaS industry been working to increase their CLV?
The trend this year that has proven to enhance CLV is personal communication from the CEO or founder of the SaaS company. Companies are now integrating relationships with their customers, and it is working.
At first, many in the SaaS industry thought it was fine enough to attract users with a free trial, and that users would see the value of the product, and keep coming back. However, people purchase based on the experience they have with a person, not necessarily the company’s product.
Alex Turnbull, CEO of Groove, said that once he started sending a personalized email to each new subscriber, they began renewing subscriptions with greater frequency. SaaS companies are realizing now how vital customer engagement is, not just how snazzy they can make their product perform. Customer engagement has become a game changer for the industry.
5. Beginning or improving the SaaS onboarding process
The first few months of a free SaaS trial are crucial for determining whether you will convert a user into a paying subscriber. 40%-60% of trial users will use SaaS once and not subscribe. So, what is the SaaS industry doing to improve the user experience?
Bingo, a SaaS for teachers, has begun taking their onboarding to the next level. Enhanced communication with the user at the early stages of using the service is proving to retain more users, who convert into subscribers. Take a look at their onboarding funnel analytics:
Sometimes, a user will not understand the entire value of a product, and if they are not onboarded sufficiently by the company, they will not ask further questions, which decreases their own interest in the product. In Bingo’s case, they decided to develop a step-by-step introduction to using their software, including presets and customization of their cards:
They noticed that after implementing their onboarding program, 82% of teachers customizing cards jumped to 90%, and then had an increased knowledge of the product’s value. Companies can often forget that first-time users do not know all of the ins and outs of the SaaS product they have signed up for, so this year we have noticed an increase in the amount of companies incorporating an onboarding program into their software, and greater direct communication with users early on.
Hop aboard the train…
SaaS is soon going to replace on-premise software in its entirety for the business sector. As a new service technology, there have been stumbles during its infancy. If you are starting up, or already have your own SaaS company, learn from these trends during your baby steps. The five trends listed above are happening because they are solutions to problems that others have experienced during their tenure in the industry.
The bottom line is that customer satisfaction increases retention. Being a cloud-based service, you are not going to see your customers in person, but that does not make personal communication any less important.