1. Easy to use - people should be able to signup and use the tool within minutes. Navigating around the tool and learning how things work should be self-service.
2. Robust - the SaaS application should be power-packed with elegant features that people can take advantage of when they learn the basics.
People love features (think cellphones) and feel great/smart when they can graduate from a basic user to a power user within the same system.
A good article on various options for SaaS pricing and a list of infrastructure options for your SaaS business…
Software As A Service has become widely accepted and is a popular choice among businesses. Businesses consuming SaaS applications favour the low upfront cost and zero infrastructure headaches. Also, SaaS applications being deployed online have the advantage of being available anywhere, anytime and even on any platform. Businesses developing software have embraced the SaaS model with open hands. The emergence of Cloud computing, subscription ready payment gateways and success stories of the likes of SalesForce and Google Apps makes it an easy model to follow.
Clearly SaaS applications have adopted a different pricing model than the traditional one-time license fee based desktop or web applications. There is a definite recurring cost per user in the hosted model that warrants the need for a different pricing approach. You not only provide an app but also manage users data.
Let’s dive into a few of the popular pricing strategies to understand the available models and what could fit your next SaaS application.
Read more on tenmiles.com/blog
Excellent read on what a SaaS entrepreneur must think through before launching…
Churn rate is the rate at which your customers are leaving every month. A high churn rate means that your customers are not satisfied with your product - this could be for various reasons (bugs, lack of features, performance, customer services etc.). Before you spend a lot of money on marketing you need to know why customers are leaving and how you can fix that. It is like having a hole in your bucket. Would you fix the hole first or pour more water in it?
Here is a simple formula to calculate your monthly churn rate:
Customers that canceled your service in May 2010: 10
Total Customers at the end of May: 100
May Churn Rate: ((10/100)*100) = 10%
Keeping an eye on the churn rate every month is crucial. If customers cancel, find out why they are doing so (through a form on the cancellation page, personalized email, phone survey etc.) you have a better grip on improving things in the coming months.
“A small leak can sink a great ship.”
Benjamin Franklin
This post has been inspired by my recent email conversations with David Skok of Matrix Partners. He runs an amazing SaaS blog for entrepreneurs called http://www.forentrepreneurs.com/. A must read!
To have a successful SaaS business, you need to have a leak-proof funnel. As you spend money on marketing (SEM, Banner, Blogs, Social Media) to get more people to your site, you need to also measure how many of them signup to the free trial (or free plan) and how many of those convert to a paid customer. Before you start adding more features to your app, here is what you should be measuring (use Google Analytics):
Visitor to Trial
If you have a low number (less than 10%) then you need to see why people are not trying out your product. This is where you will go to work on your website and check the following:
- Is it loading fast?
- Is my message to my visitor clear?
- Am I doing A/B testing on various pages, especially the homepage
- Is your call to action visible and appealing?
Think like your visitor and revamp areas that could hinder visitor conversion.
Trial to Paid Customer
Now that you have a free trial user, you need to convert as many of them to your paid customer. If the trial conversion is not good enough then you need to find out why people are not eager to move to the paid plan:
- Is your app too complex?
- Are there bugs?
- Is the upgrade process cumbersome?
- Are their performance issues?
- Do the trial users want more features?
Keeping Paid Customer Happy - Reduce Cancellations
Finally, a part of these trial users will convert to paid customers. They key to SaaS business growth is two-fold -
(1) have many more trial customers convert and
(2) not have many paid customers leave
If more than 5% of your customers are leaving every month, then you might have a problem. Find our why people are leaving - bugs in your app, performance, not what they expected, lack of features etc. and fix them before you spend more time and money brining in new people to your site.
Fix the leak before you do anything else.
