Strategy

SaaS Lifecycle Marketing: How to maximise your Customer LTV

Feb 14, 2017 23 minute read Edward FordEdward Ford

Last updated 08 February, 2020.

Last updated 8.2.2020.

Growth.

We all think about it.

And we can be certain that company leaders like you are thinking about it every single day.

It’s probably keeping you up at night too.

That’s because the life (and death) of a B2B SaaS company is at the mercy of growth; without it you simply won’t survive.

via GIPHY

But too often we make the mistake of associating growth with new customers. And for too long, B2B-marketers have built their game plans solely around new business acquisition.

And this is understandable, given that most companies have built their growth on the simple idea of getting new deals in rather than focusing on existing accounts. But in a Gartner study, research estimated that more than 80% of software vendors will change their business model from a traditional license to subscription by 2020.

That means more SaaS companies.

And that also means your growth won’t come from a one-off payment you receive from a new customer.

Now your growth will come from your ability to successfully retain and monetise your customers once you’ve acquired them.

But that’s easier said than done. So how do you do it?

Well, one way is with what we call SaaS Lifecycle Marketing...

Navigate this post

1. What is SaaS Lifecycle Marketing?

2. Why is SaaS Lifecycle Marketing so crucial for SaaS success?

3. SaaS Customer Lifecycle Stages: From Lead to Customer to Evangelist

4. The SaaS Lifecycle Marketing Model: Maximise the LTV of your B2B SaaS customers

5. Summary

1. What is SaaS Lifecycle Marketing?

In order to understand SaaS Lifecycle Marketing (SLM), you need to be familiar with Customer Lifecycle Management.

Customer Lifecycle Management is a way to describe the different stages that your customers progress along, from becoming aware of a need, considering specific solutions and deciding to buy, right through to using that specific product or service and ideally becoming a loyal evangelist.

SaaS Lifecycle Marketing (SLM) is a framework that helps us understand how we should market to each stage of the lifecycle in order to maximise revenue from new and existing customers.

Lifecycle Marketing is a marketing philosophy and strategy that guides marketers to drive revenue from both prospects and an existing customer base.
- Marketo

The purpose of SaaS Lifecycle Marketing is to drive Customer Lifetime Value (LTV) by truly understanding the needs of your customers at each lifecycle stage. SLM is not just about collecting customer data, but rather utilising it to deliver better marketing and a world-class customer experience that drives growth.

If you take a closer look at how the best-in-class SaaS companies perform, one thing they all have in common is that they are not only effective at acquiring new customers, but also hyper targeted in terms of going after the right customers.

By investing time and energy to focus on customers who would gain the most from their service and use it over the long-term, the top SaaS companies are building a loyal customer base who will promote, evangelise and essentially sell their service to others.

And there is one golden virtue the best performing SaaS companies achieve; negative churn.

Negative churn is when the additional revenue generated from your existing customer base is greater than the lost revenue from your existing customers either downgrading or churning.

In short, even though you are losing customers, you’re still growing your business.

This means that the secret sauce to achieving the holy grail of negative churn is your ability to retain and grow your customers. This is what makes all the difference, and more importantly, this is what SaaS Lifecycle Marketing helps you do!

2. Why is SaaS Lifecycle Marketing so crucial for SaaS success?

The success or failure of a SaaS company boils down to the three aspects. They are how well a company can:

  • Acquire new customers quickly and cost effectively
  • Retain existing customers
  • Grow and monetise customers through up-sell and cross-sell opportunities

Companies operating with a subscription business model are very different compared to non-subscription businesses, and this is mainly because the revenue and profit for the service come over a longer period of time.

So, if a customer is truly happy and able to extract the value of your service, they will stick around for a long time.

On the other hand, if a customer is unhappy they will quickly churn and you will not only lose the money you invested on customer acquisition, but you’ll also never get the pay back of the customer acquisition cost and the resulting profit.

Let’s illustrate this point using the following example and graphics below:

Single Customer Cash Flow

Single Customer Cumulative Cash Flow

This example was modified from the following post by David Skok (and this tool will let you validate your own SaaS business model). 

2.1 Churn Will Kill Your Growth

It doesn’t matter how much more you’re able to sell each month if you’re simultaneously losing customers at a higher rate. While selling more is good, it’s crucial to keep your customers happy so they stick with you.

Let’s take another example to bring this issue to life:

Churn Example

All of a sudden, the gap simply becomes near impossible to reach.

Read more: Defining the 4 types of churn

3. SaaS Customer Lifecycle Stages: From Lead to Customer to Evangelist 

SaaS Lifecycle Marketing relies on a distinctive set of lifecycle stages that help you segment your customers based on where they are in their buying journey. This allows you to talk to your customers in a way they will value based on their exact position in your funnel.

For example, you probably want to talk to a prospect in a completely different way than you would to your biggest and brightest evangelists. So in order to make this happen, you need to know — for each and every contact — which lifecycle stage they are at.

In the SaaS world, when we refer to talking to a prospect or customer, we mean your website (your best - or worst - sales rep), your sales executives, and your customer success team members.

As mentioned earlier, in order for you to communicate with your customers effectively (whether prospective, existing or churned) you must understand which lifecycle stage they are currently in.

To help you with this, most marketing automation systems have a single field that tells you this information, and it’s usually called Lifecycle Stage.

Customer Lifecycle Stages

 

3.1 Typical Customer Lifecycle Stages

If you are using a platform such as HubSpot, then you’ll see that their default customer lifecycle stages are:

  • Subscriber: A website visitor who has opted in to hear from you periodically, such as signing up for blog updates or a newsletter.
  • Lead: A contact who has converted through an offer on your website (participated in a webinar, downloaded an eBook or watched an on-demand product demo) and has typically filled in a form with more than just their email address. Leads show a stronger interest in your offering than Subscribers.
  • MQL: Marketing Qualified Leads (MQLs) have identified themselves as more deeply engaged with your company and your offering. They are more sales-ready than your usual Leads, but they’ve not yet become fully edged opportunities. These are typically contacts who have converted with Bottom of the Funnel content such as demo requests, buying guides, and other sales-ready calls to action.
  • SQL: Sales Qualified Leads (SQLs) are those MQLs that your sales team has accepted as worthy of a direct sales follow up.
  • Opportunity: Opportunities are the contacts who your sales team have identified as sales opportunities to pursue and they are tracked in your CRM.
  • Customer: An actual, real, paying customer. 🙌
  • Evangelist: Evangelists are those contacts that are advocates for your business and promote it within their networks. They often bring in new customers and help you reach leads you may not have been able to otherwise.
  • Other: Other is the wildcard lifecycle stage. Examples of what this stage has been used for include: closed lost opportunities, customer renewals, and key accounts.

While HubSpot’s default Lifecycle Stages are good for most businesses, they do not fully support the needs of a SaaS company.

For example, as a SaaS company you would almost certainly want to communicate with your churned customers. And if you have a freemium business model, you would need to distinguish between free and paid users. In addition, your free users should not be considered an MQL forever since their likelihood to buy will diminish over time if they are unable to extract a certain amount of value from your service.

And if you have a no-touch sales strategy without sales reps, you probably don’t need all SQL/Opportunity stages.

With this in mind, we recommend that SaaS companies build their own Lifecycle Stages based on their actual business needs.

To help you get started, we have created a base model which you can utilise and modify when planning the lifecycle stages of your SaaS business, taking into consideration your business and sales model. This is what we'll outline in the next section.

3.2 SaaS Customer Lifecycle Stages

  • Subscriber: A website visitor who has opted in to hear from you periodically, such as signing up for blog updates or a newsletter.
  • Lead: A contact who has converted through an offer on your website (participated in a webinar, downloaded an eBook or watched an on-demand product demo) and has typically filled in a form with more than just their email address. Leads show a stronger interest in your offering than Subscribers.
  • Free User: For companies with a freemium business model, this would be a user that has opened a free account but hasn’t upgraded to a paid plan and become a customer.
  • MQL: Marketing Qualified Leads (MQLs) have identified themselves as more deeply engaged with your company and your offering. They are more sales-ready than your usual Leads, but they’ve not yet become fully edged opportunities. These are typically contacts who have converted with Bottom of the Funnel content such as demo requests, buying guides, and other sales-ready calls to action, or they would be a Free User who has demonstrated behaviour that they are ready to upgrade and buy.
  • SQL: If you have a high-touch sales process, Sales Qualified Leads (SQLs) are those MQLs that your sales team has accepted as worthy of a direct sales follow up.
  • Opportunity: If you have a high-touch sales process, opportunities are the contacts who your sales team have identified as sales opportunities to pursue and they are tracked in your CRM.
  • Customer: An actual, real, paying customer. 🙌
  • Churned: A customer who has now churned. They are no longer paying for your service.
  • Evangelist: These are your super, happy customers that actively promote your product, mention your company, and are a true advocate for your company and service. Leveraging their networks often bring in new customers and help you reach leads you may not have been able to otherwise.
  • Other: The wildcard; basically anyone that doesn’t fall into any of the categories mentioned above.

In addition, you might want to consider having a different set of stages for customers. For example:

  • Newbie: A customer has started in the last 30 days
  • Churn Threat: A customer is likely to churn based on behaviour, e.g. inactivity or other KPIs
  • Power User: A customer is heavily using your service on a daily basis
  • Passive User: A customer is not showing signs of churning but isn’t too active or is not getting the most of out of your service

This will enable even more improved and timely communication, and in the next section we’ll look at what practical steps you can take to grow the LTV of your customers with relevant marketing tactics for each stage of the lifecycle.

 

4. The SaaS Lifecycle Marketing Model: Maximise the LTV of your B2B SaaS customers

In order to help you maximise your LTV we have created the SaaS Lifecycle Marketing model, which is built around the three cornerstones of acquisition, retention and growth.

Acquire, Retain, Grow

4.1 Acquire Magnet_Emoji-1

Acquiring new customers is how most SaaS companies try to grow their businesses. And while keeping newly acquired customers is a must, your company won’t see the desired growth levels without being able to acquire new customers in a scalable fashion.

For a B2B SaaS companies to be successful - and even just survive - they must be able to build a scalable sales and marketing model. This can be done only through the creation of your own media that attracts those buyers interested in:

  • your product
  • key themes around your offering
  • and the expert insight of your key people

While many paid acquisition programs offer you a quick route to short-term success (or at least, promise you that), they are working for you only as long as you keep on paying them.

Essentially you are renting your marketing for a defined time frame, and once you decide to stop paying the rent, you’re thrown out on the street with nothing to show.

via GIPHY

But by spending time to build your own media, you’re investing in the long-term, much like buying a house; eventually you will stop paying your monthly mortgage, but not only will you always have a place to live, you’ll have full ownership of it too.

And one of the most effective, profitable and scalable ways to acquire new customers whilst maintaining your own media is through inbound marketing.

Inbound marketing starts by understanding your dream customer and  creating truly valuable content aligned to their interests to help them in their buying journey.

Purchasing behaviour has drastically changed over the last 5-10 years and marketing needs to match the way buyers buy.

The old-school, outbound tactics no longer work; spam filters, ad blockers, caller IDs, and the switch from traditional ad-powered medias (such as television) to on-demand services (such as Netflix) means your modern, tech-savvy customers will filter out all the interruptive noise.

 

via GIPHY

Inbound marketing is based on attracting a potential buyer to engage in dialogue with your company so that they consent to marketing and know to expect it.

By guiding them to useful content that is aligned to their stage in the lifecycle, you will ultimately be able to attract, convert, and close new customers.

Read more: Is B2B inbound marketing dead in the 2020s? Probably not – but here's how you should improve your game

4.2 The Customer Acquisition Framework

Attract:

  • Define your Ideal Customer Profile to help you understand your dream customers; what challenges do they have? In which channels do they like to communicate? Where do they spend their time online?
  • Create relevant and highly valuable content that your target audience will appreciate
  • Optimise your content for search engines to increase traffic.
  • Promote and utilise relevant social networks to increase your reach.

Read more: Forget buyer personas – Here's your step-by-step guide to better customer research in B2B SaaS

Convert:

  • Make sure your website has more than just the traditional “Sign up” or “Free trial” as a way to generate leads.
  • Use conversational marketing to convert website visitors into contacts.
  • Once you’ve generated a new lead, it’s time to nurture them towards becoming a customer through automated workflows.

Close:

  • Once a lead or free user has started to show signs that they are interested in your service and are getting ready to buy, educate them with highly targeted sales materials (sales enablement).
  • This could be bottom-of-the-funnel content such as case studies, ROI calculators, TCO calculators, buying guides and product comparison sheets; make buying as easy and simple as possible for your customer!

4.3 Retain ❤️

As you’ve come to realise, growing your SaaS company is highly dependant on your ability to retain your customers.

In too many cases, and especially with services that use a freemium model, the biggest challenge is to make sure your users actually start using your product and are able to gain the value you promised. This, what product people call stickiness, is crucial to retain the customers you worked so hard to get.

Product stickiness is not something that just happens by itself, but through a combination of factors. You can increase the stickiness of your service by:

  • Having a product that actually stores the value. For example, HubSpot houses all your data regarding leads and customers, which is a pretty good reason to log in and use it on a daily basis.
  • Changing the way we do work, for the better, and over time it creates and facilitates the adoption of a new habit. For example Slack solved the problem of email and inbox overload by changing the way teams communicate.
  • Giving you reason to log in, for example to follow analytics/metrics, check your progress, or as a tool for something you do on a regular basis. Trello is used by teams and individuals for a variety of purposes - scrum task boards, content planners, or a CRM - and hence it ensures you will use it on a regular basis.
  • Creating a killer brand. In addition to the above, HubSpot, Slack and Trello have all created brands that their users love and advocate and are modern day cultural icons. They’re excited about using the product and don’t consider it a chore or something they’re forced to do. This has a twofold benefit in that it increases stickiness but also generates evangelists who will promote your product to others.
  • The other great thing about getting your customers to use your product is that it starts generating usage data.
  • This will give you insight into what your users love, and also what they hate. Earlier in the post we brought up the concept of lifecycle stages for your customers, and one example was churn threat. Over time you will start to develop an understanding of the type of behaviour a customer exhibits which indicates they are likely to churn. These could be:
    • A customer asking for features that your product doesn’t have but are important to that customer
    • Your product doesn’t integrate with your customer’s other tool
    • Your customer is only using part of your product, which doesn’t deliver the expected value and can be replaced by a competitor or alternative solution
    • Your customer has not logged in for a long period of time and isn’t actively using your product
    • Your customer is checking your Terms of Service page or viewing the page where you cancel your subscription

Retaining customers is hard work. But for it to work you need to have your customer analytics in place. Tools such as Mixpanel give you a better view on how your customers are interacting with your product, which will help you retain your exist- ing customer base.

4.4 The Customer Retention Framework

Onboard your new customers:

  • The foundations for customer retention success are built as soon as your customer signs up.
  • Make sure your first touch is warm and friendly, yet at the same time delivers educational information about the best way to get started.
  • You should make this as simple and fun as possible, whilst ensuring you promote the value-adding differentiators your product has over competitors or alternatives (hint, this one is actually is quite important).
  • Check out this short video from video hosting platform, Wistia, about how they developed their onboarding program to produce a 15% lift in one of their main retention KPIs, which also led to more account activations and sales.

Analyse usage patterns:

  • Analyse which kind of behaviour tells you that your customer is likely to churn.
  • Follow usage metrics (e.g days since last login, usage time for each login, daily visits/ usage, the number of apps used) to determine to whom and when to send some communication.
  • Follow the sales uplift the program creates, but just be sure you don’t jump to any conclusions too quickly - you’ll gather this data quite slowly and it requires a fairly large user base (hundreds of thousands) and it’s most likely you won’t get sufficient data here within a few weeks.
  • Track and monitor “activity churn”, which is how many users became inactive during the month. This will provide a good forecast for your future churn, so having your churn prevention programs in place can make all the difference!

React to customer feedback:

  • Today’s customers can really have an impact on your business, both positive and negative, but especially if they are unhappy.
  • One tweet from an unhappy customer might be worth of hundreds of thousands of dollars of lost new sales and churned customers.
  • It’s super important that you’re monitoring your customers on social media to follow what they’re saying since it’s priceless feedback.
  • In addition, your standard NPS & Customer Satisfaction surveys create a great deal of actionable data, upon which you can base your retention campaigns.

Read more: Who should own customer retention in B2B SaaS? 🤔 Here’s what 8 experts have to say

4.5 Grow 🚀

Like we discussed earlier in this post, the best performing SaaS companies achieve negative churn (up-sales and cross-sales to existing customers exceed churned revenue).

But still, way too many SaaS companies struggle with their pricing model in that they don’t enable effective up-selling mechanics. This is something that holds your growth back and prohibits it from being what it could be.

Let’s take a good example: If HubSpot only had one pricing axis, the basic monthly subscription, then it wouldn’t have grown into the company that it is today.

But they understood the power of multiple pricing axes.

Your monthly fee is not only based on your subscription plan, but also the number of contacts you have, (which is going to rise over time), as well as various add-ons you can buy, which will help you get even more out of the product.

This would already be pretty sufficient for a marketing automation platform, but HubSpot also has another suite of products available; HubSpot Sales. So all in all, their customer LTV will gradually rise over time, but more importantly, it’s tied to their customers’ success, so their is a clear motivation for HubSpot’s growth team to ensure their customers can extract and measure the value of the platform.

So if you have your add-ons and additional products in place, then you should have certain workflows in place that you trigger when a customer completes a certain action, for example visiting your add-on product page three or more times over a two day period.

This typically tells you that a customer has a specific interest in that add-on and that it’s certainly worth of follow up, either by automation (such as an email or in-app message) or via a human touch (if you have a high-touch sales process using reps).

Advanced tools, such as HubSpot Marketing, enable you to receive real time alerts when customers complete these actions, such as visiting your add-on product pages.

In addition, you might also want to consider utilising the customer support data that you receive in via chat, emails, and phone calls; customer questions usually contain a lot more insight than companies realise. You may well hear some sound bites that a customer has specific problem with their existing tool set, which your add-on could solve.

4.6 The Customer Growth Framework

Start cross-selling, up-selling and upgrading early:

  • Too many SaaS companies fall short when they don’t realise they should start their upsales communication as soon as the onboarding program starts.

Upgrade from monthly to annual plans:

  • If your company offers an annual subscription plan in addition to the monthly subscription then make sure you promote it to your monthly billed customers.
  • Upgrading to an annual plan is an underused growth tactic in SaaS companies and it offers benefits to both you and the customer How? For you, customer commitment for one year takes the pressure off your churn, and getting cash in the bank 12 months in advance is always a good thing, and for your customer it will reduce their cost since an annual plan should always be less than 12 times the monthly plan.
  • If you don’t have the possibility for an annual plan then think about adding one.

Define actions, set up triggers and alarms, and create a sales process:

  • Define a certain set of actions that a customer can complete which indicates a sales opportunity.
  • Build an alarm system that notices you every time this action is completed.
  • Create a standardised process that is triggered each time the alarm rings; this could be an automated work ow (sending an up-sell email) or it could be a call from one of your sales reps with more information about your up-sell offer.

5. Summary

✅ Your growth will come from your ability to successfully retain and monetise your customers once you’ve acquired them.
 
✅ Customer Lifecycle Management is a way to describe the different stages that your customers progress along.
 
✅ SaaS Lifecycle Marketing (SLM) is a framework that helps us understand how we should market to each stage of the lifecycle in order to maximise revenue from new and existing customers.

✅ The purpose of SLM is to drive Customer Lifetime Value (LTV) by truly understanding the needs of your customers at each lifecycle stage.

✅ There is one golden virtue the best performing SaaS companies achieve; Negative Churn.
 
✅ Negative churn is when the additional revenue generated from your existing customer base is greater than the lost revenue from your existing customers either downgrading or churning.
 
✅ The success or failure of a SaaS company boils down to the three aspects. They are how well a company can:

  • Acquire new customers quickly and cost effectively
  • Retain existing customers
  • Grow and monetise customers through up-sell and cross-sell opportunities

✅ It doesn’t matter how much more you’re able to sell each month if you’re simultaneously losing customers at a higher rate; churn will kill your growth.
 
✅ The SaaS Customer Lifecycle stages include:

  • Subscriber
  • Lead
  • Free User
  • MQL
  • SQL
  • Opportunity
  • Customer
  • Churned
  • Evangelist
  • Other

✅ In addition, you might want to consider having a different set of stages for Customers, for example:

  • Newbie: A customer has started in the last 30 day
  • Churn Threat: A customer is likely to churn based on behaviour;
    e.g. inactivity or other KPIs
  • Power User: A customer is heavily using your service on a daily basis
  • Passive User: A customer is not showing signs of churning but isn’t too active or getting the most of out of your service

 In order to help you maximise your LTV we have created the Customer Lifecycle Marketing model, which is built around the three cornerstones of acquisition, retention and growth.

 The Customer Acquisition Framework is built upon three phases:

  • Attract
  • Convert
  • Close

✅ The Customer Retention Framework is built upon:

  •  How successfully you can onboard your new customers
  • Analysing usage patterns
  • Reacting to customer feedback

✅ The Customer Growth Framework is built upon:

  • Starting cross-selling, up-selling and upgrading as early as possible
  • Converting customers from monthly to annual plans
  • Defining actions, setting up triggers and alarms, and creating a sales process to monetise your existing customer base effectively and efficiently