Are you familiar with CAC? LTV? They’re both worth getting to know. These two tiny acronyms can make a big impact on the success of your software-as-a-service (SaaS) business.
Earlier this year, Inc. published an article on marketing metrics for SaaS success. Author, Ameeta Soni, talked about Customer Acquisition Cost and Customer LifeTime Value.
For SaaS businesses:
- Customer Acquisition Cost (CAC) is the cost involved to get a customer to subscribe to your software.
- Customer Lifetime Value (LTV) is the total projected revenue that a business will derive from their entire relationship with a software customer.
Implementing ways to reduce the costs to acquire a software customer, as well as tactics to increase a customer’s lifetime value, will yield continual business growth and success.
It’s important to keep this formula front and center when determining which initiatives to carry out in your business.
Reducing Customer Acquisition Costs (CAC)
As Soni points out, CAC usually involves, in large part, costs associated with your sales and marketing process.
“Consider simplifying your product to reduce human sales touch and any other wasteful costs associated with closing the deal.”
This great piece of advice can be accomplished in a number of ways that shorten the sales cycle for software companies. Tactics to decrease CAC:
1. Create a 1-to-2-minute overview video of your software.
Cover the main features and benefits and most importantly, show how the software solves the prospective user’s problems.
A brief overview video is a great supplement to a live demo — especially for prospective customers that are in the beginning stages of their software search, want to learn the basics of your offering and don’t necessarily have time to invest in an in-person review.
2. Develop FAQs.
Having a list of commonly-asked questions will give your website visitors an extra level of support. Your potential customers will have as much information as they need without having to contact sales.
Quick Tip: Get the entire company involved in developing your FAQs. Every time someone in customer service, implementation, sales, marketing — any department — is asked a question, have them make note of it and the answer in a shared document that is then used to update your FAQs page on a continual basis.
3. Create a feature/benefit comparison table.
There are typically a few software solutions that your buyer is considering. Side-by-side feature/benefit comparison tables provide an easy way for your potential buyers to see how your software stacks up against other solutions.
4. Implement email lead nurture campaigns by segments.
You have prospects that have visited your demo or trial page, but did not fill out the form. Prospects that have scheduled a live, in-person demo but did not show. Prospects that have completed a live, in-person demo, but are hesitant to transition to another software solution.
Harness the power of automation and the cost-effectiveness of email marketing. Through marketing automation software, you can send email lead nurturing campaigns with personalized content that supports the buying cycle and stage each prospect is at. These campaigns, once set up, deploy on their own at the frequency you deem, so you save your marketing and sales teams from having to stop and start up new email campaigns continually.
Increasing Customer Lifetime Value (LTV)
In previous posts, I talked about ways to increase usage and loyalty to your software to strengthen retention — in other words, increase the lifetime value of your customers.
Tactics to increase LTV:
1. Implement a nurturing campaign as part of your onboarding process.
Have tips on how to best use your software? Share them with your users through an email campaign to get them excited about using your software.
Have a consulting arm to your software business? A blog? Webinars? eBooks? Encourage new customers to take advantage of these materials to get the most of their relationship with you.
2. Form partnerships that add value to your offering.
Your software can’t do it all. To remain competitive you need to develop partnerships with companies that complement your offering and provide value to your customers.
For example, partnering with Constellation Payments for merchant and gateway services makes it easy, fast and secure for your customers to process payments directly within their software. In other words, our channel partners leverage our scalable technology, gateway and processing platform to deliver the best value-added solutions to their software customers.
3. Host a user conference.
Gather your software users in one place to introduce new features, review development plans, talk upcoming features, and share best practices. User conferences also strengthen retention by cultivating community. Attendees are part of a group using the same tools and techniques … striving to achieve common goals and business success.
How have you reduced CAC and increased LTV for your software business? Share below.
Kristen Campbell is a Marketing Specialist with Constellation Payments.
Image courtesy of Pixabay.
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