Make New Friends, But Keep the Old

A while back, I was working with a client with a SaaS application. The project I was involved in required my speaking with a number of their customers about how they were doing with the product, what they liked about it, how they benefited…The usual “whazzup” questions.

What surprised me was the number of customers who weren’t using the product - even though most of them had signed up for it months before.

Clearly, at least for the customers who were letting their SaaS app grow virtual cobwebs on its virtual shelf, this product was a vitamin not a painkiller. Now, this lack of use would have been problematic enough in the world of installed software. It’s never good to have products that customers aren’t using, and with installed software you’d run the risk of losing out on a support renewal. But at least you’d have gotten paid for the software.

With SaaS, the risk associated with lack of use is much, much higher. When that subscription’s up, and no one’s using the product, there’s a very high probability that the customer won’t renew. Sure, you’d have gotten a year’s worth of revenue, but what you really want is the ongoing revenue stream.

I’ve never worked directly for a SaaS provider, but I have worked for hosting providers, and customer churn was a big no-no.

Customers slipping away meant loss of revenue and loss of face. And we all knew the fast rule that it costs a lot less to retain an existing customer than it is to find a new one.

Now, we weren’t always brilliant concerning what we did about it, but we did pay plenty of attention to customer churn. And with hosting, the problem wasn’t that the customer wasn’t “using” our services (although certainly many had locked into to contracts that anticipated higher growth than they actually experienced). With SaaS, it’s so much worse.

Anyway, I mentioned my “findings” to my client - VP of Marketing - along with some suggestions that might help solve this problem. He told me that he was well aware of the problem, and was trying to get “the company” to do something about it, but they were so focused on winning new customers for a new product that they weren’t paying attention to the ones they already had in the fold.

As they’ve just passed the first anniversary of their SaaS application’s release, I should check in with this client and see how things are going with respect to churn.

My guess is that they’re in for a douse of reality, and that they’ll be putting into practice some measures to make sure that they retain existing customers by doing whatever hand holding and prodding they need to do to make sure that they become active users.

There was a round we used to sing in Girl Scouts that went “Make new friends, but keep the old. One is silver and the other’s gold.”

Same goes for customers - especially when they’re using subscription based software apps.

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