Cloud

Study: Businesses focus too little on keeping existing customers happy

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Many software companies believe in giving away limited versions of their products, expecting some to turn into devoted paying customers. Doting on existing customers and ensuring they renew their subscriptions can yield payoffs too, but executives don’t always pay as much attention to that method of business development.

Maybe they ought to. Today Totango, a company that analyzes user and customer behavior for SaaS vendors — and winner of an Innovation Showdown prize at VentureBeat’s CloudBeat 2013 conference released the results of its third annual Software-as-a-Service (SaaS) Metrics Survey, after checking with 257 executives at SaaS companies. The results show that the companies reporting revenue growth over 75 percent keep their churn rates low and get many customers to buy more expensive services.

That’s not a causal relationship, but it’s an interesting factoid, especially when you look at the report’s findings on what executives prioritize. For 87 percent of respondents, acquiring new customers is a high executive priority, while customer renewals are a high priority for just 58 percent of respondents. Upselling or add-on sales came in as a high priority for 51 percent of respondents.

More SaaS companies appear to be tracking metrics on picking up new customers more than metrics on existing customers’ activities. While tracking the number of unique visitors to a website is quite popular, at 88 percent, measuring add-on or expansion sales lags at 53 percent.

totango graph

Measuring churn looks to be relatively common, at 70 percent. But while many companies do appear to count customers as a way to keep an eye on churn, they do not always try to spot churn in terms of revenue, the number of users per license, or product downgrades.

Free trials still drive lots of business for SaaS companies. For 27 percent of respondents, more than half of all new business results from free trials and a freemium model. But there’s still room for money to come from existing customers.

The survey seems a bit slanted, in that it points out problems that Totango’s software can solve and asks about metrics that Totango can look out for. Then again, 31 percent of respondents said they’re not satisfied with existing SaaS metrics tools and are investing to improve the situation. So maybe Totango’s approach would be useful for some SaaS companies.

More about the companies and people from this article:

Totango (http://www.totango.com/) provides Software-as-a-Service (SaaS) companies the unique ability to understand their customers in real-time. By monitoring customer engagement as it happens, Totango gives SaaS companies valuable inf... read more »

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