This is a guest post by Corey Haines. Corey is the Head of Growth at Baremetrics, a tool for SaaS & subscription companies to get the metrics, dunning, and engagement tools they need to grow. He is also a proud pug owner and nerd for all things growth marketing, entrepreneurship, and software.
If “growth” just means acquiring new customers to you, you’re missing out.
Using the AARRR framework, we can break growth down into five core categories:
With a narrow perspective of growth as just acquisition, you’d be missing out on four more ways to grow! Four more ways to be strategic. Four more ways to create more revenue.
But what if we were to remove acquisition altogether? Could you still grow?
The answer is an outstanding yes — and this is the cutting-edge secret many SaaS companies today are using to accelerate growth beyond what just acquisition could provide.
In this article, we’ll explore how to grow without focusing on acquisition.
Activation is simply how you get users into your product and experiencing enough value in order to make a buying decision.
Your activation model is a critical component to growth as it determines how many of the leads you acquired actually result in happy, paying customers. Driving growth through your activation model is as simple as increasing the number of leads that turn into customers.
Most marketers and entrepreneurs optimize their activation model for lead volume or lead conversion rate. But at the end of the day, customers are all that matters.
Find the activation model that results in the most customers long-term. Again: Not the most leads… the most customers.
The five major activation models I’ve categorized are:
- Freemium (e.g. Mailchimp)
- Free trial (e.g. Baremetrics)
- Paid trial (e.g. Ahrefs)
- Money-back guarantee (e.g. MeetEdgar)
- Consultation (e.g. Uplaunch / Superhuman)
And believe it or not, price actually doesn’t have very much to do with your activation model.
The perfect example of this is Superhuman, a Baremetrics customer.
Superhuman costs $30/month, but does that mean that you can sign up and get started for free? Nope!
They meet and onboard every single customer. In fact, you’ll probably have to wait in line to even book a meeting to sign up. Because that’s what they’ve found results in the most happy customers.
Superhuman requires some training and practice and so they help you configure your inbox, practice keyboard shortcuts, and go over what you need to know to really see the value of the product.
For Databox, offering a free trial cut their churn in half because customers were already treating their first month essentially like a trial anyways.
Notion’s secret weapon is that you can use the product completely for free until you become a power user — right when you’re ingrained, hooked, and invested — which in their case is represented by a certain number of “blocks” you use in the app, and then they ask you to upgrade to a paid account.
Evernote’s lost opportunity is in their model. They couldn’t successfully monetize Scott because he could do everything he wanted to for free.
Onboarding — also a part of activation — determines how well you can enable someone to use your product, and ultimately, the value they get from using it.
You can’t expect someone to be a perfect driver if they’ve never had driving lessons before. You can’t be good at a game if you don’t know the rules.
This is where onboarding comes in.
Some common onboarding tactics include:
- Having dedicated setup pages when someone first signs up for the product to capture key information and inform users how the product works
- Using checklists, tooltips, highlights, and other in-app experiences to encourage key engagement in the app.
- Sending both scheduled and triggered emails and in-app notifications to properly educate and facilitate key steps to realizing the value of the product.
The SaaS business model is quite literally dependent on retention.
“Without acquisition, you don’t have a business. Without retention, you don’t have a business for very long.” — Jordan Gal, Carthook
Strong retention makes acquisition and activation a whole lot easier. Even just a single percentage or two difference in your churn rate can make or break your growth goals.
And even if, hypothetically, your acquisition rate stayed completely the same, you can grow by reducing churn rate alone.
One simple way to do this is when customers cancel, ask them why!
A lot of companies guess why customers cancel. They hear things here and there and then make assumptions about what customers are saying and who said what.
Guessing is a bad strategy.
If your customers could tell you exactly what to do in order to reduce churn, wouldn’t you want to know?
We saw a need in the market for a product that could help with this and built Cancellation Insights.
You could technically build this yourself or hack it together another way if you had the time and resources, but we recommend that you at least have a way to:
- Capture qualitative feedback in the cancellation process or immediately after via email
- Have a way to track which reasons are most common
- Calculate the revenue associated with each reason given
But even long before they cancel, you can also make a considerable dent in churn by incentivizing and encouraging annual plans instead of monthly.
Let’s say you had very respectable monthly churn rate of just 3%. After a year, you’ll have lost 30% of your original customers. If you started with 500 active customers and your ARPU is $100, that’s $15,000 in lost MRR.
However, if 30% of your customers convert to annual billing instead of monthly, you’ll only lose 20% of your original customers over the course of a year, reducing your monthly churn by a whole percentage point to 2%.
Not only that, but you also get more cash upfront to reinvest in the product and support, a minimum 12 month commitment, and a long-term mindset and buy-in from customers.
In order to get more annual adoption, it’s common to discount annual plans by 15-25% and show annual pricing on the pricing page, when upgrading, via an email 2-3 months into the customer’s subscription, and at year-end when the expense can be counted towards that year’s tax filing.
Rewards, referrals, and affiliates are fantastic ways to drive acquisition without having to directly focus on acquisition itself. Empower customers to share with others and thus share in the rewards, and then watch as your customers help you grow for you.
Notion rewards users with referrals and using the product in certain ways.
And of course, no talk about referrals would be complete without a reference to Dropbox’s classic referral program.
Rewards and referrals can come in the form of:
- Your product currency (e.g. storage)
- Free stuff (e.g. merch, swag, event tickets)
- Coupons, discounts, or credits
- Bundle of similar products
- Upgrade to next tier or feature
If you’re going to implement a referral program, follow these best practices to get the best results:
- Create multiple rewards that are attractive enough to different segments
- Double-sided rewards are far more effective than single-sided rewards
- Always use the bigger number (40% off vs $10 off OR $250 off vs 10%)
Affiliates can also be a huge driver for retention for two reasons:
- Everyone wants to use the tool that the “influencers” are using and recommending
- When customers become affiliates, now you’re a revenue stream, and they become much less likely to cancel
With the right incentives in place, you’ll be surprised how much marketing your customers and partners will do for you.
Pricing is the intersection of every facet of a business.
On one hand, great pricing is a key component to acquiring, retaining, and expanding with customers.
On the other, bad pricing is an easy excuse for customers to cancel, which we’ve already established is a key to drive growth sustainably.
First, choose the pricing model that aligns you the best with the value you deliver to your customers.
These are the major pricing models you’ll see in SaaS today:
- Flat-rate pricing (e.g. Basecamp)
- Usage-based pricing (e.g. Stripe)
- Tier-based pricing (e.g. Kinsta)
- User-based pricing (e.g. Calendly)
- Feature-based pricing (e.g. Intercom)
- Credit-based pricing (e.g. Audible)
- Hybrid pricing (e.g. Drift)
Choose the wrong model, or an unoptimized version of that model for your business, and you’ll be leaving money on the table. Choose the right model, and the right version of that model for your business, and you’ll be able to grow as your customers get more and more value from the product.
Also think about how you can use your pricing model as a competitive advantage.
- Most project management apps charge per user, whereas Basecamp charges a flat rate.
- Intercom’s pricing structure allows them to be modular and also provides many upsell opportunities.
And speaking of upsell and cross-sell opportunities… don’t be afraid to upsell, cross-sell, and promote upgrades.
If you have multiple pricing tiers, getting a percentage of your customer base to upgrade to the next tier can be a huge source of growth. The key is to do so in a way that isn’t too pushy or salesy.
A simple email, in-app message, pop-up, or button can be enough to get the conversation going and introduce an opportunity for an upsell, cross-sell, or upgrade like the example below.
Especially for multi-product suites, you might be surprised how many of customers don’t know what else you offer.
In-app messages and buttons, promotional offers, and calls are also great ways to trigger interest.
Make it your mission to make your customers as successful as possible and these opportunities will present themselves naturally.
You can grow without focusing on acquisition.
Think about how these new strategies can help you achieve your goals and implement a more robust growth strategy.
Relying solely on acquisition can be risky as you “put all your eggs in one basket.”
Diversify, think outside the box, and start looking for more ways to grow.