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What SaaS Companies Can Learn From Drug Dealers

Market Trends - February 6th, 2013 by Natalie Issa.

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In our line of work, “subscription model” is practically synonymous with SaaS. But SaaS companies weren’t the first to take advantage of this revenue concept. Drug dealers have long depended on regular, repeat buying, very similar to the subscription model.

So what can SaaS companies learn from their subscription model forefathers? Using a little creative thinking coupled with customer analytics, SaaS companies can benefit from three key concepts.

1. First One’s On The House

Free TrialDrug dealers commonly give a free sample to prospective customers in order to show their credentials. They do this knowing that offering something for free will make their target market more likely to at least try it, which is the first step of the conversion process.

As a SaaS provider, you should, like drug dealers, use the free trial offer as a strategy for attracting new customers. Think of it as a marketing activity and any costs you incur as a marketing expense.

To make sure you attract customers, optimize your website and messaging to get potential customers to sign up for your free trial by advertising the minimal investment on their end. That may mean highlighting the fact that it’s free, risk free, or requires only a short sign up process. Your goal here is simply to leverage the free offering to get customers to try out your product.

2. Don’t Scrimp On The Sample

Now, it’s not enough to just give potential customers something for free; You need to give them something that will keep them coming back. The main objective is to get them hooked, so make sure your free trial will do just that.

Drug dealers know that a customer won’t get hooked if they give them a sample that’s not potent enough. So instead of being greedy and giving them a poor quality sample, dealers give prospects a taste of their best stuff, which is sure to entice.

So how does a SaaS company apply this concept to their business? Aside from having an amazing product, of course.

First of all, give trial users the full package. Many SaaS companies mistakenly limit the features and functionality they make available during the free trial period in hopes that it will encourage users to convert sooner. However, this strategy ignores the central concept of the free trial. If you want to get users hooked, you have to let them try your full product, not a watered down version.

Second, look at the free trial experience as the sample you’re giving users, rather than the product alone. If you execute the free trial experience well by enabling users to see the full value of your product during that period, you’ll have no trouble getting customers to come back for their next fix.

To create a free trial experience that’s going to get users hooked, invest in onboarding, making sure free trial customers implement and use your product to the fullest. Unlike drug dealing, this benefits both the customer and the vendor.

To accomplish this, you should be using customer analytics to track every important step or milestone of your implementation process. Each SaaS company will find different milestones important, depending on the product itself. Box would want to track when users share files, while at Woopra we track when customers implement the JavaScript tracking code to their website.

Once you’re leveraging customer analytics to track the implementation and engagement of free trial users, you can use this insight to communicate with customers throughout their trial, offering proactive assistance that is relevant to each user. For example, a user who has not yet reached one of the most important and most basic milestones several days into their free trial should receive an email or a phone call to help get them started.

Many companies waste the critical free trial period by not monitoring customer behavior or making that insight available to customer-facing teams who can put it into action. If you don’t manage to get trial customers hooked and coming back for their next fix, then your free trial simply isn’t doing its job.

3. They Stop Using, They Stop Paying

Drug dealers understand that their business depends on their customers continually using their product. Similarly, with SaaS companies, users must continue to see value in your product so that they continue to pay you the recurring subscription fee. The minute they stop seeing that value, they’ll go looking for a new supplier.

Consequently, retention is top of mind for almost every SaaS company, yet so many struggle with high churn rates because they fail to preemptively spot at risk customers. But as drug dealers know, a lack of product usage is the biggest indicator that a customer is at risk of leaving and early detection can be vital in retaining clientele.

This means that you, as a SaaS provider, need to use customer analytics to continually monitor your customers’ engagement with your product in order to watch out for this important indicator. Having this visibility into customer engagement and product usage enables you to easily spot those at risk customers who have stopped using your product.

Customer Analytics Product Usage Danger Zone

The next step is to make sure your team is alerted whenever a user is no longer engaged with your product so that they can proactively intercept and save the customer. Remember, once a customer stops using your product, they have no reason to keep paying.

Your Thoughts?

When it comes to creating a SaaS-induced addiction, drug dealers can offer some effective and surprisingly morally sound strategies. What other pointers can we ethically take from these business owners?

Disclaimer: This post is written entirely for illustrative and educational purposes. Woopra in no way endorses the sale or use of illegal substances.

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