Pacific Crest Securities’ annual SaaS survey has become something of a staple in SaaS circles for its useful benchmarking across key SaaS metrics. The information gathered in this report is quite diverse- covering everything from churn to server delivery for SaaS companies of various sizes. Below are a few of the findings that will be of interest for Customer Success teams.
It’s hard to be a hugely successful company without growing your ACV
There are a few SaaS metrics in the survey that hark back to this point. Successful companies keep net churn low by upselling and existing customers to even larger contracts. We all like more money, but does it really matter where it comes from? This survey confirms that the answer is Yes. As more companies move towards a bottoms-up sales model it is critical to their business that they see success with an initial user group from which they can drive growth across an organization. You also have the added benefit of higher retention rates for customers spending more on your products. This is likely an effect of longer contract lengths and an increased investment in product implementation. Also, the customer acquisition cost of an upsell is on average 11% of what you’d spend to acquire a new customer. As your company becomes more mature you should invest more in marketing to drive expansion with your current customers.
Charging by “seats” is the most popular pricing metric
While we’re on the topic of growing ACV, SaaS companies need to build in opportunities to grow revenue with existing customers. Pricing by the number of “seats” a customer has licensed (as popularized by Salesforce) remains the most popular way SaaS companies monetize. Pricing your product for success requires that you ensure your pricing structure allows for opportunities to increase revenue from existing customers. You will never be able to achieve additional revenue growth with your existing customers if your pricing is capped at say $5,000/month based on an “all you can eat” product license. It is ideal to create a pricing model where your company benefits from a customer’s increased success with your product. To do this, create scalable pricing axes. There are a few different axes you can experiment with when it comes to pricing out a SaaS product discussed in this previous post.
Trials remain a great way to get people to try your product
More companies are driving users towards taking a product for test run before becoming paid customers. While the duration of trials varies greatly (from Intercom’s 14 day one to Basecamp’s 60 day thorough vetting window), it looks like certain SaaS companies see this as an important part of their acquisition funnel. I think it’s safe to assume that the companies having the most success with trials are those with a bottoms-up sales model. Perhaps it’s little wonder that this model is sometimes called B2C2B.
Did you find any other SaaS metrics from this survey particularly interesting?