How to Prioritize your SaaS Customers to Maximize Revenue

Your existing customer base is gold, right? We’ve all heard it before, the cost of acquiring a new customer far out weighs keeping an existing one. This is even more true in the SaaS world. More and more companies are rolling out SaaS business models. It just makes sense.  Why? Companies don’t want to manage expensive hardware infrastructures, deal with complicated software rollouts, upgrades and more. SaaS solutions are cost effective and have a lower TCO (total cost of ownership).

In a SaaS model, keeping your existing customers happy is critical. The recurring revenue from the existing base can make up as much as 75% and more of your annual revenue. Growth comes from new customers, but the meat is in maintaining the existing base and protecting the recurring revenue stream. With this said, not all customers are the same and knowing which customers require the most attention and which of those require less is key. Spend the wrong time with the wrong customers and the consequences could be devastating.

A key metric in SaaS is churn. The key, keep churn as low as possible. But, with that said, some churn is better than others. The most effective way to manage your SaaS customer base is through prioritization, placing your most valuable accounts on the top of the list and placing your least valuable on the bottom of the prioritization list. The best way to prioritize SaaS customers is across 4 categories:

  1. Low risk to renewing, lots of up-sell opportunities
  2. High risk to renewing, lots of up-sell opportunities
  3. Low risk to renewing, few up-sell opportunities
  4. High risk to renewing, few up-sell opportunities

 

 

saas mgt model

When you prioritize your customer base along these lines it changes the game. It allows you to segment your customers based on opportunity AND loss of revenue. This way you can spend your time on those customers with the greatest value and not burn precious time on customers that may not deliver a return.

Lots of up-sell opportunities and low risk to renewing:

In most cases, this is your best client. They are happy with your service. They  aren’t considering alternatives and are most likely going to renew. In addition, they aren’t using all your products or services. The relationship isnt’ maximized. There is room for them to spend more with you thereby generating even more revenue. These are your best customers and should get the lion’s share of your time and attention.

Lot’s of up-sell opportunities but high risk to renewing:

These customers are the most painful. They represent tremendous upside to your business. Unfortunately, they aren’t happy. They may be looking at alternatives. They may feel your service isn’t meeting their needs. Their business model may have changed and they are seeking alternatives. Whatever the reason, they are at risk to churn. What sucks with these types of customers is they aren’t buying all your products and services. There is tremendous additional revenue opportunity in these accounts. These customers are tricky, spend too much time trying to save them because of their upside and fail, you’ve wasted time that could have been place else where. Don’t spend enough time and you could loose a good account with killer upside. Pay close attention to these customers. Find out why they are at risk and see if it’s something you can fix. If it is, fix it. Don’t lose a current customer with killer upside. If it’s not something you can fix, bite the bullet and accept your losses. Don’t let the allure of all the “additional” revenue cloud the reality that this customer is already gone.

Few up-sell opportunities and low risk to renewing:

These accounts are your “steady Eddies.”  In most cases they will make up the majority of your customer base. They are happy, they’ve bought most, if not everything you have to offer or have no need for anything more. When this group starts to shrink and churn starts to increase, you have a problem.  The key with this group is to keep delivering great service. Create dedicated teams to provide world class support. Build killer KPI’s to monitor their health and make sure you don’t do anything to hurt them. They are the cash cow. With this said, don’t burn sales resources here. This is not fertile selling territory. Growth won’t come from this group. Dedicate sales resources to customers that can move the needle.

Few up-sell opportunities and high risk to renewing: 

With few exceptions these clients are you’re least valuable (exceptions are those large clients who have bought everything and have high ARPU’s, average revenue per user. Any extra effort put into these accounts should be made on a case by case basis). When clients have few opportunities for up-sell and they are at risk to renew, there is all downside no upside. You don’t want to lose these clients, however there is no upside for investing too much time and resources in these accounts. It takes a lot of time and effort to save this revenue, time and effort that could be spent preserving revenue in an account with up-side potential. Churn is bad, and therefore minimizing it is critical. However, putting in lots of cycles to save an account with little to no upside, time that could have been spent on an account with growth potential isn’t efficient.

As head of sales or a SaaS account manager, growth comes from knowing how to prioritize your account base and allocate resources to secure maximum return. Don’t waste time with accounts or customers with little return. Take the time to segment your existing accounts and customers into most valuable to least valuable. Don’t kid yourself into thinking all customers are the same — they’re not.

You want to win in SaaS? Start with knowing how to attack the base. There is revenue risk AND reward in the base. You just have to know where to find it and how to go get it. Spend your time wisely.

Keenan