Welcome back to a new episode of our “Give me 5!” video series.
In this video, Philipp Reichardt, Vice President of Sales for North America at 2Checkout, is going to focus on how to successfully transition your business to SaaS & Subscriptions.
Already about half of online purchases are subscription-based and by 2020, more than 80% of software will be about subscriptions. Therefore, the shift to a subscription-based business is inevitable.
This video provides strategic tips for making the shift to subscriptions and SaaS, so let’s get started!
1. Choose your transition model
Is it legacy perpetual with subscriptions or just subscriptions, legacy with SaaS or pure SaaS. Also, define how your customers will transition. Will you introduce your new subscription-based products to existing customers, new ones, or an in-between solution?
2. Think how much but also how you will charge your customers
In other words, think of the monetization option(s) for your subscription or SaaS product, and make sure they work for your customers. Here are few of the major ones:
- Flat-rate subscription – which can be month, yearly, etc.
- Hybrid – a combination of flat-rate & usage-based
- Freemium, with a path for upgrading to premium
- Time-based Trial – which can be free or paid.
Closely related to this is pricing – Don’t price your SaaS product too high or too low. Differentiate it from your legacy perpetual license product and make sure to deliver innovation, flexibility, and service.
- Trials and freemiums
3. Get your metrics sorted out
Sort through the alphabet soup and understand the metrics you need to track for SaaS & subscription success.
We’re talking about metrics such as:
- Monthly & Annual Recurring Revenue (MRR & ARR)
- Customer Acquisition Cost (CAC)
- Customer Lifetime Value (CLV)
- Renewal Rate (RR)
- Churn Rate (CR)
- Expirations (E)
- Trial Conversion Rate (TCR)
- And the list goes on…
You need to also track them with the right reporting and analytics tools in order to optimize your business.
4. Prevent Payment Problems
Find a recurring payment and revenue recovery platform that can stop subscription payment problems before they start, with tools like:
- Payment Failure Prevention
- Billing Continuity
- Expired Card Updaters
- Retry Logic
- Retention Strategies
- Churn Prevention
- Local Payment Methods
One tip would be to ask your payment or eCommerce provider for a list of payment methods supporting recurring charges. Make sure they are appropriate for the new models you are about to adopt.
5. Support success
Customer support can make the difference between success and failure. For subscription-based sales, support will be accelerated – you’ll be in closer contact with your clients – even if in some cases through automated triggers and notifications – and you’ll constantly need to reinforce your value. Here’s what you’ll need for SaaS support:
- Account Management Tools
- Self-Service Support via API-based Customer Portal
- Customer Success Team for assisted, proactive support
- Customer Communication
No matter the end game, the start of your transition must begin with open and clear communication with your existing customers.
You can watch the previous episode of our “Give me 5!” series on growth hacking here.