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Understanding the SaaS Customer Lifecycle

Understanding the SaaS Customer Lifecycle

New data from Synergy Research Group shows that across the main public cloud service and infrastructure markets, operator and vendor revenues for 2022 reached $544 billion, having grown by 21% from 2021. The biggest growth was seen in IaaS & PaaS. Annual revenue from these services grew by 29% to reach over $195 billion, despite some major headwinds from the strengthening US dollar and problems in the Chinese market. In the other main service segments, managed private cloud services, enterprise SaaS and CDN added another $229 billion in service revenues, having grown by an average 19% from 2021.

Understanding SaaS

The U.S. Department of Commerce has a division known as the National Institute of Standards and Technology. They explain that SaaS provides the customer use of an application on a cloud infrastructure. Access to the applications is commonly through a web browser, client interface or program interface. The consumer generally has no direct control over or any need to manage the infrastructure.

One advantage for the consumer is that they are not responsible for installing or running applications in-house. One exception is when the consumer controls settings related to “user-specific” configuration. This allows them to eliminate the cost of acquiring and maintaining hardware and software costs such as licensing and support.

SaaS Market

Within the market currently, there are three general categories of vendors. These include “traditional” enterprise software vendors, many newer “born-in-the-cloud” organizations, and IT vendors that are now expanding into software markets. The industry is largely structured into vertical markets with customized industry-specific features.

Overview of Customer Lifecycle

The SaaS customer lifecycle can be broadly separated into three phases as follows:

  • Acquiring a customer: Involves attracting a prospective customer by creating value. The goal is for prospective customers to recognize the value of the product and how it serves as a solution for their needs.
  • Engagement with the customer: This phase is where a prospective customer becomes an actual customer. It involves interaction will the buyer, the sales process, and much more that will be detailed further.
  • Retention: The ability of an organization to retain its existing clients is important in SaaS. Retention is critical as SaaS companies are often reliant on future recurring revenues.

These phases are often described in other related terms; however, the principles are largely similar. We will progress through the many subsections or steps of the process in detail. SaaS companies that are struggling to grow should be continually evaluating and improving their practices and strategies to maximize success.

1. Awareness

Potential customers may or may not be aware that they have a problem that you can solve. The emphasis today is placed on attracting attention and generating interest through various channels. Creating educational content and useful resources may lead a prospective customer to your site.

Other key promotional tools employed in the market today include video content, social media, and is optimized for search engines like Google.  When a visitor feels that you educate, entertain or potentially provide worthwhile solutions they may engage. They may provide their contact information by subscribing to your blog, newsletter or filling out a product inquiry form.

2. Consideration

The potential customer as this point can be best described as a lead. They have recognized an offer or determined that you have some value to them and/or their organization. Nurturing a lead is critical in this phase. A member of your customer service or sales team may reach out to them.

This phase may or may not begin the sales process.  The marketing and sales teams should maintain communication. Are you attracting the right audience? Are your marketing strategies attracting leads that are qualified or appropriate for your sales team to pursue? These are critical factors because marketing efforts may be costly.

3. Potential Trial Period

This is a critical phase because it is often the point where a lead continues to escalate through the sales process or is lost. It is common in software sales to transition a lead to try your products on a “free-trial” or “freemium” basis. This tends to be a short-term opportunity for the lead to engage with your product in some limited manner. The goal in this phase is to expose the lead to your product and demonstrate that it has value to them. It may involve a demonstration of your product.

4. Qualification

If the potential customer believes your product would benefit them, there is a qualification period. They may continue exploring the software and researching it online. The lead may engage a salesperson during this phase (or vice versa) and the potential customer may investigate competing products when applicable. From the perspective of the potential customer, this may be considered a “feasibility” period.

5. Evaluation

During the evaluation phase, many of the actions and interactions may overlap with the qualification phase. The difference is that the potential customer is likely to have others in their organization to assess the product and is likely to ask more detailed questions. At this point, the sales process is in full swing and key considerations may be made regarding how the product may or may not integrate with other tools they use.

6. Negotiation or Conversion

During this phase, the potential customer is preparing to purchase. If there was a trial period, can they be converted to a paying customer? Are there any lingering objections that must be overcome or any unanswered questions? There may be negotiating on prices, clarifications needed on terms or conditions of agreements, and hopefully a sale.

7. Implementation

The process of implementation may largely transition away from the sales team. Depending on the complexity of the product, other potential people that may become involved include a sales engineer, IT staff, customer service and support, and others.  The process of “onboarding” should be closely managed to ensure a smooth transition.

8. Building Customer Satisfaction

After the installation, it becomes critical to ensure the customer is satisfied and that things are going smoothly. Software vendors recognize that often it takes significant time, expenses, and other resources to secure a new customer. Efforts toward customer satisfaction reduce the potential for “churn.” This is a term that describes losing an existing account.

The individual(s) from the customer’s organization that was involved in the sales process may or may not use the product regularly. For example, perhaps the software solution is used exclusively by sales, marketing, and customer service professionals. Good communication and customer support continue to be important. These day-to-day users may begin to provide feedback to their management-particularly when they are not satisfied!

9. Renewal (Potential Upsell or Cross-selling)

Depending on the terms of the agreement, there may be a date that the subscription terminates and needs to be renewed. In many cases, the sales team may be involved, particularly if the cost of the product will be rising. There are a host of potential factors that may impact this critical phase, including:

  • The customer’s level of satisfaction with the product
  • The current perception that the customer has regarding the value. Does the product still provide a solution that justifies the expense?
  • Other potential competitive or alternative products
  • The effort and resources needed to transition away from your product to another, and more
10. Different Existing SaaS Pricing Strategies

If an existing customer is on a usage-based or per-active-user model, it may be possible that other departments, divisions or offices may adopt the product. This would increase the revenue generated from the account.

Keep in mind that this phase of the customer lifecycle also may potentially create opportunities. It may be an opportunity to engage the organization’s key decision-makers on possibly purchasing other products and/or upselling. Perhaps you have recently introduced an enhanced enterprise version of the product they currently use?

Generating Referrals

Another great benefit to maintaining high satisfaction levels among your existing SaaS customers is that they may serve as a referral source.  A satisfied customer may become an excellent source of new potential clients simply through word-of-mouth with other organizations. You also may consider approaching the customer about providing a testimonial or being featured as a case study.

RevTek Capital – Providing Capital for SaaS Company Growth

RevTek Capital has been providing significant funding to SaaS companies for many years. The strategic funding model delivers the capital that SaaS companies and companies with recurring revenue need to expand operations.

Many startup companies struggle to raise capital and have found the process to be quite time-consuming. Our organization has unique insights regarding SaaS businesses and the challenges that these and other tech-enabled companies encounter. The professional team at RevTek also has many years of experience in marketing and operations that may assist our clients.

Key Benefit Summary

  • Cost-effective capital for growing tech-enabled companies
  • The company leadership retains control
  • Recurring revenues serve as the collateral for financing
  • Repayment is structured into simple and manageable monthly payments
  • You have faster access to funding – closing in as little as four weeks

We look forward to the opportunity to partner in growing your business!

Funding Solutions from RevTek Capital

If you are raising capital, let us collaborate with you.

Our experienced team can provide you with ideas and perspectives to help you grow your company.