SaaS Customer Lifecycle, Engagement Model & Biz Model
The typical customer lifecycle for a SaaS product has six stages:
- Awareness — potential user including all first time and repeat visitors who have not yet bought your product becomes aware of your product by doing online research and finding your free resources like blogs, videos, or posts on social media.
- Conversion — user signs up for a free resource or trial to learn more. This kind of user who has left their personal information is also called the lead user. It’s important you immediately prove your product’s value by helping s/he solve the pain points with your solution. You could provide a helpful onboarding guide to make it easier to adopt the product at this stage.
- Purchase — user completes the first transaction on your website.
- Activation — user begins using the software and becomes a frequent and regular active user. Make sure you provide enough outreach, support, and education on topics to reduce user churn.
- Renewal — after using your product for a while, the user needs to renew to keep using it or upgrade the feature. It’s brilliant to consider creating an attracting loyalty program rewarding your faithful users at this point. Before these times, it’s critical you maintain a close communication with the user to know if there are any possible causes for not to renew. Remember: “You don’t earn loyalty in a day. You earn loyalty day-by-day.”
- Referral — loyal users are your strongest brand advocates! Through referral programs, writing customer reviews, customer community and serving as case studies, your happy user becomes your best sales rep. 👉 See 77 best referral programs for 2020. 21 SaaS referral marketing.
The customer lifecycle is also applicable when you’re rolling out new features to your users. Here’s how each step could apply:
- Awareness — users learn your new feature release and how it can solve their problems.
- Conversion —users take a look at the tutorial you released to guide them to the new feature.
- Purchase —if the new feature requires an update, users could pay for it.
- Activation — users adopt the new feature
- Renewal — if the feature required an upgrade, users could renew their upgraded subscription.
- Referral — the user lets others know the new features.
Engagement Model
There are two strategies when it comes to approaching your clients: high touch model with many touch points vs. low touch model using tactics like product usage, engagement, and health scores/ NPS.
Hybrid Approaches to the engagement model
1. High Touch Onboarding / High Touch Post Onboarding
This model is usually used for enterprise customers who have high MRR (monthly recurring revenue). From sales cycle to implementation, renewal, and beyond, these use high touch approach to ensure customers have the best buying experience.
2. High Touch Onboarding / Low Touch Post Onboarding
This model is used by companies that have a complex product or service that needs configuration, but after the sale is won, the approach will be changed to low touch(maintenance) from high touch.
3. Low Touch Onboarding / High Touch Post Onboarding
This model is applicable for companies that have easy signup from their websites but have to offer additional training or resources to ensure success in the long term.
4. Low Touch Onboarding / Low Touch Post Onboarding
This model is typically used by companies providing both cheap and intuitive products or services with automatically charged on a monthly or annual basis.
Business Model
A business model is a rationale of how a company generates, delivers, and acquires value. It can be described by 9 aspects: Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships & Cost Structure.
Desirability
1. Value Propositions
The Value Proposition is a simple statement of why customers choose your products or services. It solves a customer’s problem or meets a customer’s need.
2. Customer Segments
In order to make the best use of resources and target the right customers, a company must group customers into distinct segments with common needs, common industries, or other attributes. A business model can define one or multiple customer segments.
3. Channels
Channel is customers’ touch points that influence customer experience. It serves a plethora of functions, including:
- Raising customers’ awareness about a company’s products and services
- Delivering a value proposition to customers and helping them evaluate it
- Allowing customers to make a purchase
- Offering post-purchase customer support
4. Customer Relationships
A company should define which type of relationship it wants to build with different customer segments. The relationship can range from person-to-person to automated. It can be evaluated by these metrics:
- Customer retention rate
- Upselling revenue
Viability
1. Revenue Streams
A company must have to know how much each customer segment is willing to pay. It involves different contracts under different conditions like monthly and annual contracts, on sale, etc.
2. Cost Structure
This should include all costs incurred when running a business model.
Feasibility
1. Key Resources
Key resources describe the necessary assets to make a business model work, which means key resources are for creating and offering a value proposition, reaching markets, maintaining relationships with customer segments, and earning revenues.
2. Key Activities
Key activities describe the necessary things a company must do to make its business model work, which means key resources are for creating and offering a value proposition, reaching markets, maintaining relationships with customer segments, and earning revenues.
3. Partnerships
By having alliances, companies can optimize, reduce risk, or acquire resources. There are 4 types of partnerships:
- Strategic partnerships with non-competitors
- Strategic partnerships with competitors
- Joint ventures to develop new businesses
- Buyer-supplier relationships to assure stable supplies
Sketch Out Hypotheses
You can look at all 9 aspects of business models on one page by using business model canvas. Each component of the business model has various hypotheses you can test.
Things to Note
To make every steps of customer lifecycle succeed, it’s crucial to segment your customers to be more efficient and effective for a frictionless user journey. I found these reads are especially good to have a basic idea on how to differentiate your customers: User segmentation: A guide to understanding your customers. WHY AND HOW TO SEGMENT YOUR CUSTOMERS.
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