Scaling from 0-100M as a Self-Serve SaaS: A Beginner’s Guide to Growth and Resilience

1. Grow Organically through Word of Mouth

You most likely won't hear about the best SaaS products through a cold call. It will be through word of mouth.

- Blake Bartlett, OpenView Venture Partners

Word-of-mouth is, undoubtedly, the most powerful marketing medium at your disposal. And the best (and most challenging) part about it - you can't buy it off a store. You need to earn your word-of-mouth recommendations.

Not for every business, but if your product consistently exceeds customer expectations, and gets them excited with every use, this could be an effective acquisition enabler. If your product makes customers so delirious with joy that they can't stop talking about it to everyone they meet, it's high time you designed a strategy to capture that word-of-mouth already.

Example

Freedom is a website blocker that allows over 450,000 users to enjoy a distraction-free experience. With a solution for a pain point affecting the productivity of millions of people every day, Freedom had a head-start on word-of-mouth marketing.

Fred Stutzman wrote the first version of Freedom back in 2008 when he wanted to keep himself away from distracting sites. He shared the tool with a few people, and it just took off from there. People naturally wanted to rave about the app that kept them focused on what matters without getting sucked into the Internet black hole. Within a year, with zero marketing, Fred earned over half a million users, just through word of mouth.

2. Capture Virality from within your Product

Virality is how a new product, an app, or a tool is able to catch on rapidly and spread like a software-driven wildfire. It hits critical mass, and takes off to the point where thousands of users are infected by it.

An essential part of engineering a viral experience lies in crafting channels that encourage and capture users to continue spreading the idea of your product. A truly viral product turns every user experience into a self-propagating marketing and sales machine.

Example

As one of the easiest calendar scheduling applications available today, Calendly is amongst the elite list of B2B SaaS products that enjoy inherent virality. Each time someone schedules a meeting via Calendly, they tacitly promote the product to the invitee, and kick-start a viral loop. The invitee experiences Calendly's Aha! Moment first hand, and, most often, start using the product to schedule their own meetings.

Calendly's greatest customer acquisition strategy comes from its users and they value their experience.

3. Optimize Your Content Strategy

"Make something people want"

- Paul Graham, Y Combinator

The best part of being in a growing self-serve market is that your users already have intent. They're already on their journey to discovering solutions for their pain points. All you need to do is just show up and offer a solution.

If you already have a massive amount of inbound interest in your product, category, or the pain points you are solving for, a well-laid content strategy will ensure you win your prospects' mindshare.

Example

Inbound marketing is the essence of Hubspot.

Hubspot today is a common name in marketing automation and CRM that continues to invest in their self-serve, freemium approach. Hubspot didn't just take the inbound route - it was pretty much instrumental in establishing 'inbound marketing' as a strategy.

"People wanted to do more of the research themselves. And if you go to Google Trends and look at, even just type in "how-to," it's pretty interesting just to see the trend for people searching how-to, as more and more people self-educate. I think that's why inbound marketing works so well for Hubspot", says Hubspot VP of Marketing, Kieren Flanagan.

4. Drive Prospects to Try the Product with a Free Trial or Freemium

The goal of every self-service SaaS business should be to get the product in the hands of the user as quickly and seamlessly as possible. Getting users to try your product early via a freemium edition or free trial gives them the chance to truly experience your product, free from marketing, sales, or any other distractions.

There are pros and cons to both approaches.

So if I was going into a new market, and I was thinking about freemium, I would think about what is the most value I could give away that would allow users to see some amount of value with the freemium product, that would make it shareable with their colleagues.

Like it's value enough that I would tell another person at work about it or I would tell someone in my network about it. But it's not so valuable that I have no reason to upgrade.

Like it's value enough that I would tell another person at work about it or I would tell someone in my network about it. But it's not so valuable that I have no reason to upgrade.

Kieren Flanagan, VP of Marketing, Hubspot

Your value metrics help you in demonstrating value to your free users and enabling their growth with your product. It is the one core feature of your product, the main value you offer that incentivizes your freemium users to upgrade:

• For Wistia, their core value is video hosting, so the number of videos hosted is their value metric
• For Appcues, their core value is helping your users, so the number of users is their value metric
• For Amplitude, their core value is tracking analytics, so the number of events tracked is their value metric

Considering a free trial model:

The goal of a free trial is to deliver as much value as possible to users during their trial period. Important questions to consider before deciding whether a free trial strategy is right for your organization:

• How long does it take for prospects to realize initial value on average?
• How long should the trial last?
• What features to limit or remove from the free trial process?
• How do we nurture a free-trial user? How to guide him to the A-ha moment to realize value soon?

Example

Here's how Riddle ditched freemium for a free trial, and boosted their new sales by 34%

Riddle is a Germany-based quiz-making platform that allows publishers to create quizzes, personality tests, and other interactive formats to engage their audience. Riddle's freemium plan worked beautifully as an acquisition channel, bringing in thousands of subscribers. The problem, however, was with converting them into paying customers.

Riddle's free-to-paid conversion was suffering.

We also realized pretty soon that offering a free plan with hopes of converting users to a paid subscription is not a good idea. The users on the free plan ended up being responsible for a large portion of our expenses but never had any intention to ever upgrade.

Boris Pfiefer, Founder, Riddle.

They solved the problem in two ways.

• Deserting the freemium strategy to nudge customers to upgrade to a paying plan after a limited 2-weeks trial
• Combining that with allowing users to check out without sharing their card details

Read the full story here

1. Value-oriented user onboarding

Identifying your product's key action or value can help in crafting the best onboarding strategy. Key action is a function or feature that offers users their desired value. À la, the Aha moment. Users who experience such key actions are more likely to convert to customers.

How to identify those leading in-product actions around which you could build your onboarding:

• Consider the actions that are most impactful for user activation. You need not go down the funnel to find your key actions. Appcues recommends - The steps you want to drive users toward onboarding aren't necessarily your main conversion metrics. You're looking for "day one" actions that are low-effort, high-value.
• Dive into both qualitative and quantitative data to identify the user actions and validate if they are helping users achieve their goals.
• The average number of steps to reach the key action could be anywhere between 3 - 7. Once you have a list of steps, ensure your product is supportive of your onboarding journey.
• Be prepared to constantly test, analyze and build your onboarding flow.

Giveaway

Wondering how to structure your onboarding experiments' hypothesis? Try the free Hypothesis Builder.

Watch out for the value gap: A Value Gap is the point where a user's product engagement declines, or they fail to interact with a critical feature or complete the key action.

The figure above illustrates a value gap that an activated user can experience as a result of not engaging with a product's most valued features.

Here's how your self-service SaaS product could help close the value gap:

• Create an engagement loop using the product Insightful in-product usage data combined with customer engagement behaviors can help your SaaS business automate timely responses, that engage prospects and customers with the product in more meaningful ways.
• Create a loyalty loop using the product The idea of your product continuously delivering substantial value and experiences to your customers favors: easy adoption of new features, increase in usage, and more renewals.

1. Churn Management

Churn is a pain for any subscription business. And there are two main categories of SaaS churn, each of which require a different kind of treatment:

Customer Churn (or Logo Churn) occurs when a customer does not renew, leading to a cancellation. Even with a great product, amazing support, and top-notch training, some customers are just going to leave. And when that happens, a considerable proportion of the energy, time, and money invested in onboarding goes down the drain. Since Customer Churn impacts your growth metrics like Total Active Users it can have a crushing effect on your morale. But it might not be all that bad if you're losing your lower tier customers to acquire the ones that actually grow your bottomline.

Revenue churn is the absolute nemesis of growth. It is the actual revenue you lose due to churning customers.

There's no magic pill to reduce churn, and surprisingly, blind improvements to your product will not always solve it. While you have to continue providing great value and immense customer experiences throughout your product, most times you could just be operating on a leaky system ( 20-40% of all churn is involuntary ).

To accurately deal with churn you have to understand it better. Ask yourself these three questions:

• Has the churn been recurring?

  If a number of customers have been consistently churning out over a period of time, it's a major red flag and needs to be fixed immediately.

  One-time spike in churn can be attributed to process problems like revenue recovery rules, payment failures, etc. In which case, implementing automated dunning, setting up smart retries and ensuring alternate payment methods, might help prevent revenue leakage and a breakup.

• Is the churn voluntary or involuntary?

  Involuntary churn is when customers churn due to payment failures, card expiry or change, gateway errors, etc.

  Voluntary churn is when a customer leaves due to product or process problems like lack of proper support or major pricing/design changes.

• Is it early-stage or late-stage churn?

  Early-stage is when the churn happens within the first few months of activation.

  Late-stage is when it happens after a year of activation.

  You can also use Chargebee's subscription revenue metrics analysis tool, RevenueMD to find out the right churn metrics to track.

2. Product Engagement Drives Stickiness

Here's Sequoia's framework to Stickiness, Retention and Growth

Engagement Drives Stickiness Drives Retention Drives Growth

If a product truly adds value for you, you will engage with it more deeply. If it makes you happy, you visit it more frequently and become an active user. In other words, engagement drives stickiness, which drives retention — and that, in turn, drives growth.

As a recurring business, you need to focus on building a sticky product that people love coming back to. This way, customers who are realizing recurring value from your product are not just less likely to churn out; they are more likely to fight to keep your service active in the face of budget cuts, competitor offers, etc.

Bonus tip: Even a frictionless checkout experience could result in an uptick of user stickiness:

• Spoil the user with a variety of payment options from debits to wallets.
• Short is the new black. Forms that ask only what's relevant.
• Mobile friendly forms for those hurried, less tolerant users.

Example

Integrations help get your product in front of your users so they have more reason to use it.

Increased productivity contributes to a stickier user experience that discourages customer churn. For example, Zapier found that Typeform users who integrated with Zapier to push Typeform data to their other services showed about 40% less churn than users who used Typeform on its own.

3. Take the Road to Negative Churn: If You Want to Grow Fast

A negative revenue churn means that you're generating more revenue from existing customers than the revenue that is lost each month from churned customers.

Negative churn is an incredibly powerful growth mechanism. Customer accounts are like high-yield savings accounts where money keeps coming in every month, without much effort.

Example

If you are using a help desk tool like Help Scout, the more team members you can key into your support pipeline, the faster you can respond to customers and the more teammates you can keep on the same page.

That value-add is borne out by Help Scout's remarkable ability to drive expansion revenue from their per-seat pricing scheme. Over the course of 23 billing cycles, the average Help Scout user grows to be paying 143% of the average revenue per customer:

Lever 1: Pricing

The key to pricing is to always keep testing.

Pricing has always been a tricky affair. Price too high, you lose customers. Price too low, you lose value. Finding the sweet spot has been one of the oft discussed topics in the realm of SaaS. And every pricing expert will recommend that you need to keep testing and iterating.

Getting to the product-market fit is a continuous process. You'll always end up identifying a new persona, a niche market, or a different vertical you're catering to.

And you'll almost always end up finding yourself evaluating your current pricing.

Self-service SaaS companies land paying customers by being strategic about the product packaging i.e limiting the right set of features to the paid plans and thereby converting free users into paying customers.

Example

GetAccept, An AI-based eSignature and deal management platform, adopted a hybrid approach when it came to sales — an outbound sales-driven model as well as a self-service sign-up model. As they scaled, their customer acquisition strategy pursued different use-cases and required a platform that allowed for pricing experiments, including support for tiered as well as dynamic pricing for enterprise sales. And for mid-cycle expansions, this needed to be done on a pro-rata basis.

Iterating on pricing and custom pricing, among other experiments contributed to GetAccept's revenue growing 4X at the time — businesses should take a leaf out of GetAccept's growth book and use it to improve their pricing strategies.

Lever 2: Trial patterns

Free trial has become the de-facto for SaaS businesses, typically under the SMB segment. Free trial is largely recommended as a must, if your product is competitively priced. You'd want your prospect to try before they buy, of course.

Free trials also come with their share of options, and like pricing, it is pertinent to experiment with trial patterns. Some of those experiments should be around:

The more important thing to take care of here is to take context into account. Is your product designed to demonstrate value in the limited trial period? How long will it take for a customer to realize it? What kind of communications or nudges should you employ during trial?

To learn is to grow.

The more you test, the more you learn.

The growth strategies and channels that worked yesterday would likely not work so well today, and might yield even worse returns tomorrow. Every growth experiment, no matter the results, yields an opportunity to learn about your business and users, and grow further.

If the results are impressive, you've found something with meaningful impact – optimize it for all its worth. And if you've found something that doesn't move the needle at all, there's value in that too. It signals that something was wrong with your intuition (about your product or user), or you've missed something along the way.

1. Virality

Product virality occurs when a product's rate of adoption increases exponentially with each additional user. Viral growth is measured using the viral coefficient—or the k factor — which is calculated as:

In order for virality to exist, k must be greater than 1.

C(0) = the number of customers at the beginning of the time period you're measuring

i = the number of invitations each customer shares

c = the percent conversion rate of each invitation

k = the number of new customers each existing customer can convert (i * c)

The product virality formula is calculated by multiplying the number of customers at the beginning of a time period by the viral k coefficient (which measures the conversion rate of new customers invited by existing customers to start using a product).

2. Time to Value

Time to value (TTV) is the amount of time it takes new users to reach their first aha moment or activation event.

Goal: The goal is to reduce TTV as much as possible—the closer it is to zero, the better.

3. Product Qualified Leads

Product-qualified leads (PQLs) are typically activated users—folks who have completed a key action within your product, had their aha moment, and have seen the value that your product can offer first-hand.

PQLs provide insights into customer intent and predict how likely a user is to progress to the next stage of the customer lifecycle.

4. Average Revenue Per User (ARPU)

Average revenue per user (ARPU) is the amount of money, on average, that you can expect to make from an individual user. It is a good indicator of the overall health of your business.

How to calculate

5. Customer Lifetime Value

Customer lifetime value (CLV or LTV) is a prediction of how much revenue your business will receive from a single customer over the duration of your relationship.

The simple CLV formula:

6. Net Revenue Churn

Net Revenue Churn is the percentage of revenue you have lost from existing customers in a period by total revenue at the beginning of a period.

7. Expansion Revenue

Expansion revenue—also called expansion MRR—measures the revenue generated from existing customers through upsells, add-ons, cross-sells, etc.

Blossom Street Ventures found that most companies going public maintain a Net Dollar Retention of over 110%. And to maintain a healthy growth rate and outpace revenue lost from churn, revenue from upsells should account for the bulk of SaaS revenue.

In other words, companies are losing 5% to 20% of their revenue from current customers, so if net dollar retention is 110%, that means, upsells were 15% to 30% of original revenue.

Sammy Abdullah, Founder, Chair, and Managing Partner, Blossom Street Ventures

The most important thing when it comes to measuring PLG metrics is that you keep it simple and then make sure every department is aligned around the one or two metrics that really matter.

If you're drowning in spreadsheets but aren't iterating on your product, you're probably doing it wrong. The above mentioned metrics can help for starters.