Six Customer Engagement SaaS Strategies That Work
For software service providers, customer engagement SaaS strategies play a central role in a successful business model. Proactive interactions with your customers can increase satisfaction and retention, driving repeat business and referral revenue.
In this article, we’ll offer some tips for a winning customer engagement SaaS strategy. First, we’ll examine what SaaS customer engagement is and how it incorporates the strategy of “land and expand.” Then, we’ll dive into how customer engagement is measured and which key performance indicators (KPIs) are important, a topic further discussed in this excellent post by Matrix Partners serial entrepreneur and venture capitalist David Skok. Next, we’ll share six keys to effective SaaS customer engagement. Finally, we’ll lay out a three-step approach to building a SaaS customer engagement strategy.
What Is SaaS Customer Engagement?
SaaS customer engagement is the strategic management of interactions with software users to help them see the value of the product. SaaS customer engagement strategies promote higher engagement, more successful outcomes, and more satisfying experiences. It increases customer satisfaction and loyalty, driving higher subscription renewal rates, reduced churn, and more sales from upsells and referrals.
Customer engagement can occur at any point in your customer journey where clients interact with your brand – before or after purchase. For example, you can:
- Extend premium upgrade offers to freemium customers
- Use in-message apps to guide new customers through setting up their profiles during the onboarding process
- Send email tips on advanced features to customers in the adoption phase
- Invite customers who are nearing subscription renewal to participate in customer satisfaction surveys
- Extend upsell offers or referral incentives to customers with high satisfaction ratings
A customer journey map helps you optimize these engagements by planning what customers ideally should experience to receive satisfaction at strategic points in their journey and which actions can help facilitate this. Customer engagement supports your customer success strategy by planning engagements that promote customers’ successful outcomes. This encourages customers who are satisfied with the outcomes you deliver to use your product more frequently, purchase from you more often and refer more new users to your brand.
Balancing Customer Acquisition Costs and Lifetime Value
The strategy of using customer engagement to increase sales can be framed in terms of balancing customer acquisition costs (CAC) with customer lifetime value (CLTV). From a financial perspective, these are the baseline metrics that govern SaaS business success, with CAC reflecting marketing expenses and CLTV representing offsetting sales revenue. The larger the margin between CAC and CLTV, the more poised a SaaS business is for sustainable growth and profitability.
Lowering CAC while increasing CLTV is key and customer engagement has a dramatic impact on both. The most effective way to lower CAC is to increase conversion rates from free to paying customers. We’ve learned that when customer engagement is high during the evaluation period, it has a direct link to conversion rates.
The same applies to CLTV. The key metric here is churn. Higher CLTV means lower churn. Customer engagement (or lack thereof) is a very good indicator of churn.
The Dynamics of “Land and Expand”
The SaaS model lends itself to gradual adoption by customers. The freemium marketing model provides an inherent motive to upgrade to unlock premium value, and the same principle can be used to motivate the increased adoption of advanced features and upgrades to higher tiers. Most customers start off as short-term pilots by one team in an organization. Success results in renewed subscriptions and further adoption within the organization. This means that SaaS companies have users and clients who actively evaluate the service and decide whether or not to continue as a customer or to expand usage.
This inherent tendency of customers toward increased adoption suggests a customer success strategy that is called “land and expand.” Once you’ve landed a new customer through acquisition, the goal is to promote further expansion. To give an example, suppose you land a new customer with a smaller contract. Perhaps their team is trying out your product to see if it fits their needs. Once they experience success with your product, you can leverage their positive experience to turn them into an advocate of your brand. Not only will they expand usage to premium features, but they might promote your product to other divisions in an organization – which can help you achieve enterprise customer growth.
Implementing the land and expand strategy calls for a customer success approach that focuses on promoting digital engagement. As Skok describes in his post, times have changed with a much higher percentage of business transactions transpiring online and much less live interaction. This new reality places digital customer engagement at the center of your marketing and sales SaaS strategy. So what does it take to strengthen customer engagement in your service?
How Is SaaS User Engagement Measured?
SaaS user engagement metrics may track the quality, quantity or frequency of different types of customer interactions. Which KPIs are measured may vary depending on the stage of the customer lifecycle the engagement occurs in, as well as the nature of your product. You can define engagement in terms of whichever events are applicable to your product, such as log-ins, use of a given feature or buying-oriented behaviors.
Most common engagement metrics focus on the adoption phase of the customer journey. Important metrics include:
- License utilization rate: How many licenses that your client purchased have been activated? Getting this number up is a prerequisite for increasing other engagement metrics.
- Usage frequency: This can measure the activity of active users as well as indicate users who do not log into the app and do not engage with it.
- Time spent within an application: This can provide deeper insight into engagement than log-ins alone.
- Key features used: This tells you more specifically how customers are engaging your product, which can let you know which features are delivering the most value and help you promote your product as well as improve it.
- Events correlating with pricing tiers: For example, you might track whether usage of a certain product feature changes from one tier to the next. This can help you analyze how different customer segments are using your product as well as create an opportunity to create compelling events that motivate a customer to upgrade.
- Purchase-intent signals: For example, you might track how often in-app users click on a link to your pricing page and what they’re doing at the time, which can provide insight into what behaviors lead to upsells.
- Net Promoter Score (NPS): This customer satisfaction metric tells you how likely customers are to recommend you to others, which reflects engagement. A low NPS tends to indicate low engagement.
These are only a few examples of different engagement metrics you might select. Use the KPIs most relevant to your product and customer base.
How Can SaaS Businesses Improve Customer Engagement? Six Winning Strategies
Here are six methods SaaS providers can use to improve customer engagement metrics:
- Know your customers
- Learn how to be proactive
- Evolve your service
- Share new features and products in-app
- Use content marketing to promote features and upgrades
- Automate engagement with a CS platform
- Turn customers into advocates
Let’s expand on these methods.
1. Know Your Customers
It’s easy to fall into the trap of treating your customers as unknown, faceless people. After all, chances are no one in your organization has ever met them. They probably live far away and may even speak a different language. But you can’t afford to do that.
A company must develop or achieve tools that will help them measure customer behavior. These tools must be capable of capturing the user’s in-app behavior to answer relevant questions such as:
- Have the users tried the service more than once?
- How much time are users investing in your service?
- Which features have they used?
- Have they been exposed to your core features and do they fully understand the value proposition of your offerings?
- Is momentum growing or declining within the organization?
- Are they potential buyers?
Knowing what your users choose to do in your application is crucial for you to interpret their actions correctly and use the results as a basis for running a successful SaaS business.
2. Learn How to Be Proactive
Being attentive to your customers also means knowing when to intervene. You need tools to identify and intervene with users who need help and are at risk of churn. It’s also vital to identify users who are reaching the limits of their current plan and are prime for an upsell offer. Being able to identify these users and conditions is critical because:
- Your sales and success teams have finite resources and need to be laser focused on accounts that matter
- Users nowadays prefer self-serve and self-paced work. You need to know it’s a good time to contact them, or run the risk of doing more damage than good.
Contacting users at the right time increases their satisfaction and loyalty. It shows you understand their needs and respect their time. It will also increase conversion, reduce churn and maximize upsell opportunities for your business.
3. Evolve Your Service
The same tools that help you measure and understand customer behaviors should also help you draw conclusions as to how your services and products need to improve, such as:
- Do the new features add value or complexity?
- Is the new design helping convert more trials but causing added friction to existing customers?
- Are the new tutorials and guides helping new users or are they still getting lost?
- Are users from the basic plan not engaged enough to advance to the premium packages?
Customer engagement can shed a light on some of these tough product and marketing questions. Not only can tracking engagement directly show you what parts of your product different users engage with, but it can identify the users you should be talking to directly for primary market research.
4. Share New Features and Products In-app
Your greatest opportunity to engage customers is when they’re already engaged inside your app. This creates a golden opportunity to reach out to them with in-app messages.
A great way to leverage in-app opportunities is by sharing new features and product offerings relevant to the features your customer is currently using. You can follow up automated emails with tutorial links, reinforcing your customers’ awareness of relevant features and products.
5. Use Content Marketing to Promote Features and Upgrades
Your customers don’t have to be in-app for you to reach out to them about features and products. Another great tool for engagement is content marketing.
Content on your blog can be used to showcase beneficial features, product lines and new product releases. Customers using your portal will naturally come across this content, and you also can promote it proactively through emails.
6. Automate Engagement with a CS Platform
The strategies suggested above can be automated by using suitable technology, and your customer success platform can serve as the centerpiece of effective engagement automation.
Totango’s platform includes built-in tools to help you proactively promote engagement throughout your customer journey. Modules keyed to the stages of your customer’s lifecycle provide KPIs to monitor activity and trigger appropriate automated or manual workflows based on what your customer is doing.
7. Turn Customers into Advocates
You’ve worked hard to build value with your customers and earn their loyalty. Leverage your happy customers by turning them into an advocate for your brand. If you don’t ask to be introduced to another department, typically, you won’t get there – so ask for the referral!
How to Build Your Customer Engagement Strategy for SaaS: Three Steps to Implementation
Here’s a simple three-step approach to implementing your SaaS customer engagement strategy:
- Define clear objectives
- Determine how to measure results
- Select tools to automate your CS strategy
1. Define Clear Objectives
The first step is to establish what you’re trying to achieve with your engagement strategy. What type of engagement are you trying to increase? Toward what business end? For example, are you trying to promote higher usage of a particular feature that can make subscription renewals more likely? Think in terms of revenue-oriented objectives and consider what types of engagement would promote them.
2, Determine How to Measure Results
Once you know your objectives, the next step is to quantify them. Which KPIs can be used to measure success? What numbers would represent success? Which benchmarks can you use to track progress toward your goals? Use your historical data and analytics tools to help you set appropriate target numbers.
3. Select Tools to Automate Your Engagement Strategy
The right automation is key to an effective engagement strategy. Ideally, your customer service platform should allow you to automatically execute engagement strategies and monitor KPIs.
Totango lets you automate your engagement strategy easily and at scale with built-in tools and templates that don’t require advanced technical know-how to use. The platform also integrates seamlessly with other digital apps you’re using in your CS workflow, such as Slack and Salesforce.
Automate Your Customer Engagement SaaS Strategy for Rapid Results
In the long run, SaaS customer engagement is all about value – customers have needs and they’re seeking an efficient and easy solution that fulfills those needs. If you are able to understand your customer’s behavior, interpret their needs and act accordingly, customers will choose to use and reuse your service. With the right SaaS customer engagement strategy, all parties involved will thrive.
Totango’s platform is designed to let you get your customer engagement SaaS strategy up and running at scale in minimal time. Start for free to put your customer engagement SaaS strategy into effect today.