The SaaS industry continues to be a challenged by high churn rates Spending on customer retention is growing SaaS companies continue to invest in tracking more metrics on their existing customers. The top new metrics companies plan to track in 2016 are customer retention cost, customer health, and customer lifetime value. More than two-thirds of the surveyed SaaS companies experienced annual churn rates of 5% or higher. Additionally, almost the same number saw an increase or no change in churn since the previous year. More than half of the companies surveyed increased their spending on customer retention last year. Spending on staﬃng increased at a faster clip compared to spending on technology or programs, suggesting that companies are still more focused on building out their teams vs. putting in place the infrastructure to scale customer retention operations. Upsell and expansion sales are a missed opportunity for SaaS vendors For the large majority of SaaS companies surveyed (81%), only 20% or less of new revenue came from existing customers in the form of upsell and expansion sales. SaaS company growth rates are strongly inﬂuenced by customer retention and upsell For the third year in a row, the survey indicates that the fastest growing SaaS companies have a signiﬁcantly better record on churn and upsell, underscoring the critical role of managing revenue from existing customers in the SaaS business model.
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Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.
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