Marketing to the Right Customers Reduces Churn

User Retention🕑 Reading Time: 6 Minutes

Defining your target market is one of the most crucial tasks in marketing.

This step is the foundation of an effective marketing strategy. From the way you develop your product names to your marketing channels, your target consumer should always be in mind.

Target marketing is all about identifying and understanding your niche so that you can dominate the field.

Identifying the right consumer helps you streamline your marketing strategy. You can target this demographic better with the relevant content, messages, and ads. As the depth of consumer insight grows, you will start to realize better ROI and higher conversion rates.

Consumer acquisition is at the heart of any SaaS company’s growth, reeling in the wrong customer can be tragic to the growth of your business. The wrong customer is more likely to churn than the right customer. Marketing to the wrong demographic is a waste of resources.

In this article, we shall discuss how you can mitigate churn by marketing to the right people.

Defining Your Target Market

A target group is a specific demographic or group of people that you want to reach. These are people who are more likely to use your services and they share particular characteristics, like behavior or demographics.

The clearer you define your target group, the better you can understand how to reach them.

To define your target group, you can start with broad categories like single mothers, millennials, etc. From this step, you can dive deeper and get more specific. The more specific you get, the better your possible conversion rates.

You should base your target market to audience research and not gut feeling or instinct. You should be willing to adapt as you fly, learn as you go, and zero in on people who want to buy from you.

You cannot target everyone, but you can sell to everyone.

Selling to the Bad-Fit Customers Can Significantly Affect Growth

There are many consequences to selling to the wrong consumers. These include increased customer support costs, drag in growth, decreased employee morale, and increased churn. All these factors can ultimately add up to serious damage to your company’s brand and reputation.

Think of it in this sense:

Unhappy customers are complainers, and those who complain have a tendency of telling their friends, acquaintances, contacts, and total strangers. Unhappy customers have many online platforms where they can vent. It is more frustrating when these complainers were not the right fit for your products and services in the first place.

The Cost of Bad-Fit Customers

You do not need to burn through and churn thousands of customers to learn the value of customer success. Most SaaS startups make this mistake and end up losing a lot of money.

Customer churning is expensive in the long-haul.

Let us take the example of a company that recruited three customers that they shouldn’t have signed. These customers lack a significant input into customer success potential; technology fitness. This factor gives the three customers a 0% chance of success in integrating the services to third-party systems. These customers each contribute a total of $25,000 in Annual Recurring Revenue (ARR). In total, the three customers account for $75,000 in ARR deals.

These customers will end up actively working to get out of their contracts. As they churn, they take away $75,000 in ARR deals. Had they remained customers for the next five years, you would have gained $375,000. The figure could be higher if you were to consider opportunities in expansion programs.

Apart from failing to make the company some money, these customers cost the SaaS business in terms of Cost of Acquiring a Customer (CAC) and cost to serve.

The cost to serve a bad-fit customer is higher than the cost to serve a consumer with higher success potential. SaaS companies end up diverting valuable resources from successful customers toward efforts to keep customers who will eventually churn.

As customers churn, they take away with them an unquantified number of potential customers. These are people that they influence with negative narratives about your products and services.

How to Stop Selling to Bad-Fit Customers

Mindset Changes

There needs to be a change in mentality in every organ of the organization. Customer acquisition needs to shift from laying emphasis on the numbers to identifying the right prospects. the sales team should create a mindset that focuses on building better customer relationships rather than chasing the transactions.

Interdepartmental Collaboration

Different departments can join forces to mitigate the churn that arises from marketing to the wrong people. Customer support teams occupy a space that is strategic in identifying bad-fit customers. Coordination between support teams and the sales and marketing departments can yield significant change.

Sales Education

Stop trying to appeal to everyone. Instead, identify your ideal target group and focus on them. Your salespeople should learn how to identify and differentiate good-fit customers from bad-fit equivalents. They should also learn why these people are a bad fit and negative impact such customers can have on a business.

Create Incentives for Your Sales Staff

Incentives for your sales team should focus on customer quality over quantity. If you want your sales team to sell to the best-fit customer, consider aligning sales objectives and commissions with customer LTV and churn rates.

Learning From Churn

A good starting point is customer surveys and interviews. Interview the customers that you won. Try to determine the reasons why they chose you. Also, interview the prospects you lost to competitors.

It is easy to blame the sales team for closing deals with bad-fit customers. The leadership of the sales department should take responsibility. There needs to be a shift of focus from quantity to quality of customers won.

After identifying bad-fit customers as a major impediment to retention, the whole organization should take restrategize. Different departments should coordinate with others to ensure that the business sells services to the right customers. The marketing team also needs to switch tactics.

Marketing to the Right Consumer

After you determine your ideal customer, you need to formulate a marketing strategy. Everything starts by creating the right environment and mindset to attract the right customer.

A retail giant like Walmart has a sophisticated strategy that uses the placement of products and prices to encourage shopping behaviors.

The goal is to set up a mood and environment that encourages the prospect to buy your services. When selling products on your website, you want to get rid of any clutter that may distract your target from completing a purchase.

SaaS Marketing For Retention Conclusion

Defining your target market is the foundation of an effective market strategy. Identifying the right customer helps you formulate your marketing strategy. There are times when we end up selling our products and services to the wring customer. Even though you make money by completing a sale, the bad-fit customer will eventually churn.

The disadvantage of this kind of churn is that the bad-fit customer will let others know about his or her dissatisfaction. This hurts your potential to win over prospects who were influenced by the negative reviews.

Marketing your SaaS services to the right people increases your chances of customer success and retention. In this way, targeting the right customer reduces churn.