SaaS companies have done a great job of acquiring sign-ups. However, most of them are finding it a challenge to convert these free users to paying customers. Predictive Analytics can significantly increase the conversion of free to paying customers, without additional marketing spend.
Why is Box, the cloud storage service, getting boxed?
With its much-hyped-IPO being delayed, questions on the company’s profitability, challenges around sustainability of its business model, Box has become the talk of the town for all the wrong reasons. Analysts say that most of the SaaS and cloud-based companies are under tremendous pressure, to grow their revenues and increase profitability. Investors are pressing for a hockey stick growth; but the high cost of customer acquisition and increased competition, are coming in the way of positive results.
Industry experts now feel that the business model itself brings in volatility; it rides on nursing free trialers endlessly, ending up in an extremely skewed paying vs. non-paying user ratio. Though free users can’t be ignored, increasing the paying-user-base remains imperative for sustainability. Box has a total user-base of 200 million, out of which only a few pay for their usage; the remaining generate no revenue; the marketing and support costs incurred thus, is a sunk cost for the company. In the last year, Box reported revenue of $124 million, and a sales and marketing spend of $170 Million.
Source: TechCrunch Report
SaaS companies need a survival strategy – to boost their revenue, without any additional cost. Conversion of free to paid users is an excellent way of rapidly increasing revenues and profits. By doing this, SaaS and subscription based companies can strike gold at the bottom of the customer pyramid, and leverage the massive investments already made in acquiring these customers.
The first step is to identify the customers most likely to convert. A simple 2-by-2 matrix (refer insert) helps you determine the pool you need to focus on. Analytics helps you identify patterns in customer behavior, and hence determine who are most likely to pay.
Once the target customers are identified, work on the message, medium and timing. Solid, customized pitches, delivered via the platforms of consumer choice, at an opportune time will make all the difference. Free trialers can be engaged much better, and consumers can be catapulted along the path-to-conversion. By combining the ‘obvious’ with ‘analytics’, Absolutdata helps you increase conversion of free and trial customers, by 25-30%, in a very short period of time.
About the author
Dr. Anil Kaul is the CEO and co-founder of Absolutdata. He is a visionary and a decision engineer helping companies increase their revenue and achieve higher profitability.