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“What should be our subscription strategy?” is a question we are often asked, in the journey of our partnership with SaaS companies for crafting and engineering their product experience.
Have you been in a similar dilemma?
In our experience, focussing your growth strategy on the following primary dimensions of your business ecosystem should hopefully get you closer to your goals.
- Customer
- Market
- Product
- Sales
Before we dwell deeper, let’s understand popular customer acquisition models;
“Free Trial” is when a product is introduced in the market with all features accessible by potential users for a limited time-period at zero cost. In this model, products with many features are generally complimented with guided feature walkthroughs and tutorials for increasing awareness and reducing the users adoption curve. The advantage is that, the products’ value proposition is self-discovered by interested and aware users. In this strategy, the probability of churn is low considering that the free trial version users are the eventual end-users of the paid version as well. Having said, considering it’s time-bound, poses a huge challenge in effectively conveying the products’ value in a simple and direct way.
“Freemium” is when a product is introduced in the market with few features accessible by potential users for an unlimited time-period at zero cost. This model allows users to gradually get acquainted with the product, benchmark its alignment with their goals, and build a habit. When the need arises, the probability of a financial commitment and conversion is high, as users are confident about the value they will get by upgrading. Moreover, once the system is working and set, users are usually reluctant to change. Once again, the advantage is that, the products’ value proposition is self-discovered by interested and aware users. Having said, deciding which features should be offered for free, and across plans, so that the upgrades are exciting enough for users to progressively imbibe and embed the product in their day-in-life goals can become extremely nerve-racking.
“Demo” is when the business team schedule in-person or virtual meetings with potential customers to provide a live product walkthrough. This model helps focus the products’ value proposition and features in alignment with the customers’ business, quickly and accurately. In this model, convincing the key decision-maker at the get-go could result in a faster conversion. Having said, considering the products’ value proposition is judged by a decision-maker who will be sponsoring the budget, and may not be the actual end-user, could eventually result in a high churn rate.
Dimension #1
WHO are your “Customers”?
- “Customers have a need-gap” - and have unfulfilled needs or are using inadequate solutions owing to low~no availability. The general level of acceptance for trying new products, and adopting a perceivable average quality product for getting their needs fulfilled quickly is much higher. Moreover, these type of customers are willing to pay more to get their job done. Time plays an extremely important factor in their overall decision making process for ensuring their needs are quickly fulfilled. Hence, a ‘Free Trial’ customer acquisition strategy may work well as they would like to experience the entire product and its feature-set before committing.
- “Customers with no specific needs” - are satisfactorily using available solutions for bridging their needs. The general level of acceptance for trying new products is much lower. These customers are generally open to trying new and unique solutions if their existing needs can be adequately bridged by significantly cheaper alternatives. The overall product uniqueness, value to business, and cost, are important factors in their decision making process. Hence, a ‘Freemium’ customer acquisition strategy may work well in this scenario as customers would like to try accessible features for sometime before committing to a paid plan.
- “Customers with no options” - is an interesting twist to the aforementioned two customer types wherein they are forced to accept whatever is available in a specific situation. These customers are constrained by choice, and usually are ready to pay more for a product that is similar or perceivably lower in quality. Urgency of getting their needs fulfilled is an important factor in their decision making process. A good example for this scenario could be, when you cross the security gates at an airport for boarding a flight, and, when you may have purchased your first windows laptop (at some point, the Microsoft Windows OS was powering nearly ~80 percent of all personal computers in the world). Hence, a direct off-the-shelf customer acquisition strategy works well in this scenario as customers would be willing to pay any price for fulfilling their needs.
Dimension #2
WHAT “Market” do your customers thrive in?
- Is the market space crowded? - carving out a total addressable market of serviceable and obtainable customers in a crowded competitive space can become extremely challenging. Having said, customers are always on the look-out for new products which provide higher value at competitive price bands. They are generally driven by a community or industry trend. Hence, ‘Free Trial’ and ‘Freemium’ customer acquisition strategies may work well in this scenario as it would increase customer reach in a short amount of time and accelerate acquisition. Moreover, customers would get a chance to experience the product for sometime in their day-in-life benchmarking with already-in-use products. Thereby, obtain a higher level of certainty before committing to a specific paid plan.
- Is it a deserted or virgin market? - introducing a completely new concept or way of doing is not easy. Customers have a general tendency to gravitate towards products that may be off high interest to them or is needed for a certain purpose. Thereby, new products could easily get missed in a ‘spray-and-pray’ method. In this scenario, we have experienced a high-touch ‘Demo’ based targeted customer acquisition strategy working better as prospects react to a unrealised need or opportunity much better.
Dimension #3
WHY should customers choose your “Product”?
- It’s a significantly better solution with similar features - The customers are already users of a competitive product and are fairly aware about the general product offerings and workflows. Hence, in these scenarios a self-serve ‘Free Trial’ model works well for an edge-to-edge evaluation of the product features and its alignment with goals.
- It’s a simpler and focussed solution - Introducing a competitive product with lesser features is often perceived as being an inferior product. In reality it may not be the case, if the product is solving specific business and end-user pain-points effectively. Offering a comparable lower cost solution will attract prospects, and thus introducing a ‘Freemium’ or ‘Free Trial’ customer acquisition strategy at this point would work better.
- It’s a unique and innovative solution - When a unique solution is introduced in the market there are no customers as such, and acquisition can become challenging. You will have to do a need realisation, leading to a high awareness and learning curve for the targeted customer groups. Thus, a high-touch ‘Demo’ based marketing and sales strategy would work better.
Dimension #4
HOW are you “Selling” your product?
- Top-down strategy - focussed on high-level management (C-Level), the decision makers and sponsors? - this audience is primarily looking to bridge a gap fairly quickly and hence need pointed solutions and answers for their needs. Thus, a high-touch ‘Demo’ based strategy works better.
- Bottom-up strategy - focussed on end-users of the product, the influencers? - this audience loves tinkering with products as their primary goal is to become better at what they do. Hence, want to be extremely sure before influencing a purchase decision. Self-serve strategies like ‘Free Trials’ and ‘Freemium’ work better.
No matter which growth strategies you adopt, customers always love significantly better quality products at a lower price.
In today’s mature market, focussing on the overall product experience from a design as well as engineering point of view is utmost important. Continuously analysing and optimising the customer experience journey starting from product awareness, onboarding, and feature usage, is necessary for nurturing loyalty and garnering a reference-able community.