SaaS (Software as a Service) is the latest trend in the business world: applications available online that clients can use without having to install them on their computers.
With SaaS, buying and installing programs on a computer seems a thing of the past. Listening to music and managing shipments or invoices are just examples of all the things that can be done through online applications.
Given the growth of this software licensing and delivery model, it is important to get a grip on what is trending. That is exactly what Totango, a company focused on customer success, has been doing every year from 2011, and this year's edition – which is their 5th survey on the subject – has recently been made public. This comprehensive study is performed by surveying professionals at SaaS companies with different sizes, from startups to big and established businesses. The goal of these metrics is to better understand what performance indicators that SaaS companies use when running their businesses. With more than 300 participants, this survey reached five major conclusions:
High churn rates are still a challenge for the SaaS industry
Over two-thirds of the surveyed SaaS companies had churn rates of 5 percent or higher – an increase for nearly the same number of companies.
SaaS vendors do not take advantage of upsell and expansion sales
81 percent of the surveyed companies got a maximum of 20 percent of new revenue from existing customers in the form of upsell and expansion sales.
Growth rates of SaaS companies are influenced by customer retention and upsell
SaaS companies with a faster growth have better results in terms of churn and upsell – a conclusion already observed in the last two years.
SaaS companies are investing in more client-related metrics
For 2016, SaaS companies plan to track more metrics on their customers: customer retention cost, health, and customer lifetime value.
Companies are spending more on customer retention
Over 50 percent of the surveyed companies assigned bigger budgets to customer retention in 2015. However, companies still seem more focused on building their teams rather than developing their infrastructures to scale customer retention operations.
These insights are surely valuable for SaaS-related companies to further develop their own strategy and to measure and monitor their businesses in 2016.