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SaaS Behavioral Marketing:

How it Can Increase Your Bottom Line

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In April 1985, Coca-Cola released a fresh product called New Coke. The company was attempting to swing back against Pepsi, which was quickly gaining a lot of momentum in the cola duopoly.

Unfortunately, New Coke was a complete disaster that cost Coca-Cola millions of dollars. To this day, this story remains one of the biggest gaffes in the marketing world.

The failure was due to Coca-Cola failing to consider the importance of consumer behavior. Put shortly, the company was trying to introduce New Coke in a bid to appeal to the new generation, new consumers. What they fail to realize was that their audience deeply attached themselves to the original coke.

So deep, in fact, that when New Coke was introduced to the market, Coca-Cola received nearly 10,000 calls a day from angry customers. Some even went as far as buying the original product and hoarding them.

The backlash was so severe that only three months later, Coca-Cola brought back the original coke. So how does this relate to the SaaS industry?

Well, this story highlights the importance of behavioral economics. And by tracking, collecting, and analyzing this data, a SaaS business could become a million-dollar company. That’s a tall order back in the day what with technological limitations and other restrictions.

Fortunately, technology has evolved to a point that it’s relatively easy to map out and interpret consumer behavior.

In this blog, we’ll talk about SaaS behavioral marketing and its role in increasing your MRR (monthly recurring revenue) and ARR (annual recurring revenue).

Let’s begin with its definition.

 

An image representing behavioral analytics

 

What is Behavioral Marketing?

 

Behavioral marketing is the act of monitoring and collecting data based on someone’s interaction with a site. And depending on the user’s behavior, a strategy is then created with the end goal of converting that user to a paying customer.

However, you shouldn’t rest on your laurels once you onboard a customer. You also need to nurture that client so they’ll stay with you for years.

Remember, most SaaS products have a subscription-based payment model. That means the longer a customer stays with you, the more revenue you’ll get from them. And of course, if your SaaS product is helping their business streamline their operations, you’re contributing to their growth as well. It’s a two-way street where everyone wins.

 

The Importance of Behavioral Marketing

 

As you can see, by centering your strategy on behavioral science, your decisions are guided by observable data. For instance, if someone is using certain features of your product repeatedly, it might indicate their dependence on that specific feature. They could be using it with whatever campaign they’ve rolled out and future campaigns as well.

Conversely, if the user isn’t using a feature at all, that would either mean it’s complicated or they need further training on how to use it. Information like that will be your guide in improving the overall experience of the user. And by doing so, you’re going to increase customer retention and, ultimately, your MRR and ARR.

But before that, let’s first discuss the buyer’s journey. Where does it begin? As you will see, behavioral segmentation will be the name of the game here.

 

Behavioral Marketing: From Visitor to Loyal Customer

 

Behavioral segmentation is where you divide your customers based on their interaction with your site. Have they landed on your site for the first time? Or have they repeatedly visited site for the past two weeks?

Knowing this behavioral pattern will give you an idea of what stage of the buyer’s journey they’re in. In the SaaS industry, that’s divided into five. These are:

  • Awareness
  • Consideration
  • Decision
  • Retention
  • Advocacy

Let’s explore each one.

 

1. Awareness

 

The awareness stage is the first segment of your sales pipeline. As the name suggests, it’s where your customers are first introduced to your company and learn about the service you’re providing.

At this stage, they have a pain point they’re trying to solve. And they may have stumbled across your company through:

  • Ads
  • Web content
  • Social media
  • Referrals

Thus, your behavioral marketing strategy should focus on the pain points you’re trying to solve. Are you trying to help them with their email list? Perhaps your product can provide a comprehensive keyword report? Or maybe it focuses on link building strategy?

Whatever it is, you need to clearly define these problems and how you’re going to solve them. At the awareness stage, your ads and content should educate your potential customers. By doing so, you’re signaling to them that you’re a trusted authority on the matter.

You should also try to get their email so you can add them to your mailing list. Accomplish this by creating a valuable eBook or comprehensive report that they could access in exchange for their email.

 

2. Consideration

 

Here, your customer has fully understood their problem and is now looking for a solution. This is why in the awareness stage you need to create content to educate your readers. Empathize with your customers. Connect with them.

Note that the awareness stage isn’t where you’re introducing your product as the solution. You’re still winding up for the pitch. You do that in the consideration stage.

As such, your content would be listing possible solutions that your customer could choose from. Of course, one of those solutions would be your SaaS product.

Highlight the pros and cons of each. Discuss the price, features, and overall ease of use. How long are they going to see the result once they integrated a particular solution into their system?

You should:

  • Launch email campaigns
  • Conduct free webinars
  • Provide expert guides
  • Release white papers
  • Release comprehensive eBooks
  • Hand out detailed reports

Since your customer will be shortlisting their options, the goal is to be included in that list. After that…

 

3. Decision

 

The decision stage is where your customer is ready to commit to a solution. However, they still can’t pull the trigger and is on the fence about what to choose.

As such, your behavioral marketing strategy here is to push them over your side. You do that by putting yourself in their shoes. Ask questions like:

  • What makes your product the best? Is it the price? Specific feature? Customer support? All of the above?
  • How are you going to help them? Is your onboarding process comprehensive enough?
  • What’s your product roadmap? What features are you planning to launch that would help your customer’s bottom line?

You should also highlight customer testimonials here. Assure your customers that other businesses experienced success when they integrated your SaaS product into their operation.

You can also provide a sample trial for your customers. That could either last 30 days or 14 days, with the latter the most ideal option as it shortens your sales cycle.

 

4. Retention

 

As mentioned earlier, a SaaS business doesn’t only focus on acquiring a customer. It should also try its hardest to retain them.

A lot of SaaS companies blunder at this stage due to poor onboarding, lackluster customer support, and several other mistakes. Your focus in this stage is to monitor and analyze how your customer is using your product.

Try to see what features are being used the most and what is left collecting virtual dust. Tracking these behavioral patterns will help you improve your product. Moreover, you’ll also provide added value to your users by enhancing the overall capabilities of your software.

To get a clear picture of this area, you’ll need to:

  • Ask your audience how they’re using your product – this should be done even before you onboard a client. Ask them what campaigns are they trying to launch in the future and tie your product’s features into these campaigns.
  • Send out satisfaction surveys – ask your clients how satisfied are they with your products. Did it help smoothen their daily operations? Or maybe it increased employee engagement?
  • Features they want to add – the market is always evolving and your product needs to evolve with it. As such, you’d want to get an idea of what features you could add to further help your client’s growth. Uncover these consumer data by asking your customers through surveys and interviews. You can then give them a small incentive for taking part in the survey.
  • Features that will be added – reveal to your clients the roadmap of your product’s features. Better still, conduct a poll and have them vote on the features they want to see first. This sends out the message that you’re listening to your clients. That you’re valuing the input they provided in the previous survey. In turn, it could increase their loyalty and your retention rate.
  • Provide ideas – your clients are always looking for ideas to get more customers. As such, you should release content that could spark inspiration for them. And of course, always highlight how your product can help in this regard.

By getting a pulse on your SaaS retention average, you’re essentially tracking your churn rate. To learn more about how to calculate and lower churn, you can read our blog about that here.

 

5. Advocacy

 

The advocacy stage is the holy grail of your sales pipeline. You’d want every customer to be an avid supporter of your product as they’ll help spread the word about your solution. And spread it without getting prompted, at that.

Think about it. Your customer has friends and colleagues operating in the same niche. If you could get one of them to recommend your product to his or her circle, then everyone in that group could become your customer.

From there, you’re going to transform these new clients into advocates, which, in turn, would recommend your product to their other circles.

Do you see where this is going? Your product’s reach is expanding and at the center of that expansion are your advocates.

To turn your customers into avid supporters, you’re pretty much going to follow the same process in the retention stage. Consistently improve your product to a point that it becomes one of your customer’s foundations in their daily operations.

It’s now an essential component of their company. It plays a vital role in the success of their previous campaigns. And best of all, it’s happening organically. Your customers are willingly endorsing your product to their peers.

As you can see, your behavioral segmentation strategy should revolve around these five stages. That way, when you’re collecting customer data, you already know what stage they belong to.
It’s now easier for you to launch a…

 

Behavioral Targeting Campaign

 

In a nutshell, behavioral targeting is exactly what its name suggests. It allows you to create targeted ads, educational content, and social media posts that deeply resonate with your targeted audience. And it will certainly make a connection as it’s rooted in psychological marketing.

You’ve targeted their pain points and provided a solution to those pain points. As a result, you’re going to see an increase in user engagement and conversion rates.
And on the other side of the lake, your audience is getting targeted ads. They’re already looking for a solution. So why not position yourself in front of them and present your product?

Sure, it’s no guarantee that they’ll interact with your ad or content. But by using behavioral marketing, you’re increasing your chance that they would. And when they click, they’re then added to your sales pipeline.

From there, you can just follow the steps above and guide them smoothly through the buyer’s journey.

 

Market Segementation

 

Behavioral Marketing and Activation Cohorts

 

SaaS companies have a lot to consider when tracking the progress of their growth. But one of the most crucial aspects to monitor is what’s called activation cohorts.

Activation cohort is a segment of your customers belonging to the same month they became paying clients. So if Customer A, B, and C became active customers in January 2021, they belong to the same category.

Where does behavioral marketing come in? Well, by monitoring activation cohorts, you’re identifying which months your customers are likely to churn. It could be that on the second month, which is quite common among SaaS companies.

Someone became a paying client, they try your SaaS product for a month, and they don’t renew their subscriptions on the second month.

Why? Well, it could be that your onboarding procedure needs improvement. Or maybe your training video isn’t clear enough. Regardless of the reason, you need to identify its source as it will be fatal to your company.

You spent resources trying to onboard a client and they churn on the second month. That’s a loss on your end.

 

Sales Churn Vs Customer Churn

 

But wait, do not assume that just because you have a high churn, you are losing revenue. There’s a massive difference between sales churn and customer churn. And that difference is the revenue you’re earning from these customers.

Ask yourself, would you rather have 10 customers churning who’s giving you an overall monthly revenue of $1,000. Or do you want a single customer churning who was giving you $1,500 a month?

Always remember that your SaaS customers are divided into different payment tiers. And your main priority is those who are giving you the highest revenue.

That’s not to say you should ignore the lower tiers as you can still upsell to them through add-ons and additional gated features. But your main target is retaining those whales, the customers who are paying huge amounts to access your service.

And that’s not just because of their financial value, mind you. Customers who are paying a lot for your SaaS product clearly sees the significance it offers. They don’t see your SaaS product as an expense. They see it as an investment that increases their bottom line.

So do everything you can to keep these clients. Gather as much behavioral data from these guys to determine how you can help them. Their success is your success, after all.

This is but one aspect of your behavioral marketing strategy that can help mitigate your sales churn and customer churn. By looking at these trends and behavior patterns, you can determine the value your customers place on your service.

 

Tracking Consumer Behavior Online

 

Of course, you shouldn’t just use the customer data you’re getting from your product alone. It should also come from other sources like your targeted ads, social media, and other platforms you’re using to promote your product.

Behavioral science is an incredible tool to use in your marketing strategy and behavioral marketing segmentation. It provides the pieces that complete the puzzle to your overall growth. And by religiously tracking it, your marketing message, as well as your customer relationship, will coalesce into a stronger, coherent whole. As a result, you’ll experience continuous growth on an annual basis. That’s the power of behavioral economics.

For more information about SaaS strategies that can help your business, try visiting our blog here.

 

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Ken Moo
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