Money Matters

How established SaaS companies can leverage data for success

Bruce Croxon former Dragon of Dragon's Den and host of the disruptors

Ahead of his appearance on the upcoming Sage webcast: Growing a SaaS Company in a Shifting Landscape, Bruce Croxon, partner at Round13 Capital and co-host of BNN’s, The Disruptors, talks to Sage Advice about how important it is to analyze as much customer data as possible before making strategic decisions that could affect customer retention levels.

Bruce Croxon former Dragon of Dragon's Den and host of the disruptors

In Steps to success when scaling your SaaS business, Bruce Croxon discussed in detail how young SaaS companies can successfully scale their operations. Although this advice is critical for businesses that have just achieved their funding goals and are about to enter a growth phase, there are still many lessons that established SaaS companies need to keep in mind in order to keep market share, improve their value proposition and retain their audience.

For established SaaS companies, one of the key challenges is to maintain and grow revenue. The common method that companies use to strategize how they intend to achieve this, is to apply the Ansoff Matrix. Put very simply, this looks at four strategies:

  • Market penetration: sell more of your current solutions to your current customers
  • Market development: sell current solutions to new customers
  • Product development: sell new solutions to your current customers
  • Diversification: sell new solutions to new customers

For established businesses that have just one product or service to offer, it’s logical to prioritize a mix of market penetration and market development. This approach often gears a company towards a price increase especially if there is a shortage of ‘land to grab’.

To increase prices or not?

Think for a moment of Netflix. It offers one product, it has expanded into numerous markets around the globe, but has never offered more than a video on demand subscription service. It goes into a new territory with a low introductory fee which will rise over the following years, thus increasing revenue.

Although a price increase is not always a sustainable growth strategy for every business, as Bruce Croxon explains, one of the benefits of the data analytics tools available to medium and large businesses is that they can now model the potential outcomes to issue like pricing.

“We’ve talked about data and understanding your customers and your market. So the beauty of having information at your fingertips is that you should be able to tell very quickly what the impact of something like a price increase is going to do to your retention levels,” says Bruce.

Are you utilizing your customer data properly?

As Bruce explains there is vast amount of data available that can be distilled to understand specific user behavior patterns, such as churn rate in a particular region, among a set of users with a certain income.

Let’s say for example, subscribers in Toronto, under the age of 40 earning $40,000 a year. Being able to examine subsets of user groups and other data sets, enables SaaS businesses to better predict how their customer base will be affected by strategic decisions. Using the price increase example, Bruce explained the questions a business must ask to successfully measure impact.

“Let’s go find out…let’s find a segment of our customer base and we can test that and we will get the data back and see whether in fact it was a mistake to increase the price and if so, how much of a mistake it was. How many customers did we use and who else in the market is there that we would be concerned about in terms of taking our market share?” explains Bruce.

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man with glasses in a blue shirt presenting the webinar about scaling sass

Seeing the future value of the current customer

As a partner in Round 13 Capital, Bruce seeds an expanding portfolio of growth stage Canadian companies. Bruce cautiously explains that the market conditions and business circumstances are different for each one of the businesses that Round 13 Capital invests in, but he always has an eye on companies that can recognize future customer value.

Bruce says, “As we’re growing a market, I’m not a huge fan of once you’ve landed on a price and you are comfortable with the gross margin of the business and you are focused on the land grab, I don’t like too many things getting in the way of that land. Especially if the customers have value beyond that one service you happen to be selling them at the time.

There are other ways to increase customer value without hitting them with a price increase. Every situation is different, and that’s a bit of a blanket statement, but generally we are looking at company’s that are early enough in the adoption phase that there are still a lot of customers to be had and that becomes the primary objective. ”

Don’t miss Bruce Croxon and Matt Hodgson, CFO at Kitchener-based online video platform company, Vidyard, as they address the challenges and opportunities of a shifting landscape in the SaaS industry.

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