3 Steps for Reducing SaaS Average Customer Acquisition Cost

SaaS average customer acquisition cost is an obstacle that all companies in the field strive in various ways to reduce, and as a result, a lot of innovations in SaaS itself as well as its presentation and customer experience have been made over the past few years. However, some serious mistakes have also been made. Those who do not learn from history are of course doomed to repeat it, and those who do not look to the future are forever blind.

With that in mind, let’s take a look at some ways to reduce SaaS average customer acquisition cost, and some previous attempts at this that were less than successful. Hopefully, we can prevent these mistakes in the future, and find more ways to make customer outreach and acquisition affordable, which will make the SaaS concept yet more viable than it currently is.

Do keep in mind that not all of these suggestions may be right for your company, as corporate culture and philosophies vary, as do SaaS business models and demographics. That said, let’s move on.

#1 – Reducing Overhead

First, the greatest issue is overhead. The outreach to entice customers is primarily trials and free less-capable versions of the software in question, which certainly brings in potential customers, but makes it markedly more expensive for paid user acquisition.

This is because for each customer, be they free or pay, there is increasing overhead, which multiplies with the overhead of the product itself, culminating in expensive costs for paid users. Due to the extreme schism resulting between the free use and the overbearing price of paid accounts, it can become costly to entice users due to this overhead.

A way to reduce this is to limit free accounts, or find some way to incentivize users to convert to paid service more frequently, such as discounts for signing up at specific times, or discounts for a limited time for any sign up, to ease users into the idea of paying for a pepped up version of what they get for free. This may still have some cost, but less than the overhead issue is inflicting currently by a long shot.

#2 – Rethinking Outreach and Advertising

Another thing to consider is outreach. SaaS companies have a bad habit of turning to traditional advertising and marketing tropes that’re not often suitable for this type of product or service, such as media ads and the like. These don’t work well for SaaS, as it’s mostly business-oriented. While magazine/website ads work well if the demographics are right, a less expensive outreach is through blogs and SEO, which cost pennies on the dollar, sometimes nothing at all.

When the outreach to customers is reduced in price, the customer acquisition cost is reduced in parallel, obviously. So, rethink your advertising strategy, it’ll probably help significantly.

#3 – balancing Feature Disparity

Feature disparity can result in problems one way or the other for customers as well. If a free trial or free account has too few less features than a paid account, many users will be less enticed to convert, making it costly in free losses to acquire paid customers. However, if the features are severe, then the price is also severe, resulting in the price point issue mentioned earlier. So, take a close look at this, and see if perhaps it’s not a problem for you, as it is for many. The balance that is needed is a bit taxing to achieve, but definitely possible.

Things to avoid …

Some things to avoid, that others have tried are giving free accounts to people who sign up at specific times, special features or assets to users who sign up, or instituting ads in paid services. These things never work out, and we must remember in the future that they did not end well when tried in the past.

Lastly, avoid capping free trials with credit card or personal information requirements, as less customers will try the service, making it more expensive to acquire each one, and the price, whether you want it to or not, will be passed on to the user.

These are just some key things to consider when working out ways to reduce SaaS average customer acquisition cost, but they seem to be the most common issues companies face.

Omri Erel
Omri is the Head of Demand Generation, as well as the Lead Author & Editor of the SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.
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