- Hi, I am Dan Martell, serial entrepreneur,
investor and creator of SaaS Academy.
In this video I'm gonna teach you the five steps to increase
the lifetime value of your customer.
And be sure to stay to the end where I share with
you an exclusive download.
It's my revenue maximizer worksheet that's gonna unpack
the specific strategies so that you can fill it out and start
designing your opportunity to increase revenue
as fast as possible.
(upbeat music)
So the goal of every software product is to achieve a thing
called net negative churn.
It's the holy grail of SaaS.
Essentially means that your expansion revenue on a monthly
basis is growing faster than your contraction revenue from
cancellations and downgrades of accounts and the only way to do
that is to ensure that your current customers are expanding
their relationship with you, spending more money.
Ideally on an annualized basis your expansion revenue should
make up about 30% of your additional reoccurring revenue.
And that is the challenge.
In this video I'm going to share with you how to do that in a way
that doesn't add complexity or overcomplicate your product
roadmap or take months to execute.
Step number one, fix your churn.
Oh Dan, that is so obvious.
Thank you oh king software dude for telling us.
Look, I have to say it.
It is honestly the most powerful thing you can change
in your business, increase lifetime value.
If you get a customer and they're churning after three
months no matter what I tell you next you won't have the audience
to actually grow their account with.
So building a structure and an onboarding sequence and really
just delivering the value to the customer that you promise.
Making sure that you're solving a real problem and keeping that
customer is going to be the most powerful thing you can start off
by doing to increase lifetime value of your customers.
Fixing your churn.
Number two, redesign your plans.
Very often when I'm working with a client I'm seeing either they
have one plan, just a long list of everything their product does
or they have several, I've seen seven different plans on a
pricing page that just overcomplicates the interface
and makes the customer think way too much.
What you want to simplify it into maximum four,
usually small, medium, large, enterprise.
Enterprise is kind of like write a check and
let's have a conversation.
But the way I think about the plans is you want to figure out
what specific aspects of your product are truly required to
solve the customers pain point at the size of business they're
at and if certain characteristics of the size,
maybe it's the team, maybe it's specific features,
if they're bigger than they might need the medium plan.
What you want to do is make sure that you actually provide that
clear delineation and progression so that you have
something else for a customer to grow into.
If you don't essentially project a future with your product and
what's possible through your pricing plan then you won't be
able to expand your reoccurring revenue.
Three, price on value.
Every product has what's called a value metric.
It's the number that if it increases it tells you that your
customers are receiving more value from your product.
For a product like Wistia, which they're a hosted video platform,
it's the number of videos on their platform
and total bandwidth.
Most software companies have one value metric.
Wistia is kind of a rare case,
not very often that they have two.
They have both the number of videos plus the download.
If you look at things like Trello,
it might be the number of boards.
Although I don't think that's actually true.
Or Dropbox will be the size of storage on the system.
Yeah, if you need terabytes then you're probably a business
account and you have other specific features that you would
need like team features that would be relevant
to that type of account.
And their priced totally different,
the consumer account's priced
totally different from the business.
But you need to think about what is that value metric.
What is that number that you're gonna use to kind of show to
customers if you go above this then you really
should be on the next plan?
For a landing page software,
that can be the number of landing pages, et cetera.
It's also used to be competitive in the market, right?
Or somebody else might have a fixed number of elements and you
offer unlimited but you still need to figure out what is that
other point of value.
Use that as your pricing and make sure that you
capture some of that value.
The worst you can do is just allow a customer to have
unlimited all the time.
I've seen this once on a price page it was $7 a month for a
business account and it was unlimited everything.
There's no way that company's gonna scale
because they don't have enough product.
They're not capturing enough value from their product to
actually grow the business.
Step number four, create add-ons.
Now in your business there's probably situations or features
that your customers are asking for that may fall out the
specific focus or problem that you're solving and in those
cases you want to consider creating add-ons that
bolt onto your product.
So this could be specific integrations.
If you think about it if I need what's called LDAP integration
which is kind of like active directory or kind of like
authentication integration, single sign-on.
That is an enterprise request.
If I need maybe it's you know 99.9 maybe I need a service
level of agreement.
Those are things that are enterprise.
Maybe I don't need a team edition
or a white labeled version.
So those things are kind of small business characteristics.
Whatever it is, you might have add-ons that you can offer a
customer that's outside of your core plans that are priced as an
additional monthly reoccurring subscription on top of the plan
so that you can offer that.
Maybe offer it as a discount, you can even get your
salespeople or in your email sequences to promote certain
things that you want to amplify but it's really important to
have different pricing axises, different things you can sell or
offer to a customer to really serve them.
The way I think about it at the end of the day you want to ask
yourself how can I create more value for my customer than
anybody else and sometimes those features are not core to your
plan but they could be add-ons
that you can offer your customer.
Step number five, offer partner solutions.
Now, I'm a big fan of focus.
If you've got a product, you want to focus on actually
delivering the value to your customers.
You don't want to over complicate the interface and try
to be everything to everybody and in those situations you want
to consider other products that exist on the market that might
help the customer expand their problem-solving abilities.
So the way I think about is where does your product begin or
end and where do other solutions in the market
kinda take over at that point.
Or even just surveying your customers that you have today
and saying hey what are the top five other products that you use
in your business and considering
those solutions as potential offers.
And the way it works is you reach out to those companies you
say, "Hey, we have a customer that looks
"a lot like your current customers.
"We'd love to offer your solution and potentially do an
"aligned partnership where we get a referral fee,"
and ideally it's an ongoing.
So typically in these situation a company,
including yourself, you should be willing to give up 30% of the
monthly reoccurring value if you present them a customer.
So if you give them a link, they sign up.
They put their credit card on file and they become a customer
that you'll get 30% of the monthly reoccurring fee
from those partner solutions.
And what's great if you pair three or five of those together
you can almost double your monthly reoccurring value from
an existing customer account just by offering and introducing
other people's solution to your existing customers.
It's low hanging fruit, a real big opportunity to grow the
average revenue per account.
And as simple as sending out an email and asking.
So really you help your customer and you help your business with
this simple strategy.
So quick recap, number one, fix your churn.
Number two, redesign your plans.
Number three, price on value.
Number four, create add-ons
and number five, offer partner solutions.
As I mentioned at the beginning of this video,
I want to share a worksheet I created called
the Revenue Expansion Maximizer.
It'll allow you to outline the specific features that I went
over in this book so that you don't build new product or
overcomplicate your product roadmap and really just look for
opportunities to repackage, redesign or partner with other
solutions to increase your lifetime value.
You can click the link below in the description to download that
now and if you liked this video,
be sure to click the like button,
subscribe to my channel
and be sure to share it with a friend.
Thanks for watching and I'll see you in the next video.
Keep it fresh.
How to increase the lifetime value per customer.
- [Jared] Sweet. - Ready?
- [Jared] Ready to go when you are, man.
(Dan groans)