5 Reasons Engagement is Essential When Growing a SaaS Startup
⏱ Reading Time: 8 minutes
SaaS solutions have become quite popular over the last decade, and even more so during the pandemic. They are easy to use, affordable, and versatile enough to suit the needs of big and small clients.
Additionally, SaaS companies always update their software and maintain it, taking the load off the customers’ shoulders.
For all these reasons, the SaaS market is expected to experience a 12 percent compound annual growth rate, generating close to $105 billion by the end of 2020.
Therefore, it should come as no surprise that companies have been clamoring to get into the SaaS space. Today, there are more than 15,500 SaaS companies all over the world.
Offering SaaS solutions has become a very competitive proposition. As a result, companies have been looking for ways to differentiate themselves.
One of the best ways for a SaaS startup to stand out is to focus on customer engagement.
What is Customer Engagement?
Customer engagement describes how attached a customer is to a company, its brand, and product.
The more a SaaS startup focuses on building positive engagement, the faster it will be able to grow.
To get a better idea of why this is the case, let’s first examine the engagement spectrum.
At the positive end of the spectrum, there are fully engaged customers. Such customers feel the most attachment to a brand. They are loyal to the company and its products.
Picture 1. Customer engagement
Fully engaged customers would never change brands. They act as your ambassadors, often singing your praises to whoever will listen. In short, this segment represents a company’s most profitable and most valuable group of customers.
In the middle of the spectrum, there are indifferent customers. These are the customers who feel lukewarm about the brand, if not entirely neutral.
They don’t have emotions either way, and they can buy a company’s product or switch to a competitor; it’s all the same to them.
At the negative end of the spectrum, there are actively disengaged customers.
These are the ones who, even though they actively don’t like a brand or product, still feel compelled to buy. Perhaps they feel stuck and believe switching is almost impossible.
Nevertheless, if presented with the opportunity, they would switch to a competitor in a heartbeat.
The main problem with actively disengaged customers is that if they are unable to switch, they grow resentful of the company in question. They damage its reputation by complaining of how poor they find its services or products.
Switching from Negative to Positive Engagement
So, how does a company, particularly a SaaS startup, get customers to the positive end of the engagement spectrum?
It focuses on the interactions it has with each and every customer.
These interactions could take place on social media platforms, such as Facebook and Twitter, or on a company’s website, such as on the landing page.
Alternatively, they could transpire through live chat; or on the customers’ mobile device. For instance, they can include sending them push notifications and offering them applications.
In addition to all of this, there is the most important interaction: one that takes place face-to-face. Each interaction creates what is known as the customer experience.
Picture 2. Customer Experience
How Is Customer Experience Different From Customer Engagement?
Although these two terms seem similar at face value, they are different.
As mentioned earlier, customer experience revolves around how customers perceive a brand as a result of their interactions with it.
In other words, customer experience tries to look at a specific moment in time, the moment of the interaction. The goal is to see how the customer perceives and remembers that moment.
On the other hand, customer engagement is all about the emotional connection a customer builds with a brand or product.
Rather than looking at a specific moment in time, customer engagement refers to the aggregate of countless moments. It determines the customer’s overall emotional connection to the business as a result of all these moments.
Simply put, customer engagement encompasses customer experience. Excellent customer experiences lead to fully-engaged customers.
For a SaaS startup, that is crucial.
Why Are Customer Experience and Customer Engagement Important for a Saas Startup?
Above all, it is worth noting that customer experience is the core offering of any SaaS startup.
After all, SaaS companies sell software as a service, so every time the customer uses the software counts as a customer experience.
The software itself has to be user-friendly and superior to anything else on the market. Additionally, it has to save the customer both time and money to maximize their ROI.
The Benefits of a Good Customer Experience
According to Harvard Business Review, customers who have an exceptional experience with a company spend more than double of those who have had a very poor experience.
Forrester’s Customer Experience Index reports that companies that offer a highly satisfactory experience grow at a compound rate of 17 percent. Conversely, those that offered a poor one only grew at a rate of merely 3 percent.
Furthermore, here are a few findings from a report that Walker published in 2013 and updated in 2017:
- When they have the choice, 86 percent of buyers are happy to pay more for an exemplary customer experience.
- Almost three-quarters of all buyers assert that customer experience is an important factor when making a purchasing decision.
- Positive experiences have a stronger influence than great advertising for 65 percent of buyers.
Therefore, along with the quality of your product, ensuring that a customer has a positive experience with your SaaS startup should be your priority.
The Benefits of Customer Engagement
You achieve all the benefits of exceptional customer experiences by keeping your customers engaged. While memorable moments benefit a brand, consistently nurturing positive emotions is even more powerful.
So let’s look at some positive results you get from customer engagement.
Engaged Customers Increase Your Saas Startup Revenue
Satisfied customers spend more and often recommend their favorite companies to their friends and family. This brings in new customers and results in free marketing.
As a matter of fact, reports claim that engaged customers are happy to spend 20 to 40 percent more than other types of customers.
Engaged Customers Are Loyal to the Brand
For companies, retaining an existing customer is cheaper than acquiring a new one.
What’s more, customers who come back for repeat purchases also increase a company’s revenue.
According to the previously cited Harvard Business Review report, increasing customer retention by a mere five percent results boosts company profits anywhere between 25 and 95 percent.
Picture 3. Customer retention stats
However, as mentioned earlier, disengaged customers are looking for an opportunity to start doing business with someone else.
Are you wondering what it takes to attract clients vs. retain them? You might be surprised to learn that it costs around seven times more to acquire a new customer than it does to retain an existing one.
The likelihood that a company will be able to sell to an existing customer is 60 to 70 percent. On the other hand, the probability of closing a sale with a new lead is around 5 to 20 percent.
Engaged Customers Help the Your Saas Startup Grow
While the Internet has made it easy for brands to reach people from all over the globe, it has also made it nearly impossible for any entity, regardless of size, to control its online reputation.
SaaS startups and other companies need to be extra careful to attend to every review and comment about them, the positive and the negative.
It is essential to handle negative feedback delicately. People are more susceptible to negative reviews than positive ones.
More people tend to read negative reviews than positive ones. Yet, even those who leave negative feedback usually react positively as soon as the company addresses their concerns.
This is where the power of engagement really proves its value.
Customers who regularly engage with your brand are more forgiving. Their negative feedback is usually more constructive than that of disengaged customers.
Consequently, while disengaged customers focus on why they think the company is horrible, engaged ones help it flourish by offering ideas on how to improve.
They also often suggest new products and services that might increase the company’s value.
This can be vital for SaaS companies, which often grow exponentially.
Such companies have to ensure that their software is ready to scale, yet they also might struggle to keep up with the demands of an ever-expanding consumer base.
For SaaS startups, learning and harnessing the latent power of customer feedback makes all the difference between success and failure.
Conversely, positive reviews just contribute to a company’s growth.
At the end of the day, it is another form of word of mouth, the most powerful form of marketing. And, it goes without saying that the customers who usually leave positive reviews are those that regularly engage with it.
How to Maximize Customer Engagement to Grow Your SaaS Startup?
Countless tactics and techniques promise to help companies offer excellent experiences and create fully-engaged buyers. Still, there are a few key principles to keep in mind.
Internalize the idea that the customer’s success means success for your startup.
With this in mind, be proactive and personalize your interactions with the client.
The best way to achieve this is to encourage all teams to share customer data, ensuring the optimization of every customer experience.
An approach that centers on customer experience and engagement allows your SaaS startup to improve its offer and contributes to growth, something all companies should strive to.
Heather Redding is a part-time assistant manager and writer based in Aurora, Illinois. She is also an avid reader and a tech enthusiast. When Heather is not working or writing, she enjoys her Kindle library with a hot cup of coffee. Reach out to her on Twitter.
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