Operating in a high-growth sector, SaaS companies face constantly changing business conditions, making it challenging for them to consistently increase revenue. In this era of capital-efficient growth, SaaS companies must squeeze the most out of their billing data.
In addition to streamlining payment collection processes for software companies, SaaS billing software offers value by gathering a wealth of data for executive leaders to analyze. More successful companies know how to use those insights, digging deeper into data to unearth the context behind it and adjusting strategies accordingly to optimize revenue.
Here are a few critical revenue optimization areas that leaders of SaaS companies would do well to pay attention to.
Pricing strategy
Pricing strategies can get complex in a hurry in SaaS. They’re also the biggest revenue driver for a company. Most SaaS companies do not get too many shots at creating the best pricing strategy, since they cannot experiment with it on an agile basis. Constantly changing pricing structures will annoy customers, leading to churn.
However, successful companies constantly monitor pricing and correlate it to product usage. For example, if users sign up for a few licenses but use the product for a huge number of hours per month, switching from a seat-based to a usage-based model might make sense. Conveying this switch to customers is a challenging task, but if executed well, the company will earn more revenue.
Some companies reduce prices by default when faced with challenging times, but this move is often a mistake. Reduced prices paint a less-than-premium picture, something no customer wishes to associate with. Rearranging features and delivering more value to higher-tier customers is the right way forward in this situation.
Billing data is a marker of how well these efforts are paying off. Correlating billing data to usage hours and customer tiers is a great way of figuring out who a company’s best customers are and how to deliver better experiences to them that lead to more loyalty and therefore more recurring subscription revenue.
Customer segmentation
Every SaaS company has customers from different demographics. These demographics vary more as the company grows. Segmentation is much more than a marketing exercise – It’s also a revenue-generating one.
SaaS companies must review their segments and cohorts periodically. These reviews will help them understand their audiences better and create microsegments. By delivering customized experiences to these microsegments, companies can optimize revenue with granular audiences.
Customer success data is a great way of figuring out your ideal customer profile’s demographics. For instance, which types of customers use the product the most, and how do they use it? Which customers were the easiest to close, and how engaged are they? Which pain points are they using the product to solve?
These datasets help companies tailor messaging and branding to appeal to relevant customer segments, as well as attracting lookalike audiences that boost revenue. Often, a SaaS company might discover multiple lucrative audience profiles. Billing data helps companies understand the nature of revenue from these customers.
Questions about which audience is better to upsell to are also answered by billing data. Companies can understand which factors they want to prioritize and tailor their strategies accordingly.
Marketing channels
Marketing channels don’t produce revenue directly like sales reps do, but they play a central role in building pipeline. The problem is that many SaaS companies treat marketing attribution incorrectly, leading to decisions that reduce revenue.
For instance, because audience touches with your content across platforms can’t always be tracked, attributing revenue to different channels is an inexact science, but SaaS marketers often treat these data as if they are completely accurate. A podcast appearance might lead a prospect to the company’s social media page, following which they engage with blog content, leave comments on social media, and a few quarters later, reach out to book a demo.
Revenue attribution might or might not distribute credit evenly across these channels, but which was the most important part of it? Over time, if the company notices attribution numbers via podcasting drop, does that mean podcasts are a losing proposition?
Dropping podcasts might harm brand awareness, leading to fewer brand searches on Google, leading to poor SEO performance. Companies must engage with prospects on as many marketing channels as possible, and use attribution data as a guideline. Linking content engagement to billing revenue via CRMs is a good way of tracking which content definitively engages people the most.
Note that using this data to determine which content assets and channels perform the worst is not instructive and can lead to the situations described above. Instead, companies must measure engagement, instead of topline revenue generated from these channels.
Sales efficiency
Sales directly produces revenue, and increasing sales teams’ operational efficiency will affect it.
SaaS companies must monitor every aspect of the sales funnel, starting with the number of leads entering the funnel. How many of these leads convert to the next stage and what engages them the most?
Companies must also adopt tools that help their sales teams conduct smooth demos and offer interactive product experiences. These tools reduce sales cycles by giving sales teams more time to focus on solving customer issues in high-pressure environments.
SaaS companies must also keep an eye on their sales efficiency – the ROI they’re receiving from sales-related spending. Sales can turn into a cash hole if left unchecked. Billing data directly measures sales efficiency and is a useful aid in measuring ROI.
Revenue optimization is critical for SaaS
SaaS company leaders are advised to constantly examine the factors listed in this article to optimize their revenues. This approach is the only way to remain competitive in the long run and future-proof the business.
