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Five red flags to watch out for with your SaaS/subscription business

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Roy Barak is CEO of Vindiciaa leader in monetizing business-to-consumer digital services.

By 2025, the global digital subscription economy market size is expected to reach $1.5 trillion, according to UBS. On the one hand, Software-as-a-Serve (SaaS) companies belong to an industry that is booming with a mind-boggling potential for success. On the other hand, it is a tricky and competitive game, and making money is far from easy.

I am fortunate to speak with dozens of professionals and partners in the subscription industry every day. I hear a lot about the day-to-day challenges businesses face – challenges that are both unique to the SaaS/subscription model and rapidly changing as the market grows and matures. It is important to know how to adapt and what to do, but it is also equally important to know what not to do and what obstacles to be aware of.

Here are five red flags to watch out for when starting or expanding your SaaS and subscription business.

1. You are too focused on acquisitions.

An acquisition is only the first step of a much longer and larger customer journey in the subscription world. If you find that all or most of your internal discussions are focused on acquisition, it’s like giving up the race as soon as you start running. An acquisition is just the opening; retention is the key to successful subscriptions. For every week, month or year that you keep customers connected to your subscription, you increase their lifetime value and maximize your potential revenue stream. Don’t get caught up in acquisition, as it’s only a fraction of the story. Shift your focus to retention to get a complete picture of customer usage and their ongoing journey with your subscription.

2. Your CAC keeps getting higher.

As the saying goes, “speculate to accumulate”. Getting new customers on board is going to cost money. Testing new approaches, campaigns and messaging is an essential part of customer acquisition and requires measurable investment. But beware, if you notice that customer acquisition costs (known as “CAC”) are rising without any sign of procrastination, it could be a sign that you are beginning to reach market saturation. Anyone who may have signed up is already a subscriber.

What should you do? Shift your efforts to improve your subscription experience for existing customers. Evaluate your offering, see where it could be updated or improved, look at personalization to create exciting bundles and trips for different users, and perhaps explore a partnership with another subscription-based company whose offering complements your own. offer. Look for ways to make your offer more attractive and optimize the revenue of your current customer base.

3. You have a fragmented business strategy or no strategy at all.

When it comes to creating a business strategy, there is something worse than disagreement, and that is disagreement. For subscription businesses, there must be a single internal mindset and understanding of business strategy, product development and distribution channels, all of which must reflect a deep understanding of the market and target audience.

How do you reach customers? How do you navigate the competition? Do you offer free and/or paid subscriptions? Where is the product sold the most, on social media or mobile-first? Understanding all these questions and more must extend beyond the boardroom across the organization, from product development to marketing and sales. If this doesn’t happen or your strategy is somewhat disjointed, it’s time to go back to the drawing board.

4. You sprint, not a marathon.

A business runs on sprints — great spurts of focused activity to achieve short-term goals — but at the same time, you better prepare for a marathon. Ideally, you should have a roadmap that spans 18 months into the future. This roadmap should contain signposts and milestones. Think of your SaaS business as a long-haul sprint.

Consider the analogy as it applies to research and development. If you have not planned your technical development map at least a year in advance along with the special budget, then you will not realize your product dreams. Why would people sign up or stay subscribed without product innovation? If you can’t give them a reason to stay, people can sign up for the few weeks they need and then cancel. Or they may prefer a competitor who can offer a perpetual offer or a one-time product. This equates to a satisfying subscription: your product must evolve to continue to engage your customers and continually amplify the value proposition.

5. Your pricing is too complicated.

View your latest mobile bill. It’s probably nice and clean. Do you really want to go back to those days when the cost was X cents per minute, but after 6pm it was 40% off (except weekends, which are 50% off) unless you were abroad, in which case… let’s not even go there. The moral of the story: Don’t make your prices so hard to understand that your customers will get annoyed or drop out.

For your SaaS offering, keep in mind that only Fortune 5000 companies would invest time in understanding ultra-complicated pricing models. Even then, they would probably prefer a competitor that offers a simpler, straightforward model. To broaden your potential customer base, ease of doing business is essential. Keep it simple and you will see the rewards.

The bottom line is that a SaaS subscription business is full of challenges, but will be significantly easier if you avoid or soften these common flags. And if you can overcome these barriers, you’ll be well positioned to maximize the growth engine that the subscription economy can be for your business.


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