Bad SaaS: 5 Things Not to Do When Growing a SaaS Product
Hey everyone, Greg here.
Today, I wanted to bring you another guide designed specifically for the SaaS business model. You’re going to hear from Rod Austin, director of marketing for Pagely.com, talk about five key things you need to avoid when growing your SaaS product.
We all want to increase our net profit, lower our churn rate, and most importantly… not make our valuable customers angry with us.
This guide is going to help you avoid some common mistakes that many SaaS entrepreneurs make as they’re in the trenches building up their business. If you’re a SaaS entrepreneur looking to sell your business, set up an exit planning call with us. Or maybe you’re a buyer and wanting to start growing a SaaS portfolio? If so, schedule a criteria call with us so we can help you find the perfect business.
Alright, enough from me.
Rod, take it away.
“Grow fast or die slow.”
That seems to be the mantra driving SaaS businesses today—at least according to Google, which touts 262,000 search results for “saas growth hacks.”
In this “growth trumps all” world, the age-old adage “the customer is always right” flies out the window.
This came to mind when a SaaS product we use tried to bill us an entire month before our scheduled annual renewal date. Rude, right?
It got me thinking: What other tactics are SaaS businesses employing that piss off customers?
As it turns out, there’s a lot. According to a quick poll taken within my network, these tactics include everything from making it almost impossible to unsubscribe from services, billing issues much like mine, over-automation, a lack of pricing transparency, and muddy client onboarding.
This post is an ode to these ethically questionable tactics that we, as users, brush up against more often than we should.
Keep reading to learn how to growth hack in a way that doesn’t piss off your customers.
1. Billing early, or without warning
A surefire way to piss off your customers is to charge users early and/or without notification.
I’m sorry, but doing this is just plain wrong.
While SaaS users are accustomed to regular, automatic deductions from their bank accounts, many customers are becoming less forgiving of shady companies who take their money without so much as a hey, hello, or hi.
Sneaky annual and early renewals, which most busy people forget about, not only annoy users, but also place your business in a totally different and ethically questionable light.
Unfortunately, you can’t growth hack a good reputation.
Why SaaS businesses do this
The surface reason? Because they can.
The underlying reason? Because they aren’t confident that their products or services are actually providing value (i.e., being used regularly).
So, some businesses quietly charge their users’ credit cards, cross their fingers, and hope that their “customers” don’t check their statements each month.
How not to make this mistake
First and foremost, make sure your product provides real value and is used regularly by subscribers.
This means consistently reaching out well before renewal periods and monitoring app usage so you know which users need closer attention.
In a world with thousands of great customer automation and communication tools, there is literally no excuse not to do this.
Don’t hide from your users.
They’ve taken a chance and invested in you, so do the right thing. Invest in helping them succeed in using your platform. That’s how you will get people to want to stick around.
2. Hiding cancellation buttons
How annoying is it when you want to cancel a subscription, but you can’t find the damn cancellation button—or worse, when you’re forced to email the support team to end the relationship?
Tell me if this sounds familiar:
- You sign up for a product that you want, or are simply curious about, and decide it’s not for you.
- You go to cancel your subscription but can’t find the button, so you email support.
- The support team asks why you want to cancel.
- You explain why.
- They say they’ll do better, send you a ton of support articles links, and offer you discounted pricing.
- You still ask to cancel.
- Two or three emails later, they give in, all while making you feel like somehow it’s your fault for not “getting” the product.
It’s the online equivalent of trying to cancel your gym membership and hoping they won’t keep charging your credit card once it’s finally canceled.
Why SaaS businesses do this
It boils down to one of three reasons:
- They’re still in their early stages and don’t consider it a priority.
- They’d rather force customers to email them so they can document a reason for the cancellation.
- It’s a knee-jerk reaction to customer churn.
Unfortunately, number 3 on this list is all too common. Take, for example, this awful story from someone in my network:
“I worked at a SaaS company where the CEO would make decisions on the fly. It drove the devs crazy. At a meeting one day, we were discussing churn rates and he said he wanted to remove the cancellation button from user accounts, basically to stop users from cancelling so he could reduce churn. I tried to talk him out of it. The support manager tried to talk him out of it. He wouldn’t listen. Members started contacting support to cancel, which meant support tickets went up. The support team were told to down-sell to users and started getting upset, members were getting upset and complaining on Twitter. Our churn rates didn’t change, we just annoyed a whole bunch of users. Eventually, we added the cancellation button back.”
How not to make this mistake
Don’t get in the way of customers who want to leave.
Customers will always come and go, especially those that did not intend to stay in the first place.
If you’re confident in your service and know it provides value, customers will come back.
Annoying people in this way will only lead to a bad rap, oftentimes publicly on Twitter or wherever else your audience hangs out—not to mention it keeps your support team unnecessarily busy.
If you don’t have a self-service cancellation button for the first two reasons listed above, try to keep your interactions with customers brief and positive.
When someone asks to cancel, reply with something like this:
“Sure thing! I’ve canceled your subscription. Is there anything else we could’ve done better to keep you as a customer?”
This way, you’re still getting feedback on how to improve while also leaving the door open for them to come back in the future.
There’s nothing wrong with asking a customer why they’ve canceled; just be sure to cancel their account first.
Finally, if the reason for cancellation is something you can resolve, the customer can always sign up again.
By immediately canceling their account with no questions asked, you leave the customer with a positive experience.
For example, when customers unsubscribe from HubSpot emails, the company sends them this video that makes them completely reconsider their decision.
3. Automating Too Many Things
While SaaS users have come to expect some level of automation when dealing with online businesses (think welcome emails and receipts), they definitely don’t expect—and won’t accept—an overabundance of automation.
When you begin automating everything from support bots to irrelevant “personalized” emails, subscribers start to feel like another number on your spreadsheet.
Your users aren’t stupid, so don’t treat them like they don’t know how to use Google or Twitter. Trust me; they will not be afraid to call you out.
Why SaaS businesses do this
It all comes down to resources.
Automation is a lifesaver for SaaS businesses that don’t have the resources for unimportant and redundant tasks.
It’s much cheaper to pay for an automation tool like Zapier or Drip than to pay a human to execute tasks. Not to mention, these tools also free up time for staff to undertake more important, higher level tasks—the ones that should never be automated.
When you’ve eliminated all human contact from the process, you’ve gone too far.
I get it. It’s super easy to get excited about the shiny, slick features offered by new products, but please don’t get carried away.
Just because you can automate something, doesn’t mean you should.
Tesla is a prime, real-world example of this.
In April of this year, Elon Musk admitted that “too much automation” had slowed down Tesla Model 3 production, forcing him to bring in more human workers for quality assurance.
How not to make this mistake
Automate processes, not relationships.
The goal of automation isn’t to eliminate human contact altogether, but to enhance it.
When introducing any form of automation into your business, consider the impact it will have on your end users.
Genuine human interactions with companies are few and far between these days. Why allocate capital to a process that can be automated?
The trick is to find the right balance between automation and human touch that best serves the needs of both your business and your customers.
A great example of this is sales automation that lets you “listen in” to where prospects are in your funnel.
Creating an automated workflow can help you to determine when someone is serious about your product, but needs a little nudge to push them over the line.
This kind of automation, when paired with a sales rep who is ready to schedule a call, is the best way to influence a user’s purchasing decisions.
4. Hiding Pricing Information
What do you think when a site doesn’t list its pricing?
Probably that it’s overpriced or too expensive. I’m not talking about enterprise here; I’m talking about SaaS companies.
When you don’t have a pricing page, or force users to request a demo of your service, you create too much friction and ultimately lose potential Marketing Qualified Leads (MQLs).
Without transparent pricing, visitors have no way of knowing whether your product fits their budget, which can lead to time spent wasted on unqualified prospects.
Remember, users aren’t stupid.
Even if you keep your pricing a secret, users will Google your business and find the information elsewhere.
Why SaaS businesses do this
Businesses often do this as a marketing tactic.
Either they hope to force prospects to request a demo so sales can get them on the phone, or they want people to think their offering is expensive so they can attract those willing to spend more money.
The problem? Neither of these options are sustainable marketing tactics.
Don’t make your sales team answer questions that should be featured on your pricing page. It’s a waste of time.
Here’s another story that drives this point home:
“Our CEO stubbornly refuses to add a pricing page to our website and has for years. He thinks that getting customers to engage with the sales team is the best way to hook in users and get them started on a free trial. But instead, the sales team has gotten into the habit of down-selling memberships at discounted prices, which is a huge problem when annual renewals come around.”
How not to do this
In today’s SaaS market, where users have a ton of choice and won’t hesitate to go with your competition, showing the world your prices helps to both demonstrate your transparency as a company and engage with customers early in the buying process.
The last thing you want in your sales funnel is friction.
To win in this environment, SaaS companies need to emphasize trust, helpfulness, and, of course, transparency.
Users are doing more and more research before committing to SaaS products. When your prices are published, customers are given one less thing to research, clearing the way for them to explore your site.
In doing this, you’re accelerating the sales cycle, not wasting time on unqualified potential customers or losing silent customers who are put off by having to send your sales team an email.
5. Upselling without value
No one likes being pressured into spending more than they have to, especially when it’s on something they don’t even want or need.
However, upselling is a common tactic for SaaS businesses that usually leads their customers to feel alienated.
While unsolicited upsells can lead to short-term wins, negative brand perception is often the long-term effect. Users never forget a bad experience.
Here are a few annoying IRL upsell tactics:
- In-app sales messages. When’s the last time you purchased something as a result of one of these messages? Never. That’s what I thought. Customers want to use your product—they don’t want to be bombarded with spammy pop-ups.
- Bait and switch advertising. This is when businesses let users think they have access to a certain feature, only for them to learn the truth through a spammy modal that recommends an upgrade. Freemium WordPress plugins are notorious for this. Developers often list features of the premium service in the free plugin description found on wordpress.org.
- Outdated sales tactics. One example: when a user reaches out for customer support but is pressured into upgrading to a plan they don’t need.
Why SaaS businesses do this
SaaS marketers are told that upsells are the Holy Grail. In fact, upselling is 20 times more effective than cross-selling and is a cost-effective way for SaaS businesses to increase their average revenue per customer.
It’s true. They can be effective.
The problem is when SaaS businesses:
- Push their own agendas with a complete disregard for what is important to the customer
- Push upgrades that the customer doesn’t need
- Lack awareness regarding when to stop pushing the customer
How not to do this
Upsells don’t have to be sleazy.
They can work. They can increase revenue, improve retention, and even decrease churn—you just have to use them correctly and with good intentions.
Rather than pushing your products with a company-first approach, consider the customer’s needs and think about what you can do to help them achieve their goals. When you make a customer’s life a bit easier, you both win.
There’s a long list of upselling techniques, but they won’t all automagically work for you. There is no one-size fits all solution.
With that being said, here are a few good examples:
- In-app messaging. Okay, I know I just said not to do this, but it’s all about offering subtle upsells in the right place at the right time. Buffer, for example, does this really well when the limit is hit on their free plan. The user gets a simple message asking them to upgrade. It’s not pushy. It just lets the user know they’ve reached their limit.
- Customer support interactions. When a customer reaches out with a problem that can be solved with either an upgrade or another product you offer, offer them an upsell as long as it helps them.
- When customers hit milestones. There’s no better time to upsell than when the value of your product is truly apparent. Target customers for upsells when they reach an anniversary, spend a certain amount of time using your product, or become a power user, as these are great opportunities to help them take their usage to the next level.
If you have a customer who isn’t ready for your upsell, consider down-selling or cross-selling.
Offer them a cheaper alternative that still delivers value, but without the bells and whistles and exorbitant price tag.
The simpler you can make upsells, down-sells, and cross-sells for customers, the more likely they are to take them.
Stop pissing off your customers
Whether or not you believe the customer is always right, listening to their concerns offers a ton of value to both your team and your current/future customers. When growing your business, the last thing you want is to annoy the very hand that feeds you: the people you want using your product.
So pay attention to patterns in feedback and find nonchalant ways of growing your offering—as long as there’s value to the user.
Remember, business is all about mutually beneficial relationships. You don’t want to take from the customer without providing them value. That’s a recipe for disaster.
If you have any questions or have your own SaaS gripes or advice, please leave a comment below.
Rod Austin is the Director of Marketing at Pagely, the premier managed WordPress hosting solution. When he’s not in front of the computer, he enjoys exploring Montana with his blended family.
This was really helpful. Thanks for sharing
1. Don’t have a free Beta because the users wont value it as much
2. Understand the exponential component of SaaS, you don’t make a lot of money up front, it grows exponentially over time
3. Build a simple app, otherwise you will have a lot of maintenance work to do in the future
4. Focus on CHURN rate, keep it low! It’s much more efficient than trying to get new customers
5. Get a CLEAR sense of ALL the numbers early on
6. Invest more into MARKETING, not just product development.
Glad you found the article helpful. All great points.
Churn is especially an interesting one. It goes with reason that you’d want to minimize churn as much as possible, but from our research it is often better to focus on lowering your CAC with focusing on lowering churn being the second priority. Of course, both will ultimately help your LTV
Ha, #1 is why anytime I actually decide to sign up up for one of those “give us your cc details first” free trials, I always set myself multiple reminders in Google Calendar to remind myself to cancel before it automatically renews. I’ve fallen for that “trick” more than enough times and I’m not going to let it happen again!
I feel your pain!
My personal faux pas with SaaS was accidentally buying an annual subscription for what I normally pay monthly for. I think they were split-testing placements and I just simply didn’t look… so more my fault. I keep the subscription though cause it’s a great software haha
Thanks for this much needed article. As I lead the Customer Success at Mailshake we are constantly looking for ways to make sure our customers are engaged and actively using the product. Reducing churn through a superior customer experience is key. No shady tactics.
I love Mailshake, I have a lot of good friends who use it. You guys are going a great job over there. And absolutely, shady tactics rarely lead to long term growth of any kind. Usually any short term growth to be had with those kind of tactics ultimately backfire and stunt the business over the long haul
Incredible to think the CEO wanted to hide the cancellation button so he could reduce churn. This surely infuriated disgruntled users even further. How about taking time to find out why the wanted to leave, and develop the product inline with their requirements.
Great comment. I absolutely agree. Looking to your own audience first for solutions to your problems is often the best strategy. Creating a customer survey for feedback, or if you’re small enough just picking up the phone, can be worth way more for you as a business than trying to hide or tweak certain things in the process.