“Growth hacking” has been the buzzword of the past several years. As annoying as it may be as a headline in about 34.2 MM online articles, the phrase is popular for good reason. Growth is a top indicator for success with software-as-a-service (SaaS) companies (and hosting companies, in particular). Without a solid growth strategy, many won’t live to see another day.
SaaS companies are reliant on a repeatable business model and recurring revenue. Once that foundation is in place and proven, the next step is to scale.
It’s a big step.
The easy answer is to boost Customer Acquisition Rate (CAR) by beefing up the sales team, but that’s also an incomplete answer. Winning more customers is great – if they’re sticking around. But if your churn rate isn’t under control then no amount of growth can save your business. The other half of the equation is increasing Lifetime Value (LTC) to continue growth. LTV is the expected value of a client over their duration as a customer. It isn’t enough to get new customers; they need to stick around for as long as possible as well!
So how does a hosting company increase LTV and continue to scale? One surefire way is to increase Average Revenue Per User (ARPU). Let’s look at some of the surefire ways to boost ARPU and grow.
Tinker with Pricing
As a hosting company, you should be constantly innovating and seeking out ways to update products and services in ways that provide unique (and additional) value to your customers. This means new features, improved functionality, enhanced usability, and more. As you roll out these new updates and offerings your current customers are receiving additional value in real-time. It also keeps you at pace with the market and (if you’re doing it right) ahead of your competitors. As additional capabilities are introduced it’s a great idea to revisit pricing. We recommend quarterly pricing reviews, but if that seems too frequent for your business than twice a year can be sufficient. Take note, however, that there is a right way and a wrong way to introduce new pricing for your service. Do your homework. Figure out what makes sense in price increases and keep an open line of communication with your customers.
If you’ve invested in building your sales team – along with customer success representatives – you’re in a great place to focus on up-selling. Enabling your customers to upgrade or add-on to their current offering is a great way to increase CLV and ARPU. First, however, you need to have a solid strategy in place to increase adoption and usage, so that customers can clearly see the value you provide.
This also ties into tinkering with pricing in that you need carefully defined pricing tiers that make up-selling seamless and that make upgrading an obvious choice for customers. With hosting, this can be as simple as usage limits that require an upgrade. Make it as easy and streamlined as possible for customers to take that next step.
Bundling can be a highly effective way to support an up-sell and cross-sell strategy. Offer new products and services that seamlessly complements the value customers already receive from your core offering. It makes upgrading an easy choice.
Being able to clearly identify the added benefits of bundles will make marketing easier. Also be sure that your overall objectives are tied into how you are creating bundles, as this will inform how you market them, too.
One example is Perfect Dashboard’s Secure WordPress Updating. The problem for hosting companies is clear: WordPress sites get hacked all the time without appropriate (and constant) updates. The benefit is clear, too: Perfect Dashboard prevents this by automating WordPress updating for customers.
This is a no-brainer for hosting clients who are looking for an end-to-end solution that can also update, test, and fix WordPress sites seamlessly. And it’s a no-brainer for hosting companiese that don’t have the time, expertise, or resources to build this technology on their own.
The endgame is really about adding value. Any approach to growth should always be customer-centric. It seems intuitive, but your goal should always be about what you can do for your customers by way of providing additional value. Delighting your customers with the value you provide reduces churn and unlocks additional cross-sell and up-sell opportunities. Make yourself your customers’ #1 problem solver and many of the strategies outlined above will become second nature.