What is subscriber-led growth?

Subscriber-led growth, or SLG, is a business in which subscription businesses make decisions about products and marketing based on what their customers want. With SLG, subscriber choices determine how to get new customers, convert existing ones, grow, and keep old ones.

This method for growth is only used in the subscription economy, which includes the following:

• Companies that offer SaaS
• Services in the cloud
• Companies that stream media
• Delivery services and mail-order boxes
• Subscriptions to content, like digital magazines and newspapers
• Digital goods (like classes)
• Benefits of paying for packages

It’s a lot like customer-led growth. The most significant difference is that SLG only cares about subscribers, not all their potential customers.

A staggering 98% of companies use at least one SaaS tool. And the typical millennial subscribes to 17 different types of information.

Businesses are pressured to give customers a great experience and keep improving their products because there is so much competition. That’s where growth driven by subscribers comes in.

Synonyms

• Customer-led growth
• SLG

Why SaaS companies should pay attention to the subscriber journey

Account-based subscription sales bring in most of the money for SaaS businesses. In this way, they depend on information from subscribers for almost everything they do.

According to data from SaaStr, most of the yearly growth comes from new customers and expanding sales. As a business gets older, more and more of its new revenue comes from growth and customer upgrades.

• 73% of Salesforce’s new bookings come from repeat buyers.
• At $600 million ARR, UiPath says that current customers bring in 75% of its new income and bookings.
• For 13 quarters in a row, Zoom’s customers have spent 30% more each year.
• When Slack hit $1 billion ARR, it created more sales within the company, 5% faster than getting new ones.

It’s clear from these numbers that if SaaS companies want to grow, they need to pay attention to how their users feel about their service. In the end, those subscribers are also growing their businesses, which means they’ll need to add more people and improve features.

So, keeping customers comes back in three ways:

• People who subscribe pay fees every month.
• Over time, retention is often linked to more spending.
• Referrals from other subscribers and good reviews bring in more users.

You can only get those benefits if you put your subscribers and their experience with your offering first. To do that, you need a growth plan that subscribers drive.

Strategies for running a customer-focused SaaS business

The subscription business strategy is naturally focused on the customer. People who subscribe to a product must be loyal and interested in it all the time because they get charged monthly for it. With this in mind, it makes sense for subscription companies to think about the subscriber journey when they make choices.

Here are some of the best examples of SaaS businesses that put the customer first:

Different pricing

In some way, most SaaS businesses use different prices for different customers. Rather than charging them a set price, this is the best way to charge them for the value they get.

Some examples are

• Freemium plans for small and new companies
• Pricing tiers are based on what the customer wants and how complex the product is
• Pay-as-you-go plans and other methods based on usage
• Using penetration prices to get people to try new things
• Private discounts and freemium options to get current users to try out the new features
• rates for certain groups, like student rates

Setting different prices for different people is one of the best ways to give each one a chance. You can get more subscribers and keep the ones you already have by making it easier for your whole target market to reach, giving customers transparent pricing they can trust, and rewarding your most loyal customers.

Automatic cross-sells and up-sells

SaaS companies that use a customer data tool to collect information about their users know:

• what each customer does with the product
• which traits are most important to them
• the ones they don’t have
• what they look at on the business website
• where they’ve sent support tickets or asked for help
• what they think about the product, how it works, and how satisfied they are overall

Businesses that use CDPs can set up automated triggers to email, message, or offer an upgrade or add-on in-app based on a customer’s behavior and preferences. This is possible because CDPs automate both data collection and reaction.

Messages and alerts inside the app

Many SaaS companies give their whole product to each customer so that users can see all its features. But they can only use and click on the ones they paid for.

Businesses can inform customers about features they can’t use by using in-app messages and pop-ups to appear when customers try to use them (or click on them by mistake). The message then gives them a chance to move up when they do.

This “feature nagging” style is typical in subscription businesses; it’s seen as a friendly warning rather than an attempt to sell something.

Campaigns to Nurture

Most SaaS companies expect their clients to update independently between three and six months after signing up. That’s why efforts to nurture are so important.

The first step in nurturing a customer is getting them to know the product during training. At this point, Customer Success should interact with customers, answer their questions, and send them materials that help them get more out of the product faster.

During the subscriber trip, there are several chances to keep customers interested:

• Emails and feedback forms sent in-app or by mail
• Emails with tips and tricks for doing everyday things
• Feature explanations that stress how advanced the product is
• Email or push alerts about new products
• Tours of the products inside the app every time a new version or feature comes out

You can connect with and earn the trust of your customers by giving them information relevant to their needs. In the end, this strengthens the link between both parties and raises a customer’s lifetime value.

Sessions for user feedback

If you asked 100 successful SaaS founders how they made such a great product, they’d all say the same thing: “We listened to our customers.” This is a true statement, but it’s still very accurate.

User feedback events are essential for the growth of SaaS because they help connect what you think you know with what actual customers say.

The most important thing is to talk to customers and find out what they think about the product should be changed or improved. Customer success teams can find out what users like and don’t like about the product by talking to users in person or over video talks. They can also find out how users would use certain features or change them if they could.

Product teams need this kind of feedback because it helps them make decisions that put users and their needs first. They can also find out what new features or goods customers like and which channels to use to get new customers.

Growth Metrics Based on Subscribers

Value of a customer over time

When businesses want to know how much a customer could be worth throughout their subscription, they look at their customer lifetime value (CLV).

Most CRM and RevOps software can figure out CLV immediately. To figure it out, divide the average amount of money the customer makes by the average contract length. Many businesses look at CLV per customer group to get more details.

Rates of Retention

Firms measure two different kinds of retention:

• Customer retention: How many customers keep their subscriptions from one month, quarter, or year to the next?
• Revenue retention: How much money is kept from users who have already signed up?

Keeping customers is an excellent way to figure out how successful a product is. A low customer attrition rate (less than 80%) makes many unhappy.

Customer retention is more useful when you can keep your revenue. Gross revenue retention (GRR) tells you how much money you lose when customers leave, which is generally more or less important than the percentage of customers you lose.

The expansion income is part of net revenue retention (NRR). NRR should be above 100% for a business whose products and markets fit well. If that’s the case, revenue growth happens from current subscribers alone, regardless of new customers coming in or leaving.

Revenue from expansion

Any extra money customers spend on top of their original subscription fee is called expansion income. In reality, most of a business’s new income comes from people who already subscribe. And the conversion rate for current users is 60% to 70%, while it’s only 5% to 25% for new ones.

Still, that’s good. If you can sell to your current customers or let them improve themselves, you’ll make more money without spending any money on getting new customers. Subscriber-led growth means getting more customers for less money and getting more of them to buy.

Annual Recurring Income (ARR)

After subtracting their costs, ARR also lets businesses know how much cash they’ll have at the end of the year. This number is used as a standard by investors and lenders to judge the success of subscription companies.

A business needs to keep track of its yearly recurring income to see how fast it’s growing and to meet its revenue goals. ARR, which is MRR times 12, gives a more complete picture of the business’s possibility of making money than MRR alone. This is especially true if the business is seasonal or does something strange for a short time.

The average amount of money made per user

In the same way that CLV describes how much money a customer is supposed to bring in, ARPU does the same thing. The significant difference is that you could figure out the average revenue per user over:

• one month
• a fourth
• one year
• a few years
• the lifetime of the subscriber

This is how companies need to break down ARPU into smaller timeframes like this to find growth opportunities that come from adding new subscribers. Their insights will be more detailed if the time frame is shorter. It will also be easier to change their approach and see minor improvements.

How to Get More Money from Subscribers

There are a million different ways to make more money. The subscriber-led growth plan of each company will be a unique mix of sales, marketing, product development, and customer success strategies that all work together to reach the same goal.

But there are a few key tactics that all businesses should think about if they want to grow through subscribers.

Journey of a Map Subscriber

You must consider your goods as a whole experience to get SLG down.

1. Online study—Most research on products is done online. Make it simple for people to find the most essential information about your product in your content marketing plan. Then, make it search engine-friendly and even more straightforward for people to find.

2. Making the buying process smooth from beginning to end is part of the sales process. Get rid of approvals and feedback systems that aren’t needed, and use CPQ software to make the proposal and quote process automatic.

3. Implementation and onboarding: Depending on how many customers help your product needs, offer a mix of digital, in-app, and hands-on onboarding materials. Track and compare the time to the first value (TTFV) to see how things are getting better over time.

4. Help with customer service—Use helpdesk tools to keep customer service organized and effective. Create an information base to help customers figure out their problems. Email automation lets them know about changes, updates, and trends in your business.

5. Expansion: To raise ARPU, consider ways to cross-sell or up-sell within the offering (and have software do it for you). Make your current customers champions by giving them rewards for telling their friends about your business through loyalty programs or “refer a friend” campaigns.

6. Renewal or churn: Auto-renewal tools can help you keep your subscribers. Customers who don’t want to stay should be surveyed and asked to fill out exit interviews.

Focus on making customers stay with you longer.

The most direct way to raise SLG is to raise customer lifetime value. This means that you need to make sure that your product helps people with a problem they have and that they are getting the most out of it.

Take a look at these ways to raise CLV:

• Product road map: Make sure your product road map focuses on the user. Put changes and features in order of importance based on what customers need and want most, not what will be easiest or fastest for you to make.
• Analyzing data: Use a tool for customer data to find out where customers stop using the product or get stuck. That knowledge can help you improve the customer experience and ensure they get more out of your product.
• Get information about your customers by polling them often and dividing them into groups to learn more about their wants and habits.
• Subscription tiers: Make subscription plans with different levels of value that increase as customers move up. The plans must be well organized and easy to understand. You should only use three or four tiers at most.

Add-ons or upsells: As add-ons or upsells, offer goods and services that go with the main one. This could be anything from paid tools to services you can buy separately, like consulting, custom integrations, or help setting up the system.

Keep an eye on subscription metrics.

Analytics for subscriptions are what make subscriber-led growth possible. Companies should monitor the above metrics (ARR, CLV, etc.) to see how well they do and find places to grow. Also, they should look at measures like NPS to learn about customer loyalty and happiness.

Make things better for subscribers.

Subscription-led growth comes down to how the customer feels at the end of the day. Companies should learn more about their customers through analytics and polls. Then, they should make personalization plans that make it easy for those customers to find value in the product.

In the end, this means a few things:

• Consistency: Give users the same valuable experiences on the web, on their phones, on social media, in emails, and in-product messages.
• Personalization: Without it, you won’t be able to give your customers the truly unique experiences they expect. You should segment and learn about your customers to send them appropriate content, messages, and offers.
• Ease of use: Making things like sign-up, onboarding, and payment more manageable will get customers up and running quickly, which will boost conversion rates and lower customer turnover.
• Self-service: It should be simple for customers to update on their own. When they want to buy something, they won’t if they have to talk to sales every time.

Prices, products, and contracts should be changed to meet customer needs.

Businesses can’t always change their prices, which makes price optimization a tricky problem. Also, they can’t just set them and forget about them.

To ensure buyers get the most out of your product, you should use a mix of competitive, usage-based, and tiered pricing. Over time, look at the pricing system repeatedly to see how customers feel about it. These can be found in interviews and surveys.

Cut down on forced churn.

Churn is sometimes unavoidable. Of course, some people will always choose to go elsewhere for different reasons. But a big part of your loss rate is probably people who leave without choosing to. It’s usually between 20% and 40% of all company losses for SaaS companies.

Several things can cause unwanted change:

• When credit cards expire
• Payment is declined because there aren’t enough funds
• Wrong payment information
• An inactive subscriber account
• Problems with billing or handling payments

The best (and fastest) way to lower the risk of these issues is to use subscription management and billing software to automate the billing and renewal process.

Improve the ways you bill and get paid.

As was already said, billing and payment handling problems cause more customer dissatisfaction and churn than you think. To keep your customers happy, your billing and payment methods should be easy to understand and run automatically.

Here’s what your payment gateway should have:

• Support for several currencies and payment methods
• Strong protection to keep customer information safe
• Easy for buyers to set up (for example, they can save their card information).
• The ability to support your pricing system and different billing cycles for each customer

Try out different, flexible pricing models.

Here are some examples of flexible pricing:

• User-based pricing, which lets smaller businesses join your service at a more reasonable price
• Customized (negotiable) prices for business contracts
• Dynamic pricing takes the impact of price sensitivity and how people see value into account
• Price based on usage, which lets customers pay based on how much they use your product

These ways of setting prices can’t work for all membership businesses. Like, a streaming service is much easier to set up and can’t be changed than a business SaaS. If you have models that make sense, you should see how people react.

Why subscription management and billing tools are essential for growth driven by subscribers

Customer data is the first thing that comes to mind when considering subscriber-led growth. But what about the tech that makes it work? How do businesses handle fees and subscriptions?

Effects of Software for Managing Subscriptions

For a subscriber-led growth plan to work, businesses must:

• Keep an eye on their customer information
• Make billing steps automatic
• Take care of bills and payments
• Record income and keep track of payments
• find out right away how users are acting
• act on these ideas

Businesses can’t do all these things without subscription management and billing tools. They would have to handle all their customer data and processes by hand, which is impossible because customers use so much data.

What Subscription Billing Solutions Mean

The most crucial part of subscription management software is the payment part. It’s what makes subscription companies work. This is where all the different payment and price options come together to make things easy for the customer.

Some of the things that subscription billing systems offer are:

• Automatic billing, payments, and recording of income
• Billing on the fly
• Customers can choose from different ways to pay.
• Better security thanks to PCI compliance
• Being able to work with other systems (like CRM and ERP)
• Analytics and information in real-time
• Pricing statistics (and making them better)

Software for subscription billing also helps businesses better handle their customers by giving them tools like custom subscription deals based on customer groups or usage patterns. To put it another way, growth driven by subscribers would not be possible without subscription fees.