Many software as a service (SaaS) startups want to increase their sales focus on attracting new customers.
While increasing your customer base is important, getting a sale from someone who’s not familiar with your company is hard work. Not only is it hard work, but it also costs a lot of money. In fact, i t can cost five times more to attract a new customer than to keep an existing one. But if you focus solely on keeping your existing subscribers, how does your SaaS company grow its revenue?
The answer is that you need to increase the average revenue per user (ARPU). Average revenue per user is simply the measure of revenue generated per customer and can be calculated by dividing your total monthly revenue by the number of paid subscribers. So, the real question is: How do you get more money from your customers who are already paying?
Here’s how to increase the average revenue per user for SaaS.
Introduce Variable Or Scalable Pricing
If you’re just charging subscribers a flat monthly price for your software, then you need to introduce variable or scalable pricing. Flat pricing is great when you’re just starting out and trying to attract your first users. But once you’ve got a decent-sized customer base and want to increase ARPU, you need to introduce pricing that allows your company to grow alongside your customers.
For instance, Evernote Business uses variable pricing, charging per user. So, a customer can sign up for the lowest-priced plan for one user, but when they need the ability to add more users to the account, they can upgrade to a higher-priced plan.
Alternatively, you can introduce scalable pricing. Scalable pricing is effective because it allows you to capture more revenue from the customers who can afford it without scaring off smaller customers who can’t afford the higher prices. We use scalable pricing at our company. For instance, our cheapest-priced plan is for users who get 5,000 page views. As our customers grow their websites and traffic, they upgrade to a higher-priced plan for increased page views as well as access to advanced features. – Read more