Black Friday, Growth Hacking and SaaS, oh my!
Black Friday (and Cyber Monday). Usually the first thing that comes to mind when I hear those words are sales and crowds.
Everywhere you look, you’ll see flyers and ads about how insanely cheap stores are selling their goods (often their TVs).
But, say you’re running a SaaS business. Should you partake in the discounting festivities? My advice to you: I’d advise against it.
- Unlike brick and mortar, SaaS has to worry about churn and retention. Brick and mortar (and eCommerce sites like Amazon) have the “luxury” of running out of stock and enticing users to purchase something else (read: loss-leader). SaaS has to worry about consistently prove its value to the customer so they will renew when the time comes.
- Discounting kills your lifetime value (LTV). Since you will be acquiring those who are, arguably, more price-sensitive as compared to your usual customer, they will likely have a higher churn rate and as such a lower LTV. Because of this, now your Customer Acquisition Costs really matter.
- You’ll leave money on the table up-front. There is a good chance that many users would have purchased at full price anyways. You’re just throwing money away.
So what should you do instead?
- Target sales to specific audiences and nurture then separately.
- Don’t promote your sale widely. You’ll just kill your NPS for current customers.
- Keep your prices relatively steady all the time.This is not to say, don’t price test. But rather maintain the perceived value of your product. Add value to your offering rather than discounting.
Originally published at www.linkedin.com