Start-up Series: How to go about increasing Monthly Recurring Revenues (MRR)?

As some of you are aware, I mentor start-ups under the auspices of Start-Up Direct. This is a fantastic not-for-profit organization that helps entrepreneurs secure seed funding, as part of the UK government’s initiative to encourage small business growth. While my mentees are vastly different in their service offering, a common question I always get is around how to accelerate revenue growth, and in particular, the topic of recurring revenues. So I thought I’d start an ongoing series of marketing tips for start-ups based on my experiences of having my own small business, and from my time working at a tech start-up. For the purpose of this post, I’ll be looking at the classic subscription-based software product.

The SaaS customer lifecycle – particularly for subscription-based, freemium to premium products, has a particular lifespan. On the surface, it may seem that the biggest customer acquisition obstacle to overcome is getting prospects to part with their precious contact details. In my view, this is actually the easiest part of the equation, with the real heavy-lifting needed after the sign-up process. While a lot still rides on the quality of the product offering itself, companies that understand how to move prospects through a prescriptive customer journey can clear the way for a healthy run rate of recurring revenues.

Many of you will already be aware of the three critical stages for building a strong user base:

Effective Onboarding
First impressions count, and there’s a real need to approach user activation in an impactful way, to achieve effective sign-up and onboarding. You should aim to make the sign-up process as pain free as possible, collecting only the most minimum of information required for activation. Better yet, integrate popular social networking logins to form the basis of your sign-up process for maximum uptake. As the user gets hooked-in to the product with on-screen walk-throughs, timely ‘how-to’ emails and visual onboarding guides, you can discreetly mine further details to create a more complete profile on each customer prospect. But ultimately your goal here is to hold the user’s hand through acclimatization, so they get a real sense for product feature and functionality as they build-up their usage.

User Advocacy
The next challenge entails a systematic communication approach, to ensure users fully understand the value of the product and what it can do for them. It’s no good if you have a steady stream of sign-ups, but an overall percentage of active users in single figures. While there are no right or wrong answers as far as what type of content to seed out, your campaigns can include anything from short videos that highlight new functionality, a ‘tip of the day’ series that showcases the best product features, or nurture tracks that have built-in logic triggered by user behaviors. The last point is particularly effective when the automation sequence is tied to certain milestone completion i.e. congratulating a user when they complete certain actions, or, sending a friendly reminder email if more than 7 days has lapsed since their last login, etc… At this stage you want the user to rely on the product as frequently as possible, and anything you can do to encourage return visits will convert them into fans.

Product Evangelism
The pivotal point for monetization depends on how you structure your go-to-market strategy. Traditional SaaS models either involve a limited free access period (usually 30 days), where the user is then required to upgrade to paid-for membership to continue using the service. Or it’s based on a model where the free access provided is for a basic version of the product, and users need to upgrade in order to unlock premium features. User engagement with the product, and the perceived value of the service they’re getting will determine the motivations for moving to a fee-based account. By this stage, you’ve hopefully created enough loyalty, usage and enthusiasm for the service that will provide an impetus to upgrade from a free to premium subscription. It also doesn’t hurt to strategically place a few comms pieces amidst your marketing programs to solicit upgrade behavior. Anything that creates awareness of the value-added benefits of a premium plan can only help your goal of moving prospects through the purchase funnel.

By no means are these steps a foolproof blueprint for how to monetize your users. There are bound to be several behaviors – customer churn being the most common – you’re going to constantly need to keep an eye on to understand where the bottlenecks are building amongst your users. If your client base has a high churn rate, attempt to identify drop-offs causes or dormant user patterns. Devising a win-back approach with small incentives (for example, a month of premium account benefits for free) could be one solution to re-engaging with disenchanted users, while short surveys can also be deployed for collecting feedback. You can split your strategy, and ask for feedback from active users on what they thought could be improved with the onboarding/activation process, and send a second, slightly modified version to those that have activated their accounts but have only logged in a handful of times since to get their perspective.

Ultimately however, it always comes back to the product, and it’s perceived value. Take the emotion out of the equation, and ask yourself some home truths. Does the product really solve a pain-point? How engaging a user experience does it provide? Does the paid-for version warrant the cost? and are the upgrade features and add-ons priced correctly? These are the sorts of questions I’d be asking myself as a business owner, and the responses will contain the answer to how you go about increasing MRR.


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