How to Get SaaSy With Your E-Commerce Business

How to Get SaaSy With Your E-Commerce Business Featured Image

Apply these same methods that SaaS businesses have mastered to any e-commerce business in order to maximize profits with fewer visitors.

There are few (if any) e-commerce businesses that can sustain themselves with just 5,000 visitors a month.

Many B2B SaaS businesses have no problem generating profit from those numbers.

The reasons for that is that SaaS businesses profit from their existing customers. Five thousand visitors in a certain month will often generate revenue for a whole year or more.

Unlike SaaS,  e-commerce businesses rarely benefit from the existing customer base. A lot of revenue and especially profit is left on the table.

Using SaaS business tactics in e-commerce can generate some really impressive results especially by lowering the costs for generating the same profit. It’s like feeding your ROI with steroids.

A SaaSy Case Study for E-Commerce

Though my company is specialized on customer engagement optimization algorithms for SaaS, I had the opportunity to actually work with an e-commerce business that was run like a SaaS one. It was an online shop affiliated with a major telecom company.

I was invited to a marketing meeting in which they discussed one of their latest marketing campaigns.

They decided to use the summer months — a period which is expected to generate lower sales anyway — to validate an algorithm for targeting users based on past behavior.

The algorithm identified which users are more likely to change their smartphone within a month and those which are less likely to do so. The algorithm relies on the activity of the user in their online shop account, their data and voice usage, and their subscription contract.

Then the telecom company sent an SMS to all the users with an offer for a new smartphone.

The goal was to see if the segments identified by their algorithm had different buying behaviors.

The users who were likely to buy a new phone converted more than 120 percent better than the users who were not. We are talking about a difference of hundreds of sales.

More than 100,000 texts were sent. They were split as follows:

  • The majority: 70 percent of them were for users who were less likely to upgrade
  • The minority: 30 percent for the group which was more likely to upgrade.

The minority generated more sales and more revenue than the majority at a considerably higher conversion rate: 99 percent statistically significant data.

The algorithm they had just discovered was spot on, identifying users at their most probable moment to upgrade.

If one were to judge the content of that meeting without knowing who the participants were and where they worked, it would be very likely they’d say it was a typical SaaS Marketing meeting.

But it wasn’t. It was e-commerce with a catch: it was focusing on existing customers rather than on new customers.

Activate — Retain — Revenue — Refer

activate-retain-revenue-refer

I started my analytics career in e-commerce. The call to action was always: Buy Now.

I then switched to running a SaaS company where long-term relationships generated the majority of the revenue.

My focus changed from “Buy Now” to “Activate — Retain — Buy — Refer.”

So, how do you get SaaSy with your e-commerce business?

Start With Providing a Service

providing-a-service

There are many ways to do it. It can be as much as putting a service at the core of your business. One of the best examples of this is Amazon Prime.

It can be a web app that acts as an affiliate store for your business. The app owned by H&M, for instance, is installed on over 5 million devices.

They have data on more than 5 million buyers that they can use to provide better services and products, therefore generating better business.

It can be as little as a community that you manage.

Track Like a SaaS Company

Saas-retail-company
Source: TotalRetail

Most analytics services that are used by e-commerce businesses (yes, you figured it out, including even Google Analytics) rely on cookies to identify users.

Most analytics services for SaaS rely on a username, user ID or email, so a user is the same no matter when they access an app, a website, or email.

This presents  a treasure trove of information, as Sam Hurley explains:

By default, Google Analytics assigns what is known as a Client ID to all website visitors.

However: This offers only a small, very disjointed slice of the customer journey. The “journeys” (note plural!) can end up giving the impression that multiple users have visited and/or purchased, when the truth could, in fact, be very different — with only ONE user actually completing these actions…

Why? Because Client IDs work on cookies…and cookies aren’t reliable for multiple reasons. One of those reasons being: Users visit on multiple devices.

Twelve billion mobile-connected devices are expected to be in use by 2020.”

For e-commerce brands to get on par with SaaS operations, to truly gain a hold of their analytics, and to start tracking the right way — the User ID needs to be implemented and encouraged (through the use of sign-in functionality).

This additional layer of data paves the way for an enjoyable, seamless, feature-rich omnichannel experience that leaves customers feeling delighted across all devices and channels.

Such enjoyment offers a much higher likelihood of transforming into heartfelt brand loyalty and retention, rather than e-comm CMOs second-guessing what content and products their customers want to see or buy.

Focus Like a SaaS Company

business-focus

The “buy now” moment is the main advantage eCommerce has over SaaS. In SaaS the first engagement almost never starts with a payment.

For many SaaS companies, payment comes days, weeks, or even months after the initial interaction with the business.

In SaaS, commitment and engagement needs to be nurtured.

In e-commerce, a user that has just made a purchase has just passed the first commitment milestone. The nurture process in many cases is way easier than getting new customers, as the client has already received value from you.

The moment of purchase is one of the best moments to get the users to join a service that you provide, especially if they see in that service a way to get more out of their purchase.

After they join, the following milestones need to be reached:

Activation

A user creating an account or installing an app is not helpful unless they start interacting with the service you provide.

After being onboarded, which means receiving the value that you promised them for the first time, you’ll need to look into getting them hooked.

That moment is what every SaaS company spends a lot of resources and energy on (in order to optimize the retention process). Hooked means that the users have got to the point where they want to use your service for the long term.

For Facebook that moment is when a user reaches seven friends, for instance. For your app it might be when users reach a specific number of points doing different actions.

You don’t need to guess it. There are very specific algorithms that can help you identify such moments and set them as business goals.

Retention

A user that doesn’t come back to your service is a user that can’t convert again.

Most B2C SaaS companies look to get at least a 60 percent retention for the first week and then to have it stabilized at 40 percent after more than four weeks.

Revenue

You can use the existing data you’ve collected to identify buying patterns in users that are active in your community or in your mobile or web application.

Those buying patterns will help you generate very specific campaigns (email, push, or retargeting ones) for which you mostly control the channel, so their costs are very small.

This is the main reason they say that converting an existing customer again is much cheaper than buying a new one.

Referrals

Making a referral program work is the ultimate path to growth. The more customers you have the more potential customers are referred to you. It’s the snowball effect every SaaS business dreams of.

A working referral program correlates with the experience a user has with a SaaS. In most cases that experience is purely online.

In e-commerce, the experience with the product is offline. That offline experience might give e-commerce businesses an unfair advantage over their SaaS counterparts when it comes to implementing a referral program.

Here is a list of 74 referral programs that include both SaaS and e-commerce businesses.

The only catch is that the referral program is part of your service, so it can be tracked and linked to a user profile in order to identify patterns that can later help you do better for your users.

Your turn now! Have you ever tried any SaaS specific tactics with your e-commerce business? If not, what would you like to start with?

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