Does growth hacking work in SaaS?
“Growth hacking,” i.e. finding one quick trick to supercharge your growth, is a fantasy. However, you can grow your SaaS business by focusing on certain overarching growth levers.
When growth is taken to mean obsessive acquisition, it is extremely short-lived and inefficient. Unfortunately, many SaaS companies rely too heavily on acquisition as a growth lever. Price Intelligently did a study on growth blog posts to analyze the zeitgeist opinions about SaaS growth and found that the community is disproportionately interested in customer acquisition.
The 70% of blog posts on growth cater to a large audience in the SaaS community that is looking for better ways to acquire new customers. They really should be focusing on retention and monetization if they want to grow faster and more efficiently. There are high costs associated with customer acquisition, and as a result, acquisition is nearly half as effective as retention in growing revenue and nearly four times less effective than monetization. So, sound retention analysis can provide a better ROI than acquisition.
The growth strategies that work in SaaS are those that help you better retain customers and better monetize your existing customers. Improvements in these areas drive up your revenue:
- A 1% increase in customer retention results in a 6.71% increase in your bottom line
- A 1% increase in customer monetization results in a 12.70% increase in your bottom line
Better retention and monetization help you to increase a customer's lifetime value without adding more acquisition costs, which helps keep your LTV:CAC ratio high. Simply acquiring a customer will not improve their lifetime value and saddles you with CAC—so acquisition is actually very inefficient for revenue growth.
Read more about retention and monetization as the best SaaS growth strategies here.