Dan Martell - April 02, 2018


How To Increase Your Lifetime Value (LTV) Per Customer

Topics
fixing churn and redesigning plans
Hosted by
Dan Martell
Mentioned
Active Directory Dropbox Wistia
How To Run Your SaaS Board Meeting How To Capture a Great Customer Case Study

Episode Stats


Length

8 minutes

Words per minute

180.24

Word count

1,619

Sentence count

86

Harmful content

Misogyny

2

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

If you get a customer and they're churning after three months, no matter what you tell them next, they won't have the audience to actually grow their account with. In this episode, Dan Martell shares the 5 steps to increase the lifetime value of your customer.

Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
Topics generated with Qwen2.5-3B-Instruct.
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
00:00:00 Hi, I'm Dan Martell, serial entrepreneur, investor,
00:00:02 and creator of SaaS Academy, and in this video,
00:00:04 I'm gonna teach you the five steps to increase
00:00:07 the lifetime value of your customer.
00:00:10 And be sure to stay to the end where I share with you
00:00:12 an exclusive download.
00:00:14 It's my revenue maximizer worksheet
00:00:16 that's gonna unpack these specific strategies 0.90
00:00:19 so that you can fill it out and start designing your opportunity
00:00:23 to increase revenue as fast as possible.
00:00:30 So the goal of every software product is to achieve a thing
00:00:42 called net negative churn.
00:00:43 It's the holy grail of SaaS.
00:00:45 It essentially means that your expansion revenue on a monthly
00:00:48 basis is growing faster than your contraction revenue from
00:00:52 cancellations and downgrades of accounts.
00:00:54 And the only way to do that is to ensure that your current
00:00:58 customers are expanding their relationship with you,
00:01:01 spending more money.
00:01:02 Ideally on an annualized basis your expansion revenue
00:01:05 should make up about 30% of your additional
00:01:09 reoccurring revenue and that is the challenge.
00:01:12 In this video I'm gonna share with you how to do that
00:01:14 in a way that doesn't add complexity
00:01:17 or over complicate your product roadmap
00:01:19 or take months to execute.
00:01:20 Step number one, fix your churn. 0.81
00:01:24 Oh Dan, that is so obvious.
00:01:26 Thank you O-King Software Dude for telling us.
00:01:29 Look, I have to say it.
00:01:30 It is honestly the most powerful thing you can change
00:01:34 in your business to increase lifetime value.
00:01:35 If you get a customer and they're churning after three months,
00:01:38 no matter what I tell you next, you won't have the audience
00:01:43 to actually grow their account with.
00:01:46 So building a structure and an onboarding sequence
00:01:49 and really just delivering the value to the customer
00:01:52 that you promised, making sure that you're solving
00:01:53 real problem and keeping that customer is gonna be the most
00:01:57 powerful thing you can start off by doing to increase
00:02:00 lifetime value for customers, fixing your churn.
00:02:03 Number two, redesign your plans.
00:02:05 Very often when I'm working with a client I'm seeing either
00:02:09 they have one plan, just a long list of everything their
00:02:12 product does or they have several.
00:02:14 I've seen seven different plans on a pricing page that just
00:02:18 over complicates the interface and makes the customer think
00:02:20 way too much.
00:02:21 What you want to do is simplify it into maximum four,
00:02:25 usually small, medium, large enterprise.
00:02:27 Enterprise is kind of like write a check
00:02:29 and let's have a conversation.
00:02:31 But the way I think about the plans is you want to figure out
00:02:34 what specific aspects of your product are truly required
00:02:39 to solve the customer's pain point
00:02:40 at the size of business they're at.
00:02:43 And if certain characteristics of the size,
00:02:45 maybe it's the team, maybe it's specific features,
00:02:47 if they're bigger than they might need the medium plan,
00:02:50 what you want to do is make sure
00:02:51 that you actually provide that clear delineation
00:02:54 and progression so that you have something else
00:02:56 for a customer to grow into.
00:02:58 If you don't essentially project a future
00:03:01 with your product and what's possible
00:03:02 through your pricing plan,
00:03:04 then you won't be able to expand your reoccurring revenue.
00:03:08 Three, price on value.
00:03:11 Every product has what's called a value metric.
00:03:14 It's the number that if it increases,
00:03:18 it tells you that your customers are receiving
00:03:20 more value from your product.
00:03:21 For a product like Wistia, which is their hosted video platform,
00:03:25 it's the number of videos on their platform and total bandwidth.
00:03:29 Most software companies have one value metric.
00:03:32 Wistia is kind of a rare case, not very often that they have two.
00:03:36 They have both the number of videos plus the download.
00:03:39 If you look at things like Trello, it might be the number of
00:03:43 boards, although I don't think that's actually true.
00:03:45 Or Dropbox will be the size of storage on the system.
00:03:49 If you need terabytes, then you're probably a business
00:03:52 account and you have other specific features that you would
00:03:55 need like team features that would be relevant to that type
00:03:58 of account and they're priced totally different.
00:04:00 The consumer account's priced totally different from the
00:04:02 business but you need to think about what is that value metric?
00:04:04 What is that number that you're gonna use to kind of show to
00:04:09 customers that if you go above this then you really should be
00:04:11 on the next plan?
00:04:12 For a landing page software, that could be the number of
00:04:14 landing pages, et cetera.
00:04:15 It's also used to be competitive in the market, right?
00:04:18 where somebody else might have a fixed number of elements
00:04:22 and you offer unlimited but you still need to figure out
00:04:25 what is that other point of value.
00:04:27 Use that as your pricing and make sure that you capture
00:04:30 some of that value.
00:04:31 The worst you can do is just allow a customer
00:04:33 to have unlimited all the time.
00:04:35 I've seen this once on a price page.
00:04:36 It was $7 a month for a business account
00:04:39 and it was unlimited everything.
00:04:41 There's no way that company's gonna scale
00:04:43 because they don't have enough product.
00:04:46 They're not capturing enough value
00:04:47 from their product to actually grow the business.
00:04:49 Step number four, create add-ons.
00:04:53 Now, in your business, there's probably situations
00:04:56 or features that your customers are asking for
00:04:59 that may fall out of the specific focus
00:05:02 or problem that you're solving.
00:05:03 And in those cases, you wanna consider creating add-ons
00:05:07 that bolt onto your product.
00:05:09 So this could be specific integrations.
00:05:11 If you think about it, if I need what's called
00:05:13 LDAP integration, which is kind of like Active Directory
00:05:16 you're kind of like authentication, integration,
00:05:19 single sign-on, that is an enterprise request.
00:05:22 If I need, maybe it's 99.9, maybe I need a service level
00:05:27 of agreement, those are things that are enterprise.
00:05:29 Maybe I don't need a team edition or a white-labeled version,
00:05:33 so those things are kind of small business characteristics.
00:05:36 Whatever it is, is you might have add-ons that you can offer
00:05:39 a customer that's outside of your core plans that are priced
00:05:43 as an additional monthly reoccurring subscription
00:05:46 on top of the plan so that you can offer that,
00:05:49 maybe offer it as a discount.
00:05:50 You can even get your sales people
00:05:51 or in your email sequences to promote certain things
00:05:54 that you wanna amplify but it's really important
00:05:57 to have different pricing accesses,
00:05:59 different things you can sell or offer to a customer
00:06:02 to really serve them.
00:06:02 The way I think about it, at the end of the day,
00:06:04 you wanna ask yourself how can I create more value
00:06:06 for my customer than anybody else
00:06:08 and sometimes those features are not core to your plan
00:06:12 but they could be add-ons that you could offer your customer.
00:06:15 Step number five, offer partner solutions.
00:06:18 Now, I'm a big fan of focus.
00:06:20 If you've got a product, you want to focus on actually
00:06:22 delivering the value to your customers.
00:06:25 You don't want to over complicate the interface and try
00:06:27 to be everything to everybody.
00:06:29 And in those situations, you want to consider other products
00:06:33 that exist on the market that might help the customer
00:06:35 expand their problem solving abilities.
00:06:39 So the way I think about it is where does your product begin
00:06:42 or end and where do other solutions in the market
00:06:45 kind of take over at that point.
00:06:47 Or even just surveying your customers
00:06:49 that you have today and saying,
00:06:50 hey, what are the top five other products
00:06:52 that you use in your business
00:06:54 and considering those solutions as potential offers.
00:06:58 And the way it works is you reach out to those companies,
00:07:00 you say, hey, we have a customer
00:07:01 that looks a lot like your current customers.
00:07:03 We'd love to offer your solution
00:07:04 and potentially do an aligned partnership
00:07:07 where we get a referral fee.
00:07:09 And ideally, it's an ongoing.
00:07:11 So typically in this situation, a company, including yourself, you should be willing to give up 30% of the monthly reoccurring value if you present them a customer.
00:07:21 So if you give them a link, they sign up, they put their credit card on file and they become a customer, then you'll get 30% of the monthly reoccurring fee from those partner solutions.
00:07:29 And what's great if you pair three or five of those together, you can almost double your monthly reoccurring value from an existing customer account just by offering and introducing other people's solution to your existing customers.
00:07:45 It's low-hanging fruit, a real big opportunity to grow the average revenue per account, and as simple as sending out an email and asking.
00:07:55 So really, you help your customer and you help your business with this simple strategy.
00:07:58 So quick recap.
00:08:00 Number one, fix your churn.
00:08:02 Number two, redesign your plans.
00:08:05 Number three, price on value.
00:08:08 Number four, create add-ons.
00:08:11 And number five, offer partner solutions.
00:08:14 As I mentioned at the beginning of this video,
00:08:16 I want to share a worksheet I created called the Revenue
00:08:19 Expansion Maximizer.
00:08:21 It'll allow you to outline the specific features that I went
00:08:25 I went over in this book so that you don't build
00:08:28 new product or over complicate your product roadmap
00:08:30 and really just look for opportunities to repackage,
00:08:33 redesign or partner with other solutions
00:08:36 to increase your lifetime value.
00:08:37 You can click the link below in the description
00:08:39 so download that now and if you like this video,
00:08:42 be sure to click the like button, subscribe to my channel
00:08:45 and be sure to share it with a friend.
00:08:46 Thanks for watchin' and I'll see you in the next video.
00:08:49 Keep it fresh, y'all.
00:08:51 How to increase the lifetime value of your customer.
00:08:53 Sweet.
00:08:55 Ready?
00:08:55 Ready to go when you aren't, man.
00:08:58 Ah.