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

83

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.
00:00:00.000 Hi, I'm Dan Martell, serial entrepreneur, investor,
00:00:02.500 and creator of SaaS Academy, and in this video,
00:00:04.400 I'm gonna teach you the five steps to increase
00:00:07.400 the lifetime value of your customer.
00:00:10.200 And be sure to stay to the end where I share with you
00:00:12.400 an exclusive download.
00:00:14.000 It's my revenue maximizer worksheet
00:00:16.200 that's gonna unpack these specific strategies 0.90
00:00:19.300 so that you can fill it out and start designing your opportunity
00:00:23.000 to increase revenue as fast as possible.
00:00:30.000 So the goal of every software product is to achieve a thing
00:00:42.020 called net negative churn.
00:00:43.220 It's the holy grail of SaaS.
00:00:45.360 It essentially means that your expansion revenue on a monthly
00:00:48.340 basis is growing faster than your contraction revenue from
00:00:52.040 cancellations and downgrades of accounts.
00:00:54.320 And the only way to do that is to ensure that your current
00:00:58.480 customers are expanding their relationship with you,
00:01:01.040 spending more money.
00:01:02.720 Ideally on an annualized basis your expansion revenue
00:01:05.580 should make up about 30% of your additional
00:01:09.660 reoccurring revenue and that is the challenge.
00:01:12.760 In this video I'm gonna share with you how to do that
00:01:14.860 in a way that doesn't add complexity
00:01:17.400 or over complicate your product roadmap
00:01:19.240 or take months to execute.
00:01:20.900 Step number one, fix your churn. 0.81
00:01:24.080 Oh Dan, that is so obvious.
00:01:26.240 Thank you O-King Software Dude for telling us.
00:01:29.140 Look, I have to say it.
00:01:30.540 It is honestly the most powerful thing you can change
00:01:34.180 in your business to increase lifetime value.
00:01:35.880 If you get a customer and they're churning after three months,
00:01:38.780 no matter what I tell you next, you won't have the audience
00:01:43.020 to actually grow their account with.
00:01:46.000 So building a structure and an onboarding sequence
00:01:49.860 and really just delivering the value to the customer
00:01:52.200 that you promised, making sure that you're solving
00:01:53.840 real problem and keeping that customer is gonna be the most
00:01:57.480 powerful thing you can start off by doing to increase
00:02:00.820 lifetime value for customers, fixing your churn.
00:02:03.120 Number two, redesign your plans.
00:02:05.820 Very often when I'm working with a client I'm seeing either
00:02:09.780 they have one plan, just a long list of everything their
00:02:12.320 product does or they have several.
00:02:14.820 I've seen seven different plans on a pricing page that just
00:02:18.000 over complicates the interface and makes the customer think
00:02:20.400 way too much.
00:02:21.500 What you want to do is simplify it into maximum four,
00:02:25.300 usually small, medium, large enterprise.
00:02:27.780 Enterprise is kind of like write a check
00:02:29.740 and let's have a conversation.
00:02:31.980 But the way I think about the plans is you want to figure out
00:02:34.480 what specific aspects of your product are truly required
00:02:39.020 to solve the customer's pain point
00:02:40.860 at the size of business they're at.
00:02:43.080 And if certain characteristics of the size,
00:02:45.160 maybe it's the team, maybe it's specific features,
00:02:47.920 if they're bigger than they might need the medium plan,
00:02:50.060 what you want to do is make sure
00:02:51.060 that you actually provide that clear delineation
00:02:54.160 and progression so that you have something else
00:02:56.460 for a customer to grow into.
00:02:58.340 If you don't essentially project a future
00:03:01.200 with your product and what's possible
00:03:02.880 through your pricing plan,
00:03:04.440 then you won't be able to expand your reoccurring revenue.
00:03:08.740 Three, price on value.
00:03:11.440 Every product has what's called a value metric.
00:03:14.880 It's the number that if it increases,
00:03:18.520 it tells you that your customers are receiving
00:03:20.560 more value from your product.
00:03:21.800 For a product like Wistia, which is their hosted video platform,
00:03:25.700 it's the number of videos on their platform and total bandwidth.
00:03:29.500 Most software companies have one value metric.
00:03:32.600 Wistia is kind of a rare case, not very often that they have two.
00:03:36.800 They have both the number of videos plus the download.
00:03:39.720 If you look at things like Trello, it might be the number of
00:03:43.520 boards, although I don't think that's actually true.
00:03:45.820 Or Dropbox will be the size of storage on the system.
00:03:49.520 If you need terabytes, then you're probably a business
00:03:52.320 account and you have other specific features that you would
00:03:55.060 need like team features that would be relevant to that type
00:03:58.820 of account and they're priced totally different.
00:04:00.440 The consumer account's priced totally different from the
00:04:02.040 business but you need to think about what is that value metric?
00:04:04.760 What is that number that you're gonna use to kind of show to
00:04:09.000 customers that if you go above this then you really should be
00:04:11.280 on the next plan?
00:04:12.200 For a landing page software, that could be the number of
00:04:14.280 landing pages, et cetera.
00:04:15.740 It's also used to be competitive in the market, right?
00:04:18.720 where somebody else might have a fixed number of elements
00:04:22.660 and you offer unlimited but you still need to figure out
00:04:25.420 what is that other point of value.
00:04:27.720 Use that as your pricing and make sure that you capture
00:04:30.560 some of that value.
00:04:31.400 The worst you can do is just allow a customer
00:04:33.500 to have unlimited all the time.
00:04:35.300 I've seen this once on a price page.
00:04:36.600 It was $7 a month for a business account
00:04:39.200 and it was unlimited everything.
00:04:41.240 There's no way that company's gonna scale
00:04:43.340 because they don't have enough product.
00:04:46.380 They're not capturing enough value
00:04:47.840 from their product to actually grow the business.
00:04:49.980 Step number four, create add-ons.
00:04:53.240 Now, in your business, there's probably situations
00:04:56.540 or features that your customers are asking for
00:04:59.180 that may fall out of the specific focus
00:05:02.360 or problem that you're solving.
00:05:03.580 And in those cases, you wanna consider creating add-ons
00:05:07.460 that bolt onto your product.
00:05:09.260 So this could be specific integrations.
00:05:11.560 If you think about it, if I need what's called
00:05:13.800 LDAP integration, which is kind of like Active Directory
00:05:16.760 you're kind of like authentication, integration,
00:05:19.460 single sign-on, that is an enterprise request.
00:05:22.460 If I need, maybe it's 99.9, maybe I need a service level
00:05:27.040 of agreement, those are things that are enterprise.
00:05:29.400 Maybe I don't need a team edition or a white-labeled version,
00:05:33.140 so those things are kind of small business characteristics.
00:05:36.720 Whatever it is, is you might have add-ons that you can offer
00:05:39.780 a customer that's outside of your core plans that are priced
00:05:43.680 as an additional monthly reoccurring subscription
00:05:46.720 on top of the plan so that you can offer that,
00:05:49.420 maybe offer it as a discount.
00:05:50.660 You can even get your sales people
00:05:51.980 or in your email sequences to promote certain things
00:05:54.860 that you wanna amplify but it's really important
00:05:57.200 to have different pricing accesses,
00:05:59.300 different things you can sell or offer to a customer
00:06:02.000 to really serve them.
00:06:02.840 The way I think about it, at the end of the day,
00:06:04.600 you wanna ask yourself how can I create more value
00:06:06.700 for my customer than anybody else
00:06:08.540 and sometimes those features are not core to your plan
00:06:12.580 but they could be add-ons that you could offer your customer.
00:06:15.140 Step number five, offer partner solutions.
00:06:18.360 Now, I'm a big fan of focus.
00:06:20.520 If you've got a product, you want to focus on actually
00:06:22.620 delivering the value to your customers.
00:06:25.160 You don't want to over complicate the interface and try
00:06:27.300 to be everything to everybody.
00:06:29.060 And in those situations, you want to consider other products
00:06:33.040 that exist on the market that might help the customer
00:06:35.740 expand their problem solving abilities.
00:06:39.280 So the way I think about it is where does your product begin
00:06:42.580 or end and where do other solutions in the market
00:06:45.220 kind of take over at that point.
00:06:47.600 Or even just surveying your customers
00:06:49.320 that you have today and saying,
00:06:50.740 hey, what are the top five other products
00:06:52.380 that you use in your business
00:06:54.160 and considering those solutions as potential offers.
00:06:58.320 And the way it works is you reach out to those companies,
00:07:00.720 you say, hey, we have a customer
00:07:01.840 that looks a lot like your current customers.
00:07:03.540 We'd love to offer your solution
00:07:04.600 and potentially do an aligned partnership
00:07:07.380 where we get a referral fee.
00:07:09.760 And ideally, it's an ongoing.
00:07:11.160 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.
00:07:21.720 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.
00:07:29.900 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.
00:07:45.180 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.
00:07:55.340 So really, you help your customer and you help your business with this simple strategy.
00:07:58.660 So quick recap.
00:08:00.660 Number one, fix your churn.
00:08:02.660 Number two, redesign your plans.
00:08:05.660 Number three, price on value.
00:08:08.660 Number four, create add-ons.
00:08:11.660 And number five, offer partner solutions.
00:08:14.660 As I mentioned at the beginning of this video,
00:08:16.660 I want to share a worksheet I created called the Revenue
00:08:19.660 Expansion Maximizer.
00:08:21.660 It'll allow you to outline the specific features that I went
00:08:25.660 I went over in this book so that you don't build
00:08:28.700 new product or over complicate your product roadmap
00:08:30.940 and really just look for opportunities to repackage,
00:08:33.580 redesign or partner with other solutions
00:08:36.000 to increase your lifetime value.
00:08:37.280 You can click the link below in the description
00:08:39.460 so download that now and if you like this video,
00:08:42.280 be sure to click the like button, subscribe to my channel
00:08:45.100 and be sure to share it with a friend.
00:08:46.940 Thanks for watchin' and I'll see you in the next video.
00:08:49.420 Keep it fresh, y'all.
00:08:51.100 How to increase the lifetime value of your customer.
00:08:53.920 Sweet.
00:08:55.300 Ready?
00:08:55.680 Ready to go when you aren't, man.
00:08:58.460 Ah.