Why We Abandoned Our Smallest Customers at SaaStr (But Why You Probably Shouldn’t) | SaaStr

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So in many ways I use SaaStr itself as sort of a lab to try sales and marketing experiments.  I have my own experience as a SaaS CEO to draw on, for a product now doing hundreds of millions in ARR a year.  And I have the experience of investing in 5 SaaS unicorns and decacorns.  But you need to keep it fresh.

Running SaaStr itself definitely helps.  We have a world-class sales team now that does $20m a year, with just 6 sales execs, so I’ve learned a lot about efficiency there.

And one thing we finally did this past year was drop our smallest customers.  It’s something at SaaStr I generally strongly recommend against.  The team often wants to do this, because your smallest customers consume so many resources in support, success, etc.  They churn at the highest rate.  And they often distract the sales team from bigger deals.  So in many cases, most of your team will vote to move on from the smallest customers as you scale.

But we didn’t want to.  We offered two products for smaller SaaS companies, a “Bronze” sponsorship that, while it had a tiny booth, basically offered all the benefits of more expensive SaaStr Annual sponsorships to SaaS companies at < $2m ARR.  For 40% of the price.

Ok what did the data show?  We finally have it, because with SaaS Annual taking place … well, annually … the data takes a while to get:

  • Of the 37 Bronzes Sponsors in 2020 and 2021, only 9 renewed, our lowest renewal rate of all categories, by far
  • The ones that did renew though did upgrade, leading to 86% NDR
  • 8 of the 9 that did renew, renewed for a normal sponsorship
  • They represented about 5% of total revenue

So in the end, these very small customers were just 5% of total revenue, consumed a lot of our support resources, complained the most … and most didn’t renew.

Now data is great, but it has its limited.  By removing the Bronze sponsorship, folks had to buy a standard priced Gold.  How much additional revenue did we gain in 2022 by, in essence, forcing folks into a high pricing tier?  That unfortunately we’ll never know.  That’s where you have to try to comb through more qualitative data.

Having said that, was it the right decision?  These smallest, Bronze sponsors did in the aggregate return with 86% NDR.  That’s not bad for your smallest customers.

And we’d also love to have our events highlight up-and-coming SaaS companies that aren’t well funded yet.  So perhaps the bigger problem was we just also didn’t have enough demand for our lowest-end product.  We only had 37 over 2 years.  We had far more capacity for low-end Bronze sponsors than we sold — versus our other sponsor offerings all sold out.

In the end, for us, though the real issue was resources.  These smallest sponsors took the same or more resources than the larger sponsors, yet only made up 5% of the revenue, and burned out a lot of the team with more complaints and demands than the bigger sponsors.  And that 5% is declining.  It was 10% a few years back. So like many SaaS companies going a bit upmarket, the smaller customers become a smaller and smaller portion of your revenue base.

But if we’d just had more organic demand for our cheapest product, we would have kept it.  No matter what the data said, most likely.

We also ran a second experiment with our digital media assets — ads in our podcasts, newsletters, and digital events.  We allowed some one-off sponsors that didn’t have a relationship with us to buy these assets with a spot purchase.  It turns out so many marketers have extra budget at the end of each quarter, this was a very easy sale.  But it also turned out to be a bad sale.

What happened?  0% of the one-off digital media sponsors renewed.  Not only is that pretty bad, it’s actually worse because these assets are capacity constrained.  Our podcast and newsletter ads sell out 100% for the year.  So by selling them to sponsors that didn’t really know us or have a relationship, and didn’t come back, we took away opportunities from our more valued sponsors.  So net net, we no longer sell these assets as one-offs to anyone.  Even when a top public SaaS company offered us $1m to pre-buy sponsorships in a big chunk of these media assets, we said No.  That $1m sounded great, but it was better to hold it back for long-term partners.  We’d sell it all out anyway.

In the end, the real learning was run experiments and speak from data:

  • I didn’t want to leave the smallest sponsors behind, but in the end the learning was just wait for them to get a bit bigger before they sponsor SaaStr events.  They are happier then, when they have bigger marketing budgets, and less stress around any individual buy.
  • And the second learning, which we have really learned by studying the leaders from Box to Datadog and more in our 5 Interesting Learning series, is really lean into your existing customers and give them more products to buy from you.  Once they trust your brand, if you have more good products to sell them, they’ll buy them.  More on going multiproduct here.

Published on August 27, 2022

Go to Publisher: SaaStr
Author: Jason Lemkin