When your company is struggling - like losing customers, slow adoption, or low profits - it's easy to think that things will only get worse. However, as an entrepreneur, its your duty - nay, obligation - to keep your cool and get resourceful. In this guest blog post, Anssi Uimonen (co-founder & CEO of CloudBounce and Graduate of the Helsinki Founder Institute) outlines how his company managed to quickly double their revenue - even when they were losing customers.
Your startup is dying. You’ve built an MVP, acquired users, and started generating revenue. But your startup is still dying. The customers are churning at an unacceptable rate. And you don’t have the slightest clue what’s going on. They are leaving you. Soon, you will be dead.
This is what we experienced a year ago with our instant audio mastering startup CloudBounce. Musicians, producers and DJs around the world use CloudBounce to get their songs, mixes and podcasts mastered automatically, without the need to buy expensive plugins, learn mastering yourself or waiting 48 hours for an engineer to master your tracks. The service offers a pay-as-you-go and subscription plans.
We had been live for 6 months with our first version, trying to find our way to product/market fit, by testing various pricing and product features, but failing to get the revenues up fast enough, and failing to retain subscription customers. We were also running out of money, and would’ve needed to raise another round to keep the company afloat. Something needed to be done.
So how did we end up doubling revenue?
At that time, we had a 3-tiered pricing model: a Pay-as-you-go and 2 subscription tiers. The subscriptions were performing bad; people who bought the unlimited package pumped as many songs through the engine as possible during the month, and then un-subscribed. Not good. Churn rate was huge, over 20% for some months. Seriously not good.
1. Gather and analyze all customer data available
So, we took a big step back from the situation and analyzed all data available; the average time for a signed up user to convert into a paying customer, the cost to acquire an “ideal customer” who would be with us long enough to validate the scalability of this SaaS business, and at which point they churn.
For this we used Mixpanel (conversion rates), Intercom (behavior and customer feedback) and ChartMogul (track revenues and churn), crunched all data together and extracted valuable data to base our next test on.
As a result, we ended up spinning up a new pricing tier, which:
will retain users for 12 months
generate revenue so that the customer acquisition cost is less than 1/3 of the customer lifetime value
The new pricing plan: $199 for a 12-month, unlimited mastering subscription.
Also, we took all of our creativity and data to improve each step of the user acquisition funnel, from signup to retention, from payment hiccups to automated customer messaging, marketing, and free content to hand out to new users.
2. If the product fails, fix it before trying out new models
We had also noticed that the quality of the product was not up-to-par on some use cases, so we reworked the whole audio processing toolset, from the ground-up. We spent countless of hours with Kristian from our team to improve the sound quality (this played a pivotal role in doubling the revenue and finding new customers).
This, in turn, has lead us to fix more issues, usability bugs, and to hone the product further to retain the customers. We took every single user request into account, prioritized them, and implemented the most critical ones immediately.
Hot tip: gather each and every piece of user feedback in an excel sheet, then assign priority numbers from 1 to 3 (1= Critical, 2 = Important, but users can live without this for a while, 3= Nice to have). After you have assigned the numbers, start fixing them in the order of importance.
We ended up bringing 10+ new options the musicians could choose from – much like the conversation you have with a mastering engineer, and a plethora of other features. To boil things down: listening to, and acting on, customer feedback relentlessly has a huge impact on loyalty and growth.
3. Test the new pricing fast
After we conducted a data-driven study I hacked the new pricing tier into our production environment, we set up a launch campaign letting users know of the improved sound quality, and a more convenient annual subscription plan.
We launched the new features to our userbase. And what happened…?
We doubled our revenue!
[Fun fact: after 12 months had passed, we saw that 90% of the customers ended up renewing their subscription]
Our subscribers were astonished, and came thru Intercom to thank us on multiple occasions!
And ultimately, within next 3 months, we were able to raise our 2nd round of financing.
Extra tip: Make your users give you an explanation before unsubscribing.
One additional thing we’ve done to maximize the learning from our users is changing the “self serve” unsubscribe process into an assisted one. Even though it might come as annoying for some users, we noticed that over 80% of customers were willing to share their insight and reasons behind the unsubscribing.
Since then, we ended up doubling our revenues while providing a much better user experience for our customers.
So, what’s next for us?
Now the next milestone is to reach ramen profitability, and raise a 7-figure seed round to expand our product offering and scale the business up.
About the Author
Anssi Uimonen is a serial entrepreneur and Founder Institute Graduate from Finland. He has done 3 startups before, and is actively advising and consulting high tech startups. Currently, he is the co-founder and CEO of CloudBounce, which offers instant, cloud-based audio mastering and enhancement for content creators.