Entrepreneurs don’t get fazed easily. They are resilient when faced with crippling challenges, resourceful when they need to find a solution, and overall tough as nails. But nothing gives entrepreneurs everywhere, myself included, sweaty, shaky nightmares as the thought of no one buying their product. It is the one outcome we all dread.
I have been asked this question countless times by founders whose startups I have consulted on. Why is nobody buying my product? It seems they are interested in what we do, even show excitement about the product, but when it’s time to make the transaction, we see extremely low conversion rates.
This question comes in many forms, some of which you may be able to relate to yourself.
People are subscribing to our newsletter, but not buying the product.
People sign up for the free trial, but don’t upgrade when the trial ends.
People opt in for the free plan, but most of them never upgrade.
We are seeing a lot of clicks on our ads, but very low conversions.
Some of the founders, when unable to diagnose the underlying problem, even resort to blaming the platform for this behavior.
We were seeing better conversion on our ads, but since last month, the CAC has just been going up. Are you seeing similar trend with other businesses? Is this because of some change Facebook has recently introduced?
As much as I would have liked to tell them there exists a silver bullet that will solve their problems for them, unfortunately that silver bullet does not exist. Every startup is different, and why your customers react (or don’t react) a certain way to your SaaS product would be different for each startup, influenced by a bunch of possible reasons. Maybe your product is priced too high. Maybe your positioning is just wrong. Maybe your marketing strategy isn’t effective, or not being executed on the right way. Maybe the product in itself falls short on consumers’ expectations. Or worse of all, maybe you are solving a painpoint nobody is looking for a solution for.
There are countless such reasons that by themselves, or acting in combination with each other, prevent your product from scaling up the heights of the transaction chart. But, while each startup will have its own unique challenges and influencing factors that as founder, you will need to dive into, there are some commonalities. Factors that come up again and again, specially when it comes to most of the SaaS product businesses out there.
It is tough getting traction in the crowded internet space. It is even tougher to get your audience into becoming paying customers, especially if you are catering to well known, well understood pain point - which means the market is well served, putting you toe to toe with a fair bit of healthy competition.
But, you can improve the odds in your favor. And that is what we are going to talk about today. How can you have access to a captive audience. An audience that is engaged enough that you can leverage that engagement into enabling transactions and revenue.
Monetization is a switch
This was the concept most social networks, and many B2C businesses depended upon while chasing growth, often without making any real revenue. The idea was simple, if you have access to a large enough audience, even the tiniest micro-transactions from just a small percentage of your audience can translate to massive revenue. And not just B2C businesses, or SaaS products, almost all mobile games follow this strategy. The gameplay is free, entertaining and engaging, and just a small tiny fraction of their userbase buying the virtual currency drives hundreds of thousands in revenue.
The concept holds true for your SaaS product as well, irrespective of the nature of your business.
You don’t always need to be focused on revenue
Businesses are in the business of making money. I strongly believe in that. But you don’t need to be focused on doing that in everything you do.
Focus on giving value to your customers, before expecting them to add value to your bottomline, i.e. your revenue.
If you look at the blogs of some of the SaaS businesses you see around you, you would constantly find blog posts and articles talking about their product. But the fact is, potential customers are very rarely, if at all, looking to know more about your product in their early stage of the discovery process. What they are interested in is solving their problems. So that is what your initial focus should be as well.
If you have a captive audience, you will eventually make money
He talks about how a small, local, non-profit museum makes more than quarter million dollars in profit each year off of a miniature train ride that would have cost the museum probably half a million to set up. And he talks about why he would not be able to make even close to that kind of money no matter how many miniature train rides he installs and operates all over. He notes that the reason the museum is able to make this money is because it already has an audience base of tens of thousands of potential customers actively engaging with its presence.
So, just by placing a train ride in front of its audience, the museum is able to monetize it. Something that won’t obviously work for someone who doesn’t have that access to an engaged community.
Building a captivated audience base is important. By doing so, you are able to create a semblance of market demand, and then you can capitalize on that demand via a product.
This is the whole premise behind building an online fan following, communities - both free and paid, and the whole plot behind the success of successful content creators and content entrepreneurs.
Nuseir Yassin (better known by the name of his Facebook Page Nas Daily) created short one-minute videos traveling all around the world for 3 years. His videos were entertaining, fun, and full of new culture and people. Tremendously popular amongst a strong, growing base of followers who were extremely loyal to him. An audience as captivated as it gets. Today, Yassin runs Nas Academy to help content creators make a business out of their passion.
Nas Academy has raised more than 11 million dollars in external capital, and it all started with sharing short, people-centric, fun, educational videos with his audience. An audience that eventually grew to more than 40 million in size.
If you have an engaged audience base, you would be able to come up with innovative ways in which you can monetize the value you are generating for your base. But if you have an.audience of zero, no matter how many times you try monetizing your efforts, you will add zero dollars to your business.
Creating a product is easy, creating a base of audience is tough
Someone I know wanted to create a marketplace for tshirts a few years back. His premise was that since Amazon and other marketplaces charge an arm and a leg in commission and other facilitating charges, he would be able to attract all merchants to his marketplace by offering extremely friendly terms and fees.
There is a huge flaw in that logic.
A merchant, at the end of the day, is interested in revenue. He is more interested in the total revenue he can make rather just the revenue he can make on each and every single order. So, all things are equal, yes - he would definitely be interested in becoming the customer of a marketplace that helps him retain a healthier percentage of the sales. But all things will not be equal, will they?
Even if this new marketplace signed on a bunch of merchants by offering a sweet deal, merchants would have quickly become disenchanted when they would find themselves making much more money overall on Amazon as compared to this new marketplace. So, the merchant would redirect his focus on Amazon, and this new marketplace would wither as quickly as it had started to blossom.
Creating the marketplace here wasn’t the challenge, making sure its customers (the merchants) continue to make the money they are used to was. Amazon is able to help its merchants do that because it has a huge audience who turn to it every time they need to make a purchase. So, the merchant would consciously choose to make lesser money on each sale because at the end of the month, Amazon is helping him rake in a lot more money than any other alternative he has.
Amazon’s wide and deep reach to the end customers is what its moat is. You can cater to a niche market and make a name for yourself there, but if you are trying to simply rehash what Amazon does, without the audience, all you have is a marketplace website/app.
So, how do you create an audience?
By focusing on them. Their problems. Their needs. Their challenges.
Nas focused on the fact that people everywhere want to travel the world, experience new cultures, try out new food, meet new people, but they are rarely able to do that. He facilitated an environment where his audience was able to enjoy a part of that experience via him. This is what made his videos so engaging, with several of them being shared tens of thousands of time on Facebook and other platforms.
If you are a SaaS business, focus on what your audience is looking for, and which part of your audience’s “need” are you most equipped to fulfill. And then just do that. This is what several businesses are trying to do this days by attempting to create communities for their target audience. You can follow suit. Creating and running a community, if executed well, can add tremendous value to your business.
Will you make mistakes? Yes. And that’s okay. How your audience is engaging with your community will help you refine how your community needs to be shaped as. What’s most important is to start, and to start now. The rest we can fix when it needs fixing.
But yes. Making mistakes in executions is fine, but there are a few things you need to get absolutely right, right from the get go:
- Be empathetic and compassionate
- Be sincere in your attempt to help out your audience
- Stay true to your values
- Be honest, truthful and respectful
When people transact with an individual or a business, they are looking for an entity they can trust in, an entity who has similar values as them. This search for alignment in values is even more prominent in case of online communities where the sense of camraderie and belonging determines how connected, engaged and loyal the participants are to the community.
There is a reason I chose Nas Daily to highlight today’s topic. Yes, they did a lot right while building the community, but since starting to monetize the community, the business has been mired in one controversy after another. So much so that earlier this month, more than a quarter million members of the community called it quits - in less than 2 days. Values. Compassion. Humility. If you are running a community, as long as you get these right, your audience will forgive you for missing a step or two along the way.
That’s it for today, see you tomorrow.
Thoughts and feedback? Talk to me.
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