There's actually a worse scenario for a SaaS business: Bad Customers.
Logic says if customers equal revenue, bad customers must be better than no customers.
But that's not the case for SaaS!
To understand why, we have to first clarify what we mean by 'bad customers'.
Bad customers are customers who are a poor fit for your product or business.
This covers everything from your product not suiting the customer's use cases to a value mismatch.
Maybe your product isn't optimized for the customer's industry. Maybe your company can't yet handle the scale of the customer's business. Maybe there is a large gap in expectations between you and the customer.
There are several ways in which your SaaS business and a customer looking for a similar solution may not be a good match, but how do you know if you have bad customers?
Here are a few tell-tale signs:
- High churn: Customers who sign on and then realize that your product is not what they're looking for are going to walk away, thereby contributing to the dreaded Churn. What's worse, if they're merely a poor fit now but may hold potential to become a good customer in future, you've lost a solid prospect!
- High CAC: Bad customers directly cost you money. Since they don't fit your ideal customer profile, you'll spend more money in the sales cycle acquiring them and explaining the value of your product. And they'll walk before you have a chance to recuperate the acquisition cost. It's also likely they'll ask for customizations and added features because the standard product doesn't work for them.
- Demand for special support or additional features: Got a customer who is never happy with your actual product? Sounds like a poor fit. These customers will always be in queue with special requests for non-standard terms or features. We aren’t talking about custom configurations for long-term or enterprise customers—especially if it’s something you’ve earmarked resources for. These are the folks who are basically looking for a different product altogether.
- Low morale: Working with bad customers is exhausting. Every interaction takes longer than it should and the relationship often ends on unpleasant terms. Your reputation takes a hit, your employees are frustrated, and the whole experience is draining.
- Bad Reviews: We’re not talking about reviews that result from a genuine mess-up on your end: like when your support takes ages or you have a persistent glitch. We’re referring to reviews that you feel are undeserved—because your product is simply not built for that use-case or need.
So, why are you getting bad customers?
Unfortunately, there's no way to completely avoid bad customers, but if they make up the majority of your customers, one of the following may be a likely cause:
- You're speaking to the wrong people altogether: From your marketing channels to your website communication, are you really targeting the people who find the most value in your product? Are you marketing on the platforms they're on? Are you running ads targeting them specifically? Do your landing pages clearly communicate whom you're speaking to?
- You're missing the mark with your messaging: Are you selling the outcomes your ideal customers actually want to achieve? Are you hyping features that are secondary at best? If you're talking about things your ideal customer doesn't care about, you're going to attract customers who misunderstand the real value of your product.
- People are picking you for superficial reasons: When you're not speaking to the right people and not communicating your product's value props accurately, people end up choosing your product for superficial reasons. They're not clear on what makes your product perfect for them. But you're... there... doing something similar to what they're looking for. And they have a pressing problem to solve. And you're not too expensive. Eh, why not give your product a try, right?
(This is a terrible idea, for the reasons discussed above.)
You're in a better position if you don't have any customers.
Because you're starting at zero, it's much easier to figure out and fix the reasons you're not getting customers.
So what do you do when you have no customers:
Let's assume you have a great product which has a market of paying customers. (If not, that's an entirely different conversation). You're somehow still not getting any customers.
If this sounds familiar, the main thing is to pinpoint where in the journey you're losing them.
- They're never coming to your website: If customers don't know you exist, you have a marketing problem. This problem could stem from a variety of reasons from how search-engine friendly your website is to how effective your ads are. If you don't have the traffic, you can't convert any of it.
- They're exploring the website but not converting: If prospects are coming to your website and spending time on it but not converting, you're not adequately communicating the value of your product or overcoming all concerns. Your website may also be creating a poor customer experience if it's not mobile-friendly, slow or confusing.
- They're visiting your site multiple times but aren't converting
- If prospects are returning to your site, the good news is they're seriously considering you. But if they're not converting, the bad news is they may be comparing options—and you're not standing out. You don't want it to come down to a price battle with your competitors because you didn't adequately differentiate your product for your target audience.
- They're instantly bouncing from the site
- A high instant bounce rate usually indicates a disconnect between your marketing and your website/product messaging. Basically, your marketing is hooking prospects with a certain promise but when they come to your website, they feel misled and leave.
To improve from zero customers, all you have to do is pinpoint the source of the problem and address that.
- If your problem is marketing, work on improving discoverability. Pay attention to SEO, put yourself out there on the platforms your ideal customers are on, ensure your website looks attractive and professional.
- If the problem is communication, look at your positioning, consider the ideal customer profile, identify and highlight your product's main value props and gather feedback on what concerns may be holding customers back.
- If you're dealing with comparison shoppers, make their job easier—to your advantage! Take them to dedicated landing pages that show them how you're better than your top competitors.
- If the problem is a high bounce rate, make sure your communication is aligned across platforms and your product messaging is in line with your marketing.
Studying and addressing these points is bound to make a difference to your customers.
On the other hand, if you have bad customers, all hope is not lost!
Yes, it is easier to tackle the reasons you might have no customers, but it's not impossible to fix your bad-customer problem.
- Focus on your messaging.
- The first and most important step is to conduct an overall messaging audit and see where you stand. Work on making your messaging pointed and crystal clear.
- There's no room for ambiguity on what your product does, who it's for, and how it helps. You might even find it useful to tell people what it does not do and who it's not for. The better you explain the scope of your product and manage expectations, the fewer bad customers you'll have to deal with.
- Learn to identify and step away from bad customers.
- The earlier in the sales cycle you're able to identify bad customers, the fewer resources you'll spend chasing them. And when you've realized you have a bad customer on your hands, watch for that voice that says “a customer is a customer—it doesn't matter.” You know it does.
What you absolutely shouldn't do is ignore the problem and hope you'll magically start attracting good customers.
It's pretty obvious what the cost of having no customers is—no revenue.
But bad customers cost you even more.
To begin with, bad customers won't stay. Whether it's because they just want a cheaper option or because the product isn't solving their problem, bad customers will always have one foot outside the door.
This means, you're spending huge amounts of money to convert customers that are going to leave. You're increasing your marketing budget just to meet your revenue targets—leading to a vicious cycle of acquiring customers just for them to churn a few months later.
Plus, you have to deal with the hit your reputation takes from a poor customer experience (even if it's not your fault).
Having no customers is like making a fresh start. Having bad customers requires you to figure out how to deal with them while trying to acquire good customers.
At the end of the day, however, you can fix both. All you need is some introspection, research and the right tools.
