SaaStr Warns Against Exploiting Customers When Growth Slows
SaaStr advises companies not to exploit customers when growth slows, as this can lead to loss of trust and ultimately, customers. Instead, focus on winning and gaining market share.
Original reporting · saastr.com
Original: “When Growth Slows, Folks Start Wanting to Do the Crappy Things. Fight It.”
Read “When Growth Slows, Folks Start Wanting to Do the Crappy Things. Fight It.” at SaaStr →
How this was written. Hustle Bucks wrote this article with a language model from SaaStr’s reporting (model: @cf/meta/llama-3.3-70b-instruct-fp8-fast); it describes that reporting rather than adding to it. The original, linked above, is the full story.
Key points from SaaStr’s report
- Companies should not raise prices or eliminate low-end and free editions as a short-term solution to slow growth.
- Forcing customers into annual and multi-year contracts can lead to customer dissatisfaction and churn.
- Companies should focus on providing value to their customers and building trust rather than exploiting them.
- Customers have more options than ever and can switch to alternative products or services quickly.
- Founders should prioritize winning and gaining market share rather than extracting more from their existing customers.
When a company's growth slows, it may be tempted to raise prices, eliminate low-end and free editions, or force customers into annual and multi-year contracts. However, according to SaaStr, these strategies can have negative consequences, such as eroding customer trust and ultimately leading to churn.
Raising prices to cover a forecast gap may provide a short-term solution, but it can also damage customer relationships and lead to a loss of trust. Similarly, eliminating low-end and free editions can dry up the top of the funnel, making it harder to acquire new customers.
Forcing customers into annual and multi-year contracts can also be counterproductive, as it may lead to customers feeling stuck and unhappy. Additionally, threatening to sue customers over autorenewals or nonpayment can damage a company's reputation and lead to negative word-of-mouth.
SaaStr also warns against hanging on to low performers and moving customer success into sales, as these strategies can also harm customer relationships. Instead, companies should focus on providing value to their customers and building trust.
Deals are often lost due to reasons other than price, and companies should focus on understanding the underlying issues rather than simply raising prices. As Jason Lemkin says, companies should not allow price to be the reason for losing a deal.
In today's market, customers have more options than ever and can switch to alternative products or services quickly. Companies that prioritize extracting more from their existing customers rather than acquiring new ones may find themselves losing market share and damaging their reputation.
SaaStr advises founders to fight against the temptation to exploit their customers and instead focus on winning and gaining market share. By prioritizing customer relationships and providing value, companies can build trust and loyalty, ultimately leading to long-term growth and success.
Questions and answers
What happens when a company raises prices to cover a forecast gap?
Raising prices to cover a forecast gap may provide a short-term solution, but it can also damage customer relationships and lead to a loss of trust.
Why is it important for companies to prioritize customer relationships?
Prioritizing customer relationships and providing value can help build trust and loyalty, ultimately leading to long-term growth and success.
What can happen if a company forces customers into annual and multi-year contracts?
Forcing customers into annual and multi-year contracts can lead to customer dissatisfaction and churn, as customers may feel stuck and unhappy.
