{"id":4006,"date":"2016-04-15T15:06:53","date_gmt":"2016-04-15T13:06:53","guid":{"rendered":"https:\/\/chartmogul.com\/blog\/?p=4006"},"modified":"2023-08-09T21:02:38","modified_gmt":"2023-08-09T19:02:38","slug":"seasonal-saas","status":"publish","type":"post","link":"https:\/\/chartmogul.com\/blog\/seasonal-saas\/","title":{"rendered":"Seasonal SaaS: Your worst enemy?"},"content":{"rendered":"

The SaaS business model brings with it a wealth of benefits over traditional non-subscription based models. Everything suddenly becomes more measurable and predictable. Furthermore, your revenue recurs and compounds over time. What could be better?! However, subscription models aren\u2019t a great fit for every product out there. There\u2019s a common aspect of some products that can play havoc with metrics and growth: Seasonality.<\/p>\n

What is seasonality in SaaS?<\/h1>\n

Simply put, seasonality is when a customer\u2019s need for your solution is not continuous.\u00a0On a higher level, it\u2019s all about how revenue flows into your business across a timeframe. The best way to detect it is to look at two metrics: Reactivation MRR<\/strong> and Churned MRR<\/strong>. In a seasonal business, both of these metrics will assume a high proportion of your total MRR for at least part of the year.<\/p>\n

There are two key types of seasonality, each exhibiting different characteristics:<\/p>\n

1. Regular Seasonality<\/h2>\n

(Usually caused by external factors)<\/em><\/p>\n

Example:<\/strong> A service offering an easy way to send greetings cards during the holiday season.<\/em><\/p>\n

These businesses will show fluctuations in Reactivation and Churn MRR in a predictable pattern. This is because the business has customers who leave and come back due to some external factor – usually calendar events during the year.<\/p>\n

In the above example, most customers would subscribe during the run-up to the holiday season each year and unsubscribe (churn) after the holidays are over. This is predictable, and caused by external factors.<\/p>\n

2. Irregular Seasonality<\/h2>\n

(Usually caused by internal\u00a0factors)<\/em><\/p>\n

Example:<\/strong> A product offering an easy way for businesses to find and move into new office space.<\/em><\/p>\n

This type of business will have a consistently high level of Reactivation and Churn MRR throughout the year, and on a per-customer level will be almost completely unpredictable. This is because the reasons for churn and reactivation are not caused by externally visible events (holidays etc.) but rather by internal events experienced by each business.<\/p>\n

In this example, the product\u2019s usage on a customer level seems fairly spontaneous. Customers will subscribe at the point where they need to move their company to a new office, and will unsubscribe (churn) once the move is complete.<\/p>\n

What\u2019s so bad about this? My customers come back!<\/h1>\n

On the surface, having a business with some of the characteristics mentioned above might not seem like a desperately bad situation to be in. Actually, in a lot of cases many business can survive \u2014 and even thrive \u2014 with these high levels of churn and reactivation. After all, people are coming back and paying you when they need the product, so what\u2019s the problem?<\/p>\n

It\u2019s largely about risk.<\/strong> Each time those customers churn from your subscription, things are completely out of your control. Investors aren\u2019t hugely fond any kind of seasonal business for this very reason – there is a consistent, ongoing level of risk that may just come back to bite you at some point. Will they come back? What if a better solution enters the market in the meantime? Why would they come back to yours when they have no ties to it — either in the form of a contract commitment, or just in terms of customer loyalty?<\/p>\n

It\u2019s also about control.<\/strong> One of the huge benefits of a subscription model in the first place is that you can focus on providing ongoing incremental value, and a high-level user experience to your customers. If those customers are leaving all of the time, you lose the chance to build up any ongoing rapport or connection between them and your brand. They\u2019re not really loyal to you, they just come back when they need you.<\/p>\n

\"seasonal-quote2\"<\/p>\n

<\/h3>\n

If you can move away from this seasonality, you\u2019ll likely solve a lot of problems and start to see many of the often-touted benefits of the subscription model:<\/p>\n