How A SaaS Product Can Reduce Both User Churn And Customer Acquisition Cost At The Same Time: A Killer Combo

If your product is replaceable by the competition, read this.

Dropbox and Google Drive lock you in. Once I spend time (in the trial, especially) moving my files, documents or pictures into them, it’s harder for me to leave.

It gets to a point where it costs me more to move to someone else than to cancel the subscription. And that cost can be time/effort as well, it doesn’t have to be money.

Apple Music or Spotify have the same effect. Apple offers a 3-month trial for that specific reason — they know that the more time you spend adding songs and creating playlists, the tighter you’re locked in. They can also afford it, as opposed to Spotify (see: Spotify files anti-trust complaint against Apple).

This is the lock-in effect. Airlines do it with the miles travelled acting as points. You do it with the free trial version of your SaaS.

However, the lock-in effect gets compounded growth if paired with another phenomenon:

Network effect — the more people using a product, the better the product becomes.

Think Basecamp. Basecamp’s USP is that it brings you the utility of Google Suite, Asana, Slack and Dropbox — flat price no matter how many users.

What’s up with that “no matter how many users?” — how does it add up?

My insight is that they understand how valuable it is for them to facilitate the network effect, thus they understand that their buyers will quickly get one thing: ROI increases as more people are jumping on a Basecamp account.

Not only they’re aware that their buyers are analytical people, but they also capitalise on it. Not only every user will bring another person on the other end, but she/he might actually bring the whole team. Win-win?

What’s the big picture here?

Stickiness. The lock-in effect and the network effect come together in a very healthy self-feeding loop.


Yes, but Basecamp had a very good idea. I’m already years into my SaaS product and it’s too late now.

It’s not too late. Your SaaS product is bought as it’s got some utility. Whether it’s sticky or not is a matter of adjustment on the company’s side. Memes are sticky but don’t have any utility. Your product is not in that situation.

The tough news is that what I’m proposing is adding new core features to your product. But it could as well be easier than that — a small quirk that makes the product sticky without adding new features. It obviously depends on the situation and general advice can’t be given for this issue.

It is paramount though that the implementation of these new core features follow the guidelines below (or most of them):

  • 1. Users benefit from inviting other people — the product gets better as more people use it
  • 2. Users deploy something into the product. Something that “locks them in” but not in a hostage-taking situation, rather they build something for themselves there (like you would build your playlists on music-streaming services)
  • 3. The product brings value to a group of people. To have #1 and #2 happen easier, focus and audience-selection are necessary
  • 4. The product shows how it’s rather dull if used singularly.

Further explanation for #4. Imagine an empty Facebook feed — rather boring, isn’t it? But it promises something. More will happen once you get more people involved.

Basecamp is tackling this from another direction. You can use it by yourself — but is it worth paying $1200/yr to use it just by yourself? Especially when whether you add 10 or 50 people, you still pay the same price?

The bottom line

When word of mouth is happening, customer acquisition cost goes down. Same amounts of money are spent, yet now ever acquired user brings 2 or 3 more people into the game.

That’s what the two described effects (lock-in, network) bring to the table.

About Ch Daniel

I run Chagency_, an experiences design agency that specialises on helping tech CEOs reduce user churn. We believe experiences are not only the reason why users choose not to leave but also what generates word of mouth. We’re building a credo around this belief.

If I’ve brought you any kind of value, follow me and get in touch here: LinkedIn | Twitter | Email | Quora | YouTube (same content but in video)

I’ve also created an infinitely-valuable app for sneaker/fashion enthusiasts called Legit Check that impacted hundreds of thousands over millions of times – check it out at

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Illustration credits: SongXian Yu

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