Genuine Customer Engagement

Customer Engagement - Shake hands

Jon Buscall on Be Good to Your Customers believes that most engagement related activities these days are actually lead generation activities and not really about customer engagement.

This article grabbed my attention as I’ve been thinking a lot lately about the whole customer engagement life-cycle for SaaS and other online services.

The main strategy Jon suggest B2B businesses should apply is to provide true value to loyal customers only.

I would argue even further; loyal customers of online services should get specialized treatment. They should receive personalized engagement by their B2B vendors.
This wasn’t possible few years back, when it took few months and even years to create products and later on deliver it to customers. This isn’t the case anymore, and customers do expect this level of service.

For example, SaaS companies basically have all the information required to provide to each and every one of their customer special treatment tuned directly to their needs:

  • They know who they are
  • They know what they are trying to achieve with their service and
  • They have all of their interaction history

Genuine customer engagement is personalized, contextual and timely. This is what customers expect.

6 Tips for Cloud Sales using Channels

The Cloud Channel Summit Logo

I attended Jeff Kaplan’s Cloud Channel Summit today. It was a very interesting conference. Clearly cloud channel sales is in its infancy, but there were some companies here with successful channel strategies including Salesforce.com (1400 partners and counting), Scribe and others.  What follows are six tips that stuck with me:

Lesson 1: Think how you will compensate cloud channels
By: Jeff Kaplan, Managing Director THINKStrategies @thinkstrategies
Jeff opened the conference by highlighting the 4 Common Fears of the use of the Channel in Cloud: Cannibalization, Confusion, Disruption of the corporate environment and operations, and Channel conflict. After listening to most of the conference, I would have added to his list: How to compensate the channel to create a win-win relationship (as we discussed in our blog post on 3 Recommendations for Sales Compensation for SaaS from earlier today).

Lesson 2: Your job starts when you sign-up a new customer
By: Ron Huddleston, SVP ISV Alliances, Salesforce.com @Rhuddles1
Your job just begins when you sign-up a new customer: you need to focus on customer success (as a vendor and also working with your partners).  With cloud and subscription based businesses, you have to build deeper relationships that last much longer. This is true not only for partners, but also for your relationships with your customers. Also in this context: don’t overestimate ramp & return, don’t underestimate initial investment.

Lesson 3: In the cloud, you have to earn your business on a daily basis
By: Gil Zimmerman, Founder & CEO of CloudLock @giljzim
This one speaks for itself and is re-iterating Ron’s lesson in different words. Customers can vote with their wallets and cancel their subscription, often on a month-to-month basis.  I have written on this topic on this blog as well such as in my blog on Customer Engagement is Key for SaaS.

Lesson 4: The primary role of the cloud channel today is integration
By: Carolyn April, Director of Industry Analysis, CompTIA @CarolynAApril
In a CompTIA study Carolyn found that the primary role for channels in cloud today is integration, not sales.  This makes sense considering many attendees and speakers felt that we haven’t figured out commission plans for channel sales yet. That being said, I believe there will be major opportunities for the channel in on boarding new customers as well as sales, both initial and up selling, that will increase Customer Lifetime Value and Customer Experience.

Lesson 5: Use the coloring book approach to onboard cloud channels (and customers)
By: Brian Anderson, Global Business Development, Dell
The best way to onboard new partners (but this could also be new customers): take the coloring book approach – give them direction, success stories and examples. I really like this analogy and plan to maybe write about it in the context of on boarding new SaaS customers.

Lesson 6: Let customer success own the relationship with the customer
Michael Blaisdell, The Customer Success Management Initiative
Who owns the customer: sales or support (customer success)?  If customer success owns the customer it really changes the tone with the customer and creates much more trust with the vendor.  In reality, customer success probably doesn’t own all of the relationship, but it should at the very least be responsible for the ‘farmer type sales’: renewals and incremental sales. Totango is sponsoring some of Michael’s research and we recommend you check it out. It’s fascinating stuff and an important area.

So there you have it.

Thanks Jeff, for organizing a very insightful conference! We hope to be back next year. Perhaps we could even present our experiences on how cloud vendors are sharing customer trial and usage data with their partners in order to increase cloud sales?

3 Recommendations for Sales Compensation for SaaS

Designing sales compensation for subscription businesses

I am at the Cloud Channel Summit today.

A topic that seems to be coming up over and over again today is the need to come up with innovative sales compensation (commission) models that align with the subscription business model of cloud.

While this is mentioned as an issue, not too many solutions were discussed so far (we are only at lunch time) so I went hunting online for some good blog posts on the topic. Here are three posts to get the discussion started:

October 2011 – David Cummings on Inside Sales Rep Comp Model for Startups

Here are some ideas when thinking about the inside sales representative compensation model in a startup:

  • Base salaries in the range of $25k – $50k
  • Commissions in the range of $25k – $60k (e.g. $40k base salary and $60k in commission for an on-target earnings of $100k)
  • Commissions would be 10% – 20% of first-year’s revenues (e.g. $1,000/month SaaS product is $12,000/year with a 15% commission would be an $1,800 commission)
  • Commissions should be paid out after the customer’s payment has been received by the startup

July 2011 – Larry Steele (VP of SaaS at Savvis) Tips for Transitioning Your Business to SaaS

It’s not just about compensation: you could technically have a comp-neutral model for perpetual licensing and SaaS bookings. However, you need to examine how Sales is compensated on revenue or bookings. If you set up term limits (i.e., 12 to 36 months) in your subscription billing, then you will want to review your renewal process and make sure your sales team has the right incentives in place to keep the customers you have. Remember, it’s harder to find new customers than it is to keep the precious ones you have.

February 2011 – Joel York Cloud Channel SaaS Channel Compensation

In my post on SaaS Sales compensation, I made the claims that SaaS vendors should a) pay in proportion to the lifetime value of the deal and b) pay entirely up-front, because the SaaS sales rep should not be asked to bear any of the SaaS investment risk, or the rep is likely to just quit and find better work. The same basic ideas holds for the SaaS channel partner with the caveat that it is reasonable to expect the channel to absorb at least some of the risk, if not all of it. So, when it comes to SaaS channel compensation, SaaS vendors should a) pay in proportion to the lifetime value of the deal and b) pay disproportionately, but not entirely up-front because the SaaS channel partner should not be asked to bear a disproportionate amount of the SaaS investment risk, or the channel partner is likely to just quit and find better work.

Somebody also mentioned to me over the break that there may also be models we could learn from in other industries: for example, in commercial real-estate sales people are paid as a percentage of the monthly lease over the lifetime of that lease.

Do you know of any other good recommendations or posts? Please let me know in the comments!

VP Customer Success at Alcove9: On Boarding SaaS Customers

Alcove9 Main Slide

At Totango, I have initiated a project to collect and share more best practices around low-touch selling, free-to-paid conversion, up-selling and customer retention. On this blog we will share what we learn from speaking to sales and customer success professionals in the field of open source and SaaS software.

Today, I had an opportunity to speak to Rudy Reyes, the newly appointed VP of Customer Success at Alcove9. Alcove9 is a young company with an open source search tool that looks into a company’s intranet and indexes all of its data and information for rapid retrieval. It is a subscription-based service, but not a cloud-based solution.

Alcove9 Gallery

The basic indexing and search tool is a free, open source download called the a9 Hub. Then, Alcove9 offers support subscriptions and upgrades to premium features such as CAD visualization and markup (a9 CADViz) or application connectors (a9 AppConnect) to systems like PLM (Product Lifecycle Management), ECM (Enterprise Content Management), ERP (Enterprise Resource Management), and more.

I asked Rudy about his priorities and customer success metrics for the company.

What are the priorities for the company today?

Rudy Reyes - VP Customer Success at Alcove9Alcove9 just went live on Monday, October 31; however, the foundation is based on a proven solution that has matured for over 7 years.
Our primary focus is on people who are looking for instant access to all of their corporate data that often resides in disparate systems. The core, open source download, a9 Hub, is the cornerstone of the entire suite of products and support services. Another important aspect of our sales and marketing activities is to work with partners such as AutoDesk and Aras to identify new product solutions in order to make organizations more efficient while eliminating the frustrations of trying to find vital, lost or legacy data.

What is the priority for the Customer Success team?

I work with the early adopters, translating customer requirements into product features. Then we help customers with successful on-boarding and implementation. It is really important to have someone who is focused on the total customer experience.

What are the key metrics you measure?

We are interested in adoption rates: who is downloading our application, who is installing it and then adoption metrics of different modules, such as which features they are using and finally retention rates (churn).

What are sales or up-selling signals?

Our sales are based on high-touch qualifying questions. For example, do they use CAD; do they have a PLM, ECM or ERP system. If they answer “yes,” then we will introduce them to the appropriate connector solutions. (AppConnect).

Thanks Rudy for the insights! I am keen to watch the progress of Alcove9 in the future!

Trial Conversion is Top Priority in SaaS

Trial Conversion is Top Priority for SaaS-DreamSimplicity Interview

Interview to DreamSimplicity.com

Thanks so much to Matt Childs for giving me an opportunity to tell the Totango story on DreamSimplicity.

Matt and I met each other on a very nice day at San Francisco and conducted this interivew which is actually about Totango’s core believes.

Here are the main points from the interview we had:

The Customers are Kings

Totango is all about helping SaaS companies to be more successful by understanding their customers.
The idea with SaaS is that customers are kings, meaning that in order to be a successful SaaS company, businesses should make sure their clients continuously have value, otherwise customers have other choices and they can easily switch into other solutions, so that Totango helps them understand the value they are currently getting from their service and continuously improve the value they are providing to their customers.

Increase Trial Conversion Rate

One of the big challenges big companies are currently experiences is that they have enough leads but having free trial or freemium programs, they are naturally trying to convert those free accounts to paying customers and in order to get there they will need to make sure that customers are getting value through their trial and they can help them being more successful.
So what Totango does is actually help them see what their users do during their trial period and then help them convert into paying accounts.

View the complete interview in the following link:

Get your FREE copy of our latest RESEARCH:

The 2012 SaaS Free Trial, Freemium and Pricing Benchmark

get-your-free-copy


About Totango:

Totango analyzes in real time customer engagement and intention within SaaS applications to help you grow your business

 

Increase your revenue!
Try Totango free for 30 days
sign-up1

Joel York: Why to Measure Customer Engagement in SaaS?

Why and How to Measure Customer Engagemetn in SaaS?

Joel YorkJoel York has written extensively about the new breed of B2B buyer and the changes to the B2B sales process, especially for SaaS products.

A quick recap …

The good old sales process according to Joel

“The process went something like this: ask the analysts about the next big thing, collect requirements into and RFP, get a list of vendors from a roundup in an industry magazine, go to a trade show and collect collateral, solicit and evaluate RFP responses by mail or fax, call in a short list of vendors to do a dog and pony show, follow up with a technical drill down meeting, maybe do a bake-off or a pilot, select a vendor, call a reference account, negotiate final pricing and contract terms, and wrap it all up by planning out phase 2 of the project: a complex and expensive implementation.”

The new breed B2B buyer: it’s self-service stupid!

“With such a treasure trove of information available online, the Internet is the 21st century B2B buyer’s first stop for researching products and services. Your strongest strategy is to give the prospect efficient self-service access to your content.”

“In the case of most SaaS and cloud applications, the entire B2B buying process is cheap: trial is free and purchase amounts to a monthly subscription that can be canceled at any time. So in addition to reading about the product, the barriers for a customer to go ahead and just try your product itself (even without a lot of upfront research) are low.”

Long story short, the key to the wallet of the new B2B buyer:

Instant online gratification through efficient self-service

So it’s no surprise that many SaaS companies spend their marketing dollars on content creation and inbound marketing, and invest in marketing automation to track campaign ROI.

Good. But not enough. According to Joel.

Inbound marketing or simply getting found by a prospect is not enough. Once you are found, you must engage with that prospect frequently and consistently throughout the entire customer lifecycle, because if you don’t, your competitors will, and what is easily found can be just as easily lost.”

What’s worse, simply accessing your content may no longer be a reliable indicator of purchase intend. Joel uses the term “fuzzy funnel” to describe the undeterministic process that customers follow these days: the new B2B buying process is anything but linear, deterministic and under the B2B salesperson’s control.

So what comes after inbound marketing? If accessing your content is no longer a reliable indicator of purchase intent, then how to best measure customer interest?

I asked Joel some questions on it via e-mail and got his permission to publish his answers on this blog:

  1. Do you see more B2B buyers demanding instant and self-service access to the product or service (rather than just to information and education about the product)?

Joel: I think in general, B2B buyers want a trial whenever it is possible. A brochure or a video is great, but they are no substitute for test driving the actual product you plan to buy. It’s more educational, more convincing, and more comforting to see the real thing. And, given the choice of getting it immediately without a salesperson looking over their shoulder vs. scheduling a demo or a pilot that will be designed to hide any flaws, most B2B buyers will choose the former. However, I prefaced all this with “whenever it is possible.” Some products are so complex that it is simply too much work for the buyer to go it alone, especially those that need extensive configuration, imported data and integration and before they are useful, and in these cases the buyer will actually prefer to lean on the advice and assistance of a salesperson.

2. Do you see a strong correlation between trial sign-up and product usage and the conversion to a paid customer (as compared to say, downloading a white paper)?

Joel: Absolutely. Test driving the real thing demonstrates more interest and requires more commitment on the part of the buyer than reading a piece of content.

3. Do you see marketing automation systems, which you mention in your article, integrating trial usage related metrics into their lead scoring algorithms?

Joel: If they are smart marketers they will. As I mentioned, trial and usage demonstrate interest and commitment. If the statistics are segmented, e.g, what is tried and used, they also show interest at the feature/function level, which can be used in both marketing campaigns and sales calls. For all these reasons, trial and usage statistics are probably some of the strongest indicators you could integrate into a lead score.

Of course, I very much agree with Joel. Participating in a trial is the best possible indicator of potential customer commitment. Of course, I also believe that not all trial customers are created equal. As we discussed in a previous post: a prospect with many users and many hours of trial usage is a hotter prospect than a trial user who only logged in once. And yes, of course Totango can help you figure out who these hot prospects are!

Using Customer Analytics to Increase Revenues of SaaS Business

Presentation: Using customer analytics to increase saas revenue

This week I was attending the Business of Software Workshop talking about Using Customer Analytics to Increase Revenues of SaaS Businesses.

I’ve shared the presentation I’ve used in the workshop in which I discussed:

  • Characteristics of the SaaS business
  • How CLTV (represents Customer Success) should be higher than CAC (represents Marketing & Sales)
  • The Customer Engagement Cycle
  • Grow Conversion Rates
  • A case-study on the SaaS Low Touch Module which shows how to focus on the converting opportunities and create priorities in order to increase conversion, reduce churn and enetually increase revenues for a SaaS business
  • Ensure customer success (CLTV)

Can you implement those important tips in your SaaS business?

3 Ways to do Cohort Analysis on SaaS Churn

Ways to do Cohort Analysis on SaaS Churn

Last week, Jason Cohen wrote a very comprehensive blog on software-as-a-service churn: Deep Dive – Cancellation Rate in SaaS Business Models. I required everybody at Totango to read this blog and recommend that you do the same. Jason looks at many different definitions for the SaaS Cancellation Rate metric.

Eventually, Jason recommends performing cohort analysis when looking at cancellation rates. He suggests to divide customers in segments based on their “time to cancel” (i.e. cancelled after 30 days vs. cancelled after more than 30 days) and, for all intends and purposes, he recommends focusing in the long-term users who have greater business revenue potential and cancellation reasons which can be addressed and resolved more easily.

This is indeed an interesting way to look at it, and very analogous to the importance of the “time to convert” metric when it comes to inbound marketing and trial conversion. However, I argue that this is not the only, and maybe not always the best, way to do cohort analysis on SaaS churn.

Let’s take for example an email service application. If 2 users have signed up at the same time:

  • One of them is using the service more frequently, creating many accounts, visits almost all application features and cancels after 10 days
  • The other accesses the service 3 times a week but just checking very limited features and cancels after 31 days

Who should be given more weight?

If I’d measure by Jason, I would focus my efforts on the second user, but if I weigh my analysis with user behavior altogether, then my most valuable customer to understand is the first one.

So this leaves us with three promising ways to segment customers for cohort analysis:

  1. Traditional way: create cohorts based on the week or month in which they signed up for the service. This will allow you to analyze the effect of changes you made to your product or service over time.
  2. Jason’s way: to create cohorts based on the “time to cancel” (or the “time to convert” for that matter). This will allow you to focus on long-time users of your product and sift out those who signed up in error.
  3. The customer engagement way: to create cohorts based on the “engagement level” with the product or service. This will allow you to focus on frequent users of your products, independent on how long it took them to cancel, but still sift out those who signed up in error (and never started to use the product).

Of course, in all cases, measurement is just the first phase of the process and the complementary phase must be to prioritize the changes needed in the service which would ultimately lead to increase customer satisfaction and customer engagement.

What about you? What is your definition for cohort analysis?

Survey Results: Which Metrics are Key to SaaS Executives?

Pie Image

As part of my effort to create the SaaS Executive Dashboard, which helps executives to put together their business metrics for SaaS on a single page and track them, I’ve online surveyed 522 executives at SaaS companies. The survey compiles the list of metrics that matter most to SaaS Executive.

We aimed to get an industry perspective on questions such as:

  • Which metrics are most important for SaaS executives?
  • How satisfied are they with the tools & methodology their organization uses to monitor metrics?

Some of the things we found:

  • Following metrics related to customer-acquisition is a common practice by SaaS executives, with growing demand for life-time value (LTV) measurement
  • As it pertains to CAC, most SaaS organization have a clear view of what and how to measure metrics (practices & tools). But for LTV, there is less industry knowledge.
  • Similarly, there is a lack of quality tools for “LTV measurements”, whereas most SaaS executives feel CAC related metrics are well covered with existing tools

Survey Results Screenshot

While many executives rely on metrics, most also struggle with the in-house implementation of monitoring systems and find that there is a general lack of off-the-shelve tools:

Survey Results Screenshot

The results of the survey overall were pretty insightful and we’ve learned a lot about things like:

  • The specific metrics people use to track their SaaS Business
  • How often executives review SaaS metrics
  • Differences in the use of metrics between start-ups and mature businesses

We hope this research is helpful to you as well.

We plan to continue and follow these trends by running a quarterly updated survey.

 

How does it compare to the use of metrics in your SaaS or online business? We would love to hear from you.

 

Download Survey Results

 

For the complete results of the survey download the report here.

The SaaS Executive Dashboard

Today, the Totango team is excited to announce a brand new “SaaS Executive Dashboard”.
The Totango SaaS Executive Dashboard is an extension of the Totango online platform which allows SaaS teams to gain full visibility into the level of customer engagement in their business.

The SaaS Executive Dashboard allows SaaS executives to track and plan to improve key SaaS performance indicators and contains features such as Cohort Analysis. From the dashboard you can also drill down and instantly see specific account details.

The simplest way to learn about the SaaS Executive Dashboard is to watch this intro movie.

Totango SaaS Executive Dashboard from Totango on Vimeo.

We’ve chosen the metrics included in the SaaS Executive Dashboard based on discussions with many SaaS companies at various maturity levels. Many of these conversations started from our  SaaS Metrics Survey through which we aimed to capture an even wider view of the industry.

We’ve learned that most companies are struggling with homegrown monitoring solutions and still lack the visibility into important metrics needed to make strategic and tactical decisions for their company.

You can download the full survey to learn more. However, bottom line, most SaaS companies start with nothing, then as they grow they realize they need metrics to measure their business and start building home grown solutions which eventually gets out of control in terms of complexity and budget.

Totango SaaS Executive Dashboard captures the current SaaS best practices around monitoring customer engagement and customer success and tracks visitors, signups, activations, conversions and your SaaS churn rate. You can monitor against your business objectives and plans, diagnose problems and identify areas for improvement. The Totango SaaS Executive dashboard is the best way to focus your SaaS organization around customer engagement and customer success.

 

Availability

The Dashboard is available to existing Totango customers and will be available for new registrations within a couple of weeks. You can go ahead and pre-register to get access when it’s released.

The SaaS Exec Dashboard will always have a free tier, so SaaS startups that are just starting their business can take advantage of industry best practices with limited effort.

View our Trial Conversion Webinar!

 

To learn more about how to measure key metrics
view our 40 minute webinar: “Best Practices on Trial Conversion

 

About TOTANGO:
TOTANGO analyzes in real time customer engagement and intention within SaaS applications to help you grow your business

 

Get a high level view of your business!
Try TOTANGO free for 30 days
sign-up1