6 Steps to On Boarding Software-as-a-Service Customers

Customer Engagement Funnel

It is more critical than ever to make sure customers get started and find value during the first days, weeks and months after signing up for your SaaS service. Customers sign up long before they start paying you and only if they see value, month in month out, they will (continue to) pay you. This means that in addition to a sales funnel, successful SaaS companies now also use and track a customer engagement funnel (see picture).

Customer Engagement Funnel

There are six steps to successfully on boarding a new SaaS customer:

1. Sign Up: provide self service sign up

Take all friction out of the sign up flow. Ask for as little information as necessary to setup an account. As long as you can track usage and prioritize prospects later on, you can keep the top of the funnel wide.

2. Activation: provide clear instructions

Provide clear instructions to get your new signups up and running as soon as possible.

3. Active Use: include ample examples

Usually active accounts are only 35% of monthly sign ups. To move the needle on active users, demonstrate immediate value. Make sure that you include default settings and, if necessary, some demo data. Also include examples of how others have been successful with your product.

4. Paid Use: personalize customer engagement

Free to paid conversion is difficult to achieve. The key is to personalize your communications with the user at this moment. You should know what features they have tried and target your sales pitch. With the right message delivered at the right time, you can increase free to paid conversion by 37% or more.

5. Renewal: check in with the user often

The key to high renewal rates is to predict which customers might be unhappy and to pro actively engage these users. If you know that a customer hasn’t logged in recently you might e-mail or call. If you see they are not using certain features, perhaps they need a helping hand.

6. Expansion: increase lifetime value

If customers are happy, you may have the opportunity to sell them more. It should be possible to achieve negative churn: this means that the total revenues derived from your existing customer base is growing over time through a combination of high renewal rates and expanding existing customers.

When Not to Waste Your Time on a SaaS Sales Prospect

Target the right prospects

Anthony Iannarino’s sales blog on “All Opportunities Aren’t Created Equal” got me thinking about prioritizing your time, given limited sales and marketing resources.

This is especially important for lean startups and high velocity sales businesses, where there are a relatively high number of prospects as compared to the number of sales and marketing resources.

However, prioritizing your time in a self service sales model is changing as compared to the traditional enterprise model where every prospect requires sales touch. Consider these reasons
why a prospect may not be ‘Mr. Right’ or ‘Mrs. Right’ in the traditional sales model (as mentioned in Anthony’s blog):

#1 – When a Prospect Has No Money. The art world’s ‘starving artist’ is the ‘struggling start-up’ of business. Both may produce beauty, but without a stable income neither is worth bringing
home to your parents.

#2 – When a Prospect Has Too Much Money. They have big ideas and big budgets to make them happen—they just need your software, customized almost beyond recognition; causing too much work and distraction.

#3 – When a Prospect Is Dissimilar. Trust, communication, shared values, and a united vision for achieving goals are all factors of a great relationship.

Interestingly, if you are offering an online, self service trial for your service and have a low touch or zero touch sales model, you may not need to be too concerned about these factors
upfront. You can let customers self qualify through your sales funnel. It is ok to have any of these three customers sign up for a trial. Then actions speak louder than words. When a prospect
is active during the trial and engages with your product as-is, he is probably worth your time.
If, on the other hand your prospect never logs into the free trial or is aggressively calling your support team, it may be worthwhile finding yourself another ‘date’.

Top 5 Trends in Sales 2.0

Sales2.0

It was a jam packed day at Sales 2.0 in Santa Monica today. It was a great opportunity to meet with and learn from some of the brightest in the Sales 2.0 community.  I have summarized my key takeaways for Sales 2.0 leaders below:

#1 – Attract many, then focus on filtering

If your prospects do research online, will they find your company, or your competitor? Mark Roberge, VP Sales from HubSpot argued that you should keep the top of your sales funnel as broad as possible. Attract as many people as possible to your website through good content. HubSpot itself is attracting 50,000 leads a month, of which 40% get passed to the inside sales team and about 400 (or less than 1%) convert into new customers.  The leads that don’t convert still help to reinforce the HubSpot brand and trust. With so many leads, strong filtering and lead scoring algorithms are keys to sales success.

#2 – Give all sales people a social media address

Scott Holden, Senior Director at Salesforce.com argued that not just companies need to be discoverable, but also individual sales representatives. Social pages are often the first ones to come up in search results.  Darren Suomi, VP Sales from HootSuite called it “giving all sales reps a social media address”. He said it is no different from issuing a rep a cell phone and e-mail. IBM indeed has done just that, said Douglas Hannan, BU Executive at IBM: all 1,000 IBM sales reps have a web page with built in 2-way video and chat. They are also asked to get on Twitter and LinkedIn. IBM marketing maintains a social messaging calendar to make it easy for reps to find content to post.

#3 – Deliver value first, sell later

Jim Cathcart, the well-known author of “Relationship Selling”, defined what customer relationships are all about: in a relationship people know each other and have an exchange of value. Ask yourself: who is truly glad to know me? In a sales relationship, provide value first, sell later. Don’t talk about up selling customers, but rather up serving them. If you do a good job others will vouch for you and recommend your services. Scott Holden summarized this as moving from self-promotion to social referrals: “trust me, he is a great lover” and not “I am a great lover”.  I expressed a similar sentiment in my blog earlier this week on Genuine Customer Engagement.

#4 – Use online demos to drive sales

Salesforce.com recently did a survey of 1 million influencers in the buying process and found that 50%-70% of sales processes start long before a sales person ever gets involved. The most important deciding factor in the sales process was “online demos”, not sales person interaction.   HubSpot data points in the same direction: the most reliable indicator that a lead will convert into a customer is a request for a demo (46%) as compared to download a white paper for example (22%). As we discussed in many blogs including Trial Conversion is Top Priority in SaaS, I would add that interaction with a free trial version of your product has an even higher correlation with conversion to customer.

#5 – Consider a territory model based on social proximity

A somewhat radical idea was presented by Michael Lodato from Network Hardware Resale. He argued that in a commodity business (he sells network hardware) buyers are deciding based on personal relationships and customer service. Therefore he moved to an open territory model, where leads are assigned based on the personal relationship of a rep to the lead, rather than geography. On paper this social proximity model sounds great, but in reality it is still difficult to implement. Michael admitted to have a team of marketers manually assigning leads based on social parameters.

#6 – Move towards a lower touch model

Gerhard Gschwandtner pushed speakers to learn from B2C selling models:  Amazon has $30 billion in sales with ZERO sales reps. B2B companies need to learn from this and move to lower touch selling models, wherever possible. One of the speakers, Rini Das from PAKRA, has achieved just that. She is closing 95% of her business based on social media leads. She has hardly met any of her clients in person, but is still doing $30,000 to $150,000 in revenues per customer each year.  

Gerhard and gang; thank you so much for a great conference!

Tomorrow: Enterprise 2.0!

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!