Thoughts from my journey

Businesses these days are making significant efforts to delight their customers, and for good reasons. One of the key areas where businesses focus their efforts is in creating online self-serve applications with a great user experience in order to help customers get what they need and when they need it.

But how do businesses know if they are successful? Below are 3 key metrics you need to measure customer engagement.

1. Activity Time

When an online service creates value, people use it and use it often. Usage is measured by the number of times a customer visits your service (sometimes termed sessions) and the elapsed time they spend in using it.

We call this Activity Time – the total time a user spends online, interacting with the offered service. Note that Activity Time measures the actual time a user spends interacting with the service, and factors out time in which the user is idle (even if logged-in). This is critical given modern usage behaviors where users typically have many web-applications and sites open on different browser tabs.

2. Visit Frequency

How often a user returns to your service is a key reflection of the value they get from it. This is often called Visit Frequency.

Visit frequency yields many potential patterns in customer behavior, as shown in the table below. The main goal is to identify the pattern that is most relevant for your service and monitor users against that pattern. If you expect a delighted user of your service to visit every day, measure against that, if you offer a seasonal service and expect them to only return on holidays, look for that pattern and so forth.

3. Core User Actions

Another indication of value customers gain is their use of Core User Actions, as defined for your service. If a user is consistently performing core actions, it is a good indication of adoption. When user’s explore new features and start to use them, the service is growing on them, and they are happy to use it more.

Conversely, if a user is not performing Core User Actions, while still spending time on the service, it may be because he is unable to get to it (indicating a usability problem) or that you don’t understand the value they are getting. Regardless, it requires further investigation to make sure the user and your offering are on track.

Core User Actions are naturally service specific, the following table gives examples of certain types of web applications and online services.

Creating an Engagement Score

A combination of these core metrics: Activity Time, Visit Frequency and Core User Actions uncovers the level of user engagement for any web-application or service. To get to the combination that is right for your particular service requires some thinking and modeling of the expected user behavior.

It may not be simple to do, but it’s essential if you want to continuously delight users and in turn increase their life time value. If you want the best tools in the industry for this job, we recommend you learn about Totango and signup to get started with these concepts today!

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B2B SaaS companies increasingly rely on inside sales teams to drive growth. The model is often referred to as “Low Touch Sales” and follows this formula:

• Use Inbound marketing to drive Internet traffic to the site and create new leads
• Use an inside sales team to support leads through their evaluation process and convert them to paying customers.

Inside sales representatives (ISR) and sales management teams juggle with large volumes of leads of various qualities. Leads follow a self-paced evaluation model and the role of the inside sales team is to increase the number of those that eventually “convert” to paying customers once their trial concludes.

Here are 4 tips for inside sales teams to improve their effectiveness, increase conversion rates and deal sizes. Creating happier customers and a happier sales organization!

1. Prioritize correctly by eliminating noise

Within many SaaS companies the lead volume is very high and there are only so many phone calls one can make. The trick is to focus on the most promising prospects, the potential customers who came in with a real intention to evaluate the service and buy.
In order to focus on the right opportunities, sales teams should have ‘intention indication’ which is usually reflected by the amount of time and investment prospects put in the evaluation process. In short, make sure your CRM contains data that reflects the actual (as opposed to potential) engagement level of a lead, and prioritize your work accordingly.

2. Increase Contact Rate

Every sales person knows that being in contact with a prospect increases the chances of a bigger, better deal. However, in many cases, due to volume and geography it takes a while before you can actually contact a prospect.
To increase your chances of making contact, follow up while the prospect is within context, meaning, when the prospect is actually using the web application. By implementing a ‘who’s currently online’ monitor and contacting leads that are actively evaluating, your contact rates are sure to go up.

3. Make smart and personal sales call

When making contact, be sure to use all the information you have on the prospect in order to be personal and address the actual needs of a potential client. Prospects who interact with your business over the web expect a conversation with a sales rep to be effective and rather not repeat their entire history which was already reflected in forms that they have filled out and actions they performed on your application.

Make sure to prepare for each sales call by reviewing the following on the lead:

• Demographics information: This includes the size and industry of the organization, the evaluator’s role within the organization and so forth.
• Usage information: What has a prospect done so far during their Trial? Have they been able to get up and running? Are they using the software regularly during trial? Did they invite necessary stakeholders to join the evaluation (where appropriate)?

Make sure your sales-tools provide visibility into these two issues so you can form an intelligent view on their status and be more useful to the lead as you interact.

4. Timely follow up

Potential customers need time to absorb the information available on your web site and properly evaluate to understand the true value of your service. In many cases, they will evaluate multiple alternatives simultaneously. Make sure to follow up on time. On the one hand you don’t want to annoy the prospect (that adds zero value), but on the other hand you wouldn’t want to drop the ball and let them fall in the hands of your competition.

Sales teams should map various milestones of the evaluation process, and have clear benchmarks and definitions for prospects who are on track and those who are not.
For example, for an online help-desk service, we would expect to have more than one agent by the 5th day of the evaluation. If this is the case, a prospect is on track and only needs encouragement, if this is not the case, a prospect might need a different type of engagement in order to open the road blocker.

Managing these milestones for multiple ongoing accounts is not easy, but it’s essential to fulfill your role as a facilitator of the evaluation.

Summary

Successful SaaS sales teams that follow a proven methodology and take advantage of automated high-quality information will increase their chances to sell more and faster. They will improve the predictability and consistency of results – this is critical for scaling the organization.

Want to know which metrics other Sales Executives use?
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Understanding data to increase conversion rates and key business processes

Last week, we established the need to measure the “right things” constantly in order to improve trial conversion. This week, we’ll discuss how those metrics can be used to actually improve your company’s trial conversions.

Trial conversion comes from multiple business processes: from sales, to marketing, to the product itself. In order for metrics and collected data in general to be valuable to your company, they must be actionable and this will mean different things to different aspects of a SaaS business.

Sales

For sales teams, it’s all about focusing on opportunities that matter most in your business pipeline. For the majority of SaaS sales teams, there are many more leads than the team can effectively handle. The team needs to be able to focus its energy on those that are more likely to convert into a sale.

Once you are working with reliable conversion rates and have eliminated the noise in the funnel, your sales team can use the same process to prioritize its work. Rather than contacting, qualifying and trying to convert all new trials, they should focus on those that appear to be “Actually Evaluating,” as those provide a much more likely sale.

Marketing

One of the key challenges for the marketing teams of a SaaS company is the need to properly qualify leads. The nature of Internet marketing is essentially casting a wide net into the unknown and trying to engage with as many people that are relevant to what you have to sell. The reality though is that you end up also engaging many that are not really relevant to your offering. Understanding the ratio between these two groups is essential to figuring out which marketing efforts are effective for your business. The ratio between effective (i.e.. “Actually Evaluating”) and total leads represents this exact number. This ratio is essential when determining if your marketing strategy is working and if your budget is well spent.

The ratio number will naturally vary by industry, but you need to make sure it’s under control, i.e. the number of qualified leads should constantly be growing; this will essentially lower acquisition costs (a fundamental parameter in business sales of a SaaS company).

Product

People that signup to your trial are primarily there to experience your product and assess it if fits their needs, and they expect to be able to do that quickly and with minimal effort on their behalf.

That means, someone who comes into the trial immediately gets it, is productive in attempts to evaluate product, has all the information they need, and the product’s general usability and experience is of high quality.

How to improve the product experience for your customers is something your product team needs to constantly assess (see “Getting your prospects to be come devoted users” provides solid ideas). But the key metric they should use to determine if they are making progress is conversion rate. What percentage of qualified leads ends up activating they account, using it and eventually upgrading to a paid account.

Summary

Data, when correctly measured and broken down into proper categories, becomes valuably actionable. Keep in mind that this activity is not a one-time effort; it has to be ongoing and continuously improved. The business needs to be able to measure data effectively, get the information in front of the right people at the right time, and constantly improve those metrics based on their true meaning.

Next week we’ll jump into understanding marketing automation, BI, analytics, and CRM.

To learn more about Trial Conversion please View our Webinar where we discuss Best Practices in Measuring Trial Conversion Rates for SaaS Applications:

About TOTANGO:

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

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Defining an active user and setting a baseline

Over the next few weeks, Totango will be posting a blog series on best practices for measuring conversion rates of trial usage for Software-as-a-Service (SaaS). Trial conversion is arguably the single most important business metric for SaaS companies since the model is based on two key parameters: customer acquisition cost and customer lifetime value. The trial conversion moves customers from the acquisition phase to the lifetime value phase and as more potential customers become paying customers, the customer acquisition cost goes down and the customer lifetime value goes up. Simply put, the ratio between customer lifetime value and customer acquisition cost is the entire profit of a SaaS company.

It is important to make sure that the measurement of trial conversion addresses three basic concepts:

1. Simple to measure;
2. Simple to understand;
3. Be actionable.

Unfortunately, trial conversion is not that simple to measure correctly (most organizations do it, but haphazardly) because there is no “single source of truth” per se. That is, trial conversion comes from multiple business processes (marketing and lead generation, in-house sales, and the product itself), which muddies the ability to measure it definitively. As a result, to get an accurate trial conversion number, organizations need to make sure that all the data collected is aligned among the business processes mentioned above.

The second challenge is “noise,” or trials that are “dead on arrival.” These users may have signedup for a trial, but have no intention of buying. They are just playing with the software because they can; it could be for educational reasons, it could be for other reasons. Taking these “dead on arrival” trails into account creates a very blurry picture, which is difficult to take action on.

Considering the challenges of measuring trail conversions (and the need for simplicity), the first step is to define the active, or effective trials (trials who came with the intention to buy and now are evaluating the service) and weed out the “dead on arrival” trials. There are different ways to do this of course, but one example could be measuring active trials based on a second day of usage or perhaps based on what the user is actually doing. Once the SaaS organization defines an active user, a baseline can be established. A baseline is taking the current number of trial conversions (and perhaps taking into account historical information as well, if available), and setting metrics around that.

With a baseline set that weeds out “dead on arrival” trials, organizations can tweak the service they sell or the various parts of their sales and marketing processes to improve trial conversions. Perhaps the organization needs to focus on marketing to get better leads because the current leads aren’t good enough. It could be that the sales process is not effective and it needs to be improved. Or it could be that the service itself needs improvement. Ultimately, the SaaS organization needs to measure continuously in order to put a finger on the right problem.

Imagine an organization that had, for the duration of July, 1,000 new signups for trial. Out of those accounts, 10 ended up “converting”. On the face of it, the conversion rate is 1%.

However, dig a bit deeper and in many cases, you see that many, if not most, of those 1,000 trials never had a “buying potential at all”, evident by the fact that they never did a serious evaluation of the service

(note: it would be nice if numbers in real life would be so round and simple to calculate in ones head!)

Why is this important? First off, because it gives a more real indication to what is going on within the sales team’s pipeline (they are succeeding in selling to 1 out of every 10 prospects not out of every 100), and it is easier to motivate people to improve a metric they intuitively feel is true.

But that is not it, in our next post, we’ll explore what the trial conversion metrics mean and how SaaS companies can best act on the data that is collected to increase conversion rates.

To learn more about Trial conversion,
view our 40 minute webinar: “Best Practices on Trial Conversion”

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Aaron Levie, CEO and Founder of Box.net posted this excellent article on TechCrunch. I encourage you all to read it before reading onwards.

Levie describes a major shift in enterprise software towards ‘value to users’ vs. the old ‘perceived value to the CIOs’.

One of the key arguments in his article, that grabbed my attention is:

“By focusing on building enterprise software that the users love, driving demand up to the CIO. Vendors like Workday, Jive, Yammer, or Rypple are responding by investing more in design, usability, openness, and the total user experience. They’re measuring success by user adoption, rather than feature checklists“

I couldn’t agree more! Consumer products, such as the iPhone, iPad, Facebook and many others are changing the way people evaluate products, including enterprise software products.

Value to users is key decision criteria. Software vendors who fail to constantly improve and increase value to users will end up with shrinking user bases, resulting in replacement from others who will deliver the right value.

When thinking about the emerging customer facing business models of subscription (SaaS) and pay-per-use, switching costs and vendor lock-ins can not be a reason for enterprises to stick with overly complex products who fail to deliver ‘right’ value to users. We at Totango certainly appreciate vendors that do it differently, and create an ongoing dialog about value with their customers.

It is crucial for software vendors, to constantly monitor the current value their users are getting from their online software. It is the challenge and at the same time the big opportunity for the SaaS delivery model.

Luckily, measuring value is simple. Vendors can learn about the value their customers are getting by measuring how much the software is being used and how. By providing Totango Analytics service to some of the vendors Levie mentions in his article we’ve learned that  investing a small effort in determining the right information to collect, companies gain great visibility of value their clients are getting (or not).

The need to constantly increase value to customers is inherit in the SaaS model and results in alignment of customer success and the vendor’s own business success.  Successful SaaS companies realize this and constantly strive to get immediate feedback on value by monitoring increases or drops is usage. Combined with fast paced releases and methodical A/B testing, software vendors can focus on building customer-centric, value-first enterprise software products.

It’s great to share this vision with others. Enterprise customers should expect this level of value from their software vendors.

Get your FREE copy of our latest RESEARCH:

“The 2012 SaaS Free Trial, Freemium and Pricing Benchmark“

About Totango:

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

Increase your sales revenue!
Try Totango free for 30 days