My first indication is the amount of drinks we’ve had together last night at Norwood. Reminds of some other crazy times ten years ago with a bunch of tech sales people in NYC.
For the first time, when asking a room full of people (over 100!), how many of them actually practice customer success daily – all hands went up.
We’ve spent some time talking about models. The business model of customer success and how the business metrics of maximizing customer lifetime value are should be the goal.
And lastly, we’ve shared operational tips on portfolio management, prioritization and measurement at the customer success, director and VP level. This is exciting!
For your convenience, here’s the presentation I’ve used below. Looking forward to seeing you again – the good customer success people of New York!
This is a great signal for SaaS sales teams that want to identify the accounts that are most likely to convert, but it is also very helpful for marketing and product teams.
Marketing: Relevant, qualified and nurtured new trials are more likely to be engaged once they begin their trial.
Product: A better, clearer and smoother first user experience, increases the amount of trial accounts that actually go through the evaluation.
The question so far has been how to systematically measure the ratio of engaged trials with your offering?
We are pleased to release a new Totango Executive Report which does just that:
Engaged Evaluation (Totango users: View here for your customer base)
A month by month analysis of the percentage of trial accounts that are engaged in their evaluation. Engaged accounts are those that have at least 3 days of active usage during their first two weeks of trial.
What you can learn from this report?
The percentage of engaged evaluations is simultaneously an indicator of the quality of the incoming leads and of the first-user-experience your application delivers. For an established business, you should expect at least 20% engaged evaluation, ideally reaching 50% or more.
Monitor this metric on a month by month basis and take actions in marketing, sales or product onboarding to maintain a high ratio of engaged evaluations. To assess leads, you can also break down this information by Source Campaign, in order to identify which marketing campaign are generating the most engaged leads.
– Totango User: See this live for your customer base
– Not a Totango customer yet?: Signup for a free trial or contact us to talk.
I was at the SaaS University conference in Austin this week organized by Rick Chapman from Softletter. This is really one of the only conferences in the United States that focuses on the business side of running Software-as-a-Service and cloud application companies.
These are my six favorite quotes on the sales and marketing of cloud applications and what I learnt from them:
1. “Software-as-a-Service is about Service (not Product)”
In the cloud you are selling a service, not a product. What does this mean? It’s often the best practices and business process around the code that matter most to clients. Chuck DeVita from the Growth Process Group shared how adding a design review methodology and implementation with conventional software products allowed one vendor to lift pricing from $15,000 to $100,000 per customer. The best practices and business processes were worth more than 5x the code itself.
2. “Products are evaluated, services are experienced”
Moving from a product to a service has implications for your marketing strategy as well. Ken Rutsky, an independent marketing consultant who used to run Marketing at Netscape and Secure Computing, pointed out that: “products are evaluated, services are experienced”. So for your marketing, forget about white papers and instead focus on creating experiences such as self-service demos and a self-service trial which give prospects a taste of your service experience.
3. “The CRM system of the future is your website (CRM is dead)”
Zach Nelson, CEO of NetSuite CEO said in his keynote: “the CRM system of the future is your website”. I would like the quote even better if it wasn’t so self-serving but there is still a lot of truth in his statement. The SaaS service itself is becoming the primary platform for communications with the customer. Rick Chapman added that a SaaS service should also embed community elements and become the primary channel for communications for customers amongst themselves.
4. “Product management is dead”
A surprisingly large percentage (about half according to an upcoming study by Softletter) of SaaS companies have integrated requirements management into their service: this means that customers can submit feature requests from within the application. Patrick Fetterman shared that Plex Systems has taken this one step further: they give customers a “budget” which can be used to “buy features”. Beyond the assigned budget, customers can also pay extra to get even more features. There are no product managers at Plex, just developers and community managers.
5. “Your customers know more about your solution than your sales guys”
This is another quote from Ken Rutsky. With so much information available on the web, propsects now have more knowledge and expertise about your product (and your competitor’s) than your sales guys. So why not get out of the way and create a friction less sales model? Most SaaS companies are moving towards a self-service discovery and self-service delivery model. In Softletter’s 2012 SaaS Report 51% of SaaS companies report to use a direct sales force. It is still high but down from 60% last year. Indirect (zero touch) selling on the other hand jumped to 25%.
6. “Don’t get people to buy, get them to use your app”
It is much easier to sell if prospects already love your service. The imperative to drive usage and adoption doesn’t stop after the initial sale. Most SaaS companies now use a “land and expand” sales strategy. In Softletter’s survey, the dollar-based renewal rate for SaaS companies ranges from 70% to 140%. Larry Cates from KeyStone On Demand, an online training application, analyzed the main reasons why customers cancel: low organization adoption, not enough customer stakeholders or the app is not utilized properly to gain full potential. These all relate to “lack of usage”. App reliability, competition or budget were reported much less frequently.
We sure learned a lot from our beta stage and this is the place to thank all our wonderful customers who were taking part of our beta stage.
Out of the massive data we’ve gathered, here are 4 main conclusions that could help sales and customer success teams to understand where to focus in order to increase revenues: from new sales, expansion sales and renewals.
Free trial users who are still active during day 3 of their trial were 4 times more likely to convert into paying users than the average customer
What can I do with that information?
SaaS sales teams could use this insight by focusing their time and close more deals
Active trial users who were contacted by a sales rep were 70% more likely to buy the paid service than those who weren’t
What can I do with that information?
This proves that timely and contextual engagement with prospects results in more sales
A full half of paid SaaS customers log in less than once a month or do not use their paid service at all. Another 19% is using their paid service less than once a week. Only 14% of paid customers use their service weekly and only 17% use it daily
What can I do with that information?
Have customer success team focus on the non-active paid users and the sales teams to focus on the frequent users to increase upsell
Most cancellations were preceded by a period of non-use
What can I do with that information?
SaaS customer success teams could use this insight to configure alerts for inactive users and to pro actively reach out to these customers and offer help
Today, I’m happy to announce that Totango has analyzed the customer engagement and optimized the sales and customer success interaction with more than one million prospects!
We sure learned a lot from our beta stage and this is the place to thank all our wonderful customers who were taking part of our beta stage.
Out of the massive data we’ve gathered, here are 4 main conclusions that could help sales and customer success teams to understand where to focus in order to increase revenues: from new sales, expansion sales and renewals.
Free trial users who are still active during day 3 of their trial were 4 times more likely to convert into paying users than the average customer
What can I do with that information?
SaaS sales teams could use this insight by focusing their time and close more deals
Active trial users who were contacted by a sales rep were 70% more likely to buy the paid service than those who weren’t
What can I do with that information?
This proves that timely and contextual engagement with prospects results in more sales
A full half of paid SaaS customers log in less than once a month or do not use their paid service at all. Another 19% is using their paid service less than once a week. Only 14% of paid customers use their service weekly and only 17% use it daily
What can I do with that information?
Have customer success team focus on the non-active paid users and the sales teams to focus on the frequent users to increase upsell
Most cancellations were preceded by a period of non-use
What can I do with that information?
SaaS customer success teams could use this insight to configure alerts for inactive users and to pro actively reach out to these customers and offer help
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Lately there is an obvious increasing demand for user friendly cloud based apps and a tendency to prefer low touch and zero touch sales approaches, where there are as little sales involvement as possible.
In my latest article: 8 ways digital will improve b2b sales in 2012, published in Mashable lately, I tried to predict what would be the customizations that B2B sales would need to embrace in order to survive in this competitive and evolving market:
Social Selling Will Go Mainstream – Sales executives will substitute the cold calls with nibbling into the social media networks follow by conducting warm introductions
Companies Will use Facebook as a Sales Channel – Facebook ceased to be perceived as a personal communication channel only and more and more sales people will start using it as a sales tool
Sales Executives Will Adopt Big Data – Wide funnel could increase leads volume, allowing your researches on users behavior and performance during the trial period in order to later focus on the most profitable ones
Customer Engagement Becomes a Top Priority – Since customers nowadays can choose their service on a subscription basis, customer engagement and customer success become a key player in this game
Outside Sales Rep Will Use iPads – Tablets will become a vital working tool as outside sales reps can start using them for shipping, product documentation, demonstration, capture leads at trade shows and quickly research a prospect before a meeting
Most Sales Tools Will Move to the Cloud – The average sales organization is using more than 24 software tools to complete a sales process – most of these services will be available in the cloud in 2012 and that will increase the sales process fluency
Sales and Marketing Will Converge – The boundaries between those roles is becoming obscure as outside sales are becoming inside sales and inside sales is being replaced with self serving website resources
More Companies Will Offer Free Trials – this way the customers could evaluate the service before they decide to purchase and that will also produce more word-of-mouth referrals which are much cheaper than live touch points
This week, I’ve interviewed Charles Hudson, CEO and Co-Founder of Bionic Panda Games about how he uses analytics system to increase free to paid conversion.
Charles indicates that they’re trying to find a pattern of the paying customer and try to build a profile around the way users behave and try to predict what they’d like to see in the game they’re going to pay for.
I like the way of finding a winning card and then replicate it and this is why it is very important to know what have caused to that engagement. Measuring the right metrics here are crucial to understand your customer behavior and a comprehensive research should be done on the route which caused the free user to convert into a paying customer.
Charles also talks about the advantages of the freemium model versus the enterprise – what can a freemium offer that Enterprises can’t? for the complete interview see below:
To read the full transcription of the video, click here
Video Transcription:
This is Charles Hudson from Bionic Panda Games. We use our analytic system internally to identify that subset of customers that converts and spends money in the game, and to better understand their behavior and we take that information and then go try to acquire more customers who look, behave like the ones we find that monetize well.
If you look at some of the really big freemium consumer success stories, part of what makes them work is that it allows customers who have a problem, to use your service without having to pick up the phone, without having to have a salesman so i think what enterprise companies can learn is that making your service free and available to consumers who have a defined need is a great way for customers to self-select.
Then you can always go back and follow up directly with the people who are using your service.
Jeff Bennett, who is the founder and CEO of ServiceVantage, has a lot of experience working with SaaS companies in various sizes and being part of the SaaS Industry myself, I see eye to eye with his key strategies and therefore thought it would be interesting to share:
Easily Consumable and User Initiated – have ALL of your customer experience as easy as possible. This includes software trials, sales, on-boarding, training, support etc.
Hold off on the elephant hunt – Don’t start off with the big shots companies, take it step by step and wait till you’ll have a more mature infrastructure
Configure, don’t customize – Rather than customizing, allow configuration which do not change the core product yet provide some tailoring to specific customer needs
Marketing can close deals – Sales are all about conversion from lead to paid. Incent your marketing to close deals!
Understand your cost of sale – Push deals by their cost – bigger deals to outside sales and smaller to marketing
Have a Client Lifecycle Program – Especially important for SaaS businesses that need to ensure customer retention and recurring revenue
Don’t be an island – Aspire to integrate your solution with other solutions to increase dependency on your service
Broaden the impact of your SaaS solution through services – Provide service offerings to compliment your solution
Make client retention a corporate mantra – this is not only the concern of your Support group – have the entire company focus on client retention and reducing churn
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).
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.
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’.
Customer Success is maturing! How do I know?
