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Best Practices Business Insights cancellation rate cohort analysis conversion rate Customer Engagement Customer Retention & Churn customer satisfaction inbound marketing RC-SaaS Customer Retention Response saas churn saas metrics time to cancel time to convert trial conversion user behavior User Engagement

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?

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Best Practices Business Insights customer acquisition cost Customer Engagement customer lifetime value customer success key metrics most important metrics for saas RC-SaaS Best Practices RC-SaaS Customer Analytics saas executive saas metrics track saas business User Engagement

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.

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b2b sales Best Practices chief revenue officer Customer Engagement customer satisfaction customer success low touch sales model vp customer success zero touch sales model

Does your SaaS Business have a VP Customer Success?

Earlier this week, I spoke to Dave Rosenberg for his CNET Blog ‘Customer success’ VP role: To reduce SaaS churn.

At Totango, we care deeply about customer engagement and customer success. We agree with Dave that with SaaS “it might make just as much sense to focus on retaining (and garnering new revenue from) current customers as it would be to focus on gaining new customers”.

For companies with a zero-touch or low-touch sales model, customer engagement management is about much more than ensuring customer satisfaction. I wrote about that previously in my blog 4 Tips to Increase B2B Sales for example. It doesn’t matter who owns the customer engagement function and many modern sales leaders understand and implement customer success programs. Some B2B sales leaders have split their team into hunters and farmers, with the latter focused on customer success. Others now call themselves “Chief Revenue Officer” (as discussed in a recent blog by Phil Hernandez).

Still, the trend to assign a dedicated executive to manage customer engagement, is promising. Sometimes, you have to put your money (people) where your mouth is.

Some companies which already have a VP Customer Success include: ReputationDefender, Intacct (VP Sales and Customer Success), HubSpot, Salesforce.com, Sendori, Computer Associates, SAP, Marketo, InsideView, Zuberance, Success Factors, Zuora, JIVE Software, and Yammer (VP Customer Engagement).

On this blog, we plan to continue to monitor this trend.

For now, some appointments we have seen in recent months are below.

New VP Customer Success Appointments

Rudy Reyes, VP Customer Success at Alcove9

Rudy Reyes, VP Customer Success at Alcove9

  • On October 17, 2011 Alcove9 appoints Rudy Reyes, Vice President of Customer Success.
  • On October 3, 2011 Xignite appoints Cameron Karr as VP Customer Success.
  • On September 14, 2011 Jump Technologies announced the appointment of Adam Jacobs as Vice President of Customer Success.
  • On August 23, 2011 AtHoc appointed Sanjay Saini as its vice president of global operations and customer success.
  • On August 2, 2011 Zenprise Inc. announced it has named Christopher Doell as vice president, customer success.

Congratulations to all!

 

Customer Success Hot Line

If you know about a recent Customer Success appointment
please e-mail me at gnirpaz [at] totango [com]

 

 

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

 

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Business Insights cohort analysis Customer Engagement customer success Product updates saas best practices saas churn rate saas dashboard saas metrics survey User Engagement

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!
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Categories
Added Value Best Practices Business Insights customer acquisition cost Customer Engagement Customer Life Time Value Customer Loyalty customer satisfaction Increase Conversion Rate Reduce Churn Response SaaS business

Customer Engagement is Key for SaaS

Customer Engagement is key for software-as-a-Service business. A recent post by David Skok explains how and why to measure customer engagement. If you are a SaaS executive and haven’t read it yet, read this first.

In this post I’d like to elaborate in what areas customer engagement is critical for SaaS business success.

Balancing Customer Acquisition Costs and Lifetime Value

The baseline metrics that govern SaaS business success are Customer Acquisition Costs (CAC) and Customer Lifetime Value (CLTV).   The larger the margin between CAC and CLTV, the more poised the business is for sustainable growth and profitability.

So lowering CAC while increasing CLTV is key and customer engagement has a dramatic impact on both.

The most effective way to lower CAC is to increase conversion rates from free to paying customers. We’ve learned that when customer engagement is high during evaluation period it has direct link on conversion rates.

Same in CLTV. The key metric here is churn. Higher CLTV means lower churn.
Customer engagement (or lack of) is very good indication for churn.

The dynamics of “Land & Expand”

The SaaS model lends itself to gradual adoption by customers. It could be inherit in the business model (e.g. freemium), or just by nature of subscription model itself:  Most customers start off as short term pilots by one team in an organization. Success results in renewed subscriptions and further adoption within the organization.

This means that SaaS companies have users/clients who actively evaluate the service (paid or free evaluation), and at the end reaches a decision to continue or not as a customer.

As David describes in his post, times have changed with a much higher percentage of business transactions transpiring online with much less interaction.

This new reality places customer engagement at the center. So what does it take to strengthen customer engagement in your service?

 

Cultivating Customer Engagement

Cultivating customer engagement requires an organizational culture that focuses on customers and their needs.

1. Know your customers

It’s easy to fall into the trap of treating your customers as unknown, faceless people. After all, chances are no-one in your organization ever met them. They probably live far away and may even speak a different language. But you can’t afford to do that.

A company must develop or achieve tools that will help them measure customer behaviour on their service. These tools must be capable of presenting the users behaviour once in your application and answer relevant questions such as:

  • Have the users tried the service more than once?
  • How much time are users investing in your service?
  • Which features have they used?
  • Have they been exposed to your core features and do they fully understand the value-propositon of  your offerings?
  • Is momentum growing or declining within the organization?
  • Are they potential buyers?
  • Etc.

Knowing what your users choose to do in your application is crucial for you to be able to interpret their actions correctly and use it as a basis for running a successful SaaS business.

2. Learn how to be proactive

Being attentive to your customers also means knowing when to intervene.
You need tools to wisely call-out users who need help and are at risk of churn or, conversely, those that are reaching the limits of their current plan and are prime for “upsell”.

Being able to identify these users and conditions is critical because:

  • Your sales and success teams have finite resources and need to be laser focused on accounts that matter
  • Users nowadays prefer self-serve and self-paced work. You need to know it’s a good time to contact them, or run the risk of doing more damage than good.

Contacting users at the right time increases their satisfaction and loyalty. It shows you understand their needs and respect their time. And it will increase conversion, reduce churn and maximize upsell opportunities for your business.

3. Evolve your service

The same tools that help you measure and understanding customer behaviour, should help you draw conclusions of how your service and product needs to improve.

  • Do the new features add value or complexity?
  • Is the new design helping convert more trials but causing added friction to existing customers?
  • Are the new tutorials and guides helping new users or are they still getting lost?
  • Are users from the basic plan not engaged enough to “push through” to the premium packages?

Customer engagement can shed a light to some of these tough product and marketing questions. Not only by directly showing you what parts of your product different users engage with, but by surfacing the users you should be talking to directly for primary market research.

 

Summary

In the long run, Customer Engagement is all about value – customers have needs and they’re seeking for an efficient, ready and easy solution that fulfills those needs. Now.

If you are able to understand your customer’s behavior, interpret their needs and act accordingly, customers will choose to use and reuse your service!

SaaS Executive Dashboard

Do you know how to measure your Customer Engagement?
Our SaaS Dashboard can easily do that for you!
Try it now for FREE

 

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

 

Improve customer engagement now!
Try TOTANGO free for 30 days
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