Thoughts from my journey

How do you grow from trial to paying users? The freemium business model is popular with many cloud-based companies but depending on company size, the user experience for trial users is different each time. We sat down to discuss smart conversion metrics for the freemium business model with Vik Chaudhary VP of Product Management and Corporate Development from Keynote Systems. Keynote is experimenting with free mobile apps to drive demand and leads for their paid enterprise solutions.

To read the full transcription of the video, click here

It’s important to figure out how deeply your trial users are using your product. Here are some metrics to consider:
– Are they downloading your software?
– Are they registering for your service?
– How often are they logging in to the service?

The ultimate goal is to figure what they are doing within your service and how to get them to upgrade to your paid features. Identifying the right conversion metrics will allow you to more accurately target your users and extend the lifecycle of your relationship with them.

Video Transcript:
Hi, my name is Vik Chaudhary and I’m VP of Product Management and Corporate Development at Keynote Systems. At Keynote, what we do is test and monitor the online user experience for companies that are online or have a mobile presence. When you talk about premium business models, there’s really two kinds of premium.

One is if you’ve got a product that’s used by hundreds of thousands or even millions of users. Starbucks is a great product for that. The other one is a product that may be a premium product used by a smaller number of enterprises. We’re talking about maybe tens of thousand of companies using this.

When you have a premium product for the latter, it’s a very different kind of experience that you have to measure. When we talk about premium business models, you really have to think about who is buying your product. On one end, it could be a product like DropBox, which is bought by consumers or by small businesses.

And that could be used by millions of users. On the other side, it could be a product that’s used by tens of thousands of enterprises. So when you think about a premium business model, you really have to think about who’s gonna be buying it and how do you build conversion metrics into the process of going from trial to paying users.

When we start thinking about how do enterprises evaluate and use our products, we really have to go for metrics such as downloading a product, registering for it. But how do they deeply begin to use the product? Are they creating a test script, for example? Are they begging to play back the test script?

How many websites are they testing? How many times are they logging into the product? So as we begin to look at our funnel, we’re really thinking about, what are the users doing here? They’re logging in. They’re logging in many times, they’re creating test scripts, they’re testing their own websites.

Are they coming from existing customers, or are they completely new to Keynote? Those are the kinds of conversion metrics that we think about.

Just a short while ago, I was co-presenting a webinar with J.D Peterson, VP Product Marketing of Zendesk.

In the webinar I gave 3 tips on how we accelerate revenue throughout the customer lifecycle and how to drive conversion from free to paid users, grow the lifetime value of the existing customers & boost retention!

Zendesk, which is one of Totango customers, is using Totango to find out how people who are trying their product or already existing customers are actually using it and how engaged are they with their product.

J.D. from Zendesk, was covering the other 3 steps, to complete the process of building customers loyally, form the customer-service and support angle.

Here are Totango slides from the webinar – please feel free to share or embed them in your website/blog:

View the Complete Zendesk-Totango Webinar

Did you notice how business flow has changed in the past years?

Purchasing online became the user’s field where they can check your application, test it and decide to come and go as they wish. No strings attached, no obligations. The new generation users are only paying for what they need and that make SaaS companies busy with making their users happy and increase customer success.
In fact, this is why many SaaS companies offer Free Trial period or even a Freemium version of their product and by that they’re actually telling their users – hey, check me out, I don’t mind, my product is worth it and you’ll be happy with it!

So how can those companies succeed in their new sales model?
Well, I’ve wrote a report, which is based on our recent study on freemium, free trial and pricing of 550 SaaS companies, summarizing 6 action steps on how to increase sales using this models.

If you’re a web-based company, you might find this very interesting.
Download report here

I plan to post every Friday on interesting developments and articles on Freemium in B2B land, but we will see how long I actually keep this up

This week is a good week to start as we just signed up to participate in the first-ever Freemium meetup in San Francisco.  Three B2B Freemium gurus will be presenting:

Drew Banks, our host and head of marketing at Prezi, a cloud-based presentation software service that opens up a new world between whiteboards and slides. Drew will speak about Prezi’s rapid growth (1M users/month!) and profitability success with a Freemium business model.

Chad Heinrich a.k.a. “Freemium Fighter”  is the Marketing Consultant for Avira. He has successfully marketed the Freemium business model in a wide variety of technology companies including his current gig at Avira (with 100M+ users), and previously at Dropbox and Box.net.

Todd Wilkinson is the Co-founder & CEO at WordWatch, a cloud-based app for small businesses that manages AdWords, automatically delivering optimal ROI for Google AdWords PPC advertising.

More information on the meetup here.

In B2B Freemium news these two caught my eye:

A Forbes article on Box.net Freemium model: it doesn’t go into much depth, but quotes Box’s initial Freemium conversion at 8% with little sales effort. However also mentions that now Box is hiring up to 200 sales reps: apparently enterprise sales needs a push and a shove even if you are Box.

SAP owned SuccessFactors announced a Freemium version of it’s Jam product (a Salesforce.com Chatter competitor). For now the product is only free to customers, but Dmitri Krakovsky, SuccessFactors VP of global product management, said (when asked if the company is planning to extend the freemium model to non-SuccessFactors customers): “Yes, for sure. We’re always thinking about making it a very broad tool.”

Yesterday, the SandHill Magazine have published an article about Managing Challenges of Onboarding SaaS Customers and Converting from Free Software Trials where 2 of the very popular app services providers – Zendesk and CloudBees, were quoted about their success in increasing engagement level and therefore their free to paid conversion rate.

Both companies, who are using the Totango technology, managed to increase their visibility on what their users are doing in their application and therefore optimize communication with them to make sure they’re gaining value out of their product.

Many app services in the SaaS industry lack that visibility. This problem is especially in onboarding new customers and in converting free trial users into paying customers.

“Understanding user behavior is critical to success in the XaaS model”, states Sacha Labouray, founder and CEO of CloudBees.

Zack Urlocker, COO of Zendesk is happy that this solution exists and therefore saves the time on self development: “Rather than trying to build the technology to do this in house, we love the fact that Totango has already figured this out, giving us tremendous insight into what is going on with our users during that trial period.”

Zendesk’s goal was to increase customer engagement for their 30 days trial users and increase the free to paid conversion that way:
“We changed how people experience sending and receiving customer service tickets during the trial. Totango helped us figure out ways to try different approaches to highlight key features which and see ones got the most usage” says Urlocker.

Since Zendesk has massive amount of daily downloads and thousands of customers, they needed visibility into who to focus on in order to gain the most success and Totango is helping them to achieve that and thus increase their conversion rates.

Similarly, CloudBees needed to understand, in real time, how developers in its freemium model use their platform. “We need to see where they start using specific services and using multiple services,” says Labouray. “Before implementing Totango, we tried using analytics to track user behaviors. It gave us overall trends but no insight into what specific teams or specific users within a team or group are doing on our platform. You don’t know what you don’t know. Totango showed us what we didn’t know. We’re using those insights in working a lot of services and reaching out to our users.”

He says they had a big “aha” moment when Totango revealed an unexpected spike in usage all of a sudden. They then realized there is often a lag between when customers sign up for the freemium model and when they actually get ready to use it.

Creating value for customers is the most important activity for retaining customers longer, so all customer-facing teams need to align around that objective. With the right data, you can get real insights into which customers are likely to convert from free to the paid model as well as where those customers come from, their overall lifetime value and the customer acquisition cost and with all of that information, you can build an effective marketing/sales model!

We want to help ensure our customers not only improve their communications with their users but also gain the ability to drive to monetization and unified value-creating goals for acquiring and retaining customers.

What about you – have you tried our service yet?
Signup now for our free trial!

Zack Urlocker is chief operating officer at Zendesk and heads up Sales, Marketing, Business Development and Support. Zack came to Zendesk from MySQL, where he was Executive VP of Products. Besides building the business model for MySQL, he helped grow revenues to more than $100 million annually. He has more than 20 years of experience in the software industry and has held executive management positions at Active Software, webMethods and Borland.

Sacha Labourey is founder and CEO of CloudBees. In 2001, Sacha joined Marc Fleury’s JBoss project as a core contributor and implemented JBoss’ original clustering features. In 2003, Sacha founded the European headquarters for JBoss and in 2005 he was appointed CTO. After the acquisition of JBoss by Red Hat, Sacha became co-General Manager of Red Hat’s middleware division until leaving in 2009 to eventually start CloudBees.

This week we’ve added a section into our website which I believe would add value to the SaaS Community – I present our SaaS Resource Center!

The Resource Center is a place where we update the most important/informative/valuable articles on 7 of the hot categories that are most current these days in the SaaS industry and I believe this knowledge base would assist many beginners as well as veterans in this industry to learn on new trends in their fields.

Here are the categories the Resource Center approaches:

1. SaaS Best Practices – Will consist our latest SaaS business models and SaaS best practices and is updated with the hottest topics facing SaaS software and Cloud app vendors today.
2. SaaS Sales Tips – B2B sales tips on different sales models such as low touch or zero touch, sales metrics and the best practices to build the ultimate sales machine.
3. Lifecycle Marketing – Drive the usage and adoption of your application and maximize customer lifetime value. Nurture existing customers based on their specific needs and wants and their use of your application.
4. Customer Analytics – Perform customer, conversion, cohort, funnel, usage or churn analysis. Discover how big data and customer intelligence can increase SaaS revenues.
5. Free Trial & Freemium – Free trial tips, benchmarks and best practices and the way to optimize trial conversion and freemium conversion.
6. Customer Engagement – Increasing customer/user engagement and customer lifetime value and reduce churn through lifecycle marketing and other techniques.
7. Customer Retention – New strategies to increase customer lifetime value and reduce churn for SaaS businesses, how to identify customers at risk and how to implement customer retention strategies.

If there is a topic that we haven’t addressed and you think is worth mentioning, please don’t hesitate to comment on this post with the subject and we promise to consider it.

Also, if you’d like to guest-post in one of our categories, please feel free to contact me through this form and I’ll get back to you as soon as possible.

Cheers,
–Guy

We recently published a study that proves through big-data analysis what many people already know:

Users that are actively engaged a few days into their trial are much more likely to convert to paying customers.

4x times more likely, to be exact. (more details)

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.

The 2012 SaaS Free Trial, Freemium and Pricing Benchmark

The way that enterprise products are being bought and sold is changing rapidly. Customers are increasingly demanding instant access to all information about your product, including pricing and a Freemium or free trial version of your application. We call this trend the consumerization of B2B sales.

Totango recently conducted a research studying the Freemium, free trial and pricing practices of 550 Software-as-a-Service (SaaS) companies.

Click to Tweet this Infographics

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

Click to Tweet this Infographics

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<br /> <a href=”http://www.totango.com/blog/2012/01/totango-analyzed-engagement-and-optimized-sales-with-over-one-million-businesses/” _mce_href=”http://www.totango.com/blog/2012/01/totango-analyzed-engagement-and-optimized-sales-with-over-one-million-businesses/”><img title=”4 Conclusions from Totango Aggregate Customer Analysis – Infographic” src=”http://www.totango.com/blog/wp-content/uploads/2012/01/PR-Infographics1.jpg” _mce_src=”http://www.totango.com/blog/wp-content/uploads/2012/01/PR-Infographics1.jpg” alt=”4 Conclusions from Totango Aggregate Customer Analysis – Infographic” width=”600″ /><br /> </a><a href=”http://www.totango.com” _mce_href=”http://www.totango.com”>Totango – Real Time Customer Engagement for SaaS and Web App</a><br />