Thoughts from my journey

Joel York has written extensively about the new breed of B2B buyer and the changes to the B2B sales process, especially for SaaS products.

A quick recap …

The good old sales process according to Joel

“The process went something like this: ask the analysts about the next big thing, collect requirements into and RFP, get a list of vendors from a roundup in an industry magazine, go to a trade show and collect collateral, solicit and evaluate RFP responses by mail or fax, call in a short list of vendors to do a dog and pony show, follow up with a technical drill down meeting, maybe do a bake-off or a pilot, select a vendor, call a reference account, negotiate final pricing and contract terms, and wrap it all up by planning out phase 2 of the project: a complex and expensive implementation.”

The new breed B2B buyer: it’s self-service stupid!

“With such a treasure trove of information available online, the Internet is the 21st century B2B buyer’s first stop for researching products and services. Your strongest strategy is to give the prospect efficient self-service access to your content.”

“In the case of most SaaS and cloud applications, the entire B2B buying process is cheap: trial is free and purchase amounts to a monthly subscription that can be canceled at any time. So in addition to reading about the product, the barriers for a customer to go ahead and just try your product itself (even without a lot of upfront research) are low.”

Long story short, the key to the wallet of the new B2B buyer:

Instant online gratification through efficient self-service

So it’s no surprise that many SaaS companies spend their marketing dollars on content creation and inbound marketing, and invest in marketing automation to track campaign ROI.

Good. But not enough. According to Joel.

“Inbound marketing or simply getting found by a prospect is not enough. Once you are found, you must engage with that prospect frequently and consistently throughout the entire customer lifecycle, because if you don’t, your competitors will, and what is easily found can be just as easily lost.”

What’s worse, simply accessing your content may no longer be a reliable indicator of purchase intend. Joel uses the term “fuzzy funnel” to describe the undeterministic process that customers follow these days: the new B2B buying process is anything but linear, deterministic and under the B2B salesperson’s control.

So what comes after inbound marketing? If accessing your content is no longer a reliable indicator of purchase intent, then how to best measure customer interest?

I asked Joel some questions on it via e-mail and got his permission to publish his answers on this blog:

1. Do you see more B2B buyers demanding instant and self-service access to the product or service (rather than just to information and education about the product)?

Joel: I think in general, B2B buyers want a trial whenever it is possible. A brochure or a video is great, but they are no substitute for test driving the actual product you plan to buy. It’s more educational, more convincing, and more comforting to see the real thing. And, given the choice of getting it immediately without a salesperson looking over their shoulder vs. scheduling a demo or a pilot that will be designed to hide any flaws, most B2B buyers will choose the former. However, I prefaced all this with “whenever it is possible.” Some products are so complex that it is simply too much work for the buyer to go it alone, especially those that need extensive configuration, imported data and integration and before they are useful, and in these cases the buyer will actually prefer to lean on the advice and assistance of a salesperson.

2. Do you see a strong correlation between trial sign-up and product usage and the conversion to a paid customer (as compared to say, downloading a white paper)?

Joel: Absolutely. Test driving the real thing demonstrates more interest and requires more commitment on the part of the buyer than reading a piece of content.

3. Do you see marketing automation systems, which you mention in your article, integrating trial usage related metrics into their lead scoring algorithms?

Joel: If they are smart marketers they will. As I mentioned, trial and usage demonstrate interest and commitment. If the statistics are segmented, e.g, what is tried and used, they also show interest at the feature/function level, which can be used in both marketing campaigns and sales calls. For all these reasons, trial and usage statistics are probably some of the strongest indicators you could integrate into a lead score.

Of course, I very much agree with Joel. Participating in a trial is the best possible indicator of potential customer commitment. Of course, I also believe that not all trial customers are created equal. As we discussed in a previous post: a prospect with many users and many hours of trial usage is a hotter prospect than a trial user who only logged in once. And yes, of course Totango can help you figure out who these hot prospects are!

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?

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.

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