Fergus states that Marketing Qualified Leads (MQL) won’t turn into Sales Qualified Leads (SQL) by themselves – this phase can’t be automated and requires human interaction.
I agree with Fergus about the necessity of an additional role which businesses should consider. This role should help submitting qualified leads for the sales team. Mark Roberge, VP Sales at Hubspot has also talked about this by distinguishing the Hunter’s job from the Farmers.
I also talked in the past about the necessity of the Customer Success role in the SaaS industry new generation model.
But how would this function know which leads are qualified for their sales team? Well, Marketo is offering their scoring system, which based on user behavior on your website, which is a really efficient tool!
However, how would you know what leads are doing inside your APP?
For example, would you react differently if a new signup of yours signed up once and didn’t invite new users for your service rather than a user who logged in 3 times and invite 2 of his colleagues? Of course you would! You would like to invest more on the second user which reflects a higher level of engagement, won’t you?
And what if several users have entered one of your most important pages which suppose to lead for a sale and then signed out and never go back? you would probably want to look at that page again and figure out conversion issues, right?
This is why Totango service also offer the engagement score that would show you in-app engagement involvement.
But why compromise on one of the solutions – why not use them both?
This is why Totango and Marketo have joined forces and now Totango is also offering integration with Marketo’s services – this is how you could both know what’s happening in your application, get analysis on wha’t going on your app and then use Marketo strong nurturing tool to send your users exactly what they need to know by the stage they’re stuck on or need help with – the perfect match – Totango’s Lifecycle Marketing with Marketo’s automated nurturing – can you afford not to have it?
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
Jon Buscall on Be Good to Your Customers believes that most engagement related activities these days are actually lead generation activities and not really about customer engagement.
This article grabbed my attention as I’ve been thinking a lot lately about the whole customer engagement life-cycle for SaaS and other online services.
The main strategy Jon suggest B2B businesses should apply is to provide true value to loyal customers only.
I would argue even further; loyal customers of online services should get specialized treatment. They should receive personalized engagement by their B2B vendors.
This wasn’t possible few years back, when it took few months and even years to create products and later on deliver it to customers. This isn’t the case anymore, and customers do expect this level of service.
For example, SaaS companies basically have all the information required to provide to each and every one of their customer special treatment tuned directly to their needs:
They know who they are
They know what they are trying to achieve with their service and
They have all of their interaction history
Genuine customer engagement is personalized, contextual and timely. This is what customers expect.
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:
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.
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.
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?
He suggests measuring two basic metrics: CLTV (Customer Life Time Value) and CAC (Customer Acquisition Cost). Those metrics should both be measured accurately, as based on the outcome, a company should decide how to treat its prospects/customers:
Low CLTV would mean to use a less expensive resource to handle prospects/customers (i.e. non-direct contact such as email).
On the other hand high CLTV would mean considering a one-on-one contact with the prospect/customer.
This principle would increase conversion rates from prospects and maximize penetration rates withing current customers.
As for the CAC, Scott recommends focusing on existing leads as it more profitable to cross-sell and upsell an existing customer than acquiring a new one.
I agree it is much more effective to reach out customers from a dedicated list.
I also agree, as posted in my previous post, that CLTV and CAC are crucial metrics which should be measured accurately in order to spot potential buyers.
However, CTLV and CAC are not the only metrics a company should measure – there are other metrics (such as churn rates, account activation rate, account usage statistics, etc.), that should be taken under account in order to perceive a business whole picture.
In addition, in order to reach the right conclusions out of those metrics and know where to focus on, it is essential to wisely choose tools that would help a business to both measure and analyze its data correctly.
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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 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!
Do you know how to measure your Customer Engagement? Our SaaS Dashboard can easily do that for you! Try it now for FREE
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Lately, I’ve started building a SaaS Dashboard for my own usage (which I’ll be happy to share with others as well) and I have put together a short survey in order to learn what are the key metrics to measure SaaS business success. As I posted in our previous post, every metric matters when trying to see the whole picture, however, according to Chris Zane’s interview in Christoper Brown latest post, if he could only have one measure to manage his business, he would have chosen “lifetime value of customers”.
This metric, in Zane’s opinion is not a static number but a dynamic one that can grow with the customer, so that customers will first purchase their bike when they’re 4 years old, then when they’re 6, again when they’re 12 and they might come by to buy their own kids their first bikes. That’s the power of a happy customer.
This classic example could be taken to any sort of business, as in all businesses, it is critical to understand customers behaviour.
What is ‘customer lifetime value’ translated to the terms of a SaaS company? It’s when your service is valuable and highly appreciated by your users who chose to repeatedly and constantly use your service.
Most customers will encounter SaaS online services when signing-up to their free trial period / freemium. As the funnel goes on, the amount of users converting to paid customers naturally goes down, however, user’s usage pattern in crucial to understand what’s behind those numbers and also to reflect the users behaviour and needs.
Therefore, even though measuring many other metrics should be taken under account, I agree that customer lifetime value should be standing in front of our eyes when thinking of our business plan.
To run a successful SaaS business and increase the chances to gain lifetime users and revenue, a business must make the right conclusions and adjust its service according to customer / user experience.
Tell us how you adjusted your service to fit your user’s needs!
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Following Lincoln Murphy’spost on SixteenVentures.com (talking about conversion average rate for free trials, pricing pages or Freemium for SaaS or Web Apps), conversion rate average figures will do no good, as it doesn’t reflect the whole picture and usually lacking context.
It’s hard to know what metrics are being used for the “average conversion rate” and Lincoln claims that looking on average numbers to plan businesses around might make us average ourselves – and who want to be considered average?
Every company aspires to increase their conversion rate figures but Murphy’s suggestion is to figure out where you are today and then figure out how to make it better.
Meaning, if you’re at 1% conversion rate, reaching 2% is achievable, even though it’s 100% increase over what you have now.
I agree that context is crucial and also explained about this in “Measure trial conversion rate” webinar. Furthermore, in order for each SaaS business to understand where they stand, a lot of other metrics need to be taken under account besides conversion rate from free to paying customers. For example – do you also review unique visitors to your website? Social media mentions? signups, churn rates, customer lifetime value, account activation rate, account usage statistics, etc.?
All of these are metrics that should be taken under consideration in order to reflect the whole picture for a SaaS company and to allow it to set its goals.
Which metrics do you use to make your goals setting?
I came across “What is user engagement” article by Jordan Willms of Work at Play. In this post, Jordan defines a good engagement metric as the number of user actions divided by the number of content items. The example provided is of blog posts comments divided by the number of posts per month.
This is certainly a very interesting metric. It made me think, does this also make sense to web application usage?
Following the same logic, in web applications (as opposed to a content site) we would count features and divide those by the number of user actions. I’ll use Google Docs as a simple example:
Say the features are: New, Save, Print and Share document. Total of four features.
For each user the engagement metric would be the number of activities divided by four.
Let’s see the score of two users over a week of usage
Activity
User A
User B
New
10
2
Save
10
2
Print
10
2
Share
2
22
Score
32/4 = 8
28/4=7
User A scored 8 while user B scored 7. By this engagement metric user A explores more the feature set of Google Docs and is more engaged.
On the other hand user B uses a more competitive feature of Google Docs, which is Share Document, hence might be a more valuable user of Google Docs.
Although this engagement calculation method isn’t perfect I’m convinced that this it is better measurement of user engagement then by just counting “number of logins” which is what most application owners do.
What do you think?
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
Increase user engagement now! Try TOTANGO free for 30 days
