Thoughts from my journey

I was on a super exciting panel at the All About The Cloud conference in San Francisco this week: “the Power of the Customer”.

Here are 3 predictions for the future that were discussed on the panel:

1. All SaaS companies will use predictive customer analytics. Measuring and optimizing customer lifetime value was a big topic. You can’t manage what you can’t measure so expect SaaS companies to invest big in customer analytics and predictive analytics.  These are technologies coming from the consumer marketing space. However, in software you can go one step further because all customer interactions, including interaction with the product itself are digital. So while Victoria’s Secret may analyze customer transactions to predict whether customers will buy again (and whether it’s worth sending you another expensive catalogue) imagine that you could actually know how often your customer wore that swim suit. That would be a pretty good indicator of how much you liked the swim suit and how likely you are to buy again from the catalogue. With software this is possible! And indeed software usage turns out to be the most reliable buy signal (or churn signal whatever the case may be).

2. There will be many SaaS companies with no sales teams. Think about Atlassian: a $100 million+ revenue B2B software companies with ZERO sales personnel. Their sales model is 100x or more cheaper than that of their competitors with field based sales teams. And their velocity is so much higher. I bet you their customer satisfaction is higher too.  At no-sales companies, marketing is responsible for demand generation and initial signups. For more complicated products a customer success function is emerging to coach customers post sign-up and to grow usage, users and use cases over time. There was common agreement on the importance of building out customer success teams regardless of the sales model. Customer success managers have responsibility over renewal revenues as well as upselling and carry a quota rather than being a glorified support team.

3. Products are becoming social. The product itself will be the primary sales tool. Much of customer engagement will happen from within the application itself. Customer actions speak loudest: usage is the most important buy or churn signal. Also customers will communicate with other users and with the vendor using in-application communities and communications. The panel agreed that the new Social Buyer demands self-service. It started some years ago with self-service information (‘inbound marketing‘) and these days the ‘must have’ is a free trial or freemium version of your product. The panel agreed that freebies were essential in creating trust. Also think about this: if your competitor offers  free trial of some version of your product and you don’t, then customers will be already half-way down the sales process with your competitor before they ever talk to you.

Thanks to the All About Cloud team for having us, thanks to Shubber Ali from Accenture for moderating and thanks to my fellow panelists Jon Miller (Marketo), Todd Bursey (FinancialForce) and Jeff Yoshimura (Zuora) for fun times! See you next year

If you are interested to analyze and predict your customers’ actions, or if you want to make your product social:

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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.

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.

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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