The purpose of the Best of SaaS Showplace (BoSS) Award program is to recognize SaaS companies who are delivering solutions which produce measurable business benefits for their customers.
“An example of the measurable business benefits which can be derived from Totango’s solution is Zendesk, a SaaS customer service solution company founded in Denmark in 2007. The company serves over 15,000 companies, including Adobe, Sony, OpenTable and Groupon. Zendesk offers a 30-day free trial and has been able to improve the user onboarding process and increase trial conversions by about 30% by using Totango’s Cloud-based customer engagement platform.” as quoted from the award announcement. Read Totango’s Award Submission
The BoSS Awards are part of an ongoing THINKstrategies Cloud Computing Showplace campaign to recognize SaaS companies producing tangible business benefits for specific user organizations. These benefits can include increased sales, lower costs, higher customer satisfaction, faster operations and greater profitability.
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.
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.
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.
The Totango team is excited to announce the release of the Customer Health Dashboard which helps cloud application providers and software as a service companies of all kinds track and manage overall user happiness at a glance (Read Press Release).
The first of its kind, the Customer Health Dashboard is a configurable cloud-based tool that summarizes customer success and engagement using their realtime activity streams, capturing and calculating data like overall time spent, license use, CRM system feeds, and trouble tickets. With it, you can get a clear picture of your customer base’s health, identify customers at risk, and track trends across segments.
The Customer Health Dashboard is especially useful to businesses who see value in the growing trend of shifting focus from acquiring new customers to driving usage, adoption, and happiness in existing ones — the hallmarks of customer success.
For providers of software as a service, company revenue depends on having happy customers who keep renewing their subscriptions; the lifetime value of existing customers may end up far exceeding the gains made by simply picking up new ones. Customer success begins with customer acquisition and onboarding, but continues after a customer signs up with you; renewals and expansion sales depend critically on customer happiness.
Totango found in recent customer success research amongst over one million prospects and customers of software businesses that over 50% of paying customers aren’t using the service they paid for. The same study also found an unsurprisingly near-perfect correlation between non-use and cancelations: cancelations of software subscriptions were almost always preceded by a period of non-use.
The Customer Health Dashboard can show you at a glance how well your success strategies are working and gives customer-facing personnel the tools to help customers be more successful where needed. Not only can you quickly locate your best customers, but you can also identify the ones requiring the most attention and take immediate action, engaging with them before they see a problem.
Interested in learning more about customer success management (CSM)? Totango would be delighted to host you at our free meetup on The Future of Customer Success on Thursday, April 5th, from 7-8:30pm in San Mateo, CA. Mikael Blaisdell, publisher of The HotLine Magazine, will be on hand to give a talk and host a Q&A. Come have a snack, meet your fellow CSM professionals, and stick around for some customer engagement tips from yours truly.
Promotional discounts, credits or value-add offers can be an important part of a product launch strategy. A properly timed discount, upsell or cross-sell or “bundling” can positively change the perceived product value and dramatically impact adoption of SaaS applications.
But, making on-the-fly changes according to the dynamic needs and circumstances of customers can inherently complicate your billing and pricing models. How does your billing system support the various iterations of a subscription discount, promotion or credit?
For example, how does the discount get applied? What is the duration of the discount? Does the discount apply to all subscription types (recurring, one time charges, activity)? What about conflicting offers? What types of customers are eligible for discounts?
Subscription discounting can get complex very quickly because most billing platforms use a very limited set of “price levers” (time, duration, quantity) capable of shifting the Perceived Product Value.
What you want is to have many price levers around where you dynamically configure and reconfigure services and pricing on the fly: subscriptions + sign-up/activity/event fees + bundles + add-ons + incentives + promotional products.
The ability to add and manage activities, consumption or usage-based price levers to a promotion gives a company a powerful tool for growing its customer base (recurring revenue) and maximizing lifetime value of the customer (reduce churn).
Effect of Changed Product Value
Positive changes in the product – or its perceived value proposition – have the potential to drive improvements in ARPU. Product differentiation can lead to short or long-term market advantages, depending upon how quickly the differentiation can be continued.
As stated earlier, with the simplest subscriptions, a business only has control over the price, the term of the offering, and the product mix of the relationship. Because choice is limited, tweaking price levers in those three categories provides limited results.
For example, if a $10 per month subscription is the MSRP, reducing the price to $7 to attract more users may simply cannibalize the existing customer base.
For this reason, it is important to add additional pricing levers around consumption or usage parameters to evolve the relationship with the customer. For example, the consumption or usage price lever can be implemented as a limit or as a set of charges that are generated by ongoing use. For example, as a person consumes, reward him with a discount or promotion every time he reaches a certain threshold, thus enticing him to continue to consume (along the lines of airline “point” systems.
When charging for different classifications of the good or service, customers paying the set amount for unlimited access will have a different value equation than those paying a lower price for limited access.
Over time, customers can migrate from an unlimited ($10 per month) to other price segments, depending on the customer experience or the changing perception about a subscription’s value – especially to those initially not interested.
Customers that do not see value in paying a set amount for unlimited access to a good or service may become interested if offered a chance to pay a nominal per piece price. For those subscribers, the value comes in the flexibility to consume the good or service at will. In a SaaS application, for those not willing to pay for a $10/month for unlimited access to articles may be willing to pay a $7/month plus a discounted price of $0.25 per activity such as time entry, project, download, computing cycle, contact, or any other measureable activity.
In this scenario, the customer who does not see value in paying $10 for unlimited access may become interested when he can pay $0.25 for only the activities that have value. At $0.25 per activity, the customer has a low barrier to trying out the new content, and the business succeeds in making money on content that previously would not be monetized. But the real value for the business is the opportunity to convert the customer to different subscriptions over time, as the subscriber’s situation and interests evolve.
Billing: A Strategic Asset & Enabler of Innovative, Sustainable Business Models
In a subscription business model, it is the relationship with a person that matters most, and no customer touch point is more important than billing, as it connects businesses with customers on an ongoing, personal basis.
Though not the sexiest topic, “billing” is the medium by which companies can truly drive and capitalize on customer usage patterns and preferences.
Billing is, therefore, central to improving adoption. Product management and sales strategies that focus on long-term relationships and maximizing customer lifetime value must address billing models.
Utilizing any one of those practices requires sophisticated billing that goes beyond a cookie-cutter approach for maximizing volume and per-unit profits. Now, billing has to boast real-time intelligence, the type of which is derived only from sophisticated rating and charging engines built to dig into data about actual usage (as opposed to forcing business people to pore over enormous reports after the fact, when opportunities have slipped away).
The next generation of billing has to enable business users to dynamically implement, enforce and change parameters on the fly. By implementing activity, usage or consumption-based billing, companies create more opportunities to innovate and drive new sources of revenue.
About the Author
Christopher Couch is COO and co-founder of Transverse, LLC. TRACT, from Transverse LCC, is the all-in-one activity, rating and subscription-billing platform that can bill for anything. SaaS, cloud, MSP, ISVs, telcos or wireless providers with TRACT’s pricing levers to rapidly build and evolve any business model: if it can be metered or measured, TRACT can bill for it. Learn more at www.tractbilling.com
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:
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.
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.
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.
Customer Analytics – Perform customer, conversion, cohort, funnel, usage or churn analysis. Discover how big data and customer intelligence can increase SaaS revenues.
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.
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.
Engagement score is an at-a-glance metric which Totango adds to each account.
Its purpose is to give you a sense of how active and engaged a particular account is with your cloud application.
An account’s Engagement Score is calculated by looking at the aggregate amount of time spent, by all users of the account, with the application in the last 14 days.
This number is then normalized across all accounts of the same life-cycle stage to produce a number between 0 – 100.
Accounts with an engagement score of 0 were the least active during this period, whereas those with a score of 100 were the most active.
Example: For a setup with three lifecycle stages:
An account in the Paying stage with an Engagement Score of 99 is the most active Paying customer (together with any other accounts with the score of 99)
An account in the Activated stage with an Engagement Score of 50 is more active than half of the current Activated accounts
A New Trial account with an Engagement Score of 0 is the least active at this stage (usually reflecting a period of 14 days of no activity)