Lead Gen Budget Allocation…Zig When Others Zag

MarketingSherpa recently published the results of a survey that queried marketers on their expected budget allocations for various lead generation activities. Most of the focus among those who have picked up on this data has been on the increased budget for digital activities—in particular, social. The data does indeed tell an interesting story about the overwhelming trend in marketing to move away from traditional outbound demand generation tools towards inbound tools like social, SEO, and content marketing. From a practitioner’s perspective, however, I take something else away from the data: if I thought my audience might be receptive, I’d be overweighting to direct mail and paid search.

Sometimes in marketing it’s worth following the trends—not because they are trends but because they have become trends on the basis of positive reinforcement. SEO falls squarely into this category. There are times, though, when a trend develops out of wishful thinking and the fear of being left behind. While social absolutely has its merits and is a valuable tool for certain strategic situations, as a lead generation tool, I’d say the jury is still out.

And that brings me back to direct mail and paid search. Given the choice between marketing where all your competitors are and marketing where they are not, I’ll go with the road less traveled, zigging when others zag. We marketers spend much time, effort, and money trying to craft creative that gets our messages noticed. What if you put yourself in a position to be noticed simply be being the only piece of substantive mail on your target’s desk or the top sponsored link in a search? I’m not advocating ignoring the social channel at all, but sometimes zigging can deliver a big return.

What an Overnight Camp Can Teach Us about Managing the Customer Experience

Note: Since this involves a personal anecdote, I deviate from normal EMI blog practice and include my name at the bottom of this post. What follows is a cautionary tale about how an organization can destroy customer satisfaction and ultimately threaten revenue by not adhering to these simple rules:

  • View your CRM approach and communications through the lens of the customer.
  • Understand that satisfaction = reality – expectations: if you set expectations properly through communications, then satisfaction will benefit.

This summer, for the first time, my 11-year-old daughter decided that she really wanted to go with a friend to overnight camp. The camp we selected was one that the friend—and my wife—had attended in the past and enjoyed a great deal. For anyone familiar with overnight camps these days, it will not come as surprise to learn that the cost for a month of camp was not insignificant. My wife and I wanted our daughter to be able to have the experience, though, so decided to sign her up.

About a month before camp was to start, we received a communication that detailed all of the clothes that our daughter would need during her stay. All of a sudden, we were now on the hook for several hundred dollars more, but we appreciated the level of organization that enabled us to ensure that our daughter had what she needed.

But things took a turn for the worse, as detailed below:

  1. We were informed that in addition to the clothes on the list, we would also HAVE TO purchase several shirts and pants from the camp. No option to opt-out, no mention of that when we signed her up.
  2. Then, immediately after dropping her off, we were told that in order to communicate with her we had to sign up for an emailing service for which, yes, there was a fee.
  3. Now, with the end of camp approaching, we have received another communication: on the day we pick up our daughter we must—before we actually get to see her—settle up her “Canteen tab”, which comprises items (e.g., batteries, candy, soft drinks) she “purchased” from the little on-site store as well as the costs associated with day trips (e.g., to a nearby amusement park) planned by the camp.

All these additional costs took us by surprise. Maybe they were buried somewhere in the material provided about the camp, but they certainly weren’t prominently displayed. Moreover, we had no control over the expenditures. I’m confident that opting-out of the amusement park trip was not an option, nor would I have wanted to deprive my daughter of the experience, but since the camp knew it was going to charge me for these things, why didn’t it clearly tell me upfront…or better yet, why not build the charges into the cost of the camp?

And that brings me to what this whole experience should teach us about the importance of thinking strategically about the relationship between poor customer experience and lifetime value. My daughter might come back from camp having had so much fun that alternatives will not be an option next summer, and the camp will retain us as customers. However, the camp’s poorly considered pricing and communication decisions mean that even if my daughter loves it, I don’t. The next time another parent asks me how it was, my answer will be “Well, my daughter thought it was great, but it aggravated me like crazy….”

That’s called negative word-of-mouth and it should be a cause of concern for any business—but especially ones like this camp that relies on referrals for most of its marketing. Now, not only am I on the fence about sending my daughter, but I’m sure the parents I talk to will have second thoughts about sending their children. Avoiding this problem wouldn’t have involved any loss of profit for the camp; all it needed to do was follow the rules laid out at the top of this post.

Anthony Nygren

A Look Inside Sales and Marketing at SaaS Companies, Part 2

In a previous post reviewing some of the data from the Pacific Crest SaaS company survey, we highlighted some of the sales and marketing strategies that distinguished higher growth companies from their slower-growing peers. This time, we’ll look at other data from the survey that reveals that for all SaaS companies, there are significant areas of missed opportunity.

The chart below speaks to the ability – or inability – of SaaS companies to upsell existing customers.

Across the entire sample population, the mean percentage of new annual contract value dollars coming from upselling existing customers is only 19%. Larger companies (20%) are no better than small companies (23%) who are themselves not much better than mid-size companies. With a business model that depends on future revenues to payback initial sales and service costs, there seems to be a significant missed opportunity for maximizing lifetime customer value. In addition to needing that upsell revenue to maximize profits, SaaS companies have a wealth of usage data that can and should be used to target upsell offers based on actual customer behavior.

The next chart, which shows the distribution of respondents based on contract renewal percentage, also points to missed opportunities for maximizing lifetime customer value.

While this data isn’t segmented by size or growth attributes, the sheer fact that fewer than half the respondents achieve a 90% or greater renewal rate – and that 25% don’t even reach 80% – suggests a widespread lack of execution. Often, sales and service efforts are entirely focused on closing the deal and getting the customer up and running; ongoing support, nurturing, and engagement are neglected. To help correct this neglect, consider a service like Totango, which enable SaaS companies to monitor usage behavior and thus identify underutilization (which can lead to a lack of value recognition on the customer’s part at renewal time). Then create email campaigns that target the areas of underutilization with news about training and support options. Greater utilization leads to greater value recognition, which should have a significant positive impact on renewal rates.