Category Archives: Customer Retention

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.

A Look Inside Sales and Marketing at SaaS Companies, Part 1

A survey of SaaS business executives recently published by Pacific Crest (results available free here) reveals some interesting information about the profiles of higher-growth companies.

In their graph below, we can see that while the greatest number of SaaS companies use a field-based sales strategy, those that use inside sales that are actually growing the fastest—on average, almost 75% faster than the field sales companies. (Growth is defined as year-over-year change in revenue.)

The complement to this graph is the one below, which shows that the Fast Growers (>45% growth) have lower customer acquisition costs. This differentiation is undoubtedly driven in part by the use of an inside sales force.

The final piece of the puzzle is revealed in the following graph. This slice of the survey data shows that Slower Growers are much more focused on Enterprise customers. Fast Growers, on the hand, balance their Enterprise sales with a healthy dose of SMB sales.

Of course, this data shouldn’t be read as an indictment of SaaS businesses that use field sales to sell mostly to the Enterprise; there are highly successful examples of such businesses. Instead, the data serves to highlight the achievement of those Fast Growers, and I hypothesize that effective marketing has played a key role in their success. It isn’t easy selling through an inside sales force to SMB; relationships are difficult to build over the phone and SMB management is often difficult to reach. Success, then, becomes a numbers game: Maximize leads (with a focus on inbound), and optimize conversions by creating tools to move prospects through the funnel. Without a highly capable marketing function, the numbers don’t add up and growth is elusive.

The Mobile Marketing Opportunity of Behavioral Routines

An article recently posted on the Mobile Marketer web site urges marketers to think longer term about what they can and should be doing to nurture a relationship with someone who clicks on their ad from a mobile device. While I certainly agree with all of the advice (and assertions of missed opportunity) in the article, I think that this doesn’t push far enough. There’s something more that should added to marketers’ thinking about interactions with customers and prospects on their mobile devices: routine behaviors.

Some time ago, I signed up to receive Groupon daily offers and, as a result, wake up every day to find my Groupon email waiting for me in my inbox. And every day, I read the email. I’ve probably bought 2 or 3 things in the 18 months I’ve been subscribed, but that lack of conversion hasn’t stopped me from checking that email every day. The reason? It’s part of my daily routine. Wake up, make breakfast, check email—including that day’s email from Groupon. The combination of the variety of the offers, the programmed consistency of delivery, and the fact that I always have my mobile device on hand has ingrained checking that email into my morning behavior.

While it may not be the case that every marketer pursuing every type of customer should think in terms of establishing a presence in the audience’s daily routine, the increasing ubiquity of mobile devices makes it an opportunity every marketer should be considering. To aid in this consideration, below are some scenarios that would make “behavior integration” a strategy worth pursuing:

  • A highly competitive battle for mind share and audience attention
  • A need to expand the target audience’s understanding of the range of product, services, or solutions offered
  • Under-utilization of a rich collection of thought leadership resources

In any of these scenarios—or, most of all, in environments in which more than one of these scenarios are combined—a strategy to foster a behavioral routine that leverages the particular usage profile of mobile devices is worth exploring.