Category Archives: Investment

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 Six Triggered Campaigns Every SaaS Marketer Should Try

Almost any business can benefit from the strategic implementation of triggered campaigns (see: http://www.emiboston.com/wp-content/uploads/2012/03/Triggered-Campaign-Field-Guide.pdf) to increase mindshare, walletshare, and lifetime customer value. For SaaS businesses, though, the benefits can be even more powerful as success depends on the optimization of the ongoing revenue stream from existing customers and prospects in trial. In a SaaS business, there is a proliferation of customer “moments of truth” – points in the customer lifecycle when the customer experience can significantly affect the business decision-making process. Because services are often paid for as-you-go, a change in usage volume, a service experience, training attendance (or lack thereof), and the degree of understanding of the product features can all lead to decisions to increase or decrease contract levels. As a result, marketing based on usage behavior and lifecycle rises significantly in importance as there is a strategic imperative to influence and/or drive interactions.

With that in mind, the following is a list of triggered campaigns that any SaaS marketing team should think about putting into circulation:

  • Free trial conversion. Once a prospect is in trial, that is the opportunity to communicate the value of the product – to reiterate the benefits and make it an easy decision for them to move from trial to paid. The conversion campaign should be planned as a series of communications, ideally including sales scripting. Customer testimonials and cautious use of incentives (e.g., discount offers) can be effective.
  • Win Back. You win some; you lose some. Having invested in getting the prospect to trial or even to a paid subscription, you shouldn’t sit back and simply accept the loss of a customer. A campaign based on common reasons for cancellation and/or non-purchase, potentially featuring incentives to entice the customer back, is vital to ensuring that you are maximizing the return on your acquisition costs.
  • Onboarding. Immediately after a customer has agreed to a pay is not the time to sell, but it is definitely the time to reaffirm the customer’s decision and the value of the product, as well as preparing the customer for future communications. The Onboarding campaign can be a single email, a series of emails, or even a multi-channel/multi-touch effort.
  • Training attendance. Even if it’s the greatest software in the world, customers won’t use more, expand their user base, and spend more unless they really understand how to use it. A triggered campaign targeting training attendance is therefore vital to maximizing lifetime customer value. The campaign can target individual users or a point-person/advocate who has a stake in training attendance.
  • Cross-sell and up-sell. After the onboarding campaign has laid the relationship groundwork and the training attendance campaign has ensured initial satisfaction, it is time to begin trying to increase walletshare. Cross-sell and up-sell campaigns should not apply a “hard sell” approach; they should be informative rather than overtly promotional. Again, customer testimonials (e.g., “see how customers like you are getting the most out of the software”) can be a powerful messaging element.
  • Feedback. Nothing enhances satisfaction like being asked for feedback. Any important point of contact (e.g., service call, initial implementation, training session attendance) should be seen as an opportunity to solicit opinions. But beware: if you don’t take action on the feedback, asking can be worse than not asking at all.

The good news for marketers is that not only is lifecycle information available for triggers, but now, through companies like Totango (www.totango.com), one can easily create and execute triggered campaigns based on software usage.