Tuesday, September 2, 2014

A Free Trial Isn't Really Free

Free, free, free. 

It sure is a powerful word.  Which probably explains why “free trial” is used so often by software-as-a-service (SaaS) marketers.

Lots of SaaS solutions, whether they’re for business or for personal use, let prospective customers use the solution for free.  And then after 15 days, 30 days, maybe 60 days, they ask them to actually pay for it.

(For now, I’ll focus on free trials.  I’ll leave the subject of “freemium” or “free forever” for another day.)

Here's one reason free trials are so common:  they work.  They can attract lots of users, and even lots of paying customers, if they’re done properly.

I’ll let you in on a secret about free trials, though.  They’re not really free.

Not free for solution providers

Free trials cost money for the SaaS providers.

There’s the cost of developing, hosting, and maintaining the solution. 

There’s the cost of supporting the solution if you offer help to the  trailers.

There’s the cost of attracting prospects to the free trial in the first place.  Search engine optimization, pay-per-click, email, PR, or whatever other tactics you’re using to drive people to find your free trial cost time and/or money.

And then there’s the cost of trying to convert the free trialers into paying customers.  Whatever you’re doing, it’s not free. 

If you’re not doing anything to convert trialers to paying customers, we should talk... soon.

Not free for the customers

Free trials aren’t really free for prospective customers either.

It takes time for them to find the solution and figure out if it’s something worth trying.

It takes time to register and then download the solution.

It takes time for trailers to learn to use the solution

And then it takes time for them to input some data and actually work with the solution enough to see
any value in it.

None of these activities are costing customers cash out-of-pocket.  But their time isn’t free.  

These prospective customers evaluating your solution are busy folks.  They've got a long list of things to take care of during the course of a day.  If they want to use the free trial, they’ll need to make time to do that.

By the way, if the folks using your free trial have all the time in the world, you might wonder whether they have the authority and budget to eventually make a purchase.

Think before you go free

If you offer a free trial, or you’re considering one, keep the costs in mind… both the costs to you and to the customer.  Ignoring them usually leads to failure... namely, high costs and low revenues.

Free trials, done well, can be effective.  But they’re not really free.

Monday, August 4, 2014

The human touch wins SaaS customers


Lots of smaller software-as-a-service (SaaS) businesses are tempted to try to sound “corporate” or
hide their real personality when they talk to prospective customers.

They act impersonal, like some alien borg.

They think that “sounding bigger” makes them more credible.

It's a bad idea that usually doesn’t work.


How can I trust you?

It’s hard to gain the trust of prospective customers if the provider is faking it.  People usually see through that.

And it's hard to sell SaaS without trust.

When customers buy a SaaS solution, they’re not buying a product;  they’re buying a promise.  They are relying on the vendor’s promise to deliver certain functionality and service over the life of the subscription. 

Which means that before they subscribe, the customer needs to trust the provider.   They need to believe that the SaaS provider will deliver as promised.


Instead of faking it, SaaS companies would be better off acting naturally.  If a company is smaller, friendlier, and can treat customers with a more personal touch than its larger competitors, it should flaunt it, not hide it.


The buyers are also the users
 
The prospective customers care about the kind of people they'll be working with over the life of the
subscription.

Whether they're in HR, sales, marketing, finance, or somewhere else in the organization, the people that are evaluating the SaaS solution before its purchased are often the same people who will actually be using the solution after its purchased.  There’s often no “intermediate buyer” in IT or procurement.

What that means is that the people making the purchase decision will also be considering the “personality” of the SaaS provider.  Besides thinking about features and functions, they’ll be asking themselves, “Are these the kind of people I’m going to want to work with if I subscribe to this solution?”

In most cases, they'll prefer friendly, personable experts over an impersonal, corporate borg.

Sunday, July 6, 2014

SaaS Marketing is Not a Numbers Game

"If we just dump enough names in the top of the funnel, some paying customers are bound to come
out at the bottom of the funnel!"

Wrong.

This approach to customer acquisition - sucking in as many suspects as possible - is costly and inefficient.  In other words, it's a very bad fit for software-as-a-service (SaaS) companies.

For one thing, collecting all those names isn't free.  Adword campaigns, website optimization, list purchases, or any other tactics you might use to attract possible leads cost money.

And then cultivating those contacts - qualifying and nurturing them into legitimate opportunities - costs even more money. 

Working on bad leads actually costs money; it doesn't make money.  (See "When Lead Generation is a Bad Thing.")

Low yield doesn't work for SaaS

This "strategy" - pull in as many names as possible and then hope that at least a small percentage of them eventually convert to paying customers - creates a tremendous strain on the SaaS business model.

On the expense side of the equation, it means substantial sales and marketing costs that are incurred up front.

On the revenue side, it means small and uncertain income collected over a period of time.

Relative to expenses, revenues are too low and too slow.

Timing vs. quantity
 
The goal is not to get as many names into the top of the funnel as possible. 

Instead, companies should be trying to get the right names into the funnel and move them through it as quickly as possible.

SaaS success requires turning "suspects" into paying customers as quickly and efficiently as possible.  The goal is to shorten the conversion cycle.

SaaS customer acquisition is actually a timing game, not a numbers game.





Tuesday, June 3, 2014

Accelerating the SaaS Purchase Process

Inbound marketing can be very cost-effective, but it can also be slow.

Inbound marketing relies on prospective customers making contact with vendors.  That's the other way around from traditional marketing, where vendors try to make contact with potential customers.

What that means is that by the time the vendor engages with a prospective customer, that prospect is already fairly far along in the evaluation process.  They're already familiar with the vendor and the solution.  In other words, they've qualified themselves.

That’s perfect for software-as-a service (SaaS) vendors.  They can focus their sales and marketing activity on well-qualified prospects.  

That fits well with the SaaS business model which demands that companies spend their sales and marketing resources wisely.  (See "SaaS companies can't afford to sell")



Finding customers in the short term

But it’s not so perfect for SaaS vendors in a hurry.

While inbound marketing makes sense - and the process usually works over time - it can be a long journey.  The prospective customers move at their own pace, not the vendor's pace. 

If you're a SaaS vendor that needs to close business in the short term, you need to add in some other tactics.  Inbound marketing may not have the instant impact you need.

Friends & family

There’s a reason most vendors’ early sales are to friends & family.  These folks already have some connection to the vendor.  They might be a previous employer, an investor, or former colleagues, for example. 

Vendors looking to quickly sign on some early customers should focus their efforts on these friends & family. 

These folks are already familiar with the vendor, which means they’ve already passed through the early stage of the evaluation and purchase process.  They're more likely to buy the solution in the short term.

The early adopters

In most markets, there is usually a cadre of early adopters, folks that are actively looking for innovative solutions. To gain a competitive advantage and bolster their credentials as market leaders, they are more willing to try technology solutions before they become mainstream. 

If you're looking to close business in the short term, seek out these early adopters.

Where do you find them?  Look at the press announcements for vendors selling solutions that are
complementary to yours.  See who’s speaking at relevant conferences.  Find out who's publishing a blog that describes their experience using new technologies.   

Leverage the early adopters

One of the reasons early adopters want to be out front is that they like being known as innovators.  They want others to take their advice and follow their lead. 

So once you've secured one of these folks as a customer, enlist their help to find others.  They tend to have a wide sphere of influence.  They post, they speak, they network.  And they’re often willing to help.

Don’t abandon inbound marketing

Do keep one thing in mind:  While you’re focused on closing a few deals in the short term, don’t forget about inbound marketing.  That's what you'll need to attract the prospects that will fill your sales pipeline over the medium and long-term. 

These are the customers that will get you “across the chasm” and help you establish a sustainable revenue stream. 

Yes, it may take them some time for these prospects to get to know you, assess their needs, and evaluate how well your solution fits their requirements and budget.  (See "Winning SaaS customers requires patience.")

But when they do eventually get there, they’ll be well-qualified and ready to seriously evaluate your solution.  You just can’t rush the process.





Creative Commons License

This work by Peter Cohen, SaaS Marketing Strategy Advisors is licensed under a Creative Commons Attribution 3.0 Unported License. Images obtained via iCLIPART.com.









Monday, May 5, 2014

What makes junk mail junky?


The junk email I get about replacement windows, oil change coupons, and life insurance doesn’t really bother me.

Somehow I got on a list of millions of people who own a house, own a car, and can still fog a mirror. 

These emails go out in bulk and luckily my spam filter traps most of them. 
 
Are you talking to me?  Really?

What does bother me though is the inappropriate email I get that isn't sent out by the millions.  It's the ones that come out from a real person who somehow thinks I'd really be interested.

I get several of these every week from PR people who want me to talk with their client who’s been named “something or other of the year,” or who thinks I ought to do a blog post on “Promotional Products Work! Week,” whatever that is. 

A few weeks ago, someone sent me a press announcement about changes to tax law in Idaho.  Huh?

These emails are friendly enough, and I’m certain that a new tax law in Idaho is very interesting to someone… but not to me.

Anyone who's spent any time trying to figure out what I would really be interested in would know that.

I’m not asking folks to do a lot of work here.  Thirty seconds on my website or LinkedIn profile will tell you everything you need to know.

Junk email is bad for SaaS marketing

So other than a rant about junk email that finds its way to my inbox, what does this have to do with software-as-a-service (SaaS) marketing?

For one thing, this kind of inaccurate marketing costs time and money.

Some marketing or PR person spent at least a little bit of time putting together the note... though obviously not enough time to figure out whether I’d really care about whatever it is they're promoting.

And if they follow up the note with a phone call, it’s even more time-consuming and more expensive.

If you're using poorly targeted email to market a SaaS solution, you're wasting time and money.  And the SaaS business model doesn’t leave much room for that. (See "SaaS customer acquisition: Feed it or starve it?")


Junk mail costs trust

The bigger cost though is credibility and trust.  And for SaaS businesses, that means a lot.  

Remember, SaaS marketers are selling a promise, not a product.  They are promising to deliver some benefit over the life of the subscription. 

Before they buy anything, the prospective customer needs to trust that the vendor will deliver on that promise.  (See "Winning customer trust.")

Establishing that kind of trust first requires that the vendor spend a little bit of time finding out about the prospective customer.
  • What kind of tasks are they responsible for?  
  • What challenges do they face?  
  • What kind of solution might help them succeed? 
How do you find that out?  Ask.  (See "Listen to your SaaS customers," March 2014)

Wrong mail to the wrong person = wrong result

When a SaaS marketer sends out an email to a prospect before they know anything about the prospect, they’re off to a bad start.  It’s tough to start a relationship with someone when you haven’t bothered to find out anything about them.

All you’re likely to do is waste time and money and annoy the prospective customer. 

Rather than respond to your email, the prospect is likely to wonder:  “What in the world was this person thinking?!”

Monday, April 14, 2014

Winning SaaS customers requires patience

"Eighty percent of success is showing up."  — Woody Allen.


For most companies, buying a software-as-a-service (SaaS) solution to address a critical business need isn't a decision they take lightly.

Evaluating a solution to support HR, CRM, finance, marketing, or any other important part of the business takes a good amount of deliberation.  It could involve a demo or a trial.  There might be several people involved in the decision.  It could require a series of meetings or presentations.  In other words, it takes time.

And time is in short supply.  Prospective customers don't have a lot of it.

What's urgent for you isn't necessarily urgent for the customer

While you, a SaaS vendor, thinks your solution is the most important priority, the customer has other items on their to-do list.  And the particular problem your solution is addressing just might not be at the top of the list right now.

That doesn't mean they don't have a problem that you can solve.  It doesn't mean they don't like your solution or your company.  And it doesn't mean they've already bought a solution from some other vendor.

It just means they're not ready to evaluate your solution and make a purchase decision right now.

Two options:  Push or Wait

So what's a SaaS vendor to do?

One option is to push.  That is, try to move the problem and your solution higher up on the priority list.

Create a greater sense of urgency and convince the prospective customer that every day they delay, they're losing money, losing customers, exposing themselves to risk, or some other bad outcome.  (See Practical Advice on SaaS Marketing newsletter: "Turn 'nice to have' into 'need to have.'")

Another option is to wait.

But waiting doesn't mean sitting on your hands and doing nothing. It means staying in front of the prospect, so that when they are ready and able to spend the time to evaluate solutions, you'll be there.

Guidelines for waiting

Waiting isn't easy, especially when your company has sales goals to meet.  But there are a few guidelines to doing it effectively.

Be consistent:  Staying in front of a prospective customer requires a long term commitment.  It can easily take a prospect many months before they fully engage on an evaluation of your solution.  And you'll probably not know precisely when that moment arrives.

That means you need be in front of them consistently... maybe not once every week, but certainly at least once every month.  A "one and done" approach won't work.

Educate your prospect:  The most effective way to stay in front of prospects is to provide something useful for them.  Publishing an insightful white paper, a blog post, benchmark data, or some other valuable content reinforces your credibility and makes a positive impression.

By the way, keep in mind that just because someone's on your contact list isn't an invitation to harass them.  A high "opt-out" rate will tell you've crossed into "spammer" territory.

Keep costs low: All of this effort to stay in front of prospects while you wait patiently isn't free.  It's part of the customer acquisition costs that make the SaaS business model so challenging.  (See "How to cut customer acquisition costs.")

But there are ways to keep the costs under control.  Email newsletters, white papers, and blog posts, for example, are fairly inexpensive to distribute.  On the other hand, on-site visits from sales executives are expensive and probably not the most efficient way to stay in touch with prospects who are not yet ready to fully engage.

This stuff does work

I recall work I did with one particular vendor to assess whether this "stay in front of prospects" strategy really works.  We looked at the deals we had won and worked backwards to examine the entire life of the relationship with the customer.

In most cases, we found that the process extended over many months and involved at least ten "touches" with marketing material.   That is, we got in front of the prospect ten times over the period: sent a white paper, invited them to a webinar, delivered a blog post, etc.  All that activity happened before the customer seriously engaged in an evaluation of the solution and began working closely with a sales person.

Believe me, I know patience isn't always easy.  But if you're selling important solutions to enterprises, plan for it.  It's just the way the process works.





Monday, March 10, 2014

How SaaS Marketing has Changed

Over the 10 years since salesforce.com went public, a few things have changed in the way we market software-as-a-service (SaaS) solutions.

For one, companies are getting more comfortable with the idea of running critical business functions in the cloud.

Not too long ago, people marketing SaaS solutions spent a lot of time trying to convince prospective customers that putting key applications and data on the cloud was OK.

We put together plenty of documents - white papers, fact sheets, policy and procedures documents, and more - explaining that SaaS solutions were reliable and sensitive information stored there would be safe.

Fewer concerns about "the cloud"

I don’t hear many of these concerns anymore. 

Companies have grown more comfortable with the idea. 

Maybe the hosting companies have earned more trust, building a solid record of security and high-availability over the years. 

Or maybe the benefits of cloud-based solutions now simply overwhelm the possible downsides.

Of course when companies evaluate SaaS solutions, the IT professionals still care about security, performance, and integration issues.  They need to do their due diligence and ask the tough questions.  And solution providers need to have solid answers.  (For more on addressing these concerns, see "SaaS Security:  Don't Ignore It.")

Smarter buyers

As the SaaS market has matured, buyers have become more knowledgeable.  In some markets, they are now on the second or third generation of solutions.  These companies are often replacing existing systems, not adopting automation for the first time.


With this experience, buyers have a much better idea of what features and functions they really need, and what they’re willing to pay for.

To package and promote their solution effectively, SaaS marketers need a much better understanding of these more sophisticated buyers. There's no point in highlighting features and benefits that prospective customers don't really care about and aren't willing to pay for.

“SaaS” by itself isn’t a selling point

In many markets such as HR or CRM software being “SaaS” doesn’t, by itself, distinguish one solution from others anymore.  The benefits - faster deployment, no local servers, access from anywhere, regular enhancements, lower cost, etc. - are now simply “check box” items for prospective customers.  They expect them from all the solutions they’re considering.

Of course, vendors should include the benefits of SaaS in their marketing messages, but it may not make sense to put them at the top of the list. 

(A brief commercial interruption:  Contact me if you need help understanding your prospects and preparing your marketing messages.)

Some things stay the same

Though there have been some changes, some of the challenges of marketing SaaS solutions have stayed the same.

When a company’s evaluating a SaaS solution, there’s still a broad mix of folks involved in the process.  Along with IT and procurement, there’s the business owner, the department head, and the end user.  In fact, it’s often the department head - the executive responsible for Sales, Marketing, or HR, for example - that initiates the process. 

We folks marketing SaaS solutions need to reach each of these audiences and address their particular concerns.  The head of HR or the head of sales needs to hear different messages than the IT executive.


SaaS marketing is still expensive

Another constant is the high cost of acquiring customers.

In its most recent financial statement, salesforce.com reported it spent 53 percent of annual revenues on sales and marketing.  By far its largest single expense, sales and marketing costs have kept it from net profitability.  And this is for a SaaS company that is already well-known and well-established.

Yes, there are ways that SaaS companies can keep their customer acquisition costs under control - inbound marketing tactics, low-touch sales models, etc. - but sales and marketing is still going to be a substantial expense.  (See "Customer Acquisition Spending: Lessons from Workday")


It takes a lot of work and money to build visibility and credibility, generate leads, nurture leads into qualified opportunities, convert them into paying customers, and then retain and up-sell those customers.

That's an effort and an expense that hasn't changed for SaaS companies.