Saturday, October 3, 2015

Your toughest competitor… inertia

It's possible that the competition for your technologically sophisticated, software-as-a service (SaaS) solution is somebody else’s technologically sophisticated SaaS solution.  

Some markets are jam-packed with SaaS solutions, all scratching each others' eyes out to win deals. 

But while you're battling tooth and nail with other SaaS solutions, don’t forget about the other competitor in the picture:  inertia.

In many cases, in fact, inertia may be your toughest competitor.

A high tolerance for "good enough"

Your target customer has probably been stumbling along for quite awhile, somehow managing to get by with a mediocre solution.  Depending on the department and the function, it probably consists of some combination of a spreadsheet, email, Word docs, and paper forms.  Sometimes Quickbooks or sticky notes are in the mix, too.

Of course, you know that home-grown solution is less than optimal.  It’s awkward to use, prone to error, and inefficient.

In fact, the prospect probably knows that too.  They're quite aware that the system they’re using now is really just barely good enough.

But most companies have a high tolerance for “good enough.”

Only urgent problems get attention

Folks at these companies are busy, they have lots of other priorities, and they can only focus on things that need urgent attention.  If the problem you solve is way down on their list of priorities, your solution isn’t likely to get attention any time soon.  So the prospect customer puts off any decision to evaluate alternatives, replace the current system, and purchase something new.

It’s not that they’re buying a solution from some other vendor.  They’re simply not buying anything at all.

Time is not on your side

Delays like this are a particularly acute problem for SaaS companies.

SaaS companies have incurred lots of costs up-front to get a prospective customer’s attention.  Adwords, events, inside sales, or whatever other tactics you use to attract prospects cost money.  To recover that investment in sales and marketing, companies need to convert those prospects into paying customers.  That’s how the SaaS model works.

When the prospects have no sense of urgency, no immediate need to buy, the sales cycle gets longer, and the SaaS companies collect no revenue.  That’s a problem.

And the longer the sales cycle runs, the longer the delay before there’s a purchase, and the bigger the problem.

Companies need much deeper pockets to fund a six-month sales cycle vs. a six-day sales cycle.

Subscription deferred is actually revenue lost

But wait it’s actually worse than that.  Under a subscription model, revenue that’s deferred is actually revenue that’s lost.

In the traditional license model, if a deal gets pushed out from January to April, the license fee is still received in full, albeit one quarter later.

But in the SaaS subscription model, if a purchase decision moves from January to April, that’s three month’s worth of subscription revenue that’s lost.  When those three months have passed, they’re passed.  It’s not possible to recover the subscription revenue for that quarter.     

What’s a marketer to do?

It’s not enough to trot our your impressive roster of features, benefits, and advantages.

The first task is convince the prospect that they have a problem and that their existing system is not, in fact, good enough.  They need to see that every month, every week, every day that they ignore it, and try to get by with their existing solution, is badly hurting their business.

You need to point out, for example, that:
  • Their paper-based recruiting system is losing them great candidates and costing them hours per week. 
  • Their accounting solution is losing track of thousands of dollars and exposing them to liability.
  • Their customer support solution built with email and Word is infuriating customers.
  • Their inventory management system cobbled together with Excel and paper documentation is costing them lots of money in overstocks and shortages.
 Until they see that they have a problem - an urgent problem - they don’t care about your solution.

Saturday, September 5, 2015

Let Your Prospective Customers Know "This Solution is for You"

I'm guessing that at some point before you built your software-as-a-service (SaaS) solution, you thought about who
might need this kind of product.   

Maybe you figured it out through market research, your own personal experience and frustration, or a flash of inspiration.

Whatever the methodology, either consciously or unconsciously you somehow answered a critical question: Who would need a solution like this? 

What prospects want to know first 

Oddly enough, that's exactly the same question prospective customers ask.  When they find their way to your website, scan your email, or walk by your trade show exhibit, what they want to know is this: "Is this solution meant for me?"

Before they think about anything else - how's the solution built, how much does it cost, what are the key features and benefits, etc. - they need to know if they are the intended buyer. 

And by the way, you need to answer that question in 60 seconds or less.  That's about how much of their attention you've bought through a pay-per-click campaign, a tradeshow, PR or whatever tactic you've used.   

If you can't nail that question in that short window, you've wasted your money and your opportunity.  The prospective customer ends up clicking, deleting, or walking away. 

I'm talking to you! 

Tell the prospect right up front who you built this solution for.  You want to make it crystal clear to them that "I'm talking to you."  

And the more explicit the better.

 For example, this solution is designed for "small dental offices," "K-12 school districts," "companies with 3 or more warehouses," "companies spending more than 10 hours per week tracking vacation and time-off requests," or whatever.   

The people in your target market should know, without any doubt, that you're talking to them.

Be specific, not generic 

Believe me, I know that it's difficult to narrow your target market.  There's always a nagging fear that you're leaving out a lucrative potential market.  You figure that with a few tweaks here and there, your solution probably could be adapted to a broader market and another set of prospects. 

Resist this urge.   

You want the prospect to see your product as "the perfect solution" for their particular problem.  It's not a generic tool that can be adapted to handle some of their needs... sort of.   

They don't want a "mediocre fit."  They want  a "perfect fit." 

Of course with enough resources, you can sell to multiple audiences and multiple markets.  But each one will require a dedicated focus.  Each group of prospects expects that your solution will solve their particular challenges and is built to suit their specific requirements. 

Prospective customers don't care about everybody's problem.  They care about a solution that perfectly fits their problem.

Saturday, August 8, 2015

How to Lose a Customer in the First 90 Days

Bravo!  You’ve landed a new customer. 

You've successfully lead someone through the tortuous process from a lead to a qualified opportunity, maybe to a free trialer, and finally to a paying customer.

And you’ve been racking up customer acquisition costs all along the way.  Whatever tactics you use - search engine marketing, events, email, webinars, etc. - they all cost money.

So now that that prospective customer is a paying customer, it’s time to start to recover those costs.

The SaaS customer acquisition machine

That’s exactly how the software-as-a-service (SaaS) business model is supposed to work.   You invest money up front to acquire a customer, and over time you collect enough revenue from the customer to recover the money.

With a well-functioning SaaS customer acquisition machine in place, you should be putting in $1 for customer acquisition cost at one end, and $3, $4, $5 or more should come out the other end.

Of course, the machine only works if the paying customer sticks around long enough to recover your acquisition costs.  If you put in $1 and the customer only pays for 3 months, you may only see 25 cents in return.  Your machine is broken.

Right about now you might be asking “How long is long enough?”  How many months or years do you need to hang on to that customer?

That depends on how much it cost to acquire the customer and how much they’re paying you.  The higher the customer acquisition cost (CAC) and/or the lower the revenue, the longer the payback period.  (See a more complete discussion of "paying today for a return tomorrow" in this post on the "Wimpy Effect.")

Why customers leave too soon

Lots of customers will try a solution for 2-3 months.  With most SaaS solutions, deployment is hassle-free, and there’s no upfront license fee or long term commitment.   That’s the good news.

Here’s the bad news.  For those very same reasons, it’s easy for them to leave after 2-3 months.

Why does that happen?

Sometimes the customer figures out that the solution just isn't the right fit for their problem.  Stuff like that happens every once in awhile, and you really can't do much about it.

But there are other problems that you can do something about. 

Poor on-boarding

No matter how simple you think your product is to learn and use, in most cases a new customer needs at least a little bit of guidance to get started.  A "quick start" guide, helpful "sign-posts" built into the product, or a "getting started" video might be all that's needed to get them started and to build their confidence.  (Most folks don't have time for an hours-long training course anyway.)

This kind of on-boarding help is especially important when there are many users (for example, an HR
application used by every employee) or there's a lot of existing data to be imported into the new system.  Without some help to get over these initial barriers, new customers may never actually deploy the solution.

In the world of on-premise, licensed software, this is fondly referred to as "shelfware."  The difference in the SaaS world, however, is that the vendor doesn't receive a large upfront license payment, and customers won't keep paying for a subscription that they don't use.  They'll leave.

Reality doesn’t match the promise

Marketing and selling SaaS solutions is really about marketing and selling promises.  The vendor promises to deliver certain functionality over the course of the subscription.  (See "SaaS Marketing is About Promises, not Products.")

If the actual solution doesn't deliver on the promise, new customers will not only be disappointed with the functionality of the product.  They'll lose confidence in the SaaS vendor.  And then they'll leave. 

Gotcha pricing

In many cases, it makes sense for the SaaS vendor to publish their prices on their website. 
Prospective customers need the information to see if the solution fits within their budget.  They may also see it as an indication of the vendor's transparency. 

New customers rightly expect that the price they pay is the price that's posted.  And they're usually surprised, disappointed, and even upset when it's not.  When the invoice includes "extras" such as a required minimum number of users, a mandatory data migration fee, or other unexpected "gotchas," new customers are not happy.  And they leave.

Marketing extends to customer retention

For SaaS marketers, the customer acquisition process does not end once the prospective customer converts into a paying customer.  The SaaS model doesn’t really work that way.

Success requires that you hang on to that paying customer for awhile.  SaaS providers that don't pay attention to retaining new customers - especially through the first critical 90 days - will fail. 

Tuesday, July 7, 2015

Good content marketing requires good content

Content marketing isn't just a good idea.  It actually works.

I've seen it work for my clients and I've seen it work for my own business.  Most folks find me by
way of my blog or my newsletter.

When it's done well, content marketing can boost visibility, enhance credibility, and generate inbound leads.  There's a reason it's sometimes called "inbound marketing."

It can be especially effective for software-as-a-service (SaaS) companies, where keeping the cost of customer acquisition is critical.

But here's the thing about content marketing:  It requires good content.

Seems obvious, but lots of SaaS companies have a hard time getting this right.

First explain the problem

Too often, companies think "content" means a product brochure, a demo, a data sheet, or something else that's all about the solution.

But most prospects are not yet ready to hear about the solution.  They first need to learn more about the problem.

  • What's wrong with their existing process or product?  
  • Who exactly has this problem?  
  • How costly is it?
Until prospective customers acknowledge that they have a costly problem and recognize that there's a better approach, they're not yet ready to pay attention to any vendor's particular solution.

Many of my blog posts and newsletter put the problem right in the headline, e.g. "Most demos are useless," or "Avoid random acts of marketing."

Once prospects recognize that they have an urgent project, then - and only then - should you start talking about how your product works.

Educate and earn the right to promote

At the beginning of the evaluation process, content that helps educate the prospect will be more effective than promotional product brochures.

The vendor has two tasks at this early stage of the process.

For one, they need to educate the prospect.  Besides helping them to understand the scope of the problem, the vendor can help explain to the prospective customer how to evaluate solutions.
  • What criteria should be used?
  • Who should be involved?
  • What are good sources of information?
The second goal for the solution vendor is to establish credibility.  The prospect must have confidence that they are working with a knowledgeable expert, a company that truly understands the needs of customers.

This is especially important for SaaS as the prospects will be relying on the vendor to deliver reliably over the life of the subscription.  (See "SaaS marketing is about promises, not products.")

Of course at some point in the prospective customer's evaluation process, they'll need to see material specifically about the product and how it works: data sheets, technical specs, etc.  But first the vendor needs to show they're knowledgeable and credible.  They need to earn the right to show their product to the prospect.

Saturday, June 13, 2015

Where Up-Selling Goes Wrong

Up-selling can be a very good thing for software-as-a-service (SaaS) companies. It’s a winner on two counts:
  1. It boosts revenue per customer
  2. It usually lowers the cost of customer acquisition. 
According to one critical SaaS metric - Customer Lifetime Value/Cost of Customer Acquisition - up-selling is a formula for success.

But selling to existing customers isn’t always easy and there are few ways it could go wrong.

Unhappy customers

Before you can sell new services to an existing customer, they need to be happy with the old services.  That sounds obvious, but it’s easy to see how companies can get it wrong. 

Imagine a sales team that’s not connected to the support team.  In that instance, the sales person may have no idea that a customer is in the midst of a long unresolved support issue.  When the sales person calls on that account to sell add-on services, that might not go so well.

Bad timing 

Sometimes the up-sell effort is simply mistimed.  There's both a good time and a bad time to try sell new services.

I purchase services from one particular SaaS company that insists on pitching me new services every time I call in to their support people about a problem I'm having with their service.  I’ve just called with a complaint, and you want me to buy more stuff?!  Not right now, thank you.

Hidden cost

Customers don’t react well when the additional service you’re offering really ought to be part of the standard subscription fee.  If it's something that’s fundamentally necessary to make the solution function effectively, the customer rightly expects it to be included... not an add-on that they need to pay extra for.

I’ve even seen SaaS companies that charge extra for an add-on service... and then require the customer to buy it. That doesn't sound like the way you want to treat new customers.

Wrong offer

Offering to provide an add-on service to an existing customer is usually most effective if it’s targeted to their particular needs.  If the add-on is best-suited to your larger customers, for example, focus the up-sell effort on your larger customers.  Offer something else to your smaller customers.

This is one of the advantages of offering a SaaS solution.  You actually do know quite a bit about your customers and how they use the solution.   You should be able to target precisely those that might be most interested in particular add-on services.

In fact, trying to up-sell everything to everyone can backfire on you.  When you present them services that aren't appropriate for them, your customers get the impression that you really don’t know much about them.  That's not good for a long-term relationship.

Saturday, May 2, 2015

FIve mistakes with free trials

It’s common for software-as-a-service (SaaS) companies to offer free trials.  That’s because a lot of times they work.  Done well, free trials can be a very effective way to attract new customers. 

But done poorly, they can be an expensive failure. 

I’ve seen SaaS companies make several common mistakes with their free trials.

1.  “Free” isn’t really “free”

Sure, it’s called a “free trial.”  But to the SaaS vendor, it’s not really free.  They’ve paid to build and host the solution, and attract and support the trialer.

And it’s not really free to the trialer either.  They’ll invest a fair amount of time learning and evaluating the solution.

So if you’re going to offer a “free trial,” recognize that it actually will cost something. 

2.  A free trail doesn’t always make sense

Free trials make sense for certain solutions and markets, but not all of them.  For example, customers might not be eager to deploy a critical enterprise application throughout the entire organization as a free trial.  There’s just too much at stake.

Talk with your prospective customers to see if they’d consider taking on a free trial.  You might find that they’re not as eager as you might expect. 

3.  Free trialers need guidance

If you want free trialers to see the value in your solution, you need to take them by the hand and show them.  If you let them just wander around, don’t expect they’ll see what you want them to see. 

Whether through a phone call, email, video, sign-posts in the trial, or some other way, walk the free trialers to the handful of awesome features and benefits that you think will cinch the deal.  And try to get them there in less than a few minutes.

4.  Free trialers don’t convert automatically

Just because someone signed up for the free trialer doesn’t mean the marketing and sales job is done.  It takes some work to convert them into a paying customer.  They need to be shown the value in the solution (see item 3, above), push it to the top of their to-do list, allocate budget, and trust the vendor. 

All that might not happen by itself.  It requires some effort.

5.  “Lost trialers” aren’t really “lost”

Just because a free trialer didn’t convert to a paying customer at the end of the trial doesn’t necessarily mean they’re no longer a prospective customer.  It doesn't always mean that they've purchased another vendor’s solution or changed their mind.  They simply got distracted by other priorities and the trial period expired.

Stay in touch with these “lost" trialers.  At some point, whatever problem they had that caused them to sign up for the trial in the first place will probably bubble back up to the top of their priority list.

When that happens, you want to be top-of-mind and give yourself a second chance.


Saturday, April 4, 2015

SaaS Marketing is About Promises, Not Products

If you’re a software-as-a-service (SaaS) marketer and you think you’re marketing a product, think again.

What you’re really marketing are promises.  You’re promising to customers that you’ll deliver value over the life of the subscription. 

Though part of that value includes making available a certain set of functionality on day one - features to track a sales pipeline, manage inventory, handle HR, etc. - it goes way beyond that. 

You are also promising that you’ll deliver:
  • Hassle-free deployment
  • Reliable performance and instant access
  • Security for the customer’s data
  • Expert customer support
  • An ongoing stream of enhancements

Earning trust means more than showing features

That’s a lot of promises, and marketing them requires that you win the prospective customer’s trust.  They need to believe that you'll make good on them.  There's a lot more to it than just showing that the features work.

You need to show customers that you’re committed to a long term relationship… something that extends beyond a one-time transaction.

You need to show them other customers that you’ve kept satisfied over a long period. 

You need to show proof of reliability and security, and a track record of enhancements.   

In short,  you need to show them you’re a company they can trust.

There are several critical differences between marketing SaaS and traditional on-premises software:  different buyers, different messages, and different processes.  Marketing SaaS requires a different strategy, something fit for selling promises, not just a product.