Sunday, January 23, 2011

SaaS makes a mess of the org chart

SaaS messes up organization charts. It takes those boxes that represent separate departments and it smushes them together.

Let me give some examples.

Marketing & Sales: The marketing organization and the sales organization used to work separately, though they'd occasionally meet to cast blame back & forth. "Your leads are worthless; Your sales guys don't follow up," ad nauseam.

But the SaaS model requires an ultra-efficient customer acquisition process, and there's a penalty to pay for that kind of friction. SaaS companies can't afford to run marketing programs that generate leads that the sales force can't or won't follow up on. A disconnect means wasted leads, lost sales, squandered resources, and lots of nasty finger pointing.

Customer Support and Sales: Customer support and sales were also once considered neatly separated on the org chart. Sales brought in new customers, tossed them over to the customer support people, and moved on.

Not so in the SaaS world. Because SaaS customers can leave once their subscription expires and the company's success depends on renewals, the customer support organization is selling as well. Their ability to deliver quality support and a positive experience is critical to renewing customers and reducing churn.

There's no point in sales working hard to bring new customers in the front door only to have an inadequate customer support organization lose them out the back door. Given the high cost of customer acquisition, SaaS companies usually can't afford to win customers more than once.

User Experience and Marketing: I'll add one more example of org chart boxes getting scrunched together in the SaaS model: the user experience (UX) team and the marketing group.

Those clever and creative UX folks who make solutions usable share the same goals as the marketing team: clarity and simplicity.

The UX designers are trying to make applications easy to use. This is especially critical for broadly-deployed SaaS applications such as expense reporting or talent management.

Trying to patch over a confusing UX by providing lots of training and customer support is very expensive and doesn't fit the SaaS model well. Just a handful of long support calls might suck up whatever profit would be gained in a monthly subscription fee.

Similarly the marketing team is striving for clarity and simplicity. Confusing messages that target the wrong audiences will miss the most likely prospects. Worse, they'll bring in inappropriate prospects that won't eventually purchase your product. These bad leads cost you money; they don't make you money.

But the connection between UX and marketing goes beyond the fact that they share common goals. They actually depend on each other.

It's a waste to hide an elegant UX behind a heap of marketing mumbo-jumbo. If prospective customers are unable to quickly grasp how a solution could be helpful to them and why it's better than alternatives, they're not likely to go beyond the company's home page, brochure, or announcement to actually look at the product.

By the same token, no amount of clear messaging can save a complicated UX. If the product is hard to use, it's hard to sell... and even harder to renew.

Good UX demands good marketing and vice versa.

Wednesday, January 5, 2011

2011: More of the same... only worse

What's new for 2011?

Not much, really.

If you were looking for my "top ten" list of dramatically new trends for the new year, sorry to disappoint you.

What I expect is that we'll see many of the same things we've been seeing for awhile in software-as-a-service (SaaS) marketing... only more of it.

More confusion

Customers will confront more confusion about SaaS, PaaS, IaaS, cloud computing, private clouds, public clouds, hybrid clouds, etc. Much of that is a natural consequence of a still-emerging market, with every vendor, analyst, pundit, and guru trying to put their own spin on things.

For SaaS marketers that means you should continue to educate prospective customers. To put a twist on the old Sy Syms maxim, "an uneducated consumer isn't likely to be a customer at all." Help prospects to understand the basics of SaaS and you'll gain their confidence and accelerate the sales process.

More noise and distractions

It will be even more difficult to cut through the clutter this year and capture prospects' attention. Speaking from my own experience, there's ever more stuff coming at me through my email, phone, mobile device, web browser and TV screen. And at the same time, I think my attention span is getting shorter.

Marketers will need to get their messages across with laser-sharp clarity. If prospects can't figure out in less than a minute what problem you solve and why they should pay you money for it, they'll move on.

Over the course of the year, I'm planning on doing a "one-minute drill" on selected SaaS vendors' marketing messages to assess how well they articulate their benefits and advantages in under 60 seconds. Stay tuned.

More pressure on marketing costs

Companies learned a lot about cutting costs in the past couple of years, and many learned to do marketing on a shoestring. Be assured that our friends in the finance group noticed that marketing folks could do more with less. Or at least we could do something with less.

Bottom line, don't expect a huge marketing budget windfall in 2011.

If they haven't already, marketers will need to put processes in place to regularly measure the success of each program. The cardinal rule still applies: the cost of acquiring a customer can't exceed the lifetime revenues that the customer will generate.

And keep in mind that programs and tactics that worked well last year may not work so well this year.

More competition

One great thing about SaaS is that it's getting easier and less expensive for new companies to build an application. One terrible thing is that it's getting easier and less expensive for new companies to build an application.

I've seen a handful of clever developers build an application on top of in a matter of months. Easy access to outside platforms and infrastructure at "pay-as-you-go" costs makes it lots easier, cheaper and faster.

For existing SaaS solution providers, expect a continuing influx of start-up competitors who think their solution is a little bit better than yours.

Add to this that more large, on-premise application vendors won't ignore the SaaS challenge any longer, and those that have been dipping their toe in the water will likely take the full plunge soon. If they do it well, these deep-pocketed vendors can make a big splash.

For you existing SaaS vendors, prepare yourselves: sharpen your value messages, hone the customer acquisition process, and engage your existing customers.

More engagement with existing customers

With the growing use of social media, customers expect more interaction with their vendors. They want to know more about what features are available, how best to use them, and what's coming in the future. And they want an opportunity for a conversation, not a one-way outbound broadcast.

SaaS marketers should communicate regularly with customers through all appropriate channels. For SaaS businesses that rely on renewals (and that's most of you), existing customers are also prospective customers.

In addition to email, newsletters, events or whatever else has worked in the past, try out social media. Facebook and Twitter are becoming more widely used, even for business-to-business companies. Though you want to be careful not to be too casual, you may find that the more "human," less "corporate" tone of social media is refreshing.

Have a happy and prosperous new year.