Wednesday, June 29, 2011

Good news & bad news about SaaS

The good news about the SaaS subscription model: long-term paying customers.

The bad news about the SaaS subscription model: long-term paying customers.

With the software-as-a-service (SaaS) business model, vendors can build a sustainable source of long-term, predictable revenue. As long as the subscription fees cover customer acquisition expenses and other costs, the model should support a profitable, growing business.

So far, so good. But there's a catch:

Long-term, paying customers require long-term care and feeding.

In exchange for collecting on-going subscription fees, the SaaS vendor takes on substantial on-going obligations.

Some of those depend on product development and operations. They need to keep the SaaS solution up and running, protect the customer's data, and add new features over time.

Marketing's role in retention

But marketing plays a role too. Those long term customers also expect on-going communications from the SaaS vendor. They want to know how best to use the system, what enhancements are being developed, and what other customers are doing.

And they don't want just one-way communications. Customers want a way to have input into what new features are built, and they want a way to share information with other customers.

This is where marketing comes in. (I warned you that we weren't off the hook.) Marketers need to take a role in building and maintaining communication channels with existing customers.

Talk to existing customers? For lots of marketers, this could be new territory.

A confession

When I was responsible for marketing traditional on-premise applications, I usually only thought about existing customers on two occasions: once at the annual user group meeting, and second when I needed a customer reference. That's it.

Nothing personal; it just wasn't my job. My main responsibility in marketing then was to find new customers. People who had already signed up and paid weren't my concern.

In the SaaS subscription model, it's all different. Retention and renewals are an essential part of marketing's job. Marketers need to focus on existing customers as much as on prospective customers.

In fact, in the SaaS world, existing customers are prospective customers.

Creative Commons License

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

Wednesday, June 8, 2011

SaaS marketing, baseball and the batting order

I recently read "Three Nights in August," a wonderful book about the "game inside the game" of baseball. The author, Buzz Bissinger, shadowed St. Louis Cardinal manager Tony La Russa through a three game series against the Chicago Cubs. Bissinger chronicles in detail the manager's thought processes and decision making through 27 innings.

It's not a story about dramatic home runs, sparkling pitching, or spectacular defensive plays. It's more about how La Russa decides when to put on a hit-and-run, who to intentionally walk, and when to go to the bullpen.

Which players and in which order?

A portion of the book describes La Russa putting together the line-up for each game. He analyzes who's hit well against the opposing pitcher, who's injured and needs rest, and which pitch hitters he wants to match up against certain relief pitchers late in the game.

Among these decisions, La Russa gives a great deal of thought to the batting order- who bats where in the line-up. It's a complicated process: who can take a lot of pitches and work a walk, who can steal a base, who can bunt, who can hit for power, who's right-handed, left-handed, a switch hitter, etc.

The challenge for the manager is more than just putting guys up at the plate who can hit. The goal is to construct a complete line-up, in the right order, that produces runs. It's runs, not hits, that win games.

Don't get lost in individual tactics

I hope I haven't lost the non-baseball fans among you, because there's a lesson in here for software-as-a-service (SaaS) marketers. It's about the customer acquisition and retention process.

What matters isn't just the performance of individual marketing programs or campaigns. What matters is whether the overall process produces long-term customers.

There's a tendency to focus too narrowly on individual pieces of the customer acquisition funnel or even more tightly on particular tactics:
  • Does this individual keyword draw more traffic?
  • Does this particular white paper attract more leads?
  • Does this version of the email convert more trialers into buyers?
Given all the sophisticated marketing analytics tools available, it's easy to see how marketers can sometimes get buried in the numbers.

Yes, you need to know which tactics are working and which are not. I encourage SaaS companies to try different things, measure their performance and make adjustments. Marketers trying to do their job without metrics will struggle.

Certain tactics fit certain roles

But it's also important to know the particular role of each tactic and each campaign. Some programs, for example, are designed to build visibility early in the buying process. Others are designed to retain existing customers. These are two different objectives calling for two different kinds of campaigns. If your goal is to reduce attrition, implementing a pay-per-click campaign, no matter how well-executed, probably won't help you.

It matters what happens before and what happens after

It's also important to know what activity precedes each individual marketing tactic and what follows it. Understand the entire customer acquisition and retention process from building initial visibility and attracting leads, through to converting leads into opportunities and into customers, and then retaining and up-selling existing customers. There's not much value in generating lots of leads from prospects if you have no process in place to convert those leads into buyers.

To go back to the baseball analogy (sorry I can't resist), there's no point in stealing a base and getting a runner into scoring position, if the batters behind him can't drive in the run.

Creative Commons License

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